Management of HHS: Using the Office of the Secretary to Enhance Departmental Effectiveness

Published by the Government Accountability Office on 1990-02-09.

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

  -GAO            United Statet General Accounting Office
                  Report to the Congress

, February 1990
                  Using the Office of the
                  Secretary to Enhance

                                                                      .          .
                                                            ,.'   '"" -:: ...t   l~"-
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States


      February 9, 1990

      To the President of the Senate and the
      Speaker of the House of Representatives

      This report on management of the Department of Health and Human Services (HHS) is one in
      a series of GAO management reviews of major departments and agencies. Our objective was to
      assess the Office of the Secretary's role and effectiveness in managing the Department and to
      identify ways in which departmental management processes and structures could be

      The report makes specific recommendations to the Secretary for improving management of
      the Department and helping it better prepare for the future. Implementation of many
      recommendations will require a sustained commitment from the current and future
      Secretaries of HHS, the Office of Management and Budget, and the Congress.

      We are sending copies of this report to the Secretary of HHSi the Director, Office of
      Management and Budget; interested congressional committees and subcommittees; and
      individual members.

      This report was prepared under the direction of J. William Gadsby, Director, Inter-
      governmental and Management Issues, who may be reached on (202) 275~8387. Other major
      contributors are listed in appendix VI.

      Charles A. Bowsher
      Comptroller General
      of the United States
Executive Summary

                  Secretaries of the Department of Health and Human Services (HHS) have
Purpose           shouldered tremendous responsibilities for budgets totaling several hun-
                  dred billion dollars, for hundreds of programs, and for decisions that
                  affect the health and welfare of millions of Americans. Some have been
                  remarkably effective in executing their responsibilities. Others were less

                  The responsibilities given to the Secretary of HHS cannot be executed by
                  that person alone. The Secretary needs a cohesive management team
                  operating together to carry out those responsibilities. The Office of the
                  Secretary is the HIlS component charged with assisting the Secretary in
                  administering and overseeing the Department's organization, programs,
                  and activities. Shortcomings in its organization or operations will
                  impede the Secretary's ability to carry out his or her responsibilities.
                  With this in mind, GAO reviewed the role and activities of the Office of
                  the Secretary to assess its effectiveness and to identify ways in which
                  its management processes and structures could be improved.

                  HHS presents one of the more massive and complex management chal-
HHS Environment   lenges in the federal government. Organized into five major operating
                  divisions and the Office of the Secretary, the Department has an annual
                  budget of $401 billion-the largest of any federal department-and a
                  direct work force of 116,000. HHS is responsible for some 200 very dif-
                  ferent programs, having diverse designs, program delivery concepts,
                  and purposes. Some programs are directly administered by HHS compo-
                  nents; others, by IIHS contractors; still others, by state and local govern-
                  ments, which often have substantial flexibility in designing the
                  programs to suit their local needs. No fewer than 23 congressional com-
                  mittees have jurisdiction over HHS's programs and activities. (See pp. 12
                  to 15.)

                  The nature of the Secretary's management task has changed over the

                  see common                                                as nDlr<::!ronn,o.1
                  and financial matters, but kept program responsibility with component-
                  level officials. As the Department grew, the Secretary gained greater
                  responsibility for most HHS programs and policies. Staff were added to
                  the Office of the Secretary to handle planning, evaluation, legislative,
                  fu'1d                             pp.    to
                    Executive Summary

                   GAO'S review of the Office of the Secretary's activities and operations
                   spanned administrations dating from Secretary Gardner's through Sec-
                   retary Bowen's. GAO interviewed current and former top-level Depart-
                   ment officials; consulted with public policy experts and panels of former
                   top-level HHS management officials; administered a questionnaire to cur-
                   rent managers and senior staff to gain their perspectives on factors
                   influencing the Office of the Secretary's effectiveness; and evaluated the
                   office's management activities, operations, policies, and systems. (See
                   pp. 16 to 18.)

                   Secretaries of HHS are responsible for providing policy leadership and
Results in Brief   overseeing departmental administrative matters and programs. Some
                   Secretaries have achieved successes with policy initiatives that person-
                   ally interested them, but have been less successful in addressing other
                   important issues confronting the Department and the nation.

                   GAO believes that Secretaries' capacity to effectively manage their tre-
                   mendous responsibilities ha<; been hampered by the lack of an effective
                   management system within the Office of the Secretary. With such broad
                   responsibilities and tenures averaging less than 2 years, Secretaries need
                   a management system that structures the Department's activities and
                   provides information on how well it is working.

                   Such a management system must help Secretaries understand and iden-
                   tify emerging policy and management issues, establish clear goals and
                   objectives for these issues, and develop strategies to accomplish the
                   goals and objectives. In addition, the system must include accountability
                   dimensions that allow the Secretary to monitor and track the Depart-
                   ment's progress in achieving its goals and objectives, oversee the opera-
                   tions of programs and activities that have been delegated to others, and
                   provide feedback to and communicate with the Department's

                   ance and                   process, remain use             other  lIITIrvY",_

                   tant elements of an effective management system, such as departmental
                   strategic planning and monitoring and oversight systems, are missing
                   today. No secretarial management system has stayed intact long enough
                                       to the
                          Executive Summary

                          broad responsibilities of the office, yet flexible enough so that succes-
                          sive Secretaries can adapt it to their own management styles.

Principal Findings

Establish the Strategic   Departmental strategic planning is a key element missing from the
Planning Element of a     Office of the Secretary's management system. A planning process helps
                          the Secretary establish departmental goals and objectives, develop
Secretary's Management    implementation strategies, monitor and track progress in achieving
System                    them, and communicate with and provide feedback to the Department.
                          Without strategic planning, communications, coordination, and decision
                          making in the Department can be handicapped. A majority of the HHS
                          officials GAO surveyed believed that adding a strategic planning element
                          would have a positive effect on the Department's activities and opera-
                          tions, such as crisis management, staff knowledge about future opera-
                          tions, and short-range decision making. (See pp. 27 to 36.)

Enhance the Decision-     HHS'S decision-making processes tend to be slow, but when properly used
Making Element of a       they are generally effective in assuring that decision makers consider
                          the right information, evaluate alternatives, and consult with appropri-
Secretary's Management    ate parties. In reviewing a number of specific HHS decisions, however,
System                    GAO found that their quality or timeliness has suffered when the clear-
                          ance process has been used inappropriately.

                          To manage the large volume of decisions that the Secretary must make,
                          the Office of the Secretary has used a clearance process, designed to
                          ensure that the Secretary obtains the knowledge and perspective of
                          Department officials before making a decision. In some instances, when
                          allowing officials to bypass the clearance process, Secretaries made deci-

                          In one case GAO examined, a decision was delayed 4 years when depart-
                          mental officials disagreed about whether to ban interstate sales of raw
                          milk-a product that was knmvn to cause illness and sometimes death.
                          In     case, HHS                                 and         acted
                          a court order.
                           Executive Summary

Establish Clear Lines of   Since 1981, Secretaries have appointed chiefs of staff to assist in manag-
                           ing the Department. The involvement of chiefs of staff in various
Authority and              departmental matters, such as major personnel and policy decisions,
Accountability             often has overlapped with and caused confusion over the formal duties
                           and responsibilities of other senior officials within the Office of the Sec-
                           retary. For example, GAO found redundant responsibilities and unclear
                           lines of authority between the Under Secretary and the chief of staff.
                           Chiefs of staff generally have had greater access to the Secretary than
                           other senior officials, whose influence was thereby lessened. Also, the
                           roles and responsibilities of some Office of the Secretary units do not
                           match existing mission and function statements, further confusing the
                           lines of authority within the office.

                           Secretaries typically have retained authority for policy activities and
                           delegated authority for managing day-to-day administrative and pro-
                           gram activities to others. In an organization with so many diverse activi-
                           ties and programs, decentralized management is appropriate as long as
                           it is balanced with adequate accountability and control. The Secretary
                           must hold those officials to whom authorities have been delegated
                           accountable for results.

                           Recent Secretaries have used few formal or informal means to monitor
                           delegated activities to assure themselves that programs and activities
                           are being managed effectively and efficiently. BBS managers and senior
                           staff reported that the Office of the Secretary's oversight of departmen-
                           tal activities and programs was weak. In addition, top-level management
                           officials said they had limited access to the Secretary. (See pp. 51 to 60.)

Implement Strategic        HHS does not have a Department-wide, coordinated approach for system-

Work-Force Planning        atically addressing its work-force problems. The Department is expeli-
                           encing operational and program changes that have major implications
                           for the size and skill needs of its work force. While some operating divi-

                                         resources to                       and
                           Secretaries and the Office of the Secretary have played a limited roie in
                           addressing departmental work-force issues. Strategic work-force plan-
                           ning could help the Department (1) ensure that personnel actions sup-
                           port program objectives and (2) address its work-force problems. (See
                           pp.    to 71
                                Executive Swnmary

Continue Strengthening          Information management problems in many HHS programs have caused
                                or contributed to difficulties in providing good service. For example,
Management of                   inaccurate and incomplete data on HHS'S child support enforcement pro-
Information                     gram made it difficult for the Department and the Congress to assess the
                                program's performance. Before 1986, the Office of the Secretary's
                                efforts to improve HHS'S management of information were unsuccessful,
                                because it had attempted to exert too much direct control over operating
                                divisions' information management activities.

                                More recently, however, the Office of the Secretary adopted a more par-
                                ticipatory management approach and initiated several measures to
                                strengthen HIlS'S information management, including the hiring of staff
                                with strong technical skills in top-level positions. The Office of the Sec-
                                retary's actions are promising. But additional emphasis and sustained
                                attention need to be given to several important information management
                                activities, including planning, policy development, information resources
                                management reviews, and skill development. (See pp. 72 to 81.)

Sustain Efforts to Improve      HHS has had longstanding problems in establishing an effective depart-
Financial Management            mental financial management system. Two past attempts to correct
                                these problems were unsuccessful because of technical difficulties, cost
                                constraints, and inadequate support from operating components. A
                                promising new departmental effort to modernize financial management
                                systems is underway. However, top-level support, adequate funding,
                                and a skilled financial management staff will be needed to assure the
                                success of this modernization effmt. (St"C pp. 82 to 88.)

                               GAO'Skey recommendation to improve the management of HHS is that the
Recommendations                Secretary establish a secretarial management system that would include

                             • a departmental strategic planning process to identify emerging policy

                               goals and objectives and
                             • an accountability dimension that would monitor and track the Depart-
                               ment's progress in achieving its goals and objectives, oversee the opera-
                               tion of departmental programs and administrative
                                     delegated to       and provide feedback to and communicate
                     Executive Summary

                    GAO   also is recommending that the Secretary

                  • enhance the decision-making process by establishing means to resolve
                    significant disputes promptly and preventing individuals from circum-
                    venting the process;
                  • clarify and formally communicate the authorities of key departmental
                    leaders and adhere to such lines of authority;
                  • define the duties and responsibilities of a chief of staff, should the Sec-
                    retary appoint one, so that they do not conflict with those of other high-
                    level departmental officials;
                  • establish a departmental strategic work-force planning effort; and
                  • continue recent efforts to upgrade financial and information manage-
                    ment within the Department. (See pp. 36, 50, 60,71,81, and 88.)

                    In commenting on a draft of this report, HHS said the Secretary would
Agency Comments     give serious consideration to GAO'S recommendations as he proceeds
                    with his administration's management initiatives. HHS, however, did not
                    specify any actions it plans to take to address GAO'S recommendations
                    for improving departmental management. HHS'S general comments are
                    included in this report as appendix V. HHS also provided technical com-
                    ments, which GAO incorporated into the report as appropriate.

Executive Summary                                                               2

Chapter 1                                                                      12
Introduction            HHS History and Organization Structure                 12
                        Objective, Scope, and Methodology                      16

Chapter 2                                                                      19
Understanding the       The Secretary Is Responsible for the Department        19
                        Policy and Administrative Leadership-The Key           20
Role of the Secretary       Secretarial Roles
                        An Effective OS Management System Needs Certain        24
                        GAO Assessed OS Management Activities                  24

Section I                                                                      26
Chapter 3                                                                      27
Departmental            Planning: A Management Tool for Leading an             27
Planning Could          HHS Lacks a Departmental Planning Process to Prepare   28
Enhance HHS                 for Future Challenges
Leadership              Planning Processes Not Kew to HHS                      30
                        Departmental Planning Could Help HHS Address           32
                            Management Concerns and Issues
                        Past Processes Provide Foundation for Departmental     34
                        Conclusions                                            35
                        Recommendations                                        36

Chapter 4

Effective Secretarial   Managing the Substance of Policy Decisions             44
Decision-Making         Conclusions                                            49
System                  Recommendations                                        50

Chapter 5                                                                        51
Establish Clear Lines   Key Organizational Ingredients of Effective Leadership   51
                        Greater Accountability Needed for the Operation of       53
of Authority and            Departmental Activities and Programs
Accountability          Unclear Lines of Authority Weaken Departmental           56
                        Conclusions                                              59
                        Recommendations                                          60

Section II                                                                       61
Invest in HHS
Management Support
Chapter 6                                                                        62
Enhance Work-Force      HHS Faces Major Work-Force Challenges                    62
                        HHS Has Responded in Different Ways to Work-Force        64
Quality Through             Challenges
Improved Human          HHS's Management Efforts Could Be Enhanced by Work-      68
Resources                   Force Planning
                        Organizational Changes Needed to Implement Strategic     69
Management                  Work-Force Planning
                        Conclusions                                              70
                        Recommendation                                           71

Chapter 7                                                                        72
Improving               Responsibilities for lRM                                 72
                        lRM Problems Experienced Department-Wide                 73
Information Resources   Past OS Efforts to Improve lRM Had Little Success        73
Management              New OS Philosophy Toward lRM                             74
                        More Effort Needed to Strengthen IRM                     74

Chapter 8                                                                      82
Need to Sustain      HHS Has a Complex Financial Management Environment        82
                     Phoenix Plan Addresses Problems in HHS's Primary          85
Efforts to Improve       Accounting Systems
HHS's Financial      Substantial Investments Required to Complete Financial    86
Systems                  Management Improvements
                     Conclusions                                               88
                     Recommendation                                            88

Appendixes           Appendix I: Secretaries of HHS                            90
                     Appendix II: Methodology for Questionnaire                91
                        Administered to HHS Managers and Senior Staff
                     Appendix III: CAMS: A Planning Model for HHS              94
                     Appendix IV: Skills Useful for Effective IRM and Some     96
                        Potential Applications
                     Appendix V: Comments From the Department of Health        99
                        and Human Services
                     Appendix VI: Major Contributors to This Report           101

Table                Table 11.1: GM/GS-15 and Above Managers and Senior       92
                         Staff Questionnaire Response Rate

Figures              Figure 1.1: HHS's Organization Structure                 13
                     Figure 6.1: HHS Full-Time Equivalent Employment          63
                         (FY 1980-88)
                     Figure 7.1: HHS Managers Who Feel the IRM Manual Is      75
                         Not Particularly Useful for Certain Activities
                     Figure 8.1: Composition of Estimated FY 1989 Federal     83



AIDR        acquired immunodeficiency syndrome
ASMB        Office of the Assistant Secretary for Management and Budget
ASPE        Office of the Assistant Secretary for Planning and Evaluation
ASPER       Office of the Assistant Secretary for Personnel Administration
CAMS        Cooperative Agency Management System
I<'DA       Food and Drug Administration
GAO         General Accounting Office
HeFA        Health Care Financing Administration

                          resources na:nal~ernel1t
OHDS        Office of Human Development Services
OIR!\1      Office of Information Resources Management
OMH         Office of Management and Budget
OS          Office of the
PH::;       Public Health Service


                         Picture a conglomerate overseeing hundreds of programs to aid the
                         health and welfare of Americans, spending more than $1 billion a day.
                         The conglomerate sends millions of pension checks to retirees; pays
                         health care expenses for the aged, poor, and disabled; safeguards food
                         and drugs from harmful agents; gives money to the aged, the disabled,
                         and women and children to help them through difficult times; conducts
                         research to advance the treatment of human diseases; helps immigrants
                         and refugees to assimilate into a new culture; and offers health services
                         for American Indians. This conglomerate is the Department of Health
                         and Human Services (lms).

                         HHS presents one of the more massive and complex management chal-
                         lenges in the federal government. Its expenditures for fiscal year 1989,
                         estimated at $401 billion, account for about 35 percent of estimated fed-
                         eral expenditures and are the largest of any federal department or
                         agency, including the Department of Defense. About 116,000 people are
                         employed directly by HHS, and hundreds of thousands more work on its
                         programs administered by the states, grantees, and contractors. The
                         Department has about 200 programs that provide for the health and
                         welfare of virtually every American citizen. No fewer than 23 congres-
                         sional committees have jurisdiction over its programs and activities.

                         HIlS has evolved from a series of consolidations and reorganizations of
HHS History and          various federal departments and agencies. In 1939, health and human
Organization Structure   services programs were consolidated under the Federal Security Agency.
                         This consolidation induded the Office of Education, the Public Health
                         Service (PHS), and the formerly independent Social Security Board. The
                         Federal Security Agency was reorganized in 1953 as a cabinet-level
                         department known as the Department of Health, Education, and Wel-
                         fare. In 1980, the Department was redesignated HHS when Education
                         became a separate entity. As illustrated in figure 1.1, HHS is made up of
                         the Office of the Secretary (os) and five operating divisions.
                                                           Chapter 1

Figure 1.1: HHS's Organization Structure
Office of the Secretary

    Immediate Office of the
                                                                                                                            Executive Assistant
                                                                      Under Secretary
                                                                                                                      Deputy Under Secretary          a
                        !   Executive Secretary
                                                      '-                 Chief of Staff
                                                                                                                  I         Regional Directors
    Staff Divisions

                                                                 I                           I                                I
                              Management                                               Personnel                   Planning and
                              and Budget                                             Administration                 Evaluation

                                                                I                            I                                I
                                General                                                                               Inspector
                                                          Public Affairs               Civil Rights
                                Counsel                                                                                General

Operating Divisions

            I                                                                                                                                     I
                                                                                                         Health Care
                                                                              Health                                                     Social
   ,g,,,,,Vl""                                                                                            1:i;''''Ht;!lIY
                                          "un",,, d\lUi                    Service                                                       Adm inisiration
     S\:!'"''''.. '''                                                                                     III "''''SUdiIUl'

                                                          Note: Also located admintstratively In HHS, but reporting to the President, IS the Office of Consumer
                                                          Affairs, wnlch handles COnSlJ<1ler.related poliCY and programs in the lederal government
                          Chapter 1

OS Oversees Department   os, which employs about 4,300 people, consists of the Immediate Office
Activities               of the Secretary and eight staff divisions. The Secretary is the chief
                         executive of HIrs. Legislation authorizes the appointment of key staff
                          assistants to help the Secretary administer the Department's programs.
                         The Under Secretary serves as Secretary in the incumbent's absence.
                         Three Assistant Secretaries oversee offices-Planning and Evaluation
                         (ASPE), Legislation, and Public Affairs-that deal with the Department's
                         policy and communication activities. Two other Assistant Secretaries
                         head staff offices-for Management and Budget (ASMB) and for Person-
                         nel Administration (AsPER)-that oversee the functions identified in
                         their titles. Several other offices form the remaining staff divisions of
                         os. The Office of the General Counsel provides legal assistance to the
                         Department, and the Office for Civil Rights enforces civil rights policies
                         and investigates discrimination complaints against HIlS grantees and
                         contractors. In addition, the Office of the Inspector General (IG), which
                         accounts for about 32 percent of os staff, conducts audits and investiga-
                         tions of Department-funded activities.

                         Also, since 1981, Secretaries have appointed chiefs of staff, who have
                         been assigned various duties at the Secretaries' discretion. Reporting to
                         the chief of staff is the executive secretary, whose responsibilities
                         include coordinating policy development activities and ensuring that
                         offices affected by proposed actions or decisions are informed and given
                         an opportunity to comment.

                         HBS also has 10 regional offices to help administer its programs through-
                         out the nation and to provide closer contact with state and local govern-
                         ments. Heads of these field offices, called regional directors, are
                         appointed by the Secretary to be his or her direct personal representa-
                         tive in the region. Within each region, there is a small office to handle
                         central administrative responsibilities. Regional representatives of HHS'S
                         operating divisions are under the line direction of their parent

Manage HHS Programs      providing a variety of services to the American public. PHS is the oldest.
                         Authorized in 1798 to provide health services to merchant seamen, PHS,
                         and its functions, were expanded as federal involvement in health activ-
                         ities      The Assistant Secretary for Health        PHS and oversees its
Chapter 1

numerous programs. Also, the Surgeon General, who heads the Commis-
sioned COrpS,l helps plan and direct the activities of PHS. PHS is also
unique among the HHS components in that it employs many research
scientists and medical professionals. With a staff of about 40,100, PHS
also is involved in such diverse activities as basic health care, biomedi-
cal, and behavioral research; direct service delivery; grant programs;
and public health surveillance and treatment. For fiscal year 1989, PHS
will spend about $13 billion.

The Social Security Administration (SSA) is the Department's largest
operating division, employing over 65,300 people and having estimated
expenditures of $247 billion in 1989. SSA administers relatively few pro-
grams, including Old Age, Survivors, and Disability Benefits; Supple-
mental Security Income; and part of the Black Lung program. Nearly
every household in America is affected by social security programs,
either as a contributor or a beneficiary.

The Health Care Financing Administration (HCFA) was organized in 1977
to oversee the Medicare and Medicaid programs. While SSA does much of
its benefits processing in house, HCFA uses contractors and states to
administer Medicare and Medicaid. Together, these programs will spend
about $121 billion in fiscal year 1989. HCFA directly employs about 4,000
staff. Both PHS and HCFA exert significant influence in the nation's health
care matters.

