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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

    THE RESULTS ACT: STATUS OF PERFORMANCE BUDGETING PILOT PROGRAMS

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      INFORMATION, AND TECHNOLOGY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 1, 1999

                               __________

                           Serial No. 106-106

                               __________

       Printed for the use of the Committee on Government Reform

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
63-672                     WASHINGTON : 2000

  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                                 ______

                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH, Idaho                   (Independent)
DAVID VITTER, Louisiana

                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                      Carla J. Martin, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

   Subcommittee on Government Management, Information, and Technology

                   STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois               JIM TURNER, Texas
THOMAS M. DAVIS, Virginia            PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon                  MAJOR R. OWENS, New York
DOUG OSE, California                 PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin                 CAROLYN B. MALONEY, New York

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          J. Russell George, Staff Director and Chief Counsel
                     Matthew Ebert, Policy Advisor
                          Grant Newman, Clerk
                     Faith Weiss, Minority Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 1, 1999.....................................     1
Statement of:
    Harper, Sallyanne, Chief Financial Officer, Environmental 
      Protection Agency; Olivia A. Golden, Assistant Secretary, 
      Administration for Children and Families, Department of 
      Health and Human Services; and Jesse L. Funches, Chief 
      Financial Officer, Nuclear Regulatory Commission...........    50
    Lee, Deidre, Acting Deputy Director for Management, Office of 
      Management and Budget; and Paul L. Posner, Director, Budget 
      Issues, U.S. General Accounting Office, accompanied by J. 
      Christopher Mihm, Acting Associate Director, Federal 
      Management and Workforce Issues............................     6
Letters, statements, et cetera, submitted for the record by:
    Funches, Jesse L., Chief Financial Officer, Nuclear 
      Regulatory Commission, prepared statement of...............    77
    Golden, Olivia A., Assistant Secretary, Administration for 
      Children and Families, Department of Health and Human 
      Services, prepared statement of............................    68
    Harper, Sallyanne, Chief Financial Officer, Environmental 
      Protection Agency:
        Information concerning reinventing environmental 
          information............................................    63
        Prepared statement of....................................    52
    Horn, Hon. Stephen, a Representative in Congress from the 
      State of California, prepared statement of.................     4
    Lee, Deidre, Acting Deputy Director for Management, Office of 
      Management and Budget, prepared statement of...............     9
    Posner, Paul L., Director, Budget Issues, U.S. General 
      Accounting Office, prepared statement of...................    20
    Turner, Hon. Jim, a Representative in Congress from the State 
      of Texas, prepared statement of............................    93

 
    THE RESULTS ACT: STATUS OF PERFORMANCE BUDGETING PILOT PROGRAMS

                              ----------                              

                         THURSDAY, JULY 1, 1999

                  House of Representatives,
Subcommittee on Government Management, Information, 
                                    and Technology,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 254, Rayburn House Office Building, Hon. Stephen Horn 
(chairman of the subcommittee) presiding.
    Present: Representatives Horn and Turner.
    Staff present: J. Russell George, staff director/chief 
counsel; Matthew Ebert, policy advisor; Jane Cobb, professional 
staff member, Committee on Government Reform; Grant Newman, 
clerk; Justin Schlueter and John Phillips, interns; Faith 
Weiss, minority counsel; and Jean Gosa, minority staff 
assistant.
    Mr. Horn. The Subcommittee on Government Management, 
Information, and Technology will come to order. I should warn 
our witnesses, bear with us. We have a lot of votes coming up 
this afternoon so we will probably have to go into recess on a 
number of items. We have H.R. 10 before us later in the 
afternoon, and right now we have the Y2K litigation conference 
report that will be voted on soon.
    For decades, widely publicized examples of waste, fraud and 
error in Federal programs eroded the American public's trust in 
Government. In 1993, Congress attempted to address this by 
enacting on a bipartisan basis the Government Performance 
Results Act, otherwise known as the Results Act. The act's goal 
is to improve the efficiency and accountability of Federal 
programs by shifting the focus of the Federal budget process 
from its longstanding concentration on Government spending to 
the results of its programs.
    A key expectation of the Results Act is that Congress will 
gain a clearer understanding of what is being achieved in 
relation to what is being spent. To accomplish this, the act 
required that beginning in fiscal year 1999, agencies must 
prepare annual performance plans with goals covering the 
program activities in their budget requests. In addition, these 
plans must outline the funding level being applied to achieve 
each performance goal.
    The General Accounting Office assessment of fiscal year 
1999 performance plans found that most of the agencies it 
reviewed showed some progress in linking planning and budgeting 
structures and presentations. However, most of the plans did 
not explain how the funding would be allocated to achieve 
performance goals. Much remains to be done if performance 
information is to be more useful for budgetary decisions and 
programmatic decisions, including the completion of another 
requirement of the Results Act: Performance budgeting pilot 
programs.
    With the enactment of the Results Act when agencies make 
spending decisions, they are required to make closer and 
clearer linkages between the processes of allocating resources 
on the one hand and expected results to be achieved with those 
resources on the other. This management practice of aligning 
spending decisions with expected performance is commonly 
referred to as performance budgeting. The Results Act required 
that pilot programs be used to test performance budgeting in 
agency budget requests.
    The act required the Office of Management and Budget to 
designate at least five agencies to conduct pilot programs in 
fiscal years 1998 and 1999. These agencies were expected to 
develop budgets that show how performance would change if the 
agency received more or less allocations than requested. The 
office of management and budget was to include these pilot 
performance budgets as an alternative presentation in the 
President's budget for fiscal year 1999. In addition, a report 
is required to be transmitted to Congress and the President no 
later than March 31, 2001.
    The performance budgeting pilot programs were scheduled to 
start in fiscal year 1998 so that they would begin after 
agencies had sufficient experience in preparing strategic and 
performance plans. On May 20, 1997, the Office of Management 
and Budget announced that pilot programs would be delayed for 
at least 1 year. In September 1998, the Office of Management 
and Budget solicited agencies' voluntary participation for 
these pilot programs, but no agencies were selected. At 
present, the Office of Management and Budget has no definite 
plans for proceeding with the performance budgeting pilot 
programs, at least that this committee is aware.
    Meanwhile the American public continues to lack confidence 
in the executive branch of the Federal Government because of 
the widespread waste and inefficiency in Federal programs. The 
Results Act represents a genuine attempt by Congress to restore 
this trust by ensuring accountability and effectiveness in 
Federal agencies and their programs. The Office of Management 
and Budget's continual delay in implementing the performance 
budgeting pilots called for by the Results Act greatly concerns 
us as well as the leadership in this chamber. We hope that 
experience to date with respect to the pilot designation does 
not suggest that some of the statutory requirements of the 
Results Act will simply be ignored.
    On our first panel today, representatives from the Office 
of Management and Budget and the General Accounting Office, 
will discuss the delay and determine its implications for the 
implementation of the Results Act and performance budgeting in 
the Federal Government.
    Our second panel includes witnesses from three Federal 
agencies that have made considerable progress in performance 
budgeting. They will describe the obstacles to overcome in the 
process, the lessons that have been learned and the future 
expectation of performance budgeting within their respective 
agency. I welcome our witnesses and look forward to their 
testimony.
    I think this is one of the most important hearings we will 
be having this year and we will keep at it in terms of 
measurement of programs. New Zealand and Australia have done 
this 10 years ago. We should not be such a laggard. South 
Carolina, Minnesota, the State of Oregon have been doing it. 
Oregon in particular is the one ahead of everybody else. So the 
Federal Government certainly ought to catch up with Oregon, I 
would hope.
    [The prepared statement of Hon. Stephen Horn follows:]

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    [GRAPHIC] [TIFF OMITTED] T3672.002
    
    Mr. Horn. We have on panel one the Honorable Deidre Lee, 
Acting Deputy Director for Management, Office of Management and 
Budget; Mr. Paul L. Posner, the Director for Budget Issues of 
the U.S. General Accounting Office, a part of the legislative 
branch; and he is accompanied by Mr. Christopher Mihm, the 
Acting Associate Director, Federal Management and Work Force 
Issues in the U.S. General Accounting Office.
    You know the routine, ladies and gentlemen. Stand up, raise 
your right hands.
    [Witnesses sworn.]
    Mr. Horn. The clerk will note all three witnesses have 
affirmed.
    We thank you very much for coming, and we will start with 
Ms. Lee on behalf of the administration.

     STATEMENTS OF DEIDRE LEE, ACTING DEPUTY DIRECTOR FOR 
   MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; AND PAUL L. 
   POSNER, DIRECTOR, BUDGET ISSUES, U.S. GENERAL ACCOUNTING 
 OFFICE, ACCOMPANIED BY J. CHRISTOPHER MIHM, ACTING ASSOCIATE 
       DIRECTOR, FEDERAL MANAGEMENT AND WORKFORCE ISSUES

