Management Reform: Continuing Progress in Implementing Initiatives in the President's Management Agenda
Published: 2003-03-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As part of its work to improve the management and the performance of the federal government, GAO monitors progress and continuing challenges related to the five crosscutting initiatives in the President's Management Agenda (PMA). The President cited GAO's high-risk areas and major management challenges in developing these initiatives. GAO remains committed to working with the Congress and the Administration to help address these complex issues.
section_title: What GAO Found
paragraphs: There has been continuing progress in implementing the five crosscutting PMA initiatives to improve the management and performance of the federal government. However, progress has been uneven, and a continuing focus is needed to improve the management and performance of the federal government and ensure accountability. These five crosscutting PMA initiatives are interrelated and must be addressed in an integrated way. Strategic human capital management: Considerable progress has been made in this area since we designated it as high risk in 2001. Serious human capital shortfalls, however, continue to erode the ability of many agencies, and threaten the ability of others, to economically, efficiently, and effectively perform their missions. Budget and performance integration: The administration has set forth an ambitious agenda for performance budgeting but the federal government has a long way to go before it can meet its goals. More explicitly infusing performance information into resource allocation decisions is critical for further progress in government performance and management. Improved financial performance: This initiative is aimed at ensuring that federal financial systems produce accurate and timely information to support operating, budget, and policy decisions. Although a range of improvements is under way, much work remains to be done across government. Expanded electronic government: E-government offers many opportunities to better serve the public, make government more efficient and effective, and reduce costs. Although substantial progress has been made, the government has not yet fully reached its potential in this area. Competitive sourcing: The administration has committed to using competitions to determine whether public or private sources should provide commercial services. OMB has proposed changes to the procedures for conducting public-private competitions under its Circular A-76. However, some of the proposed changes are not consistent with sourcing principles or recommendations of the Commercial Activities Panel. Congressional support has proven to be critical in sustaining interest in management initiatives over time. A focus on the quality of program performance and effective management is critical today, and now is the time to act.

section_title: Letter
paragraphs: I am pleased to be here today to discuss continuing progress in  implementing the President’s Management Agenda (PMA) initiatives to  improve the management and performance of the federal government.  PMA points out important challenges for the federal government and is  intended to focus agencies’ efforts on making needed improvements. It  establishes priorities for five crosscutting challenges and nine program  initiatives. There are clear links between the PMA initiatives and the high- risk areas and major management challenges covered in our 2003 and 2001  Performance and Accountability and High-Risk Series. Many of these  issues are complex and long-standing, and we are committed to working  with Congress and the administration to help address them.
The President’s 2004 budget recognized that although progress has been  made, it has been uneven and there needs to be a continuing focus on  improving effectiveness and getting results from federal spending. As  discussed in our 2003 Governmentwide Perspective, several major trends,  including diffuse security threats and national preparedness, globalization,  a shift to knowledge-based economies, and advances in science and  technology, are driving the need for federal agencies to transform their  cultures and operations. Budgetary flexibility has been shrinking for some  time and long-range fiscal and demographic pressures affect the long-term  outlook of the federal government. The retirement of the baby boom  generation and rising health care costs threaten to overwhelm our nation’s  finances. Within this context, government leaders must be accountable for  making needed changes to resolve high-risk areas, address major  management challenges, and position the federal government to take  advantage of emerging opportunities and meet future challenges.
Today, as agreed with the subcommittee, my statement will focus on the  progress made in the five crosscutting initiatives in PMA and the next steps  our work shows will be key to effectively enhance the management and  performance of the federal government. I will also highlight the importance  of transparency and congressional oversight in continuing to provide the  attention needed to improve management and performance across the  federal government and ensure accountability. Overall, there has been  continuing progress in implementing the governmentwide PMA initiatives.