Principally through the use of grants, the Office of Human Development
Services (OHDS), created in 1973, provides social services for the aged,
children, disabled, families, Native Americans, and youth. It employs
about 1,000 people and will spend about $7 billion in fiscal year 1989.

The Family Support Administration is the newest HHS component, cre-
ated in 1986 by Secretary Bowen to emphasize the family. This operat-
ing division administers welfare programs, such as Aid to Families With

                        Chapter 1

                        Our objective for this management review was to examine the role and
Objective, Scope, and   the operations of os in managing HHS'S diverse operations and suggest
Methodology             ways for improving its effectiveness and efficiency. We tried to gain a
                        historical perspective of both HHS and os not only to understand the
                        Department's current strengths and weaknesses, but also to learn about
                        past successes and failures. Our focus, consequently, was not on any
                        particular administration's actions, but rather on the organization as it
                        has functioned over time. We reviewed information dating from Secre-
                        tary Gardner's administration, beginning in August 1965, through Secre-
                        tary Bowen's, ending in January 1989.

                        We used a variety of techniques to evaluate os's management of HHS.
                        First, to gain an understanding of HHS'S environment, history, opera-
                        tions, organization, and programs, we reviewed agency documents,
                        budget material, consultant reports and studies, GAO and IG reports, leg-
                        islation, literature on HHS (such as books written by former Department
                        principals), regulations, and transcripts of congressional hearings on
                        various aspects of the Department.

                        Second, we conducted structured interviews with current and former
                        top-level managers of the Department to better understand the role of
                        os, the environment in which HHS operates, and the longstanding man-
                        agement strengths and weaknesses of os and the Department. We inter-
                        viewed 24 former top-level management officials, including 8 Secretaries
                        (see app. 1),3 Under Secretaries, 2 chiefs of staff, 7 assistant secretaries,
                        and 4 operating division heads. We also interviewed the incumbents of
                        these positions, as well as the regional directors and program officials in
                        four regions.

                        Third, we sent a questionnaire to 1,065 career and appointed HHS mana-
                        gers and senior staff to obtain their perceptions on the effectiveness of
                        various Department management activities. Recipients included Depart-
                        ment managers and senior staff at and above the GM/GS-15 level that
                        worked in                                                      areas and

                                based on an au.lu"""u
                        and further details on its methodology are in appendix II.

                        As a result of our preliminary research, interviews, and questionnaire,
                        we identified three major management areas to                 role and
                        organization; its evaluation, decision-making, and planning processes;
   Chapter 1

   Most of the information we obtained concerning os's role and organiza-
   tion resulted from our interviews with current and former leaders, ques-
   tionnaire results, and review of legislation. But we also reviewed mission
   and function statements for staff divisions and reports on departmental
   reorganizations to help us understand proposals that had been tried or
   considered in the past.

   We reviewed the processes that Secretaries have used to manage plan-
   ning and decision making.

• To evaluate planning, we reviewed operating components' current plan-
  ning activities and researched the Department's past planning processes.
  In addition, we convened a panel-composed of former top-level HilS
  management officials, a planning expert, and the Department of Labor's
  Director of Personnel-to discuss the value of departmental planning
  and the role of os in such planning.
• We also convened a panel of former top-level HHS management officials
  to discuss policy development and program evaluation activities within
  HllS. At this panel's suggestion, we choose a case study approach to
  review various decisions and decision-making processes used by the
  Department over the years.

   Another focus of our review was an evaluation of os's management of
   Hns's financial, human, and information resources. In each of these
   areas, we reviewed (1) reports issued by os, GAO, and the IG and (2) cur-
   rent IlHS procedures and policies. More specific evaluation steps taken
   for each of these areas are described below.

• In the financial management area, we interviewed key officials in ASMB
  responsible for this area and reviewed prior GAO and IG reports. We
  relied heavily on recent GAO work assessing HHS'S financial management.
  In addition, we reviewed HHS'S past and current efforts to develop a
  departmental financial management system.
• For information resources management (IRM), key officials in ASMB and
                                       their IRM activities,

                       about various                        such as
  ing, planning, and budgeting, within their lRM organizations,
• In the human resourc'es management area, we convened a panel of IlHS'S
  former top management officials, human resource management experts,
  and Labor's Director of Personnel to discuss work~force issues and plan-
        activities. Our           of HHS work-force planning activities
  focused on               and the activities            PHS, and
Chapter 1

addition, we examined Labor's work-force planning approach to assess
its adaptability to InIS.

We also reviewed os's evaluation activities. Our analyses of these activi-
ties, however, were inconclusive and are not discussed in this report. No
more than 44 percent of the managers and senior staff responding to our
survey indicated that they had an evaluation conducted of their pro-
gram or functional area since 1985. A majority of these officials found
the evaluations to be usefuL However, the survey also indicated a belief
among the staff that there was not enough evaluation occurring. Our
analyses showed some relationship between staff who were dissatisfied
with os's performance of its evaluation functions and staff who had not
received an evaluation of their activities since 1985. A useful evaluation
component should be linked to a planning component. Because HHS lacks
a departmental planning process, it was difficult to assess the effective-
ness of os's evaluation activities.

We performed the review in accordance with generally accepted govern-
ment auditing standards. Our review was done at HHS headquarters in
the Washington, D.C., and Baltimore metropolitan areas and its Atlanta,
Chicago, New York, and San Francisco regional offices. We conducted
our fieldwork between February 1987 and October 1988.

In August 1988, we briefed former Secretary Bowen and other top-level
HHS management officials on our findings and preliminary conclusions
and recommendations. mIS'S written general comments on a draft of this
report are included in the report as appendix V. HHS also provided tech-
nical comments, which we incorporated in the report as appropriate.
Understanding the Role of the Secretary

                      Effective national health and welfare leadership is vital to the well-
                      being of the American people. Getting a quick, appropriate response to a
                      public health threat like product tampering can save lives. Conversely,
                      responding slowly to an epidemic like acquired immunodeficiency syn-
                      drome (AIDS) can result in hundreds of avoidable deaths. The health and
                      welfare issues that face the nation-ArDS, long-term care, homelessness,
                      and abortion, to name a few-are both complicated and controversial.
                      The nation looks to the Secretary of HHS to take the lead in addressing
                      these challenges.

                      More than being managers who direct and control departmental activi-
                      ties, Secretaries need to be leaders, influencing others to support needed
                      changes in the Department's activities. Secretaries of HHS have broad
                      responsibility for federal health and welfare activities, but limited uni-
                      lateral authority to change them. In addition, Secretaries find they can-
                      not manage programs centrally. To have an impact on HHS, Secretaries
                      have to lead. They must build consensus among varied interest groups
                      and gain the cooperation of the Congress and other elements of the exec-
                      utive branch. Secretarial leadership is needed not only for policy and
                      program development but also for institutional vitality. Through such
                      leadership, HHS Secretaries can help assure that the Department main-
                      tains and builds its capacity to deliver programs effectively.

                      os is the HHS component that assists the Secretary in executing his or her
                      leadership responsibilities. Shortcomings in its organization or opera-
                      tions will impede the Secretary's ability to provide the quality leader-
                      ship needed.

                      Over time, the Secretary's responsibilities have evolved from increa.'>ing
The Secretary Is      the Department's administrative efficiency to leading the national
Responsible for the   response to health and welfare problems. When the Department was
Departmentl           formed in 1953, the Secretary had few resources and limited authority
                      to direct and control its diverse activities. There were few central staff

                                                   such as           and
                      but by law, program decisions remained largely the responsibility of
                      component officials.

                        Chapter 2
                        Understanding the Role of the Secretary

                       The Department grew in the 1960s and 1970s with the passage of major
                       health and welfare legislation, and the Secretary gained increased pro-
                       grammatic responsibilities. Many legislative restrictions that had previ-
                       ously placed program responsibilities in the hands of component
                       officials were removed. Specialized staff within os, particularly in pol-
                       icy, budget, and legislative areas, also emerged during this time. Greater
                       authority, combined with the resources to review and oversee programs,
                       made os more influential in health and welfare matters.

                       Today, the Secretary is responsible for providing health and welfare
                       policy leadership to the nation and administrative leadership to the
                       Department. To carry out the policy leadership role, os performs a
                       number of functions, such as planning, evaluation, budgeting, and con-
                       greSSional and public relations. To carry out its administrative leader-
                       ship role, os oversees various management support functions, such as
                       financial, human, and information resources management, that are com-
                       mon throughout the Department.

                       Former HHS Secretary Elliot Richardson offered a paradigm for under-
Policy and             standing the management roles of a federal department or agency. In his
Administrative         view, the management role can be arrayed along three dimensions:
Leadership-The Key
Secretarial Roles  . Developing and refining policies and programs through planning, evalu-
                     ation, and policy making.
                   • Managing day-to-day, routine activities, such as issuing Social Security
                   • Responding to emerging situations and crises, such as public health
                     epidemics and product tampering incidents.

                       Secretary Richardson observed that executives of federal departments
                       and agencies place different emphasis on each of these dimensions in
                       response to the unique mission and environment of their organization.
                                          rinnnr,f" of                               and

                       Service Commissioner spt~nds relatively more time and energy on day-to-
                       day revenue collection than on crisis activities.

                       Page                                       GAO/HRD-90-54 mm Management Review
 Chapter 2
 Undel'\!ltanding the Role of the Secretary

HHS'S Secretaries concentrate os activities on policy and program devel-
opment and central administrative matters.2 Typically, they delegate
authority to manage day-to-day operations and programs to the heads
of the operating divisions. While Secretaries must always be prepared to
handle aspects of emerging crises, such as product tampering or unfore-
seen epidemics, this is not a routine role for them. HHS components, such
as the Food and Drug Administration (FDA) or the Centers for Disease
Control, often must assume primary responsibility for the response
because of the technical nature of the incidents.

I1HS'S environment helps explain the principal reasons that Secretaries
concentrate their efforts on policy and program development activities
and central administrative functions. Secretaries of HHS face constraints
to their authority that are more severe than those facing executives of
many other departments and agencies because the Department's pro-
gram goals are less unified and harder to measure. Such constraints dis-
courage central management of routine program activities, but
encourage Secretaries to lead through legislative and regulatory reform
and through investments in the Department's administrative activities,
such as making improvements to its financial and information manage-
ment systems.

Several program and organizational factors have influenced the role
chosen by HHS Secretaries. First, to manage centrally, Secretaries need
single, clear operating goals that could help unify the Department's pro-
grams. Typically in HIlS, program goals tend to be many, vague, and hard
to implement. For example, health care programs have three simultane-
ous goals-assuring access to needed services, providing high-quality
services, and controlling benefit costs. Such goals are interdependent
and conflicting. In other words, needed services may be too costly to
provide universally. Conversely, efforts to control costs may restrict
access to certain providers or may result in lower quality services. Such
conflicts are pervasive among HHS programs. No coherent strategy exists
   rD"""'", such                                   have

     sheer number of diverse HHS programs having           different pro-
gram designs magnifies the difficulty of goals that are multiple, vague,
and hard to implement. Over 200 separate programs exist in very differ-
ent lines of business. Social Security is a large-scale administrative and
 Chapter 2
 (jnderstanding the Role of the Secretary

service delivery operation, while NIH is a large-scale scientific research
facility. The mode of operations also varies dramatically by program.
For some activities, administration is handled by federal personnel. For
other activities, it is handled by outside entities-states, localities, or
contractors-who often have flexibility in defining program details for
their local setting.

In contrast to the vague, unclear goals of the many IlHS programs, the
expectations for HIlS administrative activities are more uniform,
allowing more central oversight by os. As a federal organization, HHS
must conform to laws and regulations governing federal administration.
The Department is subject to civil service rules as well as to Office of
Management and Budget (OMB) and General Services Administration
guidelines covering administrative matters, such as financial manage-
ment, information resources management, procurement, and grants

Another factor influencing the Secretary's role is the fragmentation of
program authority and appropriations. Assuming that Secretaries devel-
oped coherent relationships among programs, they still would have lim-
ited ability to change program designs or funding without congressional
approval. Certain programs, such as SSA'S, operate under extremely
detailed statutes. For such programs as welfare, Medicaid, and block
grants, states have substantial flexibility in designing the benefits and
eligibility to suit their local needs. Most of these programs are funded
through formula grants, obliging lIIIS to fund authorized activities irre-
spective of the degreE' to which the Secretary may believe that they sat-
isfy federal objectives.

Even budget authorities are narrowly constrained: About 96 percent of
the 1990 HlIS budget funded entitlement programs, such as Social Secur-
ity, Medicare, and welfare activities, which must provide benefits to
those who legally qualify The discretionary budget is a very small part

                                                 is the controversial
nature of HHS issues. Issues such as abortion, homelessness, and welfare
evoke widely divergent and strong views. Support as well as opposition
comes from a variety of directions for many different reasons. The Sec-
        role is to       and consider the views of other                   par-
ties, When national decisions are made about such           and programs,
                                                          C>I""HlJU,"ArulL dis-
Chapter 2
Understanding the Role of the Secretary

designed and operated, and who should be served. Such a value-laden
environment is vastly different from such federal activities as tax col-
lection, which tends to be more technical or operational in nature.

These factors add up to a single reality for Secretaries of HHS. When
Secretaries want to alter existing programs and policies, introduce new
ones, or change departmental operations that affect program services,
they must seek support from outsiders. Most significant changes to HHS
activities require either legislative or regulatory action that directly
involves the White House, OMB, or the Congress and indirectly involves
interest groups representing different bodies of public opinion. Even
changes that appear to be within the control of the Secretary-such as
reorganizations and other operational decisions-often require endorse-
ment by these outsiders to be successful because ultimately they may
affect how services are delivered.

To operate successfully within this controversial environment, Secretar-
ies define their role as one of providing leadership more than managing
departmental affairs. Secretaries cannot achieve significant changes
solely by executing their official authority. Rather, they must be able to
move the various influential parties to a consensus for action. Some-
times such leadership is programmatic; at other times it is administra-
tive. Through such leadership, Secretaries can create opportunities to
influence the character and operations of health and welfare programs
that they cannot unilaterally accomplish. John Gardner, Secretary of
HHS during the Johnson administration, spoke about the challenge of
having broad responsibilities without commensurate managerial author-
ity, forcing HHS Secretaries into a role of influencing those inside and
outside the Department:

" ... you cannot manage the outside world; you lead. You cannot manage Congress:
you can lead them. And you cannot manage the White House. You cannot manage
the press. You cannot manage your big, professional constituencies .... The top
person has that curious task of           the world       which the top person has
                       Chapter 2
                       Understanding the Role of the Secretary

                       Effective Secretarial leadership requires management systems to organ-
An Effective OS        ize, guide, measure effectiveness, and readjust activities. Such systems
Management System      should help Secretaries identify and pursue their goals and objectives
Needs Certain          and contribute to enhancing the Department's administrative efficiency.
Elements               To effectively support the current and future Secretaries in their leader-
                       ship role, we believe 08 should have a management system for the Secre-
                       tary that has

                    • a departmental strategic planning process to assist the Secretary in
                      establishing goals and objectives for the nation's health and human ser-
                      vices programs, as well as developing strategies to accomplish the
                      desired goals and objectives, and
                    • an accountability component to help the Secretary monitor and track the
                      Department's progress in achieving its goals and objectives, oversee the
                      operation of departmental administrative activities and programs that
                      have been delegated to others to manage, and provide feedback to and
                      communicate with the Department's components.

                      In addition, os should have

                    • an effective decision-making system that gives the Secretary the infor-
                      mation and knowledge needed to make informed policy decisions for the
                    • a sound organization structure with clear lines of authority for key os
                      offices and leaders;
                    • components that give Secretaries advice and assistance with their policy
                      agenda, such as legislative affairs, congressional relations, and public
                      affairs activities; and
                    • the capacity to guide and assist the components in developing and
                      improving the Department's management support activities, such as its
                      financial, information, and human resources management systems.

GAO Assessed as       OUf  review assessed the overall t:>n·Af"rn'An,,,""'"
                      responsibilities before and during Secretary Bowen's term. Our survey
Management            of managers and senior staff throughout the Department indicated that
Activities            os carried out its responsibilities adequately or better. Some offices and
                      activities were particularly highly regarded. For example, most officials
                      believed the Office of the General Counsel and the IG were performing
                      well to very well. Similarly          activities carried out by os to support

                      Page 24                                    GAO/HRD-90-M HIlS Management Review
Chapter 2
Understanding the Role of the Secretary

policy leadership-such as legislative affairs, various aspects of deci-
sion making, and certain characteristics of program evaluation-were
viewed positively by senior managers throughout the Department.

Other os activities were perceived to be working less effectively. The
following sections of this report discuss our assessment of these less
effective activities and make recommendations for establishing or
improving them. Section I focuses on the need for a departmental strate-
gic planning process, a well-~anaged decision-making system, and
increased accountability and clear lines of authority for os offices and
leaders. Section II discusses the need to enhance os's oversight and sup-
port of departmental administrative support activities.
Leading IlliS

                Changes in the nation's demographics-like the aging population-
                promise to bring about increased demands for health, social, and welfare
                services. As in the past, the nation will look to HHS to help meet these
                demands. It will be the Secretary's responsibility to take the lead in find-
                ing solutions.

                The Secretary cannot tackle this leadership challenge alone. He or she
                needs to influence and gain the support of the White House, the Con-
                gress, the public, and others. In addition, the Secretary needs the experi-
                ence and resources of HHS and its top political and career officials to help
                evaluate problems, examine alternative solutions, choose courses of
                action, and implement them.

                To create a departmental team that works together cohesively, the Sec·
                retary needs to develop a plan so that the players have a clear under-
                standing of where they are going. In addition, he or she needs an
                effective decision-making process so that the players can participate
                effectively in executing the plan and revise it when needed to meet
                changing national priorities. Last, the Secretary must establish clear
                lines of authority and foster accountability among the players, so that
                they understand what their role and responsibilities are and what is
                expected of them. In the next three chapters, we review these manage-
                ment areas within OS and make recommendations for improving them.
Departmental Planning Could Enhance
HHS Leadership

                      Executives of large private and public organizations, operating in chang-
                      ing, complex environments such as HHS'S, find planning processes to be
                      an effective management tool in leading their organizations. HHS, how-
                      ever, lacks a strategic planning process to help establish departmental
                      goals and objectives and to identify alternative strategies to accomplish
                      them. During the late t960s and most of the 1970s, HHS had such a pro-
                      cess. More recently, in the absence of a departmental planning process,
                      leaders of several HBS components have initiated planning efforts within
                      their organizations. These planning processes have helped HIlS leaders
                      improve communications, coordination, and decision making. Some mrs
                      managers and senior staff expressed skepticism about a departmental
                      planning process. Many others believe it would be beneficial. We agree
                      with the latter.

                      Planning is the first step of a sound management system. It provides a
Planning: A           rational and systematic way for an organization to visualize its future,
Management Tool for   set goals and objectives to achieve its vision, develop and evaluate alter-
Leading an            native strategies to accomplish the goals and objectives, and choose a
                      course of action. Accomplishing the planning goals and objectives is the
Organization          primary purpose for the remaining functions of a management system-
                      budgeting, budget execution and accounting, and evaluation.

                      Planning processes are usually tailored to meet the unique characteris-
                      tics of the organization and managerial styles of the chief executive and
                      other top management officials. There are two principal types of plan-
                      ning-strategic and operational. Strategic planning is an important
                      activity conducted by top levels of management throughout the organi-
                      zation. Compared to operational planning, strategic planning focuses on
                      broader policy questions facing an organization, covers a longer period
                      of time and issues that are not well defined, and embraces all or a large
                      part of an organization. Consequently, the goals, objectives, and strate-
                      gies developed through such planning can and should be subject to
                      change, Operational planning is more short range and is done principally
                      from a                                 of view, It                      of

                      Management experts believe that several factors lead to successful plan-
                      ning. One is the direct participation by the organization's leader, because
                      it      the                           and staff an              to
                      and be heard          leader. Another is n«IM'1t'lT\''l't
                            Chapter 3
                            Departmental Planning Could Enhance
                            HHS Leade"",bip

                            throughout the organization, because it allows them to know and under-
                            stand what they are expected to accomplish. Also, by having key staff
                            participate in establishing the goals and objectives, the leader gains
                            their commitment to achieving them. In this fashion, planning enhances
                            a leader's ability to influence a broad spectrum of the organization and
                            its activities.

                           As explained in chapter 2, the Secretary cannot directly control events
                           but must lead in mIS'S complex and political environment. Strategic plan-
                           ning can be a useful tool for the Secretary in leading HHS in the political
                           world of health and welfare issues. It is in this context that we reviewed
                           the Department's use of strategic planning processes over time.

                               lacks a departmental planning process at the Secretary's level to
HHS Lacks a                HHS
                           help establish goals and objectives to address the challenges it faces
Departmental               moving into the 1990s. Some HHS managers and senior staff are skeptical
Planning Process to        about the value of instituting such a process, but many others believe it
                           would improve their operations. Although an agenda of Secretary
Prepare for Future         Bowen's priority issues was developed to help guide the Department
Challenges                 through his term, few staff were guided or influenced by the agenda in
                           managing their activities, operations, or programs.

No Departmental Planning   About 83 percent of the managers and senior staff responding to our
Led by the Secretary       survey were unaware of any comprehensive, Department-wide effort led
                           or coordinated by os to prepare for HHS's future. In addition, top-level
                           management officials that we interviewed acknowledged the lack of a
                           Department-wide planning effort.

