The Federal Payment Reauthorization Act of 1994 requires that the mayor of the District of Columbia submit to Congress a statement of measurable and objective performance goals for the significant activities of the District government (i.e., the performance accountability plan). After the end of the each fiscal year, the District is to report on its performance (i.e., the performance accountability report). The District’s performance report is to include a statement of the actual level of performance achieved compared to each of the goals stated in the performance accountability plan for the year, the title of the District of Columbia management employee most directly responsible for the achievement of each goal and the title of the employee’s immediate supervisor or superior, and a statement of the status of any court orders applicable to the government of the District of Columbia during the year and the steps taken by the government to comply with such orders. The law also requires that GAO, in consultation with the director of the Office of Management and Budget, review and evaluate the District performance accountability report and submit it not later than April 15 to your committees. Our June 2001 report on the District’s fiscal year 2000 performance accountability report included recommendations that the District (1) settle on a set of results-oriented goals that are more consistently reflected in its performance planning, reporting, and accountability efforts, (2) provide specific information in its performance reports for each goal that changed, including a description of how, when, and why the change occurred, and (3) adhere to the statutory requirement that all significant activities of the District government be addressed in subsequent performance accountability reports. Our review had determined that the District’s fiscal year 2000 report was of limited usefulness because the District had introduced new plans, goals, and measures throughout the year, the goals and measures were in a state of flux due to these changes, and its report did not cover significant activities, such as the District’s public schools, an activity that accounted for more than 15 percent of the District’s budget. In response, the District concurred with our findings and acknowledged that additional work was needed to make the District’s performance management system serve the needs of its citizens and Congress. The comments stated that the District planned, for example, to consolidate its goals and expand the coverage of its fiscal year 2001 report to more fully comply with its mandated reporting requirements. We examined the progress the District has made in developing its performance accountability report and identified areas where improvements are needed. Specifically, the objectives of this report were to examine (1) the extent to which the District’s performance accountability report includes its significant activities, (2) how well the District reports progress toward a consistent set of goals and explains any changes in the goals, (3) the extent to which the report adheres to the statutory requirements, and (4) areas for future improvement. To meet these objectives, we reviewed and analyzed the information presented in the District’s fiscal year 2001 performance accountability report and interviewed key District officials. To examine the extent to which the District’s performance accountability report included significant activities, we compared the information in the 2001 performance and accountability report with budget information on actual expenditures presented in the District’s budget. To determine how well the District reported progress toward a consistent set of goals, we compared the report’s goals with those contained in the District’s fiscal year 2002 Proposed Budget and Financial Plan which served as the District’s 2001 performance plan and then reviewed any changes. To determine the extent to which the report adhered to the statutory requirements, we analyzed the information contained in the District’s report in conjunction with the requirements contained in the Federal Payment Reauthorization Act of 1994. We also reviewed the performance contracts for the District’s cabinet-level officials. To identify areas for future improvement, we compared the fiscal year 2001 report with the District’s fiscal year 2000 and 1999 performance accountability reports to identify baseline and trend information. We based our analysis on the information developed from work addressing our other objectives, recommendations from our June 8, 2001, report commenting on the District’s fiscal year 2000 report, and our other recent work related to performance management issues. We conducted our work from December 2001 through April 2002 at the Office of the Mayor of the District of Columbia, Washington, D.C., in accordance with generally accepted government auditing standards. In accordance with requirements contained in P.L. 103-373, we consulted with a representative of the director of the Office of Management and Budget concerning our review. We did not verify the accuracy or reliability of the performance data included in the District’s report, including information on the court orders in effect for fiscal year 2001. We provided a draft of this report to the mayor of the District of Columbia for review and comment. The deputy mayor/city administrator provided oral and written comments that are summarized at the end of this report, along with our response. The written comments are reprinted in their entirety in appendix III. The fiscal year 2001 performance accountability report includes most of the District’s significant activities, providing