    Ms. Lee. Good afternoon, Chairman Horn. I appear before you 
today to discuss the Government Performance and Results Act, 
commonly referred to as GPRA or the Results Act. It's a very 
difficult acronym. The Results Act of 1993 established a number 
of new major requirements for the executive branch with one 
overriding objective: To improve agency performance and get 
better program results for the taxpayers. This has been a high 
priority for the administration. The Results Act outlines 
several objectives. Key among them is to clearly present what 
results the taxpayers get for dollars spent. To accomplish 
that, the Results Act delineated several progressive steps 
including the concept of performance budgeting. There is quite 
a bit of background on GPRA and on the performance budgeting 
objectives in the GAO report dated April 12, 1999, which I know 
you are very familiar with. I have also briefly outlined the 
process in my testimony.
    Therefore, in the interest of brevity and trying to stay 
within my 5 minute limit----
    Mr. Horn. We won't limit you to the 5 minutes, folks. This 
is very important, so if you want to take some more time feel 
free.
    Ms. Lee. Good, I won't talk so fast. In the interests of 
that, I will move on to accomplishments to date and future 
plans for performance budgeting pilots.
    Accomplishments to date. Performance measurement pilot 
projects as required by GPRA were conducted during fiscal years 
1994 through 1996; 28 departments and agencies were designated 
as performance measurement pilots. These performance 
measurement pilots successfully demonstrated that Federal 
agencies could prepare annual performance plans and annual 
program performance reports that met GPRA requirements. They 
also documented that the time spent on the pilots was indeed a 
learning process and helped lay the foundation for the full 
implementation of Government wide plans.
    Following these pilots, we began to implement GPRA in 
earnest across the Government in 1997. We are now in the 3rd 
year; and overall, the agencies have made very substantial 
progress. Over the past 2 years about 100 departments, 
independent agencies and Government corporations have prepared 
their initial strategic plan and two sets of annual performance 
plans. Within the next 15 months, these agencies will prepare 
an updated strategic plan, two more sets of annual performance 
plans and their first program report. All the while, the 
agencies have prepared annual budgets and, as they will tell 
you in the next panel, they are clearly involved in the 
performance budgeting-like process of plan, budget, results, 
report, and then integrate all of that.
    Agencies continue to improve. As the GAO report indicates, 
the continued success of this program will to a great extent 
depend on its use and integration into the budget 
decisionmaking process both internal and external to the 
agencies.
    Specifically, regarding performance budgeting pilots. The 
GPRA specified the the Director of OMB, after consultation with 
the agencies, would designate agencies or departments as 
performance budgeting pilots. The pilots would test whether 
agencies have adequate performance and financial information 
from which to calculate the effectivness of varying funding 
levels on several or more measures of performance. They would 
also determine whether agencies can define in advance the 
changes in performance resulting from various funding levels, 
and they would describe and display the performance information 
in a manner that would allow decisions to be based upon it. And 
the performance budgeting pilot would have OMB assess agency 
capabilities to perform a performance budget, including the 
cost, practicability and time needed for preparation. These 
pilots were to have been conducted in the fiscal year 1998-1999 
with the report to Congress on the performance budgeting pilots 
by March 31, 2001.
    Let me add that as well as performance budgeting pilot 
assessment, the report is to address the overall implementation 
of GPRA from 1997 through 2000 and provide a picture of what is 
working well in areas of change or improvement.
    Mr. Chairman, as noted by the then Director of OMB, 
Franklin Raines, letter to this committee on May 20, 1997, the 
performance budgeting pilots were delayed. Our priority, then 
as it is today, was to bring about the successful 
implementation of GPRA throughout the executive branch. 
Agencies have devoted a great deal of time and effort to 
ensuring its strategic plans and annual plans were timely and 
useful.
    As with the performance measurement pilots, a foundation 
was needed before the next steps. Challenges remain in 
performance budgeting foundation as cited by the GAO. Some 
agencies still need to clearly define their strategies, and the 
second set of strategic plans is in process with congressional 
consultation this fall and probably early next spring. Agencies 
still need to improve their capability to gather and use 
performance data--first reports due next spring--and they also 
need to have more accurate and allocable cost accounting 
systems. The FASBI standards are working, but they too had 
experienced several years of delay.
    I am acknowledging that challenges for performance 
budgeting remain. However, during the fiscal year 2001 budget 
formulation process, which is now beginning, OMB will select 
agencies and programs or projects within those agencies for 
performance budgeting pilots. With the agencies, we will 
analyze these performance budgets to determine alternative 
levels of performance and the associated resources aligned with 
these performance levels. And we will report in the March 2001 
GPRA report the results and recommendations stemming from 
performance budgeting pilots. Although later than originally 
anticipated, we believe this proposal is consistent with 
previous recommendations on Government performance and results, 
particularly in the relation to the need to set a foundation. 
We look forward to working with the agencies, the GAO, and the 
Congress in moving forward on this effort.
    Mr. Chairman, the Results Act is bringing about a 
fundamental transformation in how we prepare budgets, make and 
manage programmatic decisions, and become more accountable to 
the American public for how we spend their tax dollars. Any 
great change is not accomplished overnight, but we have made a 
very good start. And from this solid beginning the path to a 
true and useful linkage of resources and performance can be 
realized in the months ahead and we intend to work very hard to 
bring about that linkage. Thank you.
    Mr. Horn. We thank you for your statement. And as you know, 
we will go to the next witness and then we will have a dialog 
on this.
    [The prepared statement of Ms. Lee follows:]

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    Mr. Horn. Mr. Posner.
    Mr. Posner. Thank you, Mr. Chairman. I want to introduce 
Chris Mihm on my left who heads all of GAO's work on the 
Results Act, and two people behind me, Mike Curro and Laura 
Castro who have been instrumental in our own work in addressing 
the linkages between resources and results which, as you so 
aptly noted, is critical to both improving budgeting and 
improving the outcome and likelihood for successful transition 
to performance-based management at the Federal level.
    What I thought I would talk about today is what is 
performance budgeting, how is it defined by the Results Act, 
why it is important, where are we at the Federal level and what 
is the agenda for the future.
    Performance budgeting did not start with the Results Act. 
In the report that we did, we noted the checkered history of 
performance budgeting over the past 50 years at least from the 
Hoover Commission on through PPBS, ZBB, MBO and other acronyms 
too numerous to mention. In general, all of those initiatives 
tended to transform what the debate about resource allocations 
are all about, from the debate about activities and inputs to a 
debate about results and performance. Each one of them made 
some progress. I think the Results Act promises to capitalize 
on some of those earlier initiatives and really push this much 
more completely.
    The point in each of these efforts was to more 
systematically address performance as part of resource 
allocations, not necessarily in a mechanical way where 
resources are adjusted every time performance goes up or goes 
down but to improve the way we conduct the conversation about 
resource allocation. That's clearly one of the main goals we 
are talking about here.
    The other main goal is to ground performance planning in 
budgeting to ensure that whatever performance goals we 
articulate are firmly grounded in realistic assessment of what 
resources are available.
    Against that general background, the Results Act has two 
approaches that attempt to solidify this relationship.
    First, the performance plans and the annual plans that 
agencies define must cover the program and activities in the 
Federal budget itself on a comprehensive basis. OMB's A-11 
guidance goes further and calls for transparency so that you 
know how much it is go going to take in resources to implement 
the goals in the plans. The point is to make the link between 
the goals in the performance terms and the budgets that 
agencies have articulated elsewhere.
    The second form of the performance budgeting, is what you 
noted earlier, the performance budgeting pilots which were to 
take place in fiscal year 1998-1999 where OMB was to choose 
five pilots to show how performance varied based on funding 
levels and other kinds of variables that were described. And 
the intent was to pilot the resource linkage more systemically 
during the implementation initially of the Performance Act.
    We have already talked about why this is important. I think 
that you could say that many of the previous reforms that we 
have undertaken, whether it is PPB, ZBB, or MBO, failed in part 
because of the failure to make the analysis and plans relevant 
to the conversation about resources. These initiatives were 
launched with great fanfare, sometimes with unrealistic 
timeframes. I am reminded that under PPBS, agencies had 10 
weeks to define the activities that we are giving them 7 years 
to define in Results Act terms. It ultimately ground to a halt 
when these were not really taken seriously in the resource 
allocation process.
    So we learned from this and I think the designers of the 
Results Act learned very well that if we want to make 
performance stick in the Federal environment, we have to make 
it relevant to the one process that is most critical to the 
agencies and the Congress, and that's the budget and 
appropriations process.
    Now, where are we in articulating this linkage? As the 
study that we have done for the Senate Governmental Affairs 
Committee that we published, as has been stated here before, 
the two forms of the linkage have been--we took a snapshot of 
them essentially in April and found the following: That the 
performance budgeting pilots themselves have not gone forward 
as of yet. We are heartened to hear that OMB is planning on 
moving ahead with some performance pilots in the budget area. I 
think that the barriers that OMB pointed to in the May 1997 
letter were real and are still real. The cost accounting is 
still in its beginning stages at the Federal level. Performance 
baselines and other kinds of tools necessary to articulate and 
tighten this linkage are still in the developmental stages so 
this is still very much a work in progress.
    Notwithstanding the performance budgeting pilots, our 
reviews show that nonetheless a far more basic but yet useful 
connection is in the process of being articulated by the 
agencies at the Federal level anyway. We think these constitute 
what we might call natural or grass-roots experiments and 
pilots in themselves that provide the foundation for moving 
ahead with this agenda of performance based-budgeting.
    The point is that we found a variety of efforts under way 
by agencies to incorporate and link performance into the budget 
presentations and show the implications for the budget of their 
performance goals. This is the first, and I will say in a few 
minutes, necessary step but only the first step in the effort 
to really promote this linkage in a more robust way.
    As straightforward as this seems, it's nonetheless a 
daunting challenge. When we look at our budget, we know that 
there is a tremendous disconnect between the way the budget 
accounts and program activities are presented and the way that 
the performance plans and goals are articulated. That's the 
fundamental challenge that we face. We have over 1,000 budget 
accounts that reflect a 200 year history of budgeting that have 
served very well the changing needs of appropriators. They have 
a variety of orientations from object classes to organization 
to function and programs. The program activities under them are 
over 3,000, and they also reflect a variety of different 
orientations. They very well serve Congress's control purposes 
and Congress's efforts to allocate resources among competing 
purposes.
    The performance goals at agencies are more global. They are 
more articulated as the act contemplates in outcome terms. So 
there is a fundamental tension between the structures that we 
found familiar use in budgeting and structures we find 
necessary to implement the results-oriented approach. Agencies 
have bridged this tension in three predominant ways.
    A few agencies, are actually redefining the budget 
structures to accommodate an outcome or results-oriented 
perspective. You are going to hear from some of them on the 
next panel. Others have attempted to embed their performance 
results in their budget presentations themselves. Finally, the 
vast majority of agencies are developing a variety of 
informative and some noninformative crosswalks between these 
two structures at least at this stage of the process. And to 
reprise the results of our study of the 35 agencies, only 14 
were able to for fiscal year 1999 translate their plan into 
bedget form. In other words, what they were able to do was both 
to identify the proposed funding level needed to implement the 
performance goals and describe specifically where that money 
could be found in the budget.
    In my statement here on page 13, we have one illustration, 
the Nuclear Regulatory Commission. As you can see there, the 
NRC not only indicated they would need $211 million to achieve 
a nuclear reactor safety performance goal or target in its 
plan, but explained that it had been derived from a single 
program activity in its budget request. The point is the NRC 
plan indicates the estimated cost of a performance target and 
shows which goals would be affected by the budget activity 
structure that you see there. I have included in the appendix 
to the testimony several examples from their budget-planned 
presentations of how other agencies have articulated this 
linkage that is so critical.
    In contrast to the 14 agencies, most of the other agencies 
we looked at, such as the Department of Veterans Affairs, did 
not identify the funding levels needed to achieve the goals.
    Mr. Horn. If you wouldn't mind, let me declare a recess so 
I can make this vote. We will be in recess for 15 minutes and 
we will try to be back and pick it up on page 13. So relax. 
Thanks.
    [Recess.]
    Mr. Horn. Recess is ended and we will continue with Mr. 
Posner's testimony, and we are about on page 13 in the 
examples.
    Mr. Posner. As I was saying, I was contrasting the 14 
agencies where you could tell how much money they were going to 
spend to support their performance goals and those where you 
couldn't, which were the majority.
    The Department of Veterans Affairs is one example where 
they didn't identify the funding levels needed to achieve the 
performance goals. And many agencies had the problem where they 
had many goals linked to many program activities and the 
problem was they would show the link, but they would not 
apportion how much of the dollars from each of the activities 
were related to which goal. So you really didn't have a 
transparent kind of linkage there that we have all wanted to 
move to. We will note that the VA is considering changes in its 
budget structure to improve this relationship.
    We have been looking at the 2000 plans for the same 35 
agencies again for the Senate Governmental Affairs Committee. I 
would note that we have noted little change in the overall 
number of agencies that succeeded in relating resources to 
results. It appears that some progress is being made in 
presenting the performance consequences of budget decisions and 
that more fiscal plans in 2000 were associating funding levels 
with specific goals, but they weren't able to say which program 
activities in the budget were related to those goals.
    What does the agenda look like here based on this study for 
the future? In our view, we were heartened to find that there 
was continual experimentation in this very difficult but 
important relationship. We believe that the approaches being 
developed by some of the agencies can provide a valuable 
foundation for further experimentation in this area. In light 
of the delay in the performance budgeting pilots, in fact, we 
recommended in our April 1999 report that the Director of OMB 
use these natural experiments, if you will, as the basis to 
push forward the agenda of linking resources and results.
    We still think that this is relevant, that OMB should lead 
an effort to analyze which kinds of approaches make the most 
sense under different circumstances, should work with the 
agencies in a proactive way, perhaps through the CFOC council 
or the BOAC councils as they have so successfully in some other 
areas like financial management reform, to promote more 
knowledge about best practices in this area, to further promote 
the kinds of pilot projects which we think are important here 
and to provide some good evaluation as to what the effects of 
these presentations have been.
    Let me conclude at this point by noting that we are really 
at the beginning of an important new stage for Results Act 
implementation and one that really will very well be critical 
in determining its ultimate success. It's important to note 
where we are and where we are not.
    What we are really working on is improving the kinds of 
presentations so that we can better align performance 
information with budget information. This is a critical first 
step. We know that the absence of this first step will surely 
frustrate the efforts to link resources and results. However, 
having achieved this as we have in some cases is only the first 
step.
    A few cautionary notes I think are in order here about the 
road that we still have left to travel. The first is we need to 
be clear about what our expectations are as I indicated 
earlier. What we want, I think, is to enhance the kind of 
budget debate we have to enhance the quality of budgeting 
itself to make it more performance based, but I don't think 
that we should expect to promote the kind of mechanical 
linkages where performance levels automatically in some way 
determine resource allocations. There are too many values that 
we care about like needs, equity, and a variety of other things 
to have a straightforward relationship as some might expect.
    Another thing to just caution about is that performance-
based budgeting won't take the politics out of budgeting, as I 
am sure you know, and necessarily shouldn't. In fact, I think 
that you could argue that performance-based budgeting will 
increase the stakes involved with budget decisions. It will 
increase the importance and the perceived importance of what we 
are making decisions about. As a result, this, I think, 
increases the importance of the rest of the GPRA Results Act 
implementation agenda because as the stakes increase, so does 
the potential for distorting measures and making decisions that 
may not be based on the right kinds of data.
    So this means that it's more important than ever, in our 
view, to ensure that there is a validation and verification 
process in place on the performance goals and results that the 
agencies are reporting. It makes it more important than ever to 
ensure that the goals that are articulated in performance plans 
are balanced and reflect everything that is important that we 
care about in that agency to avoid the kind of distortions that 
we might see from a purely quantitative approach to the 
decisionmaking.
    It makes it more important to move on with the cost 
accounting agenda that we just started this year. For the first 
time, agencies have articulated cost accounting responsibility 
segments. This is vital to comparing programs in like terms and 
the like. It's probably also important to think about how our 
budget structures could be ultimately better aligned with 
performance in the long run. These are sensitive relationships. 
Congress has many issues at stake in the appropriations 
process. But ultimately, as we have seen in the past, we would 
hope that as results become a more compelling way to make 
decisions, that ultimately the budget account structures and 
the program activity structures will change accordingly. We 
have noticed this has happened in the past. It wasn't too long 
ago that positions were described in the budget as line items, 
for example, in agency budget presentations 50 or 60 years ago. 
It no longer is the case. We note that the number of accounts 
has actually been reduced in the past 50 years. My colleague, 
Mike Curro, has done some pioneering studies of this. So we 
have moved a long way in our budget account structures, and we 
would hope that that would continue.
    I think what this points to is that GPRA as an act was 
right in concept, that budgeting is vital, and the act was 
right in recognizing that it vitally rests on the successful 
completion of the rest of this agenda which is why performance 
budgeting was not introduced first, it was introduced last, it 
was deliberately piloted in a development process. The linkage 
of resource to results makes the implementation of this whole 
act important. As daunting as the challenges are, we have no 
choice but to pursue it if we want to improve both budgeting 
and performance in the Federal Government. Thank you.
    Mr. Horn. Well, thank you. Mr. Mihm, do you have anything 
to add? That was a very eloquent statement you had, Mr. Posner.
    [The prepared statement of Mr. Posner follows:]

