21st Century Challenges: Performance Budgeting Could Help Promote Necessary Reexamination
Published: 2005-06-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As part of its work to improve the management and performance of the federal government, GAO monitors progress and continuing challenges in performance budgeting and the Administration's related initiatives, such as the Program Assessment Rating Tool (PART). In light of the nation's long-term fiscal imbalance and other emerging 21st century challenges, we have also reported that performance budgeting can help facilitate a needed reexamination of what the federal government does, how it does it, who does it, and how it is financed in the future. GAO remains committed to working with Congress and the Administration to help address these important and complex issues.
section_title: What GAO Found
paragraphs: The federal government is in a period of profound transition and faces an array of challenges and opportunities to enhance performance, ensure accountability, and position the nation for the future. A number of overarching trends--including the nation's long-term fiscal imbalance--drive the need to reexamine what the federal government does, how it does it, who does it, and how it gets financed. This will mean bringing a variety of tools and approaches to bear on the situation. Performance budgeting holds promise as a means for facilitating a reexamination effort. It can help enhance the government's capacity to assess competing claims for federal dollars by arming decision makers with better information both on the results of individual programs as well as on entire portfolios of tools and programs addressing common goals. However, it is important to remember that in a political process, performance information should be one, but will not be the only, factor in decision making. Existing performance budgeting efforts, such as PART, provide a means for facilitating a baseline review of certain federal policies, programs, functions, and activities. Successful application of these initiatives in this reexamination process rests on building a supply of credible and reliable performance information, encouraging demand for that information by garnering congressional buy-in on what is measured and how it is presented, and developing a comprehensive and crosscutting approach to assessing the performance of all major federal programs and policies encompassing spending, tax expenditures, and regulatory actions. Through the President's Management Agenda and its related initiatives, including PART, the Administration has taken important steps in the right direction by calling attention to successes and needed improvements in federal management and performance. However, it is not clear that PART has had any significant impact on authorization, appropriations, and oversight activities to date. It will only be through the continued attention of the executive branch and Congress that progress can be accelerated and sustained. Such an effort can strengthen the budget process itself and provide a valuable tool to facilitate a fundamental reexamination of the base of government. We recognize that this process will not be easy. Furthermore, given the wide range of programs and issues covered, the process of rethinking government programs and activities could take a generation or more to complete.

section_title: Letter
paragraphs: I am pleased to be here today to discuss performance budgeting and the  Office of Management and Budget’s (OMB) Program Assessment Rating  Tool (PART). Given current trends and challenges facing the nation— including the federal government’s long-term fiscal imbalance—it is critical  to reexamine the relevancy of federal programs and their fit with national  priorities, while maximizing program performance within current and  expected resource levels. The implementation of performance budgeting  approaches can be an important step to help achieve this goal.
As Congress is well aware, our nation is currently on an unsustainable  fiscal path. Long-term budget simulations by GAO, the Congressional  Budget Office (CBO), and others show that we face a large and growing  long-term structural deficit due primarily to known demographic trends  and rising health care costs. Continuing on this unsustainable fiscal path  will gradually erode, if not suddenly damage, our economy, our standard of  living, and ultimately our national security. All reasonable simulations  indicate that the problem is too big to be solved by economic growth alone  or by making modest changes to existing spending and tax policies. Rather,  a fundamental reexamination of major spending and tax policies and  priorities will be important to recapture our fiscal flexibility and ensure  that our programs and priorities respond to key emerging social, economic,  and security changes and challenges.
Performance budgeting holds promise as part of a process of reexamining  the base of the federal government. It can help enhance the government’s  capacity to assess competing claims for federal dollars by arming decision  makers with better information both on the results of individual programs  as well as on entire portfolios of policies, programs, and other tools  designed to address common goals. However, it is also important to  remember that in a political process performance information is likely to  be one, but not the only, factor in budgetary decision making. In other  words, performance information can change the terms of debate but it will  not necessarily determine the ultimate decision.
