According to OMB, its predominant mission is to assist the President in overseeing the preparation of the federal budget and to supervise budget administration in executive branch agencies. In helping to formulate the President’s spending plans, OMB is responsible for evaluating the effectiveness of agency programs, policies, and procedures; assessing competing funding demands among agencies; and setting funding priorities. OMB also is to ensure that agency reports, rules, testimony, and proposed legislation are consistent with the President’s budget and with administration policies. In addition, OMB is responsible for overseeing and coordinating the administration’s procurement, financial management, information, and regulatory policies. In each of these areas, OMB’s role is to help improve administrative management, to develop better performance measures and coordinating mechanisms, and to reduce unnecessary burden on the public. To drive improvement in the implementation and management of IT projects, the Congress enacted the Clinger-Cohen Act in 1996 to further expand the responsibilities of OMB and the agencies under the Paperwork Reduction Act. The act requires that agencies engage in capital planning and performance- and results-based management. OMB is required by the Clinger-Cohen Act to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by executive agencies. OMB is also required to report to the Congress on the net program performance benefits achieved as a result of major capital investments in information systems that are made by executive agencies. In response to the Clinger-Cohen Act and other statutes, OMB developed section 300 of Circular A-11. This section provides policy for planning, budgeting, acquisition, and management of federal capital assets and instructs agencies on budget justification and reporting requirements for major IT investments. Section 300 defines the budget exhibit 300, also called the Capital Asset Plan and Business Case, as a document that agencies submit to OMB to justify resource requests for major IT investments. The exhibit 300 consists of two parts: the first is required of all assets; the second applies only to information technology. Among other things, the exhibit 300 requires agencies to provide information summarizing spending and funding plans; performance goals and measures; project management plans, goals, and progress; and security plans and progress. This reporting mechanism, as part of the budget formulation and review process, is intended to enable an agency to demonstrate to its own management, as well as OMB, that it has employed the disciplines of good project management, developed a strong business case for the investment, and met other Administration priorities in defining the cost, schedule, and performance goals proposed for the investment. The types of information included in the exhibit 300, among other things, are to help OMB and the agencies identify and correct poorly planned or performing investments (i.e., investments that are behind schedule, over budget, or not delivering expected results) and real or potential systemic weaknesses in federal information resource management (e.g., project manager qualifications). According to OMB’s description of its processes, agencies’ exhibit 300 business cases are reviewed by OMB analysts from its four statutory offices—Offices of E-Government and Information Technology (e-Gov), Information and Regulatory Affairs (OIRA), Federal Financial Management, and Federal Procurement Policy—and its Resource Management Offices (RMO). In addition to other responsibilities under various statutes, e-Gov and OIRA develop and oversee the implementation of governmentwide policies in the areas of IT, information policy, privacy, and statistical policy. OIRA and e-Gov analysts also carry out economic and related analyses, including reviewing exhibit 300s. Each of about 12 analysts is responsible for overseeing IT projects for a specific agency or (more commonly) several agencies. OMB’s RMOs are staffed with program examiners, whose responsibility is to develop and support the President’s Budget and Management Agenda. RMOs work as liaisons between federal agencies and the presidency. In formulating the budget, they evaluate agency requests for funding and evaluate agency management and financial practices. RMOs also evaluate and make recommendations to the President when agencies seek new legislation or the issuance of Presidential executive orders that would help agencies to fulfill their organizational objectives. According to OMB officials, the OIRA and e-Gov analysts, along with RMO program examiners, evaluate agency exhibit 300 business cases as part of the development of the President’s Budget. The results of this review are provided to agencies through what is called the “passback” process. That is, OMB passes the requests back to agencies with its evaluation, which identifies any areas requiring remediation. The final step in the budget process, occurring after the Congress has appropriated funds, is apportionment, through which OMB formally controls agency spending. According to the Antideficiency Act, before the agency may spend its funding resources, appropriations must