                            Many current and former HHS management officials believe the Depart-
                           ment would benefit from a planning process. At least 52 percent of the
                           managers and senior staff responding to our survey believed that such a
                           process would have a positive effect on the reduction
                                  and                      making.     more than 6
                           that a departmental planning process would have a negative effect on
                           these operations. A former Under Secretary noted that a departmental
                           planning process "not only enhances organizational effectiveness and
                           efficiency of the Department, it greatly enhances the Secretary's ability
                           to                steer and run it [the Department]. A senior IH()tH<1j;;Cl
                                                       management support areas said that the
                   Chapter 3
                   Departmental Planning Could Enhance
                   HHS Leadership

                   absence of broad Department-wide planning makes "it slightly more dif-
                   ficult to formulate goals" in his specific area of responsibility.

                   While many believe departmental planning would be beneficial, others
                   questioned its value. For example, one official said that there is no
                   incentive for a Secretary to plan ahead because he or she will be given
                   credit for only accomplishments made while in office. Some officials
                   believed that such planning would be difficult because HBS components
                   are so diverse. Others noted that such planning can be potentially
                   embarrassing and problematic if major shortcomings in programs or
                   management operations are identified and made public.

Bowen Agenda:      While many officials said HHS lacks a departmental planning process,
Beginnings of      others said the Bowen agenda was developed through such a process.
                   The Bowen agenda did help communicate the Secretary's priorities, but
a Departmental     few staff were guided or influenced by it in managing their activities,
Planning Process   operations, or programs.

                   Early in Secretary Bowen's term, the Under Secretary led an effort to
                   develop an agenda of the Secretary's priority issues. The Secretary had
                   20 policy items that he wanted to address. Through biwL'ekly meetings
                   of primarily the leaders of operating divisions and staff divisions, 4 pri-
                   ority initiatives and 23 sub-initiatives were developed. The initiatives
                   focused on illegal drug use in America, improving the quality of health
                   care, the future of the family, and AIDS. Individuals were designated to
                   lead each sub-initiative. and time frames were established for accom-
                   plishing them. The Management Council, a senior level adVisory body
                   for significant Department-wide management issues, was assigned
                   responsibility for reviewing the progress.

                   The Bowen agenda represents the beginnings of a departmental plan-
                   ning process. It was developed with the participation of the Depart-
                   ment's operating division and      division leaders and has

                   more                                  and senior
                   an adequate or better job communicating the Secretary's priorities to the
                   operating divisions. Also, the Management Council was deSignated to
                   monitor the progress being made in accomplishing the goals and
                        Chapter 3
                        Departmental Planning Conld Enhance
                        HHS Leadership

                        activities, operations, or programs. Our review and discussions with
                        senior HHS officials indicated that clear, meaningful, and outcome-
                        oriented objectives had not been established for many agenda initia-
                        tives. Thirty-three percent of the managers and senior staff responding
                        to our survey said that they used the Bowen agenda as a principal
                        source of planning guidance for their activities. Although three of the
                        agenda's four major priorities focused on major national health issues,
                        no more than 26 percent of the PHS officials responding to our survey
                        said they used the agenda as a principal source of planning guidance.
                        Also, a top-level PHS official said that the Bowen agenda is not being
                        used to develop national health objectives for the year 2000, a major
                        effort being led by PHS working with among others the National Acad-
                        emy of Sciences, state health departments, and national professional
                        and voluntary organizations. In addition, few staff divisions were
                        directly affected by the agenda, because it did not contain any initia-
                        tives in management support areas.

                        Although HHS currently does not have a systematic, rational planning
Planning Processes      process to establish departmental goals and objectives, such planning
Not New to HHS          existed in the past. In the absence of departmental planning, several
                        operating divisions recently engaged in such planning efforts (see pp.
                        31-32), which enhanced management within their organizations.

Departmental Planning   During the late 1960s and most of the 1970s, various Department-wide
Processes               planning processes existed in HHS. These processes were part of two dif-
                        ferent secretarial management systems-the Planning, Programming,
                        and Budgeting System (ppss) and the Cooperative Agency Management
                        System (CAMs)-that were used in making budgetary decisions. Under
                        both, the Secretary, his staff, and operating divisions participated in a
                        systematic process to establish goals and objectives for the Department
                        and to identify strategies to accomplish them.

                               a                                       process to
                        solutions to major long-term problems. Each year, operating divisions
                        examined their mission and priorities for the future and submitted a 5-
                        year plan to the Secretary. Based on the operating divisions' plans, anal-
                        yses of the plans and suggestions by the Secretary's staff, and discus-
                                       operating             the         made decisions on
                                  objectives for the 5 years. The      plan served as a guideline
                     Chapter 3
                     Departmental Planning Could Enhance
                     HHS Leadership

                     Dr. Alice Rivlin, fonner Assistant Secretary for Planning and Evalua-
                     tion, PPBS represented the first effort at the Secretary's level to look at
                     the Department as a whole, to address alternatives and priorities, and to
                     layout a tentative program for the future.

                     Near the beginning of his tenn, Secretary Richardson introduced CAMS. It
                     began with the Secretary communicating his priorities and other strate-
                     gic guidance that operating divisions were to reflect in 5-year plans. As
                     with PPBS, the Secretary, his staff, and operating divisions participated
                     in a systematic cooperative and collaborative process of setting goals
                     and objectives and developing strategies to accomplish them. HHS offi-
                     cials have attributed several important management successes to CAc\{S.
                     For example, Secretary Richardson believed that in 1972 CAMS helped
                     him to develop an integrated policy initiative, commonly known as the
                     "Mega-Proposal," to restructure and reform departmental programs.
                     Several major policy proposals of the Mega-Proposal ultimately fonned
                     the foundation for future legislation, such as block grants. The CAMS pro-
                     cess was used into the late 1970s. Several former and current officials
                     noted that it gradually fell into disuse because succeeding Secretaries
                     were not active participants and too many issues were being managed
                     through the process. For example, Hale Champion, the Under Secretary
                     during 1977-79, said that "it became sort of a vast lint-picker .... any-
                     thing that was really important was not in the major system."

Component Planning   More recently, in the absence of a departmental planning effort, several
                     HHS components have engaged in planning processes similar to PPBS and
Processes            CAMS. As discussed on pages 32 and 33, these planning efforts enhanced
                     coordination, communications, and decision making within these compo-
                     nents. A brief explanation of these planning processes follows.

                     1. In 1984, OHDS held a symposium on "Social Services in the Year 2000."
                     The symposium examined demographic, sociological, economic, and
                           '~"J""'~~' trends that were likely to influence society in the future
                                                                  to be                 year
                               groups and experts from business, government, academia,
                     the volunteer sector participated. Based on the symposium, OHDS estab-
                     lished four overall goals-three programmatic and one management-
                     and developed a 4-year plan of goal-related objectives. The four goals
                     continue to be the guideposts against which OHDS program and staff
                     offices             their annual plans. OHDS systernatically monitors the
                                     '''aAUlll''} toward accomplishing its goals and "hl.n"h
                         Chapter 3
                         Departmental Pla:nn.btg Could Enhance
                         HIlS Leadership

                         2. In 1984, the Food and Drug Administration's new leadership and
                         career employees engaged in an "Action Planning Process" to help
                         smooth the transition of the new management team and to prepare the
                         agency for the future. The Commissioner, top-level officials, mid-level
                         staff, and outside groups participated in this strategic planning process.
                         Through this process, FDA identified 10 goals and charted a broad course
                         for policy and management directions in the years ahead. In addition, a
                         system was developed to monitor the progress being made toward
                         accomplishing the action plan's goals. FDA repeated this process in 1987.

                         3. In 1988, SSA issued a strategic plan for its organization, management,
                         and operations to the year 2000. This was SSA'S first effort to prepare a
                         coherent, long-range strategic plan that established broad directions to
                         guide how it will serve its clients. The process used to develop this plan
                         entailed extensive collaboration among the Commissioner and 8SA senior
                         management officials, component involvement, and participation from
                         external groups, such as congressional staff, the Council on Aging, and
                         the American Association of Retired Persons. 8SA has also established a
                         system to monitor its progress in accomplishing its goals and objectives.

                         A departmental planning process could help UH8 address several man-
Departmental             agement concerns and issues. Top-level management officials, managers,
Planning Could Help      and senior staff hav~~ said that communications, coordination, and deci-
HHSAddress               sion making could be improved. Planning processes have helped past
                         and current Department management officials address these manage-
Management Concerns      ment concerns. Also, departmental planning has had a positive effect on
and Issues               management at the Department of Labor. This leads us to believe that
                         HHS could benefit from such a process.

HHS Officials Identify   Through our interviews and survey, IIlIS management officials and
Concerns and Issues      senior staff identified several important management and leadership
                         issues that they said needed to be addressed Department-wide. Among

                         1. In response to a survey question to identify one problem in os that
                         they would like to resolve, at least 50 managers' and senior staff's com-
                         ments focused on communications. One official said he would focus on
                               ~~~r-'·'" better, more         two~way COInnmrnC,lW)fl
                                    the components of os and
                     Departmental Planning Could Enhance
                     HHS Leadership

                     2. About 32 percent of the survey respondents reported that os did
                     poorly or very poorly coordinating activities that required cooperation
                     among operating divisions. In commenting on the number one problem to
                     resolve in os, one official wrote:

                     "I believe that as a senior level manager I should be more knowledgeable about os
                     initiatives, especially as they impact my organization. Lacking specific knowledge, I
                     would say that OS could do a better job of tying the HHS family together in terms of
                     broad common agenda and direction. I spend a good deal of my time as a manager
                     'drawing the big (named operating division) picture' for my staff to enable them to
                     see where they fit in and how what they do adds to the common good. I'd like noth-
                     ing better than to draw HHS into the tapestry. It lends itself to employee esteem,
                     singularity of mission and purpose and achievement."

                     3. Managers and senior staff noted concern about decision making
                     within the Department. About 30 percent of the respondents to our sur-
                     vey reported that OS did poorly or very poorly considering long-term
                     effects of decisions when making major policy decisions.

Planning Processes   Each of the departmental and component planning processes previously
Enhance Management   discussed was structured to provide opportunities for improved coordi-
                     nation, communications, and decision making within the Department or
                     a component. Through various planning meetings and memoranda, com-
                     ponent leaders and staff were given opportunities to communicate their
                     concerns, goals, and objectives to the Secretary, as well as hear the Sec-
                     retary's. In addition, coordination was improved. For example, Dr. Lau-
                     rence E. Lynn, Jr., former Assistant Secretary for Planning and
                     Evaluation, noted that, through the CAMS process, the Secretary, his
                     principal advisers, and component heads and staff worked together to
                     develop a coherent approach to accomplishing goals and objectives. CAMS
                     ensured that component officials with an interest in an issue had their
                     say and thus reduced interoffice distrust and anxiet.y. Former Secretary
                     Elliot Richardson saw the CAMS process as a basis to eliminate overlap,
                     duplication, and turf Oa1tm~s

                                         with HHS planning processes
                               """>V\..la ••cu                                     having
                     established departmental goals and objectives helped the Department
                     with decision making. For example, Dr. Rivlin noted that the progress
                     made under PPBS was dearly a start toward improved decision making.
                     Also, Dr. Lynn noted that under CAMS, the quality of decisions improved
                                               C''''''4C>nC'D was                     alterna-
                                                    and OPPOSing viewpoints heard.
                              Chapter 3
                              Departmental PI.annI:ng C{)uld Enhance
                              HHS Leadership

Labor Finds Departmental     The Department of Labor has had positive results with its departmental
                             planning process, and we believe such a process could also be beneficial
Planning Beneficial          to HHS. In our management review of Labor, we recommended that the
                             Secretary institute a systematic Department-wide, long-range planning
                             process. l The Secretary established a management system that included
                             long-range planning to develop departmental goals. Our follow-up
                             review showed that, after about 1 year of operation, most of the Depart-
                             ment's managers believed the Secretary's management system had sig-
                             nificantly improved management at Labor. For example, they believed
                             that the Department's ability to identify unit goals and objectives and to
                             establish top agency management commitments had improved. Also,
                             they believed that the basic elements of the system should remain in
                             place even when there is turnover of top Department officials.

                             As evidenced by current and former HHS officials' comments, planning
Past Processes Provide       processes have enhanced departmental leadership, communications,
Foundation for               coordination, and decision making. Based on our analyses of HHS'S plan-
Departmental                 ning processes and discussions with a consultant panel,2 we identified
                             the following key elements for an effective departmental planning
Planning                     process:

                           • The Secretary should be an active participant.
                           • The Secretary should begin the process by communicating his or her
                             goals and objectives. Components should consider those in the context of
                             their own goals and objectives.
                           • The external environment should be reviewed to identify future socio-
                             logical, technological, political, and economic issues and trends that may
                             influence the direction or mission of operations and programs.
                           • External groups should be consulted to help identify the Department's
                             future challenges and issues.
                           • Formal meetings between the Secretary and components' political and
                             career staff should be held to discuss and reach agreement on a small
                             number primary goals and objectives for the Department. These meet-
                                           opportunities                        staff,
                                                    is important to each other.

                             20ur mnsultllnt panel ~'Onsisted former HHS          management officiais. Labor's Director of
                             Personnel, and a planning expert who helped   with its strategic plan.
                Chapter 3
                Departmental Planning Could   Enhan~
                filS Leadership

              • The outcome should be common management and program-oriented
                goals and objectives for the Department, as well as strategies to achieve
              • The planning process should be integrated with the budget process.
              • Everyone should gain something from the process. The components
                should get an orderly decision-making process, access to the Secretary, a
                better understanding of what is on the Secretary's mind, and more coor-
                dination among the Secretary's people. In tum, the Secretary should get
                cooperation, participation, and information from the components.
              • The process should not be intrusive, onerous, demanding, or restrictive
                on those involved.
              • The process should include a component to monitor the Department's
                progress in accomplishing the established goals and objectives.

                Our review of HHS planning processes showed that CAMS contained many
                of the key elements discussed above and could serve as a model for
                developing a departmental planning process. In addition to having been
                used at HHS and being a..'lsociated with various management successes,
                CAMS was used at the Department of the Interior-also with favorable
                results and reviews. In an article that he coauthored, Dr. Lynn com-
                mented that HHS and Interior staff greatly preferred CAMS to what went
                on before.:l He said that "the success of CAMS depended on the credibility
                that only the department's most powerful executive can confer." In
                addition, he noted that "To ensure that bureaus and agencies took CAMS
                seriously, the master eaJendar of CAMS was coordinated with the budget
                process-the one management process taken seriously by all subor-
                dinate units." Appendix III provides a general description of how this
                planning process workpd.

                We believe that HHS and its leadership, management, and staff could
Conclusions     benefit from instituting a departmental planning process. Such a process
                is a key element of an effective secretarial management system. A plan-
                ning process led    the Secretary could help establish goals and objec-
                      for                 and                    to            them.
                             process,                                and decision
                ing among the Depaltment's components could be strengthened.

                                                                      public agencies."
                    Chapter 3
                    Departmental Planning Could Enhance
                    HHS Leaden;ll1p

                    We recommend that the Secretary develop and institute a departmental
Recommendations     planning process to

                  • establish goals and objectives for the future of the Department's opera-
                    tions and the nation's health and human services programs and
                  • develop alternative strategies to accomplish these departmental goals
                    and objectives.

                    We also recommend that the Secretary establish some means to monitor
                    and oversee the progress that the Department makes toward achieving
                    desired goals and objectives.
Need to Maintain an Effective Secretarial
Decision-Making System

                Organizing and managing the os decision-making process is a challenge
                that each Secretary has faced. It is difficult, because the Department is
                responsible for many varied issues that cannot be easily mastered by a
                single person. Furthermore, because many HHS decisions affect broad
                segments of the public, poorly conceived or implemented decisions may
                result in public outcry or embarrassment for the Department.

                We evaluated HHS decision making from two perspectives-process and
                substance. We looked at the process used by Secretary Bowen and previ-
                ous Secretaries to understand how the Department manages the large
                volume of decisions made by the Secretary. To help us understand how
                HHS ensures that the substantive details of decisions are adequately con-
                sidered, we analyzed six policy decisions that confronted the Depart-
                ment during the past decade. These decisions were selected based on the
                suggestions of current and former HHS officials and our objective to
                obtain a balance of successful and less successful decisions. We reviewed
                these decisions to identify both strengths and weaknesses in the sub-
                stantive information and analysis that formed the basis for policy
                ehoices. Our analyses of both the process and the SUbstance of decision
                making were aimed at determining whether the Secretary or other key
                decision makers received appropriate information and analysis to make
                a reasonably prompt decision that would withstand public scrutiny.

                In recent times, the Executive Secretary clearance process has been a
                principal vehicle for managing decision making. The clearance process
                collects the perspectives of various parties about a policy decision facing
                the Department. In general, the process has been effective, but Secretar-
                ies must work to avoid certain problems that can delay decisions or lead
                to less informed ones.

                Our review showed that in making the six policy decisions, the Depart-
                ment generally has handled the substance of policy decisions well by
                considering pertinent information and a variety of alternatives. How-
                ever, two steps         be taken to improve        substantive          deci-
                sion                            that                                  occurs
                and       it occurs in a timely manner and        pretesting the implementa-
                tion strategies for po licit'S involving public education.
                           Chapter 4
                           Need to Maintain an Effective Secretarial
                           Decision-Making System

                           At the core of decision making within HHS is the long-standing Executive
Clearance Process          Secretary clearance process. This process circulates policy proposals to
Generally Works Well,      various parties within the Department and solicits advice for the Secre-
but Several Problems       tary's consideration. The clearance process is an effective way to
                           involve the appropriate parties in departmental decision making and get
Need Attention             support for decisions. However, when misused, the clearance process
                           has led to (1) decisionmakers' not receiving pertinent information avail-
                           able within the Department or (2) delayed decisions.

Clearance Process Helps   The Executive Secretary clearance process is designed to foster
Secretarial Decision      informed decisions that Department officials will support. First, it
                          informs the Secretary by allowing officials throughout the Department
Making                    to contribute their knowledge and perspective to a decision. Second, it
                          garners the Department's acceptance of decisions by limiting the Execu-
                          tive Secretary to presenting an unbiased summary of the different

                          The Executive Secretary clearance process was developed when os
                          became increasingly involved in program decisions and has been used
                          ever since. Secretary Richardson wanted to approve the issuance of reg-
                          ulations, which previously was the responsibility of the operating divi-
                          sions. To do this, he needed a process to manage a large number of
                          diverse decisions. The design of the clearance process mirrored Mr. Rich-
                          ardson's views on decision making:

                          "We did a lot to create this office and to me, it was an invaluable tool of communica-
                          tion .... We eventually worked out a pretty clear understanding of what kind of
                          paper I needed to make clear what the issut' was or issues were to be resolved, and it
                          would have the backup material attached to it, with tabs. If I wanted to, I could go
                          back to the underlying papers. And I used to read them quite a Jot, not all of them.
                          by any means, or all of any given one, but enough so that if I was bothered by some
                          failure of coherence or sufficiency of the evidence to support a proposal or an
                          option, I could look at it and raise questions about it. [ would write in the margins
                          and it had .. , an impact.    people, that the            read that paper, and asked
                                                                  The other

                          The clearance process exposes the decision maker to different views and
                          dimensions of an iSSlH' by allowing those with substantive expertise to
                                                             and             When a policy proposal is

                          PII.ge38                                       GAO/HRD-oo.54 HHS Management Review
                                 Chapter 4
                                 Need to Maintain an Effective St>cn'tarial
                                 Decision·MakIng System

                                presented to the Executive Secretary for clearance, departmental offi-
                                cials with related responsibilities provide written comments. The Execu-
                                tive Secretary collects and summarizes them for the decision maker.
                                Weighing the varying perspectives is the responsibility of the Secretary
                                or other decision maker, not the Executive Secretary.

                                 The clearance process attempts to represent the various views without
                                 prejudice-essentially becoming an "honest broker" of departmental
                                 perspectives. Making sure that views are presented fairly is critical to
                                 both informing the decision maker and gaining acceptance for the deci-
                                 sion. Charles Bonser, a consultant to Secretary Bowen, described how
                                 the process should work:

                                "In all large organizations, the danger exists that requests for information or action
                                flowing either up or down can vanish into what often seems to be a 'black hole' in
                                space. This can be extremely debilitating to both operations and morale. It is the
                                responsibility of the Executive Secretary to make sure this doesn't happen.

                                "As part of his organization. the Executive Secretary has several functional area
                                specialists to facilitate dealing with the operating divisions in a knowledgeable man-
                                ner. While this capability is necessary, the area specialists need to be sensitive to
                                the fact that they are not thl:'re 1.0 make policy or management decisions for the
                                operating divisions or the SI:'(Tetary. They are there as expediters and information
                                gatherers. They must also bl:' careful not to over-filter the policy information reach-
                                ing the Secretary. "

Clearance Is Ineffective        The clearance process appears to be an effective tool for managing Sec-
When Misused                    retarial decisions. However, we noted four problems that resulted in
                                delayed decisions or decision makers not receiving pertinent information
                                available within the Department:

                              • Using the process to force compromise between components.
                              • Allowing advisory bodies to make decisions without considering clear-
                                ance comments.
                                                                    in the                    process.

Clearance Process Generally     Senior managers of the Department generally perceive most aspects of
Working Well                    decision making to be working well. About 86 percent believe that the
                                Executive Secretary carries out its responsibilities adequately or better.
                                When we asked their           about specific aspects of          manage-
                                ment, 83 percent said that os generaHy involves the appropriate ""Q,U--
                             Need to Maintain an Effective Secretarial
                             Decililou-MakiIlg System

                            more dissatisfaction with the speed of decision making, with 36 percent
                            in total reporting "poorly" or "very poorly" when asked to evaluate OS
                            effectiveness at making decisions in a timely manner. Some delays
                            appear to be caused by misuses of the clearance process, which are dis-
                            cussed below.

