GOVERNING WITH ACCOUNTABILITY

   With that plain spoken appeal, President Bush conveyed to his appointed leaders that he had chosen them not to mark time but to achieve real change.  His call demands measurable results that matter in the lives of the American people.

   This mandate gave birth to the President’s Management Agenda, launched in August 2001.  As the President has said, the five main challenges he selected represent “the most apparent deficiencies where the opportunity to improve is greatest.”  The Administration harbors no illusions that leaps forward will come easily.  Constant effort must be made to find ways to save and stretch taxpayer dollars, many through small improvements.  Breakthrough gains may come only after years of dedicated, even tedious, effort.  

   Because facing such challenges requires sustained effort, the President’s Management Agenda tracks agencies’ status against established Standards for Success as well as their progress toward meeting the standards.  Status and progress are rated using the familiar symbols of red, yellow, and green.  Grades are reported on the Executive Branch Scorecard at the end of this chapter.

   Since the scorecard’s unveiling in the 2003 Budget a year ago, 26 federal departments and agencies have been working to upgrade their ratings in those areas most in need of improvement.  The good news is that signs of progress outnumber distress signals, as 11 departments or agencies show 17 changes for the better, while two agencies slipped in the management of their finances.

   Although effort and management attention have been strong at virtually every agency, progress has been uneven.

   The Administration will follow closely how and whether agencies put their plans into effect.  When shortfalls in results become apparent, we will take corrective action.

   Some real management advances in the federal government have been racked up over the past year.  For example:

• Both the Department of the Treasury and the Social Security Administration (SSA) met—two years early—the goal to produce audited financial statements by November 15^th, just 45 days after the end of the year, compared with 151 days under previous administrations. 

• The Department of Health and Human Services (HHS) has reduced its personnel offices from 40 to seven, and will eventually move to just one.  This and other consolidations will allow HHS to deploy hundreds of employees to the front lines to deliver services directly to the American people. 

• The Department of Defense (DoD) reduced headquarters staff by 11 percent, reducing civilian employees by over 3,000 in just the last year. 

• Rules for conducting public-private competitions have been slashed by almost 12,000 words, cutting the time for conducting competitions from as much as four years to a maximum of just one year. 

• The Department of Veterans Affairs (VA) is opening up the activities of 52,000 employees to competition over the next five years, 25,000 of them in 2003 alone. 

• For the first time ever, auditors said the Department of Agriculture’s financial statements accurately reflect its financial status.

• Government agencies and employees are paying their credit card bills more quickly.  The federal government began 2002 with 10 percent of its individually billed travel accounts delinquent.  That amount has been reduced to six percent, bringing total delinquent dollars for individually billed accounts down by over $310 million.

• The number of government-owned vehicles will decline by more than 10,000, from 586,450 in 2001 to 576,039 in 2004. (See the motor vehicles table later in the chapter.)

• Citizens are now only three clicks from transactions and services on the redesigned website www.Firstgov.gov, which Yahoo!© rated one of the "world's 50 most incredibly useful websites."

• The GovBenefits.gov website provides, with a minimum of red tape, an online tool for citizens to learn about federal benefit programs for which they may qualify.

• Free Filing, debuting in 2003, will enable 60 percent of taxpaying Americans to prepare and file their taxes online and without cost.

   While progress to date is encouraging, agencies, by and large, have been moving to address more easily corrected problems.  The challenges will undoubtedly increase in 2003.  The coming year will be critical to sustaining the agenda’s momentum and achieving the goals envisioned by the President.

   A discussion of overall achievement in the five government-wide areas follows.  Individual agencies’ success or lack of it in the government-wide initiatives, as well the program specific initiatives are presented in subsequent chapters and in the Performance and Management Assessments volume.  As implementation continues, the focus will sharpen on actions that demonstrate real change.

