Because of the federal statistical system’s decentralized structure, the collection and issuance of statistical information depends on the effective performance of many separate statistical agencies and programs. The former Chairman of the Senate Committee on Governmental Affairs and the former Chairman of its Subcommittee on Regulation and Government Information asked us to (1) evaluate the performance of four prominent federal statistical agencies using guidelines developed by the National Academy of Sciences (NAS) and (2) provide information on the role of the Office of Management and Budget (OMB) to coordinate and oversee the statistical activities of the agencies that constitute the federal statistical system. The four agencies were the Bureau of the Census and the Bureau of Economic Analysis (BEA) within the Department of Commerce, the Bureau of Labor Statistics (BLS) within the Department of Labor, and the National Center for Health Statistics (NCHS) within the Department of Health and Human Services. The federal statistical system is not a system in the ordinary sense but rather a designation for the numerous government agencies that collect, process, analyze, and use quantitative data. Few federal agencies have data collection as their sole or primary mission, but OMB in its annual report identifies agencies as conducting statistical activities when they devote $500,000 or more of their annual budgets to such activities. If this criterion is used for definition, the agencies in the federal statistical system could change from year to year, although the list is quite stable over time. For fiscal year 1995, 72 agencies met or exceeded the $500,000 budget level. Although the majority of these agencies produce statistical information on a particular subject as a byproduct of their administrative, regulatory, or operating responsibilities, several agencies have the production of statistical information as their principal mission. Some federal statistics are used by persons with varying information needs; such statistics are frequently called general-purpose statistics. Other statistics are special purpose in character and deal with one subject matter (e.g., education or transportation); they focus on a particular function of government and are primarily designed to aid program administrators and policymakers. The bulk of these other statistics relate to specific federal programs and are essentially a byproduct of the agencies’ administration or monitoring of these activities. The four agencies whose conformance with the selected NAS guidelines we evaluated are major, well-recognized multipurpose agencies of the federal statistical system. Census tabulates and publishes a wide variety of data about the people and the economy of the nation. These data include the Decennial Census of Population and Housing, the economic and agricultural censuses, and data on U.S. merchandise trade. BLS collects, processes, analyzes, and disseminates data on employment, unemployment, characteristics of employment and employees, and prices and consumer expenditures. BEA is a research-oriented statistical agency that prepares, develops, interprets, and publishes the U.S. economic accounts. BEA integrates large volumes of monthly, quarterly, and annual economic data—ranging from construction spending to retail sales—produced by other government agencies and trade sources to produce a complete and consistent picture of the national economy and its international and regional dimensions. NCHS specializes in health statistics, including vital statistics from marriage, birth, and death certificates. It collects, analyzes, disseminates, and carries out research on the U.S. population’s health status, lifestyles, and exposure to unhealthful influences. Although Census, BLS, BEA, and NCHS are responsible for a large portion of the statistics produced by the federal government, they are only 4 of the 72 agencies that constitute the federal statistical system. For example, NCHS is not the only agency that collects health statistics. Within the Department of Health and Human Services, 13 agencies collect health statistics. The largest of these are the National Institutes of Health and NCHS’ parent organization, the Centers for Disease Control and Prevention. OMB’s Statistical Policy Branch is responsible for coordinating the activities of the 72 statistical agencies by reviewing agency budget requests, issuing statistical standards, facilitating interagency working groups, and reviewing agency information requests. Appendix I lists by department the names of the 72 agencies in the federal statistical system that are expected to spend at least $500,000 on statistical activities in fiscal year 1995. Since the earliest days of the United States, statistics have been collected and used to describe various facets of the national economy and population. The Constitution, notably, mandates a decennial census to count the population. Government policy and private decisions depend on the availability of accurate and timely information. In addition, federal, state, and local governments rely on statistical information to administer programs under their jurisdictions. Census, BEA, BLS, and NCHS are responsible for many of the statistics used by policymakers and those who administer federal programs. The statistical activities of these four agencies influence policymakers in their formulation of national policies. For example, statistics are fundamental to the federal government’s efforts to allocate its annual budget. Federal income tax brackets and some benefit payments, for instance, are adjusted