```

[Senate Prints 106-62]
[From the U.S. Government Publishing Office]

106th Congress                                                  S. Prt.
 2d Session                 COMMITTEE PRINT                      106-62
_______________________________________________________________________

                                     

                                                                       

                              R E P O R T

                                   of

                         SENATOR FRED THOMPSON

                            Chairman of the

         COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE

                                   on

          MANAGEMENT CHALLENGES FACING THE NEW ADMINISTRATION

                  Part 1: Financial Management Issues

                  Part 2: Federal Workforce Challenges

                  Part 3: Results-Oriented Governance  

                                     

[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                                     

                              OCTOBER 2000

                                 ------                                
                                     

                    U.S. GOVERNMENT PRINTING OFFICE
67-613                      WASHINGTON : 2000

                            C O N T E N T S

                                 ------                                
                                                                   Page
Introduction.....................................................     1

                  Part 1: Financial Management Issues:

Overview and Summary.............................................     2
Status of Federal Financial Statements and Systems...............     4
Extent and Consequences of Financial Management Problems.........     7
Getting To Solutions: An Overall Framework.......................    11
Restoring the ``M'' in OMB.......................................    12
Specific Actions To Improve Financial Management.................    14
Endnotes.........................................................    17
Appendix.........................................................    18

                  Part 2: Federal Workforce Challenges

Overview and Summary.............................................    21
The Federal Workforce Crisis.....................................    23
How Workforce Problems Impede Agency Missions....................    24
The Need for Fundamental Changes in Workforce Management.........    26
The Private Sector Contrast......................................    27
Lack of Leadership on Workforce Planning.........................    28
What Needs To be Done?...........................................    30
Endnotes.........................................................    32

                  Part 3: Results-Oriented Governance

Overview and Summary.............................................    33
The Need To Improve Federal Performance..........................    37
The Promise of the Results Act...................................    41
Lack of Results From the Results Act So Far......................    42
Why the Lack of Progress?........................................    45
Getting Better Results From the Results Act......................    47
Other Steps Toward Performance-Based Government..................    48
Endnotes.........................................................    51

 
          MANAGEMENT CHALLENGES FACING THE NEW ADMINISTRATION

                  PART 1: FINANCIAL MANAGEMENT ISSUES

                              ----------                              

                              INTRODUCTION

    On the eve of the upcoming elections and transition to a 
new Administration and a new Congress, attention centers on 
policy agendas. However, for our new leaders to succeed with 
their agendas, they also will need to focus on how the Federal 
Government executes policy. The work of the Governmental 
Affairs Committee in recent years points to a series of core 
capacity problems that pervade the Federal Government and 
severely limit its ability to implement policies and accomplish 
its missions. The problems, which are interrelated, include 
Federal financial management issues, Federal workforce (or 
``human capital'') challenges, and the need for results-
oriented governance in the Federal sector.
    Capacity problems of the magnitude that face the Federal 
Government would trigger the immediate and urgent attention of 
any rational private sector executive. Unfortunately, these 
problems have festered for years under the radar screens of 
Federal policy-makers. Continued inattention to these problems 
will threaten the ability of our new leaders to implement their 
policy agendas and to provide our citizens the essential 
services they need and deserve. As one writer pointedly 
observed:

        [L]ike any good chief executive officer, the President 
        can ill afford to ignore some of the less sexy--but no 
        less important--issues that plague the Federal 
        Government. Tackling problems with the employee merit 
        system, improving agency performance and implementing 
        information technology management reforms won't get 
        George W. Bush or Al Gore on the front pages of The New 
        York Times or The Washington Post. But ignoring them 
        could.\1\
---------------------------------------------------------------------------
    \1\ Matthew Weinstock, An Agenda for Government's Next CEO, 
Government Executive Magazine (September 2000), p. 94.

    The extent of the capacity problems facing the Federal 
Government is not open to serious question. These problems have 
been documented repeatedly by the General Accounting Office 
(GAO), agency Inspectors General (IGs), and other objective 
sources. The problems are not ideological or partisan. They 
pose the same obstacles to achieving policy objectives of the 
left or the right, of Republicans or Democrats. Therefore, 
resolving them should be a priority for the next Administration 
and Congress regardless of their political makeup.
    Daunting as many of the problems may be, they are solvable. 
In most cases, it is clear what needs to be done. The main 
challenge is mustering the will to resolve them and the 
commitment to follow through until the job is done. The 
solutions usually center on sustained attention and cooperation 
by both the Executive Branch and Congress. While some 
additional legislation may be necessary, our statute books 
already contain the basic tools to do the job. Targeted funding 
often will be needed. However, the necessary investments, even 
when substantial, pale in comparison to the waste that can be 
eliminated and the performance improvements that can be 
obtained.
    Senator Fred Thompson, Chairman of the Governmental Affairs 
Committee, issues this series of transition reports to focus on 
the three core capacity problems that will face the incoming 
Administration and Congress: Financial Management Issues (Part 
1), Federal Workforce Challenges (Part 2), and Results-Oriented 
Governance (Part 3). These transition reports describe the 
three problems, discuss their nature and root causes, and 
propose ways of solving them. The reports are intended to 
stimulate action on the part of our incoming leaders and 
provide them a useful framework for this important task.
                              ----------                              

                          OVERVIEW AND SUMMARY

    This is one in a series of transition reports that describe 
core capacity problems facing the Federal Government, discuss 
their nature and root causes, and propose ways of solving them. 
The reports are intended to stimulate action on the part of the 
incoming Administration and Congress, and to provide them a 
framework for this important task. This report deals with the 
need for results-oriented governance at the Federal level. 
Other reports address Federal workforce challenges and the need 
for results-oriented governance at the Federal level.
    The vast majority of Federal agencies lack financial 
systems that can provide reliable information on a real-time 
basis to support policy-making and day-to-day management of 
Federal operations. Federal financial management problems are 
deep-seated and challenging. IGs have listed financial 
management as one of the ``top 10'' most serious problems 
facing 21 of the 24 major Federal agencies. Financial 
management is the direct subject of five of the 26 current GAO 
``high-risk'' problem areas. It is a major contributing factor 
to many more GAO high-risk and IG top 10 problems. Financial 
management problems have persisted for years and won't be 
solved overnight. The most disturbing aspect of these problems, 
however, is that we seem to be making little demonstrable 
progress to resolve them.
    More agencies are getting ``unqualified'' (``clean'') 
opinions on their annual financial statements. However, some 
agencies with huge budgets, are not. Consequently, the Federal 
Government as a whole is not close to being able to balance its 
books. Furthermore, according to GAO, the vast majority of 
Federal agencies lack financial systems that comply with basic 
statutory requirements or provide reliable information that can 
be used for day-to-day management. Indeed, many agencies get 
clean opinions despite, rather than because of, their financial 
systems. Getting a clean opinion can mask deficiencies in an 
agency's underlying financial systems and divert resources from 
fixing them.
    The consequences of these shortcomings go far beyond 
technical compliance concerns. They result in incalculable 
taxpayer losses to fraud, waste, and error. They divert Federal 
benefits and services away from those who legitimately depend 
upon them. They deprive decisionmakers of the ability to make 
informed policy decisions, oversee programs, hold agencies and 
programs accountable for their performance, and get results for 
the American people. For example:

     No one knows how many tax dollars are lost to 
outright fraud, waste, and other improper payments since the 
government does not systematically track such losses. However, 
from the few available sources that do exist, the Committee has 
documented almost $230 billion in waste. This includes 
overpayments exceeding $20 billion in just a handful of 
programs.

     Financial management weaknesses impede the 
delivery of benefits and services to our citizens. Agencies 
have trouble getting the right benefits to the right people on 
a timely basis, or even responding to their inquiries promptly 
and accurately. The Internal Revenue Service (IRS) provides 
billions in tax credits to the wrong taxpayers, while 
qualifying taxpayers fail to get billions in tax credits to 
which they are entitled. After taxpayers have settled their 
cases, IRS often fails to release liens against their property 
within the deadline prescribed by law.

     Enormous amounts of financial, medical, and other 
sensitive personal information provided by our citizens are at 
risk of inappropriate disclosure and use due to massive 
information security weaknesses and ineffective controls in 
most financial management systems.

    In order to solve these problems, it is essential that the 
incoming Administration bring a sense of commitment and urgency 
to the task and that the incoming Congress provide vigorous 
oversight and support. Our success in resolving the Year 2000 
(Y2K) Computer Problem provides a model for addressing other 
problems. It featured aggressive Congressional oversight, 
strong and centralized Executive Branch leadership, persistent 
follow-up with specific performance goals and benchmarks, and 
support through necessary funding and other resources. We need 
to bring the same sense of urgency and commitment to resolving 
financial management and other problems.
    An essential first step is that agencies candidly 
acknowledge the extent and seriousness of the problems. This 
does not always happen today. Second, neither the 
Administration nor Congress can be content with the minimal 
pace of current progress, which tends to feature expressions of 
good intentions rather than demonstrable results. We need to 
develop firm commitments for concrete improvements and follow 
through on them. Third, the new Administration needs to ensure 
that the Office of Management and Budget (OMB) carries out its 
central leadership role and statutory responsibilities for 
improving financial management across the government. OMB has 
failed to do so in recent years.
    Within this overall framework, there are a number of 
specific actions that can make real improvements in financial 
management. As detailed in this report, they include:

     Using the Government Performance and Results Act 
(``Results Act'') to establish specific and measurable goals 
for financial management improvement and to report progress on 
meeting these goals.

     Systematically disclosing and quantifying major 
overpayment problems in annual agency financial statements and 
coupling this disclosure with specific error-reduction targets.

     Enhancing data sharing and verification in order 
to improve the accuracy of eligibility determinations under 
Federal programs.

     Systematically addressing and tracking progress 
to implement GAO and IG recommendations for financial 
management improvements.

     Adopting financial management ``best practices'' 
from leading private sector and government organizations.

     Providing necessary resources and incentives to 
improve financial management, and imposing real sanctions where 
remedial action is not forthcoming.

     Using recovery auditing to recoup overpayments 
and to invest a portion of the proceeds to make improvements 
that will avoid future overpayments.

           STATUS OF FEDERAL FINANCIAL STATEMENTS AND SYSTEMS

    Expectations for sound financial management. Most major 
Federal agencies have difficulty meeting the minimum 
expectations of laws designed to ensure sound financial 
management in the Federal Government. These laws include the 
Chief Financial Officers (CFO) Act of 1990, which requires 
annual financial statement audits, and the Federal Financial 
Management Improvement Act of 1996 (FFMIA), which calls for 
agencies to comply with basic accounting and financial 
management standards. In testifying about the government's many 
challenges in meeting these requirements, a GAO official 
observed:

        [F]rom the outset today, I want to dispel the notion 
        that this is merely a compliance issue. The 
        expectations in the CFO Act and the FFMIA are integral 
        to producing the data needed to efficiently and 
        effectively manage the day-to-day operations of the 
        Federal Government and provide accountability to the 
        taxpayers. When Federal agencies can meet these 
        expectations, they will have achieved what the 
        Comptroller General has referred to as the ``end 
        game''--systems and processes that routinely generate 
        reliable, useful, and timely information the government 
        needs to assure accountability to taxpayers, manage for 
        results, and help decisionmakers make timely, well-
        informed judgments. 1

    Financial statement results. Unfortunately, we are nowhere 
close to achieving this ``end game.'' The Federal Government as 
a whole cannot pass the annual financial audit required by the 
CFO Act. Such an audit is the staple of any private sector 
business. For the last 3 fiscal years, GAO has issued a 
``disclaimer'' opinion on the consolidated financial statements 
of the U.S. Government. That means that the government's 
financial statements do not provide reliable information for 
decisionmakers or the public. GAO identified ``over $350 
billion of adjustments and reclassifications'' that had to be 
made in order to reconcile information used to prepare the 
government's fiscal year (FY) 1999 financial statements. Even 
with these adjustments, the books were still out of balance by 
$24 billion. 2
    Some individual agencies likewise cannot pass their own 
annual financial audits. Fifteen of the 24 major agencies 
received ``unqualified'' audit opinions for FY 1999. Four 
agencies--Education, Justice, Treasury, and the Environmental 
Protection Agency (EPA)--received ``qualified'' opinions. Five 
agencies--Agriculture, Defense, Housing and Urban Development 
(HUD), the Office of Personnel Management, and the U.S. Agency 
for International Development--received ``disclaimer'' 
opinions. While these results are a net improvement over FY 
1998, they fell well short of OMB's goal. Furthermore, two 
agencies (EPA and HUD) regressed from their FY 1998 opinions.
    Clean audit opinions are only the start. While getting a 
``clean'' audit opinion is important, this alone does not 
evidence sound financial management. A clean opinion simply 
means that an agency's financial information is accurate as of 
one day of the year--the last day of the fiscal year. It 
provides no assurance that the agency can actually produce and 
use reliable financial data on a real-time basis. In fact, it 
normally takes Federal agencies 6 months after the close of the 
fiscal year to establish the accuracy of their balance sheets 
as of the last day of the prior year. Some agencies cannot even 
meet this 6-month statutory deadline.
    Furthermore, the Comptroller General testified that some 
agencies were able to get clean opinions only through what he 
described as ``heroic efforts.'' These efforts entail 
painstakingly reconstruct-ing basic information about agency 
spending on programs and activities. Their financial systems 
could not routinely provide this information. Indeed, he went 
on to say, ``Agency financial systems overall are in poor 
condition and cannot provide reliable financial information for 
managing day-to-day government operations and holding managers 
accountable.'' 3
    A clean opinion actually can be misleading by masking 
deficiencies in an agency's underlying financial systems. For 
example, GAO notes that the Transportation Department's core 
accounting system was not the primary source for the financial 
data that lead to its clean opinion. Because its core system 
was so unreliable, the Department had to make about 800 
adjusting entries totaling $36 billion to get its ``clean'' 
opinion. 4 Furthermore, time-consuming and ad hoc 
efforts to get clean opinions can be counter-productive since 
they divert agency financial managers from fixing the 
underlying problems. GAO states:

        The extraordinary efforts that many agencies go through 
        to produce auditable financial statements are not 
        sustainable in the long term. These efforts use 
        significant resources that could and should be used for 
        other important financial-related work. 5

    The Department of Health and Human Services (HHS) and the 
IRS were other agencies that got clean opinions only through 
time-consuming, manually-intensive, and error-prone processes 
that involved billions of dollars of adjustments. The Education 
Department is still another example of an agency whose 
ostensible progress for FY 1999 was generally the result of 
time-consuming and ad hoc efforts rather than genuine 
improvements in its financial systems. Education received a 
``qualified'' opinion on its financial statements for FY 1999, 
which is better than the ``disclaimer'' opinion it got for FY 
1998. However, the Department's internal control problems 
actually worsened in FY 1999. For example, Education 
misreported $7.5 billion in its FY 1999 accounts; failed to 
remit to the Treasury $2.7 billion in collections from its 
Federal Family Education Loan Program (FFELP) as required by 
law; and had a discrepancy of $700 million in its FFELP account 
balance. Also, continued weaknesses in security controls 
exposed Education's sensitive grant and loan data to deliberate 
or inadvertent, misuse, destruction, or improper disclosure. 
6
    The true test of financial management fitness. Annual 
compliance audits under FFMIA provide the best indication of 
whether agencies can produce the data needed to manage their 
day-to-day operations efficiently and effectively. However, 21 
of the 24 major agencies failed to substantially comply with 
FFMIA standards for FY 1999. 7 The FY 1999 FFMIA 
results represent no improvement whatsoever over FY 1998, when 
the same 21 agencies failed their FFMIA audits. They represent 
a step backward from FY 1997, when 20 agencies failed. In 
summary, the GAO report on FFMIA results for FY 1999 observes 
that, for 3 straight years now, ``the vast majority of 
agencies' financial management systems fall short of the CFO 
Act and FFMIA goal to provide reliable, useful, and timely 
information on an ongoing basis for day-to-day management and 
decisionmaking.'' 8
    An important feature of FFMIA is the requirement that non-
compliant agencies develop ``remediation plans'' to describe 
what actions they will take to fix their problems and come into 
compliance. However, GAO found that the majority of agency 
remediation plans were inadequate and had improved only 
slightly over FY 1998. According to GAO, ``many plans still 
lacked detailed steps, target dates, and descriptions of the 
resources needed for executing the corrective actions.'' Two of 
the 21 agencies found to be non-compliant (the Federal 
Emergency Management Agency and the Social Security 
Administration) did not submit remediation plans at all because 
they disagreed with the finding of non-compliance. 9
    GAO also reported that OMB failed to meet its statutory 
obligations under FFMIA. When an agency determines, contrary to 
an audit finding, that it does comply with FFMIA, the law 
requires OMB to review the agency's determination and report on 
the findings to appropriate Congressional committees. GAO 
states that ``OMB is not reviewing and has not reviewed such 
determinations in order to report to the Congress.'' 
10
    The following table shows the results of recent CFO Act 
financial statement audits and FFMIA reviews for the 24 major 
agencies:

                                   FINANCIAL STATEMENT AUDIT AND FFMIA RESULTS
----------------------------------------------------------------------------------------------------------------
                                                                                                       FFMIA
                Agency                        FY 1998 Opinion              FY 1999 Opinion          Compliant?