performance information for 66 District agencies that represent 83 percent of the District’s total expenditures of $5.9 billion during that year. The District included 26 additional agencies in this year’s report, compared with 40 in its prior report for fiscal year 2000. Appendix I lists the 66 agencies included in the District’s 2001 performance accountability report, along with the 2001 actual expenditures for each of these agencies. However, the absence of goals and measures related to educational activities remains the most significant gap. The District reports that it is continuing its efforts to include performance information on its significant activities in its performance accountability reports. For example, the 2001 performance accountability report notes that the District of Columbia Public Schools (DCPS) did not include performance goals or measures because they were in the early stages of a long-term strategic planning process initiated by the newly installed school board. DCPS accounted for about 14 percent of the District’s fiscal year 2001 actual expenditures, and public charter schools, which also were not included, accounted for another 2 percent of the District’s 2001 expenditures. The 2001 report states that in lieu of a formal performance accountability report for DCPS, the District included a copy of the Superintendent’s testimony before the Subcommittee on the District of Columbia, Committee on Government Reform, U.S. House of Representatives. The District acknowledged that the inclusion of this information does not fully comply with the statutory requirement and set forth a plan to include DCPS performance goals and measures in the fiscal year 2003 proposed budget and financial plan that will serve as the basis for the DCPS performance accountability report for fiscal year 2002. The 2001 report lists another 10 agencies that were not included, primarily, according to the report, because they did not publish performance goals and measures in the fiscal year 2002 proposed budget. These 10 agencies accounted for about $330 million in fiscal year 2001 actual expenditures, or about 6 percent of the District’s total fiscal year 2001 actual expenditures. These agencies included the Child and Family Services Agency, which was under receivership until June 15, 2001 (with fiscal year 2001 actual expenditures of $189 million) and public charter schools (with fiscal year 2001 expenditures of $137 million). Although it may not be appropriate to include agency performance information in some cases, the performance accountability report should provide a rationale for excluding them. For example, Advisory Neighborhood Commissions, according to the deputy mayor, have a wide range of agendas that cannot be captured in a single set of meaningful measures. Table 3 lists these 10 agencies and their fiscal year 2001 actual expenditures. In addition to these 10 agencies, the District also did not specifically include other areas constituting 11 percent of the District’s fiscal year 2001 actual expenditures. In view of the District’s interest in tying resources to results, the District could further improve its performance accountability reports by linking these budget activities as appropriate to the agencies that are responsible for these expenditures or provide a rationale for exclusion. For example, the Department of Employment Services administers the unemployment and disability funds (with fiscal year 2001 expenditures totaling about $32 million). Similarly, the Office of the Corporation Counsel administers the settlement and judgments fund, which was set up to settle claims and lawsuits and pay judgments in tort cases entered against the District (with fiscal year 2001 expenditures of about $26 million). Table 4 contains a list of these budget activities and fiscal year 2001 actual expenditures. The goals in the fiscal year 2001 performance accountability report were consistent with the goals in the District’s 2001 performance plan. Using a consistent set of goals enhanced the understandability of the report by demonstrating how performance measured throughout the year contributed toward achieving the District’s goals. The District also used clear criteria for rating performance on a five-point scale and reported that these ratings were included in the performance evaluations of cabinet agency directors who had performance contracts with the mayor. In addition, according to a District official, the District will be able to provide information on any future changes made to its performance goals through its new performance management database. The District has made substantial progress in improving its performance planning and reporting efforts by focusing on measuring progress toward achieving a consistent set of goals. In our June 2001 review of the District’s 2000 performance accountability report, we had raised concerns that the District’s performance management process was in flux, with goals changing continually throughout the year. Further, the District did not discuss the reasons for these changes. This year, the goals were consistent and the District provided some information about upcoming changes that could be anticipated in fiscal year 2002 goals. In addition, according to the 2001 report, the District has developed a performance measures database to allow it to document changes to individual goals and measures that are proposed in the agencies’ fiscal year 2003 budget submissions. One of the District’s enhancements to its 2001 performance accountability report was reporting on a five-point performance rating scale, as compared to the three-point performance rating scale it used in its fiscal year 2000 report.