Measure by Measure
Why federal budgeting is a faith-based initiative.
BY JERRY ELLIG
Wednesday, April 11, 2007 12:01 a.m. EDT
"Create a culture that promotes a common identity, innovation, mutual respect, accountability and teamwork to achieve efficiencies, effectiveness and operational synergies."
This verbiage came from:
a) A buzz phrase generator developed by a member of the Public Health Service in 1968
b) A Dilbert cartoon
c) One federal agency's strategic goal in its Fiscal 2006 Performance and Accountability Report
If you guessed "c," you're not only right, you also know one reason some of the annual "Performance and Accountability Reports" produced by federal agencies tell us little about either performance or accountability.
Congress required these reports when it passed the bipartisan legislation called the Government Performance and Results Act of 1993. Each year these reports are supposed to define the outcomes the agencies seek to produce for citizens, identify measures that show whether the agencies are making progress on these outcomes, and disclose the results to Congress and the public.
Each year, a research team at the Mercatus Center at George Mason University evaluates the quality of the 24 reports that cover 99% of all federal spending. Reports receive a score between 1 and 5 on each of 12 criteria, with a score of 3 being "satisfactory."
There are some pretty good reports. This year, we had a virtually four-way tie for first place. Top honors went to the Department of Transportation, followed by the Departments of Labor and Veterans Affairs (tied for 2nd), and the State Department (4th). Other agencies can learn a lot from these reports.
But we can also learn a lot by examining the principal shortcomings in the less informative reports. This year's bottom four reports came from the Department of Health and Human Services (ranked 24th), the Office of Personnel Management (23rd), and the departments of Homeland Security and Housing and Urban Development (tied for 21st).
Reports that rank near the bottom tend to have three problems. First, their goals and measures focus more on activities and processes than outcomes. Second, they do not link the outcomes they achieved to the cost of achieving those outcomes. Third, they do not adequately explain shortcomings, management challenges and management's plans to solve these problems.
An agency's strategic goals should outline the principal outcomes the agency seeks to produce for the public. A wonderful culture that promotes efficiency, effectiveness and synergies is a means, not an end.
The Office of Personnel Management's report presents some good examples of process focus. OPM's strategic goals state that federal agencies will be "employers of choice" with "exemplary" human resource management practices; OPM will "have positive name recognition," as well as "constructive and productive relationships with external stakeholders." Key measures for fiscal 2006 included joining two human resources professional organizations and acknowledging receipt of congressional inquiries within 24 hours.
The Health and Human Services report did a better job of articulating outcome-oriented goals, but only one-third of the 35 performance measures in its report focus on outcomes. And fiscal year 2006 data for half of these measures are missing!
Citizens are entitled to know how much an agency accomplished-and they are also entitled to know how such each "success" costs. If Congress does not know how much it costs to produce various outcomes, then budgeting is a faith-based initiative.
The reports from our cellar-dwellers did not break costs down finely enough to make this kind of comparison possible. The financial tables in the Health and Human Services report divvy up costs by organizational components and budget functions, but not by outcomes. Homeland Security, Housing and Urban Development, and the Office of Personnel Management linked costs to strategic goals, but not to performance measures or outcomes.
Perhaps the most inexcusable deficiency is the failure to explain performance shortcomings, management challenges and plans for improvement. An agency's management has complete control over how it presents this information. Failure to do well on these criteria suggests that management is not really using performance information to manage the agency.
In some reports, it isn't even possible to identify performance shortfalls. HHS, for example, reported only one missed goal--but it reported on only 35 "key" measures, with data missing for half of them. The Office of Personnel Management reports that it achieved all of its 58 goals--but, as most of these goals are operational and activity measures, not genuine outcomes, it's difficult to judge actual performance.
In other cases, the discussion indicates agency management has made little progress on some serious, longstanding issues. HUD's inspector general, for example, notes that 85% of financial management vulnerabilities in the Federal Housing Administration are "delayed with no projected resolution date."
Perhaps because it's still struggling to integrate many disparate pieces, Homeland Security seems well aware of its management challenges. Its report clearly discloses performance shortfalls and describes some corrective actions. The leadoff transmittal letter from the secretary indicates a sincere commitment and effort to improve performance.
Each of these agencies' reports would have vaulted out of the cellar if it had simply achieved a "satisfactory" score on the attributes I've just discussed. OPM would have tied for 8th place, HUD and DHS would have tied for 11th, and even HHS would have finished 16th instead of last.
For agencies, the payoff from improved disclosure is big. For citizens and taxpayers, it's priceless.
Mr. Ellig is acting director of the Mercatus Center's Regulatory Studies Program.
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