Existing performance budgeting efforts, such as the Government  Performance and Results Act of 1993 (GPRA) and PART, provide a  foundation for a baseline review of existing federal policies, programs,  functions, and activities. We recognize that this will not be easy. Reforming  programs and activities leads to winners and losers, notwithstanding  demonstrated shortfalls in performance and design. Given prior  experiences and political realities, there is little real “low-hanging fruit” in  the federal budget.
Today I will touch first on the need for a fundamental reexamination of  government given our nation’s long-term fiscal challenge. Then I will turn  to and discuss the important role of performance budgeting in any such  reexamination. The successful application of performance budgeting in  this reexamination process rests on  continuing to build on the legacy of GPRA by improving the reliability  and credibility of performance information and increasing program  evaluation capacity;  encouraging demand for that information by garnering stakeholder buy- in—particularly from Congress—on what to measure and how to  present this information, since only then will it be linked to the  congressional authorization, appropriations, and oversight processes;  and  developing a comprehensive, crosscutting approach to assessing the  performance of all programs—including tax expenditures—relevant to  common goals.
This testimony draws upon our wide-ranging work on GPRA and federal  budget and performance integration and on information in the President’s  Budget of the U.S. Government, Fiscal Year 2006, specifically the budget  and performance integration initiative of the President’s Management  Agenda (PMA). We conducted our work in accordance with generally  accepted government auditing standards.
subsections: section_title: Long-term Fiscal Challenge Provides Reexamination Impetus
paragraphs: As I noted, known demographic trends and rising health care costs are  major drivers of the nation’s large and growing structural deficits. The  nation cannot ignore this fiscal pressure—it is not a matter of whether the  nation deals with the fiscal gap, but how and when. GAO’s long-term budget  simulations illustrate the magnitude of this fiscal challenge. Figures 1 and 2  show these simulations under two different sets of assumptions. Figure 1  uses the CBO January 2005 baseline through 2015. As required by law, that  baseline assumes no changes in current law, that discretionary spending  grows with inflation through 2015, and that all tax cuts currently scheduled  to expire are permitted to expire. In Figure 2, two assumptions about that  first 10 years are changed: (1) discretionary spending grows with the  economy rather than with inflation and (2) all tax cuts currently scheduled  to expire are made permanent. In both simulations discretionary spending  is assumed to grow with the economy after 2015 and revenue is held  constant as a share of Gross Domestic Product (GDP) at the 2015 level.  Also in both simulations long-term Social Security and Medicare spending  are based on the 2005 trustee’s intermediate projections, and we assume  that benefits continue to be paid in full after the trust funds are exhausted.  Long-term Medicaid spending is based on CBO’s December 2003 long-term  projections under midrange assumptions.
As these simulations illustrate, absent policy changes on the spending  and/or revenue side of the budget, the growth in spending on federal  retirement and health entitlements will encumber an escalating share of the  government’s resources. Indeed, when we assume that recent tax  reductions are made permanent and discretionary spending keeps pace  with the economy, our long-term simulations suggest that by 2040 federal  revenues may be adequate to pay little more than interest on the federal  debt. Neither slowing the growth in discretionary spending nor allowing  the tax provisions to expire—nor both together—would eliminate the  imbalance. Although federal tax policies will likely be part of any debate  about our fiscal future, making no changes to Social Security, Medicare,  Medicaid, and other drivers of the long-term fiscal gap would require at  least a doubling of federal taxes in the future—and that seems both  unrealistic and inappropriate.
These challenges would be difficult enough if all we had to do is fund  existing commitments. But as the nation continues to change in  fundamental ways, a wide range of emerging needs and demands can be  expected to compete for a share of the budget pie. Whether national  security, transportation, education, or public health, a growing population  will generate new claims for federal actions on both the spending and tax  sides of the budget.
