GAO

United States General Accounting Office

Testimony

Before the Subcommittee on Government Management, 

Information and Technology, Committee on Government 

Reform, House of Representatives

For Release on Delivery

Expected at

2 p.m.

Thursday,

July 1, 1999

PERFORMANCE 

BUDGETING

Initial Agency Experiences 

Provide a Foundation to 

Assess Future Directions

Statement of Paul L. Posner

Director, Budget Issues

Accounting and Information Management Division

Statement of Christopher J. Mihm

Associate Director, Federal Management 

and Workforce Issues

General Government Division 

GAO/T-AIMD/GGD-99-216

Page 1 GAO/T-AIMD/GGD-99-216

Mr. Chairman and Members of the Subcommittee:

It is a pleasure to be here today to discuss how we can advance 

performance budgeting in the federal government. As you requested, I will 

discuss the postponement of the performance budgeting pilots that are 

required by the Government Performance and Results Act. I will also 

discuss some of the challenges that confront these pilots and any effort to 

more closely relate performance expectations and spending estimates. 

Despite these challenges, our recent and ongoing reviews of agencies’ 

performance plans indicate that federal agencies are developing 

approaches called for by the Results Act to link performance plans and 

budget requests. These agency efforts deserve close attention and support, 

not only because of their contribution to the overall implementation of the 

act, but also because of their potential to inform our understanding of and 

expectations for performance budgeting within the federal government. 

But first, to set context for this discussion, I’d like to begin by briefly 

looking at how the concept and practice of performance budgeting has 

evolved in the federal government.

The Evolution of 

Performance 

Budgeting

The concept of performance budgeting—essentially the process of linking 

budget levels to expected results, rather than to inputs or activities—has 

and will likely continue to evolve. Historically, within the federal 

government, performance budgeting has progressed from a relatively 

straightforward efficiency concept, as evidenced in recommendations from 

the first Hoover Commission, to the complex and mechanistic processes 

associated with such initiatives as the Planning-Programming-Budgeting 

System (PPBS) and Zero-Base Budgeting (ZBB).1 Similarly, foreign 

countries and state and local governments in this country are 

experimenting with a variety of approaches to more closely associate 

expected performance with requested funding levels, as part of their 

broader reform efforts to become more results-oriented.2 These 

governments recognize that focusing on results involves defining clear 

missions and outcomes, measuring performance to gauge progress, and 

1Performance Budgeting: Past Initiatives Offer Insights for GPRA Implementation

(GAO/AIMD-97-46, March 27, 1997).

2See, for example, Budgeting for Results: Perspectives on Public Expenditure Management, prepared 

by the Organisation for Economic Co-operation and Development, 1995, and “The State of the States: 

Performance-Based Budgeting Requirements in 47 Out of 50,” by Julia Melkers and Katherine 

Willoughby, Public Administration Review (January/February 1998, Vol. 58, No. 1).

Letr
Page 2 GAO/T-AIMD/GGD-99-216

using performance information within decision processes. Performance 

budgeting is the general term used to refer to the infusion of performance 

information into resource allocation processes.

We have looked at the history of performance budgeting in the federal 

government and the experiences of state governments and believe that two 

general themes are suggested.3

• First, although the process of budgeting is inherently an exercise of 

political choice in which performance information can be one but not 

the only factor underlying ultimate decisions, many governments have 

recognized that systematic presentation of performance information 

alongside budget amounts will improve budget decision-making. In fact, 

the Results Act is based on a premise that budget decisions should be 

more clearly informed by performance.

• Second, no single definition of, or common approach to, performance 

budgeting can encompass the range of needs or interests of 

decisionmakers, or the variety of political institutions and 

organizational arrangements of modern governments. Thus 

performance budgeting is best seen as a process of adaptation rather 

than as an adoption of a specific process.

In its overall structure, focus, and approach, the Results Act incorporates 

important lessons from previous federal efforts to connect plans with 

budgets. For example, past initiatives—such as ZBB in 1977—typically 

devised unique and often voluminous presentation formats unconnected to 

the structures used in congressional budget presentations. The Results Act 

requires an agency’s annual performance plan to link directly to the 

presentation structures (“program activities”4) used in the President’s 

budget submission for that agency. Also, past performance budgeting 

initiatives—such as PPBS in 1965—were typically implemented 

governmentwide within a single annual budget cycle. In contrast, the 

Results Act defines a phased and iterative implementation process that 

incorporates pilot tests and formal evaluation of key concepts, including 

performance budgeting.

