The National Capital Revitalization and Self-Government Improvement Act, Public Law 105-33 (the Revitalization Act), approved August 5, 1997, directed the Authority and the District of Columbia government to develop and implement management reform plans for nine major city agencies and four citywide functionsduring fiscal years 1998 and 1999. Funding for management reform was to be provided, for the most part, by existing budget authority within agencies and by the fiscal year 1998 surplus that resulted from the federal government’s assumption of the cost of certain functions previously financed through District revenue. The law gave the Authority the power to allocate surplus funds to management reform projects. The Authority reported in the FiscalYear1998Annual PerformanceReport:AReportonServiceImprovementsandManagement Reform,dated October 30, 1998, that the projects were selected using management reform criteria of customer satisfaction; empowering employees; long-term service delivery improvements; and greater internal capacity (through infrastructure changes, staff training, and automation). In September 1997, the Authority hired 11 consultants, at a cost of $6.6 million, to develop management reform plans for these agencies and functions. The District’s management reform team, consisting of the Chairman of the Authority, the former Mayor, the Chairman of the City Council, and the heads of each agency, approved the projects for implementation. The Authority then hired a Chief Management Officer (CMO) who was delegated responsibility for these projects. The CMO implemented a system to manage these projects that included development of operational plans, identification of the official directly responsible for each project, and periodic monitoring of each project. Agencies were required to report monthly on expenditures and the results of the projects. On October 30, 1998, the Authority reported in its Fiscal Year1998AnnualPerformanceReportthat 69 projects had been completed. In January 1999, the Authority returned responsibility for the nine city agencies and four citywide functions to the newly elected Mayor. District officials told us that the current administration established a new reform agenda that incorporated a small number of the remaining management reform projects. Specifically, the District selected 20of the remaining 200 projects that it considered to be the best projects to be continued in fiscal year 1999. The District also initiated 7 new projects, for a total of 27 projects that were funded in fiscal year 1999. To determine the status and results of the District’s management reform initiatives, we reviewed pertinent financial documents and reports provided by the Office of the Chief Financial Officer (OCFO), the Authority, the office of the former CMO, and the D.C. City Council. We also interviewed the Deputy Mayor for Operations, the Chief Financial Officer, and other officials from those offices and the Authority. We did not audit the District’s management reform funds or expenditures, and accordingly, we do not express an opinion or any other form of assurance on these reported amounts. Our work was done in accordance with generally accepted government auditing standards between April and June 2000. I will now discuss in more detail the matters I highlighted earlier. Authority and District officials have not consistently tracked the disposition of management reform initiatives from fiscal years 1998 and 1999. These officials were unable to provide adequate information on whether these management reform projects from fiscal years 1998 and 1999 achieved their intended goals or objectives. Although this information may be available on an agency-by-agency basis, currently, the District has no systematic process for monitoring and reporting on this information. During fiscal years 1998 and 1999, the District budgeted over $300 million to begin implementing over 250 management reform projects. The reported fiscal year 1998 investment in management reform of about $293 million included $112.6 million of operating fundsand $180.3 million of capital funds. For fiscal year 1999, the investment in management reform of $36.2 million included $30.9 million of operating funds and $5.3 million of capital funds. Of the $36.2 million, about $33 million was federal appropriations provided to the Authority specifically for management reform.Table 1 shows the total funds provided to the District for management reform for fiscal years 1998 through 2000, the amounts reported as obligated, estimated savings from those initiatives, and reported savings from those initiatives. The status of the funds appropriated for the management reform projects initially identified in fiscal year 1998 and the disposition of those projects is as follows: The District reported in its Final Fiscal Year 1998 Management Reform Summary of Operating and Capital Funds, as of September 30, 1998, that of the $292.8 million budgeted for management reform, approximately $126.9 million had been spent and about $165.9 million was available at the end of fiscal year 1998. Of this amount, approximately $2.3 million of operating funds lapsed,resulting in about $163.6 million remaining at the end of fiscal year 1998. About $3.2 million of operating funds (included in the $163.6 million above), which was not allocated to any particular project, was carried over to fiscal year 1999 for management reform projects in accordance with the District of Columbia