Strategic Management of Human Capital

   The federal government faces a crisis in personnel management.  Federal agencies, for too long, have not managed themselves well enough to know whether they had the right people with the right skills to do their work.  Making the federal workforce challenges even greater, 40 percent of all federal workers and 71 percent of senior executives will be eligible to retire by 2005.

   The Strategic Management of Human Capital initiative gives agencies the tools they need to get the workers with the right skills to do the federal government’s work in the 21^st Century.  Over the past year, agencies have devoted considerable time to developing human capital plans to make their organizations more citizen-centered, ensure that their staff have the necessary skills to achieve the agency’s mission, and hold managers and employees accountable for results.

   The Human Capital initiative must now move beyond the planning stage.  While thoughtful analysis had to precede significant workforce restructuring, progress assessments in the coming year will be based on concrete action that agencies take, such as reforming their performance appraisal systems, developing succession plans, and streamlining their organizations toward more citizen- centered service.

   Several agencies already have taken action like DoD’s headquarters reorganization.  Other examples include:

• SSA has moved almost 300 employees from staff positions to front-line service delivery to provide better assistance to its customers. 

• The Department of Justice will pull its multiple performance appraisal systems together into a single system.

• The Departments of Energy, HHS, and Labor are among agencies that have placed all managers under a performance management system that links their assessments to meeting organizational goals.

   But it’s not easy.  Consider the Office of Personnel Management (OPM) Director Kay James’ effort to make senior government executives more accountable.  She learned that in 2000, federal agencies gave 85 percent of their senior executives the highest possible performance rating—an assertion that virtually everyone in Washington is way above average.  Despite James’ urging agencies to begin distinguishing the best performers from others, almost nothing changed.  In 2001, more than 83 percent of senior executives received the highest possible rating.  Five agencies gave 100 percent of their senior executives the highest rating and six more gave it to 90 percent of their senior ranks.  Such figures let the public know that federal managers are not yet serious about holding themselves or their staffs accountable.

   The government’s human capital problems derive in large part from our antiquated civil service laws, which were designed for a workforce that exists only in the history books.  In 1950 when the GS system was implemented, the largest concentration of employees was in clerical positions at the GS-3 through GS-5 pay level.  Today, over half of federal staff is at the GS-11 level or above, reflecting changes in business processes and skill requirements in the federal workforce over a period of decades.

   The rigidity of the current civil service system makes it difficult to attract and retain more highly skilled employees.  Hiring commonly takes six months or more, much of it spent by managers navigating around rules that overwhelm the process.  Pay and performance are generally unrelated.  Exceptional employees find themselves locked in “time-in-grade” pay prisons, as requirements dictate that performers stay at least one year at, say, a GS-12 level before moving, and then only as high as a GS-13.  Even worse, pay over the course of a federal career is heavily determined by the level at which a civil servant begins working. 

   Meanwhile, mediocre employees benefit, receiving the same pay raises as their harder working colleagues.  The federal government’s termination rate for poor performance is less than one-tenth of one percent.   

   For 2004, the Administration proposes to allow managers to increase pay beyond annual raises for high-performing employees and address other critical personnel needs.  A new fund of $500 million will be established at OPM for a stable of pay-for-performance plans. Rewarding top employees and those with unusually important skills is preferable to the traditional method of evenly spreading raises across the federal workforce regardless of performance or contribution.

Competitive Sourcing

   The Competitive Sourcing initiative, despite its enormous potential for savings to taxpayers, has registered the least progress so far.  All agencies are rated red for status. None has opened up a sufficient number of commercial activities to competition.  Because this initiative in many ways represents such a significant departure from the old way of running the government, it faces the greatest obstacles. 

   For example, the General Services Administration (GSA), an organization whose mission is to help federal agencies by performing what most would view to be commercial services—buying goods and services, acquiring and managing properties, and offering related support services—categorized only 44 percent of its staff as commercial. 

   On the other hand, DoD has traditionally led the government in putting its commercial activities up for competition.  The Department is currently conducting competitions on approximately 30,000 civilian positions, including cafeteria services, facilities maintenance, aircraft maintenance, and supply functions. Further progress rests on a strong commitment to start new competitions.

