oversight

Observations on the Department of the Treasury's Fiscal Year 2000 Performance Plan

Published by the Government Accountability Office on 1999-07-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office                                                           General Government Division
Washington, D.C. 20548



                 B-282765

                 July 20, 1999

                 The Honorable Dick Armey
                 Majority Leader
                 House of Representatives

                 The Honorable Dan Burton
                 Chairman, Committee on Government Reform
                 House of Representatives

                 The Honorable Fred Thompson
                 Chairman, Committee on Governmental Affairs
                 United States Senate

                 Subject: Observations on the Department of the Treasury's Fiscal Year 2000 Performance
                 Plan

                 As you requested, we have reviewed and evaluated the fiscal year 2000 performance plans for
                 the 24 Chief Financial Officers (CFO) Act agencies that were submitted to Congress as
                 required by the Government Performance and Results Act of 1993 (Results Act). Enclosure I
                 to this letter provides our observations on the fiscal year 2000 performance plan for the
                 Department of the Treasury. Enclosure II lists the GAO management challenges and the
                 Treasury Inspector General’s areas of concern that the agency faces and the applicable goals
                 and measures in the fiscal year 2000 annual performance plan.

                 Our objectives were to (1) assess the usefulness of the agency’s plan for decisionmaking and
                 (2) identify the degree of improvement the agency’s fiscal year 2000 performance plan
                 represents over the fiscal year 1999 plan. Our observations were generally based on the
                 requirements of the Results Act, guidance to agencies from the Office of Management and
                 Budget (OMB) for developing the plan (OMB Circular A-11, Part 2), our previous reports and
                 knowledge of Treasury’s operations and programs, and our observations on Treasury’s fiscal
                 year 1999 performance plan. Our summary report on the CFO Act agencies’ fiscal year 2000
                                                                                                   1
                 plans contains a complete discussion of our objectives, scope, and methodology.

                 As agreed, unless you announce the contents of this letter earlier, we plan no further
                 distribution until 30 days from the date of the letter. This report was prepared under the

                 1
                  Managing for Results: Opportunities for Continued Improvements in Agencies’ Performance Plans (GAO/GGD/AIMD-99-215,
                 July 20, 1999).




                 Page 1                                              GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
B-282765


direction of Charlie W. Daniel, with assistance of Isidro L. Gomez and John M. Lord. Please
contact Mr. Daniel or me on (202) 512-9110 if you or your staff have any questions concerning
this report.




Cornelia M. Ashby
Associate Director, Tax Policy and
Administration Issues

Enclosures - 2




Page 2                                  GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I

Observations on the Department of
the Treasury's Performance Plan for
Fiscal Year 2000
Treasury’s fiscal year 2000 performance plan, which is integrated with its budget justification,
provides a limited picture of intended performance across the Department, a limited
discussion of the strategies and resources it will use to achieve its goals, and limited
confidence that its performance information will be credible. Figure 1 highlights the plan’s
major strengths and key weaknesses.

Figure 1: Major Strengths and Key Weaknesses of Fiscal Year 2000 Performance Plan

Major Strengths
• Provides linkages between the annual performance goals and measures and the strategic
goals in the bureau’s offices’ strategic plans,
• Shows trend data for past performance,
• Includes information on resources to achieve goals,
• Includes a section on departmentwide systems and capital investments.

Key Weaknesses
• Does not consistently identify programs that contributed to the same or similar results,
• Does not consistently discuss specific strategies for achieving goals,
• Does not adequately discuss procedures for verifying and validating performance data,
• Does not include performance goals to address all significant management challenges and
high-risk areas.

Treasury’s fiscal year 2000 performance plan recognizes the weaknesses that we identified in
our assessment of the fiscal year 1999 performance plan and makes specific commitments or
shows actual attempts to address those weaknesses. However, real progress is not yet
evident. In reviewing Treasury’s fiscal year 2000 performance plan, we observed that the
weaknesses in the fiscal year 1999 plan generally applied to the fiscal year 2000 plan as well.
For example, some measures in both plans were insufficient to adequately gauge progress
toward meeting performance goals. On the positive side, unlike the fiscal year 1999 plan, the
fiscal year 2000 plan has a section that briefly describes departmentwide systems and capital
investment programs. The fiscal year 2000 plan also uses standard descriptions for assessing
data accuracy across the Department.

Treasury’s Performance Plan Provides a Limited Picture of
Intended Performance Across the Department
Treasury’s fiscal year 2000 performance plan provides a limited picture of intended
performance across the Department. This is because some measures were insufficient to
adequately gauge progress toward meeting performance goals; intermediate goals and
measures were not used to convey annual results for multiyear goals; and performance goals
and measures for mission-critical management challenges and high-risk areas were generally




Page 3                                   GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




not included. In addition, the section of the plan on IRS, which accounts for about two-thirds
of the Department’s budget for fiscal year 2000, did not link performance measures with
goals.