Appropriations Act of 1999, Public Law 105-277. The remainder was allocated to 35 former management reform initiatives that were designated as capital projects and were no longer considered part of the management reform program. According to the District’s Expenditure Data on Capital Projects report, the $160.4 million in capital funds (included in the $163.6 million previously mentioned) unspent at the end of fiscal year 1998 was carried over into fiscal year 1999 for the 35 projects. Included in the 35 projects were initiatives for the Automated Integrated Tax System, implementing the Real Property Inventory System, and implementing a new Motor Vehicle Information System. According to the Authority, 69 projects had been completed. Included in the completed projects were the modification of the Department of Corrections Employee Pay Plan and an increase in the number of building inspections. Although the District’s Final Fiscal Year 1998 Management Reform Summary reported fiscal year spending on these management reform projects totaling about $127 million, the District could not specifically identify the amount of funds spent that was used to pay consultants, contractors, and District employees. According to District officials, the former CMO requested information regarding funds spent for consultants and contractors from the agencies during fiscal year 1998. This information was reported to the OCFO on a monthly basis. However, we found that the data was inconsistent, and no such information related to these management reform projects was requested in fiscal year 1999. The District, however, has acknowledged that management reform funds were used for projects other than management reform; for example, about $11.3 million was used for the pay increase for District of Columbia Public School teachers. District officials told us that the new administration of Mayor Williams inherited approximately 200 projects in various stages of completion. Rather than continue with the entire agenda, the new administration reviewed the projects and selected those it considered to be the best projects for incorporation into agencies’ long-term plans. In consultations with the Authority, the new administration chose the 20 best projects and added 7 new projects, giving it a total of 27 projects funded in fiscal year 1999. To implement these 27 management reform projects during fiscal year 1999, the District budgeted approximately $36.2 million, $33 million of which was federal appropriations. Twenty-six of these projects were funded with $30.9 million in operating funds and one project received about $5.3 million in capital funds. The District reported in its Fiscal Year 1999 Management and Regulatory Reform Funds, Agency Expenditure Summary as of May 15, 2000, that of the $36.2 million budgeted, approximately $29.1 million had been spent and about $7.1 million lapsed at the end of fiscal year 1999. As of June 16, 2000, the District had not determined the status of the 27 management reform projects for fiscal year 1999. In February 2000, the Office of the Deputy Mayor for Operations asked District agencies responsible for the projects to provide information on the original project goals and the results that had been achieved. According to District officials, they obtained information on only a few projects. The Deputy Mayor for Operations told us that he expected to have the status of each project by mid-June. As of June 26, 2000, we had not received this information. Included in the fiscal year 1999 budget was a line item that indicated that management reform initiatives would save approximately $10 million. District officials told us that these estimated savings were based on assumptions by the former CMO that an investment of about $93 million in operating funds would yield permanent cost savings. The estimated savings by agency were not defined in the fiscal year 1999 Appropriations Act; therefore, District officials determined the allocated savings based on the amount of each agency’s management reform investment. As of June 1, 2000, of the $10 million expected in savings, District officials reported that about 15 percent, or $1.5 million, had been realized. The fiscal year 2000 budget also included $41 million of projected savings from various initiatives, including management reform productivity savings. However, in discussions with us, District officials said that the management reform productivity savings and other savings included in the fiscal year 2000 budget are not likely to be realized. The $41 million in projected savings was comprised of the following: $7 million in management reform productivity savings; $14 million in savings resulting from the implementation of the District of Columbia Supply Schedule; and $20 million in productivity banksavings. The District does not know whether any savings will be realized from the $7 million of management reform productivity savings. District officials told us that the former CMO and the Authority set the goal of $7 million; however, no one identified the savings targets related to specific management reform initiatives prior to the formulation of the fiscal year 2000 budget. The District does not expect any savings in fiscal year 2000 from the $14 million, which was to be derived from the District’s establishment of a District Supply Schedule. District officials told us that the new Chief Procurement Officer had reviewed the D.C. Supply Schedule initiative in the summer of 1999 