----------------------------------------------------------------------------------------------------------------
  Agriculture.........................  Disclaimer                   Disclaimer                           No
  Commerce............................  Unqualified                  Unqualified                          No
  Defense.............................  Disclaimer                   Disclaimer                           No
  Education...........................  Disclaimer                   Qualified                            No
  Energy..............................  Qualified                    Unqualified                         Yes
  HHS.................................  Qualified                    Unqualified                          No
  HUD.................................  Unqualified                  Disclaimer                           No
  Interior............................  Unqualified                  Unqualified                          No
  Justice.............................  Disclaimer                   Qualified                            No
  Labor...............................  Unqualified                  Unqualified                          No
  State...............................  Unqualified                  Unqualified                          No
  Transportation......................  Disclaimer                   Unqualified                          No
  Treasury............................  Qualified                    Qualified                            No
  Veterans Affairs....................  Qualified                    Unqualified                          No
  AID.................................  Disclaimer                   Disclaimer                           No
  EPA.................................  Unqualified                  Qualified                            No
  FEMA................................  Unqualified                  Unqualified                          No
  GSA.................................  Unqualified                  Unqualified                          No
  NASA................................  Unqualified                  Unqualified                         Yes
  NSF.................................  Unqualified                  Unqualified                         Yes
  NRC.................................  Unqualified                  Unqualified                          No
  OPM.................................  Disclaimer                   Disclaimer                           No
  SBA.................................  Unqualified                  Unqualified                          No
  SSA.................................  Unqualified                  Unqualified                          No

----------------------------------------------------------------------------------------------------------------
Source: GAO

        EXTENT AND CONSEQUENCES OF FINANCIAL MANAGEMENT PROBLEMS

    Scope of the problems. GAO has designated financial 
management as a high-risk problem at the Defense Department, 
the Forest Service, the Federal Aviation Administration, and 
the IRS. IGs have designated financial management a top 10 
management problem at all 24 major agencies except the Energy 
Department, the General Services Administration, and the Social 
Security Administration. The following examples illustrate the 
impact of these problems at two agencies.
    IRS. Financial management problems at IRS contribute to 
four separate GAO high-risk areas. Clearly, IRS auditors would 
come down hard on any business or individual taxpayer who kept 
their books and records as poorly as IRS does. A recent GAO 
audit identified IRS accounting errors that, if uncorrected, 
would have caused a misstatement of over $100 million in the 
agency's financial statements for FY 1999. GAO's audit also 
revealed serious internal control problems, such as the 
following:

     Delays of over 10 years in posting payments made 
by taxpayers to their accounts.

     Failure to offset refunds to taxpayers against 
their outstanding tax liabilities. In one case, IRS paid a 
refund of $15,000 to a taxpayer who owed almost $350,000 in 
back taxes.

     Delays in correcting erroneous tax assessments 
resulting from data input mistakes. In one case, it took IRS 18 
months to correct an input error that resulted in an assessment 
of over $160,000 against a taxpayer who was actually due a 
refund. IRS apparently knew the assessment was erroneous 10 
months before it was corrected.

     Delays in releasing property liens against 
taxpayers. In 25 percent of cases examined by GAO, IRS failed 
to release its liens against taxpayers who had settled their 
tax liability within the statutory deadline. In one case, IRS 
had not released its lien 14 months after settlement with the 
taxpayer. 11

    The Defense Department (DOD). DOD is the most deficient of 
all agencies in failing to provide basic financial 
accountability. Financial management at DOD as a whole has been 
a GAO high-risk problem area since 1995. GAO recently 
testified:

        Material financial management deficiencies identified 
        at DOD, taken together, continue to represent the 
        single largest obstacle that must be effectively 
        addressed to achieve an unqualified opinion on the U.S. 
        Government's consolidated financial statements. DOD's 
        vast operations--with an estimated $1 trillion in 
        assets, nearly $1 trillion in reported liabilities and 
        a reported net cost of operations of $378 billion in 
        fiscal year 1999--have a tremendous impact on the 
        government's consolidated financial reporting. To date, 
        no major part of DOD has yet to pass the test of an 
        independent audit; auditors consistently have issued 
        disclaimers of opinion because of pervasive weaknesses 
        in DOD's financial management systems, operations, and 
        controls. 12

    One major source of these problems is the cacophony of non-
integrated systems that DOD tries to operate--168 separate 
systems in all. The following graphic illustrates the number 
and ``relationships'' of the systems DOD uses for just one of 
its business areas--contract and vendor payments:
[GRAPHIC] [TIFF OMITTED] T7613.001

    It is virtually impossible to operate rationally in such a 
morass. Indeed, during FY 1999, DOD spent almost one-third of 
all its contract payments to make adjustments to previous 
contract payments. Overall, the IG found that DOD had to make 
$7.6 trillion in accounting adjustments in order to prepare its 
financial statements. Countless items fall through the many 
cracks in these systems. In 1999, GAO reported that the Navy 
wrote off more than $3 billion in inventory as ``lost in 
transit.'' When the Army took an inventory of its assets in 
1999, it found 56 airplanes, 32 tanks, and 36 Javelin command 
launch units for which it had no records. A visit to one Army 
ammunition depot found 835 ``quantity and location 
discrepancies'' for over 3,000 ready-to-fire, hand-held rockets 
and rocket launchers--obviously, very sensitive items requiring 
strict controls. DOD data shows that over half the in-hand 
inventory items it can find, valued at about $37 billion, 
exceed its current requirements.
    Improper payments. One direct consequence of poor financial 
management is the exposure of taxpayer dollars to massive 
fraud, waste, and abuse. The work of the Governmental Affairs 
Committee, based on GAO and IG reports, documents huge losses 
to our citizens from fraudulent and other erroneous payments of 
taxpayer funds. Based on a review of improper payments that 
agencies disclosed in their own financial statements for FY 
1998, GAO identified $19.1 billion in improper payments for 
that year alone. 13 This report covered only the 
nine agencies that voluntarily disclosed improper payments for 
17 major programs. GAO noted that, while the full extent of 
improper payments was unknown, ``[i]mproper payments are much 
greater than have been disclosed thus far in agency financial 
statement reports, as shown by our prior audits and those of 
agency Inspectors General.'' 14
    The Committee confirmed that the $19.1 billion figure was 
only the tip of the iceberg. Adding up wasted taxpayer dollars 
that had been documented and quantified in various GAO and IG 
reports, the Committee came up with a cumulative figure of $220 
billion in waste, fraud, and abuse. This figure included $35 
billion in overpayments. 15
    The problem of erroneous payments appears to be getting 
worse. When GAO updated for FY 1999 improper payments disclosed 
in agency financial statements, the total had grown to $20.7 
billion. 16 When the Committee recently updated its 
analysis of waste documented in GAO and IG reports, the total 
had grown to almost $230 billion. This included improper 
payments of over $47 billion. (See the Appendix to this 
report.)
    Several programs consistently make billions of dollars in 
improper payments that represent significant portions of their 
entire budgets. Examples are Medicare, Supplemental Security 
Income, and food stamps. Another example is the Earned Income 
Tax Credit (EITC). Erroneous EITC payments have been estimated 
at as much as $9.3 billion annually. This is over 30 percent of 
all EITC claims, which total about $30 billion annually. At the 
same time, it has been estimated that as few as 65 percent of 
eligible taxpayers receive the EITC credit. 17 Given 
these problems, Congress authorized IRS to spend a total of 
$716 million over 5 years to improve EITC administration. 
However, IRS has not established Results Act performance goals 
to address the EITC problems. It also has failed to provide 
meaningful outcome data on the impact of the funds provided by 
Congress to improve EITC administration. 18
    Ineffective information security. Weak security controls 
over sensitive information are a major factor underlying 
financial management problems. Information security weaknesses 
affect almost all agencies and constitute a GAO-designated 
governmentwide high-risk problem. They place enormous amounts 
of Federal assets at risk of inadvertent or deliberate misuse, 
financial information at risk of unauthorized modification or 
destruction, sensitive information at risk of inappropriate 
disclosure, and critical operations at risk of disruption. Of 
the 21 agencies that failed to comply with FFMIA, all had 
serious weaknesses in the area of information security.
    Agencies in denial. We will never generate demonstrable 
improvements in financial management until agencies 
forthrightly acknowledge the seriousness of their problems. As 
the following examples indicate, some agencies are still in 
denial.
    In a recent ``Progress Review and Accomplishment Report'' 
by HUD on its ``2020 Management Reforms'' stated: ``HUD's once 
vulnerable financial management system is now reliable, 
accurate and timely.'' However, the HUD IG reported that the 
serious weaknesses in HUD's financial systems persist today and 
led to a disclaimer of opinion on the agency's financial 
statements for FY 1999. 19
    An Education Department spokesperson recently stated: ``Our 
position is that we have adequate financial controls in place 
to provide for the smooth operation of our financial systems 
here at the Education Department.'' 20 That position 
is not shared by the agency's IG or GAO. The IG listed ``long-
standing problems with financial management'' as the number one 
management challenge facing the Department. 21 
Likewise, GAO recently testified that Education ``has 
experienced persistent financial management weaknesses'' for 
years and that these ``serious internal control and financial 
management systems weaknesses continued to plague the agency'' 
during FY 1999. 22
    Student financial aid programs have been included on GAO's 
high-risk list since its inception in 1990. However, 
Education's commitment to resolving these problems appears 
questionable. GAO expressed concern that the Education 
Department's Office of Student Financial Assistance, which was 
recently reconstituted as a so-called ``performance-based 
organization,'' has not established any performance goals to 
resolve the problems that make its programs high-risk. 
23 In 1998, Congress enacted a law designed to 
enable Education to verify income information with IRS as a 
means of enhancing student assistance eligibility 
determinations. 24 This law remains unimplemented 
nearly 2 years after its enactment, while Education, Treasury, 
and OMB engage in seemingly intractable discussions over what 
to do.
    OMB is in the forefront of agencies in denial. OMB's own 
performance report for FY 1999 seriously overstated the number 
of agencies that got clean audit opinions. It criticized GAO's 
report on massive FFMIA non-compliance, discussed previously, 
as being too negative and failing to ``acknowledge that the 
agencies are moving steadily in the right direction.''

               GETTING TO SOLUTIONS: AN OVERALL FRAMEWORK

    Solving financial management problems starts with an 
overall framework that applies equally to most of the Federal 
Government's other core capacity problems. The model for this 
framework can be found in the successful resolution of the Y2K 
computer conversion--probably the single most far-reaching and 
important management challenge of recent years.
    A host of GAO and IG reports laid out the extent of the Y2K 
problem and its root causes. The Executive Branch, particularly 
OMB, initially downplayed the problem. However, intense 
Congressional oversight ignited public concern and forced the 
Executive Branch to take the problem more seriously. Once that 
happened, the Executive Branch and Congress worked hand-in-hand 
to solve it. Action plans were developed, performance goals 
were set, and accountability was maintained through regular 
progress reports. Management and oversight responsibility over 
the agencies was centralized in a special unit of the Executive 
Office of the President under the outstanding leadership of 
John Koskinen. Congress conducted systematic oversight and 
provided the funding and other legislative support needed to 
carry through on solutions.
    While it would be hard to replicate the degree of public 
awareness and the sense of urgency that accompanied Y2K, the 
steps used to resolve it can readily be transferred to other 
problems like financial management. In essence, these steps 
require the Federal Government to:

     Acknowledge fully and candidly the nature of the 
problem as well as its dimensions and consequences. This can be 
politically difficult, but it is absolutely essential.

     Identify the root causes of the problem and 
existing recommendations to address it. Most major problems, 
including financial management, are the subject of a host of 
GAO and IG reports and ``open'' (unresolved) recommendations. 
Often the same recommendations are reiterated year after year. 
Thus, a road map to solutions usually exists.

     Muster the will and ongoing commitment to solve 
the problem. To be effective, this must come from the highest 
leadership levels of the Administration and the agencies. As 
GAO observed: ``We learned from the Year 2000 experience that 
proactive leadership at the highest levels of government is one 
of the most important factors in prompting attention and action 
on a widespread problem.'' 25 Establish specific and measurable performance 
goals to embody the commitments and systematically track them 
in order to assess progress and ensure follow through and 
accountability. As discussed below, the Results Act provides an 
excellent tool for setting goals and measuring success.

     Provide necessary support and incentives--both 
positive and negative--to implement solutions. This includes 
funding and other resources. It should also include rewards for 
progress and remedial actions (along with real consequences, as 
appropriate) for lack of progress.

                       RESTORING THE ``M'' IN OMB

    One of the prerequisites to converting the above framework 
into concrete actions is strong central leadership, support, 
and oversight within the Executive Branch. This was a key 
element in resolving Y2K and is equally important for other 
systemic, crosscutting management challenges such as financial 
management. Unfortunately, the agency charged by law with this 
responsibility--OMB--has not been up to the task in recent 
years.
    The former Bureau of the Budget was reconstituted as OMB by 
a Reorganization Plan during the Nixon Administration. 
26 President Nixon's message to Congress 
transmitting the Reorganization Plan stated that OMB would be 
``the President's principal arm for the exercise of his 
managerial functions.'' He added that ``creation of the Office 
of Management and Budget represents far more than a mere change 
of name for the Bureau of the Budget. It represents a basic 
change in concept and emphasis, reflecting the broader 
management needs of the Office of the President.''
    Congress subsequently reaffirmed and expanded OMB's 
management responsibilities on several occasions. Most notably, 
the CFO Act of 1990 established the Deputy Director for 
Management position at OMB as ``the chief official responsible 
for financial management in the U.S. Government.'' 
27 During Senate consideration of this legislation, 
former Governmental Affairs Committee Chairman Glenn said of 
the new Deputy OMB Director for Management: ``This high level 
official, appointed by the President, with the advice and 
consent of the Senate, will be responsible for the `M' in OMB 
and for integrating and coordinating important financial 
management functions with other management and budget functions 
at OMB.'' Senator Glenn stressed the importance of improving 
Federal financial management:

        Currently, there are hundreds of different accounting 
        systems in the government, and few comply with 
        generally accepted government accounting standards. 
        These current practices do not show the actual costs of 
        running the Federal Government. . . . There is no way 
        that we in the Senate can fully determine the 
        programmatic impacts of the legislative decisions we 
        make on the basis of information reported. To make 
        matters worse, often the information is reported in 
        such an untimely manner that the decisions must be and 
        are regularly made with dated, inaccurate information.

        It is time that the Federal Government had a position, 
        a Deputy Director for Management at OMB, that could be 
        held accountable for these shortcomings. Someone who 
        would be responsible for supplying the Executive Branch 
        and the Congress with reliable, consistent, timely, and 
        complete financial information, while focusing 
        attention to the management of government, which is 
        often lost in our battles over the budget. 
        28

    The foregoing objectives have yet to be realized. Sadly, 
Senator Glenn's summary of the government's financial 
management problems in 1990 still holds true today. In numerous 
contexts, including addressing financial management problems, 
OMB has failed to fulfill its leadership role. According to 
many observers, the ``M'' has virtually disappeared from OMB. A 
1994 reorganization of OMB, known as ``OMB 2000,'' shifted most 
of the agency's resources to the budget side and greatly 
diminished its capacity to carry out its management functions. 
It is clear from OMB's own Results Act plans and reports that 
the agency has little regard for its management 
responsibilities, including those specifically grounded in 
statute. Indeed, OMB's most recent draft strategic plan 
contains nothing of substance addressing any of its management 
responsibilities.
    OMB's failure to meet its management responsibilities has 
prompted calls for an entirely separate ``office of 
management'' in the Executive Office of the President. This is 
one way to achieve the central leadership on management that is 
so sorely needed. However, there is obvious power to linking 
management and budget decisions, as the expansion of OMB was 
intended to accomplish. OMB views its fundamental role as being 
``staff to the President.'' 29 Therefore, in the 
final analysis, OMB's enthusiasm for its management 
responsibilities is directly proportional to the President's 
level of interest in management issues. If the incoming 
President gives sufficient priority to management improvements, 
OMB will surely follow suit.

            SPECIFIC ACTIONS TO IMPROVE FINANCIAL MANAGEMENT

    Within the above overall framework, there are many specific 
actions that can and should be taken to address financial 
management problems.
    Establishment of specific performance goals and measures to 
resolve financial management problems. The Results Act provides 
an excellent mechanism for (1) establishing firm commitments to 
resolve financial management problems, through performance 
goals and (2) tracking progress against those goals through 
annual performance reports. Also, the annual government-wide 
performance plan required by the Results Act is well suited to 
establishing government-wide financial management improvement 
goals and re-enforcing the most important agency-specific 
goals.
    To their credit, a number of agencies have established some 
performance goals dealing with financial management. The most 
common goal is to get a clean opinion on the agency's annual 
financial statements. It is also noteworthy that financial 
management is addressed in the ``Priority Management 
Objectives'' (so-called ``PMOs'') that appear in the 
President's Annual Budget. The FY 2001 PMO on ``improving 
financial management information'' includes a performance goal 
that 22 of the 24 CFO Act agencies obtain clean opinions. 