3See GAO/AIMD-97-46, March 27, 1997 and Performance Budgeting: State Experiences and Implications

for the Federal Government (GAO/AFMD-93-41, February 17, 1993).

4The term “program activity” refers to the listings of projects and activities in the Appendix portion of 

the Budget of the United States Government. Subject to clearance by the Office of Management and 

Budget and generally resulting from negotiations between agencies and appropriations subcommittees, 

program activity structures are intended to provide a meaningful representation of the operations 

financed by a specific budget account.

Letr
Page 3 GAO/T-AIMD/GGD-99-216

The need to more closely link plans and budgets is of central importance to 

the Results Act. Improving agencies’ performance budgeting capabilities is 

critical to meet a key expectation of the act—that decisionmakers 

understand what is being achieved in relation to what is being spent. 

Agencies cannot credibly set performance goals without understanding 

what resources are needed to achieve them. Correspondingly, these goals 

will be of little value to congressional appropriations decisions without a 

connection to the resources that agencies are requesting.

The Results Act actually defines two different approaches regarding 

performance budgeting. First, the act requires “each agency to prepare an 

annual performance plan covering each program activity set forth in the 

budget of such agency.” The Congress intended this provision to establish a 

direct annual link between plans and budgets. To prevent voluminous 

presentations, agencies are permitted to aggregate, disaggregate, or 

consolidate the program activities in their budgets, so long as any major 

function or operation of the agency is not omitted or minimized. The Office 

of Management and Budget’s (OMB) subsequent guidance regarding this 

provision of the act set forth an additional criterion: plans should display, 

generally by program activity, the funding level being applied to achieve 

performance goals.5 In effect, OMB’s guidance expected performance plans 

to indicate how amounts shown for program activities in an agency’s 

budget request would be allocated to the performance goals displayed in 

the performance plan.6 Testifying on the Results Act prior to its passage, 

the Director of OMB characterized this requirement of the act as a 

“limited—but very useful—form of performance budgeting ...”7

In addition to mandating a direct link between budget requests and 

performance plans, the Results Act also required that a second approach to 

performance budgeting be piloted. Specifically, the Director of OMB, in 

consultation with the head of each agency, was required to designate for 

fiscal years 1998 and 1999 at least five agencies to prepare budgets that 

“present, for one or more of the major functions and operations of the 

agency, the varying levels of performance, including outcome-related 

5OMB Circular A-11, Sec. 220.9(e), June 23, 1997.

6Subsequently, in its guidance on fiscal year 2000 plans, OMB noted that it expected to see “significant 

progress in associating funding with specific performance goals or sets of goals” in agencies’ plans.

7Government Performance and Results Act of 1993, Committee on Governmental Affairs, United States 

Senate, S. Rpt. No. 103-58, p. 19 (1993).
Page 4 GAO/T-AIMD/GGD-99-216

performance, that would result from different budgeted amounts.”8 While 

the act required agencies to define goals consistent with the level of 

funding requested in the President’s budget, these pilot projects would also 

show how performance would change if the agency received more or less 

than requested. OMB was to include the pilot performance budgets as an 

alternative presentation in the President’s Budget for fiscal year 1999. 

Subsequently, the Director of OMB is required to report to the President 

and to the Congress no later than March 31, 2001, on the feasibility and 

advisability of including a performance budget as part of the President’s 

Budget. This report is also to recommend whether legislation requiring 

performance budgets should be proposed. However, as I will discuss in this 

testimony, the performance budgeting pilots required by the Results Act 

have not begun.

Performance 

Budgeting Efforts Face 

Many Challenges

While the Results Act’s design incorporates important lessons learned from 

previous initiatives, many challenges remain. To a large extent, these 

challenges are inherent to a complex, political environment such as the 

federal government. For example, competing and at times conflicting goals, 

the variety of service delivery approaches, and the nature of federal 

budgetary commitments raise serious implementation concerns. Both the 

Congress and the executive branch must continue to explore what can be 

reasonably expected from performance budgeting.

Performance budgeting assumes that performance goals can be defined 

and that valid and reliable performance measures can be developed. 

However, as we have noted previously, reaching a reasonable level of 

consensus on clear and precise goals will almost certainly encounter 

political hurdles.9 In addition, goal definition and measure development are 

particularly challenging in the complex operating environment of the 

federal government.