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    Mr. Horn. Let me go to figure one just for a while before 
we start the usual questions. Here you have on the left-hand 
side the salaries and expenses account, fairly traditional. 
They took out of this the first two items, nuclear reactor 
safety--which makes sense--and nuclear materials safety. And 
then the next is nuclear waste safety which might not affect 
some of the personnel but might affect the neighborhood.
    I would simply ask is this basically the chart that NRC has 
on terms of strategic goals and performance goals or is this 
the GAO interpretation of what they have?
    Mr. Posner. This is our analysis of that.
    Mr. Horn. The question is very simple. Was there anything 
else here beside--let's take goal 1.A--zero civilian nuclear 
reactor accidents.
    That often is going to be down the line and less--hopefully 
less likely. Is there another measure that one could think 
about there in terms of nuclear reactor safety? Would the 
accident, for example, if one forgot some of the safety clothes 
they wear for a day or something, and might have had some 
exposure, is that checkmarked under that accident? Is that 
basically an accident?
    Mr. Posner. Well, you are saying that that's an ambitious 
goal, if you will. I think there is some intermediate 
performance goals there.
    Mr. Horn. Well, do you know for several years? I guess that 
is another thing I have got in my mind. When I look at that, if 
it's a nuclear accident and the employee didn't say much about 
it, the doctors didn't have it as a case, and something might 
happen to them 5, 10 years down the line that they did have an 
exposure. I was just wondering how you would deal with 
something like that. That's a negative performance goal.
    Mr. Posner. I don't know that in this context. I do know 
that that's a challenge that we face in measuring and tracking 
outcomes in general. Oftentimes we don't know for several 
years--at least--whether we have been successful.
    Mr. Horn. Then the goal 1.A.1 is maintain low frequency of 
events which could lead to severe accident.
    That probably can be done on a yearly--within a year's 
basis. Goal 1.B.--zero death due to radiation or radioactivity 
releases from civilian nuclear reactors.
    Well, can you understand the deaths. The question is what 
do you tie it to if they have left the employment or whatever. 
How do we deal with that?
    Mr. Mihm. The key thing here, Mr. Chairman, without 
speaking particularly to this example, the key thing that we 
have seen for goals that are results oriented that will take 
several years before we know whether or not we have met the 
goal or not is to have a good sense of the intermediate goals 
or the steps that you would use in order to measure progress. 
Often those are more output oriented in nature and then you can 
budget to those if you have a good sense of what your ultimate 
result is. For example, in science and R&D programs, in some of 
those programs, as people at the NSF have put it to me, are 
trying to create scientists that will discover the disease that 
we don't even know yet exists for the next 20 or 30 years.
    How do you develop an annualized performance goal for those 
types of programs? Part of the answer here is to know what sort 
of scientific programs will lead you to those types of results 
and therefore you focus on making sure that you have those 
quality scientific programs in place. So you focus on 
intermediate goals--developing quality receives toward the 
longer term goals----
    Mr. Horn. Well, that's, of course, difficult and this 
agency has great difficulties because this is something that 
you can't easily see if you have an exposure. You are in a 
traditional building trades, a contractor putting up a sky 
scraper, there is often a sign in almost every plant you go 
into, it's been 400 days since we have had an accident, let's 
say, on the assembly line or whatever it is.
    You are pretty sure that you have caught most of those 
because you have Workers' Comp claims, you have all sorts of 
things. Sometimes a worker might be hiding something dumb they 
did because they just don't want to be thought of as being that 
dumb in a firm that doesn't have emissions popping out of a 
nuclear reactor. So, I am sort of fishing around here for the 
long run bit as we agreed, and how you really can measure this. 
Are there some cases where, let's say if you are an airline 
passenger. Some of us get a form every once in a while 
presumably on a random airplane basis, are you satisfied with 
the counter personnel, are you satisfied with the airplane 
personnel and all of this. Obviously, that is a satisfaction 
index. That makes a lot of sense to me. It is like a student 
evaluation of faculty. That makes a lot of sense to me. It 
didn't make much sense to the faculty, but it made a lot of 
sense to me. The fact is those are valid data, and they do make 
a difference and you can tell over a time line.
    I am just wondering when you look at--this one is very 
difficult. But when you look at other agencies without nuclear 
emissions, what--do you have sort of a choice and a measurement 
operation that GAO has ever put out as possible ways to measure 
a program?
    Mr. Mihm. We have done a number of products related to 
that. We have issued products that talk about the difficulty of 
measuring some of these larger results. We have issued some 
guidance to agencies on how to measure complex problems. We 
also have issued quite a number of products that talk about the 
other half of your equation, how do we know that the data we 
are getting is any good.
    That's an area that we have put a lot of emphasis in our 
reviews of the annual performance plans. The Results Act 
require that the agencies talk about how they are going to 
verify and validate the performance information. Sadly, that's 
also consistently one of the weakest areas in annual 
performance plans, everything from absolute silence to how the 
agency is going to do it to plans that just aren't very clear.
    The point, Mr. Chairman, that you are touching on is that 
if we don't have accurate information that we can be using to 
make decisions on, either in a budget context or nonresource 
allocation context, then the whole planning effort is really 
not worth its weight we don't have confidence in the results of 
the planning effort.
    Mr. Horn. I would like a little exhibit in this record, 
without objection, of some of the choices that you have made 
over the years. If you could just excerpt those, 10, 20 pages, 
put it in the hearing at this point.
    Mr. Mihm. We will work with the staff to get that to you.
    Mr. Horn. Thank you. Ms. Lee, what does the delay of the 
pilots mean for the Government wide implementation of the 
Results Act? What does it mean, anything?
    Ms. Lee. I think what it tells us, Mr. Chairman, is timing 
as Mr. Posner mentioned. There is a great deal of work to be 
done and we wanted to make sure that the foundation was laid, 
the agencies had begun the alignment of budgeting and resources 
and plans and measurement. We think it was logical to delay 
that time until we had a better structure. There still are 
going to be some challenges in those tradeoffs.
    Mr. Horn. It seems there is confusion between the general 
concept of performance budgeting as envisioned by some of the 
authors of the Results Act back in 1993 and 1994 versus the 
specific language in the act that requires agency pilots to 
link varying levels of performance with different budgeted 
amounts. Can you sort of clarify this confusion for the record?
    Ms. Lee. There are several options in some of the 
background in the literature, everything from taking a budget 
level and determining what different levels of performance you 
can get for that same budget amount versus different levels of 
performance for different budget level amounts versus cost 
agency or even intraagency tradeoffs among--requirements and 
budget responsibilities. So what we need to do from a piloting 
standpoint is look at these and say how can we test those 
theories in various ways.
    Mr. Horn. Can we agree on a general definition of 
performance budgeting as envisioned by GPRA that would include 
the type of performance budgeting required for the pilots? Is 
that pretty clear for everybody, the pilots, are they singing 
from the same hymnal of what they mean by performance 
budgeting?
    Ms. Lee. I think we all agree that there needs to be a 
linkage between plan, expected results and the various varying 
results or budget levels. I think that's the theory. But that 
is not to say specifically that every one will be the same. I 
think that we will see variance across the pilots.
    Mr. Horn. Is there an aim to get this variance? I'm not 
against variance. I just am wondering if in, say, a small 
agency, a medium size agency, a large agency just for the sake 
of it, that's one typology. The question would be, can you have 
performance budgeting in that relationship or is it just the 
simple things that we are doing. I remember when we had one of 
these hearings, I thought, good heavens, that's not so 
difficult. We have got to do this so let's dump this on this 
poor soul or that poor soul volunteered was sort of my feeling. 
What do you think about that in terms of definition of 
performance budgeting?
    Ms. Lee. What we try to do is consult with the agencies and 
try to make sure that we have got somebody that is willing to 
step up and work on this. Again, a solid definition of what we 
would like to do is get the pilot that looks at both small, 
medium, and large agencies, but also looks at those other 
tradeoffs. I don't think we want to just align it by agency 
size but we actually want to dig a little deeper and say can we 
find someone who can do the tradeoffs between resources and 
results or who can even do cross programmatic tradeoffs. When 
we select those, I would think that they would all look really 
quite different.
    Mr. Horn. Now, these pilot programs are in some stage of 
being undertaken, or are they?
    Ms. Lee. We are in discussions with the agencies to say----
    Mr. Horn. In other words, they haven't started?
    Ms. Lee. They have not started with them.
    Mr. Horn. It seems to me as they are started down the line 
that you might ask at the end of the first year if you don't 
submit that one to us, did they ever get rid of anything? Did 
they ever say this is a stupid program? That would be a Federal 
Government first, I realize.
    Ms. Lee. I think we are actually seeing some of that in 
GPRA when people have to align dollars are goals. Even if it is 
not performance budgeting, they have to actually sit there and 
say I have these resources, what is my expected result. And we 
are beginning to see a little bit of that tension deliver 
results as people need to articulate the outcomes of various 
programs.
    Mr. Horn. In your testimony you stated, Ms. Lee, that you 
would select the agencies that will prepare a performance 
budget pilot during the fiscal year 2001, 1 year really away 
from us. Budget formulation process, that's under way now I 
think.
    As you said, it's now beginning. At what point during this 
process of the budget--which usually you are wrestling with 
three budgets at a time--will the agencies actually be 
selected? Are we talking about August or are we talking about 
November? When you are going to select them?
    Ms. Lee. We are going to do that within the next several 
months. We wanted to go through a consultation process with the 
agencies. If we have a ready willing volunteer early, that 
would certainly be selected. In the meantime, there is going to 
be a little work and discussion going on to determine exactly 