Insufficient Measures
In some instances, Treasury’s plan contained measures that were insufficient to adequately
gauge the Department’s progress toward meeting its performance goals. FMS, for example,
lists as a goal that by 2002, it plans to ensure that the federal government serves as a model
for financial management. The measures for this goal include the “percentage of agency
reports for the consolidated financial statements [that are] processed by FMS within the
established range” and “percentage of days [that] the Daily Treasury Statement is released on
time.” While this goal supports FMS’ mission to improve the quality of government financial
management, the related performance measures appear to be insufficient to provide an
adequate basis for assessing FMS’ progress toward achieving this goal.

OCC’s plan provides another illustration of measures that are not clearly related to the goals.
The plan shows a set of six performance goals pertaining to administrative work processes,
infrastructure, information, and information technology that has just one measure, which is,
by December 31, 1999, design and implement a data warehouse with data from three
departments. Among the goals related to this measure are “(1) administrative systems are
reengineered and integrated; (2) budgeting and planning processes are integrated; and (3)
internal communication means, methods, and strategies are evaluated.” Although these goals
may be related to the measure, it is not clear how the implementation of a data warehouse
alone will lead to their accomplishment. Ideally, OCC should have produced measures for
each performance goal that demonstrate results. Throughout OCC’s plan, we noted many
instances in which specific measures for individual performance goals were often not
identified. We are aware that OCC is still in the process of developing and refining its
measures. In a March 30, 1999, letter that OCC sent to Treasury along with an update of its
plan, OCC stated that final adjustments to the 1999 measures are anticipated to be made in
the June-July 1999 time frame.

One important way that IRS helps taxpayers understand and meet their tax responsibilities is
through toll-free telephone assistance. In its plan, IRS included “toll-free level of access” as a
servicewide performance measure for this important service. However, this measure does not
adequately assess IRS’ performance in providing telephone service to taxpayers. IRS’ plan
contains another measure—-level of service—-that would be a more appropriate indicator of
how well taxpayers are being served through toll-free telephone assistance. The only
difference between these two measures, and the reason we favor level of service, is the way
in which abandoned calls are handled in computing the measures. Level of access considers
abandoned calls as successful call attempts while level of service considers them
unsuccessful. However, because level of access indicates the extent to which taxpayers are




Page 4                                          GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




able to access IRS’ systems, it does not indicate the extent to which taxpayers are successful
in talking to someone in IRS.

Parts of Treasury’s plan—IRS’ information in particular—state that many measures are to be
determined or were baseline measures in fiscal year 1999. In these instances, the plan cannot
convey a clear picture of intended performance because the measures themselves are not yet
developed or are baselines. IRS’ examination activity is a case in point. Of its eight measures,
all but one was a baseline for fiscal year 1999, and their target levels for fiscal year 2000 are to
be determined. Treasury officials acknowledged that the Department’s performance plan
contains many new and baseline measures. They said that the new measures are an
improvement over the former measures, and as a result, their future performance plans
should better reflect intended results across the Department.

Lack of Intermediate Measures
Intermediate measures should be included in performance plans to convey the results for
multiyear goals. IRS provides an example of a multiyear goal that should be included in the
plan but was not. The plan states that the IRS Restructuring and Reform Act of 1998 requires
that 80 percent of all tax and information returns that IRS processes be electronically filed by
year 2007. IRS should have discussed this mandate in its plan along with intermediate
measures to show its incremental progress toward achieving this goal. Congress will likely
expect to receive information relating to IRS’ progress in this area and IRS has requested
funding for this goal. Although a number of annual measures in IRS’ plan relate to specific
types of electronic filings, they are not aggregated to the servicewide performance level and
are not related to achieving a specific performance goal.

Mission-Critical Management Challenges Are Not Fully Addressed
The value of Treasury’s performance plan could be enhanced by including performance goals
for a brief description of how mission-critical management challenges, including high-risk
areas, will be addressed. Critical management challenges and high-risk areas may include
weaknesses in internal management processes and systems and areas identified by
administrators as being priority management objectives. As in the fiscal year 1999 plan,
Treasury’s fiscal year 2000 performance plan briefly acknowledges some of the major
management challenges and high-risk areas but does not include performance goals for all of
them. Enclosure II, table I.1 shows in detail how Treasury’s fiscal year 2000 performance plan
addresses its critical management challenges.




Page 5                                          GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




IRS Did Not Link Performance Measures With Goals
The Act requires that performance plans have objective, quantifiable, and measurable
performance goals to define the level of performance to be achieved and that performance
measures be established for assessing the progress toward achieving those goals. While the
other sections of Treasury’s performance plan we reviewed linked performance goals and
measures, the IRS section of the plan did not. Instead, IRS simply lists measures and
indicators for each of its budget activities. Measures and indicators should relate to the
achievement of specific goals to better define expected performance and show the level of
results that is expected to be achieved during the fiscal year.