• Full or ultimate program outcome is typically not under the control of a 

single federal agency, complicating responsibility determinations and 

resource allocation decisions. In some cases, federal activities are but 

one—and often a small—component of total public and private sector 

831 U.S.C. 1119(b).

9See GAO/AIMD-97-46, March 27, 1997, and The Government Performance and Results Act: 1997

Governmentwide Implementation Will Be Uneven (GAO/GGD-97-109, June 2, 1997).
Page 5 GAO/T-AIMD/GGD-99-216

interventions in a given program area; in other cases, intended results 

cut across the activities of several agencies.10 In these situations, 

individual agency outcome measures could be incomplete and of limited 

value to budgetary deliberations.

• Increasingly—in program areas ranging from child welfare to 

environmental protection—state and local governments, contractors, 

and other third parties are the delivery agents for federally financed 

activities. The efforts of these nonfederal actors—and their objectives 

and concerns—are often critical factors in determining whether 

program results are achieved.

• Many federal activities, for example health and safety programs or 

research and development programs, achieve desired outcomes only 

over periods of many years. In such cases, relating these lengthy 

performance horizons to annual budget deliberations can raise special 

measurement questions.

• Finally, the predominance of entitlement spending within the federal 

budget, in which federal spending is a function of statutory eligibility 

determinations, can cloud efforts to hold agencies accountable for 

results. In these types of programs, attention is often shifted from 

outcomes (e.g., assuring a certain standard of living) to specific process 

standards (e.g., ensuring correct and prompt payments to individuals).

The high stakes involved in budgetary decisions further complicate the 

development and use of outcome measures. Introducing such measures 

into resource allocation processes before a reasonable level of consensus 

is achieved heightens the potential for bias toward favorable results.11

Recognizing this potential, the Results Act requires agencies to build 

procedures for verifying and validating performance measures into their 

plans. However, improvements in the quality of verification and validation 

discussions in agencies’ plans are needed if the Congress is to have needed 

assurance that agencies’ performance data will be credible.12

10See for example Combating Terrorism: Opportunities to Improve Domestic Preparedness Program

Focus and Efficiency (GAO/NSIAD-99-3, November 12, 1998), Drug Treatment: Overview of Federal

Programs (GAO/HEHS-98-237R, September 3, 1998), and Homelessness: Coordination and Evaluation

of Programs Are Essential (GAO/RCED-99-49, February 26, 1999).

11Program evaluation is critical to understanding and isolating an agency’s impact on outcomes. For a 

discussion of performance measurement challenges, see Managing for Results: Measuring Program

Results That Are Under Limited Federal Control (GAO/GGD-99-16, December 11, 1998), Program

Evaluation: Agencies Challenged by New Demand for Information on Program Results

(GAO/GGD-98-53, April 24, 1998), and Managing for Results: Analytic Challenges in Measuring

Performance (GAO/HEHS/GGD-97-138, May 30, 1997).

12Managing for Results: An Agenda to Improve the Usefulness of Agencies’ Annual Performance Plans

(GAO/GGD/AIMD-98-228, September 8, 1998).
Page 6 GAO/T-AIMD/GGD-99-216

In addition to developing and using nonfinancial outcome measures, 

performance budgeting also requires an ability to understand how costs are 

related to outcomes. Reliable cost information is essential for Results Act 

implementation and was called for by the Chief Financial Officers (CFO) 

Act of 1990. Cost accounting standards developed by the Federal 

Accounting Standards Advisory Board (FASAB)13 require that agencies 

develop and implement cost accounting systems that can be used to relate 

the full costs of various programs and activities to performance outputs. 

Although these standards were originally to become effective for fiscal year 

1997, the CFO Council—an interagency council of the CFOs of major 

agencies—requested the effective date be delayed for 2 years due to 

shortfalls in agencies’ cost accounting systems. Ultimately, the effective 

date was extended by 1 year, to fiscal year 1998, but with a clear 

expectation that there would be no further delays.