who the candidates are.
    Mr. Horn. There would be few cynics that say, yes, I 
remember zero-based budgeting. Nothing ever happened to that 
either. So they will all say where did this goofy idea come 
from? It was a bipartisan Congress that submitted that goofy 
idea into law. We think it's pretty good.
    Ms. Lee. There are some agencies as we discussed that are 
really making some progress. Perhaps they would be willing to 
illustrate the progress they have made.
    Mr. Horn. Well, we hope so that--that would be the closeout 
optimistic panel, I am sure.
    You agree with GAO's recommendation that you should assess 
agencies' linkages between plans and budgets to determine an 
agenda for future performance-budgeting efforts? Do you pretty 
much buy what they have said on this?
    Ms. Lee. Yes, I do.
    Mr. Horn. Well, what are you and your program examiners 
doing to ensure that the agencies' performance plans meet the 
criteria you set out in the A-11 guidance on performance 
planning? That is GAO testimony on page 4.
    Ms. Lee. I was just telling Mr. Posner at the recess that 
we have actually taken this report and distributed it among the 
Resource Management Offices. This is very informative, very 
illustrative particularly in some of the illustrations where it 
shows the alignment. We have actually distributed that already 
to resource managers and said, yes, start thinking about this 
as we go into the next set of strategic plans and the next set 
of performance plans, and as we work with the agencies to 
further develop those.
    Mr. Horn. I am glad you say that because I hope that you 
will stress to them that we are serious here, not only in this 
subcommittee but also increasingly in authorization committees 
and also the subcommittees on appropriations. In the first 
testimony on the update of this legislation several years ago, 
I suggested to the majority leader, and whoever was majority 
leader will do the same, we ought to create a war room in his 
suite where we put up the strategic goals, and where we really 
watch this stuff.
    He is taking it seriously. I am taking it seriously. 
Believe me, by the time we are done all the appropriators will 
take it seriously. Sometimes last year they didn't. They were 
in the usual rush to try to get the job done. It's very 
difficult for people here as well as in the executive branch 
sometimes to find something different that they might think 
about rather than the routine that they have been in and it's 
so comfortable after a while.
    So what I am saying is we have a number of places around 
here where it won't be too comfortable, and we hope they will 
take it seriously. If it's good government, we ought to be for 
good government. It just seems to me that the satisfaction 
index is one way to get at these things. I think the State of 
Oregon, somebody ought to go out there and see how they do it.
    They have been doing this for years. They actually get rid 
of things, and they also improve things when something is 
worthwhile. And the citizens agree with that idea. I think 
that's a worthwhile model that the Federal Government could 
look at. I realize we are in a town somewhat like the New York 
Times, that if they haven't printed it or you haven't done it, 
it hasn't happened. They are wrong. It happens all over the 
world. It is just somebody's judgment as to what is printed. It 
is to someone's judgment in this town that, my heavens, we have 
to do something new around here? The answer is yes. When the 
leadership is pretty serious about it, I think it's a good idea 
to move right along on some of these things.
    When you issued your September 1998 discussion paper, what 
formats and timeframes did you recommend for the pilot 
programs?
    Ms. Lee. In September 1998, at that point were hoping to 
make 2000 budget. But as you know, we are now aiming for the 
2001 budget.
    Mr. Horn. What type of comments did you get back from the 
agencies?
    Ms. Lee. We didn't have any outright volunteers.
    Mr. Horn. Well, did you have any comments?
    Ms. Lee. Yes, we did. Because of the complexity, we need a 
little bit more time here. Some things that actually we have 
covered here, we need a little more time to work on this piece 
or we are still working on an alliance, cost accounting 
comments and things along those lines. There also was some 
concern on the agencies' part that said basically, does this 
put me in a spotlight that perhaps I don't want to be in.
    Mr. Horn. Well, maybe that will put them in a spotlight 
that would allow us to give them some extra money. Could we 
dangle that out there?
    Ms. Lee. That tends to be an incentive.
    Mr. Horn. Slowly but surely, $1 a carrot, but I would think 
of that and what OMB could do creatively to say, hey, for your 
trouble and if you do a good job, we are prepared to give this 
or that program some more budget authority.
    In your testimony, Mr. Posner, you indicated that the GAO 
did not assess the quality of the goals presented in agency 
performance plans or independently verify the funding levels 
associated with these goals.
    Does this imply that the status of performance budgeting in 
Federal agencies is actually worst than depicted in your recent 
report?
    Mr. Posner. No, we just looked at the linkage itself. In 
this particular study, we didn't look at the quality of the 
goals or the underlying data, but we are doing that in other 
studies that we have been working on with the Congress across 
the board, really.
    Mr. Horn. Well, obviously, our worry is are you gauging 
agency progress on unreliable data?
    Mr. Posner. That's one reason why we put that caveat in 
there. We couldn't vouch for the data itself so we put the 
footnote in that we didn't verify the funding levels associated 
with that at that time. I think this is an area that does--the 
whole area as, I indicated, earlier of verifying not only the 
funding levels but, just as important, the underlying 
performance results that are achieved is going to be an 
emerging challenge.
    Mr. Horn. It's like Y2K reporting, it's self-reported data. 
That has a lot of problem sometimes.
    Mr. Mihm. Mr. Chairman, just to add on to that, to keep 
working the Y2K analogy, the self-reported data is pretty bad 
now. It becomes a nightmare in the case of GPRA when we have 
the performance reports. In other words, there is an action 
forcing event when the bad reports or bad promises will come 
home to roost in agencies. That's why we have become quite 
adamant in focusing on verification and validation in the 
plans. It undermines the usefulness of the plans now. It will 
be a real nightmare for agencies that haven't done a good job 
of this when it comes time to put together the reports for next 
March.
    Mr. Horn. There is a day of reckoning, you are saying 
somehow, somewhere. OMB states in its testimony that agency 
budgets are showing how performance is affected by increases 
and decreases in funding levels. They also state that agency 
performance plans provide information on the budgetary 
resources associated with the set of performance goals.
    Is this a fair characterization of the status of Federal 
agency performance plans?
    Mr. Posner. Well, again, from our study, about less than 
half of the agencies are associating performance plans with 
budgeted levels, but the rest have a long way to go in that 
regard.
    Mr. Horn. Well in your testimony, you noted little change 
in the overall number of agencies clearly relating resources to 
results between fiscal years 1999 and 2000. How do you account 
for this lack of improvement?
    Mr. Posner. Well, we are still in the throes of analyzing 
that ourselves. We would have liked to have seen greater 
progress. One thing is it just shows how formidable the 
barriers are to executing this kind of linkage because of the 
disparate nature of budget activity structures and program 
planning structures. We also think that this could be aided and 
hurried along by some of the kinds of things that we talked 
about earlier here, some more concerted effort among agencies 
to learn from one another and that kind of thing.
    Mr. Horn. In your testimony, you recommended that OMB 
conduct analysis that addresses what types of pilot projects 
might be practical and beneficial and when and how these 
projects would take place. What specific recommendations can 
you offer to OMB to expedite this analysis?
    Mr. Posner. I think this really is the kind of thing that 
we think calls for somewhat more of a proactive leadership role 
as their part Governmentwide councils, of agency leaders and 
managers may be a useful strategy for leadership in this regard 
to identify some of these best practices. And frankly, I think 
it also calls for involvement of the program examiners in OMB. 
They have quite a bit of background and knowledge on these 
agencies and budgets and they need to--if they haven't already 
to gain a stake in analyzing these plans. And helping OMB 
figure out where the opportunities really lie.
    Mr. Horn. Any other comment you want to make, Ms. Lee?
    Ms. Lee. Chairman Horn, the emphasis on Government 
Performance and Results Act has been presented several times to 
the President's management council which, as you know, is the 
deputy secretaries.
    I believe last month or the month before, a couple of 
agencies came through and discuss, as we do this first report, 
how agencies are working on their next strategic plan. They 
laid out their schedule for consultation with Congress. They 
also thought about how do we write these performance plans and 
doing a little testing internally. So it is going on, but it is 
a difficult task.
    Mr. Horn. Well that's good news that the Deputy Secretary's 
undersecretaries are taking this seriously. That's the only way 
it is ever going to get done, is the chief operating officers 
of these agencies doing it. The poor secretaries running around 
the country and the world in planes to tell what the mission 
is. Somebody has got to stay at home and make sure that this 
tough, dull, drudgery--which is crucial to outcomes--is done.
    Ms. Lee. We are trying to tell them it's exciting.
    Mr. Horn. Well, you are a much more positive personality 
than a legislative personality. We hope you are right. Let it 
be exciting, let it be done. The next time you come here, you 
are going to have all of those select models prepared. And how 
long is it going to take them, one budget cycle to do it? And 
then see what happens?
    Ms. Lee. I think we will use the budget cycle and see what 
happens and then say do we repeat this? Do we have enough 
information? Where do we go from there?
    Mr. Horn. We look forward to that. Anything that the 
General Accounting Office wants to say on this subject?
    Mr. Posner. We have said our piece.
    Mr. Horn. Well, you have done a good job, all three of you. 
Thanks for coming.
    We now go to panel two, the Honorable Sallyanne Harper, 
Chief Financial Officer of the Environmental Protection Agency, 
the Honorable Olivia Golden, Assistant Secretary, 
Administration for Children and Families, Department of Health 
and Human Services, and Mr. Jesse L. Funches, the Chief 
Financial Officer of the Nuclear Regulatory Commission.
    OK. If you would stand up and all of those who are going to 
feed you information also stand up and raise your right hands. 
We have three witnesses and five feeders.
    [Witnesses sworn.]
    Mr. Horn. The three witnesses have affirmed and so have the 
five others with them, and the clerk will get all of the names 
and make sure that they are in the hearing record.
    So we will now start with the Honorable Sallyanne Harper, 
Chief Financial Officer, Environmental Protection Agency. Thank 
you for coming.

