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OECD Conference:

Sequencing and Pacing of

Performance Budgeting Reforms

Dustin BrownDeputy Assistant Director for

ManagementOffice of Management and Budget,

Executive Office of the President, US

James Inder

Director, Financial Support and Training Office, Bureau of

Resource Management, US State Department, United States.

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OverviewOverview

1. Program budget classifications– How are program objectives decided?

2. Presenting performance information in budget.

– Government-Wide Efforts – Agency-Specific Efforts– Program Assessment Rating Tool

3. Organizational Steps to Improve Performance Budgeting

4. Future Opportunities

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Program Objectives Defined By:Program Objectives Defined By:

• Legislative Branch - Congress– Authorization Statute (periodic)– Appropriations Committee (annual)

• Executive Branch – the Administration– Office of Management and Budget– Agencies

• Grantees and Program Partners

• Other Stakeholders, Public

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Programs, Organizations and Programs, Organizations and Budget StructuresBudget Structures

• Typically budgets are program centric

• Agencies, Congress and OMB are used to it.

• Creating budgets by Strategic Goal, Long-Term Objectives or Problems will require a cultural and policy shift

• Horizontal problems with solutions by vertical programs would need this shift

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Agency Performance Planning Agency Performance Planning and Reportingand Reporting

(Government Performance Results Act, 1993)

• Strategic Plans– General goals and objectives, including outcome- related goals and objectives,

for the major agency functions for a period of not less than five years – A description of how the goals and objectives are to be achieved

• Annual Performance Plans – Establish performance indicators to be used in measuring or assessing the

relevant outputs, service levels, and outcomes of each program activity – Should be consistent with the agency's strategic plan – Performance Budgets result from integration of budget information and agency

annual performance plans.

• Annual Performance Reports– Review the success of achieving the performance goals of the fiscal year – Evaluate the performance plan for the current fiscal year relative to the

performance achieved toward the performance goals in the fiscal year covered by the report .

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Performance Budget Structure

• Agency Strategic Goals (with budget trends)

• Strategic Outcome Goals

• Program Outcome Goals

• Program Output Goals

• Program Efficiency Measures

• Program Marginal Cost Estimates

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Budget and Performance Integration• Agencies’ budget justifications are required to

include full cost of achieving program performance• Performance’s costs are interpreted as budgetary

resources• Changing to real costs would require a cultural

change• Program’s costs can be tracked trough cost

accounting or activity base costing• Budgetary resources can be linked to

expenditures via financial statements

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Budget and Performance Integration

• Agencies have developed models for determining program’s marginal cost

• Current emphasis is in the use of marginal/unit cost as part of program’s target setting

• Through the use of marginal, unit and full cost, budget and performance become better integrated

• Program assessments are used to inform agency, OMB, and Congressional decisions on resource allocations.

• Programs’ performance is only one of the factors for making budget decisions

• Government-wide budget contains little performance information

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Program AssessmentsProgram Assessments

• Evaluate programs in a systematic, consistent, and transparent manner.

• Focus on program improvements that can include specific actions related to management, legislative or regulatory improvements, and funding.

• Over the past six years, agencies and OMB have completed 1,017 program assessments including 234 reassessments.

• In 2002, the government could not show what results were being achieved by their programs and spending.

• After six years of completing program assessments, the federal government now has 6,516 performance measures including 1,367 efficiency measures.

• This is the first time in history that we have assembled government performance measures in one database and reported them transparently on www.ExpectMore.gov.

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Program AssessmentsProgram Assessments

50%

38%

29%

24%22%

19%17%

5%

5%

4%

4%3%

3%3%

15%

20%26%

28%28%

29%29%

24%

26%26% 29%

30% 31% 32%

6% 11% 15% 15% 17% 18% 19%

2002 (234) 2003 (407) 2004 (607) 2005 (793) 2006 (977) 2007 (1011) 2008 (1017)0

20%

40%

60%

80%

100%

Effective Moderately Effective Adequate

Ineffective Results Not Demonstrated

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How to Increase Usefulness of How to Increase Usefulness of Performance Plans and Reports?Performance Plans and Reports?