be apportioned by periods within the fiscal year (typically by quarters) or among the projects to be undertaken. Although apportionment is a procedure required to allow agencies to access their appropriated funds, OMB can also use apportionment to impose conditions on agency spending, such as changes in agency practices; it is one of several mechanisms that the Clinger-Cohen Act authorizes OMB to use to enforce an agency head’s accountability for the agency’s IT investments. The President’s Budget for Fiscal Year 2005 included about 1,200 IT projects, totaling about $60 billion. Of this total number of projects, OMB reported in the budget that slightly over half—621 projects, representing about $22 billion—were on a Management Watch List. According to OMB’s March 2004 testimony, this list consists of mission-critical projects that needed to improve performance measures, project management, IT security, or overall justification. OMB officials described this assessment as based on evaluations of exhibit 300s submitted to justify inclusion in the budget. According to OMB’s testimony, the fiscal year 2005 budget required agencies to successfully correct identified project weaknesses and business case deficiencies; otherwise, they risked OMB placing limits on their spending. OMB officials testified in March 2004 that they would enforce these corrective actions through the apportionment process. OMB continued its use of a Management Watch List in the recently released President’s Budget for Fiscal Year 2006. The President’s Budget for Fiscal Year 2006 includes 1,087 IT projects, totaling about $65 billion. Of this total number of projects, OMB reported in the budget that 342 projects, representing about $15 billion, are on the fiscal year 2006 Management Watch List. Our objectives were to describe and assess OMB’s processes for (1) placing projects on its Management Watch List and (2) following up on corrective actions established for projects on the list. To examine OMB’s processes for developing the list, we requested a copy of the Management Watch List; we reviewed related OMB policy guidance, including its Circular A-11 and Capital Programming Guide, as well as the Analytical Perspectives for the President’s Budget submissions for fiscal years 2005 and 2006; and we interviewed OMB analysts and their managers, including the Deputy Administrator of OIRA and the Chief of the Information Technology and Policy Branch, to identify the processes and criteria they have in place to determine which IT projects to include on the Management Watch List. To examine OMB’s follow-up procedures on corrective actions established for IT projects on the list, we reviewed related policy guidance, including section 300 of Circular A-11 and OMB’s Capital Programming Guide. We analyzed OMB’s apportionment documentation, specifically the Standard Form 132 (Apportionment and Reapportionment Schedule), which documented special apportionments that specified conditions that had to be met before the agencies could receive funds. In addition, we interviewed OMB officials and analysts and reviewed testimony and laws affecting the management of IT investments, such as the Clinger-Cohen Act. We conducted our work at OMB headquarters in Washington, D.C., from August 2004 through March 2005, in accordance with generally accepted government auditing standards. According to OMB officials, including the Deputy Administrator of OIRA and the Chief of the Information Technology and Policy Branch, OMB staff identified projects for the Management Watch List through their evaluation of the exhibit 300s that agencies submit for major IT projects as part of the budget development process. This evaluation is carried out as part of OMB’s responsibility for helping to ensure that investments of public resources are justified and that public resources are wisely invested. The OMB officials added that their analysts evaluate agency exhibit 300s by assigning scores to each exhibit 300 based on guidance presented in OMB Circular A-11. According to this circular, the purpose of the scoring is to ensure that agency planning and management of capital assets are consistent with OMB policy and guidance. As described in Circular A-11, the scoring of a business case consists of individual scoring for 10 categories, as well as a total composite score of all the categories. The 10 categories are project (investment) management, enterprise architecture, performance-based management system (including the earned value life-cycle costs formulation, and support of the President’s Management Agenda. According to Circular A-11, scores range from 1 to 5, with 5 indicating investments whose business cases provided the best justification and 1 the least. For investments with average scores of 3 or below, OMB may ask agencies for remediation plans to address weaknesses in their business cases. OMB officials said that, for fiscal year 2005, an IT project was placed on the Management Watch List if its exhibit 300 business case received a total composite score of 3 or less, or if it received a score of 3 or less in the areas of performance goals, performance-based management systems, or security and privacy, even if its overall score was a 4 or 5.