   The Department of Transportation’s (DOT's) Federal Aviation Administration (FAA) is moving forward on an ambitious competitive sourcing initiative on its Flight Service Stations, which provide a range of services available from private industry such as weather briefings for pilots.  In spite of the challenges that its nationwide, 58-location scope presents, the FAA is moving forward methodically to ensure that high-quality service continues to be provided to the American traveling public and that all potential service providers are dealt with fairly.  The Department of Energy also has started public-private competition on information technology and financial systems across the Department. 

   The competitive sourcing initiative also seeks to provide managers with additional options for providing services more cost-effectively or acquiring skills or service that may not be available in-house.

   One of the roadblocks holding back agencies is the long-standing process guiding public-private competitions.  As defined in OMB Circular A-76, the process has been unnecessarily bureaucratic and lengthy, sometimes taking up to four years.  To help agencies implement the Presidential initiative and building on the recommendations of the Commercial Activities Panel chaired by the Comptroller General, the Administration is simplifying the A-76 process.  The new process will be quicker and easier.  The number of pages of instructions has been slashed by almost 12,000 words, or more than 30 percent.  The timeframe for conducting competitions should be no more than a year in almost all cases.  Agencies will compete on a level playing field with the private sector and no longer have extended timeframes or other advantages over the private sector.

Improved Financial Performance

   The Improved Financial Performance initiative is enhancing the quality and timeliness of financial information so that it can be used to manage federal programs more effectively, while preventing waste, fraud, and abuse.  The financial management challenges facing the government are longstanding.  Progress in many cases depends on installing new computer systems that in some cases will require several years.  Making progress will be hard.

   One of the major changes the Administration instituted at the outset of this initiative was to accelerate the due date of agencies’ financial statements.  If financial information is only available five months after the fiscal year ends, it is of limited use to anyone.  So, as a first step, 2002 financial statements were due February 1, 2003, or nearly a month earlier than the statutory due date of February 28^th. 

   The Administration also has required agencies to produce interim financial statements to establish the practice of preparing financial statements on a regular basis.  All agencies provided six-month interim 2002 financial statements by the June 30 deadline.  We have required them to combine their financial statements with their performance reports.  Information about agency finances and program performance in one document will be available this year. 

   Soon, bigger tests will come.  For 2004, agencies will be required to produce audited financial statements by November 15^th.  This acceleration means that agencies will no longer be able to use manual processes to prepare statements once a year.  They will need to change the way they collect and compile financial information so that it will be more timely, reliable, and useful.  The Department of the Treasury and SSA’s production of audited financial statements within 45 days of the year’s close prove that these goals are within reach.

   Challenges, though, have grown more demanding.  This initiative was launched in an environment of enhanced scrutiny of financial management practices everywhere.  The credibility of some financial auditors was appropriately called into question, causing entities and their auditors to tighten the standards they applied in their audits.  It was in this environment that new auditors of the National Aeronautics and Space Administration (NASA) downgraded their opinion of the agency's financial statements.  This resulted in the deterioration of NASA’s status rating from yellow to red, but indications are that NASA will be able to demonstrate substantial improvement in its 2002 audited financial statements.

    Reducing Erroneous Payments

   The Administration has launched a major effort to reduce erroneous payments—in other words, payments the government makes in error.  In most instances, they are overpayments.  But in all cases, taxpayers are shortchanged.

   For the first time ever, agencies were required to report the extent of erroneous payments made in their major benefit programs.  Initially, just a few agencies voluntarily reported erroneous payments in their annual financial statements.  Now, 15 agencies have estimated their erroneous payment rates.  But programs like Medicaid and School Lunch will have to design from scratch a methodology to examine the integrity of program payments. 

