Performance Budgeting: Current Developments and Future Prospects
Published: 2003-04-01T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since the Government Performance and Results Act (GPRA) was enacted in 1993, federal agencies increasingly have been expected to link strategic plans and budget structures with program results. The current administration has taken several steps to strengthen and further the performance-resource linkage by making budget and performance integration one of its five management initiatives included in the President's Management Agenda. GAO has reported and testified numerous times on agencies' progress in making clearer connections between resources and results and how this information can inform budget deliberations. The administration's use of the Program Assessment Rating Tool (PART) for the fiscal year 2004 President's budget and further efforts in fiscal year 2005 to make these connections more explicit, have prompted our examination of what can and cannot be expected from performance budgeting.
section_title: What GAO Found
paragraphs: Performance management is critical to delivering program results and ensuring accountability, but it is not without risks. Building on agencies' hard-won achievements in developing plans and measures, the government faces the challenge of promoting the use of that information in budget decision making, program improvement, and agency management. More explicit use of performance information in decision making promises significant rewards, but it will not be easy. Decision makers need a road map that defines what successful performance budgeting would look like, and identifies key elements and potential pitfalls. Credible performance information and measures are critical for building support for performance budgeting. For performance data to more fully inform resource allocation decisions, decision makers must feel comfortable with the appropriateness and accuracy of the outcome information and measures presented--that is, that they are comprehensive and valid indicators of a program's outcomes. Decision makers likely will not use performance information that they do not perceive to be credible, reliable, and reflective of a consensus about performance goals among a community of interested parties. The quality and credibility of outcome-based performance information and the ability of federal agencies to evaluate and demonstrate their programs' effectiveness are key to the success of performance budgeting. Successful performance budgeting is predicated on aligning performance goals with key management activities. The closer the linkage between an agency's performance goals, its budget presentation, and its net cost statement, the greater the reinforcement of performance management throughout the agency and the greater the reliability of budgetary and financial data associated with performance plans. Clearer and closer association between expected performance and budgetary requests can more explicitly inform budget discussions and shift the focus from inputs to expected results. The test of performance budgeting will be its potential to reshape the kinds of questions and trade-offs that are considered throughout the budget process. The real payoff will come in strengthening the budget process itself. The focus on outcomes potentially can broaden the debate and elevate budget trade-offs from individual programs to a discussion of how programs work together to achieve national goals. It is critical to understand how programs fit within a broader portfolio of tools and strategies for program delivery. Shifting perspectives from incremental budgeting to consideration of all resources available to a program, that is, base funding as well as new funds, potentially can lead to a reexamination of existing programs, policies, and activities. Prudent stewardship of our nation's resources is essential not only to meeting today's priorities, but also for delivering on future commitments and needs.

section_title: Letter
paragraphs: I am pleased to be here today to discuss efforts to further integrate budget  and performance information—what many have referred to as  “performance budgeting.” Since the Government Performance and Results  Act (GPRA) was enacted in 1993, federal agencies have been increasingly  expected to focus on achieving results and to demonstrate, in performance  plans and reports, how their activities help achieve agency goals. The  current administration has taken several steps to strengthen and further  performance-resource linkages for which GPRA laid the groundwork. For  example, the Office of Management and Budget’s (OMB) Program  Assessment Rating Tool (PART), has been designed to use performance  information more explicitly in the federal budget formulation process by  summarizing performance and evaluation information. The administration  applied this new tool to about 20 percent of the programs in the fiscal year  2004 President’s budget request. Most recently, OMB required agencies to  submit a performance-based budget for fiscal year 2005 and later years.
Given this effort to change the presentation of the President’s budget  request to explicitly connect agencies’ budget and planning structures, it is  crucial to understand what can and cannot be expected from performance  budgeting, and what opportunities and challenges lay ahead.
In my testimony today I make several points:  Performance management is critical to delivering program results and  ensuring accountability, but it is not without risks.
In a sense decision makers need a strategic plan for performance  budgeting—a road map to define what performance budgeting would  look like.
The presence of credible performance information and measures is a  critical underpinning for building support for performance budgeting.
Successful performance budgeting is predicated on aligning  performance goals with key management activities.
Ultimately, the test of performance budgeting will be its potential to  reshape the kinds of questions and trade-offs that are considered  throughout the budget process.
