oversight

The Results Act: Observations on the Railroad Retirement Board's September 1997 Strategic Plan

Published by the Government Accountability Office on 1997-11-06.

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

1        United States
J   A0   General Accounting OfXlce
         Washington, D.C. 20648                                       -
                                                                                is9:=J
         Health, Education and Enman !3ezvices Division
                                                                     ._

         B-278079


         November 6, 1997

         The Honorable Jim Bunning
         Chairman, Subcommittee on Social Security
         Committee on Ways and Means
         House of Representatives

         Subject:   The Results Act: Observations on the Railroad Retirement Board’s
                    Sentember 1997 Strategic Plan

         Dear Mr. Chairman:

         At your request, we have reviewed the Railroad Retirement Board’s (RRB)
         September 199’7strategic plan, submitted formally to the Congress as required
         by the Government Performance and Results Act of 1993 (the Results Act). On
         September 11, 1997, we briefed your staff and RRB officials on our observations
         on RRB’s July draft of this plan. This letter provides our observations on the
         formally issued plan and its changes from the draft.

         OBJEXTIVES. SCOPE. AND METHODOLOGY

         We focused our review of RRB’s formally issued strategic plan on

         - - RRB’s compliance with the Results Act’s requirements and the plan’s overall
             quality,
         --   whether the plan reflects RRB’s key statutory responsibilities,
         --   whether the plan identies crosscutting functions and plans for coordination
              with other departments and agencies, and
         --   whether the plan addresses mdor RRB management challenges and its
              capacity to provide reliable information about its performance.

         Our overall assessment of RRB’s formally &sued strategic plan was generally
         based on our knowledge of RRBs programs and financial management issues
         and other information available at the time of our assessment. Specifically, the

                                              GAOAEHS-9%13R        RRB’s Strategic       Plan
B-278079                                             .

criteria we used to determine whether RRB’s strategic plan complies with the
requirements of the Results Act were the Results Act itself, supplemented by
the Office of Management and Budget’s (OMB) guidance on developing strategic
plans (OMB Circular A-11, part 2). To judge the overall quality of RRB’s plan,
we used our May 1997 guidance for congressional review of strategic plans.’ To
determine whether RRB’s plan contains information on interagency
coordination and addresses previously identified management problems, we
relied on our general knowledge of RRB’s programs and ongoing linancial
management work. To determine whether RRB has systems adequate to
provide reliable information on performance, we reviewed the plan for
information on the chief financial officer, the chief information officer, and
financial management. We evaluated the draft plan and the formally issued
plan between August 28 and October 22, 1997. We obtained RRB officials’
responses to our preliminary findings on their draft plan during our September
briefing. In addition, RRB officials commented on a draft of this
 correspondence, as reflected in this letter’s agency comments section.

Under the Results Act, agencies’plans were due to the Congress and OMB on
September 30, 1997. Developing a strategic plan is a dynamic process, and RRB
revised its draft with input Tom congressional staff, GAO, OMB, and other
stakeholders. Furthermore, in passing the Results Act, the Congress anticipated
that several planning cycles might be needed to perfect the development of a
strategic plan and that the plan would be continually refined. The following
comments reflect our analysis of RRB’s September 1997 plan.

BACKGROUND

Established in 1934 by the Railroad Retirement Act, RRB administers two
benefit programs for the nation’s railroad workers and their families under that
act and the Railroad Unemployment Insurance Act. In one program, RRB
provides retirement and survivor benefits to individuals who have completed at
least 10 years of railroad service. In the other, RRB provides unemployment
insurance benefits to unemployed railroad workers and sickness benefits to
workers who are unable to work because of illness or injury. In fiscal year
 1996, RRB paid $8.1 billion in retirement and survivors benefits to nearly
818,000 beneficiaries and $66 million in unemployment and siclmess benefits to
36,000 claimants. RRB provides services to railroad employees through its




 ‘Agencies’ Strategic Plans Under GPRA: Kev Questions to Facilitate
 Congressional Review (GAOIGGD-I0.1.16, May 1997).

 2                               GAO/HEHS-9%13R          RRB’s Strategic Plan
                                                            .
B-278079

network of more than 50 district offices, and it provides information on its
servities in a variety of ways, including through its website on the Internet..

RRB is an independent federal agency within the executive branch headed by
three board members appointed by the president. One member is appointed
upon the recommendation of railroad employers, one is appointed on the
recommendation of railroad labor organizations, and the third, who is the
chairman, is appointed to represent the public interest.