• The right information for the right audience

• Three tiers of performance information:– Strategic Plans, Annual Performance

Plans/Report (300-400 pages)– Citizen’s Report (25 pages)– Snapshot (2 pages)

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Dept. of Energy Citizen’s Report Summary

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Dept. of State Citizen’s Report Summary

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Mock-Up of Two-Page SnapshotMock-Up of Two-Page Snapshot

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Mock-Up of Two-Page SnapshotMock-Up of Two-Page Snapshot

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Presidential Executive Order 13450Improving Government Program Performance

November 13, 2007

• The EO makes it the official policy of the Federal Government to spend taxpayer dollars more effectively and efficiently each year.

• Established Performance Improvement Officers (PIOs) in each agency

• Established Performance Improvement Council (PIC)

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Performance Improvement Officers

• Continually Improve Program Goals

• Help Develop Program Improvement Plans

• Regularly Assess Program Performance

• Help Hold Managers Accountable for Results

• Effectively Communicate Agency Plans and Reports

• Increase Transparency

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Five Opportunities1. Active performance management

– Linking outcomes with operations (i.e. outcomes with outputs and strategies)

– Linking cost (not just budget) to performance, including marginal cost analysis.

2. Linking organization and individual performance

3. Focus on rigorous program impact evaluations

4. Developing crosscutting analysis

– See Community Development Ex. In Background

5. Greater transparency and accountability

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Background

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Illustrate Performance Budgeting:Illustrate Performance Budgeting:President’s Emergency Plan for AIDS Relief President’s Emergency Plan for AIDS Relief

(PEPFAR)(PEPFAR)

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Congress – Authorizing StatuteCongress – Authorizing Statute

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Congress - Appropriations CommitteeCongress - Appropriations Committee

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Department of State Budget FY 09Department of State Budget FY 09

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Agency Congressional JustificationAgency Congressional Justification

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Snapshot of Sample Grantee ReportSnapshot of Sample Grantee Report

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Performance and Accountability ReportPerformance and Accountability Report

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Inside the Citizen’s ReportInside the Citizen’s Report

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PART SummaryPART Summary

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PART Assessment DetailsPART Assessment Details

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Program Improvement ActionsProgram Improvement Actions

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Program Performance MeasuresProgram Performance Measures

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Program Performance MeasuresProgram Performance Measures

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Program Performance MeasuresProgram Performance Measures

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Program Performance MeasuresProgram Performance Measures

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USAspending.govUSAspending.gov

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Other StakeholdersOther Stakeholders• ONE Campaign tracks U.S. commitments

on global AIDS.

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Alternative StructureAlternative Structure

Arrange by Problems/Outcomes, not Agencies/Programs

Example from Community and Economic Development

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1. Define the Problem

1) High Poverty Rural areas 64 non-metropolitan counties have registered

poverty rates higher than 30 percent for each Census from 1960 to 2000.

2) High Poverty Urban Areas (vs. Metro Avg.) 2,886 high poverty neighborhoods in US cities with

8.4 million people living in them:• Homeownership rates are 33 percent lower.• Male employment rates are 19 percent lower.• Share without a high school degree is 24 percent higher.• Share of families headed by single females is 25 percent

higher.

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2. Identify Federal Programs Addressing Problem

• USDA– Community Facilities Direct Loan ($300M

loans)– Community Facilities Guaranteed Loan

($210M loan)– Community Facilities Grants ($17M)– Rural Business Enterprise Grants ($40M)– Intermediary Relending Program ($16M)– Rural EZs/ECs ($13M)

• Commerce– Econ Devt Admin ($320M)

• EPA– Brownfield Assessment/Cleanup ($121)

• HHS– CSBG ($495M)

• HUD– CDBG ($4,330M)– EZs ($15M)– CD Loans ($7M)– Brownfields ($7M)– Rural Housing and ED ($25M)– National CD Initiative ($30M)– Indian CD Block Grant ($72M)– HOME Investment ($2,084M)– Native American Housing BG ($647M)– Self-Help Homeownership ($65M)– FHA Asset Control Program

• Interior– Land and Water Conservation Fund ($94M)

• Regional Economic Development Agencies– Appalachian Regional Commission ($66M)– Denali Commission ($6M)– Delta Regional Authority ($2M)

• Small Business Administration– 504 Loans ($4,500M in loans)– New Market Venture Capital ($3M in loans)

• Treasury– CDFI ($43M)– Bank Enterprise Award ($5M)

• Neighborhood Reinvestment Corp ($115M)

• Tax Incentives (5-year revenue loss)– New Markets Tax Credit ($3,500 M)– EZ/Renewal Communities ($6,800 M)– Brownfield Tax Expensing ($1,000 M)– Work Opportunity Tax Credit ($270M)– Welfare to Work Tax Credit ($90M)

TOTAL: 12 agencies; 35 programs $16 billion (approps+loans+tax)

Note: funding data is from 2005.