This testimony draws upon our wide-ranging ongoing and completed work  on federal budget and performance integration; the President’s Budget of  the U.S. Government, Fiscal Year 2004; and performance management  initiatives.  We conducted our work in accordance with generally accepted  government auditing standards.
subsections: section_title: Current Performance Budgeting Initiatives Are Grounded in Past Efforts
subsections: section_title: An Historical Perspective
paragraphs: In the 1990s, Congress and the executive branch laid out a statutory and  management framework that provides the foundation for strengthening  government performance and accountability, with GPRA as its centerpiece.  GPRA is a continuation of more than 50 years of efforts to link resources  with results. These management reforms of the past—the Budget and  Accounting Procedures Act of 1950, Planning-Programming-Budgeting- System, Management by Objectives, and Zero-Base-Budgeting—failed  partly because they did not prove to be relevant to budget decision makers  in the executive branch or Congress.
GPRA melds the best features, and avoids the worst, of its predecessors.  Unlike most of its predecessors, GPRA is grounded in statute, giving  Congress an oversight stake in the success of this initiative. Moreover,  unlike these other initiatives, GPRA explicitly sought to promote a  connection between performance plans and budgets. The expectation was  that agency goals and measures would be taken more seriously if they were  perceived to be used and useful in the resource allocation process. GPRA  has now entered its 10th year, has survived two successive administrations,  and has periodically formed the basis for congressional oversight.
section_title: Recent Initiatives
paragraphs: The current administration has implemented several efforts to more  completely integrate information about cost and performance during its  annual budget review process. The President’s Management Agenda  (PMA), by focusing on 14 targeted areas—5 mutually reinforcing  governmentwide goals and 9 program initiatives—seeks to improve the  management and performance of the federal government. Budget and  performance integration is one of the administration's five priorities in the  PMA, while PART is the central element in the performance budgeting  piece of the PMA.
To track both agencies’ progress towards and current status in achieving  each of the five PMA initiatives, OMB implemented an Executive Branch  Management scorecard. We have found that the value of the scorecard,  with its red, yellow, and green “stoplight” grading system, is not, in fact, the  scoring, but the degree to which scores lead to a sustained focus and  demonstrable improvements. The Scorecard criteria for the budget and  performance integration initiative include elements such as the integration  of budget and planning staff, an integrated performance plan and budget  grounded in outcome goals and aligned with the staff and resources  necessary to achieve program targets, and whether the agency can  document program effectiveness. While the scorecard focuses on the  capacity of agency management to develop an infrastructure for  performance budgeting, OMB’s PART is meant to more explicitly infuse  performance information into the budget formulation process at a level at  which funding decisions are made.
PART was applied during the fiscal year 2004 budget cycle to 234  “programs.” OMB rated programs as “effective,” “moderately effective,”  “adequate,” or “ineffective” based on program design, strategic planning,  management, and results. If OMB deemed a program’s performance  information and/or performance measures insufficient or inadequate, a  fifth rating of “results not demonstrated” was given. According to OMB, the  assessments were a factor in funding decisions for the President’s fiscal  year 2004 budget request. In an unprecedented move, OMB has made the  assessment tool, rating results, and supporting materials available on its  Web site.
OMB has said that it will apply PART to another 20 percent of programs and  reassess the fiscal year 2004 programs in developing the President’s fiscal  year 2005 budget request. Moreover, it has announced its intention to use  agencies’ updated strategic plans, which were due in March 2003, as  templates for future budget requests.
section_title: Performance Budgeting Holds Great Promise and Great Challenges
paragraphs: During GPRA’s first 10 years, the federal government has managed, for the  first time, to generate a systematic, governmentwide effort to develop  strategic and performance plans covering the essential functions of  government. While clearly a work in progress, the formulation of  performance goals and indicators has laid the foundation for a more  fundamental transformation in how the government does business.
As we begin this next decade of performance management at the federal  level, we may have reached a crossroad. Building on agencies’ hard-won  achievements in developing plans and measures, the government now  faces the challenge of promoting the use of that information in budget  decision making, program improvement, and agency management.
Promoting a more explicit use of performance information in decision  making promises significant rewards, but it will not be easy, and in fact, is  fraught with risks. Decision makers need a road map that defines what  successful performance budgeting would look like, and that identifies the  key elements and potential pitfalls on the critical path to success. In a  sense, what is needed is a strategic plan for performance budgeting.
