OECD Conference: Sequencing and Pacing of Performance Budgeting Reforms Dustin Brown Deputy Assistant Director for Management Office 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.

Overview Program budget classifications How are program objectives decided? Presenting performance information in budget. Government-Wide Efforts Agency-Specific Efforts Program Assessment Rating Tool Organizational Steps to Improve Performance Budgeting Future Opportunities

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

Programs, Organizations and Budget 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

Agency Performance Planning and 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 .

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

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

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

Program 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.

Program Assessments

How to Increase Usefulness of 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)

Dept. of Energy Citizen’s Report Summary

Dept. of State Citizen’s Report Summary

Mock-Up of Two-Page Snapshot

Mock-Up of Two-Page Snapshot

Presidential Executive Order 13450 Improving 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)

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

Five Opportunities 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. Linking organization and individual performance Focus on rigorous program impact evaluations Developing crosscutting analysis See Community Development Ex. In Background Greater transparency and accountability

Background

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

Congress – Authorizing Statute

Congress - Appropriations Committee

Department of State Budget FY 09

Agency Congressional Justification

Snapshot of Sample Grantee Report

Performance and Accountability Report

Inside the Citizen’s Report

PART Summary

PART Assessment Details

Program Improvement Actions

Program Performance Measures

Program Performance Measures

Program Performance Measures

Program Performance Measures

USAspending.gov

Other Stakeholders ONE Campaign tracks U.S. commitments on global AIDS.

Alternative Structure Arrange by Problems/Outcomes, not Agencies/Programs Example from Community and Economic Development

1. Define the Problem High Poverty Rural areas 64 non-metropolitan counties have registered poverty rates higher than 30 percent for each Census from 1960 to 2000. 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.

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.

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

Housing & Infrastructure Individual/ Family Assistance 3. What is the purpose of the programs? 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) Grants USDA Enterprise Community/EZ Grants HHS Rural Community Facilities HOME Investment Partnerships Neighborhood Reinvestment Corp. (NRC) EPA Brownfield Cleanup HUD Self-Help Homeownership HUD Native American Housing Block Grants HUD Indian CDBG Regional Commissions EDA CDBG CSBG HUD EZ grants Rural Business Enterprise Grants Rural EZ/EC HUD Brownfields HHS Community and Economic Development (CED) HUD RHED USDA Economic Impact Grants SBA HUB Zone (procurement preference) HUD NCDI CDFI Rural Business Opportunity Grants Bank Enterprise Award (BEA) CDFI Native Initiatives CDBG set-asides NRC HHS CED HUD EZ Grants CDFI Native BEA Loans USDA Community Facilities (inc. grants) USDA Intermediary Re-lending HUD Section 108 loans SBA 504 loans Tax Incentives New Markets Tax Credit (NMTC) Brownfields Remediation Single-Family Homeownership (proposed in 2006) NMTC EZ/EC/RC (wage credits and other incentives) Opportunity Zones (proposed in 2006)

Program Purpose & Design Community & Economic Development Programs 4. Where are the program strengths and weaknesses? Program Purpose & Design Strategic Planning Prog. Mgmt Results Total All Federal Programs 85% 70% 79% 47% 63% Community & Economic Development Programs 69% 82% 30% 52%

Examples of Community Development Metrics 5. How do these programs measure success? 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 assistance Number of jobs created or retained EDA none Private sector dollars leveraged Number of jobs created or retained in distressed communities. Percentage of investments to areas of highest distress USDA Community Facility Millions of rural residents served by community facilities financed by RHS Number of public safety, educational, and health care facilities financed SBA 504 Certified Devt. Loan Program Estimated number of jobs created or retained Number of 504 loans guaranteed

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).