30
    These specific performance goals are commendable. However, 
agencies and OMB should also establish Results Act performance 
goals to get at the underlying weaknesses that prevent them 
from using their financial systems for day-to-day management. 
As discussed previously, such goals would encourage agencies to 
invest their resources in making lasting improvements to their 
financial systems. One way to do this is to establish 
performance goals for compliance with FFMIA requirements. Such 
efforts will inevitably assist the agencies' overall 
performance measurement efforts.
    There are other areas in which agencies and OMB could adopt 
financial management performance-improvement goals. For 
example, the FY 2001 PMOs target additional government-wide 
problem areas that implicate financial management such as 
improving information technology and security and verifying the 
accuracy of Federal benefit determinations. For the most part, 
however, these PMOs lack specific performance goals and 
measures that could be used to track progress toward solving 
the problems they address.
    Disclosure of erroneous payments, coupled with error-
reduction targets. A powerful line of attack against the 
massive overpayment problems that plague the Federal Government 
is to disclose overpayment levels in annual financial 
statements and combine that disclosure with performance goals 
to reduce them. GAO found that only a few agencies now disclose 
their overpayments. Thus, it recommended that OMB:

        Develop and issue guidance to executive agencies to 
        assist them in (1) developing and implementing a 
        methodology for annually estimating and reporting 
        improper payments for major Federal programs and (2) 
        developing goals and strategies to address improper 
        payments in their annual performance plans. 
        31

    By a letter dated November 5, 1999, Chairman Thompson urged 
OMB Director Lew to implement these GAO recommendations. In his 
January 2000 response, Director Lew agreed to issue guidelines 
for estimating overpayments. OMB has yet to follow through on 
that commitment.
    Experience with the Medicare program demonstrates the value 
of measuring overpayments and then setting specific targets to 
reduce them. Using these combined techniques, Medicare has 
shown a dramatic overall reduction in its overpayments in 
recent years, even though overpayments rose again in FY 1999. 
The incoming Administration should ensure that OMB meets its 
commitment to require disclosure of major overpayment problems 
in annual financial statements. If OMB fails to do so, the new 
Congress should legislate such a requirement.
    Improved data sharing among agencies. Of course, the best 
solution to erroneous payments is not to make them in the first 
place. According to a recent GAO report, 32 
inadequate or incorrect information often leads agencies to 
make erroneous eligibility determinations under various Federal 
programs, thus resulting in erroneous payments. Improved data 
sharing between Federal agencies, or between Federal agencies 
and other parties such as State agencies, could enhance 
eligibility decisions and thus reduce improper payments. For 
example, GAO found that hundreds of millions of dollars in 
Supplemental Security Income payments and payments under the 
Temporary Assistance for Needy Children (TANF) program could 
have been avoided or detected more quickly through enhanced 
data sharing.
    The GAO report makes a number of recommendations to the 
Congress and the Executive Branch on ways to enhance data 
sharing. 33 Some of these recommendations involve 
policy judgments that balance improved data sharing against 
privacy and other considerations. Other recommendations are 
aimed at improving data sharing that agencies already are 
authorized to conduct. One recommendation is that OMB lead an 
inter-agency effort to develop an overall strategy to improve 
data sharing operations across all Federal benefit and loan 
programs.
    The new Administration and Congress should carefully review 
the GAO recommendations for improved data sharing. Agencies 
also should take steps to improve their internal coordination 
and use of eligibility information already available to them. 
In this regard, the IG at HHS found that HHS paid millions of 
dollars for equipment and services allegedly provided to 
Medicare beneficiaries after the agency's own records indicated 
that the beneficiaries had died. 34
    One very specific but long overdue action is resolving the 
impasse over implementation of the Education-IRS data 
verification provision in the Higher Education Act Amendments 
of 1998. As discussed previously, this provision has remained 
in limbo since its enactment 2 years ago. Education, Treasury, 
and OMB have yet to take action either to make use of the 
existing authority or to seek any legislative changes that they 
deem necessary.
    Implementing GAO and IG recommendations. Myriad GAO and IG 
reports exist on virtually all aspects of agency financial 
management problems. Many of these reports analyze the causes 
of the problems and make recommendations for corrective action. 
These reports and recommendations provide a wealth of 
information and advice that agencies should use to the greatest 
extent possible. OMB's guidance to Federal agencies states that 
each agency should establish systems to assure the prompt and 
proper resolution and implementation of audit recommendations. 
35 In addition, agencies are required by law to 
report to Congress on their actions in response to GAO 
recommendations. 36
    In August 1999 letters to the heads of the major agencies, 
Chairman Thompson stressed the need for agencies to resolve and 
implement audit recommendations related to their major 
management problems, including financial management. He noted 
that many agencies continued to have a number of unresolved 
audit recommendations. On the basis of the written responses to 
the Chairman's letters and subsequent Committee staff meetings 
with agency officials, it appears that most agencies have made 
some progress in dealing with the IG and GAO recommendations. 
Some agencies, such as Interior, have established specific 
performance goals related to implementing audit 
recommendations. 37 Other agencies need to do a 
better job.
    Financial management best practices. GAO recently studied 
the financial management practices and improvement strategies 
of private sector firms and State governments that are leaders 
in financial management. 38 Based on this study, GAO 
issued an ``executive guide'' that contains many case examples 
and strategies that can benefit the Federal Government. 
39 Just a few of the strategies are:

     Establish and monitor specific performance goals 
and measures that reflect the finance operation's role in 
meeting mission objectives.

     Benchmark financial management practices and 
processes with recognized leaders in order to measure 
performance and identify best practices.

     Place more emphasis on providing reliable and 
timely data that directly support strategic decisionmaking and 
improvements in overall agency performance.

     Identify high-volume accounting processes or 
transactions that do not directly support the agency's mission 
(low-value, low risk) and consolidate, streamline, outsource, 
or eliminate them.

    Resources and incentives. Agencies that have fully 
acknowledged their financial management problems and have 
developed credible remedial actions deserve the support 
necessary to implement those actions. Obviously, this includes 
providing necessary funding. Overhauling or replacing 
ineffective financial management systems can be expensive. 
However, making the necessary investments is well worth the 
cost. Conversely, failing to make needed investments is penny-
wise and pound-foolish. For example, the Agriculture 
Department's financial systems are chronically incapable of 
producing useful information. Yet, Department officials told 
the Committee staff that fixing the problems would cost less 
than the amount left over each year from the Department's 
unobligated funds.
    In addition to funding remedial actions that are well 
thought out, Congress needs to impose real consequences for 
agencies that aren't improving. For example, funds that are 
available for performance bonuses, travel, and other 
administrative costs of the agency (particularly perks for 
political appointees) might be ``fenced off '' for use only to 
improve financial management.
    Recovery auditing. ``Recovery auditing'' is a valuable tool 
to both recoup overpayments resulting from financial management 
weaknesses and provide resources to remedy those weaknesses. 
Recovery auditing is a technique employed by many private 
sector firms that utilizes computer software programs to 
analyze contract and payment records in order to identify 
discrepancies between what was owed and what was paid. It 
focuses on obvious but inadvertent errors, such as duplicate 
payments or failure to get credit for applicable discounts and 
allowances.
                                ------                                --
----

    The preceding recommendations need serious consideration 
and deliberation by key decisionmakers in Washington. If 
implemented, these recommendations could demonstrate 
significant movement in addressing the financial management 
challenges that face the Federal Government.

                                ENDNOTES

     1. Financial Management: Agencies Face Many Challenges in 
Meeting the Goals of the Federal Financial Management 
Improvement Act, GAO/T-AIMD-00-178 (June 6, 2000), pp. 1-2.
     2. Auditing the Nation's Finances: Fiscal Year 1999 
Results Continue to Highlight Major Issues Needing Resolution, 
GAO/T-AIMD-00-137 (March 31, 2000), pp. 10-11.
     3. Id., p. 3.
     4. Financial Management: Federal Financial Management 
Improvement Act Results for Fiscal Year 1999, GAO/AIMD-00-307 
(September 2000), pp. 18-19.
     5. Id., p. 42.
     6. Financial Management: Financial Management Challenges 
Remain at the Department of Education, GAO/T-AIMD-00-323 
(September 19, 2000), pp. 6-11.
     7. The only three agencies that passed muster were the 
Energy Department, NASA, and the National Science Foundation.
     8. Financial Management: Federal Financial Management 
Improvement Act Results for Fiscal Year 1999, op. cit. note 5, 
p. 2.
     9. Id., pp. 29-30.
    10. Id., p. 30.
    11. Financial Audit: IRS' Fiscal Year 1999 Financial 
Statements, GAO/AIMD-00-76 (February 2000), pp. 13-14, 28-29.
    12. Department of Defense: Progress in Financial Management 
Reform, GAO/T-AIMD/NSIAD-00-163 (May 9, 2000), p. 1 (Emphasis 
supplied).
    13. Financial Management: Increased Attention Needed to 
Prevent Billions in Improper Payments, GAO/AIMD-00-10 (October 
1999).
    14. Id., p. 6.
    15. Governmental Affairs Committee Press Release: Thompson 
Details $220 Billion in Government Waste (January 24, 2000).
    16. Financial Management: Improper Payments Reported in 
Fiscal Year 1999 Financial Statements, GAO/AIMD-00-261R (July 
27, 2000).
    17. Treasury Department IG for Tax Administration, 
Management Advisory Report: Administration of the Earned Income 
Credit, Ref. No. 2000-40-160 (September 2000), p. iii.
    18. Ibid.
    19. See Statement of Susan Gaffney before the Subcommittee 
on Housing and Transportation of the Senate Banking Committee 
on Management and Performance Issues Facing HUD (September 26, 
2000), pp. 10-11.
    20. Government Executive Daily Briefing, Agency 
Overpayments Rise Above $20 Billion, September 13, 2000.
    21. Department of Education Office of Inspector General, 
Semiannual Report to Congress No. 40, October 1, 1999-March 31, 
2000, p. 15.
    22. Financial Management: Education's Financial Management 
Problems Persist, GAO/T-AIMD-00-180 (May 24, 2000), pp. 1, 3.
    23. Observations on the Department of Education's Fiscal 
Year 1999 Performance Report and Fiscal Year 2001 Performance 
Plan, GAO/HEHS-00-128R (June 30, 2000), p. 2.
    24. Section 484(q) of the Higher Education Act, as amended, 
20 U.S.C. Sec. 1091(q).
    25. Financial Management: Federal Financial Management 
Improvement Act Results for Fiscal Year 1999, op cit. note 5, 
p. 42.
    26. Reorganization Plan No. 2 of 1970, 31 U.S.C. Sec. 501 
note.
    27. 31 U.S.C. Sec. 502(c).
    28. 136 Cong. Rec. 35767-68.
    29. See generally, OMB's Draft Strategic Plan for FY 2001-
2005 and a letter from Sally Katzen dated August 8, 2000, 
transmitting the Draft Plan to Chairman Thompson.
    30. See Budget of the U.S. Government, FY 2001, pp. 294-
295.
    31. Financial Management: Increased Attention Needed to 
Prevent Billions in Improper Payments, op cit. note 14, p. 42.
    32. Benefit and Loan Programs: Improved Data Sharing Could 
Enhance Program Integrity, GAO/HEHS-00-119 (September 2000).
    33. Id., pp. 43-44.
    34. Governmental Affairs Committee Press Release: Medicare 
Paying for Health Care for the Dead, March 13, 2000.
    35. OMB Circular A-50.
    36. 31 U.S.C. Sec. 720.
    37. See Department of the Interior Fiscal Year 2001 Annual 
Performance Plan, p. 101.
    38. The private sector organizations were Boeing, the Chase 
Manhattan Bank, General Electric, Hewlett-Packard, Owens 
Corning, and Pfizer. The State governments were Massachusetts, 
Texas, and Virginia.
    39. Executive Guide: Creating Value Through World-class 
Financial Management, GAO/AIMD-00-134 (April 2000).

                                APPENDIX

Governmental Affairs Committee's Estimate of Government Waste, Fraud and
                Abuse as Documented in GAO and IG Reports
------------------------------------------------------------------------
                                                        Explanation and
            Amount                      Agency             Reference
------------------------------------------------------------------------
$1.3 billion..................  Agriculture            Reported Food
                                                        Stamp Program
                                                        overpayments for
                                                        FY 1999. (GAO/
                                                        AIMD-00-261R, p.
                                                        4)
$6.5 million..................  Agriculture            Improper research
                                                        expenditures.
                                                        (Agriculture IG
                                                        letter, 11/29/
                                                        99, encl., pp. 5-
                                                        6)
$4.8 million..................  Commerce               National
                                                        Technical
                                                        Information
                                                        Service (NTIS)
                                                        cumulative
                                                        losses, FY 1995-
                                                        98. (Commerce IG
                                                        letter, 12/13/
                                                        99, encl., p.
                                                        16)
$1.9 million..................  Commerce               Amount the
                                                        National Oceanic
                                                        and Atmospheric
                                                        Administration
                                                        (NOAA) spends
                                                        annually on its
                                                        in-house
                                                        aircraft above
                                                        comparable
                                                        private sector
                                                        costs. (Commerce
                                                        IG letter, 12/13/
                                                        99, encl., p.
                                                        19)
$14 billion...................  Defense                DOD's inventories
                                                        contain $11
                                                        billion for
                                                        which Defense
                                                        has no need; the
                                                        Navy wrote off
                                                        $3 billion of
                                                        inventory as
                                                        lost in transit.
                                                        (GAO/T-NSIAD-99-
                                                        83, pp. 4, 7-8)
$1.5 billion..................  Defense                New inventory
                                                        ordered by DOD 1
                                                        year in excess
                                                        of its current
                                                        needs. (GAO/T-
                                                        NSIAD-99-83, pp.
                                                        5)
$500 million..................  Defense                Potential annual
                                                        fraud and abuse
                                                        in the military
                                                        health care
                                                        program,
                                                        TRICARE. (GAO/
                                                        HEHS-99-142, p.
                                                        2)
$984 million..................  Defense                Between fiscal
                                                        years 1994 and
                                                        1998, DOD
                                                        contractors
                                                        voluntarily
                                                        returned $984
                                                        million that DOD
                                                        had erroneously
                                                        paid them. (GAO/
                                                        AIMD-00-10, p.
                                                        18)
$25.3 million.................  Defense                Military
                                                        Retirement Fund
                                                        payments for FY
                                                        1999. (GAO/AIMD-
                                                        00-261R, p. 4)
$3.3 billion..................  Education              In FY 1997, the
                                                        Federal
                                                        Government paid
                                                        out more than
                                                        $3.3 billion to
                                                        make good its
                                                        guarantee on
                                                        defaulted
                                                        student loans.
                                                        (GAO/OCG-99-5,
                                                        p. 7)
------------------------------------------------------------------------

Governmental Affairs Committee's Estimate of Government Waste, Fraud and
          Abuse as Documented in GAO and IG Reports--Continued
------------------------------------------------------------------------
                                                        Explanation and
            Amount                      Agency             Reference
------------------------------------------------------------------------
$177 million..................  Education              Estimated Pell
                                                        Grant
                                                        overpayments
                                                        during 1995-96
                                                        caused by under-
                                                        reporting of
                                                        income.
                                                        (Education IG
                                                        letter, 12/8/99,
                                                        encl., p. 6; IG
                                                        Report ACN: 11-
                                                        50001 (January
                                                        1997))
$10 billion...................  Energy                 From 1980 through
                                                        1996, the
                                                        Department of
                                                        Energy
                                                        terminated
                                                        before
                                                        completion 31
                                                        major systems
                                                        acquisition
                                                        projects after
                                                        expenditures of
                                                        over $10
                                                        billion. (GAO/
                                                        OCG-99-6, p. 12)
$1.7 billion..................  Energy                 Estimated cost
                                                        overruns in
                                                        building the
                                                        National
                                                        Ignition
                                                        Facility caused
                                                        by poor lab
                                                        management and
                                                        inadequate DOE
                                                        oversight. (GAO/
                                                        RCED-00-141, pp.
                                                        4-5)
$13.5 billion.................  HHS                    Estimate of
                                                        Medicare fee-for-
                                                        service
                                                        overpayments for
                                                        FY 1999. (GAO/
                                                        AIMD-00-261R, p.
                                                        4)
$2.2 billion..................  HHS                    State Medicaid
                                                        financing
                                                        schemes. (HCFA
                                                        estimate for FY
                                                        2000). GAO/T-
                                                        HEHS-00-193, p.
                                                        2)
$1 billion....................  HHS                    Improper Medicare
                                                        payments in 1998
                                                        for
                                                        rehabilitation
                                                        services. (HHS
                                                        IG letter, 12/7/
                                                        99, encl., pp. 7-
                                                        8)
$600 million..................  HHS                    Medicare fee-for-
                                                        service cost
                                                        reports for FY
                                                        1999. (GAO/AIMD-
                                                        00-261R, p. 4)
$935 million..................  HUD                    HUD estimates
                                                        erroneous rent
                                                        subsidy payments
                                                        for FY 1999.
                                                        (GAO/AIMD-00-
                                                        261R, p. 4)
$1.2 billion..................  Interior               Revenues lost as
                                                        a result of
                                                        changes in
                                                        Interior
                                                        irrigation
                                                        assistance
                                                        repayment
                                                        policies.