   During the past year, the Administration expended considerable effort to prevent a further erosion of controls over payments from federal programs.  The Department of Agriculture’s Food and Nutrition Service, for instance, pursued cash sanctions against states with above-average error rates. During the Congress’ recent reauthorization of the Food Stamp Quality Control program, attempts were made to dilute the accountability of states and erode the federal government’s ability to maintain fiscal accountability.  The Administration opposed and will continue to oppose efforts to weaken financial controls and program integrity.  

   Congress endorsed the President’s effort to reduce erroneous payments when it passed the Erroneous Payments Information Act of 2002.  This bill requires an estimate of the extent of erroneous payments from all federal programs.  Program-wide erroneous payment estimates can only help stem the loss to the federal government in waste, fraud, and abuse—too much of which is taking place without an accounting.

    Strengthening Asset Management

   In another area of deficiency, the Administration will monitor agency asset management practices as part of the Improved Financial Performance initiative.  The federal government’s asset management practices have been shown to be particularly weak. 

   According to its financial statements, the federal government owns $307 billion in property, plant, and equipment, $209 billion in loans receivable, and $184 billion in inventories and related property.  But the assets reported on the balance sheet are only a small portion of the assets actually owned by the federal government.  DoD property and the government’s immense land holdings do not show up on government financial statements.  For instance, the federal government holds title to 28 percent of the United States’ entire land mass.  It owns sites and structures, monuments, memorials, cemeteries, as well as the items in its museums and libraries, including major works of art and historical documents. 

   Agency management of vehicle fleets will also be monitored as part of agency asset management practices.  The government owns more than half a million cars and trucks and spends over $2 billion annually to operate them.  In April 2002, the Administration asked agencies to take a closer look at their motor vehicle fleets and to report any planned reductions and cheaper leasing arrangements by the end of the fiscal year.  The military agencies and several civilian agencies, notably the Departments of Energy, HHS, the Interior, and GSA projected reductions ranging from five percent to 15 percent.  These reductions were offset, however, by equally significant increases in agencies with expanded law enforcement and security-related missions.  For example, the new bureaus within the DHS estimated a 21-percent rise in their vehicle fleets, from 28,502 to 34,460 vehicles. Justice projected that its fleet would increase nine percent, from 31,981 vehicles in 2001 to 34,847 in 2004. 

   The Administration will demand that assets be justified and accounted for and that plans be made for purchases, management, maintenance, and operation.

Expanded Electronic Government

   The Internet and the electronic age have made more information accessible at the touch of a button.  Government information should be at the forefront of this new revolution.   That’s where the combination of the Internet and E-Gov come in.  Twenty-four high-payoff E-Government initiatives that will maximize government productivity have been launched.  Many are already on line and serving citizens.  They include:   

• Recreation.gov allows people to log onto the Internet to find information about publicly owned federal, as well as state and local recreation sites. 

• Business.gov provides businesses access to information about laws and regulations where they can use a series of interactive tools to help them understand how those laws and regulations apply to their business.

• The GoLearn.Gov portal provides online training for tens of thousands of government employees for pennies per course, teaching thousands of government workers for a fraction of traditional costs.

• The E-Grants initiative is creating a single electronic grant application that allows applicants to enter identifying information once—like a single, unique identifier—which would untangle the process for them and the agencies that track them.   

   Analysis reveals that few federal information technology investments have significantly improved service to the taxpayer.  Many major information technology projects do not meet cost, schedule, and performance goals.  To address this, the Administration is scrutinizing funding of projects that are “at risk” of failing.  Those projects that failed this trio of tests either were not recommended for support for 2004 or will remain on an “at risk” list.  Many of those projects either didn't adequately address security risks or make business sense.

   OMB is now requiring agencies to submit business cases for over $34 billion in proposed spending, up from less than $20 billion a year ago.  For those projects that made an adequate case, the quality of justifications has gone up.  (Total Information Technology (IT) spending across the government is now almost $60 billion.)  

   Implementation of the Government Information Security Reform Act has provided a baseline for agency IT security performance, an audit trail of what has been secured, and the identification of what still needs to be done.  Because too many agencies propose funding for IT projects without adequately addressing important security issues, the budget process is being used to redirect funding to address these critical security issues.