In 1994, OMB selected the Bureau of Survivor Benefits, a component agency of
RRB, to be a pilot organization for the implementation of the Results Act’s
performance and reporting provision. The purpose of the pilot program was to
help federal agencies gain experience in using the key provisions of the act and
to provide lessons learned before the act’s governmentwide implementation.

RESULTS IN BRIEF

RRB has formally issued a plan that describes its programs, contains all six
elements required by the Results Act, and reflects the agency’s key statutory
responsibilities. Also, this plan is clearer and more specific than the draft in
several key areas. For example, in our September briefing, we stated that the
draft would be more realistic and useful to RRB, the Congress, and other
stakeholders if RRB (1) more explicitly described how certain external factors,
such as the decline in railroad employment or technology changes, may affect
goal achievement; (2) more clearly explained how it has used and plans to use
program evaluations; (3) discussed how RRB has coordinated and consulted
with other agencies, such as the Social Security Administration (SSA), that may
serve the same beneficiaries; and (4} clarified its objectives to help stakeholders
understand how RRB will measure goal achievement. RRB has addressed most
of these issues by including in the plan a matrix of external factors and their
potential effect, adding a table of its planned program evaluation activities and
an implementation schedule, and discussing its relationship with other agencies
and noting that it had provided its plan to a number of agencies for comment.
However, RRB’s objectives in its formally issued plan continue to be unclear,
making it difhcult to determine how RRB will assess whether they are being
achieved.

Independent auditors have identified serious problems with RRB’s financial
management systems, pointing to material weaknesses in the agency’s internal
controls and issuing a disclaimer of opinion on RRB’s financial statements since
1993. These weaknesses were not disclosed in the draft. By discussing the
agency’s financial management problems, RRB has significantly improved its

3                                 GAOLEIEHS-9%13R         R&B’s Strategic Plan
                                                        _
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formally issued plan, thus making it more realistic than the draft. However, the
plti still does not fully disclose serious and fundament& problems idenmed in
recent audits, such as inadequate controls over benefit payments and the lack
of auditable financial statements. Resolving these problems will be critical to
the agency’s achieving its goals.

THE STRATEGIC PLAN REFLECTS ALL THE
RESULTS ACT’S REWIRED ELEMENTS

RRB’s formally issued plan includes alI six elements required by the act: (I) a
comprehensive mission statement, (2) general goals and objectives, (3)
approaches to achieve goals and objectives, (4) an explanation of the
reIationship between general goals and objectives and annual performance
goals, (5) key external factors beyond the agency’s control, and (6) an
explanation of how program evaluations were used in drafting the general goals
and plans for future evaluations. RRB’s September 1997 plan discusses each
element with greater detail and clarity than the July 1997 draft plan.

Comnrehensive Mission Statement

According to OMB Circular A-11, the mission statement should be brief,
defining the basic purpose of the agency and focusing particularly on its core
programs and activities. RRB’s plan contains this mission statement:

     “To administer retirement/survivor and unemployment/siclss       insurance
     benefit programs for railroad workers and their families under the
     Railroad Retirement Act and the Railroad Unemployment Insurance Act.
     These programs provide income protection during old age and in the
     event of disability, death or temporary unemployment or sickness. The
     RRB also administers aspects of the Medicare program and has
     administrative responsibilities under the Social Security Act and the
     Internal Revenue Code.

     “In carrying out its mission, the RRB will pay benefits to the right people,
     in the right amounts, in a timely manner, and safeguard our customers’
     trust funds. The RRB will treat every person who comes into contact
     with the agency with courtesy and concern, and respond to all inquiries
     promptly, accurately and clearly.”

 We found RRB’s mission statement to be results oriented and better than its
 draft mission statement in its draft plan. While the draft statement focused on
 the agency’s administrative responsibilities, RRB strengthened this by referring

 4                                 GAO/EEHS-9%13R           RRB’s Strategic Plan
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to the broad public need its programs fulfill-that   of promoting the financial
security of railroad workers.                               _

General Goals and Obiectives

OMB Circular A-11 specifies that strategic plans are to set forth long-term
management goals as well as programmatic and policy goals. General goals and
objectives should be stated in a manner #at allows future assessment of
whether the goals are being achieved.

RRB’s plan expresses the following four goals:

1. we will provide excellent customer service,

2. we will safeguard our customers’ trust funds through prudent stewardship,

3. we will align resources to effectively and efficiently meet our mission, and

4. we will expand our use of technology and automation to achieve our
   mission.