In the remainder of this testimony I will discuss some of these key elements  and risks, including a definition and expectations for performance  budgeting itself; the underpinnings of credible performance information  and measures; addressing the needs of various potential users; the  alignment of performance planning with budget and financial management  structures; elevating budget trade-offs; and the continuing role of  congressional oversight.
subsections: section_title: What Is Performance Budgeting, and What Might Be Expected from It?
paragraphs: Performance-based budgeting can help enhance the government’s capacity  to assess competing claims in the budget by arming budgetary decision  makers with better information on the results of both individual programs  as well as entire portfolios of tools and programs addressing common  performance outcomes. Although not the answer to vexing resource trade- offs involving political choice, performance information could help  policymakers address a number of questions, such as whether programs  are contributing to their stated goals, well-coordinated with related  initiatives at the federal level or elsewhere, and targeted to those most in  need of services or benefits. It can also provide information on what  outcomes are being achieved, whether resource investments have benefits  that exceed their costs, and whether program managers have the requisite  capacities to achieve promised results.
Although performance budgeting can reasonably be expected to change the  nature of resource debates, it is equally important to understand what it  cannot do. Previous management reforms have been doomed by inflated  and unrealistic expectations, so it is useful to be clear about current goals.
Performance budgeting cannot replace the budget process as it currently  exists, but it can help shift the focus of budgetary debates and oversight  activities by changing the agenda of questions asked in these processes.  Budgeting is essentially the allocation of resources; it inherently involves  setting priorities. In its broadest sense, the budget debate is the place  where competing claims and claimants come together to decide how much  of the government’s scarce resources will be allocated across many  compelling national purposes. Performance information can make a  valuable contribution to this debate, but it is only one factor and it cannot  substitute for difficult political choices. There will always be a debate  about the appropriate role for the federal government and the need for  various federal programs and policies—and performance information  cannot settle that debate. It can, however, help move the debate to a more  informed plane, one in which the focus is on competing claims and  priorities. In fact, it raises the stakes by shifting the focus to what really  matters—lives saved, children fed, successful transitions to self- sufficiency, and individuals lifted out of poverty.
Under performance budgeting, people should not expect that good results  will always be rewarded through the budget process while poor results will  always have negative funding implications. Viewing performance budgeting  as a mechanistic arrangement—a specific level of performance in exchange  for a certain amount of funding—or in punitive terms—produce results or  risk funding reductions—is not useful. Such mechanistic relationships  cannot be sustained. Rather than increase accountability, these approaches  might instead devalue the process by favoring managers who meet  expectations by aiming low.  The determination of priorities is a function of  competing values and interests that may be informed by performance  information but also reflects such factors as equity, unmet needs, and the  appropriate role of the federal government in addressing these needs.
OMB’s PART initiative illustrated that improving program design and  management may be a necessary investment in some cases. For example,  the Department of Energy’s Environmental Management (Cleanup)  program was rated “ineffective” under PART. The administration  recommended additional funds for the program compared to fiscal year  2002 funding and reported that the Department will continue to work with  federal and state regulators to develop revised cleanup plans. The  Department of State’s Refugee Admissions to the U.S. program was rated  “adequate” under PART; in addition to recommending increased funding,  the administration will review the relationship between this program and  the Office of Refugee Resettlement at the Department of Health and Human  Services. For its part, State will continue its ongoing efforts to improve  strategic planning to ensure that goals are measurable and mission-related.
Ultimately, performance budgeting seeks to increase decision makers’  understanding of the links between requested resources and expected  performance outcomes. Such integration is critical to sustain and  institutionalize performance management reforms. As the major annual  process in the federal government where programs and activities come up  for regular review and reexamination, the budget process itself benefits as  well if the result of integration is better, more reliable performance  information.
section_title: Credible Performance Information and Agencies’ Capacity to Produce It Is Critical
paragraphs: For performance data to more fully inform resource allocations, decision  makers must feel comfortable with the appropriateness and accuracy of  the outcome information and measures presented—that is, they are  comprehensive and valid indicators of a program’s outcomes. Decision  makers likely will not use performance information that they do not  perceive to be credible, reliable, and reflective of a consensus about  performance goals among a community of interested parties. Moreover,  decisions might be guided by misleading or incomplete information, which  ultimately could further discourage the use of this information in resource  allocation decisions.