This progress, however, has been uneven and a continuing focus is needed  to improve the management and performance of the federal government  and ensure accountability. This testimony draws upon our wide-ranging  ongoing and completed work on federal management and transformation  issues and analysis of PMA initiatives and the President’s 2004 Budget of  the U.S Government. We conducted our work in accordance with generally  accepted government auditing standards.
subsections: section_title: Effective Management Is Required to Create and Sustain High- performing Organizations
paragraphs: The President cited our work on high-risk areas and major management  challenges in developing his initiatives, and implementation of PMA has  reinforced the need to focus agencies’ efforts on achieving key  management and performance improvements. Our work shows that  agencies have made progress in these areas—although more needs to be  done. A focus on the quality of program performance and effective  management is critical today, and now is the time to act. Building on  lessons learned, major programs and operations need urgent attention and  transformation to ensure that the government functions as economically,  efficiently, and effectively as possible. Management reform will be vitally  important for agencies to transform their cultures to respond to the  transition that is taking place in the role of government in the 21st century.
The Executive Branch Management Scorecards have highlighted agencies’  progress in achieving management and performance improvements. We  have found that the value in the scorecards is not, in fact, in the scoring, but  in the degree to which scores lead to a sustained focus and demonstrable  improvements. The Office of Management and Budget (OMB) uses a  grading system of red, yellow, and green, to indicate agencies’ status in  achieving the standards of success. It also assesses and reports progress  using a similar “stoplight” system. Although we collaborated in some cases  with OMB and the lead agencies regarding the broad standards of success,  we have not had the opportunity to review the more specific criteria that  OMB uses to assess each agency’s progress on these initiatives nor have we  examined the specific evidence that OMB used to assess the agency’s  accomplishments.
By calling attention to needed improvements, the focus that PMA and the  scorecards bring is certainly a step in the right direction. PMA initiatives  are consistent in key aspects with the statutory reforms related to financial  management, information technology, and results-oriented management  that Congress enacted during the 1990s. In crafting that framework,  Congress sought to provide a basis for improving the federal government’s  effectiveness, financial condition, and operating performance.
Central to effectively addressing the government’s management problems  and providing a solid base for successful transformation efforts is the  recognition that fundamental management practices and principles cannot  be addressed in an isolated or piecemeal fashion separate from the other  major management challenges and high risks facing federal agencies.  Rather, these efforts are mutually reinforcing and must be addressed in an  integrated way to ensure that there is the needed management capacity to  drive a broader transformation of the cultures of federal agencies.
The President has identified five crosscutting management initiatives that  are interrelated and support each other. A comprehensive planning process  that establishes clear goals and objectives linked to decision-making and  resource allocation processes will continue to be critical in achieving the  desired results and the synergy that can advance and support  governmentwide transformation efforts. These five initiatives are:  strategic human capital management,   budget and performance integration,   expanded electronic government, and   competitive sourcing.
subsections: section_title: Strategic Human Capital Management
paragraphs: People are an agency’s most important organizational asset, and strategic  human capital management should be the centerpiece of any serious  change management initiative or any effort to transform the cultures of  government agencies. Considerable progress has been made in this area  since we designated it as high risk in 2001. Legislation has been enacted  that, among other things, creates the Chief Human Capital Officer (CHCO)  position within federal departments, and a CHCO Council, expanded  voluntary early retirement and buyout authority, authorized the use of  category rating in the hiring of applicants instead of the “rule of three,” and  requires agencies to discuss human capital approaches in Government  Performance and Results Act (GPRA) plans and reports.
Serious human capital shortfalls, however, continue to erode the ability of  many agencies, and threaten the ability of others, to economically,  efficiently, and effectively perform their missions. Plainly, the major  problem is not federal employees. Rather, it is the lack of a consistent  strategic approach to marshaling, managing, and maintaining the human  capital needed to maximize government performance and ensure its  accountability. An organization’s people define its character, affect its  capacity to perform, and represent the knowledge base of the organization.
Although progress has been made, it remains clear that today’s federal  human capital strategies are not appropriately constituted to meet current  and emerging challenges or drive the needed transformation across the  federal government. Specifically, agencies continue to face challenges in  four key areas:  Leadership: Top leadership in agencies must provide the committed and  inspired attention needed to address human capital and related  organizational transformation issues.
Strategic human capital planning: Agencies’ human capital planning  efforts need to be more fully and demonstrably integrated with mission  and critical program goals.
