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) strategic plan. Hearings such as this one are an important part of assuring that the intent of the Government Performance and Results Act of 1993 (GPRA or Results Act) is met, and we commend you, Mr. Chairman, for holding this hearing. The consultative process provides an important opportunity for Congress and the executive branch to collectively ensure that agency missions are focused, goals are results-oriented, and strategies and funding expectations are appropriate. As you know, the Results Act required executive agencies to complete their initial strategic plans by September 30, 1997, and CFTC met this requirement. My testimony today discusses our review of CFTC’s strategic plan. We specifically determined whether the plan contained each of the six components required by the Results Act and assessed each component’s strengths and weaknesses. We also reviewed the extent to which CFTC consulted with stakeholders, including the other federal financial market regulators. Finally, we identified challenges that CFTC faces in addressing the requirements of the Results Act. CFTC’s strategic plan reflects a concerted effort by the agency to address the requirements of the Results Act. Although the plan could be strengthened in some areas, it compares favorably with the plans of other federal financial regulators that we have reviewed. On the basis of our review, we found that CFTC’s plan contained all of the components required by the Results Act but that some of the components could be strengthened. We also found that the plan could be improved by additional stakeholder input, including interagency coordination. Finally, due to the complex set of factors that determine regulatory outcomes, measuring program impacts presents challenges to CFTC in addressing the requirements of the Results Act, as it does for regulatory agencies in general. However, the use of program evaluations to derive results-oriented goals and to measure the extent those goals are achieved is one key to the success of the process. Notwithstanding the need for improvements, we recognize that CFTC’s strategic plan is a dynamic document that the agency intends to refine. My comments apply to the strategic plan that CFTC formally submitted to Congress and the Office of Management and Budget (OMB) in September 1997. In general, our assessment of CFTC’s plan was based on knowledge of the agency’s operations and programs; past and ongoing reviews of CFTC; results of work on other agencies’ strategic plans and the Results Act; discussions with CFTC, OMB, and Subcommittee 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 and OMB guidance on preparing strategic plans (OMB Circular A-11, Part 2). To assess CFTC’s consultation with stakeholders and to identify challenges in implementing the Results Act, we relied on the results of our previous work and/or discussions with CFTC and OMB officials. CFTC is an independent agency that administers the Commodity Exchange Act, as amended, and was created by Congress in 1974. The principal purposes of the act are to protect the public interest in the proper functioning of the market’s price discovery and risk-shifting functions. In administering the act, 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. trade-offs that are necessary for effective policymaking. Improving management in the federal sector will not be easy, but the Results Act can assist in accomplishing this task. The Results Act requires executive agencies to prepare multiyear strategic plans, annual performance plans, and annual performance reports. First, the Act requires agencies to develop a strategic plan covering the period of 1997 through 2002. As indicated in the Results Act and OMB guidance, each plan is to include six major components: (1) a comprehensive statement of the agency’s mission, (2) the agency’s long-term goals and objectives for all major functions and operations, (3) a description of the approaches (or strategies) for achieving the goals and the various resources needed, (4) an identification of key factors, external to the agency and beyond its control, that could significantly affect its achievement of the strategic goals, (5) a description of the relationship between the long-term strategic goals and annual performance goals, and (6) a description of how program evaluations were used to establish or revise strategic goals and a schedule for future evaluations. In developing their strategic plans, agencies are to consult with Congress and solicit the views of stakeholders. Second, the Results Act requires executive agencies to develop annual performance plans covering each program activity set forth in their budgets. The first annual performance plans, covering fiscal year 1999, are to be provided to Congress after the President’s budget is submitted to Congress in early 1998. An annual performance plan is to contain the agency’s annual goals, measures to gauge performance toward meeting its goals, and resources needed to meet its goals. And third, 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 the findings of program evaluations completed during the year, and describe the actions needed to address any unmet goals. Based on our review, we found that CFTC’s strategic plan contains all of the six major components required by the Results Act. The plan defines the agency’s mission, establishes goals, lists activities to be performed to achieve the goals, identifies key factors affecting the achievement of the goals, discusses the relation between the goals of the strategic and annual performance plans, and addresses methods for evaluating the agency’s programs. However, we identified several areas in which CFTC could improve the plan as it is revised and updated. Consistent with the OMB guidance, the strategic plan contains a brief mission statement that broadly defines CFTC’s basic purposes: to protect market users and the public from abusive practices and to foster open, competitive, and financially sound futures and option markets. In addition, the accompanying background of the mission statement defines the agency’s core responsibilities and discusses the agency’s enabling legislation. Consistent with the OMB guidance, the strategic plan describes CFTC’s goals and general objectives, providing staff with direction for fulfilling the agency’s mission. The agency’s three goals are to (1) protect the economic functions of the commodity futures and options markets, (2) protect market users and the public, and (3) foster open, competitive, and financially sound markets. The plan further defines each goal in terms of a number of outcome objectives. For example, under goal two, the plan includes the outcome objectives of promoting compliance with and deterring violations of federal commodities laws as well as requiring commodities professionals to meet high standards. The OMB guidance notes that a strategic plan’s general goals and objectives should be stated in a manner that allows for future assessment of whether the goals and objectives are being achieved. Although the general goals and outcome objectives support the agency’s mission, most could benefit by being restated in a way that facilitates future assessment of whether they have been achieved. Examples of objectives that could be restated include overseeing markets used for price discovery and risk shifting as well as promoting markets free of trade practice abuse. Consistent with the OMB guidance, the strategic plan lists key activities that staff are to perform to accomplish the outcome objectives and, in turn, general goals. For example, an outcome objective of goal three is to facilitate the continued development of an effective, flexible regulatory environment. The specific activities to be performed for this objective include providing regulatory relief, as appropriate, to foster the development of innovative transactions and participating in the President’s Working Group on Financial Markets to coordinate efforts among U.S. financial regulators. The plan also discusses actions for communicating accountability to CFTC managers and staff. These actions include instituting a performance management system to create a more effective communication tool for mangers and staff and using the annual performance plan to better communicate specific goals and performance levels to staff. The OMB guidance notes that a strategic plan should briefly describe the resources needed to achieve its goals and objectives, for example, in terms of operational processes, staff skills, and technologies, as well as human, capital, and other resources. The guidance further notes that a plan should include schedules for initiating and completing significant actions as well as outline the process for communicating goals and objectives throughout the agency and for assigning accountability to managers and staff for achieving objectives. Although CFTC’s plan lists specific activities to be performed to achieve its goals and objectives, it could be made more informative by discussing the resources needed to perform the activities and by providing schedules for initiating and completing significant actions. Similarly, the plan’s discussion of communicating accountability could be expanded to address how CFTC will assign accountability to managers and staff for achieving objectives. performed to accomplish each goal. Finally, the strategic plan mentions that the annual plan establishes indicators and targets with the goal of ensuring that day-to-day activities are appropriately defined and measured. According to the OMB guidance, a strategic plan should briefly outline the type, nature, and scope of the annual performance goals and the relevance and use of these goals in helping determine whether the strategic plan’s goals and objectives are being achieved. The linkage between the two plans is important because a strategic plan’s goals and objectives establish the framework for developing the annual performance plan. Moreover, annual performance goals indicate the planned progress in that particular year toward achieving the strategic plan’s goals and objectives.