   STATEMENTS OF SALLYANNE HARPER, CHIEF FINANCIAL OFFICER, 
 ENVIRONMENTAL PROTECTION AGENCY; OLIVIA A. GOLDEN, ASSISTANT 
SECRETARY, ADMINISTRATION FOR CHILDREN AND FAMILIES, DEPARTMENT 
   OF HEALTH AND HUMAN SERVICES; AND JESSE L. FUNCHES, CHIEF 
        FINANCIAL OFFICER, NUCLEAR REGULATORY COMMISSION

    Ms. Harper. Thank you, Mr. Chairman.
    I appreciate this opportunity to appear before the 
subcommittee to discuss EPA's efforts to align planning and 
budgeting and to manage for results. I particularly appreciate 
your interest in these reforms and hope that EPA's experience 
will help illustrate both the benefits and the challenges we 
face in performance budgeting. With the subcommittee's 
permission I would like to submit my written statement for the 
record.
    Mr. Horn. They are automatically in the record. Maybe you 
were not here. Once we introduce you, they all go in the 
record. You are free to give us a summary and then we will have 
more time for a dialog.
    Ms. Harper. Thank you, Mr. Chairman.
    Mr. Horn. So don't read it. We have read it.
    Ms. Harper. We are very proud to have been the first agency 
to succeed in fully integrating our budget request with our 
annual performance plan. EPA has benefited substantially from 
the structure, visibility, and credibility provided by the 
Results Act. It has been a unique and exciting challenge for me 
to oversee EPA's implementation of the Results Act because it 
fully supports our focus on environmental outcomes and sound 
management of public resources.
    The basis for many of EPA's performance budgeting 
accomplishments has been our strategic plan and its 
architecture of 10 long-term strategic goals supported by a 
range of objectives representing major steps toward those goals 
achievements. The architecture captures EPA's many complex and 
interrelated mandates in a relatively simple structure and 
paves the way for linking planning with budgeting. EPA's new 
budget structure matches the architecture of our Results Act's 
goals and objectives. Consistent with GPRA requirements, we 
implemented changes in the fiscal year 1999 budget development 
cycle that identify fiscal year 1999 activities as incremental 
steps toward our longer term objectives.
    These incremental steps were embodied in the annual 
performance goals and measures that made up our first annual 
performance plan under the Results Act. In other words, EPA 
specified what it intended to accomplish in fiscal year 1999 
with the requested resources at a level of specificity we had 
never attained in the past.
    We also have modified our financial structures to reflect 
the 10-goal architecture. This was a massive undertaking and we 
are very pleased to report that we have succeeded in putting 
the necessary financial processes in place to support cost 
accounting in time for the initial implementation in fiscal 
year 1999. We acknowledge the need to discuss results and costs 
with comparable precision. To that end, we are working to 
improve annual performance goals and measures, making clear the 
connections between what we accomplish in a single year and 
what we hope to accomplish over the longer term.
    One promising effort is EPA's National Environmental 
Performance Partnership system [NEPPS], which aims to 
strengthen our ability, combined with that of our State 
partners, to improve environmental results. EPA's annual 
performance plan contains core performance measures, those that 
we have negotiated with our partner States so that both NEPPS 
and the Results Act processes reinforce each other.
    We will summarize our 1999 accomplishments in our first 
annual performance report to Congress in March 2000. The 
information we developed through our accountability process 
will be a principal input to both future planning as well as 
budgeting cycles.
    There are some challenges that remain. We have not yet 
completed our first full year's learning experience under the 
Results Act. We must find ways to portray environmental results 
that are the product of many efforts, including those of State 
partners, other agencies and other stakeholders. We need to 
work to ensure the validity and the reliability of our 
performance data. Finally, many of the environmental results we 
aim for may become apparent only over long periods of time; and 
their full costs, including all funding sources, will be 
difficult to assess.
    In closing, I would like to reaffirm EPA's support for 
performance budgeting and the full range of Results Act 
activities that support it. We count on your continued support 
as we tackle the challenges that I have described to you as 
well as others that are bound to appear along the way.
    I thank you for the opportunity to discuss these important 
issues with you today.
    Mr. Horn. Well, thank you.
    [The prepared statement of Ms. Harper follows:]

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    Mr. Horn. This is a question that probably should be put to 
your chief information officer. The State of California's EPA 
several years ago, maybe 6 years ago, had a very interesting 
development in computing where they worked with business, and 
they set the joint codes and definitions between the agency and 
the business and most of their filing, was electronic. And, I 
just wondered to what degree, while it stays in my brain, that 
EPA has done that because I mentioned it to some of your 
assistant directors since I sit on their review committee, 
Water Resources and Environment; and I just wondered if they 
are doing any of that?
    Ms. Harper. Mr. Chairman, I am pleased to report that they 
are. I am sure that our chief information officer can provide 
more detail for the record, but one of the programs that we 
feel would be ultimately quite successful in following 
California's example is our one-stop reporting program. We are 
trying to synchronize with those who report in to us one place 
where they bring in all of their data rather than to our 
separate stovepipe elements, which we ask sometimes for the 
same data in completely different formats or slightly different 
variations.
    The administrator is also establishing, and it should be in 
early September of this year, a consolidation of our entire 
information function at EPA into a new information office, one 
of its primary goals is to do exactly what the State of 
California has been so successful in doing.
    Mr. Horn. I am delighted to hear that. I know that you have 
a very fine leadership there. That is just a good thing to do 
and I think everybody is the better for it. I am glad to hear 
about it. If you can just put a little exhibit at this point in 
the record without objection, we will do that.
    Ms. Harper. Thank you.
    [The information referred to follows:]