It is important to note that Treasury’s plan acknowledges that IRS is currently undergoing a
major reorganization and restructuring as required by the IRS Restructuring and Reform Act
of 1998. As a result, IRS is revising its strategic plan, and an interim update to its strategic
plan was published as part of the fiscal year 2000 performance plan. The interim update to the
strategic plan states that IRS has a new mission statement and new performance goals. The
performance plan includes a table showing IRS’ new mission statement and performance
goals with the servicewide performance measures. However, except for this table, IRS’
performance goals are not directly associated with its budget activities and measures. This
omission makes the IRS plan fall short in illustrating how it is addressing program
performance and implementing a results-orientation.

Comparison to Fiscal Year 1999 Plan
Treasury’s fiscal year 2000 performance plan is similar to its fiscal year 1999 performance
plan in format and content. Treasury’s fiscal year 2000 plan recognizes the weaknesses that
we identified in our assessment of its fiscal year 1999 plan as it relates to providing a clear
picture of intended performance across the Department and makes specific commitments or
shows actual attempts to address those weaknesses. However, real progress is not yet
evident.

In reviewing the fiscal year 1999 plan, we observed that some of Treasury’s performance
goals were not measurable and the quality of some measures could be improved so that they
directly relate to the performance goals. Also, the plan would have been more informative to
Congress and other stakeholders if it included performance goals to address the significant
management challenges and high-risk areas the Department faces. These observations also
apply to Treasury’s fiscal year 2000 performance plan.




Page 6                                          GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




Treasury’s Performance Plan Provides a Limited Discussion of
the Strategies and Resources It Plans to Use to Achieve Its
Goals
Treasury’s performance plan provides information that discusses some of the related
strategies for achieving its goals and describes the resources it plans to use to achieve its
goals. The plan is integrated with the budget justification, and such resource information
such as staffing levels and budgetary amounts was usually shown for each program activity
and, except for the IRS section, its related set of performance goals. The plan would be even
more informative to stakeholders if the plan had also related strategies to performance goals,
including a brief discussion of strategies that address crosscutting activities. Even though
IRS plans to implement phases of its restructuring in fiscal year 2000, the plan does not
specifically describe how strategies may be affected or how resources may be reallocated as
restructuring changes occur.

Information on Resources
With a few exceptions, Treasury’s plan adequately describes resources by relating requested
funding levels—staff and budgetary dollars—to performance goals. When provided, this
information shows that performance goals cover the program activities in Treasury’s budget
request, presents stakeholders with other information on the requested funding levels
associated with achieving performance goals and identifies where the funding was included
                                                    1
in the structure of the Department’s budget request. The plan contains trend information
beginning with fiscal year 1996 and includes proposed amounts for fiscal year 2000. By
relating its budget program activities to performance goals and including trend data and
target levels of performance, Treasury’s plan shows budget amounts that correspond with the
performance reported as actually achieved for past years as well as expected for the future
year.

The exceptions we noted were primarily in the OTS plan, which provides very limited
budgetary information. The plan states that budgetary information for calendar year 1998 is
not available and information for 1999 is to be determined. According to Treasury officials,
such limitations relate to the fact that OTS operates on a calendar rather than a fiscal year. As
such, OTS’ operating year ends 3 months later than the fiscal year under which most other
parts of the Department operate. OTS’s plan does show the actual dollars and staff levels for
1996 and 1997 as well as planned levels for 1998.


1
 IRS links performance measures, but not performance goals, with budget program activities and measures. IRS’ resources are
shown by budget activities. OCC shows staffing and budgetary funding levels by strategic goals.




Page 7                                                GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




Another important dimension of program performance is cost. In drafting the Results Act,
Congress expected that agencies, whenever possible, would develop performance measures
that correlate the level of program activity and program costs. For those parts of Treasury’s
performance plan that we reviewed, we found that it did not include either the full cost of
programs or cost-based performance measures. However, Customs had several goals to
develop cost-based measures. Among them are goals to develop baseline data for per unit
cost of trade compliance and per unit cost of its passenger processing measure.

In our audit of IRS’ fiscal year 1998 financial statements, we reported that IRS does not
consistently capture costs to permit it to routinely prepare reliable cost-based performance
measures for inclusion in its annual performance plan as required by the Results Act. IRS
does not provide measures that capture per unit cost for IRS to perform the basic tasks
entailed in its mission. IRS’ submission processing budget activity illustrates this point. This
activity has 12 measures related to volume processed, timeliness, and accuracy. However,
there were no cost-based performance measures relative to the effective and efficient use of
budgetary resources. For decisionmakers to gain an understanding of how efficiently IRS is
using taxpayer dollars, IRS needs to be financially accountable by providing reliable cost-
based performance measures.

Information on Strategies
Treasury’s plan did not consistently discuss strategies for achieving goals, including
coordination with other agencies that play a role in achieving the goals. Both Customs‘ and
IRS’ plans state that new and expanded information technology is needed to support their
goals. Although the plans discuss information technology strategies and programs that are
proposed for fiscal year 2000, there is no explanation of how these strategies and programs
are expected to help achieve the goals. OCC’s plan contains a section describing the
strategies to achieve its goals. However, this information is not linked to any specific goals.
OCC’s plan could better convey its strategies by relating information on strategies and
resources to its performance goals.