Forcing Compromise Delays   Effective use of the clearance process requires some means of resolving
Decisions                   disputes. According to several HHS officials, disputes were rarely raised
                            to the Secretary or the Under Secretary for resolution during the terms
                            of Secretaries Heckler or Bowen. Instead, disputes were resolved at
                            lower levels through extensive negotiations or repeated clearance until a
                            compromise could be reached. In certain cases, compromise could not be
                            reached and HHS action was delayed.

                            For example, action on an FDA regulation was delayed 14 months
                            because components ('ould not agree on the action to be taken. E"DA had
                            proposed several regulations to label drugs and foods that used sulfites,
                            because this preservative appeared to be life-threatening to certain indi-
                            viduals. For one proposal to label drugs containing sulfites, ASPE said the
                            scientific evidence was insufficient to warrant regulation. FDA believed
                            there was sufficient evidence, citing reports in the medical literature
                            that certain individuals were experiencing serious, often life-threatening
                            reactions, such a.'5 respiratory arrest and coma, after ingesting food and
                            drug products containing sulfites. Memos went back and forth outlining
                            their differences. Eventually, the dispute was aired in a 1985 congres-
                            sional hearing that portrayed FDA as a "sleeping government watchdog"
                            and criticized ASPE for inappropriately involving itself in the scientific

                            Another dispute during Secretary Heckler's term resulted in a court
                            finding that the Department had moved too slowly in acting on a per-
                            ceived public health threat. In the spring of 1983, FDA proposed a ban of
                            interstate sales of raw milk A number of individuals had become ill and
                                       died                                          the seriousness
                                                                ban                            raw milk
                            were               Two years          while the Department debated
                            differences of opinion. Finally, a court order forced HIlS to decide one
                            way or the other. ruling that the Department had unreasonably delayed
                            its decision on this matter. Ironically, HHS decided not to ban raw milk
                            sales but was again sued. A second court ruled that the Department had
                                        '~HJ~VA.' and ordered the Department to promulgate a regula-
                                                      sales of raw milk. The      regulation was pub-
                                Chapter 4
                                Need to Maintain an Effective Secretarial
                                Decision-Making System

                                In both of these examples from Secretary Heckler's term, there were
                                honest differences of opinion about the desirability of regulating. Such
                                differences were not promptly arbitrated by the Secretary and resulted
                                in decision delays.

                                During Secretary Bowen's term, differences of opinion on policy propos-
                                als continued to be negotiated or resolved through repeated clearance.
                                Senior departmental officials commented that they would prefer the
                                Secretary to be more involved in resolving departmental disputes. In
                                commenting on the practice of repeated clearances under Bowen, one
                                operating division manager said, "The OPDIV [operating division] must
                                resolve conflicting comments provided by os components and then Exec
                                Sec [Executive SecretarYl circulates the letter/regulation again. Only
                                after everyone agrees can the package be sent to the Secretary."
                                Another manager commented, "The Executive Secretary requires end-
                                less clearing and reclearing of reports to Congress ... even when only
                                minor changes are made."

Clearance Not Integrated With   The changes that Dr. Bowen made in the Secretarial decision-making
Advisory Bodies                 process were not well integrated with the clearance process. As a result,
                                his advisors did not conSistently have access to a variety of perspectives
                                when evaluating decision options.

                                Dr. Bowen established a structure that divided power between his
                                Under Secretary and his chief of staff in order to integrate better the
                                Department's activities and to reduce the number of issues that would
                                come to his attention. The Under Secretary and the chief of staff chaired
                                separate councils of staff division leaders-one for policy, the other for
                                management. Dr. Bowen generally did not attend council meetings, but
                                he did have daily joint meetings with the Under Secretary and the chief
                                of staff to be advised on departmental matters.

                                One problem with the council structure was that members did not
                                        have the          of           comments when deliberating
                                                                   council meetings were generally con-
                                fined to senior staff members only, and staff that knew details about
                                issues being discussed did not usually participate. As a result, the infor-
                                mation presented to council members was sometimes incomplete. For
                                example, one Assistant Secretary serving on the Management Council
                                                          to a proposed reorganization of one compo-
                                            'HHn",.u structure discussed    a         session. When
                                                                         he          it ~~~,uU.J'-
                                 Chapter 4
                                 Need to Maintain an Effective Secretarial
                                 Decision·Malting System

                                realized that increased costs were involved-a fact not disclosed at the
                                council meeting but made apparent when his staff reviewed the clear-
                                ance package.

Clearance Late in Regulatory    The clearance process can be used to give guidance for developing regu-
Development Can Slow Decision   lations or to review a proposed regulation after it has been developed. In
Making                          recent times, os has tended to use clearance to review a proposed regula-
                                tion without having provided earlier guidance for its development. As a
                                result, major disagreements have occurred late in regulatory develop-
                                ment, causing delays that might have been avoided by earlier

                                Currently, as gets its first detailed look at the content of most regula-
                                tions when a proposal comes for clearance. Such a process works fine
                                when there is agreement on the proposal, but when offices disagree,
                                delays can result. For example, late intervention by os contributed to
                                delaying the tampon absorbency labeling regulation. FDA sent a draft
                                proposal to OS after developing its position over 4 years. ASPE disagreed
                                with FDA'S approach, and 6 more months went by while the differences
                                were negotiated. Had FDA had an earlier understanding of os's policy
                                preferences, the regulation might have been issued sooner.

                                However, even when it has tried to give early guidance, the Department
                                still has had to resolve controversial policy issues late in development.
                                For early guidance to speed action, the decision makers must under-
                                stand the issues involved when they give direction. Decision makers
                                may not, however, immediately understand all of the issues involved in
                                a regulation being developed. When they do not, even early guidance
                                may not help. For example, the Policy Council gave the Family Support
                                Administration early direction on a regulation being developed to imple-
                                ment State Legalization Impact Assistance Grants. When the Policy
                                Council met, it did not consider a key issue that ultimately would need
                                to be decided-the distribution formula to be used to award grants to
                                states. As a                                               to the

                                       late in      development. The      regulation was
                                than 6 months after the program was to begin.

                                In 1988, the IG reviewed the development of HHS regulations and recom-
                                mended earlier OS guidance to help speed the regulatory development
                                process. It found that early os involvement occurred in some high-prior-
                                                                       ",,,,rt:>m to       such

                                Page 42                                      GAO/HRD-9Q.54 HHS Management Review
                            Chapter 4
                            Seed to Maintain an Effective Secretarial
                            Decision.Making System

                            Weinberger, used the clearance process to provide guidance to operating
                            divisions developing regulations. Secretary Califano used regularly
                            scheduled meetings of key os and operating division officials to provide
                            earlier guidance. As one present operating division official said, "The
                            agreements on what regulations are needed and why should be made
                            before the regulation is written-not during the clearance process."

Allowing the System to Be   On occasion, departmental officials have attempted to circumvent the
Bypassed                    clearance process to get a quick or favorable decision. Such end runs
                            have caused implementation problems.

                            For example, Secretary Bowen expanded the responsibilities of E/HS'S
                            regional directors for a brief time, then rescinded those responsibilities
                            after realizing the initial policy proposal was incomplete. This initiative
                            was sponsored by the Deputy Under Secretary, who went directly to the
                            Secretary for a decision. It had not been considered by the Policy Coun-
                            cil, the Management Council, or the clearance process. In studying the
                            effects of the change after it had been in place for several months, the
                            Management Council found the expanded authorities overlapped with
                            authorities of regional operating division heads. Secretary Bowen
                            rescinded the extra regional director responsibilities following the Man-
                            agement Council study.

                            Another decision during Secretary Bowen's term involved "revitalizing"
                            the PHS Commissioned Corps. The Surgeon General proposed that the
                            Corps report to him and that members be required to accept routine
                            reassignment so HHS could deal more effectively with health crises. The
                            proposal was adopted by HHS without going through clearance and
                            before scheduled Management Council deliberations.

                            Implementation of the decision to revitalize the Corps resulted in prob-
                            lems because certain implications of the change were not well consid-
                            ered. For example, in recent years, certain features of the Commissioned
                                    such as early retirement, have       used as a way of making
                            federal service more attractive to <W1Annc,rc ,,~'UUU6''''6
                                                                      to attract and retain "'-'"H'"''''~'''''
                            had the potential to weaken recruitment and retention, especially for the
                            Centers for Disease Control, FDA, and the National In.''ltitutes of Health.
                            Yet the proposal was not presented to the head of the Centers for Dis-
                            ease C{)ntrol and went to the National Institutes of Health for comment
                                hours before it was            adopted.
                            b~'gan to make           to the
                         Need to Maintain an Effective Secretarial
                         Decision-Making System

                         from senior Corps officials eligible for retirement-he confronted seri-
                         ous opposition, particularly from the National Institutes for Health,
                         which had 34 such officials serving as senior scientists or

                         A policy process can only be as good as the information and analysis
Managing the             that goes into it, which represents the substance of a decision. To better
Substance of Policy      understand how HHS manages the substance of decision making, we
Decisions                reviewed six decisions that it made in the last decade.

Strengths of Decision   The decisions we studied showed that HIrs has used a variety of tech-
Making                  niques that strengthened substantive aspects of decision making, includ-
                        ing (1) having secretarial involvement, (2) filling information voids,
                        (3) considering a variety of alternatives, and (4) using staged decision
                        making. As discussed below, these ingredients seemed to help the
                        Department make speedier and better informed decisions.

                         i<lrst, the most sensitive and significant decisions typically get special
                        treatment and sometimes personal involvement by the Secretary. Secre-
                        taries tend to convene special task forces or groups to manage the most
                        significant or sensitive policy decisions. This special treatment or per-
                        sonal involvement by the Secretary seemed to speed decision making.
                        For example, Secretary Schweiker, the HCFA Administrator, and the
                        Assistant Secretary for Planning and Evaluation Were directly involved
                        in developing the Prospective Payment System Medicare legislation. The
                        Secretary used several task forces to develop alternatives and to draft
                        the final legislation. The Assistant Secretary and HCFA'S Administrator
                        worked intensively on developing the regulations. These complex regu-
                        lations were developed within 6 months.

                        syndrome and tampon absorbency prompted HHS to begin an active sur~
                        veillance study to better understand it. Similarly, PHS has conducted or
                        funded a series of t~pidemiological and medical studies to develop infor-
                        mation to help control the spread of AIDS. Also, FDA asked an indepen-
                        dent        to                 as                      }'[)A learned

                        Page 44                                      GAO/HlID-90-1S4 HHS MlI.ruI.gement Review
Chapter 4
Need to Maintain an Effective Secretarial
Decision-Making System

sulfites could be fatal to some people. In these cases, HHS officials identi-
fied the information voids that created uncertainty about the dimen-
sions of a problem and tried to improve their information.

Third, senior managers generally believed that the Department consid-
ers reasonable alternatives before a final decision is made. About 38
percent said this aspect of decision making is done well to very well, and
another 45 percent find it handled adequately. We agree. In each case
we reviewed, except in the case of the Baby Doe regulation to be dis-
cussed later, reasonable alternatives were considered. For example, PHS
considered several options to respond to the potential threat of the
blood supply being contaminated by the human immunodeficiency virus,
which causes AIDS. Their alternatives ranged from taking no action to
requiring blood banks to test blood for other infectious agents that AIDS
patients might have. PHS settled on an intermediate course and required
blood banks to educate donors in high-risk groups to avoid donating
their potentially contaminated blood. I1HS rapidly implemented screening
for the human immunodeficiency virus as soon as a test became

Fourth, when faced with uncertainties, departmental officials have
tended to use staged decision making. More than 10 years ago, after
reviewing the Department's response to a potential swine flu epidemic,
we concluded that HHS could better manage situations of scientific uncer-
tainty by separating decisions into components and systematically
reevaluating what should be done as more information becomes availa-
ble. Our current analysis of several cases-blood donor guidelines, sul-
fites, and tampon absorbency labeling-showed HHS applying such a
strategy. For example, in 1980, HIlS was confronted by a newly identi-
fied disease-Toxic Shock Syndrome-that was causing sudden death
of healthy young people. Early indications showed that among young
women the disease was linked to the use of tampons. There was limited
scientific evidence that indicated the use of more absorbent tampons
           risk. FDA first                           labels on tampon
            the initial findings, so FDA later promulgated a second, more
detailed regulation to prescribe (1) the scientific measure for tampon
absorbency and (2) the package labeling that would allow consumers to
compare absorbency among products.
                             Need to Maintain an Effective Secretarial
                             Decision-Making System

Weaknesses in Substantive   The decisions we studied showed that HHS made inappropriate or
                            unnecessarily late decisions when it (1) did not effectively consult with
Decision Making             external parties having interest in the policy under consideration and
                            (2) designed policy proposals using public education strategies without
                            pretesting their effectiveness_

Obtaining Timely Outside    Three of the decisions we examined illustrate the importance of
Consultation Crucial        obtaining outside consultation on proposed public policy decisions in
                            HHS_ In one case-Baby Doe-outside parties such as hospitals and phy-
                            sicians were not consulted, and they successfully overturned two ver-
                            sions of the Baby Doe regulations. In a second case-tampon absorbency
                            labeling-HHs sought voluntary action on the part of tampon manufac-
                            turers. The effort led to a stalemate that FDA neither negotiated to settle-
                            ment nor cut off. As a result, the regulation was delayed for several
                            years. In the third ca...,e-the Prospective Payment System for Medi-
                            care-HHS effectively consulted with hospitals and the Congress and
                            won support for its legislative proposal to revise Medicare payments.

                            HHS did not consult with outside parties on the Baby Doe case because it
                            had clear marching orders from the White House. President Reagan
                            reacted disapprovingly when he learned about an Indiana baby with
                            Down's Syndrome who died after being denied life-saving surgery. Sec-
                            retary Schweiker was directed to prevent further cases of handicapped
                            newborns from being denied treatment. Citing the life-threatening cir-
                            cumstances, HHS issued an interim final regulation requiring hospitals to
                            treat medically handicapped newborns. It used section 504 of the Reha-
                            bilitation Act of 1973, a civil rights law, as its legal basis for issuing the
                            regulation. Organized hospital and medical groups were not consulted
                            about the regulation.

                            The hospitals and medical groups found the regulation to be overbearing
                            and objected to (1) posting of signs they considered to be offensive in
                            newborn nurseries, (2) a federal telephone "hot-line" set up to solicit
                                                                      care that hospitals

                                           teams that            believed could interfere with patient
                            care. These groups successfully challenged the Department's failure to
                            follow administrative procedures when it published the regulation in
                            final rather than proposed form. HHS wrote another version, this time as
                            a proposed regulation. which external groups continued to oppose. The
                            ~upreme Court overturned the second regulation, ruling that the Depart-
                            ment          a           b~~"lis to

                                                                         GAOjHRD-90-M HHS Marutgement Review
Need to Maintain an Eff~t1ve Secretarial
Decision.Ma.Idng System

A policy to prevent medical neglect of infants was finally developed by
the Congress and successfully implemented by HHS. Several congressmen
and congressional committee staff consulted with interested groups to
develop the Child Abuse Amendments of 1984. These amendments
required that states receiving grant funds under the Child Abuse Pre-
vention and Treatment Act must establish procedures to respond to
reports of medical neglect of infants. HHS made more concerted efforts to
elicit the viewpoints of hospitals, medical providers, and handicapped
and right-to-life advocates to develop the implementing regulations for
this law. According to an IG study, these amendments appear to have
focused attention on the needs of severely disabled infants with life-
threatening conditions.

In a second case, tampon absorbency labeling, FDA consulted with manu-
facturers and consumer representatives but set no limits on the amount
of time to devote to external consultation; as a result, its rulemaking
was seriously delayed. FDA was willing to abide by voluntary agreements
reached by manufacturers and consumers as long as they met FDA'S reg-
ulatory goals. Rather than begin rulemaking, FDA initiated a task force
composed of manufacturers and consumer representatives in January
1982 to develop, among other things, a voluntary labeling scheme. Fun-
damental disagreements among the task force members surfaced within
a year. Manufacturers could not agree on a labeling scheme that would
be fair to all.

FDA started rulemaking in June 1984, after concluding that the volun-
tary effort had failed. In January 1986 correspondence to FDA, one major
manufacturer proposed a labeling scheme it would use voluntarily. FDA
stopped its rulemaking while it tried to get other manufacturers to
accept this proposal and avoid regulation. They refused because they
felt the proposal favored one manufacturer over others.

In December 1986, the Commissioner of FDA concluded that the second
voluntary effort had         and ruiemaking was restarted, FDA pub-
       its                          in             1988              com-
ments that argued       standardizing or eliminating existing absorbency
terms. As a result of these comments, l"DA proposed a different regula-
tion in June 1989, more than 7 years after the effort to label tampons
for absorbency began. Had FDA set reasonable limits on the time allowed
to achieve compromise, this regulation could have been issued sooner.
                                  Need to Maintain an Effective Secretarial
                                  Decision-Making System

                                  Through a task force and meetings with key interest groups, Secretary
                                  Schweiker brought outside ideas about Medicare prospective payment
                                  into the Department. Through these outside contacts, he became enthu-
                                  siastic about the idea of using diagnosis related groups as a method of
                                  payment. Although this payment method had been developed through
                                  HGF'A research grants, many of the HHS staff working on developing the
                                  Prospective Payment System proposals preferred other mechanisms to
                                  adjust hospital payments. Secretary Schweiker oVt~rrnled them after
                                  having been convinced that this method met his goals. The prospective
                                  payment system proposed by HHS won widespread support, and legisla-
                                  tion was enacted very quickly.

Pretesting Education Strategies   In two cases where HBS chose a public education strategy, we believe
Could Improve Effectiveness       pretesting the strategy could have improved the decision. Particularly
                                  for public health issues, HHS often needs to influence personal choice to
                                  improve health outcome. This may take the form of labeling a product
                                  or warning the public of a potential danger. In two cases in which HHS
                                  used warnings or labels-blood donor deferral guidelines and tampon
                                  absorbency labelS-Hils did not pretest them for understandability.

                                  1. HHS reacted quickly to protect the blood supply from AIDS, but we
                                  believe its action might have been improved by pretesting. HHS instituted
                                  an education process called donor deferral to request that potential
                                  blood donors avoid donating blood if they were members of groups at
                                  highest risk of the disease. Many respected members of the blood-
                                  banking industry questioned whether anything needed to be done at all
                                  when there appeared to be only a handful of cases that could possibly
                                  be traced to blood products. But the Centers for Disease Control team
                                  was convinced the disease was being transmitted through the blood sup-
                                  ply. PHS issued guidelines for blood banks to use, outlining those groups
                                  being asked to defer their donations. However, these guidelines were not

                                  h01TIO:SCJl:uals who had "multiple" sexual partners to     their dona-
                                  tion. "Multiple" proved to have different meanings to different people.
                                  Furthermore, some men who had sex with other men did not consider
                                  themselves to be homosexual. As a result, some men engaging in high-
                                  lisk behavior continued to donate blood. HHS recognized that the guide-
                                                                   made them more specific       years
              Chapter 4
              Need to Maintain an Effective Secretarial
              Decision-Making System

              2. In September 1988, HHS proposed a rrue that would require tampon
              manufacturers to label the absorbency level of their products. Since
              higher absorbency tampons are associated with greater risk of develop-
              ing Toxic Shock Syndrome, FDA wanted tampon packages to be labeled in
              a way that would (1) inform consumers of the risk, (2) advise them to
              use the least absorbent tampon possible, and (3) enable them to compare
              the absorbency of different products. rnA considered several labeling
              alternatives, some of which were more burdensome to manufacturers
              than others. FDA did not pretest the alternative labeling schemes for con-
              sumer understandability and chose an alternative that would require at
              least one manufacturer to reformulate its product line. Comments that
              FDA received from consumers and manufacturers on this proposed regu-
              lation contended that the proposed labeling scheme would be confusing
              and could mislead consumers and argued that FDA should standardize or
              eliminate eXisting absorbency terms. rnA responded to these comments
              in June 1989 by issuing a different proposed regulation with a new
              labeling scheme. Thus, a result of not pretesting was that FDA chose an
              approach that consumers found confusing rather than informative and
              further delayed uniform tampon labeling.

              The clearance process is a good design for making informed decisions
Conclusions   that can withstand the test of time and legal challenge. But several steps
              need to be taken to improve its effectiveness: (1) have the Secretary
              resolve disputes that arise in clearance rather than forcing compromise,
              (2) integrate the clearance process with standing committees or other
              decision mechanisms that are used in the Department, (3) provide guid-
              ance early enough in decision making to avoid policy reversals late in
              the development stage, and (4) avoid bypassing the process.

              Based on the decisions we reViewed, HHS generally makes good use of the
              information and analysis available to support its decisions. HHS'S
              dedsion-making process has worked best when there has been high-level
              involvement, when the Department has worked to fill
                      considered a                        and       it used ~M';"''"'U
              sion         to cope with
              making process has not worked as well when (1) external parties have
              not been consulted effectively and (2) public education strategies have
              not been pretested.
                    Chapter 4
                    Need to Maintain an Effectivt' Secretarial
                    Decision·Making System

                    We recommend that the Secretary use the Executive Secretary clearance
Recommendations     process as the key vehicle for managing decisions and enhance its effec-
                    tiveness by

                  • establishing some means to resolve significant disputes promptly, such
                    as setting deadlines for when unresolved disputes will be referred to the
                  • integrating the clearance process with standing councils or other deci-
                    sion mechanisms used in the Department;
                  • using the clearance process to provide early guidance on significant
                    issues; and
                  • preventing individuals from circumventing the process.