Agencies recognize the importance of cost accounting and other financial 

management systems in allocating funding to performance, but developing 

the necessary tools to gather and analyze needed program and activity-level 

cost information will be a substantial undertaking. For the most part, 

agencies are just beginning this effort and are already experiencing 

difficulties. For example, our audit of the Internal Revenue Service’s (IRS) 

fiscal year 1998 financial statements found that IRS does not consistently 

capture cost information in accordance with cost accounting standards.14

Consequently, IRS was unable to reliably report cost-based performance 

measures. Similarly, the fiscal year 1998 audit of the Federal Aviation 

Administration’s (FAA) financial statements found significant deficiencies 

in FAA’s cost accounting systems. FAA does not expect to have a fully 

operational system until 2001.15

Finally, performance budgeting efforts will almost always disclose tensions 

between budgeting and planning structures. As I mentioned earlier, the 

13In October 1990, the nine member FASAB was established by the Secretary of the Treasury, the 

Director of OMB, and the Comptroller General of the United States to consider and recommend 

accounting standards to address the financial and budgetary information needs of the Congress, 

executive agencies, and other users of federal financial information. Once FASAB recommends 

accounting standards, the Secretary of the Treasury, the Director of OMB, and the Comptroller General 

decide whether to adopt the recommended standards. If they are adopted, the standards are published 

as Statements of Federal Financial Accounting Standards by OMB and GAO.

14Financial Audit: IRS’ Fiscal Year 1998 Financial Statements (GAO/AIMD-99-75, March 1, 1999).

15Federal Aviation Administration: Financial Management Issues (GAO/T-AIMD-99-122, 

March 18, 1999).
Page 7 GAO/T-AIMD/GGD-99-216

Results Act requires agencies to link performance goals to their program 

activity structures, which form the basis for their budget requests. This 

requirement is aimed at assuring a simple, straightforward connection 

among goals, budgets, and performance information. However, achieving 

this link is dependent on the capacity of agencies’ program activity 

structures to meet dual needs. These budget structures have evolved to 

help the Congress control and monitor agency activities and spending and, 

as such, are geared more to fostering accountability for inputs and outputs 

within the control of agencies.16 On the other hand, performance plans 

need to be broad and wide-ranging if they are to articulate the missions and 

outcomes agencies seek to influence. Strategies for bringing budgeting and 

planning structures together must balance both sets of needs and values.

For example, planning structures and presentations that bore no 

connection to budget structures and presentations hampered performance 

budgeting initiatives prior to the Results Act. In the fiscal year 1999 

performance plans, agencies attempted to bring these structures and 

presentations together by (1) changing budget structures to more closely 

align them with goals in the performance plan, (2) using the budget 

justification to provide more details on goals contained in their 

performance plans, or (3) using crosswalks or tables to show relationships 

between planning and budgeting structures.

The Postponement of 

Performance 

Budgeting Pilots

Many of the challenges I have just described were evident in OMB’s 

decision to delay the performance budgeting pilots required by the Results 

Act. The performance budgeting pilots were scheduled to start in fiscal 

year 1998—four years after initiation of the act’s pilot projects for 

performance plans and reports—“so that they would begin only after 

agencies had sufficient experience in preparing strategic and performance 

plans, and several years of collecting performance data.”17 In this context, 

and indicating the importance of concentrating on governmentwide 

implementation in fiscal year 1998, the Director of OMB in his statutorily 

required May 1997 report on Results Act implementation announced that 

the pilots would be delayed for at least a year. The Director stated that the 

performance budgeting pilots would require the ability to calculate the 

16Budget Account Structure: A Descriptive Overview (GAO/AIMD-95-179, September 18, 1995).

17S. Rpt No. 103-58, p. 38.
Page 8 GAO/T-AIMD/GGD-99-216

effects on performance of marginal changes in cost and funding. According 

to OMB, very few agencies had this capability, and the delay would give 

time for its development.

Subsequently in September 1998, OMB suggested possible formats and 

time frames for the pilots in a discussion paper sent to federal agencies. In 

this document, OMB noted that pilot projects would not be designated 

unless they could “fairly test the [Results Act’s] concept of performance 

budgeting,” which the discussion paper described as “the application of 

multi-variate or optimization analysis to budgeting.” The paper described 

three analytical alternatives that could be tested, involving performance 

tradeoffs (1) in the same program with changes in program funding, 

(2) in the same program with no change in total program funding, or 

(3) in several programs with shifts in intra-agency funding between these 

programs. OMB solicited agencies’ comments on the discussion paper and 

on their capability to produce the alternative budgets suggested in the 

committee report accompanying the Results Act. However, according to 

OMB, no agency volunteered to participate. In its discussion paper, OMB 

stated that “the absence of designated pilots or having fewer designations 

than required would be an indication of agency readiness to do 

performance budgeting, and would be discussed in the OMB report to 

Congress,” which is required on March 31, 2001.