Acquiring, developing, and retaining talent: Additional efforts are  needed to improve recruiting, hiring, professional development, and  retention strategies to ensure that agencies have the needed talent.
Results-oriented organizational cultures: Agencies continue to lack  organizational cultures that promote high performance and  accountability and that empower and include employees in setting and  accomplishing programmatic goals.
One step in meeting the government’s human capital challenges is for  agency leaders to identify and make use of all the appropriate  administrative authorities available to them to manage their people both  effectively and equitably. Much of the authority agency leaders need to  manage human capital strategically is already available under current laws  and regulations, as recognized by PMA. We recently reported on a set of  practices that are key to the effective use of flexibilities. These practices  are shown in figure 1.
Another step in meeting the government’s human capital challenges is for  policymakers to continue to pursue incremental legislative reforms to give  agencies additional tools and flexibilities to hire, manage, and retain the  human capital they need, particularly in critical occupations. The National  Aeronautics and Space Administration (NASA), for example, is facing  shortages in its workforce which could likely worsen as the workforce  continues to age and the pipeline of talent shrinks. This dilemma is more  pronounced among areas crucial to NASA’s ability to perform its mission,  such as engineering, science, and information technology. NASA is  addressing this challenge through strategic planning, a new workforce  planning and analysis system, and requesting additional personnel  flexibilities, among other initiatives.
Over time, however, it will be important for all interested parties to work  together to identify the kinds of comprehensive legislative reforms in the  human capital area that should be enacted. These reforms should place  greater emphasis on knowledge, skills, and performance in connection  with federal employment, promotion, and compensation decisions. This  summer the Comptroller General will be convening a forum to discuss the  key actions needed for significant human capital reform.
Federal agencies need to continue to incorporate a crucial ingredient found  in successful organizations: organizational cultures that promote high  performance and accountability. Effective performance systems align  organizational goals with daily operations and thereby create a “line of  sight” between an individual’s efforts and results that the organization is  trying to achieve. In doing so, performance management systems can be a  strategic tool to drive internal change and achieve external results by  creating a shared perspective and demonstrating how unit, team, and  individual performance can contribute to overall organizational goals.  Agencies can also foster a results-oriented culture by the way that they  treat and manage their people, building commitment and accountability  through involving and empowering employees. Effective changes can only  be made and sustained through the cooperation of leaders, union  representatives, and employees throughout an organization. We have work  under way, at the request of Congress, to assess the extent to which  employees are involved in the formation of the human resource system at  the Department of Homeland Security.
We collaborated with the Office of Personnel Management (OPM) and OMB  in developing language for the standards for success that OPM released. As  OPM, OMB, and the agencies learn to evaluate themselves against the  standards for success in implementing strategic human capital  management approaches, OPM and OMB will need to ensure that the  standards are consistently and appropriately applied while they assess  agencies’ progress in managing their human capital. Importantly, OMB’s  support will be needed as agencies identify targeted investment  opportunities to address human capital shortfalls. In the final analysis,  modern, effective, and credible human capital strategies will be essential in  order to maximize the performance and ensure the accountability of the  government for the benefit of the American people.
section_title: Budget and Performance Integration
paragraphs: PMA recognized that improvements in the management of human capital,  financial performance, and expanding electronic government, and  competitive sourcing matter little if they are not linked to program  performance and resource allocation decisions. The administration has set  forth an ambitious agenda for performance budgeting, calling for agencies  to develop cost accounting systems and proposing to better align the  federal budget structure with their performance goals. Such efforts to  begin implementing a consistent and transparent framework for  performance budgeting and financial information are key steps needed to  provide a greater focus on performance and improve congressional  decision making as envisioned in GPRA, but the federal government has a  long way to go before it can meet these goals.
Performance-based budgeting can help shift the focus of debate from  inputs to outcomes and results, enhancing the government’s ability to  gauge performance and assess competing claims for scarce resources.  Building on the statutory framework that Congress enacted over the last  decade, performance budgeting requires results-oriented performance  information generated by federal agencies in response to GPRA, and cost  accounting data generated in response to provisions of the Chief Financial  Officers (CFO) Act. Sustained leadership attention, however, is needed to  build on this foundation.