to mitigate the effects of inflation. Statistics are also an important part of many presidential messages and reports. For example, the annual Economic Report of the President contains extensive statistical appendixes, and many of the policies and programs discussed in the report are based on a statistical foundation provided by the four agencies discussed in this report. In addition, Census’ Decennial Census of Population and Housing is the basis on which representation in Congress is apportioned among the states. The uses of federal statistics extend beyond the government. Decennial census data are used widely by businesses and the media to examine social trends. Much of the news on the business and financial pages of the daily press comes from the release of statistics by BEA, BLS, and Census. Business analysts regularly use statistics of economic conditions when planning investments and operations in their own businesses. Labor organizations and management use statistics on earnings, hours, employment, and prices in their collective bargaining negotiations. BLS’ consumer price index (CPI), which measures the change in the prices of a uniform “market basket” of goods and services, is widely used as the measure for “escalator clauses” in contracts. In employment contracts, for example, such a clause might tie increases in wages and pensions to the CPI to keep employee or retiree earnings in line with inflation. The administration and Congress use statistics produced by these four agencies as a basis for measuring the results of government programs. Some data series are built directly into the administration of programs such as BLS’ inflation and Census’ poverty indexes. For example, if the CPI overstated inflation by as little as 0.2 percentage points annually from 1995 through 1999, an estimated $19.1 billion would be added to the deficit over that 5-year period, according to OMB estimates. In addition, current defense industry contracts amounting to $90 billion include a purchases and sales component that is adjusted by BLS’ producer price index. And BEA, BLS, and Census produce local area unemployment, income, and poverty statistics that are important components of formula programs that allocate billions of dollars of federal funds to state and local governments. The statistics that NCHS produces and disseminates offer many indicators of the health of the nation’s population. From a public policy perspective, NCHS data are critical in the government’s monitoring of cost and delivery of health care. The use of these data in research also helps to bring about improvements in the prevention or treatment of diseases. Because data are usually published from each NCHS information system separately, the wide range of NCHS’ data is sometimes not apparent. NCHS’ data systems are used to obtain information from individuals, health care providers, and vital records, such as birth, death, and marriage certificates; the data systems are useful in studying public health. According to OMB, the 72 agencies that had budgets of $500,000 or more for statistical activities requested an estimated total of $2.6 billion in direct funding for statistical activities in fiscal year 1995. Many of these agencies also received reimbursements from other federal agencies, state and local governments, and the private sector to perform requested statistical activities. Of the requested funding for the 72 agencies combined, the 4 agencies’ share of direct funding was about $752 million (29.4 percent). Table 1.1 shows the share that each of the four agencies requested for statistical funding. The Committee on National Statistics (CNSTAT) of NAS developed guidelines that it believed were essential for the operation of federal agencies that conduct statistical activities. CNSTAT is composed of professionals in the statistical field who have no direct relationship with the federal government. Since its founding, CNSTAT has concentrated on reviewing federal statistics on a selective basis. It also prepares reports on special studies that are intended to improve the effectiveness of the federal statistical system. Considering the diversity of the agencies that make up the federal statistical system, it is difficult to devise standards against which to measure the agencies’ performance. However, CNSTAT developed guidelines that it believes are essential for the efficient operation of federal agencies that conduct statistical activities. NAS issued a CNSTAT report in 1992 entitled Principles and Practices for a Federal Statistical Agency. CNSTAT prepared this report partially in response to requests for advice from congressional and executive officials proposing the creation of new statistical agencies, such as a Bureau of Environmental Statistics and a Bureau of Transportation Statistics. These officials were interested in CNSTAT’s views on what constitutes an effective federal statistical agency. CNSTAT also prepared the report because it was concerned that federal statistical agencies might sometimes not meet what it considered acceptable professional standards. In the NAS report, CNSTAT outlined guidelines that it believes should be followed by federal statistical agencies. According to NAS, the guidelines contain principles and practices that are statements of “best practices,” rather than legal requirements or scientific rules. The guidelines, however, were intended to be consistent with current laws and statistical theory and practice. In the report, CNSTAT discussed the following three principles it found to be essential for the effective operation of a federal statistical agency.