Agencies’ reaction to the performance budgeting pilots reaffirms the 

challenges and tensions that performance budgeting will face within the 

federal government. Whether due to imprecise goal definitions, the absence 

of valid and reliable financial and nonfinancial performance information, 

uncertainty concerning the relationship between agency activities and 

desired outcomes, or a lack of priority attention, no federal agency was 

prepared to associate itself with pilot projects that appeared to 

mechanically link resources to results. Although not required to do so, 

OMB has not publicly communicated agencies’ reactions to the discussion 

paper or agencies’ reasons for declining to participate in the pilots. As a 

result, it has been over 2 years since OMB reported to the Congress on 

challenges facing these pilots, and more information is needed to 

determine not only the viability of the pilots but also the direction that 

federal performance budgeting efforts can and should take. In effect, an 

opportunity to better understand the specific challenges facing the Results 

Act’s performance budgeting pilots has been missed.
Page 9 GAO/T-AIMD/GGD-99-216

OMB Can Take Steps to 

Achieve the Intent of 

the Pilot Projects

Despite the postponement of the performance budgeting pilots, our review 

of agencies’ performance plans shows that some agencies have been able 

to develop approaches to make perhaps a more basic, but still useful, 

connection between proposed spending and expected performance. The 

experience of these agencies during the first two performance planning 

cycles under the Results Act can provide a valuable foundation for future 

efforts to more closely demonstrate the performance consequences of 

budgetary decisions.

In summary, we found that 30 of the 35 fiscal year 1999 agency performance 

plans we reviewed defined some relationship between program activities 

and performance goals, as called for by the Results Act.18 However, only 14 

of these plans translated this relationship into budgetary terms by (1) 

identifying the proposed funding level needed to achieve a discrete set of 

performance goals and (2) describing how that funding had been derived 

from the program activities in the agencies’ budget requests. Figure 1 

illustrates the relationship between resources and results that was 

expressed by 1 of the 14 agencies—the Nuclear Regulatory Commission 

(NRC). As shown in this figure, NRC not only indicated that it would need 

$211 million to achieve the nuclear reactor safety performance targets 

described in its plan but also explained that the $211 million had been 

derived from a single program activity in its budget request. As a result, 

NRC’s plan not only indicates the estimated cost of a given level of 

performance but also shows which goals would be primarily affected by 

changing the level of program activity funding from NRC’s proposal.

18See GAO/AIMD/GGD-99-67, April 12, 1999. We could not determine linkages between program 

activities and performance goals for five agencies from the information provided in their performance 

plans. 
Page 10 GAO/T-AIMD/GGD-99-216

Figure 1: The Nuclear Regulatory Commission Aligns Budget and Planning 

Structures to Create a Simple Relationship Between Program Activities and 

Performance Goals 

Note: Dollars in millions.

Source: GAO analysis based on NRC’s fiscal year 1999 performance plan and Budget of the United

States Government Fiscal Year 1999—Appendix.

We also looked across these 35 plans to determine whether agencies and 

their plans shared common characteristics. We found that three 

approaches, either alone or in combination, were used more frequently by 

the 14 agencies that were able to relate resources to results.19 These 

agencies more often (1) showed simple, clear relationships between 

program activities and performance goals, (2) fully integrated performance 

plans into congressional budget justifications, or (3) changed their budget 

program activity structures to reflect the goal structures in their 

performance plans.

19In this review, we did not assess the quality of the goals presented in the plans or independently verify 

the funding levels associated with the goals. 

 	
 

 

	
	 



Strategic goal: nuclear reactor safety ($211)

Performance goals:

• Goal I.A - zero civilian nuclear reactor accidents

• Goal I.A.1- maintain low frequency of events which

could lead to a severe accident

• Goal I.B- zero deaths due to radiation or

radioactivity releases from civilian nuclear reactors

• Goal I.B.1- zero significant radiation exposures due

to civilian nuclear reactors

Strategic goal: nuclear materials safety ($49)

Performance goals:

• Goal II.A- zero radiation-related deaths due to

civilian use of source, byproduct, and special nuclear

materials

• Goal II.A.1- no increase in the number of significant

radiation exposures due to loss or use of source,

byproduct, and special nuclear materials

• Goal II.A.1.a- no increase in the number of losses

of licensed material as reported to Congress annually

• Goal II.A.1.b- no accidental criticality involving

licensed material.