Although demographic shifts and rising health care costs drive the long- term fiscal outlook, they are not the only forces at work that require the  federal government to rethink its role and entire approach to policy design,  priorities, and management. Other important forces are working to reshape  American society, our place in the world, and the role of the federal  government. These include evolving defense and homeland security  policies, increasing global interdependence, and advances in science and  technology. In addition, the federal government increasingly relies on new  networks and partnerships to achieve critical results and develop public  policy, often including multiple federal agencies, domestic and  international non- or quasi-government organizations, for-profit and not- for-profit contractors, and state and local governments. If government is to  effectively address these trends, it cannot accept all of its existing  programs, policies, and activities as “givens.” Many of our programs were  designed decades ago to address earlier challenges. Outmoded  commitments and operations constitute an encumbrance on the future that  can erode the capacity of the nation to better align its government with the  needs and demands of a changing world and society. Accordingly,  reexamining the base of all major existing federal spending and tax  programs, policies, and activities by reviewing their results and testing  their continued relevance and relative priority for our changing society is  an important step in the process of assuring fiscal responsibility and  facilitating national renewal.
A periodic reexamination offers the prospect of addressing emerging needs  by weeding out programs and policies that are redundant, outdated, or  ineffective. Those programs and policies that remain relevant could be  updated and modernized by improving their targeting and efficiency  through such actions as redesigning allocation and cost-sharing provisions,  consolidating facilities and programs, and streamlining and reengineering  operations and processes. The tax policies and programs financing the  federal budget can also be reviewed with an eye toward both the overall  level of revenues that should be raised as well as the mix of taxes that are  used.
We recognize that taking a hard look at existing programs and carefully  reconsidering their goals and financing are challenging tasks. Reforming  programs and activities leads to winners and losers, notwithstanding  demonstrated shortfalls in performance and design. Moreover, given the  wide range of programs and issues covered, the process of rethinking  government programs and activities may take a generation to unfold.
We are convinced, however, that reexamining the base offers compelling  opportunities to both redress our current and projected fiscal imbalance  while better positioning government to meet the new challenges and  opportunities of this new century. In this regard, the management and  performance reforms enacted by Congress in the past 15 years have  provided new tools to gain insight into the financial, program, and  management performance of federal agencies and activities. The  information being produced as a result can provide a strong basis to  support the needed review, reassessment, and reprioritization process.
section_title: Current Performance Budgeting Initiatives Hold Promise for Reexamining the Base
paragraphs: While this kind of oversight and reexamination is never easy, it is helped by  the availability of credible performance information focusing on the  outcomes achieved with budgetary resources and other tools. Performance  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 outcomes. To  facilitate application of performance budgeting in reexamination, it is  useful to understand the current landscape. Going forward, decision  makers need a road map—grounded in lessons learned from past  initiatives—that defines what successful performance budgeting would  look like and identifies the key elements and potential pitfalls on the  critical path to success. Central to this is an understanding of what is meant  by success in performance budgeting and the key factors that influence  that success.
subsections: section_title: Current Performance Budgeting Initiatives Are Grounded in Past Efforts
paragraphs: Performance budgeting efforts are not new at the federal level. In the  1990s, Congress and the executive branch drew on lessons learned from  50 years of efforts to link resources to results to lay out a statutory and  management framework that provides the foundation for strengthening  government performance and accountability. With GPRA as its centerpiece,  these reforms also laid the foundation for performance budgeting by  establishing infrastructures in the agencies to improve the supply of  information on performance and costs. GPRA is designed to inform  congressional and executive decision making by providing objective  information on the effectiveness and efficiency of federal programs and  spending. A key purpose of GPRA is to create closer and clearer links  between the process of allocating scarce resources and the expected  results to be achieved with those resources. Importantly, GPRA requires  both a connection to the structures used in congressional budget  presentations and consultation between the executive and legislative  branches on agency strategic plans. Because these requirements are  grounded in statute, this gives Congress an oversight stake in GPRA's  success. Over a decade after its enactment, GPRA has succeeded in  expanding the supply of performance information and institutionalizing a  culture of performance as well as providing a solid foundation for more  recent budget and performance initiatives. In part, this success can be  attributed to the fact that GPRA melds the best features, and avoids the  worst, of its predecessors.
