Mr. Chairman and Members of the Subcommittee: I am pleased to be here today to assist the Subcommittee in its review of the Commodity Futures Trading Commission’s (CFTC) fiscal year 2000 annual performance plan. Hearings like this one and the one you held last year on CFTC’s 1997-2002 strategic plan continue to be an important means of ensuring that the intent of the Government Performance and Results Act of 1993 (Results Act) is met. As you know, annual performance plans can be an invaluable tool for making policy decisions, improving program management, enhancing accountability, and communicating to both internal and external audiences on how the long-term direction outlined in strategic plans is translated into the day-to-day activities of managers and staff. Successful implementation of a performance-based management system, as envisioned by the Results Act, represents a significant challenge requiring sustained agency attention. My testimony today focuses on five areas in which CFTC could improve its performance plan to make it a more useful tool for congressional and executive branch decisionmakers. Although opportunities exist to improve CFTC’s fiscal year 2000 performance plan, CFTC actions to date clearly show a good faith effort to comply with the Results Act and the Office of Management and Budget (OMB) guidance in developing its plan. In our discussions with CFTC staff, we found CFTC fully committed to meeting both the requirements of the Act and congressional expectations that the plan inform Congress and the public about CFTC performance goals, including how the agency will accomplish these goals and measure results. In addition, the areas in which CFTC could improve its plan are some of the same areas in which we found that many other federal agencies, including federal financial regulators, could improve their plans. Specifically, CFTC could improve its plan in the following five areas: Performance goals, measures, and targets could provide a clearer picture of intended performance. Mission, goals, and activities could be better connected to more fully demonstrate how CFTC will chart annual progress toward achieving its long-term strategic goals. Crosscutting efforts could be addressed more fully if CFTC worked with the affected federal agencies to develop performance goals and measures that reflect the nature and extent of their common efforts. Strategies and resources used to achieve goals could be discussed in greater detail to better enable congressional and other decisionmakers to judge their reasonableness. The means for verifying and validating that performance information is sufficiently complete, accurate, and consistent, as well as the extent to which such information and the means for collecting, maintaining, and analyzing it are reliable, should be discussed. My comments today apply to the fiscal year 2000 annual performance plan that CFTC prepared for OMB in September 1998. Our assessment of CFTC’s plan was based on knowledge of the agency’s operations and programs; past reviews of CFTC, including a review of its 1997-2002 strategic plan; results of work on other agencies’ performance plans and the Results Act; discussions with CFTC staff; and other information available at the time of our assessment. The criteria we used to determine whether CFTC’s plan complied with the requirements of the Results Act were the Results Act itself; OMB guidance on preparing strategic and performance plans (OMB Circular A-11, Part 2); and GAO guidance on assessing agency performance plans. CFTC, an independent agency created by Congress in 1974, administers the Commodity Exchange Act (CEA), as amended. The principal purposes of the CEA are to protect the public interest in the proper functioning of the market’s price discovery and risk-shifting functions. In administering the CEA, CFTC is responsible for fostering the economic utility of the futures market by encouraging its efficiency, monitoring its integrity, and protecting market participants from abusive trade practices and fraud. prepared—to a focus on the results of those activities, such as protecting the economic functioning of the commodity futures and option markets. Under the Results Act, strategic plans are the starting point for setting goals and measuring progress towards them. The Results Act requires virtually every executive agency to develop a strategic plan, covering a period of at least 5 years forward from the fiscal year in which the plan is submitted. In September 1997, CFTC formally submitted its fiscal years 1997-2002 strategic plan to Congress and OMB. This plan established three strategic goals: (1) protect the economic functions of the commodity futures and option markets; (2) protect market users and the public; and (3) foster open, competitive, and financially sound markets. The Results Act also requires a federal agency to prepare an annual performance plan covering the program activities set out in its budget. In establishing the requirement for a performance plan, the Results Act establishes the first statutory link between an agency’s budget request and its performance planning efforts. The performance plan is to reinforce the connections between the long-term strategic goals outlined in the agency’s strategic plan and the daily activities of program managers and staff. Finally, the Results Act requires executive agencies to prepare annual reports on