• Goal II.A.2- no increase in the number of

misadministration events which cause significant

radiation exposures

 
	 
 



 	

Salaries and expenses account

 1. Nuclear reactor safety ($211)

 2. Nuclear materials safety ($49)

 3. Nuclear waste safety

 4. Common defense and security and

 international involvement

 5. Protecting the environment

 6. Management and support
Page 11 GAO/T-AIMD/GGD-99-216

NRC adopted each of these approaches. As figure 1 shows, NRC presented 

a simple one-to-many relationship between its program activities and its 

performance goals in its fiscal year 1999 performance plan.20 The 

allocation of funding to performance goals in the NRC plan was essentially 

automatic because each of the agency’s program activities generally aligns 

with a strategic goal and its supporting performance goals. This alignment 

was facilitated by NRC’s decision to change its budget structure to align 

with its strategic goals, as shown in figure 1.21 For the fiscal year 2000 

performance plan, NRC maintains the relationships shown in figure 1 while 

fully integrating its performance plan and budget justification.22

Information traditionally contained in a budget justification, such as 

descriptions of accounts and their funding, was combined with 

performance information such that the NRC budget justification and plan 

could not be separated. In contrast, other agencies, such as the Department 

of Veterans Affairs (VA), did not identify the funding levels needed to 

achieve performance goals and associated numerous program activities 

with numerous performance goals in their fiscal year 1999 performance 

plans—a “many-to-many” presentation that did not indicate the 

performance consequences of the agencies’ budget requests. Like some 

other agencies, VA has noted that it is considering changes to its budget 

structure to improve its ability to relate resources and results. 

Although they used some common approaches, the 14 agencies that 

connected budgetary resources to results represented a range of federal 

missions, including agencies providing services directly to the public 

(e.g., IRS), those principally involved in grant or loan making (e.g., the 

U.S. Agency for International Development), and some with principally a 

regulatory mission (e.g., NRC). Similarly, these agencies achieved linkages 

despite varying planning and budgeting structures. The relative complexity 

of these structures—measured in terms of the number and layers of goal 

structures, and the number of budget accounts and program activities and 

concentration of funding within those accounts—did not appear to be a 

significant factor in an agency’s ability to relate proposed resources to 

expected results.

20Figure I.2 in appendix I provides another illustration of a simple one-to-many relationship.

21As shown in figure I.3 in appendix I, the Environmental Protection Agency proposed an alignment of 

its program activities and strategic goals.

22Figure I.4 in appendix I provides an illustration of another agency that fully integrated its 

performance plan and budget justification.
Page 12 GAO/T-AIMD/GGD-99-216

During our preliminary review of the fiscal year 2000 plans for the same 

35 agencies, we have noted little change in the overall number of agencies 

clearly relating resources to results. But, it does appear that some progress 

is being made in presenting the performance consequences of budgetary 

decisions. For example, more fiscal year 2000 plans associated funding 

levels with specific performance goals, although in many cases these 

funding levels were not linked back to the program activities in agencies’ 

budget requests.

The extent of agencies’ progress in linking plans and budgets is not 

surprising; translating the use of agency resources into concrete and 

measurable results will be a continual challenge that will require both time 

and effort. However, based on our review of the first two cycles of 

performance planning under the Results Act, we believe that the 

approaches being developed by some agencies provide a valuable 

foundation for further experimentation in identifying useful methods to 

connect planning and budgeting structures. Some of these approaches—

such as those used by NRC, the Administration for Children and Families, 

the Health Resources and Services Administration, and IRS—are illustrated 

in figure 1 and appendix I to this testimony.

In fact, agency efforts to link performance goals and program activity 

funding essentially constitute a first step toward achieving the intent of the 

performance budgeting pilots. As defined by the Congress, the original 

intent for the act’s pilot projects was twofold: to allow OMB and agencies 

to develop experience and capabilities towards realizing the potential of 

performance budgeting, and to provide OMB with a basis for reporting to 

the Congress on next steps and needed changes. In addition to providing 

some practical experience with the concept of performance budgeting, 

agencies’ fiscal year 1999 and 2000 performance plans also provide a 

baseline from which OMB could assess progress and determine what 

changes, if any, may be needed to the act and federal budget processes.

OMB is the lead agency for overseeing a framework of recently enacted 

reforms designed to improve the effectiveness and responsiveness of 

federal agencies.23 Thus, OMB should be well-situated to assess (1) the 

practicality of performance budgeting pilots as currently defined in the law, 

23The Results Act: Observations on the Office of Management and Budget’s July 1997 Draft Strategic

Plan (GAO/AIMD/GGD-97-169R, August 21, 1997).
Page 13 GAO/T-AIMD/GGD-99-216

(2) agency approaches and continuing challenges to linking budgetary 

resources and performance goals, and (3) options to encourage progress in 

subsequent planning and budgeting cycles. 

