Office of Management and Budget (OMB): A Brief Overview
Released: 2006-03-31T00:00:00

Capsule History of OMB

The Office of Management and Budget traces its origin to 1921. Established as the Bureau of the Budget (BOB) within the Treasury Department by the Budget and Accounting Act, 1921 (42 Stat. 20), it functioned under the supervision of the President. Reorganization Plan No. 1 of 1939 (53 Stat. 1423) transferred the bureau to the newly created Executive Office of the President (EOP). Subsequently, BOB was designated as the Office of Management and Budget (OMB) by Reorganization Plan No. 2 of 1970 (84 Stat. 2085). Concern about OMB's accountability prompted Congress to make the director and deputy director subject to Senate confirmation in 1974 (88 Stat. 11). Congress also established four statutory offices within OMB to oversee several cross-cutting processes and management matters.

The Office of Federal Procurement Policy Act (88 Stat. 796) established the Office of Federal Procurement Policy (OFPP) in 1974. The Paperwork Reduction Act of 1980 (94 Stat. 2812; later recodified as the Paperwork Reduction Act of 1995, 109 Stat. 163) established the Office of Information and Regulatory Affairs (OIRA). The Chief Financial Officers (CFO) Act of 1990 (104 Stat. 2838) established the Office of Federal Financial Management (OFFM). The E-Government Act of 2002 (116 Stat. 2899) established the Office of Electronic Government (E-Gov Office).

Organization and Staffing in OMB

The current profile of OMB's leadership and organizational structure is available on the agency's website. In addition to OMB's leadership and their support staff, OMB has three major types of offices: (1) resource management offices; (2) statutory offices; and (3) OMB-wide support offices.

Each of OMB's four resource management offices (RMOs) focuses on a cluster of related agencies and issues (e.g., natural resource programs) to examine budget requests and make funding recommendations. In addition, RMOs are tasked with integrating management, budget, and policy perspectives in their work as a result of OMB's latest major reorganization in 1994. Politically appointed program associate directors (PADs) lead the RMOs. Below the PAD level, RMO staff are almost always career civil servants, and are organized into divisions and branches. Each RMO branch covers a cabinet department or collection of smaller agencies and is led by a career member of the Senior Executive Service (SES). OMB's program examiners staff each RMO branch.

Three of the statutory offices focus on management areas: financial management (OFFM), procurement policy (OFPP), and information technology (E-Gov Office, shared with OIRA). The fourth office, OIRA, has a broad portfolio of responsibilities, including regulation, information policy and technology, paperwork reduction, statistical policy, and privacy. Analysts in the statutory offices develop policy, coordinate implementation, and work with the RMOs on agency-specific issues.

OMB's seven support offices also play key roles. For example, the Budget Review Division (BRD) coordinates the process for preparing the President's annual budget proposal to Congress. The Legislative Reference Division (LRD) coordinates review of agencies' draft bills, congressional testimony, and correspondence to ensure compliance with the President's policy agenda. OMB's Economic Policy Office works with the President's Council of Economic Advisers (CEA) and the Treasury Department to develop economic assumptions. The other support offices are general counsel, legislative affairs, communications, and administration.

OMB had 484 full-time equivalent (FTE) positions in FY2005 and estimated 500 for FY2006. OMB typically has a total of 20-25 political appointees and staff, while the rest are career civil servants. OMB's director, deputy director, and deputy director for management are presidentially appointed with Senate confirmation (PAS). The heads of OFPP, OFFM, and OIRA are also PAS officials. In contrast, the administrator of the E-Gov Office is presidentially appointed (PA). Figure 1 shows OMB's historical staffing.

OMB's Budget

OMB's budget is driven mainly by personnel costs. Compensation and benefits were 88% of OMB's $67.8 million in total obligations for FY2005. The remainder chiefly covered contractual services (8%). Among OMB's offices, 51% of FY2005 funding went to the RMOs, 31% to the OMB-wide support offices (including the E-Gov Office), and 18% to the statutory offices. Figure 2 shows OMB's budget history.