OTS’ plan provides a fragmented discussion of strategies and resources the agency will use to
achieve its performance goals. Strategies and resources are addressed in two different parts
of the plan. In the front section, strategies are discussed for each strategic goal, along with
1999 initiatives that also include strategies as defined by the Results Act. In another section of
the plan, OTS describes organizational structure, operational processes, skills, and
technologies that will be used to achieve its goals. These are similar to many of the strategies
and initiatives described in the front of the plan. The OTS plan would be more improved if it
consolidated the discussion of strategies and resources and more clearly linked performance
goals.




Page 8                                          GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




At times, the achievement of performance goals is dependent on cooperation or coordination
with external groups and partnerships with others. Performance plans would be enhanced by
including a brief statement that discloses how external factors and coordination with others
are being leveraged or mitigated to ensure the successful accomplishment of the goal. This is
an area where Treasury’s plan showed inconsistencies. The following examples illustrate this
point.

Coordination efforts were briefly discussed in several sections of Treasury’s plan.

• The Departmental Offices’ portion of the plan states that its annual performance goals are
met through cooperative efforts among Treasury bureaus, other agencies and businesses, and
the international community. In addition to naming some of the groups it coordinated with,
the plan identifies specific measures and targets that were coordinated with others.

• Customs mentioned that it coordinated with the Office of National Drug Control Policy and
the International Crime Control Strategy to develop its drug enforcement goals.

However, coordination efforts were not discussed in other parts of the plan.

• The Bureau of Public Debt’s section of Treasury’s plan lists the goal of meeting the
borrowing needs of the federal government and identifies conducting marketable securities
auctions without error, 100 percent of the time, as a performance measure associated with
this goal. The Federal Reserve Banks are key to ensuring that auctions of marketable
securities are conducted without error. The Federal Reserve Banks receive and process bids
for bills, notes, and bonds and function as the frontline reviewer of all bids received from the
public in such auctions. However, the bureau does not discuss the coordination or monitoring
efforts that it must undertake to ensure that the Federal Reserve Banks are properly
processing bids submitted in marketable security auctions. Also, the plan does not discuss
performance measures that it or the Federal Reserve Banks will use to measure the
performance of the Banks in this area. Without such efforts, it is unclear how the bureau
could achieve the performance measure of error-free auctions.

• IRS plays a role in administering tax code provisions pertaining to several billions of dollars
in tax expenditures, such as the earned income tax credit, the low-income housing credit, and
the research credit. However, there is no discussion of these crosscutting programs in
Treasury’s plan IRS also shares responsibilities with other agencies, such as the Social
Security Administration (SSA) in processing and reconciling information on employee wages
and social security benefits. The plan does not include any information on planned
coordination with SSA or other agencies.




Page 9                                          GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




Other Factors Affecting Resources and Strategies
Other organizational issues, such as spending on major capital investments, specifically
information technology investments, and implementing a major reorganization, can affect
resource utilization and the strategies an agency plans to use in achieving near-term and
multiyear goals.

Treasury’s plan does address the major reorganization that is taking place at IRS in several
sections. However, the plan does not fully address the ramifications of this reorganization on
its budget justification and performance plan for fiscal year 2000, even though IRS has plans
to implement phases of the reorganization in fiscal year 2000. The plan does not specifically
describe those parts of the reorganization that are scheduled to be implemented in fiscal year
2000, how strategies may be affected, or how resources may be reallocated.

Treasury’s current plan contains a separate section that briefly describes departmentwide
systems and capital investment programs. A number of recent efforts, including legislation
and initiatives by the Office of Management and Budget, now require that agencies’
information technology plans and capital decisionmaking be linked to agencies’ missions and
programmatic goals. The information in Treasury’s plan makes reference to projects such as
completing all of the Department’s year 2000 conversion efforts, which is a high-risk area for
the federal government, and modernizing the Department’s human resources systems. This
section of the plan, which briefly discusses how the projects are to contribute to the
efficiency and effectiveness of Treasury’s operations, would be more informative if it
included summary information on the performance goals that the information technology and
capital investment projects support.

Comparison to Fiscal Year 1999 Plan
The fiscal year 2000 performance plan indicates some degree of progress in addressing the
weaknesses that we identified in our assessment of the fiscal year 1999 performance plan as
it relates to providing a specific discussion of strategies and resources the agency will use to
achieve performance goals. In reviewing the fiscal year 1999 plan, we observed that the
portrayal of strategies was inadequate including descriptions of how strategies were
coordinated with others to help ensure that goals could be achieved. These same
observations generally apply to Treasury’s fiscal year 2000 plan. However, the separate
section in the fiscal year 2000 plan that briefly discusses information systems and capital
investment programs from a departmentwide perspective is an improvement.




