oversight

OMB Management Leadership

Published by the Government Accountability Office on 1990-10-03.

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

                     United States General Accounting Oface
                     Testimony




For Release           OMB MANAGEMENT LEADERSHIP
on Delivery
Exnected    at
9:30 a.m. EDT
October    3, 1990




                      Statement     of
                      Charles     A. Bowsher
                      Comptroller      General   of the United   States

                      Before the
                      Committee    on Governmental     Affairs
                      United   States  Senate
BUILDING        AN INSTITUTIONAL
MANAGEMENT CAPACITY WITHIN OMB


We concluded           that     several         operational                     and organizational
adjustments           could     help     OMB achieve                  a     stable         management            framework.
These       changes     involved          (1)    focusing                 its      limited        resources             on
agency       programs         and activities                 most         in need of attention;                         (2)

having       the budget         divisions         oversee                 management              improvement
efforts;        (3) having         the management                     staff          work with          the      budget
examiners        to help        review       problem            areas            and analyze            agency          action
plans;       and (4)      establishing             a systematic                       process       built        into         the
budget       review     cycle      for      evaluating                key agency-specific                        and cross-
cutting       management          issues        that         affect             program        effectiveness.
From a resource               standpoint,          we felt                OMB needed              to increase            its
staff       and designate          a second            Deputy             Director            to focus         on long-
term       management         issues.


Leadership        of OMB's management                        efforts             is now vested                in an
Executive        Associate         Director.                 As the             third      ranking          official           in
OMB, he is        invited         to attend            all      budget               review       sessions         and is
in a position           to interact             with         the      program             divisions          and
influence        OMB direction              to the           agencies.                   OMB requested
additional        funding         to bolster             its       management                 oversight
capabilities,           and obtained             congressional                          funding       to increase              its
management        staff        from      47 to 82 positions.                              As of September,                    66
staff       were on board             in the management                         divisions.             Also,       it     has

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recently        sought         funding         for      the development                 and audit                  of agency
financial        statements             to help          assess          agency       financial              systems.


From an operational                    standpoint,              OMB established                     two management
oversight        processes             during        the      summer of 1989:                       the     list      of high
risk      internal          control          weaknesses;           and the Management                         by
Objectives           (MBO) system              to track          agency          progress             in addressing
major        program        policy,          and management                issues.            Both         processes
require        agencies          to provide             plans       for        achieving            objectives              and
regular        progress          reports.            OMB budget                divisions            have been
instructed           to work          with     the management                   divisions             to oversee
agency        management          improvement              efforts,             and are         to assess              agency
progress.            OMB proposed               increases           in agency              fiscal          year      1991
budgets        to address             selected          internal           control           problems              and MBOs,
and agencies            were directed                 to incorporate                 their           resource
requirements            to address              internal         control            issues           and MBOs in their
fiscal        year     1992 requests.


In October           1989,       OMB established                   the     Management                Integrity              Branch
to oversee           agency       actions            to fix        internal          control              weaknesses
associated           with      the     high      risk      areas.              However,         it        took      until      May
1990 for        OMB to establish                     a comparable                unit--the            Evaluation,
Planning         and MB0 Branch                 to oversee               the     operation            of     the MB0
process        and promote              long-range            planning            and program                evaluations
in     the    agencies.



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Also,      OMB has continued                     to give           attention              to improving               the
operation          of agency          financial              systems            and credit                management
practices.            It     is pursuing                 a five         point          financial           management
improvement           program         which           includes           reviewing              agency          financial
management           practices          and providing                    for         audited        agency          financial
statements.                In June 1990,                 OMB    told         Congress            that      agencies         were
making        unsatisfactory              progress                in    implementing                its     nine       point
credit        program,        and presented                    a plan          for      giving          renewed        priority
to     improving           agency      practices.


BUILDING          EFFECTIVE RELATIONSHIPS
WITH THE AGENCIES, PRESIDENT,
AND THE CONGRESS


Our review           of OMB's past                  management               reform         efforts         led      us to
conclude           in our report               that        OMB, with             its      limited          staff,       cannot
simply        impose        change      on the             agencies.                 Agencies            must     see reform
initiatives           as important                  if     they        are      to have a reasonable                        chance
of     succeeding.            Thus,       OMB must                seek        the commitment                of agency
leaders           to address         difficult              management                 problems.


OMB has made progress                      in securing                  support           for      its     management
efforts.            For example,               it        has gained             Presidential               support          for    its
high       risk     and     MB0     efforts.               In April             1990,       the     President              met with
the      Deputy      Secretaries               and charged                   them with           making         progress          in
addressing           management            problems               within         their          agencies.             As a

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follow-on,              the     OMB Deputy             and Executive                Associate         Directors             have
met with             individual            Deputy       Secretaries                to discuss         progress             in

addressing              the     high       risk     areas,           MBOs, and other              management
issues.


