3C. Delivering a Government that Works Better and Costs Less ---------------------------------------------------------------------- The entire agenda of change depends upon our ability to change the way we do our own business with the people's money. That is the only way we can restore the faith of our citizens. President Bill Clinton September 7, 1993 ---------------------------------------------------------------------- This Administration inherited a Government with a trust deficit. Americans don't believe that they--or their tax dollars--are treated with due respect. They also don't believe that Government can or will change. The private sector has cut costs and raised quality to compete around the world. The Federal Government must do the same--to cut the deficit and free up capital for investment, and to keep up with and support our more efficient private sector, so that the whole economy can grow faster. To be a vital partner in economic renewal and prosperity, then, the Federal Government must rise to three challenges: o It must rebuild public trust. o It must work better and cost less. o It must stay in step with--not drag down--the private sector. The Clinton Administration took swift action in its earliest days to begin putting the Federal house in order, launching the National Performance Review (NPR) under the leadership of the Vice President. The National Performance Review Challenge The NPR's intensive six-month effort was the first step in a long journey toward a reshaped government for the next century: a government that will emphasize results instead of rules; treat citizens more like customers, with respect; empower front-line employees to do their best; and strip away activities it can no longer afford. That vision parallels the successful, and necessarily painful, transformation of America's private sector. To stay competitive in world markets, big corporations have redefined missions, reorganized for results, focused on customer service, and capitalized on advancing technology. While the Federal Government has tried to do more with less for years, it has not been forced to reexamine those fundamentals all at once. The sheer size of the Federal Government, with annual expenditures of over 23 percent of the Gross Domestic Product, makes this a major challenge. The expenditures of each of the Federal Government's three biggest agencies--the Departments of Health and Human Services, Defense, and Treasury--nearly triple the revenues of the Nation's biggest corporation, General Motors Corp.; expenditures of mid-sized Federal agencies match revenues of Fortune 50 companies. The NPR's principles for "reinventing" government yielded 384 recommendations--from systemic government-wide change to proposals for agencies--all following these four themes: o Cut red tape by shifting from accountability for following rules to accountability for achieving results. o Put the customer--the citizen--first by giving a voice and a choice. Restructure operations to meet the needs of individuals. Use competition, or where competition isn't feasible, use other market incentives for success. o Empower employees to get results by decentralizing authority, permitting those who work on the front lines to make more decisions and solve more of their own problems. Employees responsible for results must be provided with the necessary tools, information, and training. Make full use of computer systems and telecommunications to reengineer activities and ensure that programs are run efficiently and effectively. o Go back to basics, paring back programs by abandoning the obsolete, eliminating the duplicative, and ending special-interest privileges. The recommendations will affect all sectors of the Federal Government. The Administration will reduce the Federal work force by 252,000 through 1999--or about 12 percent of the civilian non-postal work force--by rethinking not only what government does but how it does it, and by improving program delivery as well as streamlining procurement, personnel, financial management, and regulatory affairs. From Rhetoric to Reality As management reformers have learned, getting from rhetoric to reality requires a top-down imperative and a bottom-up stake in change. Under the leadership of the Vice President, this Administration has depended primarily on government employees, not outside consultants, to paint the vision and translate it into tangible next steps. The NPR created a framework for action. The President's Management Council will coordinate and oversee critical management changes, such as streamlining and field office restructuring. Its members are the officials (mostly deputy secretaries) who have been designated Chief Operating Officers in their departments. The President and the Vice President both have noted that implementing the NPR agenda will take eight to ten years. However, as a result of 16 NPR-based Presidential directives issued to date, as well as prior legislation and reform efforts, key administrative initiatives are already in progress throughout the Government. These agency-specific initiatives are highlighted throughout this budget. The key government-wide initiatives are discussed below. REBUILDING PUBLIC TRUST THROUGH RESULTS AND SERVICE PUTTING CUSTOMERS FIRST ---------------------------------------------------------------------- We need to listen to our customers and hear clearly what they have to say to us. Vice President Al Gore October 27, 1993 ---------------------------------------------------------------------- The quality revolution sweeping through American businesses has brought the issue of customer service front and center. The Government must seek to provide the service and results its customers, and American citizens and taxpayers, deserve. Long lines, busy