Performance Reporting in Federal Management Reform
Division of Science Resources Studies
National Science Foundation
March 14, 1997
*Thanks are due Susan Cozzens, Cliff Gabriel, Mark Gast, Gerry Glaser, Joe Kull, Ernie Moniz, Larry Rausch, Phil Sunshine, Linda Sundro, Judy Sunley, and Ray Wolfe for helpful discussion; Gerry Glaser, Susan Hill, Marty Mueller, Al Muhlbauer, and Judy Sunley for insightful comments; Ed Blansitt, John Chester, Gerry Glaser, Stuart Graff, Anna Gold, Preston Rich, Jerry Stuck, and Frank Wilson for assistance in locating reference documents; Tanya Gore, Martha James, and Hattie Norris for handling logistical matters; and Jeanne Griffith and Al Tupek for providing a productive working environment. Responsibility for any errors rests with the author.
- I. Introduction and Summary
- II. The Chief Financial Officers Act of 1990
- III. The Government Performance and Results Act of 1993
- IV. The Government Management Reform Act of 1994
- V. The Federal Financial Management Improvement Act of 1996
- VI. The Information Technology Management Reform Act of 1996
- VII. FASAB Statements
- VIII. OMB Guidance
- IX. Consolidation of Reporting Requirements
- X. Concluding Comment
I. Introduction and Summary
As public attention has increasingly focused on improving the performance and accountability of Federal programs, bipartisan efforts in Congress and the White House have produced new legislative mandates for management reform. These laws and the associated Administration and Congressional policies call for a multifaceted approach-including the provision of better financial and performance information for managers, Congress, and the public and the adoption of integrated processes for planning, management, and assessment of results.
Recent laws include specific new requirements for performance reporting:
- The Chief Financial Officers Act of 1990 (CFO Act) establishes Chief Financial Officers in major Federal agencies and includes among their responsibilities provision for systematic measurement of performance.
- Performance reporting in the Government Performance and Results Act of 1993 (GPRA) is part of a larger system to be adopted by each Federal agency in order to integrate planning, budgeting, management, and performance assessment.
- The Government Management Reform Act of 1994 (GMRA) calls for agency financial statements that reflect the results of agency operations and, beginning with FY 1997, a government-wide financial statement that includes results of government-wide operations.
- The Federal Financial Management Improvement Act of 1996 (FFMIA) is intended to increase the capability of agencies to monitor the execution of their budgets by providing better support for the preparation of reports that compare spending of resources to results of activities.
- The Information Technology Management Reform Act of 1996 (ITMRA) is intended to improve the ways that agencies acquire, use, and dispose of information technology (IT) and, thereby, to improve the productivity, efficiency, and effectiveness of Federal programs. The Act requires consideration of IT goals in strategic planning and IT contributions to agency goals and performance.
GMRA authorized the Office of Management and Budget (OMB) to simplify and consolidate agency reporting requirements. To this end, OMB and the agencies are in the process of developing Accountability Reports that will streamline reporting by providing critical financial and program performance information in a single report.
OMB is working with staff from the Federal agencies, the National Performance Review, Congress, the General Accounting Office, and other relevant organizations in the public and private sectors to implement the new mandates.
Statements of concepts and principles from the Federal Accounting Standards Advisory Board (FASAB) and guidance from OMB emphasize the importance of measuring the results of government operations. All agree that it would be exceedingly convenient if a few comprehensive measures for each major Federal program could provide a complete and accurate charting of the program's results year after year. But reference is also occasionally made to the limitations of performance measurement and the need to supplement measures with other kinds of information in order to provide a complete and balanced picture.
Agencies and OMB are now in the process of determining the best balance between what can be measured and what cannot be measured and forging the most informative way to report results. Meanwhile, auditors are concerned about how the proposed approaches to performance assessment can be audited. Agency staff and stakeholders need to be included in the developmental process. But few staff or stakeholders know the arcane details of performance reporting in the new management mandates.