Integrating management and performance issues with budgeting is  absolutely critical for progress in government performance and  management. Such integration is obviously important to ensuring that  management initiatives obtain the resource commitments and sustained  leadership commitment throughout government needed to be successful.  Moreover, the budget process is one of the major processes in the federal  government in which programs and activities come up for regular review  and reexamination. Thus there is a compelling need to ensure that trade- offs are informed by reliable information on results and costs.
Performance budgeting can help shift the focus of budgetary debates and  oversight activities by changing the agenda of questions asked.  Performance information can help policymakers address a number of  questions such as whether programs are (1) contributing to their stated  goals, (2) well-coordinated with related initiatives at the federal level or  elsewhere, and (3) targeted to those most in need of services or benefits.  Results-oriented information is also needed for better day-to-day  management and agency decision-making. It can 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.
While budget reviews have always involved discussions of program  performance, such discussions have not always been conducted in a  common language or with transparency. Last year, OMB introduced a  formal assessment tool into the deliberations. PART—the Program  Assessment Rating Tool—is the central element in the performance  budgeting piece of the PMA. Potentially, PART can complement GPRA’s  focus on increasing the supply of credible performance information by  promoting the demand for this information in the budget formulation  process. PART’s greatest contribution may turn out to be its usefulness in  focusing discussions between OMB and the agencies about progress  towards planned performance; about what progress has been made toward  achieving specific program goals and objectives; and about what tools and  strategies may be used to bring about improvements. As with performance  budgeting in general, no assessment tool can magically resolve debates or  answer questions. Rather, it is likely to be a useful screen to help identify  programs for further evaluation.
Credible performance information can facilitate a fundamental  reassessment of what the government does and how it does business by  focusing on the outcomes achieved with budgetary resources. Therefore,  the goals and measures that agencies establish must address program  results. Our work has shown that agencies had at least some goals and  measures that address program results, but improvement is needed to  ensure that agencies measure performance toward a comprehensive set of  goals that focus on results. In addition, it is important for performance  measures to provide complete information. For example, in measuring  customer satisfaction, the Small Business Administration uses results of its  survey of successful disaster loan applicants, but unsuccessful applicants  are not surveyed, which is likely to produce positively skewed responses.
Understanding performance issues requires an in-depth evaluation of the  factors contributing to the program results. Targeted evaluation studies can  be designed to detect important program side effects or to assess the  comparative advantages of current programs to alternative strategies for  achieving a program’s goals. Further, 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 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 with other initiatives.
Furthermore, while no data are perfect, agencies need to have sufficiently  credible performance data to provide transparency of government  operations so that Congress, program managers, and other decision makers  can use the information. However, limited confidence in the credibility of  performance data has been one of the major weaknesses in GPRA  implementation. Based on our review of agencies fiscal year 2000 and 2001  performance reports, agencies are not consistently assessing the  completeness and reliability of their performance data as required by the  Reports Consolidation Act of 2000.
In attempting to link resources to results, it also will be important to  measure the full costs of the resources associated with performance goals  using consistent definitions of costs between and among programs. In  looking ahead, the integration of reliable cost accounting data into budget  debates needs to become a key part of the performance budgeting agenda.  Also, the current budget does not always help policymakers consider the  long-term costs associated with some activities that commit the  government to future spending. This may limit the attention given to the  future sustainability and flexibility of the government’s fiscal position and  the cost effectiveness of existing programs.
Although clearly much more remains to be done, together GPRA and the  CFO Act have laid the foundation for performance budgeting by  establishing infrastructures in the agencies to improve the supply of  information on performance and costs. Merely the number of programs  “killed” or a measurement of funding changes against performance  “grades” cannot measure the success of performance budgeting. 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. 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 perceived appropriate role of the  federal government in addressing these needs. 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 on the federal budget.
section_title: Improved Financial Performance
paragraphs: The PMA initiative to improve financial performance is aimed at ensuring  that federal financial systems produce accurate and timely information to  support operating, budget, and policy decisions. It focuses on key issues  such as data reliability, clean financial statement audit opinions, and  effective financial management systems and internal control. Our work  also demonstrates the importance of improvement efforts that are under  way. In the area of financial performance, however, we have pointed out  that the federal government is a long way from successfully implementing  the statutory reforms that Congress enacted during the 1990s.