                                                        (Interior IG
                                                        letter, 12/1/99,
                                                        encl., p. 17)
$43 million...................  Interior               Amount by which
                                                        fluid mineral
                                                        royalties may
                                                        have been
                                                        underpaid.
                                                        (Interior IG
                                                        letter, 12/1/99,
                                                        encl. 1, p. 21)
$25.8 million.................  Interior               Losses identified
                                                        in various IG
                                                        reviews based on
                                                        fees that
                                                        Interior failed
                                                        to collect or
                                                        misused.
                                                        (Interior IG
                                                        letter, 12/1/99,
                                                        encl., pp. 16-
                                                        17)
$18.2 million.................  Interior               Losses on land
                                                        exchanges that
                                                        did not comply
                                                        with applicable
                                                        requirements.
                                                        (Interior IG
                                                        letter, 12/1/99,
                                                        encl., p. 23)
$142.3 million................  Labor                  Unemployment
                                                        Insurance
                                                        payments for FY
                                                        1999. (GAO/AIMD-
                                                        00-261R, p. 4)
$19.2 million.................  Labor                  Federal
                                                        Employees'
                                                        Compensation Act
                                                        payments for FY
                                                        1999. (GAO/AIMD-
                                                        00-261R, p. 4)
$708 million..................  NASA                   Cumulative cost
                                                        overruns on the
                                                        International
                                                        Space Shuttle.
                                                        (NASA IG letter,
                                                        12/1/99, encl.,
                                                        p. 13)
$30.5 million.................  OPM                    Cost of 1%
                                                        premium
                                                        surcharge OPM
                                                        has paid
                                                        carriers (so
                                                        far) to cover
                                                        their costs
                                                        resulting from
                                                        enrollment
                                                        discrepancies in
                                                        the Federal
                                                        Employees Health
                                                        Benefit Program.
                                                        This figure
                                                        represents the
                                                        government's
                                                        share; plan
                                                        subscribers have
                                                        paid another
                                                        $11.9 million.
                                                        (OPM IG letters
                                                        of 12/1/99,
                                                        encl., p. 4, and
                                                        of 1/7/00, p. 1)
$1.8 billion..................  OPM                    Estimated annual
                                                        losses to fraud,
                                                        waste, and abuse
                                                        in the Federal
                                                        Employees Health
                                                        Benefit Program.
                                                        (OPM IG letter,
                                                        12/1/99, encl.,
                                                        p. 6)
$16.2 million.................  SBA                    Cost of defaulted
                                                        SBA-guaranteed
                                                        loans for which
                                                        the guarantee
                                                        should not have
                                                        been honored.
                                                        (SBA IG letter,
                                                        12/2/99, encl.,
                                                        p. 1)
$3.7 million..................  SBA                    Cost of
                                                        additional
                                                        questionable SBA-
                                                        guaranteed
                                                        loans. (SBA IG
                                                        letter, 12/2/99,
                                                        encl., p. 4)
$84 million...................  SBA                    Value of Section
                                                        7(a) loans that
                                                        are under
                                                        criminal
                                                        investigation
                                                        and may have
                                                        been procured by
                                                        fraud. (SBA IG
                                                        letter, 12/2/99,
                                                        encl., p. 20)
$27 million...................  SBA                    Estimated loss to
                                                        the government
                                                        from loans
                                                        procured by
                                                        false
                                                        certifications.
                                                        (SBA IG letter,
                                                        12/2/99, encl.,
                                                        p. 1)
$1.578 billion................  SSA                    Supplemental
                                                        Security Income
                                                        (SSI)
                                                        overpayments for
                                                        FY 1999. (GAO/
                                                        AIMD-00-261R, p.
                                                        4)
------------------------------------------------------------------------

Governmental Affairs Committee's Estimate of Government Waste, Fraud and
          Abuse as Documented in GAO and IG Reports--Continued
------------------------------------------------------------------------
                                                        Explanation and
            Amount                      Agency             Reference
------------------------------------------------------------------------
$1.325 billion................  SSA                    Old Age and
                                                        Survivors
                                                        Insurance
                                                        overpayments for
                                                        FY 1999. (GAO/
                                                        AIMD-00-261R, p.
                                                        4)
$1.12 billion.................  SSA                    Reported
                                                        Disability
                                                        Insurance
                                                        overpayments for
                                                        FY 1999. (GAO/
                                                        AIMD-00-261R, p.
                                                        4)
$651.6 million................  Treasury               Revenues that
                                                        Customs and ATF
                                                        failed to
                                                        collect.
                                                        (Treasury IG
                                                        letter, 12/13/
                                                        99, encl., 1,
                                                        pp. 7-8)
$77 billion...................  Treasury/IRS           Unpaid taxes that
                                                        are supported by
                                                        taxpayer
                                                        agreements or
                                                        court rulings.
                                                        IRS expects to
                                                        collect about
                                                        $21 billion of
                                                        this amount.
                                                        (GAO/AIMD-00-76,
                                                        p. 85)
$9.3 billion..................  Treasury/IRS           Estimated annual
                                                        Earned Income
                                                        Tax Credit
                                                        (EITC)
                                                        overpayments for
                                                        tax year 1997.
                                                        (Treasury Tax IG
                                                        draft report
                                                        dated August 11,
                                                        2000, p. 30)
$8 million....................  VA                     Estimated annual
                                                        benefit
                                                        overpayments
                                                        from failure to
                                                        deduct
                                                        disability
                                                        compensation
                                                        from military
                                                        reserve pay. (VA
                                                        IG letter, 12/10/
                                                        99, encl., p. 6)
$103.9 million................  VA                     Estimated
                                                        erroneous
                                                        benefit payments
                                                        to prisoners and
                                                        deceased
                                                        persons.(VA IG
                                                        letter, 12/10/
                                                        99, encl., pp. 6-
                                                        7)
$260 million..................  VA                     Estimated savings
                                                        that could be
                                                        realized from
                                                        improved debt
                                                        management. (VA
                                                        IG letter, 12/10/
                                                        99, encl., p.
                                                        10)
$247 million..................  VA                     Estimated future
                                                        savings that
                                                        could be
                                                        realized by
                                                        better oversight
                                                        of Federal
                                                        Employees
                                                        Compensation Act
                                                        claims. (VA IG
                                                        letter, 12/10/
                                                        99, encl., p.
                                                        12)
$74 billion...................  Multiple agencies      At the close of
                                                        fiscal year
                                                        1999, delinquent
                                                        non-tax debt
                                                        totaled $74
                                                        billion. This is
                                                        a $22.1 billion
                                                        increase from FY
                                                        1996. (GAO/AIMD-
                                                        00-76, 2/29/00,
                                                        p. 85)
$6.5 billion..................  Multiple agencies      According to
                                                        Congressional
                                                        Budget Office
                                                        cost estimates,
                                                        a series of GAO
                                                        recommendations
                                                        to improve the
                                                        economy and
                                                        efficiency of
                                                        various
                                                        government
                                                        operations would
                                                        save $6.5
                                                        billion in
                                                        annual budget
                                                        authority. (GAO/
                                                        OCG-99-26)
$514 million..................  Multiple agencies      Reported
                                                        overpayments for
                                                        Veterans
                                                        Benefits,
                                                        Unemployment
                                                        Insurance, and
                                                        others for FY
                                                        1998. (GAO/AIMD-
                                                        00-10, p. 6)
$92 million...................  Multiple agencies      Estimated annual
                                                        savings that
                                                        could be
                                                        realized by
                                                        consolidating
                                                        most Federal in-
                                                        house aircraft
                                                        operations.
                                                        (Commerce IG
                                                        letter, 12/13/
                                                        99, encl., p.
                                                        19)
===============================
$228.6 billion Total..........
------------------------------------------------------------------------

      
          MANAGEMENT CHALLENGES FACING THE NEW ADMINISTRATION

                  PART 2: FEDERAL WORKFORCE CHALLENGES

                              ----------                              

                          OVERVIEW AND SUMMARY

    This is one in a series of transition reports that 
describes core capacity problems facing the Federal Government, 
discusses their nature and root causes, and proposes ways of 
solving them. The reports are intended to stimulate action on 
the part of the incoming Administration and Congress, and to 
provide them a framework for this important task. This report 
deals with Federal workforce challenges. Other reports address 
financial management and the need for results-oriented 
governance at the Federal level.
    The Federal Government's workforce problems have received 
little attention, although many experts recognize that they are 
reaching an increasingly critical stage. Most agencies face 
serious challenges in hiring, retaining, developing, and 
motivating a workforce with the right skills to achieve their 
mission results. These problems have been exacerbated in recent 
years by random ``downsizing'' that reduced agency staffs 
without regard to the skills, experience, and performance of 
departing employees in relation to agency missions. Typically, 
downsizing was accomplished by ``buyouts'' and early retirement 
offers to experienced employees--thereby causing significant 
``brain drain.'' There is mounting evidence that workforce 
deficiencies at agencies limit their capacity to serve the 
public and make them more vulnerable to fraud, waste, and 
mismanagement.
    The Senate Committee on Governmental Affairs is responsible 
for overseeing the government-wide application of the Federal 
merit system and human resources policies. The current civil 
service system, a product of the 1978 Civil Service Reform Act 
of 1978, was created in large part to further standardize some 
human resource requirements and incorporate into law the merit 
system principles of fairness, equity, and earned achievement 
in public employment. There is broad consensus that this system 
lacks the flexibility necessary to meet today's workforce 
needs. Such flexibility would enable individual workers and 
their agencies to focus less on conforming to centralized human 
resource requirements and more on developing human resource 
policies and practices that support their own mission-related 
needs.
    One expert observed that the current system ``underwhelms 
at almost every task it undertakes . . . It is slow in the 
hiring, almost useless in the firing, overly permissive in the 
promoting, [and] out of touch with actual performance in the 
rewarding . . .'' 1 Agencies also suffer from 
inefficient and wasteful organizational structures with bloated 
hierarchies and excessive layers of management. Even more 
fundamentally, the basic civil service model--built around a 
30-year career from entry level to retirement with virtually 
guaranteed job security--does not fit a contemporary workforce 
that favors greater mobility and has different motivations than 
in the past.
    Strategic workforce planning is essential to the success of 
private sector organizations. They realize the importance of 
having employees with the right skills and abilities to 
accomplish their missions. However, Federal workforce issues 
have been neglected for years. The Comptroller General 
describes workforce management as the ``missing link'' in 
efforts to improve the Federal Government's performance and 
accountability. The Administration, especially the Office of 
Management and Budget (OMB), is only now acknowledging the 
seriousness of the government's workforce problems. 
Furthermore, the agency charged with administering the Federal 
Government's personnel laws, the Office of Personnel Management 
(OPM), has lacked the requisite leadership from the 
Administration to address successfully these problems. Most 
agencies are far behind the curve in addressing these problems. 
Therefore, the problems require immediate attention and 
concerted action. The following are a few recommendations to 
begin to address these problems:

     The Administration must provide much greater 
leadership in addressing critical workforce problems. In 
particular, it needs to develop specific remedial plans for 
which they and the agencies can be held accountable. With this 
greater leadership, the Administration would encourage OMB and 
OPM to move away from the status quo and consider personnel 
reforms in an open and objective way. It is obvious to all that 
the current system is broken. OPM should become a partner in 
developing solutions.

     Agencies need to undertake comprehensive 
workforce planning to: (1) determine their workforce needs in 
relation to their current functions; (2) assess how their 
existing workforce compares to their needs; and (3) develop 
strategies to bridge the gaps between the workforce they need 
and the one they have.

     In accordance with OMB guidance, agencies should 
establish Results Act performance goals and measures to address 
their most serious workforce problems and thereby assume 
accountability for solving them. Agencies should start with 
problems that lend themselves to immediate action such as 
improving recruitment practices and linking employee 
performance appraisals to performance results. (See below.)

     OPM should ensure that agencies' program managers 
fully understand and use the many personnel flexibilities that 
are now available to them under current laws and regulations. 
As noted above, OPM also should help develop changes to current 
laws and regulations to ensure that agencies can effectively 
obtain and manage the workforces they need to achieve their 
mission results.

     Agencies should directly link performance 
assessments and rewards for agency managers to the agency's 
performance results. Steps should be taken as well to ensure 
that all agency employees are accountable for their performance 
and are rewarded based on their performance.

     Agencies should take immediate action to reduce 
recruiting and hiring delays and provide better feedback to job 
applicants.

    The foregoing recommendations are just a start toward 
resolving the Federal Government's critical workforce problems. 
Additional recommendations are sure to emerge if these long 
neglected problems get the attention they clearly require.

                      THE FEDERAL WORKFORCE CRISIS

    No longer a ``quiet crisis.'' For some time now, experts 
have referred to a ``quiet crisis'' in the Federal public 
service. Clearly, the workforce problems confronting the 
Federal Government have reached an even more critical stage in 
recent years. A workforce capable of conducting the Federal 
Government's business is crucial to the effective 
implementation of government policies. One leading expert, Paul 
C. Light of The Brookings Institution, observed:

        Ultimately, effective governance is impossible if 
        government cannot attract talented citizens to serve at 
        all levels of the hierarchy. As Alexander Hamilton 
        warned 200 years ago in The Federalist Papers, ``a 
        government ill executed, whatever it may be in theory, 
        must be in practice a bad government.'' Citizens cannot 
        have confidence in the integrity of the democratic 
        process if their leaders cannot honor the promises they 
        make, but those leaders cannot honor the promises they 
        make if government cannot attract the talent necessary 
        to both draft and execute the laws. 2

    Paul Light paints a bleak picture of a current Federal 
personnel system ``that underwhelms at almost every task it 
undertakes.'' Specifically:

        It is slow in the hiring, almost useless in the firing, 
        overly permissive in the promoting, out of touch with 
        actual performance in the rewarding, penurious in the 
        training, and utterly absent in the management of a 
        vast and hidden workforce of contractors and 
        consultants who work side by side, desk by desk with 
        the civil service. 3

    The impact of non-strategic ``downsizing.'' The staffs of 
many Federal agencies suffer from imbalances in skills and 
experience as well as structural problems. The spate of 
``downsizing'' during the 1990's substantially reduced the 
number of regular, full-time Federal employees. Whether this 
downsizing really made the Federal Government much smaller is 
doubtful. According to Paul Light, the ``era of big 
government'' is still very much with us. 4 It 
clearly did not make the government smarter. The downsizing was 
accomplished indiscriminately through attrition, early 
retirements, and ``buyouts'' that resulted in random, across-
the-board staff reductions. Little or no consideration was 
given to the relative impact of the jobs eliminated--or the 
skills, experience, or performance of departing employees--on 
accomplishing agency missions. There is no evidence that this 
downsizing improved the efficiency or effectiveness of the 
Federal Government. On the contrary, the evidence suggests that 
the non-strategic way in which downsizing was accomplished 
actually detracted from the capacity of agencies to carry out 
essential functions and made them more vulnerable to fraud, 
waste, and mismanagement.
    The General Accounting Office (GAO) found that lack of 
strategic planning during the initial phases of downsizing 
threatened the ability of some agencies to achieve their 
missions. The Comptroller General recently testified that ``it 
is by no means clear that the current workforce is adequately 
balanced to properly execute agencies' missions today, nor that 
adequate plans are in place to ensure the appropriate balance 
in the future.'' 5 His testimony illustrates the 
perverse consequences of non-strategic downsizing. Agencies 
hoped to offset the loss of skilled employees by greater 
reliance on information technology (IT). However, due to staff 
reductions, they lack the skilled employees needed to take 
advantage of technology, and they are at a competitive 
disadvantage in hiring IT professionals. They also appear to 
lack the necessary in-house expertise to oversee IT work that 
they have outsourced to contractors. 6
    A top-heavy Federal workforce. Downsizing also has 
distorted the shape of the Federal workforce, making it more 
top heavy and less efficient. Not surprisingly, the greatest 
impact of downsizing occurred at the lowest levels of 
government. As Paul Light puts it, ``The Federal Government 
eliminated primarily the jobs that were the easiest to cut, 
meaning the ones with the highest attrition and the lowest 
political profile.'' 7 While middle management 
levels ostensibly were reduced, this often amounted to nothing 
more than changing titles. Thus, in reality, the number of 
political appointees, senior executives, and middle managers 
remained steady while layers of hierarchy actually expanded.
    This effect is apparent in the title glut of recent years. 
From 1993 to 1998, a number of new senior level positions were 
established with such titles as ``deputy to the deputy 
secretary,'' ``principal assistant deputy under secretary,'' 
and ``associate principal deputy assistant secretary.'' 
8 While contributing to greater layering and 
diffused accountability, high numbers of political appointees 
also are expensive. According to the Congressional Budget 
Office, capping the number of political appointees at 2,000 
would save the taxpayers about $900 million in salary costs 
over 10 years. 9

             HOW WORKFORCE PROBLEMS IMPEDE AGENCY MISSIONS

    The Comptroller General regards workforce (or what he 
refers to as ``human capital'') problems as an impending crisis 
for the Federal Government. He has labeled human capital 
management as the ``missing link'' in efforts to improve the 
Federal Government's performance and accountability. 