Building on GPRA’s foundation, the current administration has made the  integration of performance and budget information one of five  governmentwide management priorities under its PMA. PART is central to the Administration’s budget and performance integration initiative. OMB  describes PART as a diagnostic tool meant to provide a consistent  approach to assessing federal programs as part of the executive budget  formulation process. It applies 25 questions to all “programs” under four  broad topics: (1) program purpose and design, (2) strategic planning,  (3) program management, and (4) program results (i.e., whether a program  is meeting its long-term and annual goals) as well as additional questions  that are specific to one of seven mechanisms or approaches used to deliver  the program.
Drawing on available performance and evaluation information, the PART  questionnaire attempts to determine the strengths and weaknesses of  federal programs with a particular focus on individual program results and  improving outcome measures. PART asks, for example, whether a  program’s long-term goals are specific, ambitious, and focused on  outcomes, and whether annual goals demonstrate progress toward  achieving long-term goals. It is designed to be evidence-based, drawing on a  wide array of information, including authorizing legislation, GPRA strategic  plans and performance plans and reports, financial statements, inspector  general and GAO reports, and independent program evaluations.
Since the fiscal year 2004 budget cycle, OMB has applied PART to 607  programs (about 60 percent of the federal budget) and given each program  one of four overall ratings: (1) “effective,” (2) “moderately effective,” (3) “adequate,” or (4) “ineffective” based on program design, strategic  planning, management, and results. A fifth rating, “results not  demonstrated,” was given—independent of a program’s numerical score— if OMB decided that a program’s performance information, performance  measures, or both were insufficient or inadequate. During the next 2 years,  the Administration plans to assess all remaining executive branch  programs with limited exceptions.
As I testified before this subcommittee in April, PMA and its related  initiatives, including PART, demonstrate the Administration’s commitment  to improving federal management and performance. By calling attention to  successes and needed improvements, the focus that these initiatives bring  is certainly a step in the right direction, and our work shows that progress  has been made in several important areas over the past several years.  However, it is not clear that PART has had any significant impact on  congressional authorization, appropriations, and oversight activities to  date. In order for such efforts to hold appeal beyond the executive branch,  developing credible performance information and garnering congressional  buy-in on what to measure and how to present this information to them are  critical. Otherwise, as some congressional subcommittees have noted,  PART is unlikely to play a major role in the authorization, appropriations,  and oversight processes.
Prior initiatives have left us with some lessons about how to build a  sustainable approach to linking resources to results. Before I discuss those  critical factors let me touch briefly on the importance of realistic  expectations. I say this because previous management reforms have been  doomed by inflated and unrealistic expectations. Performance budgeting  can do a great deal:  it can help policymakers address important questions  such as whether programs are contributing to their stated goals, are well- coordinated with related initiatives at the federal level or elsewhere, and  are targeted to the intended beneficiaries. However, it should not be  expected to provide the answers to all resource allocation questions in  some automatic or formula-driven process. Performance problems may  well prompt budget cuts, program consolidations, or eliminations, but they  may also inspire enhanced investments and reforms in program design and  management if the program is deemed to be of sufficiently high priority to  the nation. Conversely, even a program that is found to be exceeding its  performance expectations can be a candidate for budgetary cuts if it is a  lower priority than other competing claims in the process. The  determination of priorities is a function of competing values and interests  that may be informed by performance information but also reflects other  factors, such as the overall budget situation, the state of the economy,  security needs, equity considerations, unmet societal needs, and the  appropriate role of the federal government in addressing any such needs.
Accordingly, we found that while PART scores for fiscal year 2004 were  generally positively related to the Administration’s proposed funding  changes in discretionary programs, the scores did not automatically  determine funding changes. That is, for some programs rated “effective” or  “moderately effective” OMB recommended funding decreases, while for  several programs judged to be “ineffective” OMB recommended additional  funding in the President’s budget request with which to implement  changes. As we have noted, success in performance budgeting should not  be defined only by its impact on funding decisions but also on the extent to  which it helps inform Congress and executive branch policy decisions and  improve program management. In this regard, for the fiscal year 2004  PART assessments we reported that over 80 percent of the PART  recommendations focused on improving program management,  assessment, and design; less than 20 percent related to funding.