                    We recommend also that the Secretary take steps to ensure that the
                    Department consults in a timely manner with appropriate external par-
                    ties having an interest in the policy being considered and pretests those
                    policies that involve public education strategies.
Establish Clear Lines of Authority
and Accountability

                       Effective leadership of HHS depends on departmental teamwork-the
                       capacity of operating and staff divisions to work together in a support-
                       ive and cooperative environment-and adequate accountability. The
                       Secretary can foster such teamwork by establishing clear lines of
                       authority so that each member of the team knows his or her job and can
                       promote accountability by monitoring and overseeing the performance
                       of departmental programs and administrative activities that have been
                       delegated to others to manage. In recent years, the lines of authority
                       have been unclear and confusing to the Department's leadership team,
                       and Secretaries have not given enough attention to overseeing and moni-
                       toring the performance of the Department's programs and administra-
                       tive activities delegated to others to manage.

                       In the HHS environment effective leadership is easy to characterize but
Key Organizational     difficult to accomplish. To be effective, the Secretary needs to create
Ingredients of         teams within the organization. Former Secretary John Gardner put it
Effective Leadership   succinctly: "The concept of a single leader is an illusion .... the really
                       effective people are the folks that build their inner team ... " Teamwork
                       is essential because the Secretary can do little alone. By getting the
                       Department working together, the Secretary can magnify his or her
                       sphere of influence.

                       Creating loyal and supportive teams can be difficult for a Secretary who
                       does not control the appointment process. In recent years, the Reagan
                       White House held tight control over subcabinet appointments, some-
                       times making the political credentials of candidates a more important
                       consideration than their potential to help buHd a leadership team and
                       manage the Department. Sometimes, the political leanings of one
                       appointee were offset by the differing views of another to create a cer-
                       tain political balance in the team. For example, "moderate," Eastern Sec-
                       retaries Schweiker and Heckler were paired with "more conservative,"
                       Californian Under Secretaries Swoap and Svahn. However, the result of
                              pairings      be             and even distmst among
                       mental            In this                              of
                         qrf'narl leadership teams, even at the :-';""'rA1r,,

                       is "a rare piece of serendipity, in the words of a former llIIS chief of

                       In this environment, the Secretary must do all that's possible to foster
                       ertectlve teamwork. Research shows that organizationai leaders can be
                       most           when                                  and ,.Lu>"",.ywih;l

                                                               GAO/HRD-OO-1)4 HHS Management Review
Chapter 5
Establish Clear Lines of Authority
and Accountability

of their subordinates and (2) extend trust, respect, and access to subor-
dinates to enable them to carry out their duties. In discussions with us,
Hale Champion, the Under Secretary to Secretary Califano, emphasized
that he enjoyed substantial power and influence while at HHS because he
had both the official position as the departmental deputy and the infor-
mal confidence, trust, and respect of the Secretary. In this case, Secre-
tary Califano was allowed to pick his Under Secretary and the two were
reputed to be among the best-matched and effective leadership team,
maintaining close communication and coordination.

Just defining what is expected of those officials to whom authorities
have been delegated is not enough. The Secretary must assure that the
day-to-day practices of these officials also conform with established
expectations. Consequently, the Secretary needs to have formal or infor-
mal ways to assure that departmental activities and programs being
managed by subordinates are working effectively and efficiently.

In a 1987 article on management lessons of the Irangate scandal, Peter
F. Drucker, a prominent management expert, commented on the impor-
tance of chief executives being informed. He said that former President
Franklin D. Roosevelt was the greatest delegator in recent American
political history and always stipulated when and how cabinet members
were to report back. President Roosevelt demanded that his subordi-
nates immediately inform him of the slightest deviation from plans. "He
knew, as every chief executive officer learns sooner or later, that there
are no 'pleasant surprises. ' "

A former Secretary and Under Secretary of HHS also stressed this impor-
tant concept of staying informed about ongoing activities. Former Secre-
tary Gardner said that one of his key management strategies was to
watch for the things that go wrong. He stressed that cabinet secretaries
must view themselves as responsible for everything happening within
the agency. In his words, "You [Cabinet Secretaries] are not getting all
    prestige and status for nothing.     are getting it    keeping things

Champion also           his views about the need to oversee and monitor
the ongoing Department's activities and programs rather than focusing
exclusively on policies. He said he Ilsed to say to his top-level managers,
"You've got just as mueh responsibility for the children already born
[ongoing activities and programs] as the ones to come [policy initiatives].
     anybody who wants to                                         to
stand that those are two                           "
                            Chapter 5
                            Establish Clear Lines of Authority
                            and Accountability

                            Secretaries of HHS typically have retained authority for policy leader-
Greater Accountability      ship matters and delegated authority to others for running departmental
Needed for the              programs and administrative activities. Good management practices dic-
Operation of                tate that such delegation be accompanied by an accountability strategy
                            to assure that both programs and administrative activities are managed
Departmental                efficiently and effectively. While some Secretaries before the 19808 used
Activities and              a variety of means to monitor and oversee activities that they delegated
Programs                    to others to manage, more recent Secretaries have used few formal or
                            informal means to keep them informed about these matters.

Delegation Requires         In an organization with as many diverse activities and programs as HHS,
Accountability              no one person can do all the tasks necessary to accomplish the organiza-
                            tion's mission. Consequently, the Secretary must share authority with
                            his or her subordinates. This decentralization must be accompanied by
                            adequate accountability, so that Secretaries can assure themselves that
                            the Department's activities and programs delegated to others to manage
                            are being managed efficiently and effectively. Such accountability could
                            be formal-such as through routine reporting systems to monitor the
                            performance of key programs and administrative activities. Or it could
                            be informal-such as through routine one-on-one meetings with top-
                            level operating and staff division officials, and meetings with key per-
                            sons and organizations outside HHS, such as governors and public inter-
                            est groups.

Little Accountability and   Recent Secretaries have given insufficient attention to overseeing pro-
Control of Delegated        grams and administrative activities delegated to others to manage. Our
                            survey of HHS'S managers and senior staff, interviews with current and
Authorities                 former high-level officials, and past studies of HHS indicate that os's
                            oversight of departmental activities and programs is weak and that few
                            formal or informal means have been used to foster accountability.

                            was                                                 poor          poor
                            job determining how well programs or functional areas were being man-
                            aged, determining program effectiveness, identifying specific program
                            strengths and weaknesses, and correcting identified program weak-
                            nesses. Nineteen percent believed os was carrying out these responsibili-
                            ties weU or very well.

                            According to                                        and current
                                   has                           means to monitor

                            Page 53                                        GAOjHRD-90-54 HHS Management Review
Chapter 5
Establish Clear Lines of Authority
and Accountability

programs and administrative activities. A former Under Secretary said
that, for at least the last dozen years, it has been very unclear who
within os is to evaluate organizational efficiency. He said that it takes
place a good deal less than it should. A 1976 internal study of the
Department's organization reported that management control and
accountability were not clearly distinguished or focused in os's organiza-
tion. The study conduded that the absence of clear accountability for
managing cross-cutting issues was at the crux of the Department's man-
agement problems and needed to be more thoroughly addressed.

Also, the 1983 President's Private Sector Survey on Cost Control, other-
wise known as the Grace Commission report, found a lack of accounta-
bility in HHS'S organizational structure. The Commission recommended
that an executive committee be established to, among other things,
report problems, sensitivities, and achievements to the President and
Secretary rapidly. More recently, a high-level official from Secretary
Bowen's term said there was no way to measure progress or hold man-
agement accountable for the lack of progress. The official said that,
although some former Secretaries had good agendas and a system to
hold people accountable for achieving progress, the structure of os pre-
cluded effective accountability and measurability.

In addition to having few formal accountability strategies, recent Secre-
taries have used few informal means to keep apprised of departmental
matters. Secretary Bowen had meetings once a week with the Depart-
ment's senior staff. However, an official attending these meetings said
that controversial issues were seldom raised or openly discussed with
the Secretary. The Secretary also had daily meetings with both the
Under Secretary and chief of staff. Other high-level Department offi-
cials, however, did not have this opportunity. Several of these officials
said that they and others did not have adequate access to the Secretary.
Similar comment,,; wpre made about access to Secretary Heckler. The
Grace Commission also reported on the need for operating divisions to
be                to               and os so that ",,,,nl'Y1"'nlca,tlG,n
                                             more n.or""""

At the beginning of Secretary Bowen's term, few means were available
within OS for monitoring and overseeing how well key departmental pro-
grams and administrative activities were working, Early on, a "morning
mail" system was developed to inform the           and key officials
      senior officials'                                          and
                        Chapter 5
                        Establish Clear Lines of Authority
                        and Accountability

                        major developing issues. Later, a system for tracking the status of regu~
                        lations and reports to the Congress had been established. In addition, the
                        Office of the Inspector General was relied upon as a key source of infor~
                        mation for program evaluation and compliance matters. The establish-
                        ment and use of these techniques were a positive step toward helping
                        the Secretary oversee and monitor the Department's programs and
                        administrative activities. But more formal or informal means are needed
                        within os in order to provide effective accountability.

Ineffective Oversight   HHS has been lucky not to have been confronted with the problems and
                        negative national attention that other federal entities recently have
Can Lead to Public      received as a result of insufficient oversight and monitoring. As noted in
Embarrassment           chapters 1 and 2, management of HHS'S activities and programs is highly
                        decentralized, with many programs being administered by state and
                        local governments and third-party contractors. Without sufficient moni-
                        toring and oversight of its activities and programs, HHS is vulnerable to
                        the types of problems experienced by the Department of Housing and
                        Urban Development and the Internal Revenue Service. The following
                        case provides one example within HHS of how poor management within
                        one component and inadequate secretarial oversight can lead to undesir-
                        able and unnecessary consequences.

                         In 1986, because of poor performance and limited oversight of its activi-
                        ties, HHS'S Office for Civil Rights was subjected to congressional investi-
                        gation, media attention, and employee complaints. A congressional
                        committee had found, among other things, excessive delays in the
                        office's handling of discrimination complaints and violations of federal
                        travel regulations and laws by the office's director. To correct these
                        shortcomings, the committee recommended in April 1987 that the Office
                        for Civil Rights establish a tracking system to routinely monitor the
                        progress of discrimination cases and that os establish controls over the
                        domestic and foreign travel of its senior managers to eliminate the
                                   for       and abuse,
                             tagement review
                        identified several management weaknesses and made several recommen-
                        dations, including implementing an effective performance monitoring
                        system and strengthening secretarial oversight. Similar poor manage-
                        ment within and oversight of the office's activities during the 1970s had
                        led to a backlog of discrimination complaints, several lawsuits, and
                        court-imposed time            for investigating complaints     completing

                        Page 1>5                                 GAO/HRD-90·f)4 HHS Management Review
                        Establish Clear Lines of Authority
                        and Accountability

No Single Approach to   There is no one way to foster accountability among HIiS'S leadership
                        team, but to succeed, some conscious strategy must be followed. Past
Foster Accountability   Secretaries have used various means to oversee and monitor the Depart-
                        ment's activities and programs that they delegated to others to manage.
                        For example, some Secretaries relied heavily on regular one-on-one or ad
                        hoc meetings with key headquarters and regional officials to gain infor-
                        mation on how efficiently and effectively programs were being con-
                        ducted. Others relied on more formal means for monitoring the pulse of
                        the Department. For example, Secretary Califano used service delivery
                        assessments to determine how well certain programs were working.
                        Other Secretaries established performance monitoring and reporting
                        systems, such as the Planning, Program, and Budgeting System and
                        Management-by-Objectives, to obtain key information about what pro-
                        grams were accomplishing. Under these systems, the Secretaries and
                        their staff held periodic meetings with responsible managers to assess
                        their progress in accomplishing departmental goals and objectives and
                        held them accountable for specific accomplishments.

                        Unclear lines of authority have hampered the Secretary's ability to
Unclear Lines of        establish a strong leadership team that can work together to accomplish
Authority Weaken        departmental goals. The introduction of a chief of staff into the leader-
Departmental            ship team has confused responsibilities among senior officials within the
                        Department and deprived certain officials of access to the Secretary. In
Leadership              addition, the roles and responsibilities being exercised by the Depart-
                        ment's senior officials do not match current mission and function state-
                        ments, thereby confusing the assignments and responsibilities of various
                        team members within the Department.

Chiefs of Staff Have    Since 1981, Secretaries of HHS have appointed chiefs of staff as informal
Weakened HHS's          deputies to help run the Department. The chief of staff has weakened
                        the effectiveness of the HHS leadership team for two reasons. First, the
Leadership Team                        has                          in a   departmental
                                                <Uli:J"1'ilU::U roles

                        Department. Second, the chief of staff has decreased the accessibility of
                        other departmental leaders to the Secretary, thereby diminishing
                        ( 1) their opportunity to further their understanding of the Secretary's
                        goals, which affects their success in achieving these goals, and (2) their
                        ability to report back about potentia] problems.

                        Page 56                                 GAO/HRD-oo.o4 HHS Management Review
Chapter 5
Establish Clear Lines of Autbority
and Accountability

assistant with whom he had worked for years. His Under Secretary
never gained the same degree of trust. Secretary Heckler continued the
use of a chief of staff as a way of coping with an Under Secretary not of
her choosing. Secretary Bowen was able to choose his Under Secretary,
but he too appointed a trusted individual with whom he had previously
worked as his chief of staff.

Compared to other high-level officials in the Department, the chief of
staff position has little formal structure or specified duties. The position
is not specified in statute, nor is the incumbent approved by the Senate.
There is no mission and function statement formalizing the responsibili-
ties of this office. The position description indicates that the incumbent
reports directly to the Secretary and is assigned very broad duties and
responsibilities in a wide range of departmental matters.

Despite the lack of formal structure to the position, chiefs of staff have
had the trust and backing of the Secretary and have exerted extensive
influence in an ad hoc way over departmental matters. Generally, each
chief of staff has played a key role in filling departmental vacancies.
Chiefs of staff have also been principal policy advisers, involved in top-
level departmental discussions. Dr. Bowen's chief of staff also played an
increasingly public role, giving speeches and testifying before congres-
sional committees. One former chief of staff pointed out that he did not
need formal structure because he had the unfailing backing of the Secre-
tary should a dispute arise. Another said in retrospect he thought he
had wielded too much power.

As chiefs of staff have involved themselves in an ad hoc way in depart-
mental matters, the responsibilities of other departmental officials have
been undercut. The actions of the chiefs of staff have impinged most
directly on the Under Secretary, who is designated by law as the deputy
of HHS. The chiefs of staff have reported to the Secretary but not
through the Under Secretary, creating a de facto situation of two princi-
             in the                    the                  whose

          by virtue of his relationship with the           Many the
Department's managers believe it is undesirable to have both an Under
Secretary and a chief of staff, citing redundancy of responsibility,
unclear lines of authority, and conflict between the incumbents.

Other key leaders have also found that the chief of staff's responsibili-
   have              with their own. For ,"fioc'''-U'fJH~

                                         GAO/JmD..90-54 HIlS Management Review
                         Establish Clear Lines of Authority
                         and Accountability

                         Bowen's tenure, the chief of staff was assigned responsibility for coordi-
                         nating departmental management, but the Assistant Secretary for Man-
                         agement and Budget had the official authority delegated from the
                         Secretary to direct the Department's administrative and financial man-
                         agement. Similar overlapping responsibilities existed between the chief
                         of staff and the Assistant Secretary for Planning and Evaluation and
                         between the chief of staff and the Assistant Secretary for Personnel

                         In general, chiefs of staff also have had greater access to the Secretary
                         than other top-level officials. Chiefs of staff met with the Secretary rou-
                         tinely. Yet, particularly during the terms of two recent Secretaries,
                         senior staff of the Department had limited private access to the Secre-
                         tary. For example, a top-level official from one administration told us
                         that operating division staff did not feel close to the Secretary and did
                         not have the direct contact with him that they believed was needed.

                         The ideal situation for a Secretary is to be able to select his or her own
                         Under Secretary. However, should future Secretaries face constraints in
                         choosing their Under Secretary and choose to use chiefs of staff, we
                         believe the position should be structured with the objectives of (I)
                         ensuring that the roles and responsibilities of the chief of staff do not
                         interfere with those of high-level departmental officials and (2) ensuring
                         adequate secretarial access for all departmental leaders. Structuring the
                         position so that the responsibilities do not conflict with the formal
                         authorities of other high-level officials is one alternative used in the
                         past. For example, Elliot Richardson brought Jonathan Moore with him
                         to HHS to help with the transition and to serve as a chief assistant.
                         Joseph Califano, Jr., used Benjamin Heineman, Jr., as an executive assis-
                         tant. These individuals, however, did not assume the responsibilities of
                         principal Department officials.

Inadequate Mission and           in getting the Department's staff to work "VI"J"""'"
                              have received confusing signals about the roles and responsibilities
Contribute to Role       of various HHS 'ffices. On the one hand, there is an administrative

Confusion                requirement for an official description of the duties of each office, but
                         such deSCriptions have been vague, outdated, or sometimes nonexistent.
                         On the other, there is actual practice, which can deviate from an offi-
                                         prescribed responsibilities. In our opinion, confusions and
                             .lTu,un", in cooperation within the Department could be             by
                                                              or her
              Chapter 5
              Establish Clear Lines of Authority
              and Accountability

              through revised mission and function statements and assuring that the
              actual practice conforms to the formal description.

              Clear descriptions of the organization and its major procedures are
              rt-'quired by HHS'S administrative policy, which is based on the Adminis-
              trative Procedure Act. But such mission and function statements are
              more than an administrative requirement. They are a vehicle for con-
              veying to the public and officials within the Department a description of
              its mission, responsibilities, functions, and organization.

              Mission and function statements are not serving the purpose of clarify-
              ing Secretarial preferences about operating practices and the roles and
              responsibilities of various offices. They are an amalgam of changes
              made by various Secretaries. Some are vague or outdated. Others are
              nonexistent. For example, no mission and function statement exists for
              the Office of the Chief of Staff or the Office of the Under Secretary to
              help clarify the relationships between them. The mission and function
              statement for the Executive Secretary dates from 1972. It was never
              updated to describe broader responsibilities exercised by the Executive
              Secretary under Secretaries Heckler and Schweiker. The mission and
              function statement for the Office of the Assistant Secretary for Legisla-
              tion is 10 years old. The office's responsibilities have not been formally
              changed to reflect the reduced scope of its activities since its size was
              significantly reduced. Other mission and function statements discuss
              organizations whose names were changed years ago or still refer to HHS
              as the Department of Health, Education, and Welfare.

              Insufficient secretarial oversight increases HHS'S risk of fraud, waste,
Conclusions   and abuse in its programs and administrative activities. In addition,
              insufficient oversight and unclear lines of authority among departmen-
              tal leaders have weakened the effectiveness of the Department's leader-
              ship team.

                                                            of the
                                          to                                       run-
              ning departmental programs and administrative activities. However,
              delegation does not end a Secretary's responsibility to be vigilant.
              Recent Secretaries have been too isolated from top-level officials to
              whom authorities have been delegated and have given insufficient
              attention to monitoring and overseeing the Department. With a decen-
              tralized management structure, HHS is highly vulnerable to fraud, waste,
              and abuse.             must have an accountability strategy to assure
                     Chapter 5
                     Establish Clear Lines of Authority
                     and Accountabillty

                     that the Department's programs and administrative activities are oper-
                     ating well.

                     The use of a chief of staff and the lack of mission and function state-
                     ments that conform to actual practice also have weakened departmental
                     leadership. By using chiefs of staff, recent Secretaries have confused
                     responsibilities within the Department and have lessened the influence
                     of the Under Secretary and other high-level officials. Any future use of
                     a chief of staff should ensure that his or her responsibilities do not con-
                     flict with those of other high-level departmental officials and that all
                     such officials have adequate access to the Secretary. In addition, by
                     neglecting mission and function statements, recent Secretaries have
                     missed opportunities to convey their preferred organization and operat-
                     ing practices-a key element of effective leadership.

                    To help develop an effective leadership team and foster accountability
Recommendations     within the Department, we recommend that the Secretary

                  • establish formal and/or informal means to oversee and monitor the per-
                    formance of key departmental programs and administrative activities
                    that are delegated to others to manage;
                  • should he or she choose to continue the use of the chief of staff position,
                    define the duties and responsibilities of that position so that they do not
                    conflict with the formal authorities assigned to other high-level depart-
                    mental officials; and
                  • clarify early in his or her term the roles and authorities to be assigned to
                    key Department leaders, formally communicate these roles and authori-
                    ties through updated mission and function statements, and adhere to the
                    assigned lines of authority.

                    Page 60
Invest in HHS Management Support Systems

              Too often, policy or program strategies go awry, not because they were
              ill-conceived, but because too little attention was paid to managing their
              implementation. Qualified and motivated employees, information on the
              results of program operations, and fmandal information to administer
              and control the taxpayer's investment are needed to effectively imple-
              ment important policy and program proposals. However, budgetary con-
              straints are forcing HHS managers to do more with less resources, thus
              requiring more effective and efficient management. Ineffective systems
              for managing the Department's people, financial activities, or informa-
              tion could contribute to failures in ongoing programs, frustrate new ini-
              tiatives, and leave the Department vulnerable to public criticism. The
              following chapters address actions that could improve HHS'S manage-
              ment support systems.
Enhance Work-Force Quality Through
Improved Human Resources Management

                         A competent and effective work force is critical if HHS is to achieve its
                         mission. Like other public and private entities, HHS is affected by work-
                         force reductions and operational changes that affect work-force size and
                         skill needs. HHS'S components have taken steps to address these issues,
                         but most of their initiatives have been short-term and do not represent
                         effective solutions to work-force challenges. Human resources manage-
                         ment within HHS could be enhanced if os were to lead a strategic work-
                         force planning process in the Department.