Each goal has several objectives. The goals are based on the premise that
RRB’s two programs rely on common services and business processes and,
thus, that the goals appropriately represent agencywide priorities rather than
program-specific concerns. Goals 1 and 2 focus on the business of the agency,
while goals 3 and 4 appear to be a means of achieving goals rather than
strategic goals themselves. The strategic plan states that goals 3 and 4 are
critical to the agency’s near-term success because they address some of the
agency’s management challenges, but it also notes that they will most likely be
subsumed into the two other goals as they are achieved.

Overall, as in the draft plan, some of the objectives under each goal seem
unclear, making it dif6cult to determine how RRB will be able to measure
whether they are being achieved. For example, the strategic objective “we will
ensure an efficient and effective reporting system for railroad employers” is not
specific enough that stakeholders will understand how the agency will measure
its achievement. The objectives in the formally issued plan remain unchanged
from the draft and should be expressed more clearly in future plans in order to
satisfy Circular A-11 guidance.




                                   GAOIHEHS-9%13R         RRB’s Strategic   Plan
B-278079

How the GoaIs and Objectives Will Be Achieved

According to OMB Circtiar A-11, this element describes the strategies the
agency will use to achieve its general goals and objectives. The formally issued
plan improves on the draft by discussing how RRB will achieve each goal.

Unlike the draft, the formally issued plan discusses certain, operational
processes, staff skills, technologies, and human capital needed to achieve RRB’s
goals. Under its objective “we will ensure the integrity of benefit programs
through comprehensive and integrated monitoring and prevention programs,”
for example, RRB briefly explains the programs and discusses the resources
spent to achieve the objective. The formally issued plan’s examples of the
variety of processes being used or planned give stakeholders a better
understanding of how RRB will achieve its goals. In the future, RRB may want
to consider adding further examples or clarifying discussion, especially in the
area of human capital and staff skills.

In addition, Circular A-11 states that strategic plans should outline the process
for communicating the goals and objectives throughout the agency and for
assigning accountability to managers and st& for the achievement of
objectives. While the draft plan did not explain how RRB’s goals and objectives
will be communicated throughout the agency, the formally issued plan provides
discussion on this important strategy. In addition, the draft plan did not
explicitly discuss how managers will be held accountable for meeting the
agency’s goals and objectives. The formally issued plan adds a specific
initiative for fiscal year 1998 that links managers’ and supervisors’ individual
performance appraisal plans with the achievement of agency goals and
 objectives.

How Annual Performance Goals and
Measures Relate to General Goals

 According to OMB Circular A-11, strategic plans shduld briefly outline (1) the
 type, nature, and scope of the performance goals to be included in an agency’s
 performance plan; (2) the relationship between performance goals and general
 goals and objectives; and (3) the relevance and use of performance goals in
 helping determine the achievement of general goals and objectives.

 Earlier, we observed that the draft plan discussed performance goals and that it
 appeared that RRB had considered how they will be measured. However, in
 our brieiings, but we stated that more detail that includes the items required by
 the Circular would improve the plan and help stakeholders understand how

 6                                GAO/HEHS-9%13R        RRB’s Strategic Plan
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RRB w-U determine progress toward goal achievement. The formally issued
planadds a matrix that links RRB’s performance goals &nd measures with its
strategic goals. In addition, we stated that it would be helpful for the strategic
plan to either provide a brief description of the other plans or provide examples
to help stakeholders make the linkage. The formally issued plan now describes
RRB’s other plans and programs, enabling stakeholders to better understand the
links between them and RRB’s strategic plan.

Kev External Factors

dMB Circular A-11 notes that agencies’ achievement of their goals and
objectives can be affected by change in economic, demographic, social, or
environmental factors and that strategic plans should describe each possible
factor, link it to particular goals, and describe how it could affect their
achievement.

RRB’s draft included an extensive list of key factors that could affect its
programs, such as a sudden decline in railroad employment levels or changes in
the agency’s status as an independent agency. However, the draft did not
incorporate these factors into its discussion on general goals and objectives,
nor did it discuss how these factors might affect goal achievement. RRB
strengthened the draft by illustrating in the formally issued plan a matrix of the
external factors, strategic goals affected, the likelihood of each factor’s
occurring, how goals might be affected, and how RRB is planning to address
such external factors.

frogmm Evaluation

OMB Circular A-11 states that an agency should describe the program
evaluations that it used in preparing the strategic plan and inchrde a schedule
for future program evaluations. In its draft plan, RRB discussed techniques,
such as surveys and focus groups, that it uses to determine such things as
customer satisfaction, but it did not describe how it used program evaluations
to establish or revise its strategic goals, nor did it provide a schedule for future
program evaluations.