The remaining sections of this paper present a brief overview of the CFO Act, GPRA, GMRA, FFMIA, ITMRA, and associated FASAB statements and OMB guidance--with special reference to performance reporting. The paper does not present operational, or policy, recommendations. Its purpose is to offer a "pick-and-choose" compilation of what's in the five acts and associated FASAB and OMB materials. Extensive detail is supplied because the five acts and associated FASAB statements and OMB guidance draw on a large, complex set of standards which cannot be meaningfully condensed into just a few pages and which represent a new kind of "culture" for many outside the accounting community.
Following the main text of the paper are a list of references and a series of appendices. Appendix A lists key dates for performance and financial reporting. Appendices B through F present more detail about each of the five acts. Appendix G lists FASAB statements issued to date. Appendices H through J summarize major elements of performance reporting contained in FASAB statements. Finally, Appendix K summarizes OMB guidance for performance reporting in the context of agency financial statements.
II. The Chief Financial Officers Act of 1990
The purposes of the CFO Act are to (1) bring more effective general and financial management practices to the Federal government, (2) improve agency systems of accounting, financial management, and internal controls, and (3) provide for the production of complete, reliable, timely, and consistent financial information for use in the financing, management, and evaluation of Federal programs.
The CFO Act establishes (1) a Deputy Director for Management in the Office of Management and Budget (OMB) to be the chief Federal official responsible for financial management, (2) an Office of Federal Financial Management, in OMB, headed by a Comptroller who is the deputy and principal advisor to the OMB Director for Management in carrying out his/her responsibilities under the CFO Act, and (3) a Chief Financial Officer (CFO) and Deputy CFO in each executive department and in each major executive agency in the Federal government.
The responsibilities of the CFOs include maintenance of an integrated agency accounting and financial management system that provides for (1) complete, reliable, consistent, and timely information which is prepared on a uniform basis and which is responsive to the financial information needs of agency management; (2) the development and reporting of cost information; (3) the integration of accounting and budgeting information; and (4) the systematic measurement of performance. The Act does not elaborate on the meaning of systematic measurement of performance.
The Act requires major Federal departments to prepare annual financial statements that are prepared according to OMB guidance and audited by the agency's Inspector General.
III. The Government Performance and Results Act of 1993
The purposes of GPRA include: (1) improved planning and management of Federal programs, (2) increased accountability and better assessment of results, (3) improved communication with Congress and the public, (4) better information for Congressional and agency decisions, and (5) increased public confidence in the government.
The Act introduces a new set of reporting requirements into the budget process for each agency. The requirements center on: (1) a strategic plan that provides long-run strategic goals covering 5 or more years (and up-dated at least every 3 years), (2) an annual performance plan that derives specific short-run performance goals from the long-run general goals in the strategic plan, and (3) an annual performance report that examines whether goals were met and what was accomplished with the resources expended.
In order to focus attention on managing for results, GPRA and the OMB guidance for its implementation are quite specific about the concepts which should anchor planning and assessment. Performance assessments should report (1) outputs which are the immediately observable products of program activity (e.g., not teaching, but graduates), and (2) outcomes which are the longer-term results for which a program is designed (e.g., not graduates, but graduates who obtain jobs).
There is a clear preference in GPRA for the use of measures in the specification of goals and the assessment of outputs and outcomes. However, GPRA provides that, if an agency, in consultation with the Director of OMB, determines that it is not feasible to express performance goals for a particular program in an objective, quantifiable, measurable form, the Director of OMB may authorize an alternative form. GPRA stipulates that the alternative form should include separate descriptive statements of a minimally effective program and a successful program with sufficient precision to allow for an accurate, independent determination of whether or not the agency's actual performance meets the criteria for a minimally effective program or a successful program. Agencies may also propose other alternative forms, or state why it is infeasible or impractical to express a performance goal in any form.
Agency strategic plans are due Congress for the first time on September 30, 1997. Annual performance plans must accompany annual budget requests, starting with the FY 1999 budget--due OMB September 1997, and due Congress February 1998. The first annual performance report will be for FY 1999-due Congress March 31, 2000.