Also,      OMB has continued                      to work            through         the President's              Council
on Management                  Improvement,             the      President's              Council       on Integrity
and Efficiency,                   and with          the Chief             Financial         Officer         (CFO)
Council.              These efforts               serve         to    foster         communication            across             the
executive             branch,          build      commitment              to reform          efforts,         and tap
agency         talent          to address           common management                     problems.


ACTIONS ENCOURAGING, BUT
SUSTAINED ATTENTION NEEDED


The actions                  I have      just     discussed             are       encouraging.             But,       it        is

far      too     soon to conclude                   that        OMB is           firmly    on course          to reaching
its     management                leadership           potential.                 The limited           results            from
past      OMB management                   efforts--          which       were characterized                  by a          lack

of      sustained             direction,          poor        implementation                strategies,            and
limited          integration               with     the       budget        process--make               us skeptical
about          the     long-term           success         of        any OMB management                 initiative.


Despite          20 months             of effort,             OMB seems to face                   some of the
problems              that     have plagued              past         efforts.            There       has been
changing              leadership           below       the      Executive             Associate         Director            level

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and slow          development                  of approaches                   for         implementing                a management
agenda.           For example,                     the         former       Assistant                Director          for
Management           left      in May 1990 without                                  getting           action        on an
organizational                proposal                   for     the management                      divisions.               An
organizational                structure                    was adopted                   in May 1990 with                    the
selection          of an Assistant                             Director            for     General         Management.                     He
only      recently           put        in place                his      management              team,        and is          still
defining          an agenda              for         his        staff,        including               how it         will         work        with
the      program      divisions                     and how it              will          achieve         the Director's
stated       objectives                 of     focusing               more attention                    on long-range
planning          and program                  evaluation.


OMB's financial                management                       activities                also       have not          had
permanent          leadership.                       The Assistant                       Director         for      Financial
Management           position                 is     currently               being          filled        on an acting                   basis
by the       person          brought                in to head the                       management             integrity               effort.
The position                of Chief                of     the        Management              Integrity            Branch             is also
filled       on an acting                     basis.              Further,               as of September                    21,       there
were       12 vacancies                 in     the         39 positions                   in the        Financial             Management
Division.            OMB does                 have personnel                       actions            in process             to fill
most       vacancies          among professional                              staff.


Another        problem             is        that        there           seems to be little                       delegation                of
authority.             The top                officials                at OMB have been involved                                   in
extensive          and difficult                         budget           negotiations                 with       little           time
left       over     to build                 OMB's institutional                            capacity            to work

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effectively             on management              issues.            So long            as this          condition
continues,          effective         delegation                  to well-chosen                 subordinates                 is
the     only      way progress            can be made.


In addition,             our observations                    at    two agencies                 raise      concerns
about     whether          the MB0 program                   is achieving                its      potential             to
improve         agency      operations.                 Our findings              at the              Immigration             and
Naturalization              Service            (INS)      raise          questions             regarding            the
seriousness             of the process.                   An INS official                      told     us that           INS
submitted          goals       from      its     fiscal           year      1988 budget                when directed                  by
the     Department          of Justice             to develop               and submit                objectives             within
12 hours.           Consequently,                INS established                   a goal             of apprehending
650,000         deportable         aliens          in fiscal               year    1990 as fulfillment                          of
their      objective           of maintaining                 an effective                border          interdiction
program.           This     represented                a decrease            of 241,000                apprehensions
from     fiscal         year    1989 performance.


The Department              of Agriculture                   (USDA)--which                has lacked                a
cohesive,          departmentwide                management                strategy--was                 not    fully         using
the     opportunity            offered          by the MB0 program                       to better             address
issues         which      cross-cut            the Department's                   components.                  In
monitoring             progress       toward           one of        its     major         agricultural                 goals--
encouraging             environmentally                 sound       agricultural                  policies--we                found
that     USDA does not             comprehensively                       track     all         related         activities.
For     example,          in monitoring                the    water         quality            part      of this
environmental              goal,      the       Department's                MB0 system                was primarily

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tracking         the Secretary's                     new water           quality           initiative                  instead            of
tracking         all     other           water       quality          activities            within          the
Department's             components.


Situations             such as these                 indicate          that        at    least       some agencies                        do
not     take     the MBOS seriously.                           This      must be corrected                        if     OMB
managerial             oversight            is to be truly                 effective.                Ultimately                  the
test     OMB leadership                   will       face      is whether,                in the presence                      of
budget         pressures,           it      will       be able          to devote            the needed                 attention
to management              issues           to firmly           establish               an institutional                       process
capable         of probing               the       effectiveness              of agency            management                  plans
and actions.               We will             continue         to monitor               OMB's efforts.