Page 10                                         GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




Treasury’s Performance Plan Provides Limited Confidence That
Its Performance Information Will Be Credible
Treasury’s performance plan provides limited confidence that its performance information
will be credible because its does not consistently describe (1) efforts to verify and validate
performance data, and (2) efforts to compensate for unavailable or low-quality data, and how
these data limitations may affect its ability to achieve its goals.

Verification and Validation of Performance Data
Treasury’s performance plan does not consistently describe efforts by its bureaus and offices
to verify and validate performance data. OTS’ section of the plan contains information that
describes how data are verified and validated. The plan, for example, clearly states that
quantitative values reported for OTS performance measures are accurate and auditable. In
addition, the plan briefly discusses how data consistency is ensured among OTS’ information
systems.

Other parts of Treasury’s plan, however, did not provide a comparable level of information on
efforts to verify and validate performance data as OTS did. For example, OCC provides one
short paragraph on verification and validation, which states that a corporate planning team is
working with functional area representatives to develop a methodology for the verification
and validation of new measures. Many of the measures appear to draw on information that is
already collected through existing automated or manual systems that may or may not be
verified or validated. IRS, which is developing new measures as part of its restructuring,
states that oversight of all measures will be done by one new program office. The IRS plan
generally describes the reliability of measures as being of “reasonable accuracy” and that
program areas use various methods to check the accuracy of the data that are collected and
reported. This information does not discuss procedures for determining accuracy and
completeness that could increase the confidence that the performance data are credible.

To ensure consistency across bureaus and offices, Treasury adopted standardized language
for describing the accuracy of performance data. Throughout the plan, data accuracy is
described as reasonable, unknown, questionable, or to be determined. Data are reasonably
accurate when a process or system is in place to verify and validate it. Although brief, these
descriptions provide users of the plan with Treasury’s overall assessment of the accuracy of
the performance data.

Data Limitations
When performance data are unavailable or the available data are of low quality, a
performance plan should discuss how the agency plans to deal with such limitations and their




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Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




implications for measuring progress toward achieving agency goals. Treasury’s plan was
inconsistent in discussing data limitations and their implications. Although Customs does a
good job of describing efforts to verify and validate performance data, it does not discuss the
implications of data limitations. For example, Customs’ plan discusses verification efforts for
measuring the number of persons processed by Customs as they enter U.S. borders. The plan
clearly states that the number of land passengers entering the U.S. is based on the number of
vehicles entering the country through United States ports. This figure is then multiplied by an
estimate of the number of passengers per vehicle. The plan describes the accuracy of these
data as unknown because of its estimating technique. The plan, however, does not describe
what the plans’ strategy is to compensate for the questionable reliability of these data.

Our work relating to IRS’ financial management has disclosed serious weaknesses in IRS’
data relating to internal controls and financial reporting. Some of these data are described in
IRS’ performance plan. However, the plan does not discuss its data limitations or their
implications on measuring results and achieving agency goals. For example, IRS has a
performance measure on the total number of refunds issued, and without further explanation,
IRS considers that the information it uses to assess this measure is reasonably accurate.
However, in our recent review of IRS’ financial statements, we reported that IRS does not
have sufficient preventive controls over refunds to reduce to an acceptable level the risk that
                                              2
inappropriate refunds will not be disbursed.

Comparison to Fiscal Year 1999 Plan
The fiscal year 2000 performance plan recognizes the weaknesses that we identified in our
assessment of the fiscal year 1999 performance plan as it relates to providing full confidence
that the agency’s performance information will be credible and makes specific commitments
or shows actual attempts to address those weaknesses. However, real progress is not yet
evident. In reviewing Treasury’s fiscal year 1999 plan, we observed that it did not adequately
discuss procedures for verifying and validating performance information to ensure that it
would be complete, accurate, and consistent. Also, the fiscal year 1999 plan fell short in
identifying data limitations and their implications for the reliability of the performance data.
These observations also generally apply to Treasury’s fiscal year 2000 performance plan. An
improvement in Treasury’s fiscal year 2000 plan is the use of standardized descriptions of
data accuracy across the Department.




2
    Financial Audit: IRS’ Fiscal Year 1998 Financial Statements (GAO/AIMD-99-75, Mar. 1, 1999).




Page 12                                                   GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of the Treasury's Performance Plan for Fiscal Year 2000




Other Observations on Treasury’s Implementation of
Performance-Based Management
As the information shown in enclosure II, table I.1 highlights, Treasury needs to do more to
develop ways to address the implications that its mission-critical related challenges have on
its ability to measure performance and increase accountability. We believe that Treasury’s
senior managers are committed to implementing performance management principles
throughout the Department. Treasury’s plan also briefly refers to the Department’s
performance management strategy of aligning budget, performance measurement, and
accounting data to produce a cohesive financial information framework that integrates
departmental performance management and allows budget and cost data to support decision-
making. However, many of the issues affecting Treasury’s ability to implement performance-
based management involve its mission-critical challenges, particularly those challenges
relating to information systems and internal controls. Treasury is aware of this and is
attempting to address these challenges, but even optimistically, overcoming them may take
several years.