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    Mr. Horn. We now go to the second witness, the Honorable 
Olivia A. Golden, Assistant Secretary, Administration for 
Children and Families, Department of Health and Human Services. 
We are glad to have you here.
    Ms. Golden. Thank you, Mr. Chairman. I am Olivia Golden, 
Assistant Secretary for Children and Families at HHS, and I 
want to say how much I appreciate your invitation to speak with 
you today on the topic of performance budgeting under the 
Government Performance and Results Act of 1993.
    The Administration for Children and Families [ACF] is the 
lead agency in the Department for programs serving America's 
children, youth, and families. Our programs are at the heart of 
the Federal effort to strengthen families and give all children 
a chance to succeed. ACF is responsible for almost 50 Federal 
programs, including Temporary Assistance for Needy Families or 
welfare reform, child support enforcement, Head Start, child 
care, and child welfare and adoption services.
    Our partners in delivering these services are the State, 
territories, local and tribal governments, other Federal 
agencies, and the private sector.
    We are pleased with the recognition we have received for 
our work, particularly our consensus building with our partners 
and our approach to linking performance measures to the budget. 
There were several critical steps that we took early on to lay 
the groundwork for implementing the Results Act.
    In 1994, shortly after the enactment of the Results Act, 
the Office of Child Support Enforcement and the Office of 
Refugee Resettlement became our Results Act pilots. At the same 
time, we initiated an agency wide process to define the vision, 
values, and goals of ACF. In 1995, we released our first report 
card on achieving success for children and families based on 
the goals we identified.
    Over the next 2 years, a number of senior staff members, 
including myself, taught more than 20 2-day partnership 
collaboration sessions with our staff, including how to work 
differently with our partners and how to focus on results. And 
to encourage cross-organization learning, we asked our early 
Results Act pilots to present their successes and failures to 
our whole senior staff.
    We have continued to build on these efforts, and our 
current performance plan includes agreed upon measurable 
outcomes for all of the ACF programs. These activities occurred 
in a legislative environment that also has supported a focus on 
results. For example, the Child Support Performance and 
Incentive Act of 1998 established a performance-based incentive 
system that will reward States on the basis of their 
performance on 5 results measures.
    The Adoption and Safe Families Act created the adoption 
incentive program under which States will receive incentive 
funds tied to their success in increasing the number of 
children adopted from the foster care system. This new program 
is the first in child welfare to tie outcomes to funding, and 
we look forward to making the first payments later this summer.
    GAO has called useful the way ACF's plan displayed goals 
and related program activities, and has used our budget linkage 
approach as one example of how to consolidate program 
activities and relate them to performance goals.
    In our fiscal year 2000 performance plan presented to 
Congress with the fiscal year 2000 President's budget, ACF 
created a table to crosswalk our four strategic goals and 10 
objectives to over 60 program activities and line items. The 
plan provided a narrative about program context and strategies 
along with the program's performance measures, goals and 
targets and information on data sources, validation and 
verification.
    Over the past several years, ACF has experienced increasing 
demands resulting from newly enacted programs in changing 
statutory requirements while working in an environment of 
decreasing staff and tight budgets. Our Results Act plan has 
been a key tool to help us manage our resources more 
effectively and focus our financial investments on our goals 
and priorities.
    I believe that we have learned many important lessons from 
our experiences to date. First the performance measures must 
include measures of outcomes and results. Process measures 
provide an important piece of the overall picture, especially 
where research shows that they are linked to outcomes but they 
should not stand-alone.
    Second, it is both difficult and critically important to 
develop outcome measures through consensus with partners.
    Third, it is not possible to create in a short period of 
time a mature set of performance goals and data collection 
strategies. It takes considerable time to bring partners to the 
table, develop shared priorities and goals, and address 
weaknesses in data collection and the shortcomings of the 
available measures.
    Fourth, establishing measurable goals and outcomes leads to 
opportunities for cross-program collaboration and new program 
initiatives.
    And fifth, performance measurement is one of a number of 
tools along with research and evaluation that can help us, over 
time, do a better job of taking results into account in 
difficult budgetary choices.
    In conclusion, ACF is firmly committed to the principles of 
performance measurement and the utility of the Results Act. We 
believe that performance measures are most effective when 
developed through a collaborative process with partners and 
that investments in data collection, as you have seen several 
times today are an important element of success. Results 
measurement can produce information that will inform the budget 
process and it can motivate Federal, State, local and community 
partners to work together to improve results for children.
    Thank you and I would be pleased to answer any questions.
    Mr. Horn. Well, thank you. That was a very helpful 
statement, especially on the lessons learned. We can all 
benefit from that.
    [The prepared statement of Ms. Golden follows:]

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    Mr. Horn. Mr. Funches, we are delighted to have you here. 
You are the Chief Financial Officer for the Nuclear Regulatory 
Commission, a very important agency.
    Mr. Funches. Thank you, Mr. Chairman. On behalf of the 
Nuclear Regulatory Commission, I welcome the opportunity to 
testify today on our successes and continued progress toward 
implementation of the Government Performance and Results Act. 
My specific focus today will be in the area of performance 
budgeting.
    NRC's progress in implementing the performance budgeting 
has been recognized by the General Accounting Office as 
positive and significant.
    Let me first note that a major factor in our success has 
been the strong support exhibited by the Commission for 
transitioning the agency to a more performance-based 
organization. Key to reaching this goal was the initiation of 
the NRC's strategic assessment and rebaselining initiative in 
1995. This internal effort provided a solid, reliable 
foundation on which to develop the NRC's first strategic plan 
and subsequent performance plan.
    We have found that few areas are more crucial to 
implementing GPRA than the implementation of an integrated 
planning budgeting, and performance management process. We are 
implementing such a process. The result has been the 
establishment of one, a sensible, reliable process for defining 
goals and establishing strategic direction; two, cost effective 
strategies for achieving these goals; three, and the ability to 
determine the resources needed to achieve the goals, and last, 
the ability to measure and assess our progress and overall 
performance. A recent contract evaluation of our process found 
that it is sound, and it has been a catalyst in improving 
integrated planning and budgeting.
    Thus far, we have used this process to produce the NRC's 
fiscal year 1999 performance plan and fiscal year 2000 
performance plan and budget. We are also applying this process 
in revising our strategic plan.
    A key strategy that we have used to transition to a more 
performance-based agency is to integrate the various components 
of planning and budgeting.
    We agree with GAO's findings that the following three 
approaches facilitate linking budget requests to anticipated 
results. First, change the program structure to reflect goal 
structures. Second, there should be a simple, clear 
relationship between the program activities and performance 
goals. Third, the performance plan should be fully integrated 
with the congressional budget justification.
    The NRC's fiscal year 1999 performance plan encompassed two 
of the three approaches.
    First, the NRC substantially changed its program activity 
structure to be consistent with its planning structures. We 
identified strategic arenas which comprised our major mission 
responsibilities. Funding for programs was identified for each 
strategic arena which corresponded to a specific strategic goal 
and associated performance goals and measures. This represented 
our initial steps to transition from an organizational budget 
which emphasized individual office outputs to a more 
performance-based budget that emphasizes mission-related 
outcomes.
    With respect to the second approach of establishing a 
simple relationship between program activities and performance 
goals, we created such a relationship by linking a single 
program activity with multiple performance goals. We did not 
fully integrate performance information with the budget 
justification in our initial performance plan in fiscal year 
1999, but we have for fiscal year 2000 where we combined the 
performance plan and the budget. This improvement contributed 
to the integration of planning and budgeting. At the same time, 
we were able to communicate a more complete picture of what 
actions the agency was planning to take and the resources 
needed to get the job done.
    During the past 18 months, we have taken additional actions 
to support our continued conversion to a more performance-based 
organization.
    Improving the use of outcomes and deciding which programs 
to pursue and subsequently allocate our resources continues to 
be an agency priority. We are not able to create a direct 
mathematical relationship to calculate incremental change in 
outcomes relative to an incremental change in resources. 
However, we were able to evaluate activities relative 
contributions to performance outcomes. To date, an application 
of this concept has been in our Office of Nuclear Reactor 
Regulation which is responsible for oversight of nuclear 
reactors.
    Proposed and existing work were evaluated in terms of how 
they leveraged the outcomes. By linking key activities and 
specific performance goals and then judging the relative 
contributions to the outcomes, we identified new initiatives 
that need to be undertaken, determine work that could be 
eliminated without impacting outcomes, and identify work that 
should be continued.
    We are currently revising our strategic plan. Our goal is 
to identify performance goals that more directly relate to what 
the agency wants to achieve and how the agency will be managed. 
We will identify key strategies for achieving these performance 
goals, and identify performance measures that demonstrate our 
progress in achieving each performance goal. The challenge, 
especially for a regulatory agency like the NRC, is to find the 
right balance between information related to our own 
performance and operation, and information on the industry we 
regulate. Inherent in that challenge is the need to verify and 
validate, on a sound sampling and auditing basis, information 
generated by the industry we regulate and by ourselves.
    The NRC intends to continue to provide Congress with an 
integrated budget and performance plan. We are currently 
examining how best to integrate performance reporting with the 
performance plan and budget.
    In conclusion, we are making progress in performance 
budgeting. However, we recognize we are not where we need to 
be. We need to evolve to a point where we are able to clearly 
articulate that we are doing the right work, and we are doing 
it right. The transition to a performance-based organization is 
an iterative process that requires our continued attention to 
manage toward outcomes.
    Thank you for the opportunity to summarize the status of 
our performance budgeting efforts. This concludes my remarks, 
and I am pleased to answer any questions you might have.
    Mr. Horn. Thank you very much.
    [The prepared statement of Mr. Funches follows:]