10 He adds that human capital management is likely 
to emerge as a new government-wide problem area when GAO 
updates its ``high-risk list'' of Federal program activities 
most vulnerable to fraud, waste, abuse, and mismanagement:

        [T]he widespread lack of attention to strategic human 
        capital management may be creating a fundamental 
        weakness in Federal management, possibly even putting 
        at risk the Federal Government's ability to 
        efficiently, economically, and effectively deliver 
        products and services to the taxpayers in the future. 
        These shortcomings in the Federal Government's human 
        capital management systems could well earn them GAO's 
        high-risk designation when the next High Risk Series is 
        issued in 2001. 11

    Likewise, Inspectors General (IGs) at nine major Federal 
agencies have listed workforce problems as one of the top 10 
most serious management challenges that their agencies face. 
12 Staffing problems underlie many other IG-
identified top 10 management challenges at a number of major 
agencies, such as the lack of expertise to effectively oversee 
Federal contracts and grants and to provide effective service 
to the public.
    GAO and IG reports are replete with specific examples of 
how staffing problems adversely affect the ability of Federal 
agencies to accomplish their missions.
    Department of Housing and Urban Development (HUD). ``An 
insufficient mix of staff with the proper skills'' was a key 
factor causing GAO to designate HUD programs across the board 
as high-risk. 13 Along the same lines, the HUD IG 
recently testified:

        The adequacy of staff resources in the Department has 
        long been a concern of the OIG and a root cause of many 
        of HUD's material weaknesses. Our audits have 
        consistently found a mismatch between the number and 
        complexity of HUD's programs and the capability of HUD 
        staff to administer those programs. 14

    These longstanding workforce problems were exacerbated by 
random downsizing at HUD, as well as more recent staffing 
upheavals brought on by the Department's ``community builders'' 
initiative. Despite the apparent lack of staff capacity to 
effectively carry out its existing programs, HUD consistently 
seeks to add more programs to the workload of its already 
beleaguered staff.
    Social Security Administration (SSA). The IG at SSA has 
noted that the combined effect of staff downsizing and hiring 
restrictions, on the one hand, and the increasing volume and 
complexity of caseloads on the other, threatens SSA's ability 
to provide quality service to the public:

        The quality of service SSA provides to its customers 
        continues to be a challenge facing the Agency. . . . 
        The [Social Security Advisory] Board expressed concern 
        about the effect of personnel downsizing and hiring 
        restrictions on SSA's service delivery mechanism. Such 
        constraints limit the Agency's ability to strengthen 
        and revitalize employee ranks by bringing in new 
        employees with new skills. This condition exists at the 
        same time that caseloads continue to grow in volume and 
        complexity. . . . The effects of low staffing levels 
        for the customer include: delays in scheduling 
        appointments; crowded reception areas; long waiting 
        times; and inadequate telephone service. At the same 
        time, the Agency is affected by attrition, high 
        turnover, and increased backlogs of pending actions. 
        15

    SSA's Performance Report for Fiscal Year 1999 confirms that 
it is falling short of many of its customer service performance 
goals.
    Patent and Trademark Office (PTO). Experts maintain that 
the combined effect of increasing applications and 
inexperienced staff at the Commerce Department's PTO has 
resulted in undeserving patents slipping through. This, in 
turn, poses a critical threat to an economy that runs on 
intellectual property. One expert was quoted as saying, 
``Patent quality in this country is a joke. It's getting 
worse.'' 16
    National Aeronautics and Space Administration (NASA). Last 
year, NASA lost all four of its spacecraft bound for Mars. This 
cost taxpayers hundreds of millions of dollars and brought the 
entire Mars program to a halt. These problems did not stem from 
the risks inherent in space exploration. Instead, they resulted 
from simple negligence resulting in part from inexperienced 
staff and inadequate oversight of contractors. Likewise, GAO 
reports that an insufficient staff with the proper 
qualifications poses threats to the performance and safety of 
NASA's space shuttle program. 17

        THE NEED FOR FUNDAMENTAL CHANGES IN WORKFORCE MANAGEMENT

    Rethinking current systems. Solutions to our workforce 
problems will not come easily. For one thing, the Federal 
Government faces daunting recruiting challenges both at 
professional and leadership levels. In this regard, Paul Light 
observes:

        Sad to say, when young Americans are asked to picture 
        themselves in public service careers, particularly at 
        the Federal level, they picture themselves in deadend 
        jobs where seniority, not performance, rules. And when 
        more seasoned Americans are asked to picture themselves 
        in appointive office, they picture themselves in a 
        nomination and confirmation process characterized by 
        endless inspection, over-disclosure, and delays at both 
        ends of Pennsylvania Avenue. 18

    Clearly, the basic assumptions underlying the current civil 
service system no longer hold true today. In particular, we 
need to rethink our current civil service paradigm of a large 
and permanent Federal bureaucracy composed of cradle-to-grave 
careerists. We need to develop a new paradigm to fit a 
contemporary National workforce that features much greater 
mobility and very different motivations than in the past. In 
this regard, Paul Light states:

        Designed to sustain 30-year careers with one way in at 
        the entry level and one way out at retirement, the 
        government-centered public service is increasingly 
        unattractive to a workforce that will change jobs and 
        sectors frequently, and to workers who are much more 
        focused on challenging work than security. Gone are the 
        days when talented employees would endure hiring delays 
        and a mind-numbing application process to get an entry-
        level government job. Gone, too, are the days when 
        talented employees would accept slow but steady 
        advancement through towering government bureaucracies 
        in exchange for a 30-year commitment. In the midst of a 
        growing labor shortage, government is becoming an 
        employer of last resort, one that caters more to the 
        security-craver than the risk-taker. 19

    Comptroller General Walker also emphasizes the need to 
rethink our current approach to the Federal workforce in light 
of changing conditions:

        Changes in the demographics of the Federal workforce, 
        in the education and skills required of its workers, 
        and in basic Federal employment structures and 
        arrangements are all continuing to unfold. The Federal 
        workforce is aging; the baby boomers, with their 
        valuable skills and experience, are drawing nearer to 
        retirement; new employees joining the Federal workforce 
        today have different expectations from the generation 
        that preceded them. In response to an increasingly 
        competitive job market, Federal agencies will need the 
        tools and flexibilities to attract, hire, and retain 
        top-flight talent. . . . Agencies' employment 
        structures and working arrangements will also be 
        changing, and the workplace will need to accommodate a 
        greater mix of full-time, part-time, and temporary 
        workers; more contracting-out; less job security; and 
        the possibility of additional government downsizing and 
        realignments. 20

    Improving the basics. It will be difficult to overcome some 
of the challenges the Federal Government faces in attracting 
the kind of workforce it needs. The government does not do a 
good job even in areas that are readily within its control. A 
recent survey of new hires by the Federal Government's own 
Merit Systems Protection Board (MSPB) identified basic problems 
in the recruiting process. For example, respondents reported 
that the time between submission of an application and being 
scheduled for an interview was unreasonably long, as was the 
time between being told they had a job and being able to report 
for work. The respondents also complained of not receiving 
timely feedback, or receiving no feedback at all, on the status 
of their applications. Finally, they did not receive the 
quality of service they expected from Federal hiring personnel. 
Among other things, the MSPB recommended that agencies expedite 
their hiring processes and improve service to applicants. 
21

                      THE PRIVATE SECTOR CONTRAST

    Approaches to workforce management represent a stark 
contrast between the private sector and the Federal Government. 
The Federal Government has devoted little attention to 
workforce planning. As discussed previously, this lack of 
attention was most pronounced in the recent downsizing. 
Downsizing was nothing but a numbers game. Agencies simply 
reduced in-house staffing without reducing or streamlining any 
of their functions. By contrast, private sector firms take a 
strategic approach to workforce issues. They analyze which of 
their functions are important and effective, and which are not. 
They concentrate on improving the important things that they 
do. With regard to staffing, successful private sector 
organizations give very high priority to analyzing their 
workforce needs and ensuring that they are met. These firms 
systematically identify the skills and characteristics that 
their leaders and employees need to get the job done and make 
the investments needed to hire, develop, and retain a workforce 
that embodies and can sustain these competencies.
    In 1999, GAO surveyed private sector firms that are 
regarded as leaders in workforce or ``human capital'' 
management in order to identify common principles that underlay 
their success. GAO identified 10 such common principles in all, 
which included the following:

     Treat human capital management as being 
fundamental to strategic business management. Integrate human 
capital considerations when identifying the mission, strategic 
goals, and core values of the organization as well as when 
designing and implementing operational policies and practices.

     Hire, develop, and sustain leaders according to 
leadership characteristics identified as essential to achieving 
specific missions and goals. Identify the leadership traits 
needed to achieve high performance of mission and goals. Build 
and sustain the organization's pool of leaders through 
recruiting, hiring, development, retention, and succession 
policies and practices targeted at producing leaders with the 
identified characteristics.

     Hire, develop, and retain employees according to 
competencies. Identify the competencies--knowledge, skills, 
abilities, and behaviors--needed to achieve high performance of 
mission and goals, and build and sustain the organization's 
talent pool through recruiting, hiring, development, and 
retention policies and practices targeted at building and 
sustaining those competencies.

     Use performance management systems, including pay 
and other meaningful incentives, to link performance to 
results. Provide incentives and hold employees accountable for 
contributing to the achievement of mission and goals. Reward 
those employees who meet or exceed clearly defined and 
transparent standards of high performance.

     Measure the effectiveness of human capital 
policies and practices. Evaluate and make fact-based decisions 
on whether human capital policies and practices support high 
performance of mission and goals. Identify the performance 
return on human capital investments. 22

                LACK OF LEADERSHIP ON WORKFORCE PLANNING

    Unfortunately, the Executive Branch has paid scant 
attention to Federal workforce issues. There are some 
indications that its central management agencies--OMB and OPM--
are beginning to take the Federal Government's workforce crisis 
seriously. However, they are coming to these problems quite 
late and, as a result, most agencies remain far behind the 
curve.
    For the past 3 fiscal years, OMB has included a set of so-
called ``Priority Management Objectives'' (PMOs) as part of the 
Government-wide Performance Plan under the Government 
Performance and Results Act (``Results Act''). The PMOs are 
designed to capture the Federal Government's ``biggest 
management challenges.'' Although the PMOs for FY 1999 and 2000 
made no mention of Federal workforce problems, the FY 2001 
version includes a PMO entitled, ``Align Federal human 
resources to support agency goals.'' 23 It states 
that OPM will:

     design a ``prototype workforce planning model'' 
to help agencies strategically assess their human resources 
needs;

     ``work with'' agencies on labor-management 
initiatives to ``empower'' managers and employees to improve 
customer service and get mission results;

     encourage agencies to make better use of existing 
personnel flexibilities and submit any necessary legislative 
proposals.

    In addition, OMB's guidance for agency Annual Performance 
Plans under the Results Act for FY 2001 specifically addresses 
workforce issues for the first time. It states:

        The annual plan should include a performance goal(s) 
        covering major human resources strategies, such as 
        recruitment, retention, skill development and training, 
        and appraisals linked to program performance, that help 
        support the agency's programs. 24

    This new emphasis on workforce problems is encouraging. 
However, given the lack of emphasis in the past, most agencies 
have yet to address these problems. GAO has found that 
strategic workforce management was ``notably absent'' from 
agency Annual Performance Plans submitted under the Results 
Act. 25 Thus, there is much ground to make up.
    The lack of foresight and leadership on the part of the 
Administration is particularly striking. Indeed, one 
publication recently editorialized on OPM's late entry into 
Federal workforce problems:

        The Office of Personnel Management has watched for 
        years as the effects of downsizing and aging on the 
        Federal workforce have reached crisis proportions. Now 
        it comes out with a strategic plan to help agencies 
        improve retention, hiring, training and other human-
        resource issues. In short, the OPM plan is too late . . 
        . OPM should be leading the effort to address nagging 
        human-resource issues well before the crisis stage. 
        Unfortunately, it took until this year for the 
        Administration to acknowledge that human resources is a 
        government-wide management priority . . . What would 
        have been far more useful for the next Administration 
        and Congress when they take office in January is not a 
        list of ideas to solve problems, but a list of problems 
        that have been solved. 26

    Based on reviews of OPM's past Results Act plans and 
reports, GAO found that OPM has made little progress toward the 
following key outcomes:

     The Federal Government has an appropriately 
constituted workforce with the proper skills to carry out its 
missions.

     Federal employees are evaluated, rewarded, and 
otherwise held accountable for their performance. 27

    According to the GAO report, ``OPM officials said that 
fundamental changes to the performance management framework 
were not deemed necessary.'' 28 OPM has displayed 
resistance to change in the status quo. Its reaction to 
legislative reforms the Comptroller General proposed for GAO's 
own workforce is a case in point. GAO faces essentially the 
same workforce challenges as most other agencies. To its 
credit, GAO is actively attempting to resolve them. However, in 
a letter to Congress, OPM Director Lachance stated that the 
personnel reforms GAO sought, which the Comptroller General 
deemed essential to restructuring his workforce, ``would be 
inconsistent with the Administration's policies for the 
Executive Branch.'' She added, ``If Congress chooses to allow 
these changes for GAO, it must be clear in the legislative 
history that it has done so without precedence for the 
Executive Branch.'' 29

                         WHAT NEEDS TO BE DONE?

    The incoming Administration will have to give much higher 
priority to addressing the Federal Government's workforce 
crisis if it is to effectively execute its agenda and provide 
our citizens the essential services they need. The new 
Administration should start by charging OPM and OMB with 
developing new approaches that fit contemporary workforce 
trends as well as the needs of the Federal Government of the 
21st Century.
    This will require both long-term and short-term strategies. 
Over the long term, there is a clear need to reconsider what 
the Federal Government should do and how best to do it. As past 
problems with downsizing demonstrate, it makes no sense to 
restructure the Federal workforce without restructuring what 
the workforce needs to do. Only after current Federal 
operations and structures themselves have been redesigned and 
rationalized can the government's workforce be redesigned in a 
meaningful way. This is the difference between random 
``downsizing'' and strategic ``rightsizing.'' At the same time, 
the Federal Government needs to develop near-term approaches 
that can at least ameliorate the current crisis in Federal 
workforce management. The following recommendations cover some 
actions that need to be started immediately.
    Greater leadership on critical workforce problems. OMB and 
OPM have acknowledged the seriousness of the Federal 
Government's workforce problems. Now, the White House, OMB, and 
OPM, need to demonstrate strong executive leadership by putting 
forward specific proposals to address these problems. For 
example, OMB should develop more results-oriented goals to 
address workforce problems in the Government-wide Performance 
Plan. It also needs to include specific performance targets and 
measures to accompany those goals. For its part, OPM needs to 
be more open-minded and objective when it comes to changes in 
current personnel requirements. There is overwhelming sentiment 
that Federal personnel systems are fundamentally broken. They 
clearly don't enable agencies to align their workforces with 
their missions and to hold employees accountable for their 
performance. Yet, as illustrated by its reaction to GAO's 
proposals, OPM seems to be reflexively hostile to even modest 
reforms.
    Workforce planning. As discussed previously, many agencies 
face serious staff deficits and imbalances in terms of having 
the workforce they need to perform their current missions 
efficiently and effectively. An initial means of addressing 
this problem is for agencies to undertake comprehensive 
workforce planning. Specifically, agencies should: (1) 
determine their workforce needs (number of employees, skill, 
experience levels, etc.) in relation to their current 
functions; (2) assess how their existing workforce compares to 
their needs; and (3) develop strategies to bridge the gaps 
between the workforce they have and the workforce they need. 
These strategies should encompass hiring, training, 
reorganizing, and ``rightsizing'' as appropriate. OPM is in the 
early stages of developing an automated program that will 
assist agencies in some aspects of evaluating their workforces. 
However, OPM will have to do much more to produce a useful and 
comprehensive workforce planning model that agencies need.
    Performance goals to address workforce problems. In 
accordance with OMB guidance, agencies should establish Results 
Act performance goals and measures to address their most 
serious workforce challenges and to ensure accountability. 
Comprehensive performance goals and strategies probably need to 
await completion of the workforce planning referred to above. 
However, agencies can start with those areas that lend 
themselves to immediate action such as improving their 
recruitment practices and linking employee performance 
appraisals to performance results. (See below.)
    Personnel flexibilities. OPM must ensure that agencies are 
aware of, and fully understand how to use, those personnel 
flexibilities that are now available to them by law and current 
regulations. Given the complex and arcane nature of personnel 
requirements, it is clear that many agencies lack this 
understanding now. As stated above, OPM also needs to 
objectively consider and assist in developing changes to 
current personnel laws, rules, and practices to enable agencies 
to effectively develop, align, and manage their workforces so 
as to accomplish their mission results. The question is not 
whether fundamental changes are needed, but what they should 
be. Any increase in flexibility must be linked to 
accountability, as well as adherence to the merit system 
principles.
    Linking performance to results. Accountability for 
performance results will become a reality for Federal employees 
when it is directly linked to their individual performance 
assessments and rewards. Some agencies have already started 
doing this for senior managers. OPM recently issued regulations 
requiring such a linkage for Senior Executive Service staff. 
Obviously, it is more difficult to link agency performance 
results to the individual performance of non-managerial 
employees. However, much can be done to enhance performance 
accountability on the part of all employees.