We also reported that OMB’s ability to use PART to identify and address  future program improvements and measure progress—a major purpose of  PART—is predicated on its ability to oversee the implementation of PART  recommendations. At the request of the Chairman of the House  Subcommittee on Government Management, Finance, and Accountability,  Committee on Government Reform, we are currently conducting a review  of (1) OMB's and agencies' perspectives on the effects PART  recommendations are having on agency operations and results and issues  encountered in responding to PART recommendations; (2) OMB's  leadership and direction in ensuring an integrated, complementary  relationship between PART and GPRA, including how OMB is assessing  performance when multiple programs or agencies are involved in meeting  goals and objectives; and (3) steps OMB has taken to involve Congress in  the PART process.
section_title: Achieving Success in Performance Budgeting Requires Credible Information, Congressional “Buy- in,” and a Comprehensive and Crosscutting Perspective
paragraphs: Let me now turn to three factors we believe are critical to sustaining  successful performance budgeting over time: 1. building a supply of credible performance information, 2. encouraging demand for that information and its use in congressional  processes by garnering stakeholder buy-in, and  3. taking a comprehensive and crosscutting approach to assessing related  programs and policies.
subsections: section_title: Having a Supply of Credible Performance Information
paragraphs: The credibility of performance information, including related cost data, and  the ability of federal agencies to produce credible evaluations of their  programs’ effectiveness are key to the success of performance budgeting.  As I testified before this subcommittee in April, this type of information is  critical for effective performance measurement to support decisions in  areas ranging from program efficiency and effectiveness to sourcing and  contract management. To be effective, this information must not only be  timely and reliable, but also both useful and used. Agencies are expected to  implement integrated financial and performance management systems that  routinely produce information that is (1) timely—to measure and affect  performance, (2) useful—to make more informed operational and investing  decisions, and (3) reliable—to ensure consistent and comparable trend  analysis over time and to facilitate better performance measurement and  decision making. Producing timely, useful, and reliable information is  critical for achieving the goals that Congress established in GPRA, the  Chief Financial Officers (CFO) Act of 1990, and other federal financial  management reform legislation.
Unfortunately, as our work on PART and GPRA implementation shows, the  credibility of performance data has been a long-standing weakness.  Likewise, our work has noted limitations in the quality of agency 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. Our 2003 review of  agencies’ evaluation capacity identified four main elements that can be  used to develop and improve evaluation efforts. They are (1) an evaluation  culture, (2) data quality, (3) analytic expertise, and (4) collaborative  partnerships.
OMB, through its development and use of PART, has provided agencies  with a powerful incentive for improving data quality and availability.  Agencies may make greater investments in improving their capacity to  produce and procure quality information if agency program managers  perceive that program performance and evaluation data will be used to  make actual resource decisions throughout the resource allocation process  and can help them get better results.
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. Over the longer term, failing to  discover and correct performance problems can be much more costly.  More importantly, it is critical that budgetary investments in this area be  viewed as part of a broader initiative to improve the accountability and  management capacity of federal agencies and programs.
section_title: Obtaining Congressional Buy-in
paragraphs: Federal performance and accountability reforms have given much  attention to increasing the supply of performance information over the past  several decades. However, 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 and use of that  information by decision makers and managers alike. Key stakeholder  outreach and involvement is critical to building demand and, therefore,  success in performance budgeting.
Lack of consensus by a community of interested parties on goals and  measures and the way that they are presented can detract from the  credibility of performance information and, subsequently, its use. Fifty  years of past executive branch efforts to link resources with results have  shown that any successful effort must involve Congress as a full partner.  We have previously reported that past performance budgeting initiatives  faltered in large part because they intentionally attempted to develop  performance plans and measures in isolation from the congressional  authorization, appropriations, and oversight processes. While  congressional buy-in is critical to sustain any major management initiative,  it is especially important for performance budgeting given Congress’s  constitutional role in setting national priorities and allocating the resources  to achieve them.