Reliable cost data are critical for effective performance measurement to  support program management decisions in areas ranging from program  efficiency and effectiveness to sourcing and contract management. For  effective management, this information must not only be timely and  reliable, but also both useful and used. Under this PMA initiative, agencies  are expected to implement integrated financial and performance  management systems that routinely produce information that is (1)  timely—to measure and affect performance immediately, (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.  This result is a key to successfully achieving the goals that Congress  established in the CFO Act and other federal financial management reform  legislation.
The executive branch management scorecard for the financial performance  area not only recognizes the importance of achieving an unqualified or  “clean” opinion from auditors on financial statements, but also focuses on  the fundamental and systemic issues that must be addressed in order to  routinely generate timely, accurate, and useful financial information and  provide sound internal control and effective compliance systems.
PMA stated that a clean financial audit is a basic prescription for any well- managed organization, and recognized that “most federal agencies that  obtain clean audits only do so after making extraordinary, labor-intensive  assaults on financial records.” Receiving a clean opinion on annual  financial statements is an important milestone, which 21 of the 24 agencies  designated under the CFO Act achieved for fiscal year 2002.
Even more critical, however, is the capability and quality of the supporting  financial management systems in ensuring that agencies can meet the  scorecard measures for timely, accurate, and useful financial, program  cost, and other important management information needed for decision  making and monitoring government performance every day. The scorecard  also measures whether agencies have any material internal control  weaknesses or material noncompliance with laws and regulations, and  whether agencies meet Federal Financial Management Improvement Act  (FFMIA) requirements. As stated in PMA, without sound internal controls  and accurate and timely financial information, it will not be possible to  accomplish the President’s agenda to secure the best performance and  highest measure of accountability for the American people.
Much work remains to be done across government to improve financial  performance, as shown by the December 2002 scorecards. Of the 22 CFO  Act agencies that OMB scored, 15 were in the red category for financial  performance. This is not surprising, considering the well-recognized need  to transform financial management and other business processes at  agencies such as the Department of Defense, the results of our analyses  under FFMIA, and the various financial management operations we have  designated as high risk. Four agencies improved their scores from the  initial baseline evaluation for financial performance as of September 30,  2001; however, two agencies’ scores declined, reflecting increased  challenges. Overhauling financial management represents a challenge  that goes far beyond financial accounting to the very fiber of a department’s  business operations and management culture, particularly at agencies with  longstanding problems, such as DOD. Further, establishing sound  financial management will be a critical success factor for the  implementation of the Department of Homeland Security.
In the area of financial performance we have continued to point out that  the federal government is a long way from successfully implementing  needed financial management reforms. Widespread financial management system weaknesses, poor recordkeeping and documentation, weak internal  controls, and the lack of information have prevented the government from  having the cost information needed to effectively and efficiently manage  operations through measuring the full cost and financial performance of  programs and accurately reporting a large portion of its assets, liabilities,  and costs. The government’s ability to adequately safeguard significant  assets has been impaired by these conditions.
One of the challenges that many agencies face is the difficulty of ensuring  that underlying financial management processes, procedures, and  information systems are in place for effective program management.  Agencies need to take steps to continuously improve internal controls and  underlying financial and management information systems to ensure that  managers and other decision makers have reliable, timely, and useful  financial information to ensure accountability; measure, control, and  manage costs; manage for results; and make timely and fully informed  decisions about allocating limited resources. In October 2002, we reported  that meeting FFMIA requirements presents long-standing, significant  challenges that will only be met through time, investment, and sustained  emphasis on correcting deficiencies in federal financial management  systems. The widespread systems problems facing the federal  government need sustained management commitment at the highest levels  of government to ensure that these needed modernizations come to  fruition. PMA provides the visibility needed for sustaining these efforts.
