W orkshop on the President’s
Management Agenda for SES Managers
Budget and Perform ance
Integration
Justine Farr Rodriguez
March 8, 2002
Transformation to PerformanceOriented Government
• A transformation to performance-oriented
government has begun and seems likely to
be more deep-rooted than its
predecessors.
• Attention will focus on outputs produced
and outcomes influenced throughout a
cycle of assessing past results, developing
policy, justifying and executing the budget,
managing staff, acquisitions, IT, and
financial reporting.
What Works and Why?
• Agencies will need more rigorous analysis
of program effectiveness for FY 2004.
• All kinds of documentation will be helpful
in showing that a program works and that
its managers understand why and how.
• For programs that are less effective, the
same kind of rigorous analysis must
support proposals for reforms.
Alignment: The Key to Green
• Structural reforms to support budgeting and
managing for results start by aligning
“program activity” sub-accounts with an
output or cluster of outputs.
• Under a legislative proposal, appropriations
to these accounts would cover the annual
cost of resources to produce these outputs.
• This would provide incentives for efficiency,
integrate performance plans and budgets,
and highlight effectiveness.
Performance-Oriented Government
• Nations are increasingly shifting to
buying outputs, targeting outcomes,
and performance budgeting.
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New Zealand
Australia
United Kingdom
Canada
Netherlands
France
OECD
Malasia
treasury.gov.nz
budget.gov.au
hm-treasury.gov.uk
cga-canada.org
minfin.nl
minefi.gouv.fr
oecd.org
mir.com.my/lb
Performance-Oriented Government
• State and local governments have
also been moving to performance
budgeting.
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Texas
Virginia
Louisiana
Missouri
NASBO
Sunnyvale, CA
Indianapolis, IN
Charlotte, NC
library.unt.edu/govinfo
dpb.state.va.us
state.la.us/opb/pbb
oa.state.mo.us/bp
nasbo.org
ci.sunnyvale.ca.us
indygov.org
charmeck.nc.us
Performance-Oriented Government
• The Federal Government has moved toward
performance management for a decade.
• Chief Financial Officers Act in 1990.
• Government Performance and Results Act in 1993.
• Federal Accounting Standards Advisory Board recommends
matching cost with goods, services delivered to public,
1993.
• Government Management Reform Act of 1994.
• Federal Acquisition Streamlining Act of 1994.
• Clinger-Cohen Act of 1996.
• Agencies have financial, information, procurement, and
human resources advisers linked in cross-agency councils.
Performance-Oriented Government
• So far, we have improved information
about performance and better plans.
• We also have information about cost,
including some on the cost of programs.
• Attention to this information is voluntary.
• But if it is in the budget as performance
with matched cost, it drives decisions
and creates incentives for more effective
and efficient government.
Performance-Oriented Government
In FY 2003, we started to use performance
ratings in budget decision-making -- to
allocate resources to support results.
Within each sub-function or business line:
– Support effective programs;
– Reform less effective programs, or
– Redirect resources to more effective uses.
Effective programs influence outcomes!
Performance-Oriented Government
Performance orientation will be infused
into every aspect of government:
Budgeting -- focus on results, align structure
Managing -- in the spotlight
Staffing -- empower staff, reward results
Acquisition -- competitive, performance-based
IT -- integrated, timely, accessible
Reporting -- results transparent to citizens
What Works and Why?
A full benefit-cost study is the “gold
standard” of evaluation. It works!
• Because its benefits exceed its cost -- and despite its
high unit cost -- the Job Corps got funding for four
more residential centers and upgrading to include
education for high school diplomas.
• The Special Supplemental Nutrition Program for
Women, Infants, and Children (WIC) has proven itself
cost-effective. Funding will cover all eligible
applicants.
• Funding for drug treatment was increased based on
the decreased drug use, health costs, and criminal
activity found by the latest evaluation.
What Works and Why?
An evidence-based logic model could help.
• Document what has happened to an outcome from
your agency performance plan.
• Develop a logic model showing the outputs and
environmental factors that could influence the
outcome.
• Look for evidence on the strength and nature of each
relationship in research.
• Examine recent patterns of agency outputs and
external factors to see whether these relationships
provide a reasonable explanation of changes in the
outcome.
What Works and Why?
Benchmarking can provide some evidence
of efficiency and perhaps effectiveness.
• Identify similar operations elsewhere in
government or in the private sector.
• Compare these operations to analyze their
relative cost and outputs.
• Carefully analyze the similarities and
differences.
• Are there any ways in which these are not
comparable operations? What are the
implications of the differences?
Performance-Oriented Budgeting
Submissions that support results:
• Involve planning, budgeting, and program
staffs;
• Ground the plan in previous results:
– Document effectiveness!
– Explain why less effective programs were
selected for reform; how they will succeed.