In light of the delay of the performance budgeting pilots required by the 

Results Act and the experiences of agencies during the fiscal year 1999 

performance planning and budgeting cycle, we recommended in April 1999 

that the Director of OMB assess the approaches agencies used to link 

performance goals and program activities in the fiscal year 2000 

performance plans. OMB’s analysis, building on our review of fiscal year 

1999 performance plans, should develop a better understanding of 

promising approaches and remaining challenges with respect to the 

concept of performance budgeting within the federal government. 

OMB’s analysis should address, for example,

• the extent of agencies’ progress in associating funding with specific or 

sets of performance goals,

• how linkages between budgetary resources and results can be made 

more useful to the Congress and to OMB,

• what types of pilot projects might be practical and beneficial, and

• when and how those pilot projects would take place.

On the basis of this analysis, we recommended that OMB work with 

agencies and the Congress to develop a constructive and practical agenda 

to further clarify the relationship between budgetary resources and results, 

beginning with specific guidance for the preparation of agencies’ fiscal year 

2001 plans. We further recommended that this analysis and the resulting 

agenda become the foundation for OMB’s report to the Congress in March 

2001, as currently required by the Results Act, on the feasibility and 

advisability of including a performance budget as part of the President’s 

Budget and on any other needed changes to the requirements of the act.

In summary, Mr. Chairman, much can be learned from the initial efforts of 

some agencies to demonstrate the performance consequences of budget 

requests. Given the importance of performance budgeting to achieving the 

Results Act’s full potential and the delay of performance budgeting pilots 

called for by the act, it is critical that promising approaches be explored 

and encouraged. The performance plans being developed under the Results 

Act show potential to inform the budget process and change the nature of 

its dialogue by more routinely introducing performance information into 

budgetary decision-making. To be sure, many challenges will remain—from 

defining outcome goals to developing effective performance measures and 

reliable cost information.
Page 14 GAO/T-AIMD/GGD-99-216

At the same time, the Results Act and, in fact, any performance budgeting 

initiative cannot be expected to eliminate conflict inherent in the political 

process of resource allocation. The linkage of performance plans and 

budget requests does not guarantee that decisions will be made solely on 

the grounds of performance—nor should they be, there are other important 

criteria. However, the absence of meaningful links can inhibit the 

usefulness of performance information for resource allocation decisions. 

Only through continued experimentation and the mutual efforts of the 

Congress and the executive branch will the potential, and limits, for 

performance budgeting within the federal government be determined.

Mr. Chairman, this concludes my statement this morning. I would be 

pleased to respond to any questions you or other Members of the 

Subcommittee may have.

Contact and 

Acknowledgments

For information about this testimony, please contact Paul Posner at 

(202) 512-9573 or by e-mail at posnerp.aimd@gao.gov, or J. Christopher 

Mihm at (202) 512-8676 or by e-mail at mihmj.ggd@gao.gov. Individuals 

making key contributions to this testimony included Michael J. Curro and 

Laura E. Castro.
Page 15 GAO/T-AIMD/GGD-99-216
Page 16 GAO/T-AIMD/GGD-99-216

Appendix I

Illustrations of Approaches Used to Connect 

Resources to Results in Agencies’ Fiscal Year 

1999 Performance Plans ApIenxdi

Figure I.1: The Administration for Children and Families Crosswalks Program 

Activities to Performance Goals

Note: Dollars in millions. Numbers may not add due to rounding.

Source: GAO analysis based on the Administration for Children and Families’ fiscal year 1999 

performance plan and Budget of the United States Government Fiscal Year 1999—Appendix. 

 
	 
 



 	

Family support payments to states

account

1. State child support administrative

costs ($2,749)

2. Federal incentive/ hold harmless

payments to states ($469)

3. Access and visitation grants ($10)

4. Payments to territories

5. Repatriation

6. Aid to families with dependent children

benefit payments

7. Emergency assistance

Children’s research and technical

assistance account

1. Federal parent locator service ($30)

2. Training and technical assistance

3. Child welfare study

4. Welfare research

5. Evaluation of welfare to work

6. Evaluation of abstinence education

 	
 

 	



		  	
	 



Strategic goal:

Increase economic independence and

productivity for families

 Strategic objective:

 Increase parental responsibility ($3,257)

 Performance Goals:

