We developed the information in this report from numerous interviews of OMB managers and staff and reviews of budget documents for fiscal years 1995 and 1996. In total, we interviewed 87 OMB officials and staff, representing over 15 percent of all OMB employees. However, because the interviews were not a random sample drawn from all components of OMB, the information obtained from them is not generalizable to all OMB employees. We reviewed budget documents that related to four executive departments and one agency: the Departments of Veterans Affairs, Labor, Justice, Housing and Urban Development, and the Environmental Protection Agency. To obtain access to OMB’s internal budget review documents, we agreed to keep the information the documents contained confidential and to describe examples from them that illustrated the changes before and after OMB 2000 in a general manner. In contrast to our 1989 general management review of OMB, this review focused on a specific reorganization initiative. As agreed with your offices, our review was descriptive rather than evaluative in nature because, at the time we started our review, it was too early to evaluate this complex and significant reorganization of OMB. Moreover, it was very difficult to separate the influence of OMB 2000 from concurrent management reform initiatives, such as the Government Performance and Results Act of 1993 (GPRA) or other components of NPR. We did our work in Washington, D.C., from November 1994 through July 1995 in accordance with generally accepted government auditing standards. Appendix I provides additional details on our objectives, scope, and methodology. We provided a draft of this report to the Director of OMB for her review and comment on November 28, 1995. OMB’s comments are presented and evaluated on page 28 of this report, and a copy of OMB’s comments is in appendix V. Management and budget issues have long competed for attention and resources within the Executive Office of the President, with management concerns commonly subordinated to the exigencies of the budget process. During the past 50 years, a number of presidential advisory groups have recommended changes designed to strengthen the Office’s central management leadership. In response to the recommendations of one of these groups, the Bureau of the Budget was reorganized in 1970 and renamed OMB, thereby signaling the intent to heighten the management focus in the agency. However, the creation of OMB did not produce an institutionalized capacity for governmentwide management leadership. OMB’s budget role continued to dominate management responsibilities, and its capacity to provide management direction for the executive branch remained a persistent concern. Observers have debated how to best ensure that management issues are not overwhelmed by budgeting pressures. Some observers have advocated integrating the two functions, while others have proposed the creation of dedicated offices, or even a separate agency to provide governmentwide management leadership. Previous OMB reorganizations have reflected these different points of view, alternating between integrating management into the budget review process and creating separate management offices. Proponents of integrating management into the budget review process believed doing so could increase the attention both OMB examiners and agencies give to management issues by linking these issues to budgetary consequences. However, budget issues have tended over time to squeeze out management issues and erode attempts to dedicate specific resources to management. On the other hand, proponents of creating separate management offices believed the separation of management and budget functions could help ensure a consistent level of attention to specific management issues. However, these offices may have marginal impact in leading changes at the agencies without the influence of potential budgetary consequences. Our 1989 report on OMB examined the agency’s repeated reorganizations and management improvement efforts and concluded that OMB had been unable to coordinate its management and budget functions effectively and had not established a stable management capacity. We found that OMB’s short-term, budget-driven focus often made it difficult for the agency to address long-term management problems. We recommended that OMB (1) establish a systematic process within the annual budget cycle for identifying and overseeing agency progress on key management issues, (2) give budget divisions the responsibility and resources to oversee agency implementation of management policy, (3) improve coordination between management and budget staff, and (4) consider creating the position of Deputy Director for Management (DDM). Congress has used its legislative power for the past two decades to help direct OMB’s governmentwide management leadership. For example, the Federal Managers Financial Integrity Act of 1982 required OMB to help establish guidelines agencies could use to evaluate their internal control systems. To increase attention to certain management problems, Congress created three separate statutory offices in OMB focused on specific management areas: the Office of Federal Financial Management (OFFM) to guide the establishment of systems and controls needed for agencies’ financial management; the Office of Federal Procurement Policy (OFPP) to provide overall direction for executive agencies’ procurement