Agency Comments
On June 14,1999, we met with the Director of Treasury’s Office of Strategic Planning and
Evaluation and members of his staff to obtain oral comments on a draft of this report. The
officials generally agreed with our analysis and provided some technical comments which we
incorporated as appropriate. They also said that Treasury is continually trying to improve its
strategic and performance plans. Among other things, Treasury plans to ensure that updates
to its bureaus’ and offices’ strategic plans include goals for high-risk programs and major
management challenges. In addition, Treasury’s Office of Inspector General plans to work
with the bureaus and offices to help improve their capacity to provide confidence that the
performance data used to measure progress are verified and validated.




Page 13                                         GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure II

Management Challenges


Under the Results Act, agencies can use the annual performance planning process to present
goals and strategies for addressing their major management challenges. The identification of
major management challenges in the table below is based on our work on federal
performance and accountability issues and that of the Treasury Office of Inspector General
     1
(IG). We reviewed Treasury’s fiscal year 2000 annual performance plan to determine whether
it had goals and strategies for the major management challenges the Department faces. It is
important for Treasury to address these challenges because of the pivotal role they play in
guiding the Department’s efforts to become more performance-based and more importantly,
using the Department’s performance, financial, and program cost information as a basis for
decisionmaking.

Table II.1: Management Challenges in Treasury’s Fiscal Year 2000 Performance Plan
Management challenges                                      Applicable goals and measures
Departmentwide
The need to effectively manage information technology Treasury’s performance plan makes several references
(IT) investments. (Treasury’s IG identified this area as a to the need to effectively manage IT investments. The
management challenge.)                                     Departmental Offices’ section of the plan has five
                                                           related performance goals. Two of the goals deal with
                                                           accomplishing the year 2000 date change for
                                                           Treasury’s critical and noncritical IT systems. The other
                                                           three goals and related measures are as follows.

                                                            —Ensure IT investments improve program performance
                                                            and facilitate mission goals. The measure for this new
                                                            goal is the percent of new IT investments that are within
                                                            costs, on schedule, and meeting performance targets.

                                                            —Establish a certification program for procurement
                                                            professionals in compliance with the Clinger-Cohen Act
                                                            which aims to improve the acquisition, use, and
                                                            disposal of IT resources. The measure for this goal is
                                                            that 100 percent of the procurement personnel be
                                                            certified.

                                                            —Implement a new performance evaluation model to
                                                            improve acquisition practices. The measure for this goal
                                                            is a 5-percent increase in total Treasury cost avoidance
                                                            realized based on models implemented in all bureaus.




1
 See Performance and Accountability Series: Major Management Challenges and Program Risk-A Governmentwide Perspective
(GAO/OCG-99-1, Jan. 1999) and Performance and Accountability Series: Major Management Challenges and Program Risks-
Department of the Treasury (GAO/OCG-99-14, Jan. 1999).




Page 14                                             GAO/GGD-99-114R Treasury’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




Management challenges                                 Applicable goals and measures
Treasury’s financial management systems are not       Treasury’s fiscal year 2000 performance plan contains
integrated and cannot be relied on to provide completea financial systems strategy of creating a fully
and accurate budget, financial, and performance       integrated financial system by standardizing core data
information without extensive manual procedures,      elements departmentwide and developing uniform
analysis, and reconciliation.                         integration policies to enable all key bureau financial
                                                      data to be aggregated for improved analysis and
                                                      decision-making. This is linked to a goal of the
                                                      Departmental Offices to ensure strong financial
                                                      management of Treasury accounts and its related
                                                      measure to establish a financial systems integration
                                                      framework for key Treasury systems.
The need to address weaknesses in Treasury’s process None. Treasury has a strategic goal to ensure strong
used to prepare departmentwide financial statements.  financial management of Treasury accounts; however,
Specifically, problems related to inconsistent and    Treasury’s performance plan does not have any
inaccurate financial data reported by bureaus,        specific goals or measures to address this.
intradepartmental account balances and transactions
that were out of balance, and inadequate supervisory
review of the draft 1997 Accountability Report.
Treasury financial management systems are not in      None. Treasury’s fiscal year 2000 plan contains the
compliance with federal requirements. Several of the  strategic goal of managing the federal government’s
Department’s financial management systems did not     accounts. The departmental summary of the plan states
substantially comply with requirements of the Federal that Treasury supports the governmentwide
Financial Management Improvement Act of 1996.         implementation of accounting standards and plans to
                                                      increase efforts to modernize central accounting
                                                      systems. FMS has a goal to ensure that the federal
                                                      government serves as a model for financial
                                                      management in adhering to standards of compliance
                                                      but does not make specific references to ensuring that
                                                      Treasury’s systems meet federal requirements.
The need to address weaknesses in Treasury’s asset    Although there are no direct goals or measures, this is
forfeiture program specifically, (1) the Department’s related to the Treasury Forfeiture Fund’s goal of
accountability and reporting of seized and forfeited  ensuring that revenues are maximized to cover the
property, and (2) internal controls over financial    costs of seizure and forfeiture. A related goal focuses
accountability.                                       on internal controls to eliminate weaknesses that can
                                                      result in lost revenue to the fund, however, the plan
                                                      does not list any performance measures.