RRB’s formally issued plan adds a matrix of future studies and program
evaluations, their methodology and scope, the time periods, and the issues the
evaluations would address. This matrix helps RRB and its stakeholders
understand RRB’s plans for studies and evaluations and how it will assess its
goal achievement.


7                                 GAOiHEHS-9%13R          RRB’s Strategic Plan
B-278079
THE STRATEGIC PLAN REFLECTS
I(EY STATUTORY RESPONSIBILITIES

As in the draft plan, RRB’s formally issued plan generally reflects its key
statutory responsibilities under the Railroad Retirement Act and the Railroad
Unemployment Insurance Act, as amended. The plan also states that the
agency is responsible for making certain payments under the provisions of the
Social Security Act and that it assists the Health Care Financing Administration
(HCFA) in providing Medicare coverage for its retirees. It also acknowledges
that RRB has certain administrative responsibilities under the Internal Revenue
Code.

THE STRATEGIC PLAN DISCUSSES
CROSSCUTTING ACTIVITIES AND
STAEEHOLDER INVOLVEMENT

Strategic plans should describe the extent to which agencies rely on the
resources or activities of other agencies to achieve their goals and objectives
and should discuss consultations they have with them. Circular A-11 states that
agencies should ensure appropriate and timely con&t&ion with other agencies
during the development of strategic plans that have crosscutting goals and
objectives.

We observed that the RRB draft plan discussed relationships with other
agencies, including HCFA and SSA, but was silent on whether the plan had
been coordinated with these agencies or whether consultations had taken place.
As a result, we were unable to determine whether RRB had coordinated with
these other agencies or assessed potential overlap. In its formally issued plan,
RRB improved its discussion by providing additional information about the
federal agencies with which it frequently interacts. RRB added that it had sent
its plan to these federal agencies for their review and comment.

 THE STRATEGIC PLAN DOES NOT ENSURE
 THAT MAJOR MANAGEMENT CHALLENGES
 WILL BE ADDRESSED

 Circular A-11 states that strategic plans required by the Results Act provide the
 framework for implementing the act and are key in the effort to improve the
 performance of government programs and operations. In its draft plan, RRB
 did not disclose its tinancial management problems, nor did it clarify the efforts
 it had made to resolve them. Its formally issued plan raises these fundamental
 problems but would be improved if it fully disclosed them and discussed how it

 8                                GAOAEHS-98-13R         RRB’s Strategic Plan
B-278079                                                  _

plans to correct them. Without this information, it is unclear how the agency
can fully achieve its mission.                           _-

Financial Renorting

Independent auditors that RRB hired have identified several problems with
RRB’s financial management systems. They found material weaknesses in the
agency’s system of internal controls and were essentially unable to determine
whether major items in RRB’s statements are accurate. The auditors issued a
disclaimer of opinion on RRB’s financial statements, which means that they
could not render an opinion on the statements’ accuracy.

More specifically, the independent auditors found three material weaknesses in
RRB’s internal controls in fiscal years 1995 and 1996, the 2 years we reviewed.
These three weaknesses relate to (1) the accuracy of benefit payments, (2) the
accuracy of railroad retirement tax deposits, and (3) RRB’s overall control
environment. A poor control environment is not conducive to a strong system
of internal controls.

RRB’s internal control problems are so severe that the independent auditors
concluded that the agency was not in compliance with part of its enabling
legislation. These auditors found incidents in tical years 1995 and 1996 of
RRB’s having failed to accurately calculate benefit payments; these incidents led
them to conclude that RRB had not complied with the Railroad Retirement Act,
as amended. Therefore, the accuracy and reliability of the agency’s systems for
performance reporting purposes are not certain.

We observed that RRB’s draft plan did not explicitly identify and address these
long-standing financial management problems. Its formally issued plan
identifies the specific material weaknesses but still does not disclose their full
extent. For example, the plan’s discussion on problems with the accuracy of
benefit payments focuses on problems identified in a 1993 audit that related to
past benefit payments, giving the impression that this problem has been
resolved. However, the most recent audit concluded that RRB’s controls over
benefit payments were unable to identify and correct errors in a timely manner.
Also, neither RRB’s draft plan nor its formally issued plan addresses RRB’s
inability to issue auditable linancial statements. While RRB’s formally issued
plan is better and more realistic because of its expanded discussion of the
agency’s financial management problems, the plan would have been even more
helpful if it had fully disclosed these fundamental problems and how it plans to
correct them.