IV. The Government Management Reform Act of 1994
The purposes of GMRA are to provide a more effective, efficient, and responsive government through a series of management reforms primarily for Federal human resources and financial management.
The Act requires for FY 1996 and each year after, that all major Federal departments and agencies prepare a financial statement covering all accounts and associated activities of each office, bureau, and activity of the agency. The statement should conform to OMB guidance, and it should be audited by the agency Inspector General. The statement should reflect (1) the overall financial position of the offices, bureaus, and activities covered by the statement, including assets and liabilities thereof; and (2) results of operations of those offices, bureaus, and activities.
GMRA authorizes OMB to consolidate and simplify the financial management reports that agencies are required to prepare and to adjust the frequency and due dates of the reports (after appropriate consultation with, and notification of, Congress).
The Act requires a government-wide financial statement, for FY 1997 and each year after, prepared by the Secretary of the Treasury in coordination with the Director of OMB, audited by the US Comptroller General, and reflecting the overall financial position of the US government, including assets and liabilities and results of operations.
V. The Federal Financial Management Improvement Act of 1996
The Federal Financial Management Improvement Act of 1996 (FFMIA) addresses Congressional concerns that, although progress has been made in strengthening Federal internal accounting controls, Federal accounting standards have not been uniformly implemented and certain deficiencies persist.
FFMIA notes that incorporation of FASAB concepts and standards into Federal financial management systems should enable agencies to produce cost and financial information that will assist the Congress and financial managers to evaluate the cost and performance of Federal programs and activities and thus facilitate improved decision making.
Building on and complementing the CFO Act, GPRA, and GMRA, the Act provides for the establishment of uniform accounting systems, accounting standards, and accounting reporting systems in the Federal government and for related purposes. It is intended to increase the capability of agencies to monitor the execution of their budgets by providing better support for the preparation of reports that compare spending of resources to results of activities.
The Director of OMB is required to submit a report to Congress by March 31 of each year about the implementation of the Act, and agency Inspectors General and the Comptroller General of the United States are required to report to Congress about compliance matters.
VI. The Information Technology Management Reform Act of 1996
The Information Technology Management Reform Act of 1996 (ITMRA) is intended to improve the ways that agencies acquire, use, and dispose of information technology (IT) and, thereby, to improve the productivity, efficiency, and effectiveness of Federal programs.
Fundamental is the streamlining of the IT procurement process, including elimination of the centralized authority of the General Services Administration and transfer of acquisition authority to the agencies themselves.
Also significant are requirements for integration of IT planning with overall agency strategic planning, budgeting, and performance assessment and for better information for monitoring the progress of IT investments and evaluating their results.
The Act assigns new responsibilities to the Director of OMB and to the heads of executive agencies, and it creates the new position of Chief Information Officer (CIO) in each executive agency.
The responsibilities of the OMB Director include (1) developing, as part of the overall budget process, a process for analyzing, tracking, and evaluating the risks and results of all major capital investments made by each executive agency in information systems; and (2) submitting to Congress, along with the President's budget, a report on the net program performance benefits from major capital investments in information systems in executive agencies and how the benefits of these investments relate to the accomplishment of agency goals.
The responsibilities of the agency head include (1) establishing goals for improving the efficiency and effectiveness of agency operations and, as appropriate, the delivery of services to the public through the effective use of IT; (2) preparing an annual report, to be included in the agency's annual budget submission to Congress, on progress in achieving those goals; and (3) ensuring that performance measurements are prescribed for assessing IT that is in use or will be acquired for use in the agency.
The responsibilities of the agency CIO include (1) monitoring the performance of the agency's IT programs, evaluating the performance of IT programs on the basis of applicable performance measurements, and advising the agency head about whether to continue, modify, or terminate a program or project; and (2) annually, as part of the agency's strategic planning and performance evaluation processes, assessing the extent to which the positions and personnel at the executive and management levels of the agency meet the requirements for achieving agency performance goals for information resources management.