                        HHS'S management faces two formidable challenges to managing its work
HHS Faces Major         force. First, the Department is experiencing significant reductions in the
Work-Force              size of its work force. Second, environmental, operational, and program
Challenges              changes present major challenges to HHS's managers, who must find
                        effective ways to adapt the work force to these changes. l

Work-Force Reductions   Since 1981, civilian employment in domestic agencies has declined by
                        59,400 employees. HIlS experienced the largest share of this decrease,
                        with a Department-wide loss of 20 percent--over 31 ,DOD-of its full-
                        time equivalent positions. Each operating division underwent reduc-
                        tions: SSA by 17 percent, PHS by 18 percent, HCFA by 22 percent, the Fam-
                        ily Support Administration by 25 percent, and OHDS by 46 percent. At
                        SSA, reductions of 17,000 full-time equivalent positions were scheduled
                        between 1985 and 1990. Also, os lost 37 percent of its staff, mostly due
                        to implementation of the President's Private Sector Survey on Cost Con-
                        trol (known as the Grace Commission) recommendations. Figure 6.1
                        illustrates HHS's staffing trend.

                        I Recruitment and retention scientists, serious work~force """''''''1,\''   is not addressed in
                                   Our recommendations for work-force planning, pre:;entoo           would not resolve
                                        Chapter 6
                                        Enhance Work-Force Quality Through
                                        Improved Human Resources Management

Figure 6.1: HHS Full-Time Equivalent
Employment (FY 1980-88)
                                       155    (Thouundll of Employees)









                                       110,.• •

                                         1980             1981   1982    1983   1984       1985      1988      1987     1988
                                         fiscal Veal'll

Environmental and                      The employee skills needed to accomplish the variety of HHS activities
Operational Changes                    change over time. Such factors as new or revised legislation, demo-
                                       graphic changes, incidence of disease, or the need to modernize opera-
                                       tions often require new skills. Environmental and operational changes at
                                       SSA and HeFA illustrate this.

                                       The skills SSA will need in the future are expected to be significantly
                                       different as paper processes become electronic and the need for face-to-
                                       face service diminishes. SSA recently started a national centralized tele-
                                       phone inquiry system, continues to implement a direct data entry sys-
                                       tem to eliminate paperwork when applying for benefits, and is
                                       modernizing its primary computer network. It envisions other innova-
                                       tions in                  as "smart" (multifunctional) social
                                                              transactions                               termi-
                                       nals over the telephone. These innovations have substantial implications
                                       for work-force size, employee selection and retention, skill needs, train-
                                       ing, and retraining. Most of SSA'S work force for the year 2000 is already
                                       employed by the agency. Its work force has the skills needed for paper-
                                       intensive clerical processes and face-to-face service delivery, They will
                                             to master new        as jobs change; otherwise,         to the public
                                       could deteriorate,

                                       Page 113                                        GAO/HRD-1JO.1I4 HHS Management Review
                            Chapter 6
                            Enhance Work-Force Quality Through
                            Improved Human ResoUl'eNI Management

                           At HCFA, implementation of recent catastrophic health care legislation
                           provides another example of work-force challenges brought about by a
                           changing federal program. Expansion in Medicare benefits created the
                           need for additional staff with a new array of analytical skills and for
                           professionals who are not easily attracted to federal employment, such
                           as physicians, pharmacists, and nurses.

                           HHS has resorted to several different approaches, some more effective
HHS Has Responded in       than others, in addressing the Department's major work-force chal-
Different Ways to          lenges-downsizing and program changes. Usually, its managers tum to
Work-Force                 conventional, short-term measures, mostly because of rigid federal per-
                           sonnel procedures. In some cases, however, managers adopted more sys-
Challenges                 tematic, pro-active solutions. The Secretary and ASPER have played
                           limited roles in supporting these efforts to address the Department's
                           work-force challenges.

Con ventional Approaches   HHS managers have generally used conventional approaches, such as
to Address Work-Force      across-the-board staff reductions, hiring freezes, or reductions by attri-
                           tion, to deal with its work-force challenges. These approaches offer little
Challenges                 or no managerial control over the resultant inventory of work-force
                           skills. As a result, HHS components often have been left with a work
                           force not well suited to accomplish their missions effectively. Following
                           are two examples of HHS'S use of conventional approaches.

                           1. s..~'s top management encouraged "voluntary redeployment"-relo-
                           cation of headquarters personnel to field offices-as a means to reduce
                           staffing at SSA headquarters. The relocations frequently eliminated the
                           already limited advancement opportunities in field offices and adversely
                           affected employee morale. Also, this voluntary redeployment did little
                           to alleviate chronic staff shortages at inner-city offices, which the Vol-
                           unteers avoided. Consequently, SSA'S long-term operational interests
                           were not well

                           2. Managing        cuts through                  and attrition has ham-
                           pered HHS program operations, according to many regional program
                           managers. For example, some regional officials reported difficulty
                           responding to changes in HHS'S relationship with state and local entities
                           when block grant procedures shifted the role of HHS regional offices
                           from service delivery to compliance monitoring third-pany grantees.
                                             ,,,,,,,~,'ft and attrition to

                           tions                        who often u"~Jr";;u
                              Chapter 6
                              Enhance Work-Force Quality Throngh
                              Improved Human Re!lOllrces Management

                             this new role. Many regional program managers we spoke with identi-
                             fied work-force quality as the Department's chief management

                             Some of the reasons that experts cite for the limited success of conven-
                             tional federal personnel approaches include the following:~

                           • Responsibility for personnel issues and actions belong to personnel spe-
                             cialists, not line managers.
                           • The frequent perception by program and line managers that personnel
                             rules are obstacles to obtaining needed human resources.
                           • Failure to link decisions affecting the numbers, skills, and management
                             of people to program objectives.
                           • The separation of personnel planning and decision making from budget
                           • Lack of attention to personnel management issues by agency heads.

                             All of these factors were present at HHS. Its managers have tended to
                             rely on conventional measures to contend with staff reductions or oper-
                             ational changes. Their responses (1) have lacked a long-term focus and
                             were not always linked to program objectives, (2) did not involve line
                             and personnel specialists in collaborative efforts to identify and solve
                             problems, or (3) were carried out on a project management basis and
                             were sometimes led by personnel staff, who generally received little
                             cooperation from line managers.

Pro-Active Approaches to     While conventional measures tended to predominate, some HilS compo-
Address Work-Force           nent managers have responded to changing work-force needs in more
                             innovative ways. Some work-force initiatives resulted from com-
Challenges                   ponentwide planning efforts. Other innovative solutions came about
                             when managers and staff engaged in constructive, pro-active problem
                             solving, framed issues in broad terms, and considered the long-term
                                    on the work

                                                                                                          a Private-
                                               e President's Council on Management Improvement (Washington, D.C: 1987),
 Enhance Work-Force Quality Through
 Improved HUDUln Resources Management

Managers who had engaged in componentwide planning efforts, such as
those discussed in chapter 3, were better informed about current and
future work-force needs. Componentwide planning assisted work-force
management because it clarified organizational goals, identified objec-
tives, and underscored the importance of improved human resources
management. FDA and SSA managers were able to propose innovative
work-force initiatives that were tied to organizational and program
needs, as highlighted below.

1. FDA'S action planning process represents a sustained effort, initiated
by the agency head and involving management and staff personnel, to
identify operational problems, develop solutions to these problems, and
track their resolution. As a result of this process, FDA identified several
human resources management initiatives intended to enhance recruiting,
training, and motivating its work force.

2. Even though &.'-iA managers initially responded to work-force down-
sizing and program modernization with stopgap measures, the Commis-
sioner soon recognized that the agency needed comprehensive, long-term
planning to guide the agency to the year 2000. Like FDA, SSA began its
planning process by obtaining extensive input from its field and head-
quarters managers and experts in and out of the agency. The result was
a long-range strategic plan that is intended to guide the modernization of
agency operations. The strategic plan identifies long-range work-force
goals. SSA has identifk>d and begun to implement specific steps to
develop a work force with the skills needed for a more electronic,
streamlined agency.

We found additional examples of other innovative approaches to
addressing HHS'S work-force challenges. Although not the product of sys-
tematic planning efforts, these examples illustrate pro-active, planning-
oriented approaches to personnel management:

LWhen        Congress authorized an additional 40 positions for
                   the                                     than ~"'~;+
ting     immediate hiring of assorted Scientists, Commissioner Young
insisted that FDA managers first clearly identify a new forensic role for
the agency. FDA then tied requests for specific occupational skills to the
new program objectives. As a result of the commissioner's involvement,
the agency acquired a more permanent capability rather than only a
short-term means to deal with a single
                        Chapter 6
                        Enhance Work·ForceQuality Through
                        Improved Human ResOUl'Ce8 Matiagement

                        2. When passage of catastrophic health care legislation seemed likeJy,
                        managers within the HCFi\ bureau responsible for its implementation
                        began identifying the employee skills needed for new program require-
                        ments. The managers also brainstormed recruiting strategies, concluding
                        that HCfi\ could best obtain certain technical skills on a contract basis.
                        More conventional analytical skills could be obtained quickly by use of
                        special hiring authority already obtained through the collaboration of
                        HCFA'S personnel office, ASPER, and the Office of Personnel Management.
                        As a result of pro-active management involvement and planning, needed
                        skills were quickly and effectively brought on line.

Current Role of ASPER   A..'lPER and HHS Secretaries have had a limited role in the creation of
                        strategies to solve departmental work-force issues. ASPER'S activities
and OS                  have focused largely on administering federal personnel regulations,
                        and HIlS Secretaries have not been strong proponents of comprehensive
                        human resources management improvement efforts. A high-level operat-
                        ing division official noted that the Department lacks an agenda for
                        urgent human resources issues.

                        ASPER devotes about 90 percent of its effort to administering the HHS per-
                        sonnel system. However, it has sponsored a number of human resources
                        management initiatives, including (1) software packages to analyze
                        management effectiveness, (2) an employee assistance program, and
                        (3) a management development seminar for Senior Executive Service

                        ASPER    has not received a dear mandate from past Secretaries to devote
                        more attention to improving work-force management practices. Without
                        strong secretarial support, ASPER has had little ability to persuade oper-
                        ating division managers to participate actively in its human resources
                        initiatives. ASPER staff and operating division managers informed us that
                        operating divisions rarely seek or willingly accept A."iPER'S assistance on
                        most operating division work-force problems. Several operating division
                                     commented       some ASPER            were unrelated their
                         n'.o,-"tnu1 needs.
                       Chapter 6
                       Enhance Work-Force Quality Through
                       Improved Human Re;ources Management

                       Federal managers and task forces, such as the National Commission on
HHS's Management       the Public Service, the National Academy for Public Administration, and
Efforts Could Be       the President's Council on Management Improvement, have advocated a
Enhanced by Work-      better balance between traditional merit system procedures and
                       increased personnel management flexibility. Many corporations and at
Force Planning         least one federal agency have recognized that effective management of
                       people is crucial to the attainment of organizational goals and have
                       adopted pro-active, employee-oriented personnel management
                       approaches. A key element in pro-active personnel management is stra-
                       tegic work-force planning, which is a systematic process that more
                       effectively matches human resources decision making to operational

                       The five central characteristics of strategic work-force planning are
                       (1) analysis of an organization's environment and implications for the
                       work force, (2) identification of key management concerns that involve
                       human resources issues, (3) development of strategies to address major
                       human resources issues, (4) assurance that human resources initiatives
                       are consistent with internal procedures and goals, and (5) the regular
                       development of strategic work-force plans to implement human
                       resources initiatives. Work-force planning promotes collaboration
                       between line managers and personnel specialists in identifying the
                       employee skills and resources needed to attain organizational goals.

                      Strategic work-force planning in the federal sector has been dismissed as
                      a concept with theoretical appeal, but little real world relevance. Yet
                      such planning was successfully implemented at the Department of Labor
                      in 1986 to better manage a diverse and changing work force that had
                      experienced several years of reductions in force. Managers at Labor
                      sought to avoid human resources imbalances by effectively managing
                      the hiring, use, and attrition of employees and by ensuring that officials
                      at all levels analyzed, planned, and managed human resources

                                              were           to     success:

                    • Secretarial and top-level support that promoted a new organizational
                      culture of mutual support and goal-oriented working relationships, espe-
                      cially between staff offices and operational units.
                    • Organization of both budget and personnel offices under an Assistant
                                                     and Management, which
                                             that commonly exists           personnel and
                                                    {V">r,<>.--:lT,nl'1 and
                          Enhance Work-Force Quality Through
                          Improved Human Resources Managt>mt>nt

                        • Personnel staff providing technical support and service to Labor mana-
                          gers in a way that helped introduce improved management practices and
                          accomplish effective implementation of strategic work-force planning.

                          After 2 years of experience with strategic work-force planning at Labor,
                          the President's Council on Management Improvement reported that
                          resource allocation is more rational, training is much more focused on
                          actual program needs, communication and data sharing between staff
                          and operating divisions are better, and cooperation between units has
                          increased. Labor managers, including the Director of Personnel, believe
                          that their work-force planning system is suffiCiently flexible to allow it
                          to be adapted to other federal agencies.

                          Strategic work-force planning could enhance UHS'S ability to address its
Organizational            work-force problems on an ongoing basis. However, secretarial leader-
Changes Needed to         ship will be necessary to ensure that (1) cooperative relationships are
Implement Strategic       built and maintained between managers and personnel specialists,
                          (2) budget and personnel functions are integrated, and (3) ASPER'S role is
Work-Force Planning       refocused to include increased support for improving human resources
                          management throughout the Department.

Develop Cooperation       The Secretary's leadership will be needed to overcome the reluctance to
Between Line and          engage in work-for<~e planning in the Department. New partnerships will
                          be needed between and among components, key staff divisions, person-
Personnel Staff           nel specialists, and line managers to develop systematic approaches and
                          remedies to HRS'S work-force challenges.

Coordinate Budget and     To implement work-force planning, plans must be linked to the budget.
                          A high-level manager in one operating division stated that for human
Personnel Functions       resources planning to become an institutionalized practice at HHS, the
                          Secretary would have to require IlHS agencies to identify their occupa-
                                skill needs                                  a
                                the                                         solutions to their
                          unique work-force problems. It also would help ensure the ,,'''HP)m
                          analysis of work-force needs since the budget process is an ongoing,
                          annual activity that is led by os.

                          During the past decade, personnel management in mrs has been driven
                          by budgetary decisions focused largely on controlling the size of its work
                          force. Both                     and line            however, need a

                            Chapter 6
                            Enhance Work-Force Quality Through
                           Improved Human a-turees Management

                           voice in work-force decisions made through the budget process to ensure
                           that appropriate attention is given to the skill mix of the work force, as
                           well as its size.

                           At HHS, effective cooperation between personnel and budget staffs has
                           been difficult to accomplish because ASPER and ASMB share responsibility
                           for managing personnel resources. While A.."MB controls the work-force
                           size through the budget, ASPER and operating divisions address work-
                           force skills. Strategic work-force planning will need the Secretary to find
                           ways to integrate work-force size and skill mix decisions.

Refocus ASPER Activities   Its responsibility for enforcing personnel rules places ASPER in a regula-
                           tory and potentially punitive role. Operating division managers are
                           sometimes wary of ASPER'S work-force initiatives. It will be difficult for
                           operating division managers to enter meaningful partnerships with
                           ASPER as long as ASPER'S role remains largely confined to traditional per-
                           sonnel administration. ASPER should continue to oversee personnel activ-
                           ities, but should also be responsive to and supportive of operating
                           division managers' and operational needs. Personnel actions, such as
                           recruiting, executive development, and training, should be directly
                           related to operating division program and operating objectives.

                           Secretarially led work-force planning in HHS would require ASPJ<..'R'S role
                           to be expanded to include providing support for work-force planning,
                           such as personnel data and work-force planning gUidance. Operating
                           divisions could be surveyed to determine their work-force information
                           needs, and upon request, ASPER could review operating division plans for
                           addressing work-force problems. In addition, ASPER could become more
                           of a resource for sharing work-force planning expertise among the oper-
                           ating divisions and promoting human resources initiatives in the Depart-
                           ment. ASPER could also be responsible for supporting the work-force
                           planning activities of the staff divisions, OHDS, and the Family Support
                           Administration, which it             Chapters 7 and 8 discuss employee

                           HllSfaces major challenges in maintaining a competent and effective
Conclusions                work force. Although HfL<; components have attempted to address their
                           work-force            IlliS needs a                coordinated
                           approach for                  anticipating             human
                    Chapter 6
                    Enhance Work·Foree Quality Through
                    Improved Human Resources Management

                   resources problems. We believe that, with new and changing work situa-
                   tions arising throughout HHS, strategic work-force planning should
                   become an ongoing process that could (1) integrate human resources
                   planning with other planning and budget functions and (2) help ensure
                   that personnel actions support program objectives.

                   To accomplish the goals of strategic work-force planning, secretarial
                   leadership will be needed to forge cooperation between line and staff
                   managers, to integrate budget and personnel functions so that work-
                   force size and skill mix can be determined together, and to support an
                   enhanced leadership role for ASPER in human resources management
                   within the Department.

                   We recommend that the Secretary establish and lead a departmental
Recommendation     strategic work-force planning effort. Successful accomplishment of such
                   planning will require

                 • integration of budget and personnel functions to consider both work-
                   force size and skill needs,
                 • cooperation between line and staff managers, and
                 • a new leadership role for ASPER to guide and support human resources
                   management efforts throughout the Department.
finproving Infonnation Resources Management

                   os has had difficulty developing an IRM program that effectively sup-
                   ports HHS'S missions. An IRM program should ensure that the data, equip-
                   ment, and people used to produce information and the information itself
                   are well managed. Before 1986, HHS'S IRM program was focused largely
                   on ensuring that the procurement and use of computer equipment and
                   systems were being managed effectively. ASMH, which is responsible for
                   overseeing the Department's IRM activities, had centrally controlled the
                   development of the IRM program, seeking little input from the operating
                   divisions. Also during this period, os offices had received little technical
                   assistance in developing modern computer technology to help their man-
                   agers carry out their responsibilities.

                   In 1987, ASMB revised its overall approach to managing and overseeing
                   the Department's IRM activities. It expanded the focus of the IRM pro-
                   gram by recognizing the importance of managing information and pl::opie
                   as well as equipment and systems. To increase its chances of success
                   with this expanded effort, ASMB began involving the operating divisions
                   in developing new initiatives to improve IRM throughout the Department.
                   In addition, ASMB increased its focus on developing effective computer
                   systems for os. This new approach and the improvements we recom-
                   mend in this chapter, if properly implemented, should enhance HHS'S
                   management and use of its information resources. Because effective IRM
                   contributes to accomplishing mIS'S missions, the Secretary should con-
                   tinue the investment in this management area.

                   IRM responsibility is shared by os and the operating divisions. os,
Responsibilities   through ASMB, provides IRM leadership by establishing policies, adminis-
for IRM            tering a Department-wide strategic IRM plan, overseeing operating divi-
                   sion activities, and developing management information systems for the
                   staff divisions. Recently, ASMB has begun to playa greater role in help-
                   ing os and the staff divisions carry out day-to-day IRM implementation,
                   such as planning for information needs, acquiring technology, and
                   assessing internal performance. In contra."it, implementation IRM in the

                        Assistant Secretary for Management and Budget is the Depart-
                   ment's senior IRM official. Within his office, the Office of Information
                   Resources Management (OIRM), which was created in 1987 and now has a
                   staff of about 40 people, consolidates all IRM-related activities and spon-
                   sors IRM initiatives that cut across    entire                In    way.
                   OlRM carries out the !RM leadership function.
                        Chapter 7
                        Improvtng Information
                        Resources Management

                       Poor information management can undermine HHS'S ability to provide
IRM Problems           services to the public. It can reduce mission effectiveness, delay needed
Experienced            mission improvements, increase information-processing costs, endanger
Department-Wide        human safety, and jeopardize the assessment of program performance.
                       Past GAO reports show that IRM problems have occurred in many impor-
                       tant programs and caused or contributed to difficulties in providing
                       good service. For example:

                     • One of HCfl\'S responsibilities is to manage Medicare-the health insur-
                       ance program for the nation's elderly. But neither its existing central
                       data systems nor the information generated by its review systems pro-
                       vided representative information on quality of care problems in the
                       United States. l
                     • The Family Support Administration manages the Child Support Enforce-
                       ment Program, which requires states to enforce support obligations
                       owed by absent parents to their children. Inaccurate and incomplete
                       data from the states made it difficult for HHS and the Congress to assess
                       the program's performance. 2
                     • The quality and timeliness of SSA'S service in administering the nation's
                       social insurance program depend largely on the accessibility and accu-
                       racy of information in its (.'omputer systems. SSA encountered many diffi-
                       culties in modernizing its systems. As a result, much of its workload and
                       management information had to be processed manually, which was
                       slower, more expensive, and more error-prone.:l

                       Effective information resources management could help to minimize the
Past OS Efforts to     occurrence and impact of the types of problems discussed above. os
Improve IRM Had        attempts to improve information management were unsuccessful before
Little Success         1986. It developed a strategic planning process that lasted only 1 year; it
                       introduced an IRM manual that was not expanded as originally intended;
                       and it created an IRM Advisory Board that was not often used.

                       While a number of factors contributed to the coUapse of these efforts,
                       the      factor wa.'l A..'lMB·S attempt to exert too much control over
                           division IRM activities. In          the nn."re>h                         ASMB
                       was inflexible managing IRM.               4U""'>"IC', they cited the excessive

                       'Medicare: Improving Quality of Care Assessment and Assuranc(' (GAO}PEMI).88-10, May 2, 1988).

                       "Child S1port: Need to Improve Efforts to Identify Fathers and Obtain Support Orders (GAOl
                       HRD:S7- 7, Apr. 30,1987),         .
                     Chapter 7
                     Improving Information
                     Resources Management

                     detail required in the strategic planning process and ASMB'S practice of
                     establishing IRM policies without considering the unique needs of each
                     operating division. In addition, an internal HHS study reported that oper-
                     ating division officials felt that ASMB did not give the operating divisions
                     sufficient discretion in purchasing equipment. Before 1987, ASMB
                     reviewed all requests for purchasing equipment that cost more than
                     $150,000. This approach created feelings of resentment toward ASMB,
                     and as a result, OS was unable to gain the support it needed to implement
                     IRM initiatives.