                                                         Although the Forfeiture Fund’s plan specifically
                                                         mentions that the fund received an unqualified opinion
                                                         for its fiscal year 1997 financial statements, it does not
                                                         discuss three material weaknesses in its internal
                                                         controls that the Treasury IG identified in connection
                                                         with the financial statement audit.




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Management Challenges




Management challenges                                        Applicable goals and measures
Financial Management Service
FMS needs to address issues related to preparing             Treasury has a strategic goal to manage the
reliable consolidated financial statements (CFS) for the     government’s accounts. This is linked to FMS’ strategic
government. As preparer of the CFS, FMS has a key            goal to ensure that the federal government serves as a
responsibility to work with agencies to address              model for financial management in its adherence to
problems, including the government’s inability to (1)        standards of compliance and its ability to provide useful
properly account for billions of dollars of basic            information by fiscal year 2002. Although FMS’
transactions, especially those between governmental          performance plan lists four measures for this goal, they
entities; (2) ensure that the information in the CFS is      do not fully support the goal or address the related
consistent with agencies’ financial statements; and          management challenge. The measures are
(3) ensure that all disbursements are properly
recorded.                                                    —Percentage of agency reports for the CFS processed
                                                             by FMS within standard ranges.

                                                             —Decrease in unresolved prior-year recommendations
                                                             and audit findings that prevent a clean opinion on the
                                                             audit of the CFS.

                                                             —Percentage of days the Daily Treasury Statement is
                                                             released on time.

                                                             —Percentage of government on-line accounting link
                                                             applications redeveloped to upgraded applications.
The need to improve computer security controls.              None. However, the plan acknowledges that FMS has
Computer security control weaknesses over FMS’               responsibility for ensuring the security of its automated
computer systems place the data maintained in the            systems and developing and enforcing information
financial systems at significant risk of unauthorized        technology policies and standards.
modification, disclosure, loss, or impairment, and place
billions of dollars of payments and collections at risk of
fraud. (Treasury’s IG also identified this area as a
management challenge.)
FMS needs to effectively implement the Department’s          Treasury has a strategic goal to collect revenue due to
responsibilities under the Debt Collection Improvement       the federal government by improving federal nontax
Act of 1996 (DCIA) that relates to the collection of         debt collection. This is linked to FMS’ strategic goal that,
delinquent nontax debt. FMS’ systems development             by fiscal year 1999, FMS will consolidate the
problems have resulted in the slow implementation of         management of all federal delinquent debt collection
DCIA’s debt collection provisions. (Treasury’s IG also       efforts and show improvements. FMS’ performance plan
identified this area as a management challenge.)             revised the date to fiscal year 2002 and has two
                                                             measures addressing debt collection, which are

                                                             —By fiscal year 2000, increase collection of debts
                                                             referred to Treasury (from fiscal year 1998 baseline
                                                             data) by adding more payment types to the centralized
                                                             administrative offset program.

                                                             —Increase the amount of delinquent debt that is
                                                             referred to Treasury for collection, as compared to the
                                                             amount of delinquent debt that is eligible for referral.
The need for FMS to effectively and timely implement         None. FMS’ performance plan does not discuss this
the provisions of DCIA that require FMS to provide           management challenge or how the agency plans to
electronic transfer accounts (EFT) to persons without        meet the EFT requirement for individuals that do not
bank accounts. (Treasury’s IG identified this as a           have bank accounts.
management challenge for FMS.)