Accordingly, the quality and credibility of outcome-based performance  information and the ability of federal agencies to produce such evaluations  of their programs’ effectiveness are key to the success of performance- based budgeting. However, in the fiscal year 2004 President’s budget  request, OMB rated 50 percent of PART programs as “results not  demonstrated” because they found that the programs did not have  adequate performance goals and/or data to gauge program performance  were not available. Likewise, GAO’s work has noted limitations in the  quality of agency performance and evaluation information and in agency  capacity to produce rigorous evaluations of program effectiveness. We  have previously reported that agencies have had difficulty assessing many  program outcomes that are not quickly achieved or readily observed and  contributions to outcomes that are only partly influenced by federal funds.  Furthermore, our work has shown that few agencies deployed the rigorous  research methods required to attribute changes in underlying outcomes to  program activities.
subsections: section_title: Data Quality
paragraphs: If budget decisions are to be based in part on performance data, the  integrity, credibility, and quality of these data and related analyses become  more important. Developing and reporting on credible information on  outcomes achieved through federal programs remains a work in progress.  For example, we previously reported that only five of the 24 Chief  Financial Officers (CFO) Act agencies’ fiscal year 2000 performance  reports included assessments of the completeness and reliability of their  performance data in their transmittal letters. Further, although concerns  about the quality of performance data were identified by the inspectors  general as either major management challenges or included in the  discussion of other challenges for 11 of the 24 agencies, none of the  agencies identified any material inadequacies with their performance data  in their performance reports.
Moreover, reliable cost information is also important. Unfortunately, as we  recently reported, most agencies’ financial management systems are not  yet able to routinely produce information on the full cost of programs and  projects as required by the Federal Financial Management Improvement  Act of 1996 (FFMIA).
The ultimate objective of FFMIA is to ensure that agency financial  management systems routinely provide reliable, useful, and timely financial  information, not just at year-end or for financial statements, so that  government leaders will be better positioned to invest resources, reduce  costs, oversee programs, and hold agency managers accountable for the  way they run programs. To achieve the financial management  improvements envisioned by the CFO Act, FFMIA, and more recently, the  PMA, agencies need to modernize their financial management systems to  generate reliable, useful, and timely financial information throughout the  year and at year-end. Meeting the requirements of FFMIA presents long- standing, significant challenges that will be attained only through time,  investment, and sustained emphasis on correcting deficiencies in federal  financial management systems.
section_title: Evaluation Capacity
paragraphs: In the past, we have also noted limitations in agency capacity to produce  high-quality evaluations of program effectiveness. Through GPRA  reporting, agencies have increased the information available on program  results.  However, some program outcomes are not quickly achieved or  readily observed, so agencies have drawn on systematic evaluation studies  to supplement their performance data collection and better understand the  reasons behind program performance. However, in survey based on 1995  data covering 23 departments and independent agencies, we found that  agencies were devoting variable but relatively small amounts of resources  to evaluating program results. Many program evaluation offices were small,  had other responsibilities, and produced only a few effectiveness studies  annually. Moreover, systematic program evaluations—and units  responsible for producing them—had been concentrated in only a few  agencies. Although many federal programs attempt to influence complex  systems or events outside the immediate control of government, we have  expressed continued concern that many agencies lack the capacity to  undertake the program evaluations that are often needed to assess a  federal program’s contributions to results where other influences may be at  work. In addition to information on the outcomes, impact evaluations using  scientific research methods are needed to isolate a particular program’s  contribution to those outcomes. Yet in our survey, we found that the most  commonly reported study design was judgmental assessment of program  effects. These judgmental assessments, one-time surveys, and simple  before-and-after studies accounted for 40 percent of the research methods  used in agencies’ evaluation studies conducted during the period we  studied.
There are inherent challenges affecting agencies’ capacity to conduct  evaluations of program effectiveness. For example, many agency programs  are designed to be one part of a broader effort, working alongside other  federal, state, local, nonprofit, and private initiatives to promote particular  outcomes. Although information on the outcomes associated with a  particular program may be collected, it is often difficult to isolate a  particular program’s contribution to those outcomes. Additionally, where  federal program responsibility has devolved to the states, federal agencies’  ability to influence program outcomes diminishes, while at the same time,  their dependence on states and others for data with which to evaluate  programs grows.
In past reports, we have identified several promising ways agencies can  potentially maximize their evaluation capacity. For example, careful  targeting of federal evaluation resources on key policy or performance  questions and leveraging federal and nonfederal resources show promise  for addressing key questions about program results. Other ways agencies  might leverage their current evaluation resources include adapting existing  information systems to yield data on program results, drawing on the  findings of a wide array of evaluations and audits, making multiple use of  an evaluation’s findings, mining existing databases, and collaborating with  state and local program partners to develop mutually useful performance  data.