This PMA initiative also focuses special attention on addressing erroneous  payments, credit card abuse in the federal government, and asset  management. These areas, on which we have reported problems and  challenges, have undermined government financial performance. Our  work has shown, for example, that the Centers for Medicare & Medicaid  Services (CMS) has made improvements in assessing the level of improper  payments, collecting overpayments from providers, and building the  foundation for modernizing its information technology. Nevertheless, much  work remains to be done, given the magnitude of its challenges to  safeguard program payments. This includes more effectively overseeing  Medicare’s claims administration contractors, managing the agency’s  information technology initiatives, and strengthening financial  management processes across multiple contractors and agency units. In  light of these challenges and the program’s size and fiscal significance,  Medicare remains on our list of high-risk programs.
Across government, there is a range of financial management improvement  initiatives under way that, if effectively implemented, will improve the  quality of the government’s financial management and reporting. Federal  agencies have started to make progress in their efforts to modernize their  financial management systems and improve financial management  performance as called for in PMA.
In August 2001, the Principals of the Joint Financial Management  Improvement Program (JFMIP) began a series of periodic meetings and  have agreed on key financial management reform issues such as better  defining measures for financial management success. The Executive  Branch Management Scorecard embraces these new measures. The JFMIP  Principals also agreed that agency financial statement reporting should be  significantly accelerated to improve the timeliness of the government’s  financial statements and to discourage costly efforts designed to obtain  unqualified opinions on financial statements without addressing underlying  systems challenges. For fiscal year 2004, audited agency financial  statements are to be issued no later than November 15, with the U.S.  government’s audited consolidated financial statements becoming due by  December 15. Two agencies, the Department of the Treasury and the Social  Security Administration, met the accelerated date for fiscal year 2002.  Although many actions have been taken, the continued leadership and  personal commitment of the Principals is necessary to continue the  momentum for improving the government’s financial management and  performance.
section_title: Expanded Electronic Government
paragraphs: Electronic government (e-government) offers many opportunities to better  serve the public, make government more efficient and effective, and reduce  costs. Federal agencies have implemented a wide array of e-government  applications, including using the Internet to collect and disseminate  information and forms; buy and pay for goods and services; submit bids  and proposals; and apply for licenses, grants, and benefits. Although  substantial progress has been made, the government has not yet fully  reached its potential in this area.
Recognizing the magnitude of challenges facing the federal government,  Congress has enacted important legislation to guide the development of e- government. In 1998, Congress enacted the Government Paperwork  Elimination Act, which requires federal agencies to provide the public,  when practicable, the option of submitting, maintaining, and disclosing  required information electronically. More recently the E-Government Act of  2002 includes provisions to promote the use of the Internet and other  information technologies to provide government services electronically;  strengthen agency information security; and define how to manage the  federal government’s growing information technology human capital  needs. In addition, this act established an Office of Electronic Government  within OMB to provide strong central leadership and full-time commitment  to promoting and implementing e-government.
To implement this PMA initiative, OMB has selected 25 e-government  efforts that focus on a wide variety of services, aiming to simplify and unify  agency work processes and information flows, provide one-stop services to  citizens, and enable information to be collected on line once and reused,  rather than being collected many times. For example, Recreation One-Stop  is a Web portal for a single point of access to information about parks and  other recreation areas. There are other e-government efforts that do not  necessarily rely on the Internet, such as the e-payroll initiative to  consolidate federal payroll systems. The results from these e-government  initiatives, according to OMB, could produce several billions of dollars in  savings from improved operational efficiency. To obtain such savings—and  significantly improve service to citizens—it will be critically important that  these efforts are well managed as the government undertakes the  challenging task of turning good ideas into real-world results.
While many of the e-government initiatives are showing tangible results,  progress has been uneven. Our review of the planning documents for the e- government initiatives highlight the critical importance of management and  oversight to their success. Important aspects—such as collaboration  among agencies and other governmental entities and a focus on identifying  and addressing customers’ needs—had not been incorporated into early  program plans for many of the projects, and major uncertainties in funding  and milestones were not uncommon. In particular, fewer than half  addressed collaboration and customer focus, despite the importance of  these topics to e-government strategy and goals. Similarly, the accuracy of  estimated costs in the funding plans was questionable and some of the  estimates changed significantly between May and September 2002.  Accurate cost, schedule, and performance information is essential to  ensure that projects are on schedule and achieve their goals.