• Integrate past, future performance with
resources in streamlined presentation.
Performance-Oriented Budgeting
Preparing a performance budget:
• For each outcome, which outputs with
which characteristics have the most effect?
• What is the full cost of producing these
outputs?
• Could efficiency be improved?
• With different resource levels, how would
production or performance targets change?
Outputs Are the Link Between
Inputs and Outcomes
Outputs
Inputs
Outcomes
Financing sources
Net impacts
– Outputs or clusters of related outputs can be
aligned with staff offices and budget accounts.
– Outputs and other factors can be related to
outcomes using analytical equations.
Performance-Oriented Infrastructure
Two steps are necessary to strengthen
budget structure:
• Improve alignment of budget accounts and the
program activities within accounts and staff
units with responsibility for achieving specific
results.
– This can be done agency by agency.
• Charge these accounts consistently with the
full annual cost of the resources used.
– This requires government-wide legislation.
Alignment: The Key to Green
Alignment of the program activities within
accounts and staff units with responsibility for
producing an output or related cluster of
outputs toward the same outcome is the key to
green in integration, and other initiatives.
– This puts authority and funding for the full cost of
programs in the hands of line managers and gives them
flexibility in resource use to achieve better results.
– It facilitates integration of budgetary, performance, and
accounting information for a program or bureau on small,
standard systems for everyday management.
Alignment for Integration with Plans
• Start with a good strategic plan with a few
agency strategic goals.
• For each goal, identify outcomes the agency
is committed to influence.
• Identify all of the program activities that
contribute to influencing each outcome.
• Develop an integrated plan and budget
structured around these goals, outcomes.
• Include summaries of bureau operations.
Alignment for Achieving Results
• Align program budget accounts with bureaus to
provide organizational accountability over time.
– Within bureaus, consider separate accounts for
mandatory vs. discretionary,
– Or for programs with very different purposes.
• When bureau outputs and outputs from other
bureaus contribute to the same agency outcome,
develop a formal coordinating mechanism.
– Managers of program activities should practice
continual informal coordination.
Charge Resources to the Place
Where They Are Used
All resources are financed in the budget, but not
consistently where they are used.
– Some are financed centrally by the agency or Treasury, or
cross-subsidized by other programs.
Budgeting and managing would be easier if:
– Resources were funded where used;
– Salaries, grants, transfers, credit subsidies, and other costs
were charged to programs;
– Pairs of accounts were used to charge the annual cost of
retiree benefits, cleanup, and capital use to programs.
Separate Program from Support
Accounts
Program Accounts:
• Departmental Oversight
• Inspectors General
• Programs that provide
services, goods, transfers,
grants, credit, regulation to
benefit the public
Support Accounts:
• Support Revolving
Funds of all kinds
• Retiree Benefit Funds
• Hazardous Substance
Cleanup Funds
• Capital Acquisition
Funds
Intra-governmental Support
Revolving Funds
• Franchise funds
• Working capital funds
• Fee-funded subaccounts
All required to be self-supporting at full cost
• Private contractors
Competition by performance-based contracts
Budgeting and Accounting: Key
Timing Differences
Accrual before budget:
• Retiree Benefits
• Hazardous Waste Clean-up
Budget before accrual:
• Capital Acquisition
• Inventory Acquisition
Grants, transfers, credit, salaries, and most other
outlays have similar budgetary and accrual timing.
Accruing Cost of
Retiree Benefits and Clean-up
• Employee Pensions:
Full accruing cost of CSRS
Accruing cost of small systems
• Retiree Health Benefits:
Accruing retiree health benefits
• Hazardous Substance Clean-up
from Federal operations
Capital Acquisition Funds
• CAFs would be budget accounts -- usually one per agency.
• They would be financing accounts only.
• Programs would request assets for use in their operations
subject to a capital planning process with review by the
agency head.
• Up-front BA would be borrowing authority; an annual capital
usage charge paid to the CAF could only be used for the
user’s share of the “mortgage” payment to Treasury.
Budgeting and Managing for Results
• Legislation to support this initiative:
– Full Funding of Federal Retiree Costs Act , Title II of
Managerial Flexibility Act of 2001.
– The Budgetary Cost and Performance Integration Act
of 2002.
• Other resources:
– OMB RMOs; Justine_F._Rodriguez@omb.eop.gov
– Agency web sites; US CFO Council
– GAO especially Results-Oriented Agency Budget
Practices, January 2002
Benefits for Management
• Staff, authority, resources, flexibility on the front line
serving citizens -- with rewards.
• Routine ability to seek performance-based support
services within government and from private
providers at best value.
• Good capital programming; annual user charges.
• Integrated IT for timely, accurate feedback on costs
and performance and e-Gov for delivery.
• Transparent reporting of achievements.