Our work has also shown that advance coordination of evaluation activities  conducted by program partners is necessary to help ensure that the results  of diverse evaluation activities can be synthesized at the national level.
Improvements in the quality of performance data and the capacity of  federal agencies to perform program evaluations will require sustained  commitment and investment of resources, but over the longer term, failing  to discover and correct performance problems can be much more costly.  More importantly budgetary investments need to be viewed as part of a  broader initiative to improve the accountability and management capacity  of federal agencies and programs.
section_title: Credible Performance Information Must Be Available to and Used by Actors with Different Needs
paragraphs: Improving the supply of performance information is in and of itself  insufficient to sustain performance management and achieve real  improvements in management and program results. Rather, it needs to be  accompanied by a demand for that information by decision makers and  managers alike. The history of performance budgeting has shown that the  supply of information will wither if it is perceived to have failed to affect  decision making. Accordingly, PART may complement GPRA’s focus on  increasing the supply of credible performance information by promoting  the demand for this information in the budget decision making process.
Successful use of performance information in budgeting should not be  defined only by the impact on funding levels in presidential budget requests  and the congressional budget process. Rather, resource allocation  decisions are made at various other stages in the budget process, such as  agency internal budget formulation and execution and in the congressional  oversight and reauthorization process. If agency program managers  perceive that program performance and evaluation data will be used to  make resource decisions throughout the resource allocation process and  can help them make better use of these resources, agencies may make  greater investments in improving their capacity to produce and procure  quality information. For example, in our work at the Administration on  Children and Families, we describe three general ways in which resource  allocation decisions at the programmatic level are influenced by  performance: (1) training and technical assistance money is often allocated  based on needs and grantee performance, (2) partnerships and  collaboration help the agency work with grantees towards common goals  and further the administration’s agenda, and (3) organizing and allocating  staff around agency goals allow employees to link their day-to-day  activities to longer-term results and outcomes.  It is important to note that  these and other examples from our work at the Veterans Health  Administration and the Nuclear Regulatory Commission affect  postappropriations resource decisions, that is, the stage where programs  are being implemented during what is generally referred to as budget  execution.
section_title: Structural Alignment
paragraphs: Sustaining a focus on performance budgeting in the federal government is  predicated upon aligning performance goals with all key management  activities—budgeting, financial management, human capital management,  capital acquisition, and information technology management. The closer  the linkage between an agency’s performance goals, its budget  presentation, and its net cost statement, the greater the reinforcement of  performance management throughout the agency and the greater the  reliability of budgetary and financial data associated with performance  plans. Clearer and closer association between expected performance and  budgetary requests can more explicitly inform budget discussions and  focus them—both in Congress and in agencies—on expected results, rather  than on inputs or transactions solely.
Throughout government, as figure 1 shows, there exists a general lack of  integration among budget, performance, and financial reporting  structures.  Moreover, these structures can vary considerably across the  departments and agencies of the federal government. For example, the  current budget account structure was not created as a single integrated  framework, but developed over time to reflect the many roles it has been  asked to play and to address the diverse needs of its many users. It reflects  a variety of different orientations which for the most part do not reflect  agency performance goals or objectives. Agency budget accounts, for  instance, can be organized by items of expense, organizational unit,  program, or a combination of these categories.
The general lack of integration between these structures can hamper the  ability of agencies to establish and demonstrate the linkage between  budget decisions and performance goals. While special analyses can help  illustrate these linkages, such efforts are often burdensome and awkward.  A systematic capacity to crosswalk among these disparate structures can  help encourage a more seamless integration of resources with results.  Better matching of full costs associated with performance goals helps  increase decision makers’ understanding of the links between requested  resources and expected performance outcomes. This will eventually  require linkages between performance planning and budget structures (to  highlight how requested resources would contribute to agency goals) as  well as linkages between performance plans and financial reporting  structures (to highlight the costs of achieving agency goals). Ultimately,  over the longer term, this integration may require changing the structures  themselves to harmonize their orientations.
Our work indicates that progress has been made. Agencies are developing  approaches to better link performance plans with budget presentations and  financial reporting. They have made progress in both in establishing  linkages between performance plans and budget requests and in translating  those linkages into budgetary terms by clearly allocating funding from the  budget’s program activities to performance goals.