Further, ITMRA requires the head of each executive agency, in consultation with the agency's CIO and CFO, to establish policies and procedures that will ensure that (1) the accounting, financial, and asset management systems and other information systems of the agency are designed, developed, maintained, and used effectively to provide financial or program performance data for financial statements; (2) the financial and related program performance data are provided on a reliable, consistent, and timely basis to agency financial management systems; and (3) the agency financial statements support:(a) assessments and revisions of mission-related processes and administrative processes of the agency; and
(b) performance measurement for agency investments in information systems.
As part of his July 16, 1996, Executive Order on Federal Information Technology, President Clinton established a Chief Information Officers Council which serves as the principal forum for executive agency CIOs to discuss and recommend strategic directions for the Federal information infrastructure. The Council is chaired by the OMB Deputy Director for Management.
VII. FASAB Statements
FASAB statements provide accounting concepts and principles for preparing financial reports that will help assess Federal programs' (1) budgetary integrity, (2) operating performance, (3) stewardship for the future, and (4) systems and control for safeguarding Federal assets.
With respect to operating performance, FASAB statements call for information about (1) the costs of providing specific programs and activities and the composition of, and changes in, these costs; (2) the efforts and accomplishments associated with federal programs, their relationships to costs, and changes over time; and (3) the efficiency and effectiveness of the government's management of its assets and liabilities.
FASAB statements consider performance measurement to be essential in financial reporting and discuss at length measures of outputs, outcomes, impacts, efficiency (i.e., resources used per unit of output), and effectiveness (i.e., relationship of cost to outcome).
FASAB statements also note the limitations of performance measures. For example, Statement of Federal Financial Accounting Concepts (SFFAC) No. 1 says that performance usually cannot be fully described by a single measure; indicators of service efforts and accomplishments do not, by themselves, indicate why performance is at the level reported; and reporting quantifiable indicators can sometimes have unintended consequences. For these and other reasons, performance measures generally need to be accompanied by suitable explanatory information--both quantitative and narrative--to help readers of financial reports understand the measures, assess the reporting entity's performance, and evaluate the significance of underlying factors that may have affected reported performance. (SFFAC, paragraphs 211-212)
FASAB statements also provide concepts and principles for reporting on stewardship for the future, including investments in human capital and research and development (R&D). Inclusion of these programs in the stewardship investment category is dependent on demonstrating over time that their outputs and outcomes increase or maintain national economic productive capacity or yield other future benefits.
FASAB Statement of Federal Financial Accounting Standards (SFFAS) No. 8 discusses stewardship reporting and defines output as a tabulation, calculation, or recording of activity or effort that can be expressed in a quantitative or qualitative manner.  Measures of outputs should have two key characteristics: (1) they should be systematically or periodically captured through an accounting or management information system, and (2) there should be a logical connection between the reported measures and the program's purpose.
SFFAS No. 8 defines outcome as an assessment of the results of a program compared to its intended purpose. Outcomes for stewardship investments in human capital should: (1) be capable of being described in financial, economic, or quantitative terms and (2) provide a plausible basis for concluding that the program has had or will have its intended effect.
SFFAS No. 8 says that, because of the difficulty of measuring the results of an R&D program in comparison to its intended purpose in financial, economic, or quantitative terms, outcome data for R&D programs are expected to consist typically of a narrative discussion of the major results achieved by the program during the year, along the following lines:(1) For basic research, there should be an identification of any major new discoveries that were made during the year.
(2) For applied research, there should be an identification of any majornew applications that were developed during the year.
(3) For development, there should be a description of the progress of major developmental projects, including the results with respect to projects completed or otherwise terminated during the year and the status of projects that will continue.
The information presented for R&D outcomes should provide a concise plausible basis for judging the extent to which the program is achieving its purpose. (SFFAS No. 8, Chapters 7-8).
VIII. OMB Guidance
In consultation with the CFO Council, the President's Council on Integrity and Efficiency, and other interested parties, OMB specifies the formats and instructions for agency financial statements.