and determined that it did not offer advantages beyond existing federal schedules that District agencies were already utilizing. The District expects no savings from the $20 million productivity bank project, nor are these savings directly related to any management reform initiatives. The timing of congressional approval of the federal budget resulted in productivity bank funds not being available to agencies until the second quarter of fiscal year 2000. According to District officials, the timing of the budget approval, combined with the same year repayment requirement, has discouraged agencies from taking advantage of this fund, as productivity savings are often realized in small amounts within the first year and in increasing amounts in subsequent years. Originally proposed by the previous Mayor’s 1996 plan, ATransformed GovernmentofthePeopleofWashington,D.C., this group of initiatives was included as an appendix to the fiscal year 1998 budget. The projects, which ranged from reducing the number of District employees to streamlining services to promote economic development, were estimated to save about $152.4 million. According to District and Authority officials, many of the initiatives listed in the plan have not been implemented and no savings have been realized. In many instances, the initiatives have been overtaken by other events, such as the National Capital Improvement and Revitalization Act of 1997. Because so few of the initiatives have been implemented, District officials told us that information is not available to determine the net benefit to the District either in terms of dollars saved or improved efficiencies and effectiveness of District services. Since fiscal year 1998, the District Government has budgeted over $300 million to implement management reform initiatives or projects. During this same period, District budgets have stated that management reform initiatives and other cost-saving initiatives would save about $200 million. To date, only $1.5 million of management reform savings have been documented. Additional savings might have been realized, but the Authority and District officials had not systematically assessed project results and savings. In addition, they did not adequately track the costs of these projects and, as a result, sufficient information is not available to show how these funds were spent. These management reform projects and targeted savings have been an integral part of recent District budgets and identify important reforms needed to improve services. Mr. Chairman, this concludes my statement. I will be happy to answer any questions that you or Members of the Subcommittee may have. For further information regarding this testimony, please contact Gloria L. Jarmon at (202) 512-4476 or by e-mail at jarmong.aimd@gao.gov. Individuals making key contributions to this testimony included Norma Samuel, Linda Elmore, Timothy Murray, and Bronwyn Hughes. Event unobligated as of the end of the fiscal year. The President signed into law the District of Columbia FY 2000 Appropriations Act, P. L. 106-113. The act directed the CFO of the District to make reductions of $7 million for management reform savings in local funds to one or more of the appropriation headings in the act. The Authority notified the Deputy Mayor for Operations that it was conducting a closeout review of the results of the management reform initiatives and requested information about each of the initiatives through calendar year 1999. The Deputy Mayor for Operations distributed a survey to the agencies requesting the results of the fiscal year 1999 management reform initiatives. The Deputy Mayor for Operations provided the Authority a partial response to its January 14, 2000, request. The Authority notified the Deputy Mayor for Operations of its intent to finalize its closeout review of the results of the fiscal year 1999 management reform initiatives. To track the results of the initiatives, the Authority asked the Deputy Mayor for Operations to submit survey responses from each agency. The District’s proposed Fiscal Year 2001 Operating Budget and Financial Plan includes an estimated $37 million in management reform productivity savings. The Deputy Mayor for Operations provided GAO with a draft project status report of the fiscal year 1999 management reform operating projects as of September 30, 1999. (916354)

Summary: Pursuant to a congressional request, GAO discussed the District of Columbia's management reform initiatives. GAO noted that: (1) over the past 3 fiscal years, the District government has proposed hundreds of management reform initiatives that were estimated to save millions of dollars as well as improve government services; (2) however, as of June 1, 2000, the District had only reported savings of about $1.5 million related to these initiatives and had not consistently tracked the status of these projects; (3) neither the District of Columbia Financial Responsibility a nd Management Assistance Authority nor the District could provide adequate details on the goals achieved for all of the projects that had been reported as completed or in various stages of completion; (4) the District does not have a systematic process to monitor these management reform projects and determine where savings or customer service improvements have been realized; and (5) the District cannot say for certain how funds designated for management reform have been spent or whether the key goals of these initiatives have been realized.