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    Mr. Horn. All three of you have given us helpful 
statements. Does that mean all three of you want to be a model? 
You are part way there it seems to me in really grappling with 
some of these problems.
    While you are thinking on that, I am going to yield time to 
my ranking member, and we are delighted to have him here. He 
takes a great interest in these projects, and Mr. Turner of 
Texas for questioning the panel.
    Mr. Turner. Thank you, Mr. Chairman. I am a strong 
supporter of performance budgeting because we embarked on that 
in Texas when I was a member of the legislature there some 
years ago, and I think it has proven to be very helpful. It is 
a very difficult system to implement and sometimes the 
relationships between funding and performance and outcomes are 
difficult to refine and make meaningful, but one of the things 
that I would like to inquire of each of you because obviously, 
even though I didn't see any of you raise your hands on 
volunteering to be a pilot, it does seem that you have taken 
the matter seriously.
    I would just like to know a little about your own 
experiences with your own staff about the attitudes that exist 
in your agency toward performance budgeting. Is it viewed as a 
pain that somehow you have to go through the paperwork and show 
all of this on paper so it looks good or is there--is there 
some significant commitment and significant belief in the 
validity of performance budgeting? Any of you can begin. Ms. 
Harper.
    Ms. Harper. Congressman Turner, I would be delighted to 
start. EPA has never treated performance budgeting as a paper 
exercise. We had initiated our move toward performance 
budgeting as a result of a very critical study by NAPA on how 
we set priorities to get environmental results. The 
Administrator, Carol Browner, took that study very seriously 
and established a senior leadership team of her top career 
officials of the agency to respond to this and assess how we 
were going to change.
    The net result of it was that we went through a major 
reorganization. We formed a new Office of the Chief Financial 
Officer. We put planning with it as well as budgeting, 
accountability financial management and services, and an 
analysis function to focus solely on bringing up performance 
budgeting in the agency. This is our first full year of 
implementation with our 1999 budget. In actuality, the Deputy 
Administrator just finished meeting in May with each of our 
goal leaders each of the goals that we have got to assess their 
progress against both their annual performance goals and 
measures as well as their long-term. How are we doing against 
the long-term strategic plan? Where are our data gaps? Where 
are our performance gaps? How does this reflect in terms of 
what we have budgeted, and where we are going?
    So I believe that at EPA there is top political support for 
this, and the career leadership has endorsed this fully and 
take it quite seriously.
    Ms. Golden. Congressman Turner, what I am very excited 
about, at the Administration for Children and Families, is that 
not only have ACF staff invested in performance and end results 
but also our partners in State and local government have made 
these investments. And I think the reason is that a focus on 
results has contributed today to results for children which is 
the reason people are in the business. The example I wanted to 
give you is an example where we had a pilot in the area of 
child support for our work on child support enforcement and 
paternity establishment and work with fathers.
    We are very proud of the overall result that 1.5 million 
paternities were established in 1998. It has tripled the number 
in 1992, and it is well above our GPRA target for 1999. That 
happened because when you get a very vivid focus on a result, 
people really do buy into it and think about it.
    What happened with us, I think, initially was the early 
anxiety among our staff about how our State and local partners 
would react to measurements. I am sure you can imagine, people 
were worried if they talked to Texas and said, we are going to 
need you to reach this number and it is going to be pretty 
public and pretty vivid. There was lots of worry about how that 
would play out. We focused both on our staff and our partners 
from the beginning. What we found is that you really have to, 
in our kind of work--where everything depends on local and 
State governments--focus on both those things; and then you can 
get very strong buy in.
    Now, I think the next step which may be a topic we want to 
come back to is that we have buy in. We have data that is 
improving year by year, but we also have lots of data gaps we 
need to continue to fill for the future, and I think that 
maintaining buy in requires that you keep working on credible 
data so people don't get worried that they will get measured 
for the wrong things. They have to feel good that they will be 
measured for the right things.
    Mr. Funches. At NRC, I would say it is definitely not an 
effort to produce a report or produce a plan that is not being 
used. From the beginning, we had strong support by our 
commission which is the head of our agency. They had a very 
strong interest in it with the idea that it would improve 
management. It would improve the allocation of resources within 
the agency. We have an executive council comprised of the 
executive director for operations who is responsible for all 
programs, the chief information officer, and myself; and we all 
participated very heavily in the establishment of the goals. 
And we meet often to talk about where we are in implementing 
our plan and measurement process.
    We have now moved to the next level and one of the largest 
offices have implemented and have become very excited about it. 
They see that it is a way of making decisions, bringing 
rationale to the decisions by looking at the outcomes they want 
to achieve. We are transitioning this to the different levels 
of staff by using different planning techniques.
    One of the items that we will have is an operating plan 
which will be at a lower level than our performance plan which 
is at the agencywide level. But again, we will focus on the 
outcomes.
    So, I think, we have a lot of excitement within the agency, 
and a lot of interest in doing it. And, in fact, while 
recognizing that GPRA was there, we would have started 
something very similar to this independent of the GPRA.
    Mr. Turner. It takes not only a commitment at each agency 
for it to be meaningful, but the people on the other end at OMB 
that are putting together the President's budget, the 
appropriators, and the Congress, I think they have to have a 
clear understanding of performance budgeting and its 
limitations. Sometimes things reflect inaccurately on what is 
really happening, and we have to understand that.
    But I guess I would like to ask each of you has your 
experience in performance budgeting thus far seemed to have 
impacted either the OMB in drawing up the President's budget or 
have you seen it impact the appropriators and Congress to 
really ultimately make this successful those who are deciding 
how the money is allocated and spent in the Congress and the 
office of the President, those people have to use this data. 
And I would like to ask you if you have seen any tangible 
examples of an appropriation decision having been based upon 
some of the performance-based indicators that you have 
generated?
    Ms. Harper. Congressman Turner, for EPA we have found that 
at least our budget examiners have not been shy about engaging 
in the Results Act discussions during the budget preparation 
period.
    As you may know, internally there are a number of hearings 
that take place as we prepare for a budget submission, and each 
of our program managers participates with OMB and a panel of 
OMB examiners during each of those hearings. During each of 
those hearings there was extensive discussion. What are the 
performance results? What does this mean in terms of what you 
are proposing to us? How does this differ from last year? And 
how does it track? It is difficult to trace how that will 
impact decisions sometimes. We know that it is raised. We know 
that OMB is focused on it when we get inquiries back, but it is 
hard right now so early in the process to understand how that 
translates into final budgetary decisions. It is difficult.
    The appropriation committee staff that we deal with on VA-
HUD are extremely knowledgeable about the agency. They have 
worked the agency budget for many, many years. The transition 
to the new budget structure, which is aligned with our goals 
and objectives, as well as our new finance and accounting 
process that was match our Results Act structure, is difficult 
for them because they are worried about losing the tracking 
capability built over time.
    They know our programs extremely well, and in the new 
architecture they want to make sure that they have not lost 
pieces of program information. To facilitate the transition, we 
have provided crosswalks back to the old budget structures that 
we have had and engaged in extensive discussions. That said, in 
our report language consistently over the last 2 years, on both 
the House and the Senate side from the Appropriation 
Subcommittees, there have been extensive notes on our GPRA 
implementation. The subcommittee requested information or what 
was going well and what was not and areas that we needed to 
focus on. So it is certainly taken very seriously. It hasn't 
been a flawless presentation on the agency's part to the 
subcommittee in terms of being able to walk them through the 
changes in the structure.
    Ms. Golden. I agree completely that it is very important 
that both within the administration and the Congress, the 
results information gets taken seriously, and we are part way 
there. There are a couple of examples in my testimony where we 
are very pleased that as a result of bipartisan work between 
the administration and the Congress, in the area of adoption 
and in the area of child support, we have been able to work out 
incentive strategies where dollars go to States in a way that 
is driven by results. We are well on our way to our goal of 
doubling the number of adoptions from the child welfare system 
by fiscal year 2002. And incentive legislation is not the only 
reason, there are other reasons for focusing on results besides 
the budget, there is the issue of leadership and technical 
assistance.
    Another example would be in the Head Start program where we 
have made major investments in research and data collections so 
that we can do both what we want to do and what the Results Act 
requires--which is really to look at a sample of programs and 
talk about the results for children. I do think that the fact 
that we are doing that and are serious about it, helped us last 
year in achieving the full amount of the President's request 
for Head Start, and I certainly hope it will this year as well. 
We obviously don't know the answer yet.
    Mr. Funches. I would say definitely that the appropriating 
committees are very aware of outcome-based budgeting that we 
are looking at. We do have discussion with them about the 
outcomes. Likewise with our OMB analysts, there are questions 
about outcomes. I can give you a couple of examples that may 
help illustrate the types of discussions that we are having.
    Nuclear power reactors are licensed for 40 years. One of 
the issues that is very important for the nuclear industry and 
for the country is the renewal of those licenses. During the 
past year, there has been a lot of discussion about what 
outcome do we want and how do we know if we are successful. 
Ultimately we came to the conclusion that one of the keys was 
the time that it would take to renew such a license. We 
interacted with the appropriators, et cetera. We came up with a 
time, and I think, that this definitely supported getting 
adequate resources to meet those time lines in terms of the 
outcome goal of having a review completed. So far, I am pleased 
to say that we are meeting the outcome goal that we have set.
    During the past year we have also made the effort to reform 
our regulatory processes, in order to address concerns which 
have been expressed. We worked with the Congress in trying to 
determine the outcomes that we want as a result of this. We now 
provide Congress with a report that talks about the outcomes. 
It is very consistent. They have been looking at it, and I am 
sure that we it will be an input to their decision on the 
appropriation bill this year.
    Mr. Turner. Well, I am impressed to see that there seems to 
be a sensitivity not only within the agencies but on the part 
of OMB and the appropriators and the staff of the appropriators 
to trying to make it work.
    I am one who--through our experience in Texas, I came to 
understand that it is really--over a period of years of 
applying it, have seen that it becomes meaningful. In fact, in 
the earlier stages, it can be very misleading. And there are 
always going to be decisions made that won't solely be based 
upon performance measures. But over time, as you refine the 
data collection and the methodology, then you begin to get 
comparisons 1 year to the next to the next, and then I think it 
becomes a very useful tool.
    So I am pleased to see all of you have embraced it, and I 
think positive attitude about it is essential to being sure 
that it actually ends up working. Thank you, Mr. Chairman.
    Mr. Horn. Well, you are quite welcome. That is a very good 
exchange. Some of these questions might be duplicative of Mr. 
Turner, but just for the record, do you feel it is necessary to 
have a second comment period with OMB before establishing the 
pilot programs? All three of you seem to be pretty far advanced 
in terms of looking at the performance in relationship to the 
budget? What is your feeling on this?
    Ms. Harper. Mr. Chairman, I think that it is necessary to 
have a second comment period with OMB. One of the dilemmas that 
we face, I would say probably all three of us, is that we have 