OMB Bulletin 97-01, Form and Content of Agency Financial Statements,  says that an organization's Annual Financial Statement should be composed of(1) A brief narrative overview of the reporting entity that provides a clear and concise description of the reporting entity and its mission, activities, performance goals, program results, financial results, financial condition, and limitations of the principal financial statements that follow in the next section.
(2) Principal financial statements, including a balance sheet, statement of net costs, statement of changes in net position, statement of budgetary resources, statement of financing, statement of custodial activity, and related notes.
(3) Required supplemental stewardship information
(4) Required supplemental information.
(5) Other accompanying information judged by management to help provide a better understanding of the entity's programs and the extent to which they are achieving their intended objectives.
The Annual Financial Statement should include objective, relevant measures of results that disclose the extent to which the agency's programs are achieving their intended objectives. Bulletin 97-01 explicitly discusses measurement of outputs, outcomes, efficiency, and effectiveness.
The presentation of measures in the Annual Financial Statement should include both positive and negative results; present historical and future trends, if possible; be illustrated with charts and graphs, whenever possible, for easy identification of trends; explain the significance of the trends; provide comparison of actual results to goals or benchmarks; show variations from goals and plans; and provide other explanatory information that would help readers understand the significance of the measures, the results, and any variations from goals or plans.
With respect to stewardship investments in human capital and R&D, continued inclusion in the stewardship investment category is dependent on demonstrating over time that program outputs and outcomes increase or maintain national economic productive capacity or yield other future benefits.
Although Bulletin 97-01 incorporates previously published FASAB statements and mirrors the FASAB discussion of useful measures, there is no explicit statement in 97-01 of the limitations of performance measures.
Bulletin 97-01 notes that the statement of goals and performance measures in the Annual Financial Statement should be consistent with the strategic plans, performance plans, and performance reports prepared for budget or GPRA documents of the agency; and the performance measures should be linked to the programs featured in the agency's "Statement of Net Cost."
IX. Consolidation of Reporting Requirements
The CFO Council has proposed two annual reports in order to consolidate reporting requirements (as called for by GMRA). A Planning and Budgeting Report would lay out an agency's road map for its future actions, linking resources requested to future plans. An Accountability Report would examine how well an agency has performed in relationship to its previously stated goals and objectives.
Under the direction of OMB, and in cooperation with the CFO Council, six agencies are producing Accountability Reports on a pilot basis. These reports will streamline reporting by providing critical financial and program performance information in a single report. The financial statements prepared in accordance with Bulletin 97-01 and the audits of the statements by agency Inspectors General will be major components of these Accountability Reports. It is expected that eventually all major Federal agencies will prepare Accountability Reports.
X. Concluding Comment
Agencies, OMB, and other interested parties are working together to forge approaches for assessing program results in order to meet the new reporting requirements. Meanwhile, auditors are concerned about how the proposed approaches to performance assessment can be audited. Since, for many programs, there are few pre-existing performance measures and methods that can fill the new mandates exactly, it seems likely that this will be an evolutionary process.
 The current OMB Deputy Director for Management is John A. Koskinen.
 The current Comptroller is G. Edward DeSeve.
 The current incumbent is John A. Koskinen.
 In October 1990, the Director of OMB, the Secretary of the Treasury, and the Comptroller General of the US created the Federal Accounting Standards Advisory Board (FASAB) to consider and recommend accounting standards for the Federal government. The nine-member board has one member from OMB, one from Treasury, one from GAO, one from the Congressional Budget Office, one from the Department of Defense, one from a civilian agency (currently Energy), and three from the private-sector.
 SFFAS No. 8 will apply to agency financial statements for fiscal years beginning after September 30, 1997.
 OMB Bulletin 97-01will apply in part to agency financial statements for FY 1996 and FY 1997, and it will apply in full to statements for FY 1998.
 The six agencies are the General Services Administration, National Aeronautics and Space Administration, Nuclear Regulatory Commission, Social Security Administration, Treasury, and Veterans Administration.