9                                GAO/HEHS-9%13R         RRB’s Strategic Plan
B-278079                                               -

Technologv-Related Changes to Be Considered

Recent legislation, designed to reform information technology management,
including the Paperwork Reduction Act of 1995 and the Clinger-Cohen Act of
1996, sets forth requirements that promote more efficient and effective use of
information technology in support of agencies’missions and program
performance. Under these information technology reform laws, agencies are to
(I) tighten controls over technology spending, (2) better link their technology
plans and use of information technology to their programs’ missions and goals,
and (3) establish performance measures of how well their information
technology supports their program efforts. RRB’s draft plan and formally
issued plan demonstrate and discuss its awareness of these principles.

We have identified as high in risk two technology-related areas that represent
challenges for all federal agencies, including RRB. The first, the “year 2000
problem,” stems &om the common practice in automated systems of
abbreviating years by their last two digits. Thus, miscalculations in all kinds of
activities-such as benefit payments-could occur at the turn of the century if
computer systems interpret 00 as 1900 instead of the year 2000. Unless RRB
converts its software before the new century, it could encounter major service
disruptions, including erroneous payments or failure to process benefits. The
RRB draft plan dedicated an objective to this issue and provided details on
RRB’s plans for having its systems ready for the year 2000. The formally issued
plan includes the same objective.

The second high-risk area relates to information security, or the need to
adequately protect the sensitive data in federal computer systems. The RRB
strategic plan did not discuss information security. During our September
briefing, we stated that a discussion on this topic would be helpful because the
agency deals with beneficiaries’ personal information and is considering
providing information to beneficiaries over the Internet. In its formally issued
plan, RRB raises the issue of information security and privacy in a number of
areas but does not fully discuss any future plans for safeguarding information.

AGENCY COMIMBNTS

We provided RRB with a draft of our observations on its strategic plan. RRB
officials noted in their written reply that they made many changes to their plan
based on our comments during our September brie&g. These officials also
stated that when they next update their strategic plan, they will again review
our comments to determine whether further changes should be made at that
time.

 10                               GAO/HEH!+98-13R          RJU3’s Strategic Plan
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We are sending copies of this letter to the board members of RRB and others
who are interested. Copies also will be available to others on request.

If you or your staff have any questions concerning this letter, please call me or
my Assistant Director, Kay Brown, at (202) 512-7215. Other contributors to this
letter were Valerie k Rogers, George H. Bogart, Valerie C. Melvin, Lenny R.
Moore, and Roger R. Stoltz.

Sincerely yours,




Associate Director, Income Security Issues

Enclosure




11                               GAO/HEHS-9%13R        RRB’s Strategic Plan
        I
ENCLOSURE                                                                           -             ENCLOSURE
                                                                                                          I
           COMMENTS FROM THE RAILROAD RETIREMENT BOARD

                                         tNTIED   STATES   OF AMERICA
                                 RXILROAD         RETIREMENT                BOARD
                                          3.84 NORTH   RC’SH    STREET
                                        CHICA~~O.ILL~SOIS~~*~~I.~~~~~




           Ms. Barbara D. Bovbjcrg
           Associate Diitor. Income SecurityIssues
           United StatesGeneral Accounting Office
           441 G Street,N.W.
           Washington, D.C. 20548


           Dear Ms. Bovbjerg:

           Thank you for the opportunity to commenton the U.S. GeneraIAccounting Office (GAO) dmft
                                   .
           rrpon-*                   Ohsavahoas’~Z
           &a&&J&         (GAOMEHS-98-13R), which you provided to us on Ocm&r 30.1997. We also
           appreciatethe opportunity you gave us to discussGAO’s initial obseMuions on our drafl
           stmtegic plan during the Scptemher11.1997, videoeonfcrence.As your report recognizes,we
           madcamnychangcstoourfbalstmcgicplanbascdmthatdiscussi~

           As you noted in your d& repon in passingthe Gomnmcnt Pcrfonaanceaad Results AC&the
           Congxss anticipated that sever4 planning cyclesmight be neededto perfect the processof
           developing a strategic pian and that the plan would be continually refti when we next update
           our strategic plan. we wiil againreview your commentsto determinewhether further changes
           should be made at that time.

                                                               Sincerely.




                                                               FORTHE BOARD      V
                                                               Bemice Ezerski
                                                               5GecmrytotheBoard




(207018)


12                                                 GAO/HElHS-98-13R                 RRB’s Strategic       Plan
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