Obtaining buy-in on goals and measures from a community of interested  parties is critical to facilitating use of performance information in resource  allocation decisions. PART was designed for and is used in the executive  branch budget preparation and review process; as such, the goals and  measures used in PART must meet OMB’s needs. However, the current  statutory framework for strategic planning and reporting is GPRA—a  broader process involving the development of strategic and performance  goals and objectives to be reported in strategic and annual plans. OMB’s  desire to collect performance data that better align with budget decision  units means that the fiscal year 2004 PART process became a parallel  competing structure to the GPRA framework. Although OMB  acknowledges that GPRA was the starting point for PART, the emphasis is  shifting. Over time, as the performance measures developed for PART are  used in the executive budget process, these measures may come to drive  agencies’ strategic planning processes.
Opportunities exist to strengthen PART’s integration with the broader  GPRA planning process. Some tension about the amount of stakeholder  involvement in the internal deliberations surrounding the development of  PART measures and the broader consultations more common to the GPRA  strategic planning process is inevitable. Compared to the relatively open- ended GPRA process, any budget formulation process is likely to seem  closed. However, if PART is to be accepted as other than one element in the  development of the President’s budget proposal, congressional  understanding and acceptance of the tool and its analysis will be critical.
As part of the executive branch budget formulation process, PART must  clearly serve the President’s interests. However, measures developed solely  by the executive branch for the purposes of executive budget formulation  may discourage their use in other processes, such as internal agency  management and the congressional budget process, especially if measures  that serve these other processes are eliminated through the PART process.  PART’s focus on outcome measures may ignore stakeholders’ needs for  other types of measures, such as output and workload information. Our  recent work examining performance budgeting efforts at both the state and  federal levels revealed that appropriations committees consider workload  and output measures important for making resource allocation decisions.  Workload and output measures lend themselves to the budget process  because workload measures, in combination with cost-per-unit  information, can be used to help develop appropriation levels and  legislators can more easily relate output information to a funding level to  help define or support a desired level of service. Like PART, GPRA states a  preference for outcome measures. However, in practice, GPRA also  recognizes the need to develop a range of measures, including output and  process measures. Since different stakeholders have different needs and no  one set of goals and measures can serve all purposes, PART can and should  complement GPRA but should not replace it.
Moreover, as we have previously reported, several appropriations  subcommittees have cited the need to link PART with congressional oversight. For example, the House Report accompanying the  Transportation and Treasury Appropriations Bill for fiscal year 2004  included a statement in support of PART, but noted that the  Administration’s efforts must be linked with the oversight of Congress to  maximize the utility of the PART process, and that if the Administration  treats as privileged or confidential the details of its rating process, it is less  likely that Congress will use those results in deciding which programs to  fund. Moreover, the subcommittee said it expects OMB to involve the  House and Senate Committees on Appropriations in the development of the  PART ratings at all stages in the process.
In our January 2004 report on PART, we suggested steps for both OMB  and Congress to take to strengthen the dialogue between executive branch  officials and key congressional stakeholders, and OMB generally agreed.  We recommended that OMB reach out to key congressional committees  early in the PART selection process to gain insight about which program  areas and performance issues congressional officials consider warrant  PART review. Engaging Congress early in the process may help target  reviews with an eye toward those areas most likely to be on the agenda of  Congress, thereby better ensuring the use of performance assessments in  resource allocation processes throughout government.
The importance of getting buy-in for successful performance budgeting can  be seen in the experience of OMB’s recent efforts to restructure budget  accounts. While OMB staff and agency officials credited budget  restructuring with supporting results-oriented management, the budget  changes did not meet the needs of some congressional appropriations  committees. While congressional appropriations subcommittee staff  expressed general support for budget and performance integration, they  objected to changes that substituted rather than supplemented information  traditionally used for appropriations and oversight purposes. As we said in  our February 2005 report on this issue, the greatest challenge of budget  restructuring may be discovering ways to reflect both the broader planning  perspective that can add value to budget deliberations and foster  accountability in ways that Congress considers appropriate for meeting its  authorizing, appropriations, and oversight objectives.