OMB's budget has fluctuated in recent years due to reallocations of funding, related to the "enterprise services program," among budget accounts in the EOP. For FY2003, Congress reallocated $8.3 million from OMB to the EOP's Office of Administration (OA) for central procurement of goods and services, reducing OMB's appropriation compared to the prior fiscal year. The President subsequently requested for both FY2004 and FY2005 that similar, though slightly reduced, funding be shifted back to OMB, but Congress continued a similar reallocation in both years. For FY2006, the President requested that the reallocation to OA continue, but Congress shifted $7 million, for rent and health unit costs, from OA back to OMB, and appropriated $76.2 million (after rescission) to OMB. For FY2007, the President proposed $68.8 million for OMB (9.7% lower than the FY2006 level) and $7.9 million (related to OMB's rent, health unit, transit subsidy, and flexible spending account costs) for OA. Including the $7.9 million proposed for OA that otherwise might be in OMB's budget, the FY2007 OMB proposal is a 0.6% increase in nominal dollars compared to FY2006, and a 1.7% decrease in constant dollars.

Major Functions

As a primary support agency for the President, OMB has important and varied responsibilities. A 1986 study identified 95 statutes, 58 executive orders, five regulations, and 51 circulars that reflected OMB's operational authorities at the time. Most observers include as "major functions" of OMB those listed below.

Budget Formulation and Execution

The Budget and Accounting Act, 1921, as amended and recodified, requires the President to submit each year a consolidated budget proposal for Congress's consideration. In this "formulation phase," OMB sends budget guidance to agencies via its Circular No. A-11 , which is updated each year to reflect the President's budget and management priorities. Agency heads then forward their formal budget requests to OMB, where the RMOs and E-Gov Office (for information technology initiatives) assemble options and analysis for decisions by OMB and the White House. After an opportunity for agency appeals, OMB's BRD coordinates production of the President's budget. When Congress completes action on appropriations bills and they are signed into law, the "execution phase" begins. The Antideficiency Act (which includes 31 U.S.C. Â§Â§ 1511-1514) requires OMB to "apportion" appropriated funds (usually quarterly) to prevent agencies from spending at a rate that would exhaust their appropriations before the end of the fiscal year.

Legislative Coordination and Clearance

OMB plays a key role in coordinating the President's legislative activities. Under Circular No. A-19 , OMB's LRD coordinates executive branch review and clearance of congressional testimony and correspondence and agencies' draft bills to ensure compliance with the President's policy agenda, make known the Administration's views on legislation, and allow affected agencies to provide input during intra-executive branch policy development. For non-appropriations legislation, LRD plays a coordination role in preparing "Statements of Administration Policy" (SAPs) for Congress, and memoranda to advise the President on enrolled bills (e.g., recommending signature or veto, or contents for signing statements). BRD performs similar duties for appropriations legislation.

Regulatory and Information Policy

OMB exercises considerable influence over agency regulations. Under Executive Order 12866, OIRA works with OMB's RMOs to review agency rules and cost-benefit analyses. In addition, other OIRA policy and oversight responsibilities include statistical policy; paperwork reduction; government use of personal information under the Privacy Act (5 U.S.C. Â§ 552a); information technology investment under the Clinger-Cohen Act ( P.L. 104-106 , 110 Stat. 679); and information security. OIRA shares some responsibilities with the E-Gov Office.

Executive Branch Management

OMB has responsibility for overseeing management in the executive branch. OMB is responsible for clearing and approving proposed executive orders (EOs) and many proclamations. OMB's deputy director for management (DDM) is charged with overall responsibility for general management policies in the executive branch, including the domains of the statutory offices, plus human resources management. The statutory offices also develop policy and coordinate implementation in the areas of financial management (OFFM), procurement policy (OFPP), and information policy and technology (OIRA and E-Gov Office). OMB's RMOs are tasked with integrating budget, policy, and management issues for specific agencies in cooperation with the statutory offices. Observers disagree as to how well OMB has fulfilled these management responsibilities. Some have argued that the "M" in OMB is more mirage than real, because budget responsibilities crowd out attention to management issues, while others have argued that budget and management responsibilities cannot realistically be separated. OMB leads implementation of the George W. Bush Administration's Program Assessment Rating Tool (PART) and President's Management Agenda (PMA). The PART, which OMB uses to rate the "overall effectiveness" of programs, has been used to help justify the President's budget proposals. The PMA includes, among other things, five government-wide initiatives and quarterly evaluation of agencies on a "scorecard" with red, yellow, or green "stoplight scores" for each of the initiatives, based on published "standards for success." As an agency, OMB's scorecard ratings for December 31, 2005, were two yellow and three red for "status" and, for "progress," four green and one yellow.