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Management Challenges




Management challenges                                         Applicable goals and measures
Internal Revenue Service
The need for restructuring IRS’ organization and              The departmental summary of the performance plan as
business practices to better balance its efforts between      well as the section on IRS acknowledge that IRS is in
taxpayer assistance and enforcement. (Treasury’s IG           the process of a major reorganization and restructuring.
also identified this area as a management challenge.)         As part of this process, IRS is revising its strategic plan
                                                              and has a new mission statement and new performance
                                                              goals. The new performance goals are (1) service to
                                                              each taxpayer, (2) service to all taxpayers, and (3)
                                                              productivity through a quality work environment.
                                                              However, these performance goals are not directly
                                                              associated with IRS’ budget activities and measures.
                                                              The plan also states that IRS is developing a balanced
                                                              measurement system in conjunction with restructuring
                                                              and that changes to measures are expected to occur as
                                                              a result.
The need to correct management and technical                  None. IRS’ performance plan describes IRS’
weaknesses in systems modernization efforts. (The             modernization activities in general terms. However, the
Treasury IG cited significant revisions in IRS’               plan does not provide performance goals, indicators, or
modernization project as an indication of a system            measures that specifically address IRS’ modernization.
development capability weakness.)
Weaknesses in internal controls over taxpayer receipts        None. IRS’ plan does not address these weaknesses
and sensitive taxpayer data. These controls do not            including IRS’ plans to strengthen efforts to ensure that
reduce to an appropriate level the risk that taxpayer         taxpayer receipts and data are securely transported
receipts will be lost or stolen, and that taxpayers will be   (i.e., prohibit, among other things, the use of bicycle or
exposed to diversion and inappropriate use of personal        other unarmed vehicle couriers).
taxpayer data in schemes such as identity fraud.
Weaknesses in internal controls over unpaid tax               None. IRS’ plan would be more useful by delineating
assessments. IRS does not have a subsidiary ledger            goals and measures for addressing this challenge and,
or record of unpaid tax assessments that tracks and           if necessary, developing interim measures to show IRS’
accumulates unpaid tax assessments on an ongoing              near-term progress toward achieving this goal.
basis. This has resulted in delayed and missapplied
payments and assessments, which have caused
unnecessary taxpayer burden. (The Treasury IG also
identified this area a management challenge.)
The need to address problems relating to IRS’ ability to      None. There are no program-level measures in IRS’
collect federal tax receivables and other unpaid              plan for addressing this challenge. Treasury has a
assessments. Striving to close the gap between the tax        strategic-level goal to collect revenue due the
revenue owed the government and the amount likely to          government and IRS’ reorganization and restructuring is
be collected is a major challenge for IRS. As of              listed as being an initiative toward that goal.
September 30, 1998, IRS expected to collect $26
billion (32 percent) of the $81 billion in tax receivables.
The IRS is unable to rely on its general ledger to            None. IRS’ plan would be more useful if it included
support its financial statements owing to significant         goals and measures for this challenge. By doing so,
deficiencies. As a result, it relies on extensive ad hoc      decision-makers would be better informed of IRS’ plans
procedures to enable it to prepare auditable financial        and progress to address this material internal control
statements.                                                   weakness in the financial management area.




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Management Challenges




Management challenges                                      Applicable goals and measures
The need to assess the impact of various efforts IRS       None. For the third year, IRS’ plan has funding outside
has under way to reduce filing fraud.                      the discretionary caps to improve compliance and
                                                           reduce overclaims and erroneous filings associated with
                                                           the earned income credit—a primary source of filing
                                                           fraud. The plan includes a separate budget activity for
                                                           the earned income credit and states that IRS is working
                                                           to develop a performance measure and baseline
                                                           against which improvement would be measured.
The need to improve security controls over information     None. IRS’ performance plan has no performance goals
systems to address weaknesses that place taxpayer          or measures for information security. There is no
data at risk to both internal and external threats. (The   discussion of efforts under way to improve information
Treasury IG also identified this area as a management      security.
challenge.)

The need to ensure that information systems properly       The performance plan discusses the activities IRS plans
function in the year 2000. (The Treasury IG reported       to complete as part of its Year 2000 conversion, but
that each Treasury bureau is on target to reach its        offers no specific performance goals, indicators or
conversion goal. However, more work needs to be            measures to which IRS can be held accountable.
done on contingency planning.)
U.S. Customs Service
Customs faces challenges primarily related to              None. Treasury’s plan contains the strategic goal of
controlling access and physical security over sensitive    managing the federal government’s accounts and
data maintained in its automated systems including         proposes implementation of enhanced security
maintaining complete and reliable information in its       procedures related to financial information. However,
core financial systems.                                    the plan does not discuss specific measures or
                                                           strategies.

                                                           Customs’ plan did not specifically mention weaknesses
                                                           related to ensuring that sensitive data maintained in its
                                                           automated systems are adequately protected from
                                                           unauthorized access and modification.
Improvements are needed in Customs’ accountability         Customs has a goal of identifying, disrupting, and
over seized and forfeited property including the           dismantling the systems and criminal organizations that
reliability of information on seized property.             launder the proceeds generated by drug smuggling,
                                                           trade fraud, and export violations. Two performance
                                                           measures for this goal are (1) total monetary assets
                                                           seized, and (2) increase the value of property seized.

                                                           Also, Customs has a goal of reducing the flow of drugs
                                                           across the U.S. border and disrupting and dismantling
                                                           drug smuggling organizations through unified
                                                           intelligence, interdiction, and investigative efforts. This
                                                           goal’s performance measures include the number of
                                                           narcotics seizures; and narcotics seizures in pounds for
                                                           cocaine and heroin.

                                                           Vulnerabilities in Custom’s automated systems could
                                                           affect the reliability of information on seized assets. The
                                                           fiscal year 2000 plan did not mention these issues.




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Enclosure II
Management Challenges




Management challenges                                       Applicable goals and measures
Customs has not effectively managed the development         None. ACE is a major system development effort for
of its Automated Commercial Environment (ACE)               which Customs has not secured funding. The plan
system. Incomplete systems architecture and                 proposes establishment of a Customs’ systems use fee
limitations in its plans for enforcing compliance with an   for funding. The plan does not discuss goals or
architecture have hindered Customs’ ability to              measures that specifically address ACE development.
efficiently and effectively develop or acquire
operational systems and to maintain existing systems.




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