For example, table 1 and figure 2 show the approaches used by the  Department of Housing and Urban Development (HUD) in its last three  performance plans. In table 1, for fiscal years 2000 and 2001, HUD used  summary charts to array its requested resources by general goal but  progressed from portraying this linkage with an “x” in fiscal year 2000 to  using funding estimates derived from its budget request in fiscal year 2001.  Figure 2 shows the fiscal year 2002 plan in which HUD removed the  summary charts and instead directly portrayed the linkages in the body of  the plan.
We have also seen progress in agencies’ initial efforts to link annual  performance reporting with annual audited financial statements. For  example, for fiscal year 2000, 13 of the 24 agencies covered by the CFO Act,  compared to 10 in fiscal year 1999, reported net costs in their audited  annual financial statements using a structure that was based on their  performance planning structure.
Better understanding the full costs associated with program outcomes is  another important but underdeveloped element of performance budgeting.  This entails a broader effort to more fully measure the indirect and accrued  costs of federal programs. The administration has proposed that agencies  be charged for the government’s full share of the accruing costs of all  pension and retiree health benefits for their employees as those benefits  are earned.  Such a proposal could help better reflect the full costs accrued  in a given year by federal programs.
Recognizing long-term costs is also important to understanding the future  sustainability and flexibility of the government’s fiscal position. For  activities such as environmental cleanup costs, the government’s  commitment occurs years before the cash consequences are reflected in  the budget. These costs should be considered at the time resource  commitments are made. Building on past work, we are currently  exploring these issues in greater detail.
More broadly, timely, accurate, and useful financial information is essential  for managing the government’s operations more efficiently, effectively, and  economically; meeting the goals of financial reform legislation (such as the  CFO Act); supporting results-oriented management approaches; and  ensuring ongoing accountability. We have continued to point out that the  federal government is a long way from successfully implementing the  statutory reforms of the 1990s. Widespread financial management system  weaknesses, poor recordkeeping and documentation, weak internal  controls, and a lack of information have prevented the government from  having the cost information needed to effectively and efficiently manage  operations or accurately report a large portion of its assets, liabilities, and  costs.
section_title: Performance Budgeting Can Broaden the Debate on Budget Trade-offs
paragraphs: Looking forward, it is appropriate to ask why all of this effort is  worthwhile. Certainly making clear connections between resources, costs,  and performance for programs is valuable. Improving evaluation capacity  has the potential to create the demand to support further improvements.  However, the real payoff will come in strengthening the budget process  itself.
subsections: section_title: Expanding and Elevating Budget Deliberations beyond Individual Programs
paragraphs: The integration of budgeting and performance can strengthen budgeting in  several ways. First, the focus on outcomes can broaden the debate and  elevate budget trade-offs from individual programs to a discussion of how  programs work together to achieve national goals. Although the evaluation  of programs in isolation may be revealing, it is often critical to understand  how each program fits with a broader portfolio of tools and strategies— such as regulations, direct loans, and tax expenditures—to accomplish  federal goals. For example, in fiscal year 2000, the federal health care and  Medicare budget functions included $319 billion in entitlement outlays, $91  billion in tax expenditures, $37 billion in discretionary budget authority,  and $5 million in loan guarantees. (See fig. 3.)
Achieving federal/national policy goals often depends on the federal  government’s partners—including other levels of government, private  employers, nonprofits, and other nongovernmental actors. The choice and  design of these tools are critical in determining whether and how these  actors will address federal objectives. GPRA required the President to  prepare and submit to Congress a governmentwide performance plan to  highlight broader, crosscutting missions, such as those discussed above.  Unfortunately, this was not done in fiscal years 2003 and 2004; we hope that  the President’s fiscal year 2005 budget does include such a plan.
section_title: Examining the Base in Budget Deliberations
paragraphs: Second, a focus on performance can help us shift our view from  incremental changes to an evaluation of the base itself. Making government  adapt to meet the challenges of the future is broader than strengthening  performance-informed resource decisions. Fiscal pressures created by the  retirement of the baby boom generation and rising health care costs  threaten to overwhelm the nation’s fiscal future. Difficult as it may seem to  deal with the long-term challenges presented by known demographic  trends, policymakers must not only address the major entitlement  programs but also reexamine other budgetary priorities in light of the  changing needs of this nation in the 21st century. Reclaiming our fiscal  flexibility will require the reexamination of existing programs, policies, and  activities. It is all too easy to accept “the base” as given and to subject only  new proposals to scrutiny and analysis.