    Improving recruiting practices. The Federal Government 
faces many serious recruitment and retention challenges, some 
of which it has limited ability to influence. However, as 
recent reports and a host of anecdotes indicate, the government 
brings some recruitment problems on itself that are entirely 
within its control and easily remedied. For example, the MSPB 
report suggests that the government could improve its 
recruiting chances significantly by reducing inordinate delays 
in hiring decisions and simply treating applicants with common 
courtesy.
      
                                ------                                --
----

    The foregoing recommendations are by no means exhaustive. 
Now that the Federal Government's workforce problems are 
finally getting attention, more solutions are sure to emerge. 
However, the above recommendations are intended to initiate 
discussion by all interested parties in improving the way the 
government works.

                                ENDNOTES

     1. Paul C. Light, The New Public Service (The Brookings 
Institution, 1999).
     2. Id. p. 2.
     3. Id.
     4. Another recent book by Paul C. Light, The True Size of 
Government (The Brookings Institution, 1999), puts the results 
of downsizing into perspective. He points out that most of the 
Federal employee reductions were defense-related and were 
attributable primarily to the end of the Cold War. He also 
notes that a substantial but unknown number of former Federal 
jobs migrated to a ``shadow'' Federal workforce made up of 
contractors, other private sector employees, and State and 
local government employees who are engaged, directly or 
indirectly, in carrying out Federal mandates.
     5. Human Capital: Managing Human Capital in the 21st 
Century, GAO/T-GGD-00-77 (March 9, 2000), p. 5.
     6. Id. pp. 4-5.
     7. Paul C. Light, The New Public Service, note 1, p. 8.
     8. Id. p. 10.
     9. Congressional Budget Office, Budget Options (March 
2000), p. 279.
    10. Id. p. 1.
    11. Id. p. 5.
    12. These agencies are: EPA, GSA, HUD, Justice, NASA, NSF, 
OPM, SSA, and USAID.
    13. See Major Management Challenges and Program Risks: 
Department of Housing and Urban Development, GAO/OCG-99-8 
(January 1999), pp. 7-8.
    14. See Statement of Susan Gaffney before the Subcommittee 
on Housing and Transportation of the Senate Banking Committee 
on Management and Performance Issues Facing HUD (September 26, 
2000), p. 3.
    15. Letter dated December 7, 1999, to Chairman Thompson 
from SSA IG James G. Huse, p. 8.
    16. Surge in Ideas, Turnover Swamps Patent Office, USA 
Today (September 11, 2000). The head of the Patent Office 
dismissed these concerns, stating: ``We're not overwhelmed . . 
. We're doing a great job.'' However, the agency's Performance 
Report confirms that there is a problem. The agency fell short 
of its goal for cycle time of inventions processed, and stated 
that achieving the goal in the future ``remains a challenge.'' 
The agency pointed to the need for hiring to meet increased 
workloads. Annual Program Performance Report of the Department 
of Commerce, FY 1999, pp. 99-100.
    17. Space Shuttle: Human Capital and Safety Upgrade 
Challenges Require Continued Attention, GAO/NSIAD/GGD-00-186 
(August 2000).
    18. Paul C. Light, The New Public Service, note 1, p. 2.
    19. Id. p. 1.
    20. Human Capital: Managing Human Capital in the 21st 
Century, note 4, p. 2.
    21. U.S. Merit Systems Protection Board, Competing for 
Federal Jobs: Job Search Experiences of New Hires (February 
2000), pp. vii-viii. The full report can be found at 
www.mspb.gov/studies/studies.html.
    22. Human Capital: A Self-Assessment Checklist for Agency 
Leaders, GAO/OCG-00-14G (September 2000), pp. 29-31.
    23. See Budget of the U.S. Government for Fiscal Year 2001, 
p. 298.
    24. OMB Circular No. A-11, Part 2, Sec. 220.9(d) (2000).
    25. Id. p. 11.
    26. OPM Plan: Too Little, Too Late, Federal Times (October 
30, 2000), p. 16.
    27. Observations on the Office of Personnel Management's 
Fiscal Year 1999 Performance Report and Fiscal Year 2001 
Performance Plan, GAO/GGD-00-156 (June 2000), pp. 3-4.
    28. Id., p. 4.
    29. Letters dated June 21, 2000, from OPM Director Janice 
R. Lachance to Representatives Steny Hoyer and Henry Waxman.
          MANAGEMENT CHALLENGES FACING THE NEW ADMINISTRATION

                  PART 3: RESULTS-ORIENTED GOVERNANCE

                              ----------                              

                          OVERVIEW AND SUMMARY

    This is one in a series of transition reports that describe 
core capacity problems facing the Federal Government, discuss 
their nature and root causes, and propose ways of solving them. 
The reports are intended to stimulate action on the part of the 
incoming Administration and Congress, and to provide them a 
framework for this important task. This report deals with the 
need for results-oriented governance at the Federal level. 
Other reports address financial management issues and Federal 
workforce challenges.
    Opinion polls consistently show low public trust and 
confidence in the Federal Government. Large segments of the 
public view Washington as inefficient, wasteful, and 
unresponsive to the people. Unfortunately, the Federal 
Government is plagued by management and performance problems 
that fuel the public's negative perceptions. For example:

     The General Accounting Office (GAO) ``high-risk'' 
list of Federal programs and activities most vulnerable to 
fraud, waste, and abuse has grown steadily from 14 problem 
areas in 1990 to 26 problem areas today. Only one problem area 
has been dropped from the high-risk list since 1995.

     Each year agency Inspectors General (IGs) list 
much the same problems as the ``top 10'' most serious 
challenges facing their agencies.

     Based on reviews of GAO and IG reports, the 
Governmental Affairs Committee documented hundreds of billions 
of dollars in Federal overpayments and other forms of waste and 
error.

     Duplication and fragmentation abound within the 
Federal Government. Multiple programs administered by multiple 
agencies pursue the same objectives. These so-called 
``crosscutting programs'' include 50 homeless assistance 
programs administered by eight agencies, 90 early childhood 
programs administered by 11 agencies, 160 job training programs 
administered by 15 agencies, and 342 economic development 
programs administered by at least 12 agencies.

     Policy-makers lack results-oriented performance 
measures and reliable performance data needed to determine what 
agencies and programs are accomplishing. Therefore, they can't 
make informed judgments about what's working and what's not; 
nor can they make meaningful comparisons among crosscutting 
programs.

    Results-oriented, performance-based management--a way of 
life for private sector businesses and many State and local 
governments--is virtually absent from Washington. Federal 
agencies and programs accumulate over time, are regularly 
funded, and are in effect perpetuated with little scrutiny of 
their performance. The attention they get tends to focus on 
their activities--amounts of money dispensed, numbers of 
regulations issued--rather than what results these activities 
achieve.
    The Government Performance and Results Act of 1993 
(``Results Act'') was designed to change the way Washington 
does business and restore public trust by instilling results-
oriented governance at the Federal level. Unfortunately, 7 
years after its enactment the Results Act has yet to get 
results. Many dedicated Federal employees have worked hard to 
make the Act work. However, neither the Administration nor most 
agency heads have demonstrated interest or leadership in moving 
toward results-oriented governance. The Office of Management 
and Budget (OMB) has done little to support this effort. 
Likewise, Congress has shown little inclination to factor 
performance results into its decisionmaking.
    A majority of agencies have yet to establish results-
oriented performance goals, and almost all agencies struggle to 
produce reliable performance data. To some extent, this is 
understandable since measuring Federal performance results is 
often quite challenging. However, many agencies have failed to 
use the Results Act effectively to track and improve their 
performance even for results that are largely within their 
control and more readily measured.
    We have reached a critical juncture in terms of 
implementing the Results Act and, more fundamentally, moving 
Washington toward results-oriented governance. Unless 
performance information is improved and actually used in 
Federal policy-making, Results Act plans and reports will 
degenerate into paperwork exercises and the Act will atrophy. 
If this happens, it is likely that Washington will continue to 
do business as usual with partisan ideology, special interests, 
and arguments over motivation framing the terms of policy 
debate. The fate of these initiatives rests squarely with the 
next Administration and Congress. The key is what the new 
President does. Congress can play a significant role in 
encouraging or discouraging results-oriented, performance-based 
government. However, only the President and his Administration 
can supply the unified leadership, overall perspective, and 
consistent focus to turn these concepts into reality. In 
particular, the new President needs to lead by example, 
embracing results-oriented governance by word and deed. If the 
President does this, OMB and the agencies are sure to follow 
suit. In all likelihood, Congress also will show much greater 
interest.
    There are several key actions that the incoming President 
and his team can take to move results-oriented governance to 
the next level.
    Use the Results Act to implement Presidential priorities. 
The Results Act offers the new President a powerful tool to 
help him articulate and achieve his policy agenda. 
Specifically, the President, through OMB, should start by 
developing concrete, results-oriented, and measurable 
performance goals that would define success in achieving a few 
of his priority policy objectives. These commitments should, in 
turn, be incorporated directly into performance goals for the 
annual Government-wide Performance Plan and for the Results Act 
plans of the responsible agencies. Annual Performance Reports 
would track progress toward achieving these goals. This 
approach would greatly enhance accountability and transparency 
in the implementation of key Presidential initiatives. It would 
also send a clear signal throughout Washington that the new 
President is intent on moving toward results-oriented 
governance.
    Use the Results Act to establish key expectations for 
agencies. A similar approach should be used to set performance 
goals defining the most important results that agencies are 
expected to achieve. Agency heads should be held personally 
accountable for achieving these goals, and the goals should be 
incorporated into the performance agreements of their program 
managers.
    Establish performance goals to resolve mission-critical 
management problems. Working in consultation with the IG, GAO, 
and OMB, each agency should: (1) systematically identify its 
mission-critical management problems; (2) establish specific 
performance goals to resolve them; and (3) if a particular 
problem does not lend itself to a specific performance goal, 
establish an alternative means of ensuring accountability for 
its resolution.
    Establish consistent performance goals for crosscutting 
programs. In the near term, this will encourage better 
coordination and management of crosscutting programs. In the 
longer term, it will provide the information needed to 
rationalize these programs by making informed choices among 
them based on their performance results. OMB must play a 
leadership role in these efforts.
    Enhance the credibility and usefulness of performance data. 
Agencies face daunting challenges in obtaining the data needed 
to measure their performance results. However, these challenges 
must be resolved if results-oriented governance is to become a 
reality. Some agencies, such as the Department of Education, 
are attempting to deal with their performance data challenges 
in ways that could serve as models for other agencies. OMB can 
and should help agencies develop strategies for resolving 
common data and performance management challenges. Agency IGs 
and GAO should also be a valuable source of assistance to 
agencies.
    Make sure that the doable gets done. While agencies must 
continue to work on the more challenging aspects of defining 
and measuring their performance results, this should not divert 
them from resolving less daunting challenges. Agencies can and 
must do a better job of tracking results in those areas that 
most readily lend themselves to performance measurement and 
accountability.
    Use performance information in decisionmaking. Even if 
Results Act products are improved to be more useful tools, 
these reports must actually be used to shift the terms of 
debate in Washington from intentions to results. The 
Administration and Congress must work together to 
systematically integrate performance information into funding 
and other programmatic decisions. Reliable performance data 
should be brought to bear on all aspects of Federal policy 
development and execution, including authorization, budgeting 
and appropriations, and oversight. Both the President and 
Congress can take specific steps to encourage the integration 
of performance data into decisionmaking.
    For his part, the President, acting through OMB, should:

     Insist that performance data be incorporated into 
annual budget requests and that the annual budget demonstrate, 
in a clear and transparent way, how performance results were 
factored into budget decisions.

     Require that all legislative proposals for new 
programs and program reauthorizations that the Executive Branch 
submits to Congress: (1) include specific results-oriented 
performance goals and measures; (2) include, for 
reauthorizations, information on past performance results; (3) 
be subject to sunset; and (4) be accompanied by an explanation 
of how these proposals relate to, and add value to, any 
existing programs having similar objectives.

     Require that major rules incorporate specific 
results-oriented performance goals and measures, as well as 
sunset provisions, as a means of holding them accountable for 
performance results.

    For its part, the Congress and its committees should:

     Conduct regular and systematic oversight of 
program performance. Enactment of biennial budgeting would 
greatly facilitate enhanced oversight efforts.

     Scrutinize performance results in authorization, 
appropriations, and oversight hearings.

     Clearly and explicitly indicate how performance 
results are reflected in authorization and funding decisions.

     Adopt Senate and House rules precluding 
consideration of program authorization and reauthorization 
legislation involving substantial resources unless that 
legislation: (1) includes specific results-oriented performance 
goals and measures; (2) includes, for reauthorizations, 
information on past performance results; (3) is subject to 
sunset; and (4) is accompanied by an explanation of how the 
programs proposals relate to, and add value to, any existing 
programs having similar objectives.

     Consistently enforce existing Senate and House 
rules against funding unauthorized programs.

     Disapprove under the Congressional Review Act 
major rules submitted to Congress that do not include results-
oriented performance goals and measures and sunset provisions.

    Use performance information to improve service to the 
public.  Agencies should be required to systematically conduct 
objective and meaningful customer surveys and to use the 
results to adopt tangible performance goals to improve customer 
service. OMB and Congress should oversee this process.
    Revive and strengthen the Reorganization Act. There may 
well be a need for a long-term comprehensive review of current 
Federal agencies in order to identify ways to reduce 
duplication and overlap, eliminate unneeded programs and 
functions, and perform needed functions more efficiently and 
effectively. A more immediate way to at least partially address 
duplication and overlap is to reinstate the Reorganization Act. 
This Act authorized the President to submit reorganization 
plans to Congress that proposed to transfer, consolidate, and 
within certain limits abolish, agency functions.

                THE NEED TO IMPROVE FEDERAL PERFORMANCE

    Low public trust in government. Public opinion polls 
consistently show that Americans lack confidence in the Federal 
Government. They tend to regard Washington as ineffective, 
wasteful, and unresponsive. According to one survey, 84 percent 
of Americans believe the Federal Government wastes at least 5 
cents of every dollar it spends; 26 percent believe at least 25 
cents of every dollar is wasted; and 19 percent believe half of 
the government's expenditures are wasted. 1 Another 
survey asked what terms best described their perceptions of the 
Federal Government. Only 6 percent of the respondents chose 
``efficient'' and only 5 percent chose ``responsive to the will 
of the people.'' 2
    A recent survey performed for the Federal Government 
itself, which was spearheaded by Vice President Gore's National 
Performance Review (NPR), found similar results. According to 
this survey, ``customer satisfaction'' levels for Federal 
agencies were, in the aggregate, only slightly below those of 
private sector service organizations. However, quality and 
performance expectations for Federal agencies were much lower 
than for the private sector organizations. 3
    The public's attitude toward the Federal Government seems 
to be more one of frustration than anger. Americans want the 
Federal Government to work, but do not believe that it does. 
Low public confidence in the Federal Government contrasts with 
the generally positive view most people have of their own well 
being and the strong state of the economy. Evidently, the 
public does not credit the Federal Government for the good 
things that are happening to them.
    Persistent major management problems undermine Federal 
performance. Unfortunately, there is ample evidence to support 
the public's lack of confidence in the performance of the 
Federal Government. The GAO and agency IGs continually report 
on hundreds of major management and performance problems that 
plague most Federal agencies and persist year after year. One 
leading barometer of the Federal Government's performance 
problems is GAO's ``high-risk list,'' which tracks those 
Federal programs and activities that are most vulnerable to 
fraud, waste, and mismanagement. GAO began its high-risk list 
in 1990 with 14 problem areas. The list has expanded with every 
subsequent update. The current high-risk list, issued in 1999, 
consists of 26 problem areas. 4 The list keeps 
expanding because while new areas are regularly added, few 
qualify for removal. Only one high-risk area has been removed 
since 1995. Ten of the 14 original high-risk areas from 1990 
are still on the list today. The following table shows the 
current high-risk areas and the year each was placed on the 
list:

------------------------------------------------------------------------
                                                                 Year
               HIGH-RISK PROGRAM OR ACTIVITY                  designated
------------------------------------------------------------------------
          Providing Basic Financial Accountability
1. DOD Financial Management................................     1995
2. Forest Service Financial Management.....................     1999
3. FAA Financial Management................................     1999
4. IRS Financial Management................................     1995
5. IRS Receivables.........................................     1990

 Ensuring Major Technology Investments Improve Services
1. Air Traffic Control Modernization.......................     1995
2. Tax Systems Modernization...............................     1995
3. National Weather Service Modernization..................     1995
4. DOD Systems Development and Modernization Efforts.......     1995

Resolving Serious Information Security Weaknesses..........     1997

Addressing Urgent Year 2000 Computing Challenge............    1997

 Managing Large Procurement Operations More Efficiently
    1. DOD Inventory Management............................     1990
    2. DOD Weapon Systems Acquisition......................     1990
    3. DOD Contract Management.............................     1992
    4. Department of Energy Contract Management............     1990
    5. Superfund Contract Management.......................     1990
    6. NASA Contract Management............................     1990

      Reducing Inordinate Program Management Risks
    1. Medicare............................................     1990
    2. Supplemental Security Income........................     1997
    3. IRS Tax Filing Fraud................................     1995
    4. DOD Infrastructure Management.......................     1997
    5. HUD Programs........................................     1994
    6. Student Financial Aid Programs......................     1990
    7. Farm Loan Programs..................................     1990
    8. Asset Forfeiture Programs...........................     1990
    9. The 2000 Census.....................................     1997

------------------------------------------------------------------------
Source: GAO.