policies, regulations, and procedures; and the Office of Information and Regulatory Affairs (OIRA) to direct and oversee agencies’ management of information resources and reduction of unnecessary paperwork. In addition, in the Chief Financial Officers Act of 1990, Congress established the DDM position to strengthen federal management in general. In 1993, Congress also required OMB to lead the implementation of GPRA, which was designed to improve the efficiency and effectiveness of federal programs by establishing in each agency a system for setting goals for program performance and measuring results. Congress did not create a separate office in OMB for GPRA, but OMB initially placed responsibility for that function in its General Management Division, where responsibility for other governmentwide management initiatives was housed. OMB 2000 altered OMB’s organizational structure and the responsibilities of units within that structure. As a result of OMB 2000, the RMOs were created and made responsible for all agency-specific reviews, and the statutory offices continued to be responsible for developing governmentwide policy. Each RMO consists of at least one division, with several branches in each division. OMB 2000 created new staff positions, moved staff to different units within the new structure, and made other staffing changes. Overall, the RMOs were assigned about 26 percent more staff than the former budget program areas had, although OMB’s total fiscal year 1994 staffing allocation (556 full-time equivalents) was unchanged. (App. II shows OMB’s staffing profile before and after OMB 2000.) OMB 2000 created five RMOs from five former budget program areas, which had examined agency budget requests and made funding recommendations to OMB’s Director. OMB 2000 redistributed some former budget program area assignments in order to balance the workload within and among RMOs. Before OMB 2000, OMB had separate management offices that examined agencies’ implementation of management initiatives. OMB had a General Management Division prior to OMB 2000 that was responsible for, among other things, performance measurement, program evaluation, and federal personnel and property management issues. In addition, OMB has three management-related offices that were created by statute: OFFM, OFPP, and OIRA. OMB reassigned staff from both the former budget program areas and the management offices to the RMOs to examine agencies’ specific management, budget, and policy issues. Figure 1 shows OMB’s organization before OMB 2000. The National Security and International Affairs and the Natural Resources, Energy, and Science budget program areas became RMOs with comparable agency coverage. The Health budget program area became the Health and Personnel RMO and acquired responsibility for the Department of Veterans Affairs, the Office of Personnel Management, the Executive Office of the President, and the Postal Service. Some of the Human Resources budget program area’s examining responsibilities (such as responsibility for the Department of Veterans Affairs) were moved elsewhere. Coincident with these changes, the Human Resources budget program area became an RMO. Finally, the Economics and Government budget program area became the General Government and Finance RMO, maintaining responsibility for the Departments of Commerce, Justice, Housing and Urban Development, Transportation, and Treasury; and federal financial institutions; and adding responsibility for the General Services Administration. (The RMOs’ organizational structure and examining responsibilities are illustrated in app. III in figs. III.1 through III.5.) Figure 2 shows OMB’s organization after OMB 2000. The RMOs were also given responsibility for overseeing agencies’ implementation of governmentwide management policies—a responsibility that had formerly been assigned to OMB’s management offices (the statutory offices and the General Management Division). For example, OMB made the RMOs responsible for examining agencies’ audited financial statements and for assessing agencies’ high-risk, procurement, and information resources management (IRM) issues. OMB eliminated OFFM’s Credit and Cash Management Branch and the Special Studies Divisions that had been associated with three of the five budget program areas. The Special Studies Divisions, which had originally been established to provide management expertise within the budget program areas, had most recently focused on longer term policy analysis. The General Management Division was eliminated when two of its three branches (the Federal Services and Federal Personnel Policy Branches) were moved to RMOs and the third branch (Evaluation and Planning) was eliminated. The movement of the Division’s responsibilities for examining the other two central management agencies (the General Services Administration and the Office of Personnel Management) reversed a previous initiative to give the General Management Division some budget examining responsibilities. OMB assigned most of the responsibilities and staff from these units to the RMOs. For example, the two staff members who coordinated OMB Circular A-76 activities and credit and cash management responsibilities were moved from the General Management Division and OFFM, respectively, to the General Government and Finance RMO. The staff member who coordinated GPRA responsibilities was transferred initially from the General Management Division to the Human Resources RMO.