In order to help ensure the success of the President’s objective of  expanding e-government to improve the potential value of government to  citizens, we have recommended that the Director of OMB ensure that the  managing partners for all e-government initiatives (1) focus on customers  by soliciting input from the public and conducting user needs assessments,  (2) work with partner agencies to develop and document effective  collaboration strategies, and (3) provide OMB with adequate information to  monitor the cost, schedule, and performance.
Increasingly, the challenges that the government faces are  multidimensional problems that cut across numerous programs, agencies,  and governmental tools. For example, a critical aspect of implementing  effective e-government solutions and developing and deploying major  systems development projects is ensuring that robust information security  is built into these endeavors early and is periodically revisited.
Since we designated computer security in the federal government as high  risk in 1997, there is evidence that pervasive weaknesses continue. For  example, although the Internal Revenue Service (IRS) had corrected or  mitigated many of the computer security weaknesses identified in our  previous reports, much more needs to be done to resolve the significant  control weaknesses that continue within IRS’ computing environment and  to be able to promptly address new security threats and risks as they  emerge. Related risks have escalated, in part because of the rapid  increase in computer interconnectivity and increasing dependence on  computers to support critical operations and infrastructures, such as  power distribution, water supply, national defense, and emergency  services. This year, we expanded this high-risk area to include protecting  information systems that support our nation’s critical infrastructures.  Among the actions essential to sustaining federal information security  improvements are the agencies’ development of effective risk management  programs and the development of a comprehensive strategy to guide  agencies’ efforts.
The growth in electronic information—as well as the new security threats  facing our nation—highlight privacy issues. On-line privacy has emerged as  one of the key—and most contentious—issues surrounding the continued  evolution of the Internet. The government cannot realize the full potential  of the Internet until people are confident that the government will protect  their privacy when they visit its web sites. We have made recommendations  to strengthen governmentwide privacy guidance and oversight of agency  practices that OMB has not yet implemented. For example, we  recommended that the Director of OMB determine whether current  oversight strategies are adequate to ensure agencies’ adherence to web site  privacy policies and whether the policies will need further revision as web  practices continue to evolve.
section_title: Competitive Sourcing
paragraphs: As part of the PMA initiative to achieve efficient and effective competition  between public and private sources, the administration has committed to  simplifying and improving the procedures for evaluating public and private  sources. Among the factors that agencies must consider as they determine  how best to meet their missions is whether the public or private sector  would be the most appropriate provider of the services the government  needs. Aspects of the current process for making such decisions have been  criticized as cumbersome, complicated, and slow. Against this backdrop,  and in response to a requirement in the National Defense Authorization Act  for fiscal year 2001, the Comptroller General convened a panel of experts  to study the current process used by the government to make sourcing  decisions. The Commercial Activities Panel, consisting of representatives  from agencies, federal labor unions, private industry, and other individuals  with expertise in this area, conducted a yearlong study. The panel members  heard repeatedly about the importance of competition and its central role  in fostering economy, efficiency, and continuous performance  improvement. The panel strongly supported continued emphasis on  competition and concluded that whenever the government is considering  converting work from one sector to another, public-private competitions  should be the norm, consistent with the principles adopted unanimously by  the panel.
As part of the administration’s efforts to advance this PMA initiative and  implement the recommendations of the Commercial Activities Panel, OMB  published proposed changes to Circular A-76 for public comment. This  circular sets forth federal policy for determining whether federal  employees or private contractors will perform commercial activities  associated with conducting the government’s business. In January, the  Comptroller General commented on OMB’s proposed revision, and noted  that in many ways it was consistent with the sourcing principals and  recommendations adopted by the Commercial Activities Panel. In  particular, the proposal stresses the use of competition in making sourcing  decisions and, through reliance on procedures contained in the Federal  Acquisition Regulation, should result in a more transparent, expeditious,  fair, and consistently applied competitive process. The proposal should  promote sourcing decisions that reflect the best overall value to the  agencies, rather than just the lowest cost. Importantly, the proposed  revision also should result in greater accountability for performance,  regardless of the service provider selected.