    In its most recent report on the GAO the current 26 high-
risk problem areas, GAO noted the following:

        Collectively, these areas affect almost all of the 
        government's annual $1.7 trillion in revenue and span 
        critical government programs and operations from 
        certain benefit programs to large lending operations, 
        major military and civilian agency contracting, and 
        defense infrastructure. Lasting solutions to high-risk 
        problems offer the potential to save billions of 
        dollars, dramatically improve services to the American 
        public, and strengthen confidence in the accountability 
        and performance of our national government. 
        5

    When asked why so little progress has been made in 
resolving high-risk problems, the Comptroller General 
responded:

        In part, it is a matter of changing organizational 
        cultures and priorities and ensuring accountability for 
        results. Such accountability must reside with top 
        agency leadership and should be reinforced by the 
        Office of Management and Budget (OMB) and Congressional 
        oversight. . . . The sustained attention and commitment 
        of top leadership is key to ensuring that good plans 
        are put in place to get at these high-risk problems and 
        that tenacious follow-through on the difficult task of 
        implementing actions in a detailed, comprehensive 
        manner is completed. . . . These problems can be turned 
        around but it will require a different level of 
        commitment than has been exhibited in the past. 
        6

    A similar pattern of serious and persistent management 
problems emerges from the work of agency IGs. For each of the 
past 3 years, the IGs of the 24 major Federal agencies have 
reported to Congress on the ``top 10'' most serious performance 
problems facing their agencies. Like the GAO high-risk areas, 
the top 10 problems identified by the IGs remain much the same 
from year to year. 7
    Duplication and fragmentation in Federal program 
activities. Federal agencies and programs have mushroomed over 
time, evolving in a largely random manner in response to the 
real or perceived needs of the moment. Consequently, 
duplication and fragmentation abound. Literally hundreds of 
different so-called ``crosscutting'' programs and activities 
are directed at the same problems. There is an obvious need to 
bring some order out of this chaos. As former Comptroller 
General Charles Bowsher stated in testimony before the Senate 
Governmental Affairs Committee:

        The case for reorganizing the Federal Government is an 
        easy one to make. Many departments and agencies were 
        created in a different time and in response to problems 
        very different from today's. Many have accumulated 
        responsibilities beyond their original purposes. As new 
        challenges arose or new needs were identified, new 
        programs and responsibilities were added to departments 
        and agencies with insufficient regard to their effects 
        on the overall delivery of services to the public. 
        8

    The current Comptroller General, David Walker, also 
stressed problems of duplication and fragmentation in testimony 
before the Senate Budget Committee:

        [O]ur work has repeatedly shown that mission 
        fragmentation and program overlap are widespread and 
        that crosscutting Federal program efforts are not well 
        coordinated. In program area after program area, we 
        have found that unfocused and uncoordinated 
        crosscutting programs waste scarce resources, confuse 
        and frustrate taxpayers and program beneficiaries, and 
        limit overall program effectiveness. 9

    Frequently cited examples of duplication and fragmentation 
include: 50 programs to aid the homeless administered by eight 
agencies; over 35 different food safety laws administered by 13 
agencies; 160 employment and training programs administered by 
15 agencies; 342 economic development programs administered by 
at least 12 agencies; 90 early childhood development programs 
administered by 11 agencies; 59 programs for preventing 
substance abuse; and over 40 agencies engaged in anti-terrorism 
activities.
    Presumably, no one would contend that all of these 
crosscutting programs and activities are necessary or that they 
are equally effective. However, crosscutting programs rarely 
have consistent, results-oriented performance goals that permit 
meaningful comparisons. Indeed, they rarely have results-
oriented goals and sufficiently reliable performance data to 
assess their individual contributions. Thus, Washington 
decisionmakers lack the ability to make informed judgments 
about which programs are working and which are not, or to 
compare their relative effectiveness.
    Furthermore, crosscutting programs operate quite 
differently, under diverse and even inconsistent eligibility 
criteria. Ironically, the multiplicity of crosscutting programs 
aimed at the same beneficiaries, each with its own unique 
processes and requirements, often work against those 
beneficiaries and cause them to fall through the cracks. For 
example, GAO noted:

        There are over 90 early childhood programs in 11 
        Federal agencies and 20 offices. The ``system'' of 
        multiple early childhood programs with firm cutoffs 
        could lead to disruptions in services from even slight 
        changes in a child's family status. While multiple 
        programs target disadvantaged preschool-aged children, 
        most such children do not participate in any preschool 
        program.10

    Inadequate attention to performance in authorization and 
funding decisions. In theory, Congress must enact legislation 
authorizing or reauthorizing Federal programs before money can 
be appropriated for them. The Congressional Budget Office (CBO) 
recently reported, however, that Congress enacted about $121 
billion in fiscal year (FY) 2000 spending for programs with 
expired authorizations. 11 The CBO report doesn't 
include funding for programs that have never been authorized. 
Although appropriating funds for unauthorized programs violates 
both House and Senate rules, these rules are routinely 
``waived.'' The appropriations process does not provide 
systematic oversight and review of program performance and is 
not a substitute for regular program reauthorizations. 
Appropriators typically focus on the margins of funding 
requests, i.e., whether funding should be increased or 
decreased from the prior year's level. Rarely do they consider 
whether a program's performance justifies its continued funding 
at all.
    The need to assess regulatory performance results. 
Regulation is another area of Federal activity that needs more 
scrutiny of performance results. Much current Federal policy is 
prescribed by administrative regulations, through which 
agencies exercise the sweeping discretion that Congress 
delegates to them. As the Governmental Affairs Committee 
observed:

        By any measure, Federal agencies are engaged in an 
        enormous volume of regulatory activity. In a 1997 
        report to Congress, OMB reported that there are over 
        130,000 pages of Federal regulations, ``with about 60 
        Federal agencies issuing regulations at a rate of about 
        4,000 per year. . . . Federal regulations now affect 
        virtually all individuals, businesses, State, local and 
        tribal governments, and other organizations in 
        virtually every aspect of their lives or operations.'' 
        12

    Federal rules impose huge economic costs and burdens on our 
society. It is essential to ensure that they produce positive 
results that are commensurate with their costs. In 1996, 
Congress enacted the Congressional Review Act. 13 
This Act established a process for Congressional review and 
potential disapproval of agency regulations, particularly 
``major rules'' having an annual economic impact of $100 
million or more. Just this year, Congress also enacted the 
Truth in Regulating Act. 14 This Act provides for 
analyses by GAO of the potential costs and benefits of major 
rules. However, agencies do not routinely specify in measurable 
terms the results that their rules are intended to achieve. In 
the absence of concrete performance goals, it is difficult to 
weigh the costs and potential benefits of rules, assess their 
results, and hold them accountable.

                     THE PROMISE OF THE RESULTS ACT

    With little fanfare but strong bipartisan support, Congress 
passed and President Clinton signed the Government Performance 
and Results Act of 1993, popularly known as the ``Results 
Act.'' 15 As its name indicates, the fundamental 
purpose of the Act was to refocus performance measurement and 
accountability from the activities of the Federal Government to 
the results these activities achieve. Thus, the Governmental 
Affairs Committee report on the legislation (S. 20) enacted as 
the Results Act stated:

        At present, Congressional policymaking, spending 
        decisions, and oversight are all seriously handicapped 
        by the lack both of sufficiently precise programs goals 
        and of adequate program performance information. 
        Federal managers, too, are greatly disadvantaged in 
        their own efforts to improve program efficiency and 
        effectiveness by the same lack of clear goals and 
        information on results. The goal-setting, performance 
        measurement, and results reporting requirements of S. 
        20 are intended to address these needs of Congress and 
        of Federal program managers.

        This reform has the potential to mark a significant 
        change in the way that managers, policymakers, and the 
        American people think about what services the 
        government should provide, and how well it does at 
        providing them. The legislation will provide the 
        information necessary to strengthen program management, 
        to make objective evaluations of program performance, 
        and to set realistic, measurable goals for future 
        performance. 16

    The Results Act requires Federal agencies to prepare: (1) 
5-year Strategic Plans that set forth the mission results they 
seek to achieve and strategic goals to achieve them; (2) Annual 
Performance Plans that set performance goals for each fiscal 
year; and (3) Annual Performance Reports that describe how the 
agency did in achieving its performance goals for the 
applicable fiscal year. The Act also requires OMB to prepare 
and submit as part of the President's budget an annual 
Government-wide Performance Plan.
    Judging Federal agencies and programs by the results they 
achieve may seem to be nothing more than common sense, but this 
concept was revolutionary for Washington. As embodied in the 
Results Act, it was intended to produce fundamental 
improvements in Federal performance and thereby restore public 
trust in the Federal Government. Among the stated purposes of 
the Results Act were to:

     improve public confidence in the Federal 
Government by systematically holding Federal agencies 
accountable for achieving program results;

     improve Federal program effectiveness and public 
accountability by promoting a new focus on results, service 
quality, and customer satisfaction; and

     improve Federal decisionmaking by providing more 
objective information on program performance results and the 
relative efficiency and effectiveness of Federal programs and 
spending. 17

              LACK OF RESULTS FROM THE RESULTS ACT SO FAR

    Recognizing the challenges that the Results Act posed, 
Congress delayed full-scale implementation of the Act for 
several years in order to allow agencies to gear up to meet its 
requirements. The first full cycle of Results Act 
implementation was completed in March of 2000 when agencies 
submitted their first round of Annual Performance Reports 
covering FY 1999. Thus far, the results of Results Act 
implementation have been disappointing. Some agencies have done 
a good job of establishing meaningful, results-oriented 
performance goals and reporting candidly on their performance 
against these goals. However, most agencies are struggling to 
define and report on their performance in a meaningful, 
results-oriented way.
    What are agencies accomplishing? The Governmental Affairs 
Committee identified several key results for each major Federal 
agency and asked GAO to determine whether the agencies' FY 1999 
Performance Reports demonstrated progress toward achieving 
these results. 18 The Committee identified a total 
of 97 key results for the 24 major agencies. The Performance 
Reports demonstrated definite progress toward achieving only 13 
of these results, and some progress toward achieving another 
26. The Performance Reports demonstrated a clear lack of 
progress toward four others. Most disturbing, the Performance 
Reports did not provide a sufficient basis to assess 
performance for the remaining 54 key results--over half in all. 
19 The following chart lists some of the key results 
for which the Performance Reports failed to provide useful 
information on agency performance.

------------------------------------------------------------------------
              GOALS WITH NO USEFUL PERFORMANCE INFORMATION
-------------------------------------------------------------------------
    The Nation has an adequate and reasonably priced food supply
                             (Agriculture).

        Combat readiness is maintained at the desired level
                               (Defense).

    Energy systems are secure, competitive, and serve the needs
                         of the public (Energy).

     The public has prompt access to safe and effective medical
                            drugs and devices
        (Health and Human Services).

    U.S. borders are secure from illegal immigration (Justice).

         Reduced international crime and terrorism (State).

    Tax laws are administered effectively and fairly (Treasury).

     Small businesses become self-reliant and successful in the
                         competitive marketplace
        (Small Business Administration).
------------------------------------------------------------------------

    In most cases where progress could not be assessed, the 
agency either had no relevant performance measures or the 
measures it did have were inadequate. For example, reducing the 
availability and/or use of illegal drugs was a key outcome for 
seven different agencies. None of these agencies had a specific 
FY 1999 performance target tied directly to actually reducing 
the availability or use of illegal drugs.
    The other recurring problem was that performance data were 
unavailable at the time the Performance Reports were issued. 
The Departments of Education and Health and Human Services 
lacked FY 1999 performance data for a number of their key 
results at the time their Performance Reports were submitted. 
They attributed these problems to reliance on States and other 
third parties for much of their performance information. The 
Social Security Administration (SSA) also lacked FY 1999 data 
for several important measures, for reasons that were unclear.
    Lack of performance goals to resolve major management 
challenges. The Results Act provides an excellent venue for 
agencies to make firm commitments to resolve their major 
management problems. These problems are, in themselves, major 
impediments to successful achievement of agency goals. With 
that in mind, Chairman Thompson wrote to the heads of the 24 
agencies in August 1999 urging them to establish specific and 
measurable goals to resolve major management problems in their 
Annual Performance Plans. The Chairman's letter noted that 
OMB's guidance on Results Act implementation specifically 
called for this by stating:

        Performance goals for management problems should be 
        included in the annual plan, particularly for problems 
        whose resolution is mission-critical, or which could 
        potentially impede achievement of program goals . . 
        .20

    In reviewing FY 2000 Performance Plans last year, GAO found 
that agencies had established specific performance goals and 
measures for only about 40 percent of the over 300 major 
problems that had been identified by GAO and agency IGs. 
21 Unfortunately, there was no improvement this 
year. The agency FY 2001 Performance Plans again established 
specific performance goals for only about 40 percent of their 
major management problems. Chairman Thompson has issued a more 
detailed report on agencies' use of the Results Act to address 
major management challenges. 22
    GAO and IG reviews of the FY 1999 Performance Reports offer 
little evidence that major management problems are being 
remedied. With the notable exception of the Y2K problem, which 
all agencies successfully resolved, most of the major 
management problems that existed in August 1999 remain today. 
For example, Chairman Thompson asked GAO to look specifically 
at nine Federal program activities that have long experienced 
high levels of fraud, waste, and error. Only three of these 
areas were addressed to any degree of specificity in agency 
Performance Reports--fraud and error in food stamps, Medicare, 
and Supplemental Security Income payments. The following chart 
shows six problem areas that had no performance goals or 
measures whatsoever.

------------------------------------------------------------------------
         PROBLEM AREAS LACKING ANY PERFORMANCE GOALS OR MEASURES
-------------------------------------------------------------------------
                 Contractor overpayments (Defense).

          Student assistance fraud and error (Education).

   Medicaid fraud, waste, and error (Health and Human Services).

     Fraud, waste, and error in Department of Housing and Urban
                          Development programs.

        Earned Income Tax Credit fraud and error (Treasury).

      Fraud and error in the Federal Employee Health Benefits
                             Program (OPM).
------------------------------------------------------------------------

    Not all major management challenges identified by GAO or an 
agency IG lend themselves to specific and measurable 
performance goals under the Results Act. Nevertheless, few 
agencies have made the case that the major management problems 
for which they have not established such performance goals 
would not benefit by them. Nor, it appears, have they adopted 
alternative means of dealing with the problems as suggested in 
Chairman Thompson's August 1999 letters.
    Little progress in rationalizing duplication and overlap. 
The Results Act also provides a valuable tool to address the 
problems of overlap and fragmentation described previously. In 
the near term, developing consistent performance goals for 
crosscutting programs can improve coordination and encourage 
agencies to administer them as compatibly as possible. In the 
longer term, consistent performance goals can help 
decisionmakers assess relative performance and make choices 
among crosscutting programs. As GAO observed:

        [T]he Results Act should offer a new and structured 
        framework to address crosscutting issues. . . . [I]f 
        the Results Act is successfully implemented, 
        performance information should become available to 
        clarify the consequences of fragmentation and the 
        implications of alternative policy and service delivery 
        options, which, in turn, can affect future decisions 
        concerning department and agency missions and the 
        allocation of resources among those missions. 
        23

    Thus far, agencies have made little progress in using the 
Results Act to improve the coordination and consistency of 
crosscutting programs. They got off to a slow start when OMB 
initially took the position that the Results Act was not 
appropriate for these purposes. In response to Congressional 
pressure, OMB changed its position. Its current guidance states 
in part:

        An agency should also review the fiscal year 2001 
        performance plans of other agencies participating with 
        it in a cross-cutting program or activity. This review 
        should focus on assuring that related performance goals 
        and indicators for a crosscutting program are 
        consistent and harmonious. As appropriate, agencies 
        should modify performance goals to bring about greater 
        synergy and inter-agency support in achieving mutual 
        goals.24

    With each successive round of Annual Performance Plans, 
agencies have done a better job of identifying crosscutting 
programs and activities and discussing what they have done, or 
intend to do, to coordinate them with other agencies. However, 
there has been very little progress in the most important 
area--actually developing consistent performance goals and 
measures for crosscutting programs and activities.

                       WHY THE LACK OF PROGRESS?

    Overall, the most charitable way to characterize progress 
in implementing the Results Act is ``mixed.'' There are 
examples of significant progress toward meeting important 
results, as well as equally valuable examples of forthright 
disclosure of significant performance shortfalls. However, 
these examples tend to be the exceptions rather than the rule. 
Most of the initial Performance Reports failed to answer the 
fundamental Results Act question: What is the agency 
accomplishing in terms of concrete results that matter to the 
American people?