taken our lead and gone on, and I would say that there might be 
some concern about whether diverting attention to one portion 
of the agency's implementation in terms of setting up a pilot 
might detract from the critical mass we need to keep the whole 
of it moving. At least for EPA, it is the entire agency that is 
moving forward with performance budgeting.
    We have under taken it across the entire agency already. 
And the pilots call for components of an ongoing to look at the 
different levels of budget and the expected results, which, I 
think, is actually a very valuable exercise; but since we chose 
to go with the whole restructuring, I wonder if that might not 
be the best way for us right now. Budget restructuring is a 
massive undertaking. It is a very big change for our programs, 
for our State partners and for us on the fiscal side.
    Mr. Horn. Well, I can understand that. We had that in the 
university when we were way ahead of everybody else, pretty 
soon they had a system that said, hey, everybody else has to do 
it; but we didn't want to do some little piece of it when you 
are already doing the whole works, so I can appreciate your 
situation.
    Ms. Golden.
    Ms. Golden. I think the biggest issue for us is that we 
have made this process that we are enormously proud of. I told 
you about some of the results that we have forward in child 
support, adoption, and some of the other areas, but for us 
there are big next steps in terms of data collection, 
verification, data investments, and also working with our 
partners as we go through each step. Just to take the example 
of child support where I told you about the progress on 
paternities and 80 percent increase of collections, we are very 
proud of those; but as we move into the next step which is 
implementation of the bipartisan legislation, I mentioned where 
the incentives are going to go to States, we are having to work 
with States, very closely on their data systems. And some of 
the interpretations of performance budgeting I don't think any 
of us would want to be in a situation where we were telling 
Texas or California that they didn't get dollars because their 
data just was not up to speed. We would much rather be 
developing information systems and data collection systems for 
the States and local governments to provide us with 
information. And so we need to make sure that that comes along 
as we make each step, and I think that is the big lesson that 
we have learned.
    Mr. Horn. That is very good. Now, were you in Massachusetts 
when the Debt Collection Improvement Act went on the books, the 
Federal one at all?
    Ms. Golden. I believe I was here. What year was that?
    Mr. Horn. This would have been 1996.
    Ms. Golden. No, I was in Washington.
    Mr. Horn. I just wondered because Commissioner Adams 
happened to phone me up the day it took effect. He said you 
made my day. I said, What do you mean?
    He said I am going to be able to collect a lot of money 
with that act.
    Ms. Golden. That is correct.
    Mr. Horn. And that was an act that Mrs. Maloney and I put 
in the omnibus bill that year, and it was really drafted by 
many of the Chief Financial Officers in the Federal Government. 
So I was just curious how you thought that was working because 
he felt that he could bring millions home of deadbeat dads' 
payments.
    Ms. Golden. I know that this is not the subject of the 
hearing so I won't take too long, but I do think, the numbers 
on collections for 1998 are $14.4 billion which is an 80 
percent increase over 1992. I think that it has happened for 
many reasons. It has happened because of a bipartisan 
commitment that involved investment in computer systems. It has 
happened because I think the part that is tied to the Results 
Act has been really important in focusing our efforts on 
outcomes. And then I also believe--that is partly why I 
mentioned the paternity establishment result here--that part of 
what we need to do is ensure that fathers are connected to 
their children and to their families.
    Part of this is about making sure that both parents are 
part of the child's upbringing, and I think that the 
extraordinary increases in father's voluntarily acknowledging 
paternity early, which people thought couldn't be done, are a 
really important part of what we have accomplished. So I do 
want to say thank you to the Members of Congress from both 
parties who have really had a sustained commitment to that set 
of issues.
    Mr. Horn. The Debt Collection Act of 1996 does permit the 
agency to put some of the money back in for better computing 
things. I don't know if you have taken advantage of that within 
HHS or not. Right now I don't have in my mind where they had 
debts.
    As I understand it, when the agency discussions occurred 
with OMB in September 1998, three specific approaches to 
performance budgeting were suggested from what the GAO informs 
us. What approach, if any, do you prefer? Do you have any 
thoughts, Ms. Harper, on that? Were you in that meeting?
    Ms. Harper. Actually, Mr. Chairman, I don't have any 
thoughts on that. I don't recall which of the three approaches 
EPA supported or spoke to.
    Mr. Horn. How about you, Secretary Golden?
    Ms. Golden. I think we have been focusing most on that 
first step that GAO described which is making sure that you can 
really see what results you get for the dollars; we have been 
focusing beyond that not only on how the Results Act plays out 
on the budget side but how it plays out on the management and 
the leadership side. So I think we have been focusing across 
those areas rather than looking into those particular three 
approaches.
    Mr. Horn. Mr. Funches.
    Mr. Funches. We have been doing the same thing. What we 
have focused on is trying to look at how we can evaluate our 
activities in terms of leveraging against the outcomes as 
opposed to trying to figure out the incremental pieces. I think 
we have come up with some methods to do that. I was not in the 
meeting with OMB and GAO when they looked at the different 
approaches, but we have focused on trying to look at how we can 
examine the relative merits of the different activities as 
measured against the outcome, recognizing some of the 
activities that we do will support more than one outcome.
    Mr. Horn. Did you have a chance to look at figure 1 of the 
GAO testimony.
    Mr. Funches. Yes, I did.
    Mr. Horn. Is that fairly accurate as to what you would like 
to do?
    Mr. Funches. You are absolutely correct, the top goal that 
we talk about is a very long-term goal that you measure over 
time.
    What we did was to create what we call some intermediate 
goals. In the second level goal, we are trying to say we can't 
wait until there is a death or an accident. What we want to do 
is look at intermediate measures which give us an indication 
that something might happen.
    The second tier goal, which looks at the increases or 
changes in probability of an accident, is what we created to 
give us an indication on a yearly basis whether we were on a 
trend in the wrong direction. But you are absolutely right, 
many of the outcomes that we have cannot be measured 
immediately. They are long-term outcomes, and what we try to do 
is create something that will give us an indication that things 
were going in the wrong direction.
    Mr. Horn. I see we are about to have a vote. I think we 
have 5 more minutes. I have a few more questions.
    I would be curious as to your plans succeeding in aligning 
programs and activities and strategic goals and objectives and 
that is very impressive. How does this affect the day-to-day 
management of the agency? Is this just an exercise for Chief 
Financial Officers and Assistant Secretaries or do your 
colleagues--we will do it the same way that we have been doing 
it for 20 years?
    Ms. Harper. I think that the introduction of cost 
accounting, Mr. Chairman, has very much helped to bolster the 
fact that this is a paper exercise, because we aligned our 
budget structure under our Results Act structure, of goals and 
objectives. That is how we are budgeting. It is also how we are 
doing our accounting. Cost accounting means that we are 
collecting our costs against the goals and objective also, so 
on a real time basis we have an understanding, and the program 
managers do as well, of what they are spending against the new 
Results Act structure.
    As I mentioned to Congressman Turner, the deputy 
administrator just finished meeting with each of the program 
managers as part of a midyear review on where they were in 
their performance against their annual and longterm performance 
goals and their measures, and so it is something that we are 
deeply engaged in as a management process within the agency and 
with our State partners. We have included in our annual 
performance goals and measures core performance measures that 
were negotiated with our State partners, and we also monitor 
them.
    Mr. Horn. Go ahead.
    Ms. Golden. To me, the focus on results is central and the 
reason it is important is not because of paper, it is because 
that is the way you leverage change for children and families. 
It is especially important to us because our world is so 
complicated. That is for our dollars to lead to a change in a 
child's life, it passes through a State agency, perhaps a 
nonprofit, and so being focused and clear about results is a 
way of making that happen. And that is the reason that you said 
earlier something about the secretaries are traveling on planes 
and their deputies need to focus.
    I actually try to talk about results in my travels when I 
talk to people, as well as here because I do think that the 
reason we have accomplished those results in child support, 
Head Start, the doubling of adoptions is because of being able 
to crystallize some clear results indicators and I think that 
the challenges, as I was saying to Congressman Turner, is for 
our partners and for our staff, once you raise the stakes, once 
you make it really important, the quality of the data and the 
measurement becomes especially important so we have to keep 
improving that.
    And the one thing that I wanted to tell you because I know 
you have highlighted Oregon which has, in fact, done many 
impressive things, is that we are very proud that the 
measurement strategy we developed for Head Start--the sample of 
programs, and the assessment both of programs and of children. 
They have been looking for a good way to look at outcomes in 
early childhood, and we expect that they will be adopting what 
we have developed and so we are very pleased to have that 
working relationship.
    Mr. Funches. I think it is very important for us to move 
forward on what we use internally. And I am pleased to say that 
our program managers are very excited about it, and they are 
using it. So our vision is that it become part of our day to 
day management approach.
    Mr. Horn. The General Accounting Office discussed the 
performance to the performance budgeting of agency compliance 
with cost accounting standards as set forth in the FASAB, 
otherwise known as the Federal Accounting Standards Appeals 
Board. Can you comment on this assertion and tell us where you 
think your agency is with regard to accommodating and complying 
with the Federal Accounting Standards Appeals Board?
    Ms. Harper. Mr. Chairman, EPA initiated cost accounting 
this year, at the start of fiscal year 1999. We are also doing 
our cost accounting in accordance with our Results Act 
structure that is aligned with our budget structure and our 
accounting structure. It has been difficult. We have not had 
difficulty in terms of the mechanics of it because we were able 
to handle that, but having the agency understand that this is 
how they need to accommodate their costs has taken a lot of 
time and effort. I am pleased to report that we seem to be 
making good progress. I am anxious to see how we fare at the 
end of the year. We are close. Three quarters of the year is 
done. And we seem to be on track.
    Mr. Horn. How about you?
    Mr. Funches. We are not where we would like to be. We are 
able to get some costs. We are putting in a new labor cost 
distribution system, including a cost accounting system. We 
expect the labor cost distribution system to be up in the 
February timeframe. We are not where we would like to be. It is 
very important and a key element. We will get another piece of 
the performance report and marriage of outcomes and costs. But 
it is an important thing that we are focusing on.
    Mr. Horn. One quick question for the two Chief Financial 
Officers. Are you part of the chief administrator of your 
agency's cabinet when she calls people together?
    Mr. Funches. Yes, sir. As I mentioned before, we have an 
executive council at the Nuclear Regulatory Commission?
    Mr. Horn. So the answer is yes?
    Ms. Harper. Yes.
    Mr. Horn. There will be some questions on both sides. 
Because of the vote we don't have the time to ask any more 
questions and you have all given excellent testimony. We 
appreciate that.
    I want to thank the following people that are related to 
this hearing. I don't see our staff director, Russell George, 
and chief counsel. On my immediate left, your right, is Matthew 
Ebert, policy adviser for a good part of this panel and Jane 
Cobb was involved with that for the full committee, and Mr. 
John Phillips, an intern worked very hard on this, Bonnie 
Heald, our director of communications, Grant Newman, our clerk, 
Justin Schlueter, another intern, and Lauren Leften, intern. 
You can see we use a lot of free labor from colleges during the 
summer months.
    And Faith Weiss who is not an intern, minority counsel, and 
we will be sorry to see her leave. And staff assistant for the 
minority is Jean Gosa and the court reporters are Randy 
Sandefer and Doreen Dotzler, and with that we thank all of you 
and we are adjourned.
    [Whereupon, at 4:15 p.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Jim Turner follows:]

    [GRAPHIC] [TIFF OMITTED] T3672.058
    
    [GRAPHIC] [TIFF OMITTED] T3672.059
    
                                  
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