Going forward, infusing a performance perspective into budget decisions  may only be achieved when the underlying information becomes more  credible, accepted, and used by all major decision makers. Thus, Congress  must be considered a full partner in any efforts to infuse a performance  budget perspective into budget structure and budget deliberations. In due  course, once the goals and underlying data become more compelling and  used by Congress, budget restructuring may become a more compelling  tool to advance budget and performance integration.
section_title: Reexamination Requires a Crosscutting Perspective
paragraphs: While existing performance budgeting initiatives provide a foundation for a  baseline review of federal policies, programs, functions, and activities,  several changes are in order to support the type of reexamination needed.  For example, PART focuses on individual programs, but key outcome- oriented performance goals—ranging from low income housing to food  safety to counterterrorism—are addressed by a wide range of  discretionary, entitlement, tax, and regulatory approaches that cut across a  number of agencies. While PART’s program-by-program approach fits with  OMB’s agency-by-agency budget reviews, it is not well suited to addressing  crosscutting issues or to looking at broad program areas in which several  programs address a common goal.
The evaluation of programs in isolation may be revealing, but a broader  perspective is necessary for an effective overall reexamination effort. 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 missions and performance goals.  Such an analysis is necessary to capture whether a program complements  and supports other related programs, whether it is duplicative and  redundant, or whether it actually works at cross-purposes to other  initiatives. OMB reported on a few crosscutting PART assessments in the  fiscal year 2006 budget and plans to conduct additional crosscutting  reviews in 2005. However, we would urge a more comprehensive and  consistent approach to evaluating all programs relevant to common goals.
Such an approach would require assessing the performance of all programs  related to a particular goal—including tax expenditures and regulatory  programs—using a common framework. Our federal tax system includes  hundreds of billions of dollars of annual expenditures—the same order of  magnitude as total discretionary spending. Yet relatively little is known  about the effectiveness of tax incentives in achieving the objectives  intended by Congress. PART, OMB’s current framework for assessing the  performance of federal programs, has not been applied to tax expenditures.  Assessing complete portfolios of tools related to key outcome-oriented  goals is absolutely critical to the type of reexamination needed. The  governmentwide performance plan required by GPRA could help address  this issue.
GPRA requires the President to include in his annual budget submission a  federal government performance plan. Congress intended that this plan  provide a “single cohesive picture of the annual performance goals for the  fiscal year.” The governmentwide performance plan could help Congress  and the executive branch address critical federal performance and  management issues, including redundancy and other inefficiencies in how  we do business. It could also provide a framework for any restructuring  efforts. Unfortunately, this provision has not been fully implemented.  Instead, OMB has used the President’s budget to present high-level  information about agencies and certain program performance issues. The  agency-by-agency focus of the budget does not provide the integrated  perspective of government performance envisioned by GPRA.
If the governmentwide performance plan were fully implemented, it could  also provide a framework for congressional oversight and other activities.  In that regard, we have also suggested that Congress consider the need to  develop a more systematic vehicle for communicating its top performance  concerns and priorities; develop a more structured oversight agenda to  prompt a more coordinated congressional perspective on crosscutting  performance issues; and use this agenda to inform its authorization,  appropriations, and oversight processes. One possible approach would  involve developing a congressional performance resolution identifying the  key oversight and performance goals that Congress wishes to set for its  own committees and for the government as a whole. Such a resolution  could be developed by modifying the current congressional budget  resolution, which is already organized by budget function. Initially, this may  involve collecting the “views and estimates” of authorization and  appropriations committees on priority performance issues for programs  under their jurisdiction and working with such crosscutting committees as  this committee, the House Committee on Government Reform, and the  House Committee on Rules.