There are several areas, however, where the proposed revisions to the  circular were not consistent with the principles or recommendations of the  panel. Specifically, these include the absence of a link between sourcing  policy and agency missions, unnecessarily complicated source selection  procedures, certain unrealistic time frames, and insufficient guidance on  calculating savings. Federal sourcing policy should support agency  missions, goals, and objectives. In other words, sourcing policy is not just  about choosing among potential service providers. Rather, an agency’s  sourcing policy should be viewed as part of an overall strategy for how best  to accomplish the mission of the agency, including how it conducts human  capital planning. The circular requires that agencies report the savings that  accrue from A-76 competitions but does not provide any guidance on how  savings are to be calculated. Our work examining the use of Circular A-76  in the Department of Defense has shown a lack of consistency among and  even within the military services in how they calculate savings. Additional  OMB guidance, additional training, technical resources, or other support  for agency officials would be helpful for agency officials in preparing for  and participating in public-private competitions.
The critical issue for all affected parties is how the government’s sourcing  policies are implemented. In this regard, one of the panel’s sourcing  principles was that the government should avoid arbitrary numerical or  full-time equivalent goals. This principle is based on the concept that the  success of government programs should be measured by the results  achieved in terms of providing value to the taxpayer, not the size of the in- house or contractor workforce. Although the proposed revised circular  contains no numerical targets or goals for competitive sourcing, this has  been a controversial area in the past. In our view, the administration needs  to avoid arbitrary targets or quotas, or any goal that is not based on  considered research and analysis.
section_title: Continuing Attention Is Needed to Improve Management and Performance Across the Federal Government
paragraphs: As my testimony today has highlighted, serious and disciplined efforts are  needed to improve the management and performance of federal agencies  and to ensure accountability. Along with OMB’s leadership in implementing  PMA, it will only be through the attention of Congress, the administration,  and federal agencies, that progress can be sustained and, more importantly,  accelerated. To be successful, management improvement initiatives must  become a part of agencies’ programs and day-to-day actions.
Congressional support has proven to be critical in sustaining interest in  management initiatives over time. Congress has served as an institutional  champion for many of the management reform initiatives over the years,  such as the CFO Act and GPRA. Congress has also provided a consistent  focus for oversight and has reinforced important policies. Making pertinent  and reliable information available will be necessary for Congress to  adequately assess agencies’ progress toward PMA initiatives and to ensure  accountability for results.
To facilitate congressional oversight and support executive branch  performance and decision making, the administration could develop and  use a governmentwide performance plan. This plan, required under the  GPRA, could become a valuable tool to help Congress and the executive  branch address critical federal performance and management issues by  building on the knowledge about the range of programs and tools,  including baseline and trend information, that are directed toward  achieving similar results. The first governmentwide performance plan was  issued in February 1998, and it reflected the challenges of preparing a plan  for an entity as large and diverse as the federal government. We noted that,  among other things, attention was needed to emphasize an integrated,  governmentwide perspective throughout the plan.
Preparing a governmentwide plan could build on the administration’s  efforts to assess progress across the government as well as contribute to  efforts to compare the performance results across similar programs that  address common outcomes. Although there has been limited progress,  efforts to date have not provided the Congress and others with an  integrated perspective on the extent to which programs and tools  contribute to national goals and position the government to successfully  meet 21st century demands.
Mr. Chairman, we are pleased to be able to participate in this hearing today  and look forward to participating in future oversight hearings you have  planned on specific PMA initiatives. We have issued a large body of reports,  guides, and tools on issues directly relevant to PMA, and we plan to  continue to actively support congressional and agency actions to address  today’s challenges and prepare for the future. As I have discussed in my  statement today, although efforts to transform agencies by improving their  management and performance are under way, more remains to be done to  ensure that the government has the capacity to deliver on its promises and  meet current and emerging needs. Decisive action and sustained attention  will be necessary to transform the federal government, maximize its  performance, and ensure accountability.
This concludes my prepared statement. I would be pleased to respond to  any questions that you or other members of the subcommittee may have.