As we have discussed previously, many federal programs, policies, and  activities—their goals, their structures, and their processes—were  designed decades ago to respond to earlier challenges. In previous  testimony, we noted that the norm should be to reconsider the relevance  or “fit” of any federal program, policy, or activity in today’s world and for  the future. Such a review might ferret out programs that have proven to be  outdated or persistently ineffective, or alternatively could prompt  appropriate updating and modernizing activities through such actions as  improving program targeting and efficiency, consolidation, or  reengineering of processes and operations. This includes looking at a  program’s relationship to other programs.
section_title: The Role of Congressional Oversight
paragraphs: Finally, and most critically, Congress must be involved in this debate and  the resulting decisions and follow-up oversight activities. Congressional  buy-in is critical to sustain any major management initiative, but 50 years of  past efforts to link resources with results have shown that any successful  effort must involve Congress as a partner given Congress’ central role in  setting national priorities and allocating the resources to achieve them. In  fact, the administration acknowledged that performance and  accountability are shared responsibilities that must involve Congress. It  will only be through the continued attention of Congress, the  administration, and federal agencies that progress can be sustained and,  more important, accelerated. Congress has, in effect, served as the  institutional champion for many previous performance management  initiatives, such as GPRA and the CFO Act, by providing a consistent focus  for oversight and reinforcement of important policies.
More generally, effective congressional oversight can help improve federal  performance by examining the program structures agencies use to deliver  products and services to ensure that the best, most cost-effective mix of  strategies is in place to meet agency and national goals. As part of this  oversight, Congress should consider the associated management and  policy implications of crosscutting programs.
Given this environment, Congress should also consider the need for  processes that allow it to more systematically focus its oversight on  programs with the most serious and systemic weaknesses and risks. At  present, Congress has no direct vehicle to provide its perspective on  governmentwide performance issues. Congress has no established  mechanism to articulate performance goals for the broad missions of  government, to assess alternative strategies that offer the most promise for  achieving these goals, or to define an oversight agenda targeted at the most  pressing crosscutting performance and management issues. Congress  might consider whether a more structured oversight approach is needed to  permit a coordinated congressional perspective on governmentwide  performance matters. Such a process might also facilitate congressional  input into the OMB PART initiative. For example, although the selection of  programs and areas for review is ultimately the President’s decision, such  choices might be informed and shaped by congressional views and  perspectives on performance issues.
section_title: Concluding Observations
paragraphs: How would “success” in performance budgeting be defined? Simply  increasing the supply of performance information is not enough. If the  information is not used—that is, if there is insufficient demand—the quality  of the information will deteriorate and the process either will become rote  or will wither away. However, for the reasons noted, the success of  performance budgeting cannot be measured merely by the number of  programs “killed” or a measurement of funding changes against  performance “grades.” Rather, success must be measured in terms of the  quality of the discussion, the transparency of the information, the  meaningfulness of that information to key stakeholders, and how it is used  in the decision-making process. If members of Congress and the executive  branch have better information about the link between resources and  results, they can make the trade-offs and choices cognizant of the many  and often competing claims at the federal level.
A comprehensive understanding of the needs of all participants in the  budget process, including what measures and performance information are  required at different stages of the budget cycle, is critical. Making  performance budgeting a reality throughout the federal government will be  facilitated by efforts to improve the structural alignment of performance  planning goals with budget and cost accounting structures and  presentations. However, developing credible performance measures and  data on program results will be absolutely critical in determining whether  the performance perspective becomes a compelling framework that  decsion makers will use in allocating resources.
Performance budgeting is difficult work. It requires taking a hard look at  existing programs and carefully reconsidering the goals those programs  were intended to address—and whether those goals are still valid. It  involves analyzing the effectiveness of programs and seeking out the  reasons for success or failure. It involves navigating through the maze of  federal programs and activities, in which multiple agencies may operate  many different programs, to address often common or complementary  objectives. However, the task of revising and reforming current programs  and activities that may no longer be needed or that do not perform well is  fraught with difficulties and leads to real “winners” and “losers.”  Notwithstanding demonstrated weaknesses in program design and  shortfalls in program results, there often seems to be little “low hanging  fruit” in the federal budget. In fact, some argue that because some  programs are already “in the base” in budgetary terms, they have a  significant advantage over new initiatives and new demands.