Correcting             government's                 management           deficiencies                will         require
major      changes         in how the                President,            OMB, the           agencies,                 and
Congress         make decisions.                       We must          expect          greater         managerial
accountability               than         we have seen in                  the past            from         the political
executives             who head the departments                            and major              program              agencies.
Prime      responsibility                   for      management            improvement               rests             with      the
agencies.              Agency       leadership               must       devote          more attention                    to
developing             viable       plans           for     meeting        long-term              mission              needs,          and
then     ensuring           that         continuing            attention                is given        to their
implementation.                    Congressional                oversight,                such as the                  series          of
hearings          this     Committee                has held          concerning             OMB, is           an important
part     of establishing                    accountability                 with          agency       leadership                    for



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addressing             the problems              which     compromise               service      delivery          and
safeguarding               public       assets.


I believe           that      one of       the cornerstones                   to establishing               greater
accountability                for      performance              across       government          rests      with      broad
financial          management            reform.           We currently               rely      on out      of date
financial          management            systems          which        do not        provide      relevant,
timely,       and comprehensive                     information              for     managers.           For years,              I
have advocated                strong       centralized                leadership         to direct          the
government's               financial          management              activities.             To this       end,      I
support       enactment             of S. 2840,                currently           pending      before      this
Committee,           because           I believe          it      addresses          the essential            elements
required         for       a successful             financial              management          reform      program.
These       include         the annual            preparation               and audit          of agency
financial           statements           for      all     executive           departments           and major
agencies.              I believe          this      is essential               to ensuring          that      the
financial           systems          are working,               the    government's             assets      are
safeguarded,               and reliable             information              is being          provided       to
program       managers.


In addition,        - S.2840
                         .I  requires   each agency head to forward    an
annual       report    to the President   and the Congress.   I envision                                                  that
the     report         would        include       the     agency's           financial          statements           and
the     auditor's            opinion,          as well          as a discussion                and analysis           of
the     agency's           financial           position           and operations.                 This      report
would       form       one of the bases                  for      OMB management               reviews       as part         of

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the      annual       budget     process;              help     define       the agenda            for     annual
congressional              hearings;             and strengthen              disclosure            to the public.




In summary,              addressing         our government's                   severe          management
problems          will     require         changed            behavior       on the part              of OMB, the
agencies,            and Congress.                In one area             after       another,           we find     that
our      government's           ability           to provide             effective          services         to the
public       and maintain              proper          accountability                over      public       resources
is deteriorating.                     For example


--        We expect          government               to be accountable                 to the          taxpayer,       yet
          we allow         federal         agencies            to operate            without       the basic
          internal         controls          and accounting                 systems         necessary          to run
          their       programs         and safeguard               their       assets.            The scandal           at
          the     Department           of Housing              and Urban Development                      is a clear
          example         of the dangers                inherent          when financial                 management           is
          allowed         to deteriorate.


--        We spend billions                 designing             and installing                computer        systems
          to help         agencies         meet        their      mission          objectives.              Yet we
          invariably           find       that        these     systems           do not       work      as planned,
          have cost          overruns            in    the     millions           or even hundreds              of
          millions         of dollars,                and are      not      developed           on time.



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--        We face        the     need to invest                    billions          of dollars              in our
          decaying         transportation                   infrastructure                  after         years      of
          neglect.           The Secretary                  of Transportation                    deserves             credit
          for     recently          producing              a National             Transportation                  Policy
          that     provides            a comprehensive                     overview         of major           issues.
          However,         many groups                strongly            criticized            the policy
          statement          because           it     either            stopped        short        or backed          away
          from     defining            any specific                 federal        role        in many crucial
          areas,       particularly                  regarding             funding         the huge
          infrastructure                needs.


These problems                 arise      because           government             decisionmaking                    continues
to be focused              too        intensely            on seeking             short-term               solutions
rather          than    on planning                 how to provide                effective               services         to meet
 long-term         needs.             In other            words,         we have          invested          neither         in the
programs          to meet urgent                    needs         nor    in    the basic            management
 systems         needed        to ensure             proper         accountability                  for     program
 performance.


 OMB has an important                     leadership                role       to play         and has started                   some
 worthwhile            initiatives.                  But     if     past       is prologue,                implementation
 will     suffer        unless         there         is    strong,            consistent            leadership             and
 direction.


 This      concludes           my prepared                statement.               I will       pleased            to answer
 any questions               that      you or other                 members          of     the Committee                 may
 have.


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