From defending the homeland against terrorists, to preventing the spread of infectious diseases, to providing a reliable stream of social security income to retirees and supporting the transition from welfare to work, the federal government provides funding and services to the American public that can affect their lives in critical ways every day. However, the federal government is in a period of profound transition and faces an array of challenges and opportunities to enhance performance, ensure accountability, and position the nation for the future. A number of overarching trends, such as diffuse security threats and homeland security needs, increasing global interdependency, the shift to knowledge-based economies, and the looming fiscal challenges facing our nation, drive the need to reconsider the proper role for the federal government in the 21st century, how the government should do business (including how it should be structured), and in some instances, who should do the government’s business. Without effective short- and long-term planning, which takes into account the changing environment and needs of the American public and the challenges they face and establishes goals to be achieved, federal agencies risk delivering programs and services that may or may not meet society’s most critical needs. At a cost to taxpayers of over $2 trillion annually, the federal government should be able to demonstrate to the American public that it can anticipate emerging issues, develop sound strategies and plans to address them, and be accountable for the results that have been achieved. Concerned that the federal government was more focused on program activities and processes than the results to be achieved, Congress passed the Government Performance and Results Act of 1993 (GPRA). The act required federal agencies to develop strategic plans with long-term strategic goals, annual goals linked to achieving the long-term goals, and annual reports on the results achieved. Now that GPRA has been in effect for 10 years, you asked us to assess the effectiveness of GPRA in creating a focus on results in the federal government. Specifically, this report discusses (1) the effect of GPRA over the last 10 years in creating a governmentwide focus on results and the government’s ability to deliver results to the American public, including an assessment of the changes in the overall quality of agencies’ strategic plans, annual performance plans, and annual performance reports; (2) the challenges agencies face in measuring performance and using performance information in management decisions; and (3) how the federal government can continue to shift toward a more results-oriented focus. With the 21st century challenges we are facing, it is more vital than ever to maximize the performance of federal agencies in achieving their long-term goals. The federal government must address and adapt to major trends in our country and around the world. At the same time, our nation faces serious long-term fiscal challenges. Increased pressure also comes from world events: both from the recognition that we cannot consider ourselves “safe” between two oceans—which has increased demands for spending on homeland security—and from the United States (U.S.) role in combating terrorism in an increasingly interdependent world. To be able to assess federal agency performance and hold agency managers accountable for achieving their long-term goals, we need to know what the level of performance is. GPRA planning and reporting requirements can provide this essential information. Our country’s transition into the 21st century is characterized by a number of key trends, including the national and global response to terrorism and other threats to our personal and national security; the increasing interdependence of enterprises, economies, markets, civil societies, and national governments, commonly referred to as globalization; the shift to market-oriented, knowledge-based economies; an aging and more diverse U.S. population; rapid advances in science and technology and the opportunities and challenges created by these changes; challenges and opportunities to maintain and improve the quality of life for the nation, communities, families, and individuals; and the changing and increasingly diverse nature of governance structures and tools. As the nation and government policymakers grapple with the challenges presented by these evolving trends, they do so in the context of rapidly building fiscal pressures. GAO’s long-range budget simulations show that this nation faces a large and growing structural deficit due primarily to known demographic trends and rising health care costs. The fiscal pressures created by the retirement of the baby boom generation and rising health costs threaten to overwhelm the nation’s fiscal future. As figure 1 shows, by 2040, absent reform or other major tax or spending policy changes, projected federal revenues will likely be insufficient to pay more than interest on publicly held debt. Further, our recent shift from surpluses to deficits means the nation is moving into the future in a more constrained fiscal position. The United States has had a long-range budget deficit problem for a number of years, even during recent years in which we had significant annual budget surpluses. Unfortunately, the days of surpluses are gone, and our current and projected budget situation has worsened significantly. The bottom line is that our projected budget deficits are not manageable without