   To succeed in making the government a modern, electronic enterprise, we must continue to address these chronic problems.  The passage of the E-Government Act of 2002 codifies the Office of Electronic Government, which was set up in 2001 to spearhead the Administration’s efforts in this area.  It also creates an E-Gov fund to help leverage agency investments in cross agency initiatives and promotes the Administration’s efforts to ensure computer security.  The bill enhances the Administration’s ongoing support for specific initiatives like on-line rulemaking, which allows interested parties to comment on draft regulations over the Internet.

Budget and Performance Integration

   The Budget and Performance Integration Initiative follows through on the President’s commitment to build a results-oriented government that funds what works and reforms or ends failing federal programs, redirecting or recapturing their funding.  This initiative has shown the most improvement since September 2001.  While no green status scores have been achieved yet, gains in a half-dozen departments and agencies can point to concrete results to justify why programs deserve additional resources.    

   For example, DOT’s Federal Highway Administration has justified additional budget resources by linking highway safety gains to planned use of rumble strips and reflectors to prevent run-off-the-road crashes, which kill thousands of motorists every year.

   The Department of Labor shows the full cost of the many training programs it funds; the sources of federal funding; and the extent to which participants get jobs, keep them, and increase their earnings.  Presentations like these help policymakers get results for citizens, shifting funds to programs that work best and away from those that do not. 

   Many other agencies are also working to present their budgets with information telling how well they’re doing.  However, program performance information is still often unclear or not measured at all.  And when programs are measured, more often than not there is little or no connection between performance data and budget decisions.  The Administration is using the Program Assessment Rating Tool (PART) to correct this shortcoming. 

   With the PART, this year OMB along with its colleagues in the agencies reviewed about 20 percent of all federal funding, or some 234 programs.  The process of completing the evaluations was sometimes contentious.  Nonetheless, it generated a great deal of constructive dialogue about program strengths and weaknesses, as well as the importance of demonstrating program results.  Only about half of federal programs evaluated were able to demonstrate results; as a consequence, the detailed findings from the assessments, rather than the overall rating, helped inform budget decisions.  

   Another key aspect of this initiative has been the development of a set of common performance measures for programs that deliver the same service.  Dozens of programs offer job training services in one form or another.  The question is:  Which ones work well?  But even more importantly, which ones help people land and keep solid jobs?  Common measure data will allow for comparisons that may reveal opportunities for improvement and increased efficiency. While this first year of efforts focused on six areas—housing, job training, wildfire management, flood mitigation, health, and environment—it will be expanded in the coming year.

   Discussions of these specific initiatives can be found in the chapters of agencies chosen to lead each effort.  Highlights on how agencies fared in the President’s Management Agenda can be located near the close of their respective chapters.  A compendium of performance information, including data on PART evaluations conducted this year, is contained in the Performance and Management Assessments volume.

The Scorecard

   The Executive Branch Management Scorecard that follows is the device the Administration uses to track agencies' efforts in implementing the agenda.  Throughout the year, agencies are monitored and ratings are given at the end of each quarter on each initiative.  Status ratings are evaluated against the standards for success included in the Performance and Management Assessments volume.  The standards were developed in consultation with federal agencies through the President’s Management Council, the group of agency leaders charged by the President to implement the agenda.  Progress ratings assess the agencies’ work in developing viable, ambitious plans for achieving the standards and their efforts to implement the plans.

   Since July 2002, ratings for each quarter have been posted on the Results.gov website.  The scorecard published here includes ratings for the quarter that ended December 31, 2002, and shows changes in status since the Administration conducted the first evaluation of September 30, 2001.  Since then, a single green light has been added to the one that appeared on the original scorecard.  And the second green shows up in the agency that earned the first—the National Science Foundation (NSF).  This scorecard includes status scores only for DHS, due to its newness. The second scorecard reports progress on the nine program initiatives. 

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