                     In 1987, ASMB placed increased emphasis on the need for os to provide
New OS Philosophy    departmental leadership-but less direct control-over IRM. First, it
TowardIRM            placed staff with strong technical skills in OIRM'S three top positions.
                     Second, it issued a revised mission and function statement for OIRM that
                     specified roles and responsibilities. In addition, it began several initia-
                     tives-including an IRM planning process and a project to develop an
                     effective communications network for os.

                     The Assistant Secretary for Management and Budget recognized the
                     importance of obtaining operating division support and participation in
                     formulating and implementing improvements. Accordingly, OIRM adopted
                     a more participative management style in addressing IRM issues that
                     affect the operating divisions. As a result, the operating divisions have
                     more responsibility and accountability for their IRM activities, and mana-
                     gers have a more positive attitude toward the new approach.

                     Over the past 2 years, ASMB has devoted considerable attention to
More Effort Needed   strengthening IRM. Although the efforts are still in their formative
to Strengthen IRM    stages, we believe that the path ASMB has identified has the potential to
                     develop a strong program. However, we identified five areas-policy
                     development, planning, IRM reviews, skill development, and technical
                     support-that need more focus and sustained attention. As discussed
                                                              not been           over the
                     years. OIRM                              on
                     ing technical support of os, but less on developing thorough IRM policies
                     or reviewing operating division IRM activities. Each of these areas con-
                     tributes to improving IRM and deserves management's attention.
                                             lmproving lnfonnation
                                             Resources Management

IRM Policy Manual                            HHS  issued an IRM policy manual in 1985 to give program managers and
Is Not an Effective                          IRM officials a clear and complete understanding of Department IRM poli-
                                             cies. However, it was not a successful tool for communicating those
Management Tool                              policies.

                                            Although program officials are ultimately responsible for making sure
                                            that information and information resources supporting their programs
                                            are used effectively and efficiently, responses to our survey showed
                                            that only about 20 percent of HHS'S program officials have seen the man-
                                            ual. Further, a large percentage of these managers felt that it was not
                                            particularly useful in several categories. (See fig. 7.1.)

Figure 7.1: HHS Managers Who Feel the
IRM Manual Is Not Particularly Useful for
                                            100      Percent ofToIal
Certain Activities






                                                  1I I
                                            "Iit/", ,;
                                                       .I 1.1            F
                                                                       ~~ 'r.,~
                                                                         l;   .#
                                             '"    ~


                                            OMB  Circular A-130 cites policies that apply to the information activities
                                            of all federal agencies. In comparing the circular and EIHS'S manual, we
                                            found that the manual does not provide guidance to managers in several
                                                        subjects that os originally planned to add to the manual-
                                                               and rRM
                                                        UUlAIlI.'ULLUH                                  not
                       Chapter 7
                       bnproving Infonnation
                       Resources ManAgement

                       addressed. In addition, guidance in several policy areas identified by
                       OMB'S circular has not been included. For example, the manual does not
                       discuss training staff in IRM, disseminating information, identifying and
                       correcting IRM problems, and avoiding unnecessary information.

                       Little has been done to improve the completeness and quality of the IRM
                       manual since it was issued in 1985. However, OlRM is now updating the
                       information systems security portion because of changes in technology,
                       legislation, and regulations. Also, in 1987, OlRM established a work group
                       to determine what improvements needed to be made to the manual.

IRM Planning Process   IRM planning is important because it helps HHS assure that the informa-
Needs More Focus on    tion needed to accomplish its missions will be available. After 2 years
                       without a departmental IRM planning process, OIRM introduced a new one
Information            in 1988. Past processes required the operating divisions and staff divi-
                       sions to include plans only for technology. Now they have to include
                       plans for their information needs as well as technology.

                       The following example illustrates the need for improved Department-
                       wide IRM planning. ASPER is in the fourth year of developing a new auto-
                       mated personnel and payroll system for HHS. The system-known as
                       IMPACT-is estimated to cost nearly $17 million dollars and is the largest
                       single OS computer system to reach the implementation stage. A recent
                       independent study of the system found no discernable link between
                       IMPACT'S plans and the budget process. At the same time, at least one
                       operating division is developing a new computer system that contains
                       functions that may duplicate IMPACT'S features and information. One goal
                       of good IRM planning is to prevent such problems.

                       OlRM'S new approach is to encourage the operating divisions and staff
                       divisions first to identify their information needs and then to determine
                       the appropriate technology to support those needs. Under the new infor-
                       mation planning approach, OIRM has requested         operating divisions
                       tions; and describe major information planS-SUCh as plans for forms
                       management, records management, and desk-top publishing. In addition,
                       the lRM plans are to be linked to the Department's budget to ensure that
                       funding will be available.
                       Chapter 7
                       Improving Information
                       Resources Management

                       32 IRM actions that we believed would enhance information planning at
                       HHS. The list included (1) developing information quality requirements,
                       (2) identifying the sensitivity of information, (3) developing techniques
                       to periodically assess the need for particular information, (4) developing
                       information-retention requirements, and (5) developing procedures for
                       correcting information problems. While acknowledging the value of each
                       of the actions we identified, the head of OIRM said that staff limitations
                       preclude their immediate inclusion in HHS'S planning process.

                       It is too early to tell if HHH will be able to successfully implement infor-
                       mation planning. OIRM let the operating divisions and staff divisions sub-
                       mit either an information plan or a traditional technology plan in the
                       first year-1988. After assessing the submissions-one from each oper-
                       ating division and a consolidated plan from the staff divisions-OIRM
                       determined that one of the six was information based and most of the
                       others contained elements of information planning. In December 1988,
                       OIRM issued its request for second year submissions and did not provide
                       the option of submitting technology-only plans.

OIRM Needs to Review   By law, HHS must periodically review its IRM activities to ensure that
IRM Offices            they effectively support its missions. Before 1987, ASMB focused its
                       reviews primarily on the acquisition and use of technology rather than
                       on how well the operating and staff divisions carried out their overall
                       information management responsibilities. These reviews gave os little
                       knowledge of the divisions' capability to manage information activities.
                       In 1987, os de'{eloped a broader review approach that could provide this
                       knowledge, but had not implemented it at the time of our review.

                       Until 1987, ASMB used three methods to review IRM operations. First,
                       ASMB and [G staff conducted management reviews to assess operating
                       division and staff division compliance with federal acquisition regula-
                       tions and policies. Three rounds of these reviews have been conducted,
                               for                awarded between April 1985        September

                       Second, ASMB reviewed aU procurement requests for technology that cost
                       more than $150,000. The level was generally determined by the results
                       of the acquisition reviews discussed above. The former Assistant Secre-
                       tary told us that he kept the level at $150,000 because he was concerned
                        Clu!.pter 7
                        Improving Information
                        Resources Management

                        reviewing proposed procurements, os had some assurance that HHS was
                        getting a good return on its investments in technology.

                        Third, to meet a requirement of the Paperwork Reduction Act and OMB
                        Circular A-l30 (known as Triennial Reviews), operating divisions and
                        staff divisions reviewed selected computer system development and
                        redesign efforts. ASMB played a small role in this process, serving pri-
                        marily as the focal point for reviewing the results.

                        In 1987, ASMB changed its approach to overseeing IRM. First, because the
                        most recent acquisition management review showed adequate procure-
                        ment capabilities in many operating divisions, the Assistant Secretary
                        raised the level of equipment procurement reviews from $150,000 to
                        $ 2 million for most operating divisions. In making this change, both the
                        Assistant Secretary and the head of OIRM felt that the $150,000 level
                        prOVided little incentive for the operating divisions to develop compe-
                        tent IRM organizations. Their objective was to provide this incentive.

                        Second, in conjunction with the procurement authority increase, and to
                        monitor development of operating division IRM capabilities, OIRM planned
                        to conduct broad reviews of the operating division IRM offices to assess
                        their proficiency in all phases of information management. As of Janu-
                        ary 1989, OIRM had not started the intended broad IRM reviews. An OIRM
                        official cited staff limitations and other efforts-such as the time
                        required by the planning process-as reasons for the delay.

                        Finally, concerning the Triennial Reviews, OIRM will continue to serve as
                        the focal point but will provide more guidance to the operating and staff
                        divisions on how to adopt a broader IRM perspective in conducting their

More Attention to IRM   IRM organizations are in the business of helping to meet the information
                        needs officials who operate complex and changing programs that
                        serve the needs the
                                       in a

                        Although the Department's IRM officials are aware of their current
                        staff's skill levels, they do not conduct periodic assessments of the
                        number, type, and qualifications of IRM personnel that they need. More-
                        over, HHS has no policy on the type of skills needed to improve ruM.

                                                                 current and
                                                                 of     skills
                             Chapter 7
                             Improving Information
                             Resources Management

                             would be useful for an effective IRM program. In developing this list, we
                             obtained input from officials who teach IRM and modified our list based
                             on their comments. Our list of skills include (1) needs assessment skills
                             to ensure that the IRM objective of maximizing information usefulness is
                             achieved, (2) costing skills to determine and evaluate the cost of infor-
                             mation processing operations, and (3) management information system
                             skills to identify and extract important management information from
                             operational information systems. The list of skills and their applications
                             is in appendix IV.

                             The head of OIRM agreed that many of the skills would be valuable to HH.')
                             and that upgrading the skill mix is important. He considers our list a
                             positive starting point for identifying needed skills. While indicating
                             that many of these skills are already available to his office, he added
                             that some are not available in sufficient numbers to accomplish a wide
                             range of information activities. He told us that OIRM intends to create a
                             policy addressing needed skills.

ASMB Needs to Improve        os offices have had difficulty in developing and using modern computer
Technical Support to as      technology. This has occurred, in part, because most offices have not
                             had access to technical a..<;sistance. As a result, many os computer sys-
                             tems are antiquated, problem-ridden, and unreliable. OIRM has recog-
                             nized this problem over the past year and has taken steps to improve it.

                            The current head of OIRM'S Office of Systems Management said that os
                            had been underserved for many years and that modern systems and
                            equipment were almost nonexistent. He sees this situation as the most
                            serious IRM problem facing os. A 1987 internal HHS management review
                            also observed that os officials expressed the need for assistance in
                            acquiring computer systems and appropriate technical training. Respon-
                            dents to our questionnaire confirmed this. For example:

                                                           the General Counsel [ooc] contracted for
                            an                                       . It                     to
                            abandoned.         OGC                 an
                            ing System-ALTs. The computer program was so bad they had to have a
                            programmer rewrite it. . The system doesn't generate accurate reports
                            and is user hostile."
                          • "ooc's procurement of word processing equipment and Personal Com-
                                                                          OGC           is incom·
                                                                            of OGC.
                Chapter 7
                Improving Infonnation
                Resources Management

              • "[It is a problem] getting information from personnel systems to respond
                to EEO [Equal Employment Opportunity] lawsuits and to manage the HHS
                Ethics in Government program."
              • "I have had a minor system acquisition problem which is related more to
                insufficient technical staff being available to ... modify existing frail
                systems or ... to develop state-of-the-art systems."
              • "[I] could not find the central source-if there is one-knowledgeable of
                systems in use and available throughout HHS. This would have saved
                about 3 to 4 man weeks of planning a concept ... "

                ASMB  took action to improve assistance and support to the staff divisions
                when it created the Office of Systems Management in 1987. To help
                improve os's systems, this office is leading an initiative to acquire and
                electronically link personal computers to facilitate message and docu-
                ment transfer. The office also provides technical support and training to
                staff within os and has already had some impact in helping develop sys-
                tems. So far, it has developed about six new computer applications
                requested by the heads of several staff divisions and has hired a con-
                tractor to train and assist staff division personnel in using personal com-
                puters. In developing new systems, its goal is to assure that systems
                serving os are compatible. If staff divisions take advantage of OIRM'S
                technical assistance, os could improve its use of modern technology.

                Good IRM is critical at HHS because the Department's programs affect the
Conclusions     health and welfare of virtually every American citizen. Over the past 2
                years ASMB has devoted considerable attention to strengthening IRM. We
                believe it is on the right path in its efforts to encourage the creation of
                strong, competent IRM offices throughout the Department and its recog-
                nition of the need for HHS to begin managing its information as well as its

                Although the approach is sound, A..'3MB'S progress in implementing it has
                not been uniform across five key                    planning, review,
                           ",,"nYU"\rT If                                   areas,
                ress to date                                                   to carry out
                improvements in each of these areas has precluded the Department
                from realizing the benefits that effective IRM can provide.
                    Chapter 7
                    hnproving Infonnation
                    Resources Management

                    We recommend that the Secretary continue the Department's investment
Recommendations     in HHS'S IRM program by ensuring that resources are available to

                  • develop needed IRM policies;
                  • implement ASMB'S IRM strategic planning process, focusing on informa-
                    tion planning and extending the process to include steps discussed in
                    this report;
                  • start and continue ASMB'S broad reviews of operating division IRM
                  • assess HHS'S IRM skill needs; and
                  • continue to provide technical support to os.

                   Page 81
Need to Sustain Efforts to Improve
HHS's Financial Systems

                       In 1987, the Department, together with its operating components,
                       renewed its commitment to strengthening its financial management envi-
                       ronment and developed a new plan aimed at modernizing its outdated
                       financial management systems. Known as Phoenix, the plan construc-
                       tively addresses the factors that hindered past modernization efforts. In
                       our opinion, the plan is properly focused and is a good foundation for
                       actions to improve HHS'S financial management.

                       While the Phoenix plan provides a solid base upon which to build a mod-
                       ern set of financial systems for the Department, successful implementa-
                       tion of the plan will require top.-Ievel support, adequate funding, and a
                       skilled financial management staff. These investments are essential for
                       the success of the plan and the improvement of the Department's finan-
                       cial management environment.

                       The high volume of annual expenditures, the large number of complex
HHS Has a Complex      programs, and the variety of methods used to finance and make pay-
Financial Management   ments create a highly complex financial environment for HHS. The diffi-
Environment            culties in this environment are compounded by HHS'S use of outdated
                       automated systems to account for and control the billions of dollars used
                       to carry out its programs.

Environmental          A total of 121 appropriations and four trust funds are used to finance
Complexities           about 220 HHS programs. As illustrated in figure 8.1, estimates show
                       that HHS will make about 35 percent of all federal expenditures (about
                       $401 billion) in fiscal year 1989. About 95 percent of HHS'S payments are
                       for Social Security, Medicare, Medicaid, and other smaller entitlement
                       programs. The other 5 percent are for a wide variety of social welfare
                       and medical programs.

                       Page 82                                 GAOjHRD-90-54 HHS Management Review
                                       Need to Sustain Efforts to bnprove
                                       HHS's Financial Systems

Figure 8.1: Composition of Estimated
FY 1989 Federal Expenditures
                                                   . . . - - - - - - - - - - - Interest

                                                                             -~--          HHS


                                                1.------------ Other
                                       Estimated FY 1989 Federal Expenditures == $1,102 Binion

                                       HHS  uses several methods to disburse funds to a wide spectrum of recipi-
                                       ents of its entitlement, public assistance, and medical programs. For
                                       example, SSA makes benefit payments to about 43 million retired and
                                       disabled individuals, their dependents, and their survivors by either
                                       mailing checks directly to them or depositing moneys directly in their
                                       bank accounts through electronic fund transfers. Also, HHS uses letters
                                       of credit to transfer funds to contractors, grantees, and states adminis-
                                       tering HHS programs. The recipients provide the letters of credit to their
                                       banks and draw down against them as funds are needed to administer

Financial Management                   To develop and maintain the financial information necessary to effec-
                                                        control       missions and            HHS operates
                                             3 Department-wide                          3 programmatic sys-
                                       tems. In addition, the Department's components operate numerous
                                       financial and administrative management subsystems, which feed data
                                       to the seven primary systems. Contractors and grantees operate systems
                                       outside the Department that are used to make payments under various
                                       programs, such as Medicare and Medicaid.
                            Need to Sustain Efforts to Improve
                            HHS's Financial Systems

                            The primary systems are used to (1) record and control appropriated
                            funds and other financial resources; (2) record summary information on
                            the financial results of program and administrative operations; and
                            (3) prepare financial reports for HHS managers, the Congress, and other
                            public officials. The subsidiary systems are used to carry out payroll
                            operations, pay grants, and support HHS'S consolidated regional account-
                            ing operations. Program systems help managers carry out unique pro-
                            gram and operating functions, such as payment of social security
                            entitlements and management of the processes used to collect money
                            owed the government.

Long-Standing Problems in   Most of the Department's primary accounting systems are 15 to 20 years
                            old, and they often use manual or outdated automated processes to
HHS Accounting Systems      enter, transfer, or reuse data. Such processes increase the possibility of
                            error, preclude the implementation of effective controls, are generally
                            labor intensive, and often store information in central accounting files
                            located far from managers. Because of the difficulty in gaining access to
                            data in the central files, Department managers develop their own "infor-
                            mal files," which are duplicative and sometimes inconsistent.

                            Because of these weaknesses, some of the Department's accounting sys-
                            tems do not provide timely, complete, and accurate information on the
                            results of program and administrative operations. For example, HHS does
                            not always properly account for advances made to grant recipients and
                            property for which it is responsible. These types of system problems
                            hinder HHS'S ability to establish effective fund control and manage
                            grants and property.!

Past Systems                The Department has long recognized the above problems, but past cor-
Enhancement Efforts         rective actions have not succeeded because of inadequate support from
                            HHS'S operating components, technical difficulties, and cost constraints.
                                                                                        in 1978 and

                                  to develop a       standard Department-wide             manage-
                            ment system. fIHS terminated both of these projects in large part because
                            some operating divisions did not support them and resisted implementa-
                            tion. The operating divisions believed that the Standard Accounting Sys-
                            tem would have been more cumbersome and costly to operate than the

                            Page 84                                 GAO/HRD-90-54 HHS Management Review
                         Need to Sustain Efforts to ImproVl'
                         HHS's Financial Systems

                         systems then in place. Similarly, they did not support the Financial!
                         Administrative Integrated Management System because of the complexi-
                         ties required to have a single automated accounting system to account
                         for the wide spectrum of programs carried out by different operating
                         divisions. Operating division officials also told us that they did not con-
                         sider themselves part of the decision-making process and the project
                         was forced on them.

                         Efforts in 1986 to implement the Financial! Administrative Integrated
                         Management System were also set back because of a contractor bid pro-
                         test. HHS had made changes to the functional requirements for the soft-
                         ware that were not permissible under procurement regulations.

                         In May 1987, HHS began developing the Phoenix plan to address the
Phoenix Plan             problems in the Department's primary accounting systems. In develop-
Addresses Problems       ing the plan, HHS applied the lessons learned from past efforts. It estab-
in HHS's Primary         lished effective overall direction and leadership for the project and
                         gained the support of the operating divisions.
Accounting Systems

Objective of the         The plan's objective is to obtain a set of modern financial systems that
Phoenix Plan             will meet both program and management needs as well as departmental
                         financial information requirements. The overall thrust of Phoenix is to
                         ensure that the Department's future accounting systems include

                     •   reliable and meaningful information,
                     •   less redundant and labor-intensive operations,
                     •   standardized financial processes,
                     •   interchangeable software. and
                     •   an integrated information flow among systems.


                         PageS5                                   GAO/HRD-90-lS4 HHS Management Review
                         Need to Sustain Efforts to Improve
                         HIlS's Financial Systems

Actions to Refocus      HHS'S Assistant Secretary for Management and Budget and Deputy
                        Assistant Secretary for Finance developed a participatory management
Accounting Systems      approach to gain acceptance of needed accounting system improve-
Improvement Efforts     ments. While retaining responsibility for overall direction on all account-
                        ing and financial matters, these individuals established a financial!
                        accounting/systems development group. The group consists of the oper-
                        ating divisions' financial management officers and their systems staff
                        and is chaired by the Deputy Assistant Secretary for Finance. Their goal
                        was to develop guidelines for the Phoenix plan and monitor project
                        implementation. The plan, which was completed in fiscal year 1988,
                        included guidelines and standards for acquiring and implementing
                        replacement systems for the seven aging primary accounting systems.
                        Monitoring responsibilities include approving each operating compo-
                        nent's plan, assuring that the plans are updated as needed, coordinating
                        the project, and reporting to OMB on implementation status.

                        Under the Phoenix plan, each of the Department's operating divisions,
                        working through the development group, is responsible for developing
                        and implementing its own system enhancement plan. Officials said that
                        this was a desirable approach because the divisions are most familiar
                        with the areas needing improvement. As a result of their participation,
                        financial managers in the operating divisions view Phoenix positively.
                        They are involved in setting the priority and the specifics of corrective
                        actions to be taken to solve their own accounting systems problems.

                        While the Phoenix plan is a promising start toward modernizing HHS'S
Substantial             financial management environment, substantial and continuing invest-
Investments Required    ments will be needed to complete, operate, and maintain it. The Deputy
to Complete Financial   Assistant Secretary for Finance advised us that as of September 1989,
                        the plan was on schedule, initial implementation of the seven new pri-
Management              mary accounting systems should take place between July 1989 and Sep-
Improvements            tember 1990, and aU systems should be fully operational by the end of
                        fiscal year

                        HHS estimates that it will cost about $    million to
                        and maintain the new' primary accounting systems for fiscal years 1990-
                        93. HIlS top financial management officials advised us that in the past
                        they have had difficulty maintaining the necessary funding levels to
                        operate and maintain effective financial systems. They pointed out that
                        it has been difficult to compete with programs for funds in HHS'S budget-
                        ary process.                               funding is

                        PageS6                                  GAO/HRD-9().54 DRS Management Re"iew
                             Need to Sustain Efforts to Improve
                             mIS's Financial Systems

                             provide the adequate, timely financial information necessary to make
                             decisions that will enable HHS to carry out its programs cost-effectively.
                             Moreover, Phoenix is essential to HHS'S efforts to comply with govern-
                             mentwide initiatives under OMB Circular A-127 on financial systems and
                             meet requirements to implement the governmentwide standard general

Investment in Human          HHS's accounting systems should be able to give managers the financial
Resources for Financial      data they need to adequately account for public funds. Such data can
                             help managers plan and control operations, safeguard assets, and use
Management Needed            resources effectively. Enough qualified financial staff are needed to
                             work with the Department's program staff to assure that data are useful
                             and accurate and that the integrity of financial systems is maintained.