significant changes in “status quo” programs, policies, processes, and operations. GPRA is the centerpiece of a statutory framework that Congress put in place during the 1990s to help resolve the long-standing management problems that have undermined the federal government’s efficiency and effectiveness and to provide greater accountability for results. In addition to GPRA, the framework comprises the Chief Financial Officers Act of 1990, as amended by the Government Management Reform Act of 1994, and information technology reform legislation, including the Paperwork Reduction Act of 1995 and the Clinger-Cohen Act of 1996. Together, these laws provide a powerful framework for developing and integrating information about agencies’ missions and strategic priorities, the results- oriented performance goals that flow from those priorities, performance data to show the level of achievement of those goals, and the relationship of reliable and audited financial information and information technology investments to the achievement of those goals. GPRA was intended to address several broad purposes, including strengthening the confidence of the American people in their government; improving federal program effectiveness, accountability, and service delivery; and enhancing congressional decision making by providing more objective information on program performance. 2. The agency must develop annual performance plans covering each program activity set forth in the agencies’ budgets* Building on the decisions made as part of the strategic planning process, GPRA requires executive agencies to develop annual performance plans covering each program activity set forth in the agencies’ budgets. Annual performance plans, covering the upcoming fiscal year, are to be submitted to Congress after the President’s Budget is submitted, which generally occurs in February. Each plan is to contain an agency’s annual performance goals and associated measures, which the agency is to use in order to gauge its progress toward accomplishing its strategic goals. OMB is to use the agencies’ performance plans to develop an overall federal government performance plan that is to be submitted with the President’s Budget. The performance plan for the federal government is to present to Congress a single cohesive picture of the federal government’s annual performance goals for a given fiscal year. 3. The agency must prepare annual reports on program performance for the previous fiscal year, to be issued by March 31 each year GPRA requires executive agencies to prepare annual reports on program performance for the previous fiscal year, to be issued by March 31 each year. In each report, an 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. Recent OMB guidance states that executive agencies must combine their program performance report with their accountability report and transmit the combined report for fiscal year 2003 by January 30, 2004, and the combined report for fiscal year 2004 by November 15, 2004. *Program activity refers to the lists of projects and activities in the appendix portion of the Budget of the United States Government. Program activity structures are intended to provide a meaningful representation of the operations financed by a specific budget account. The Office of Management and Budget (OMB) plays an important role in the management of the federal government’s performance, and specifically GPRA implementation. Part of OMB’s overall mission is to ensure that agency plans and reports are consistent with the President’s Budget and administration policies. OMB is responsible for receiving and reviewing agencies’ strategic plans, annual performance plans, and annual performance reports. To improve the quality and consistency of these documents, OMB issues annual guidance to agencies for their preparation, including guidelines on format, required elements, and submission deadlines. GPRA requires OMB to prepare the overall governmentwide performance plan, based on agencies’ annual performance plan submissions. OMB also played an important role in the pilot phase of GPRA implementation by designating agencies for pilot projects in performance measurement, managerial accountability and flexibility, and performance budgeting, and assessing the results of the pilots. Finally, GPRA provides OMB with authority to grant agencies waivers to certain administrative procedures and controls. Recent OMB guidance requires agencies to submit “performance budgets” in lieu of annual performance plans for their budget submission to OMB and Congress. Performance budgets are to meet all the statutory requirements of GPRA for annual performance plans. In addition, agencies are to include all performance goals used in the assessment of program performance done under OMB’s Program Assessment Rating Tool (PART) process. Moreover, the guidance states that until all programs have been assessed by PART, the performance budget will also for a time include performance goals for agency programs that have not yet been assessed using PART. The expectation is that agencies are to substitute new or revised performance goals resulting from OMB’s review for goals it deemed unacceptable. In crafting GPRA, Congress recognized that managerial accountability for results is linked to managers having sufficient flexibility, discretion, and authority to accomplish desired results. GPRA authorizes agencies to apply for managerial flexibility waivers in their annual performance plans beginning with fiscal year 1999.