    Based on the Committee's review of Results Act submissions 
and many other contacts with the agencies, it is obvious that 
agencies vary greatly in their commitment to results-oriented 
performance management and accountability. Some agencies 
clearly demonstrate such a commitment and have achieved 
impressive results. The Transportation Department has been a 
leader from the outset. The Veterans Affairs Department and SSA 
have made good progress as well. The Departments of Education 
and Health and Human Services appear to be making good efforts, 
although they are severely challenged in measuring many of 
their key performance results.
    Other agencies, such as the Departments of Energy and 
Justice, offer no evidence of taking performance-based 
accountability seriously. GAO said of the Energy Department's 
Performance Report, ``We could not determine what the 
Department was trying to accomplish or how it planned to get 
there.'' 25 With respect to Justice's Performance 
Report, GAO stated, ``Overall, DOJ's progress in achieving 
desirable program outcomes cannot be readily determined since 
the agency has yet to develop performance goals and measures 
that can objectively capture and describe performance 
results.'' 26
    There appear to be several key reasons for the lack of 
greater progress in implementing the Results Act and making the 
transition to results-oriented governance. These reasons 
include the following.
    Lack of leadership commitment. Many dedicated career 
employees in many agencies are working very hard to make the 
Results Act succeed. They are to be commended for their 
efforts. However, their leaders must develop the same 
commitment these employees demonstrate if results-oriented 
governance is to become a reality at the Federal level. With a 
few exceptions, most notably the leaders of the Transportation 
Department, this hasn't happened yet. The Administration and 
OMB likewise have failed to lead in these efforts. Finally, the 
Congress needs to engage much more to bring about results-
oriented decisionmaking.
    Measurement and data challenges. Measuring the results of 
many agencies and programs poses conceptual challenges, such as 
how to gauge reliably whether some results the Federal 
Government seeks are occurring and, if they are, how to 
attribute causation to Federal efforts. The intended results of 
Federal programs often depend on the actions of other 
participants, such as State and local governments, and can be 
affected by a host of economic, societal and other external 
factors beyond the control of the Federal Government. For 
example, U.S. Agency for International Development has a 
minuscule role in affecting its stated outcomes. In addition, 
many results that hinge on widespread societal changes, such as 
improved academic achievement and reduced poverty, may not lend 
themselves to meaningful results-oriented measurement in annual 
increments. The Departments of Education and Health and Human 
Services are two agencies that have particular difficulty in 
developing annual performance data.
    Measuring results also poses a series of practical and even 
political challenges. Efforts to obtain the best performance 
data often raise concerns in terms of privacy implications and 
the reporting burdens they impose. Another difficulty is 
attempting to develop overarching, agency-wide goals for 
Federal entities that plainly lack any real cohesion. For 
example, the Departments of Agriculture and Commerce are, in 
effect, ``holding companies'' for organizations with divergent 
and sometimes contradictory missions. Finally, given the 
massive weaknesses in Federal financial and information 
systems, many agencies may have difficulty processing and 
analyzing performance data reliably even when the raw data are 
available.
    In sum, for a variety of reasons, almost all agencies face 
substantial challenges in coming up with reliable data needed 
to measure their performance. In reviewing agency FY 2000 
Performance Plans, GAO found that only four of the 24 major 
agencies could produce credible performance data. GAO expressed 
less than full confidence in the credibility of performance 
data even for those four agencies. GAO emphasized the 
seriousness of this problem:

        The continuing lack of confidence that the performance 
        information will be credible is . . . a source of major 
        concern. . . . The inattention to ensuring that 
        performance data will be sufficiently timely, complete, 
        accurate, useful, and consistent is an important 
        weakness in the performance plans. Ultimately, 
        performance plans will not be useful to Congressional 
        decisionmakers unless and until this key weakness is 
        resolved. 27

    Performance measurement problems in areas within Federal 
control. It is not surprising that agencies like Education and 
Health and Human Services are struggling to measure their 
contributions toward achieving results over which they have 
limited control. What is more surprising, and disappointing, is 
that many agencies seem to be struggling just as much to 
measure progress in areas where they have greater control over 
their performance. The FY 1999 Performance Reports demonstrate 
few results in areas of direct and primary Federal 
responsibility such as: Fairly and effectively administering 
Federal tax and immigration laws; securing the Nation's 
borders; reducing the availability of illegal drugs; preventing 
fraud, waste, and abuse in the use of taxpayer dollars; 
resolving other major management problems; and providing timely 
and accurate services to the public. There is great room for 
improvement in these and many other areas, and little excuse 
for the current lack of progress.

              GETTING BETTER RESULTS FROM THE RESULTS ACT

    We have reached a critical juncture when it comes to 
implementing the Results Act and, more fundamentally, moving 
Washington toward results-oriented governance. Unless 
performance information is actually integrated into Federal 
policy-making, Results Act plans and reports will degenerate 
into paperwork exercises and the Act itself will become the 
latest addition to the graveyard of failed Federal management 
improvement initiatives. Worse yet, Washington will continue to 
do business as usual--with partisan ideology, special 
interests, and attacks on motivations framing the terms of 
policy debate.
    The fate of the Results Act, and with it results-oriented 
governance, will be in the hands of the next Administration and 
Congress. We have gained enough experience to know how to 
implement the Results Act effectively. What remains to be 
supplied is the political will to make it happen. The key to 
progress depends greatly on what the incoming President does. 
Congress can play a significant role in encouraging or 
discouraging results-oriented governance. However, only the 
President and his Administration can supply the unified 
leadership, overall perspective, and consistent focus to 
convert it into reality. In particular, the new President needs 
to lead by example, embracing performance-based governance in 
word and deed. The President must demonstrate that this is a 
priority. If he does so, surely the agencies and OMB, and 
hopefully the Congress, will get on board.
    Using the Results Act to implement Presidential priorities. 
The Results Act is a potentially powerful tool that can help 
the new President articulate and achieve his policy agenda. By 
using the Act in this way, the new President also would send a 
clear signal throughout Washington that he is intent on moving 
toward results-oriented governance. The President should focus 
on a few of his priority policy objectives and develop 
concrete, results-oriented, and measurable performance 
commitments that would define success in achieving the policy 
objectives. These commitments should be translated directly 
into goals for the annual Government-wide Performance Plan, as 
well as for the Strategic Plans and Performance Plans of the 
responsible agencies. Annual Performance Reports would track 
progress toward achieving these goals. This approach would 
greatly enhance accountability and transparency in the 
execution of key Presidential agenda items.
    Using the Results Act to establish key expectations for 
agencies. A similar approach could be used to define and fix 
accountability for the most important results that agencies are 
expected to achieve. Agencies are often criticized for 
establishing too many Results Act performance goals and failing 
to prioritize them. Based on the President's priorities and the 
work of his transition teams, a few key outcomes could be 
identified and highlighted for priority attention at each 
agency. These outcomes would be translated into specific 
Results Act goals for which the agency head would be held 
personally responsible and by which his or her performance 
would be assessed. The goals would also be made part of the 
performance assessments of the agency's managers.
    Making greater use of the Results Act to address mission-
critical management problems. Despite the repeated admonitions 
of Congress and OMB, agencies have not taken full advantage of 
the Results Act to address their mission-critical management 
problems. Working in consultation with their IGs, GAO and OMB, 
each major agency should: (1) systematically identify its 
mission-critical management problems; (2) establish specific 
Results Act performance goals to resolve them; and (3) if they 
determine that a particular problem does not lend itself to a 
specific Results Act performance goal, establish an alternative 
means of ensuring accountability for its resolution. If 
agencies fail to do so voluntarily, Congress should amend the 
Results Act to mandate these steps.
    Making greater use of the Results Act to address 
duplication and fragmentation. Agencies have made good progress 
in identifying crosscutting programs and activities in their 
Results Act plans. However, they need to take the next and more 
important step of establishing consistent and complementary 
performance goals within and among agencies for these program 
activities. This should force greater coordination and better 
management in the near term, and provide a basis for making 
rational choices among overlapping and fragmented Federal 
agencies and programs. OMB must play a leadership role in 
making this happen. OMB should also use the Government-wide 
Performance Plan as a vehicle for establishing common goals for 
the most significant crosscutting programs and functions.
    Improving the credibility and usefulness of performance 
data. It is essential that the massive data challenges faced by 
most agencies be overcome if performance-based governance is to 
become a reality. Some agencies, such as the Department of 
Education, are making impressive strides to deal with 
performance data challenges. Others must follow suit. Here 
again, OMB can play an important role, particularly in helping 
agencies develop strategies for resolving common data and 
performance management challenges. Agency IGs and GAO should 
also be a valuable source of assistance to agencies.
    Doing the doable. While agencies must continue to work on 
the more challenging aspects of defining and measuring 
performance results, this should not distract them from giving 
greater priority to resolving less daunting challenges. As 
noted previously, agencies can and must do a much better job of 
achieving results in those areas of Federal activity that 
readily lend themselves to performance measurement and 
accountability.

            OTHER STEPS TOWARD PERFORMANCE-BASED GOVERNMENT

    Changing the Washington culture. The point has been made 
repeatedly that results-oriented, performance-based governance 
requires fundamental ``culture change'' on the part of 
Washington decisionmakers. Policy decisions now turn largely on 
abstract and ideologically-driven arguments over whose 
proposals stem from better intentions and purer motives. 
Decisionmakers are loathe to stray very far from the 
orthodoxies of their political ``bases'' and the interests of 
their core constituencies. In this environment, there is little 
room for objective, fact-based analysis of program performance.
    It is unclear whether or to what degree the terms of debate 
in Washington can be shifted from battles over intentions and 
motivations to engagement on how best to achieve results. If 
our next leaders heed the obvious desires of the American 
people, they will appreciate the need for less partisanship and 
more constructive, bipartisan problem solving. In the final 
analysis, of course, most policy decisions are inherently 
subjective and political in that they require the balancing of 
competing interests. This will never change, nor should it. 
However, decisions that are ultimately political can and should 
be informed by objective, results-oriented, performance 
analysis.
    A shift toward meaningful performance-based governance 
entails risks for our new leaders. It will require them to 
undertake specific performance commitments and to accept 
accountability for them. As discussed previously, such culture 
change can occur only with the strong leadership of the new 
President. At the same time, it is essential that the new 
Congress be an ally in this effort. Accountability and risks 
must be shared among those in the Administration and the 
Congress who develop, authorize, fund, and implement Federal 
policies and programs.
    Use of performance information for decisionmaking. The 
Executive Branch and Congress must systematically integrate 
performance information into all aspects of Federal policy 
development and execution, including authorization, budgeting 
and appropriations, and oversight. Several specific steps would 
encourage this:

     The President, through OMB, should insist that 
performance data be incorporated into annual budget requests 
and that the annual budget demonstrate, in a clear and 
transparent way, how performance results were factored into 
budget decisions. The appropriations committees should likewise 
clearly and explicitly indicate how program performance data 
and results are reflected in their funding decisions.

     The President, through OMB, should require that 
all legislative proposals for new and reauthorized programs 
submitted by the Executive Branch to Congress: (1) include 
specific results-oriented performance goals and measures; (2) 
include, for reauthorizations, information on past performance 
results; (3) be subject to sunset; and (4) be accompanied by an 
explanation of how these proposals relate to, and add value to, 
existing programs having similar objectives.

     The Senate and the House should adopt rules 
precluding consideration of program authorization and 
reauthorization legislation that does not include the above 
features.

     The Senate and House should consistently enforce 
their existing rules against funding unauthorized programs.

     Congress, through its authorizing and oversight 
committees, should conduct regular and systematic oversight of 
program performance. Enactment of legislation to move the 
budget and appropriations cycle to a biennial basis would free 
up much more time for enhanced Congressional oversight.

     The President should require by Executive Order 
that major rules incorporate specific performance goals and 
measures as well as sunset provisions as a means of holding 
them accountable for performance results. If the President 
declines to impose such requirements administratively, Congress 
should legislate them by an amendment to the Congressional 
Review Act.

    Use of performance information to improve service to the 
public. Federal performance is particularly well suited to 
tangible performance measurement and improvement in the area of 
services provided to the public. This includes processing 
applications for benefits and services and responding to 
citizen inquiries timely, courteously, and accurately. Agencies 
have embraced the notion of improving customer service, and 
they have undertaken customer service surveys under the 
auspices of the NPR. However, NPR permitted agencies to decide 
what aspects of their performance and which customers would be 
surveyed. Also, the results of the surveys were not tied 
directly to agency performance assessments. Agencies should be 
required to systematically conduct more objective and 
meaningful customer surveys and to use the results to adopt 
appropriate performance goals to improve customer service. OMB 
and Congress should oversee this process in order to ensure 
objectivity.
    Reactivate the Reorganization Act (5 U.S.C. Sec. Sec. 901 
et seq.) in order to provide a ready means of implementing 
organizational and program reforms. There may well be a need 
for a comprehensive review of current Federal agencies in order 
to identify ways to reduce duplication and overlap, eliminate 
unneeded programs and functions, and perform needed functions 
more efficiently and effectively. One way to do this is through 
a commission, as proposed in bills such as S. 2306, the 
``Government for the 21st Century Act.'' Another approach would 
be to enact an across-the-board sunset review process for 
existing Federal agencies and programs.
    A more immediate way to at least partially address 
duplication and overlap is to reinstate the so-called 
``Reorganization Act.'' This Act, which ceased to be effective 
in 1984, authorized the President to submit reorganization 
plans to Congress for expedited consideration. Such 
reorganization plans could transfer, consolidate, and within 
certain limits abolish agency functions. According to the Act, 
a reorganization plan took effect if approved by joint 
resolution within 90 legislative days after its submission to 
Congress. The Act would be more workable if it permitted 
reorganization plans to become effective unless disapproved by 
joint resolution within 90 legislative days after submission.
                                ------                                --
----

    Key decisionmakers in the new Administration and the new 
Congress should earnestly consider these preceding steps. 
Although they are by no means exhaustive, these recommendations 
could clearly provide notable progress toward a results-
oriented, performance-based government.

                                ENDNOTES

     1. Washington Times, November 28, 1999.
     2. USA Today, December 15, 1999.
     3. American Customer Satisfaction Index, Federal Agencies 
Government-wide Customer Satisfaction Report for the General 
Services Administration (December 1999), p. 38, note 5. The 
significance of the satisfaction levels reported in this survey 
are questionable since the Federal agencies themselves 
designated what they would be rated on and who would rate them.
     4. High-Risk Series: An Update, GAO/HR-99-1 (January 
1999).
     5. Id., p. 7.
     6. Performance and Accountability and High-Risk Series: 
Responses to Questions, GAO/OCG-99-25R (March 1999), p. 2. 
(Emphasis supplied)
     7. The one notable exception most recently was the Year 
2000 computer conversion problem.
     8. Government Reorganization: Issues and Principles, GAO/
T-GGD/AIMD-95-166 (May 17, 1995), at pp. 2-3.
     9. Budget Issues: Effective Oversight and Budget 
Discipline Are Essential--Even in a Time of Surplus, GAO/T-
AIMD-00-73 (February 1, 2000), p. 11.
    10. Management Reform: Continuing Attention Is Needed to 
Improve Government Performance, GAO/-GGD-00-128 (May 4, 2000), 
p. 13. (Emphasis supplied)
    11. CBO, Unauthorized Appropriations and Expiring 
Authorizations (January 7, 2000).
    12. S. Rept. No. 106-225, pp. 2-3 (1999).
    13. Public Law 104-121, title II, 110 Stat. 868, 5 U.S.C. 
Sec. Sec. 801-808.
    14. Public Law 106-312, 114 Stat. 1248.
    15. Public Law 103-62, 107 Stat. 285.
    16. S. Rept. No. 103-58 (1993), p. 3.
    17. Public Law 103-62, Sec. 2, 107 Stat. 285.
    18. The Committee selected the key results in consultation 
with GAO and the Congressional Research Service, based on a 
review of the agencies' statutory missions and their Strategic 
Plans. The selected key results were not designed to cover all 
of the agency's important functions, but only a representative 
sample.
    19. The Governmental Affairs Committee Results Act website 
provides detailed information on the GAO findings and the 
Committee's analysis for all of the 97 key agency results.
    20. OMB Circular No. A-11, Part 2, Sec. 220.9(e).
    21. Managing for Results: Opportunities for Continued 
Improvements in Agencies' Performance Plans, GAO/GGD/AIMD-99-
215 (July 1999), pp. 13-14.
    22. Major Management Challenges Facing Federal Departments 
and Agencies, October 2000.
    23. Managing For Results: Using the Results Act to Address 
Mission Fragmentation and Program Overlap, GAO/AIMD-97-146 
(August 1997), pp. 2-3.
    24. OMB Circular No. A-11, Part 2, Sec. 220.9(f) (2000).
    25. Observations on the Department of Energy's Fiscal Year 
1999 Accountability Report and Fiscal Year 2000/2001 
Performance Plans, GAO/RCED-00-209R (June 30, 2000), p. 2.
    26. Observations on the Department of Justice's Fiscal Year 
1999 Performance Report and Fiscal Year 2001 Performance Plan, 
GAO/GGD-00-155R (June 30, 2000) pp. 1-2.
    27. Managing for Results: Opportunities for Continued 
Improvements in Agencies' Performance Plans, GGD/AIMD-99-215 
(July 1999), pp. 6-7. The four agencies whose performance data 
had some credibility were Education, Justice, Transportation, 
and SSA.
      

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