In addition, we have previously recommended that Congress consider  amending GPRA to require the President to develop a governmentwide  strategic plan to provide a framework to identify long-term goals and  strategies to address issues that cut across federal agencies. A strategic  plan for the federal government, supported by key national outcome-based  indicators to assess the government’s performance, position, and progress,  could be a valuable tool for governmentwide reexamination of existing  programs, as well as proposals for new programs. Developing a strategic  plan can help clarify priorities and unify stakeholders in the pursuit of  shared goals. Therefore, developing a strategic plan for the federal  government would be an important first step in articulating the role, goals,  and objectives of the federal government. If fully developed, a  governmentwide strategic plan can potentially provide a cohesive  perspective on the long-term goals of the federal government and provide a  much-needed basis for fully integrating, rather than merely coordinating, a  wide array of federal activities. The development of a set of key national  indicators could be used as a basis to inform the development of  governmentwide strategic and annual performance plans. The indicators  could also link to and provide information to support outcome-oriented  goals and objectives in agency-level strategic and annual performance  plans. Successful strategic planning requires the involvement of key  stakeholders. Thus, it could serve as a mechanism for building consensus.  Further, it could provide a vehicle for the President to articulate long-term  goals and a road map for achieving them. In addition, a strategic plan can  provide a more comprehensive framework for considering organizational  changes and making resource decisions.
section_title: Concluding Observations
paragraphs: The federal government is in a period of profound transition and faces an  array of challenges and opportunities to enhance performance, ensure  accountability, and position the nation for the future. In addition to the  serious long-term fiscal challenges facing the nation, a number of  overarching trends, such as defense and homeland security policies,  increasing global interdependence, and advances in science and  technology, drive the need to reconsider the proper role for the federal  government in the 21st century, including what it does, how it does it, who  does it, and how it gets financed. This will mean bringing a variety of tools  and approaches to bear. In our February 2005 report on 21st century  challenges, we outline a number of approaches that could facilitate a  reexamination effort. Today, I’ve discussed several of these, as well as  some additional steps that I believe are necessary for an effective  reexamination effort.
Much is at stake in the development of a collaborative performance  budgeting process. This is an opportune time for the executive branch and  Congress to consider and discuss how agencies and committees can best  take advantage of and leverage the new information and perspectives  coming from the reform agenda under way in the executive branch.  Through PMA and its related initiatives, including PART, the  Administration has taken important steps in the right direction by calling  attention to successes and needed improvements in federal management  and performance. Some program improvements can come solely through  executive branch action, but for PART to meet its full potential the  assessments it generates must also be meaningful to and used by Congress  and other stakeholders.
Successful integration of inherently separate but interrelated strategic  planning and performance budgeting processes is predicated on  (1) ensuring that the growing supply of performance information is  credible, useful, reliable, and used (2) increasing the demand for this  information by developing goals and measures relevant to the large and  diverse community of stakeholders in the federal budget and planning  processes, and (3) taking a comprehensive and crosscutting approach. It  will only be through the continued attention of the executive branch and  Congress that progress can be sustained and, more importantly,  accelerated. This effort can both strengthen the budget process itself and  provide a valuable tool to facilitate a fundamental reexamination of the  base of government. We recognize that this process will not be easy. Given  the wide range of programs and issues covered, the process of rethinking  the full range of federal government programs, policies, and activities could  take a generation or more to complete. Regardless of the specific  combination of reexamination approaches adopted, success will require  not only the factors listed above but also sustained leadership throughout  the many stages of the policy process. In addition, for comprehensive  reexamination of government programs and policies, clear and transparent  processes for engaging the broader public in the debate are also needed.
Mr. Chairman, this concludes my prepared statement. I would be pleased to  answer any questions you or the other Members of the Subcommittee may  have at this time.
For future information on this testimony, please contact Paul L. Posner at  (202) 512-9573 or posnerp@gao.gov. Individuals making key contributions  to this testimony include Jacqueline Nowicki, Tiffany Tanner, and Benjamin  Licht.
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