program performance for the previous fiscal year. The performance reports are to be issued by March 31 each year, with the first (for fiscal year 1999) to be issued by March 31, 2000. In each report, the agency is to compare its performance against its goals, summarize findings of program evaluations completed during the year, and describe the actions needed to address any unmet goals. results-oriented, and goals were provided for all measures and internal management challenges; (2) some performance goals were made self-measuring and others were made more objective; (3) certain performance measures were replaced, restated, or deleted; and (4) baselines were established against which annual targets could be compared. Results-oriented, or outcome, goals and measures provide the clearest picture of intended and actual performance. However, most of CFTC’s performance goals and measures focus on program outputs—such as the number of meetings attended and number of research projects or reports completed. In our testimony before this Subcommittee last year, we highlighted a similar problem with CFTC’s strategic plan. Although we recognize that establishing outcome measures is particularly challenging for regulatory agencies as they move from a focus on the activities they undertake to the results they are trying to achieve, a key shortcoming of CFTC’s performance plan is that it relies on output measures that describe completed activities, not program results. Also, these measures are weighted toward measuring the quantity of completed activities, rather than the quality, cost, or timeliness of performance outcomes. As mentioned earlier, the Results Act is intended to shift the focus of government decisionmaking and accountability away from a preoccupation with completed activities to a focus on the results of such activities. The focus of CFTC’s performance plan on output measures appears to flow from its strategy of deriving performance goals from program activities. For example, one performance goal is to aggressively identify, investigate, and take action against individuals engaged in fraudulent Internet and media activities. This goal is associated with the program activity of monitoring the Internet and other media for fraudulent activities and other possible violations of the CEA. The measure for the goal is the number of referrals to enforcement authorities generated from Internet and media monitoring—an output of the activity, not an outcome of a program. results-oriented performance goals. For example, the Enforcement Program accomplishment section discusses the effectiveness of its quick-strike ability—the ability to file injunctive actions quickly after detecting fraud—to, among other things, obtain timely injunctive relief and enhance the possibility that customer funds will be recovered. This accomplishment section describes cases, filed within days or weeks of CFTC’s discovering an illegal activity, that stopped fraud at an early stage and preserved customer funds. CFTC’s performance measures could be made more results-oriented by replacing measures, such as reports on activities related to bringing injunctive actions and sanctioning violators, with more outcome-related measures, such as the percentage of quick-strike cases filed within a certain number of days of starting an investigation that resulted in sanctions and the percentage of funds recovered. CFTC could also learn from the plans of other federal financial regulators that are attempting the transition to results-oriented goals. For example, the National Credit Union Administration is developing new outcome performance goals. One outcome goal of the National Credit Union Administration is to ensure that federally insured credit unions are adequately capitalized. A performance goal is to reduce the percentage of federally insured credit unions that are undercapitalized by 10 percent, from 372 to 335. CFTC’s plan could also be improved if performance goals were provided for all activities and performance targets as well as for internal management challenges. Currently, the plan has 16 activities for which no performance goals exist. For example, no performance goal exists for the activity of reviewing and overseeing self-regulatory organization audit and financial practices. Without a performance goal, it is not clear what performance is expected. Also, CFTC’s strategic plan identifies several internal management challenges that the performance plan does not address. These challenges include diminishing resources, recruiting and retaining qualified professionals, remaining abreast of current technology, and remaining educated and informed as innovation changes the industry. To better respond to the intent of the Results Act, CFTC could add agencywide performance goals to the plan to address these challenges or incorporate these challenges in existing performance goals and measures. Although not required by the Results Act, CFTC could redefine some performance goals so that they are self-measuring, thereby reducing the complexity of the plan. Currently, all but 2 of CFTC’s 31 performance goals are stated as abstract goals—that is, as goals requiring that specific performance measures be defined to assess progress toward their achievement. Performance goals that can be redefined so that they are self-measuring generally have one measure or two or more measures that can be combined.