                             During the 1980s, the financial management staff was subject to the
                             same budget-driven staff cuts as the rest of HHS (see ch. 6). As we
                             pointed out in an earlier report (see footnote 1, p. 84), lack of staff was
                             one of the reasons that HHS was not reconciling data in financial systems
                             with financial reports to assure that they were accurate. HHS advised us
                             that it was taking some actions to correct this problem, but the problem
                             will not be fully corrected until Phoenix is completed.

                             A number of HHS financial management officials told us that the Depart-
                             ment needs to improve its ability to attract and retain a high-quality
                             financial management work force. For example:

                          • The Deputy Assistant Secretary for Finance stated that, given the
                            restrictions on hiring and the limited computer skills of the current
                             accounting staff, HHS faces a major challenge in obtaining staff qualified
                            to operate and maintain the proposed new automated accounting
                          • A former Director of OHl)s'S Office of Management Services stated that
                            HRS lacks a career path for its financial management staff. As a result,
                              '-U<IH<W'-,G. . management       have become                have limited
                            financial                                  and
                            Division Director in the same office pointed out that he recently trained
                            two paraprofessionals for positions in his budget shop, but once trained,
                            they obtained positions with higher salaries at another federal agency.

                            As the Assistant Secretary for Management and Budget pointed out,
                            given continuing budget pressure, retaining qualified staff will be one of
                            HRS'S                 over the next          The use of a work-force
                    Need to Sustain Efforts to Improve
                    HHS's Financial Systems

                    plan could help HHf; deal with the problem. Staffing needs could be iden·
                    tified, alternative strategies (such as a career path for financial person-
                    nel) could be developed, and training needs for the Phoenix system
                    could be developed. The work-force plan for HHS'S financial management
                    staff should be developed as part of the comprehensive work-force plan-
                    ning effort we are recommending in chapter 6.

                   The Department has developed a plan-the Phoenix plan-aimed at
Conclusions        correcting its accounting systems weaknesses through long-term sys-
                   tems enhancement efforts. The plan, which has the support of managers
                   in HHS operating components, is an important first step. When imple·
                   mented, the Phoenix plan should help HHS (1) bring about improvements
                   in its accounting systems, (2) maintain an effective financial manage-
                   ment environment consistent with governrnentwide efforts to improve
                   financial reporting, and (3) improve compliance with accounting stan-
                   dards and internal control requirements. However, continuing invest-
                   ments in systems components and financial management staff will be
                   needed to complete the plan.

                   We recommend that Secretary support the goals and objectives of the
Recommendation     Phoenix plan by providing

                 • adequate funding for the upgraded systems and
                 • enough qualified staff to operate and maintain the modern systems.

Secretaries of HHS

               Incumbent                                                                   Term
               -c:---::------c-:- ---
               Oveta Culp Hobby                                                             1955
               Marion B, Folsom                                           Aug, 1955 to July 1958
               Arthur S,
               Abraham Ribicoff
               Anthony J. Celebrezze
               John W, GardnerS
               Wilbur J, Cohen a
               Robert H, Finch                                            Jan, 1969 to June 1970
               Elliot L. Richardson a
               Caspar W, Weinberger
               F, David Mathews3
                         A, Califano, Jr!                                 Jan, 1977 to Aug, 1979
               Patricia Roberts Harris       -------------------               1979 to Jan, 1981
               Richard S, Schweiker"                                      Jan, 1981 to Feb, 1983
               Thomas R, Donnelly,                                        Feb, 1983 to Mar. 1983
               Margaret M_ Hecklera                                       Mar_      to Dec, 1985
               Otis R. Bowen a                                            Dec.       to Jan, 1989
               Don M, Newmana,b                                           Jan.      to Mar. 1989
                                             -------------   -"   -----
               Louis W, Sullivan                                            Mar. 1989 to Present
               aContributed to this study,


               Page 90                                 GAO/HRD-OO-54 HIlS Management Review
Methodology for Questionnaire Administered
to HHS Managers and Senior Staff

                        We sent a questionnaire to HHS managers and senior staff (1) to obtain
                        their perspectives on os's management of HRS and (2) to assist us in iden-
                        tifying management areas that they believed were most in need of atten-
                        tion. We asked them questions concerning os's leadership and
                        management of personnel, legislative, planning, program evaluation,
                        information resources, and financial activities.

                        During June and September 1987, we pretested a draft of our question-
Pretesting the          naire with 14 civil service, political appointee, and commissioned corps
Questionnaire           managers and senior staff of HHS'S headquarters and regional compo-
                        nents. These officials included 2 from HRS staff divisions, 10 from oper-
                        ating divisions, and 2 from regional offices. We also provided a copy of
                        the draft questionnaire to the Executive Assistant to the Chief of Staff
                        and the Deputy Surgeon General of the Commissioned Corps for review
                        and comment. Based on the results of the pretests and comments, we
                        revised the questionnaire to improve the relevance and clarity of the
                        questions and to minimize design flaws that could introduce bias or
                        error into the study results. The responses to the pretest questionnaire
                        are included in the final results for questionnaire recipients who asked
                        us to use their pretest responses.

                        We concluded from our pretesting that the questionnaire should be sent
                        to HHS managers and senior staff at or equivalent to the GM/GS-15 and
                        above levels located in the Washington, D.C., and Baltimore metropoli-
                        tan areas and the Centers for Disease Control headquarters in Atlanta.
                        Officials below the GM/GS-15 level and from the regions indicated they
                        had no basis to answer many of the questions about os. Additionally, we
                        chose not to mail the questionnaire to top-level management officials,
                        such as the heads of the operating divisions and staff divisions, because
                        we interviewed these individuals.

Identification of HHS   nel to
Managers and Senior     personnel information            we identified 1         servants and
Staff With              political appointees at or above the GM/GS~ 15 grade level having man-
                        agement responsibilities within HHS'S headquarters in the Washington,
Management              D.C.) and Baltimore metropolitan areas and the Centers for Disease Con-
Responsibilities        trol headquarters in Atlanta. These officials included Senior Executive
                                      and           appointees. In addition,        PBS'S
                        missioned Corps              information"""'TD1Tl
                                 Appendix II
                                 Methodology for Questionnaire Administered
                                 to lUIS ~fanagers and Senior Sta.ff

                                 officers that were equivalent to HHS'S civil servants and political appoin-
                                 tees having managerial responsibilities and located in the same geo-
                                 graphical areas.

                                 In August and October 1987, we mailed the questionnaire to the 1,065
Administration of the            managers and senior staff identified in our universe. If we did not
Questionnaire                    receive a response from these officials, we sent up to two letters encour-
                                 aging them to return a completed questionnaire. As a final measure, we
                                 telephoned nonrespondents encouraging them to respond. In December
                                 1987, we concluded our efforts to obtain responses. We edited the com-
                                 pleted questionnaires for consistency and verified the accuracy of our
                                 computer data.

                                 To help obtain managers' candid opinions and insights about os's man-
                                 agement of HHS, we pledged confidentiality to the questionnaire recipi-
                                 ents. We assured them that their answers would be held in strict
                                 confidence and that no individual would be identified with his or her
                                 response in any material reported outside of GAO. In addition, we
                                 assured them that the responses would be combined with those of other
                                 HlIS managers in our report.

                                 A total of 690 managers had responded to our questionnaire by January
Questionnaire                    1988, when we conducted our final analysis of the questionnaire results.
Response Rate                    Questionnaires received after that time are not induded in the results.
                                 Based on an adjusted universe, as explained below, the overall response
                                 rate for the questionnaire was 72 percent. Table 11.1 shows the original
                                 and adjusted universes and response rate to the questionnaire.

Table 11.1: GM/GS·15 and Above
Managers and Senior Staff                                    Original     Adjusted             Respondents
Questionnaire Response Rate      Personnel system           universe      universe         Number       Percent
                                 Civij service and

                                                               1,065          958             690                12

                                 As a result of the questionnaire responses and further investigation of
                                 nonresponses, we adjusted the original universe of 1,012 civil service
                                 employees and political appointees. Adjustments were made to account
                                                                    1 year of HBS                     had

                                 Page 92                                       GAO/HRlJ.oo.54 HHS Management Review
 Methodology for Que.tionnalre Administered
 to HHS Managers and Senior Staff

 should not otherwise have been included (e.g., managers who worked at
 St. Elizabeths Hospital and became District of Columbia employees on
 Oct. 1,1987). No adjustment to the universe of Commissioned Corps
 managers and senior staff was necessary.

Page 93                                       GAO/BRD-OO-54 HHS Management Review
Appendix III

CAMS: A Planning Model for HHS

               Our review of HHS planning processes revealed that the Cooperative
               Agency Management System established by Secretary Richardson con~
               tained many of the key elements needed for an effective departmental
               planning process. We believe that CAMS could serve as a model that HHS
               could adapt to begin developing such a process. An article coauthored
               by Dr. Laurence E. Lynn, Jr., former HHS Assistant Secretary for Plan-
               ning and Evaluation, explained that the planning phase of CAMS worked
               as follows.'

               CAMS  began in February of each year with the Secretary issuing a plan-
               ning guidance memorandum to the Department's components, directing
               them to develop plans and tentative budget allocations for their organi-
               zations. The memorandum communicated the priorities and issues that
               the Secretary wanted each component to consider in developing its
               annual policy, legislation, and budget proposals, as well as the assum~
               tions and constraints that should be considered. Also, the memorandum
               provided strategic guidance on presidential and secretarial policies that
               were to be reflected in the plans; general fiscal guidance for the upcom-
               ing fiscal year and targets for the 4 years beyond; guidance concerning
               the selection of program objectives; and other guidance related to legis-
               lation, program planning, and evaluation.

               Using the guidance provided in the Secretary's memorandum, the com-
               ponents developed their plans for the upcoming fiscal year and 4 years
               beyond. These plans contained the components' goals and objectives, as
               well as strategies for accomplishing them. In addition, the plans were to
               include an allocation of the budget target for the upcoming budget year
               and cost implications of the allocations for 5 years. Legislative and regu-
               latory initiatives and other proposed actions for the upcoming budget
               and subsequent years were to be included.

               Between May and June, after the submission of the components' plans,
               teams of the Secretary's staff offices reviewed the plans and prepared
                                   the                                             teams
                         papers,          were jointly prepared by                 and
               the component's staff, described the major issues, identified disagree-
               ments between the secretarial staff and the components, and outlined
               alternatives for the S('CI'etary. The papers focused attention on the

               Page 94                                  GAO/HRD-9(J..M HHS Management Review
CAMS: A Planning Model for HHS

future implications of current decisions so that an overall strategy
aimed at departmental long-range goals could be fashioned.

In addition to the issue papers, an overview memorandum was prepared
for the Secretary by a separate team. This memorandum described the
issues and alternatives facing the Department as a whole and placing
the components' proposals in an overall organizational context. The
memorandum gave the Secretary "a conceptual and analytical frame-
work" within which to consider crucial decisions that he had to make in
directing the affairs of the Department, in both the short and longer run.
It described the overall financial situation of the Department, reviewed
the total of the program managers' requests, and suggested alternative
strategies to guide the Department's activities in the next 5 years.

After the issue and overview memoranda were completed, the Secretary
presided over a series of top-level meetings. These meetings were among
the Secretary and his key staff advisers and program managers and
their top advisers. The sessions gave these officials a comprehensive
picture of current and likely future departmental activities. Top officials
from all areas were encouraged to attend each program area meeting.
The Secretary used these meetings to hear the arguments and evidence
in support of various alternatives in all program areas before deciding
exactly how to allocate budgetary and legislative costs. He used the
meetings as a means to solicit information, indicate priorities, evaluate
program operations, and speculate about the future. The meetings pro-
vided a forum to put his personal imprint on the Department.

By August, the Secretary communicated to the components tentative
program, budget, and legislative decisions made on the basis of his con-
sideration of issues and arguments presented in the meetings and subse-
quent overview memorandum. This end of the planning phase started
the final budget and legislative drafting.

               met to
managing the Department,           meeting, the "i.O«,.o.1I-<n'.,'",

goals were discussed, budgetary and legislative successes and failures in
support of these goals were identified, issues that needed study before
the next series of meetings were assigned, and the focus and tone of the
planning memorandum to be published in February were decided.
Skills Useful for Effective IRM and
Some Potential Applications

                         We analyzed the Paperwork Reduction Act (P.L. 96-511), OMB Circular
                         A-130, and recent research performed for the General Services Adminis-
                         tration and the National Academy of Public Administration to identify
                         skills that we believe would be useful for an effective IRM program. We
                         also identified IRM activities (applications) that we believe relate to each
                         skill. We shared our preliminary list of skills and applications with IRM
                         instructors from the Department of Defense Computer Institute, the
                         General Services Administration Training Center, and the U.s. Depart-
                         ment of Agriculture Graduate School and revised our material, where
                         appropriate, based on their comments.

Skill Application

Management               To perform and evaluate necessary management functions of planning,
                         organizing, directing, training, budgeting, costing, and controlling infor-
                         mation, information resources, information processing, and other infor-
                         mation activities.

Information Management   To manage information. Skills involve evaluating information utility and
                         uses, determining continuing needs, and assessing mission effects of
                         poor quality or unavailable information (e.g., overpayments or excess
                         payments). Involves evaluating the quality of data sources and estab-
                         lishing data quality standards and goals based on information impor-
                         tance. Evaluates resources needed for data error correction. Also
                         involves developing data standards for system integration and identify-
                         ing sharing opportunities to avoid duplication. Determines or evaluates
                         appropriate information dissemination requirements and other informa-
                         tion life cycle attributes (e.g., timing and frequencies). Identifies privacy
                         and security requirements for appropriate information protection. Uses
                            evaluates use                     measures, audit        data
                         and                                     and error rates to

Information Technology   To keep abreast of the most appropriate technology management for
Management               producing needed, useful information. Participates in decisions about
                                                    in   '''''''TD1F'n

                         Page 96                                         GAO/HRD-90.f)4 HIlS Management Review
                         Appendix IV
                         Skills Useful for Effective mM and
                         Some Potential AppUcations

                         projects. Evaluates management of technology using tools and tech-
                         niques that identify efficiency, capacity, and throughput limitations.
                         Evaluates backlog information (e.g., software maintenance schedules) to
                         ensure problem prioritization and correction. Ensures user notification
                         of uncorrected problems. Maintains or evaluates use of inventories to
                         promote information technology sharing, standardization, and integra-
                         tion, where appropriate. Assists users in personal computers and

Needs Assessment and     To work with user organizations in identifying resources and technology
Reassessment             needs for producing needed and useful mission-related information

System Development and   To apply acquisition justification methodology, system development
Acquisition Management   approaches, contracting rules and regulations, General Services Admin-
                         istration and OMB requirement." etc.

Telecommunications       To review approaches for networking local and wide areas, distributed
Management               data processing, and personal computer integration with central, distrib-
                         uted, and local data bases.

Management Infonnation   To identify, and extract from operational systems, key information
Systems Development      needed by executive and top management officials. Applies skills in
                         assessing the degree of success in meeting organizational missions, goals,
                         and objectives effectively and efficiently.

Security                 To ensure that appropriate consideration is given to protecting informa-
                         tion and systems against threats and risks. Knowledgeable of security
                         considerations in        development phases, risk management

Manual Information       To apply skills involving forms, records, library management, and other
Processing Evaluation    manual information proce&')ing procedures. Includes evaluating manual
                                    in an
                        Appendix IV
                        Skills Useful for Effective lRM and
                        Some Potential AppUcations

Costing                 To determine (or estimate) and evaluate costs of current and planned
                        information-processing operations. Provide advice on problem correc-
                        tion, its prioritizations, and costs. Costs also used as measurement to
                        (1) determine significance of an information problem, (2) justify alterna-
                        tive actions in acquisition and systems development, (3) make return-on-
                        investment and cost-benefit decisions, (4) balance decisions between
                        operational systems performance and security in and around the system
                        (risk analyses), and (5) charge fees for services.

Productivity and        To assess the productivity and efficiency of information-processing
                        activities and information use, where appropriate. Capability to apply
Efficiency Evaluation   and interpret input and output measures, output per direct labor hour or
                        other time measures, cost per unit and other measures used to evaluate
                        the productivity and efficiency of information processing operations.
                        Useful in identifying information bottlenecks, excessive manual process-
                        ing, and difficulties in information access and use.

Statistical Analysis    To determine correlations and trends in information quality and its rela-
                        tionship to mission effectiveness and costs. Identification of problematic
                        data sources. Interpreting results and effects of information and infor-
                        mation-related problems.

Auditor/Evaluator       To troubleshoot information processing and other information activities
                        for identifying significant problems that increase costs and/or impede
                        mission effectiveness. Uses such methods as reviewing correspondence
                        and complaint files and performing data-flow analysis to assess whether
                        the prime objectives of IRM are being achieved and to identify problems
                        that need priority attention.

                           supplement needed skills that may not be resident in the agency in
                                 numbers               IRM.      a source
                                 state IRM in an organization.
Comments From the Department of Health
and Human Services

                DEPARTMENT OF HEALTH. HUMAN SERVICES               Office of the Ssctftt8l'V

                                                                   Washington. D.C 20201
                                                  tI]{   24 1989
            Mr. Lawrence H. Thompson
            Assistant Comptroller General
            United states General Accounting Office
            Washington, D.C. 20548
             Dear Mr. Thompson:
            I am responding on behalf of the Department to the draft General
            Accounting Office report on "Management of HHS: Using the Office
            of the secretary to Enhance Departmental Effectiveness". These
            comments represent the tentative position of the Department and
            are subject to reevaluation when the final version of this report
            is received. We appreciate greatly the time and effort GAO staff
            spent in developing this information.
            The draft report offers valuable insights and data about the
            historical role of the Office of the Secretary from the tenure of
            Secretary Gardner through Secretary Bowen's administration.
            Secretary Sullivan will give serious consideration to the broad
            recommendations in the draft report as he proceeds with his
            administration's management initiatives. In fact, the issuance
            of the draft report reasonably early in the tenure of Secretary
            Sullivan makes it especially useful as a fresh look is being
            taken at the Department's priorities and organizational and
            management strategies. There is no question of the key role
            which the Office of the secretary (OS) must play to help direct
            and manage numerous programs, not to mention staff resources, of
            this large Federal enterprise. The report reflects a strong
            appreciation of this role.
            The success of the Office of the secretary in managing the
            Department is certainly dependent on leadership from the top.
            The Administration has established a Governmentwide set of
            management objectives through a process of challenges and
            negotiations with the Federal agencies. Concurrent with that
            being established, Secretary SulliVan set forth a list of goals
            and priorities to guide the policies and programs of HHS in the
            years ahead, and HHS agencies have developed plans to implement
            them. As the         suggests, such      , objectives and
            milestones are       ingredients to     success of          th

            Prior to and since the receipt of the GAO draft report, we in the
            Office of the Secretary, together with the Operating Divisions,
            have been Working to improve the management of the Department of
            Health and Human Services (HHS) and the overall effectiveness and
            efficiency in achieving the Administration's and Secretary's
            priorities and goals. The GAO draft report provides an excellent
            summary reference of some of HHS' past managerial strategies,
            their achiev~ments and
      Appendix V
      Comments From the Department of Health
      and Human Services

Page 2 - Lawrence H. Thompson

The report discusses principles concerning the need for clear
lines of authority and the desirability of streamlining decision-
making processes. Making changes in these areas can be achieved
through formal as well as informal means, and often can depend on
the nature and style of persons in key positions.
The report highlights the need to continue to make improvements
in the financial and information systems throughout HHS. Much
progress has been made in these areas and, without question, more
needs to be and will be done.
As we develop plans to manage HHS better for the immediate and
more distant future, we will consider fully the insights and
background which the GAO report brings to this dynamic forum. In
the course of bringing about management imprOVements, we will
continue to survey, assess and consult with our managers and
their staffs, with the Office of Management and Budget and
Congress, and with key external agencies such as the General
Accounting Office.
Following are technical comments on the draft report which should
be of assistance in GAO's editing and preparation of the final
report, and we look forward to the receipt of the final report.
This office will ensure that the insights and recommendations
which it contains are systematically considered and reported to
the Secretary. The Office of Inspector General is highly
app'reciative of GAO's acknowledgement of departmental innovations
and progress toward quality top level management as well.


                                          Assistant Secretary for
                                           Management and Budget

Major Contributors to This Report

                       Suzanne J. McCrory, Project Director
Human Resources        David P. Bixler, Project Manager, (202) 275-8610
Division,              Sheila Avruch, Staff Member
Washington, D.C.       ,John P. Brennan, Staff Member
                       Frederick K. Caison, Staff Member
                       Sandra K. Liesner, Staff Member
                       Kopp F. Michelotti, Staff Member
                       George F. Poindexter, Staff Member

                       James H. Rieger, Staff Member
Accounting and
Financial Management
Washington, D.C.

                       Morey J. Chick, Staff Member
Information            Eugene Kudla, Staff Member
Management and
Technology Division,
Washington, D.C.