• Increase the paternity establishment percentage

among children born out-of-wedlock to 96 percent

• Increase the percentage of cases having child

support orders to 74 percent

• Increase the collection rate for current support

to 70 percent

• Increase the percentage of paying cases among

arrearage cases to 46 percent

• Increase the cost-effectiveness ratio (total dollars

collected per dollar of expenditures) to $5.00
Appendix I

Illustrations of Approaches Used to Connect 

Resources to Results in Agencies’ Fiscal Year 

1999 Performance Plans

Page 17 GAO/T-AIMD/GGD-99-216

Figure I.2: The Health Resources and Services Administration Creates a Simple 

Relationship Between Program Activities and Performance Goals

Note: Dollars in millions.

Source: GAO analysis based on the Health Resources and Services Administration’s fiscal year 1999 

performance plan and Budget of the United States Government Fiscal Year 1999—Appendix. 

 	
 

 

	
	 



Strategic goals:

 1. Eliminate health care disparities

 2. Eliminate barriers to care

 3. Assure quality

Performance goals:

 
	 


 

 	

Health resources and

services account

20 program activities including:

HIV/AIDS

Activity 1: AIDS emergency

relief grants ($490)

Activity 2: HIV care grants to

states ($670)

Activity 3: HIV early

intervention services ($86)

• Increase the number of clients served

by Title I grant programs by 7.5 percent

• 3 other performance goals

• Increase the number of clients receiving

anti-retro viral therapy to 57,500

• 5 other performance goals

• Increase by 5 percent the number of

clients receiving primary care services

• 4 other performance goals

4 Other activities
Appendix I

Illustrations of Approaches Used to Connect 

Resources to Results in Agencies’ Fiscal Year 

1999 Performance Plans

Page 18 GAO/T-AIMD/GGD-99-216

Figure I.3: The Environmental Protection Agency Proposed Aligning Budget and 

Planning Structures

Note: Dollars in millions.

Source: GAO analysis based on the Environmental Protection Agency’s fiscal year 1999 performance 

plan and Budget of the United States Government Fiscal Year 1999—Appendix. 

$4

$13

$5

 	
 



	
 
		 

	
	 



Strategic goal: clean air

Strategic objective: acid rain ($22)

Performance goals:

• Maintain 4 million tons of sulfur

dioxide reductions from utility sources

• Maintain 300,000 tons of nitrogen

oxides reductions from coal-fired utility

sources

• Launch the nitrogen oxides Emissions

and Allowance Tracking System for the

Ozone Transport Region

 
	 
 



	

Science and technology account

1. Clean air ($137)

2. Clean water

3. Safe food

4. Preventing pollution

5. Waste management

6. Global and cross border

7. Right to know

8. Sound science

9. Credible deterrent

Environmental programs and

management account

1. Clean air ($169)

• Other program activities corresponding to

EPA’s other strategic goals (similar to above)

State and tribal assistance grants

account

1. Clean air ($201)

• Other program activities corresponding to

EPA’s other strategic goals (similar to above)
Appendix I

Illustrations of Approaches Used to Connect 

Resources to Results in Agencies’ Fiscal Year 

1999 Performance Plans

Page 19 GAO/T-AIMD/GGD-99-216

Figure I.4: IRS Integrates Its Budget Justification and Performance Plan

aIRS noted that this is a projection for budget purposes and is not used in the agency’s business 

review.

Note: Dollars in millions.

Source: GAO analysis based on Internal Revenue Service’s fiscal year 1999 performance plan.

	
 

 

	
 
 


Program activity:

submission processing

($888)

Performance measure:

Number of individual

refunds issued will equal

93.3 milliona

Performance measure:

Refund timeliness--paper

40 days

5 other performance

measures

Performance goal #1:

Improve customer service

Functions: This activity provides for the salaries, benefits, and related

costs to process tax returns and supplemental documents, account for tax

revenues, issue refunds and tax notices, develop and print tax returns and

publications . . . Also included are resources to: process information

returns such as wage, dividend, and interest statements; provide for

payment of refunds . . . identification of possible non-filers for investigation;

and, provide tax returns for audits . . .

Performance goal #2:

Increase compliance

Performance measure:

211.8 million primary returns

processeda

Performance goal #3:

Increased productivity

Performance measure:

19.5 percent of individual

returns filed electronically

Performance measure:

78.2 percent of dollars

received electronically

Performance measure:

70.9 percent dollars

received via third party

processors

(935323) Lert
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