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2.a. List of Federal “Designations” Addressing Problem

• Renewal Community• Empowerment Zones• Enterprise Community• HUD Neighborhood Revitalization Strategy Area• EDA Distressed Area• Appalachian Regional Commission• Delta Regional Authority• Denali Commission Areas (Alaska)• CDFI Investment Area• New Market Tax Credit Low-Income Community• BEA Distressed Community• Brownfield Tax Incentive Zone• SBA HUBZones• FHA Revitalization Areas• Rural Community Facility Areas• HUD Underserved Areas

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Tools/Categories

Housing & Infrastructure Economic Development Technical Assistance/Capacity Building

Individual/ Family Assistance

Grants Community Development Block Grant (CDBG) Economic Development Administration (EDA)Community Services Block Grant (CSBG)HUD Rural Housing and Economic Development (RHED)HUD Empowerment Zones (EZ) GrantsUSDA Enterprise Community/EZ GrantsHHS Rural Community FacilitiesHOME Investment PartnershipsNeighborhood Reinvestment Corp. (NRC)EPA Brownfield CleanupHUD Self-Help Homeownership HUD Native American Housing Block GrantsHUD Indian CDBGRegional Commissions

EDACDBGCSBGHUD EZ grantsRural Business Enterprise GrantsRural EZ/ECHUD BrownfieldsHHS Community and Economic Development (CED)HUD RHEDUSDA Economic Impact GrantsRegional CommissionsSBA HUB Zone (procurement preference)HUD Indian CDBG

HUD NCDICDBGCDFIHUD RHEDRural Business Opportunity GrantsUSDA Economic Impact GrantsBank Enterprise Award (BEA)CDFI Native InitiativesCDBG set-asidesNRC Regional Commissions

CSBGCDBG HHS CEDHUD EZ GrantsCDFICDFI NativeBEA

Loans USDA Community Facilities (inc. grants)USDA Intermediary Re-lendingHUD Section 108 loans

SBA 504 loansHUD Section 108 loans

Tax Incentives

New Markets Tax Credit (NMTC)Brownfields RemediationSingle-Family Homeownership (proposed in 2006)

NMTCEZ/EC/RC (wage credits and other incentives)Opportunity Zones (proposed in 2006)

3. What is the purpose of the programs?

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Program Purpose &

DesignStrategic Planning

Prog. Mgmt Results Total

All Federal Programs 85% 70% 79% 47% 63%

Community & Economic Development

Programs 69% 63% 82% 30% 52%

4. Where are the program strengths and weaknesses?

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GOAL

Performance System/Program

High Level Tracking Indicators

Program Outcome Measures Program Outputs

Examples of Community Development Metrics

Improve quality of life in a distressed area to make the target community self-sustaining

CDBG None None (recently developed)

Number of households assisted with housing assistanceNumber of jobs created or retained

EDA none Private sector dollars leveragedNumber of jobs created or retained in distressed communities.

Percentage of investments to areas of highest distress

USDA Community Facility

none none Millions of rural residents served by community facilities financed by RHSNumber of public safety, educational, and health care facilities financed

SBA 504 Certified Devt. Loan Program

none none Estimated number of jobs created or retainedNumber of 504 loans guaranteed

5. How do these programs measure success?

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Sample Agency Performance Management Best Practices

• Select limited number (20-30) of senior management measures for use in quarterly meetings (See Interior & EPA).

• Include field offices in some quarterly meetings (See HUD, EPA, SBA).

• PIOs ensure PMA Initiative Leads and other leaders (CHCOs, CAOs, CFOs, E-Gov,) meet regularly to focus on program improvement and ensure common standards across Department (See HUD, Labor, EPA).

• Align PART and APP goals (See DOE).

• Has a continuing effort to benchmark itself against other government and non-government entities on performance management processes (See NASA, SSA, DOE).

• Establish centralized evaluation unit (if one does not exist) and evaluation agenda (See State, USAID).

• Program goals are basis for senior manager appraisal goals (See EPA and OPM).

• Post regular updates of quarterly meetings including performance and improvement actions online and has links to performance results on its homepage (See OPM, EPA, DOE).