signals, bad information, and financial errors are all too common, undermining public trust in Government to do anything right. Weary of promises, Americans need to experience a change for the better in the services they receive from the Federal Government. Finding Out What Customers Want ---------------------------------------------------------------------- Go to the places where your customers go and pretend you are a customer. Fill in the forms, apply for the grants, stand in the lines, call the 800 numbers. See if you like the service you receive. SSA Commissioner Shirley S. Chater December 14, 1993 ---------------------------------------------------------------------- On September 11, 1993, President Clinton issued Executive Order No. 12862, "Setting Customer Service Standards." It requires Federal agencies to put customers first by regularly asking them how they view Government services, what problems they encounter, and how they would like services improved. The first step in responding to the Executive Order is to find out who a program's customers are and what they want. ---------------------------------------------------------------------- Highlights of E.O. No. 12862 "Setting Customer Service Standards," September 11, 1993 o The Government must be customer driven. o The standard of quality for Government customer service is set equal to the best practices in the private sector. o Agencies are to identify who their customers are and survey them to determine what they want. o Agencies are to develop and publish performance standards and measure results against them. o Employee ideas and actions are to be a big part of the solution. o Agencies are to provide customers with choices in both the sources of service and the means of delivering them. o Information, services, and complaint systems are to be easily accessible. ---------------------------------------------------------------------- Internal Revenue Service (IRS): In response to its customers, the IRS piloted a system in 1992 that enables most taxpayers who use a 1040-EZ tax return to file their returns over the telephone. With a touch tone telephone, the taxpayer enters all the necessary information into an entirely automated, probe-and-response system. After an expanded pilot in Ohio in 1993, IRS plans to make TELEFILE available to taxpayers in seven states in 1994. For the taxpayer, TELEFILE simplifies filing and improves access (24-hour availability, seven days a week) and timeliness of service (refund checks were sent to taxpayers on average within 22 days, compared to 29 days for paper filings). Similarly, IRS began testing joint electronic filing of Federal and State tax returns in 1991. By 1993, 12 States had pilots and three States had fully implemented programs. In 1994, IRS expects to receive over 1 million jointly filed returns from 25 participating States. Joint electronic filing benefits: (1) taxpayers and tax practitioners by saving time and money since income tax data need only be filed with one taxing authority, not two or more; (2) State governments by saving substantial implementation and maintenance costs for an independent system; and (3) the IRS by encouraging the growth of electronic filing. Social Security Administration (SSA): By talking to its customers, SSA has become increasingly sensitive to the problems caused by delays in processing disability claims. The number of SSA's initial disability claims increased 57 percent between 1990 and 1994, creating a serious backlog of cases. The 1995 budget proposes a substantial investment ($280 million) to reengineer the SSA claims process to alleviate the backlog, reduce processing and review delays, and improve SSA's overall delivery of service. SSA customer surveys also are helping to shape its reengineering of the disability process for appeals and continuing disability reviews as well as to guide its study of the recent growth in initial disability claims. Department of Labor (DOL): By listening to its customers, DOL has learned that the public perceives the current Federal/State job training system as a confusing array of programs with multiple entry points. To respond to customers who seek job information and training, DOL proposes to establish a nationwide network of user friendly One-Stop Career Centers that will provide a single point of entry into the employment and training system. The 1995 budget proposes a significant increase ($200 million) over the 1994 base ($50 million) for the One-Stop Shopping initiative. In some cases, these resources are "seed money," helping States plan and implement programs that streamline access to the full range of employment and training services. In other cases, States may provide One-Stop services with their own resources, aided by waivers of Federal requirements that would otherwise constrain flexibility. Full implementation of the Administration's One-Stop Shopping initiative will provide all job seekers with easy access to job and career information as well as Federal training and employment programs. Integrated Service Delivery Using Information Technology Americans inside and outside the Government must deal with an incredibly complicated assortment of Federal agencies, organizations, processes, and forms--often resulting in slow, ineffective service and an aggravated public. Information technology can be a key to providing more timely, cost-effective and user-friendly Government services. The recent move toward electronic transfers of all collections and payments is illustrative. Simplification of wage reporting: Initial steps will include fostering intergovernmental tax filing, reporting, and payments processing through wage reporting simplification. Currently a business prepares and submits the same financial data to a number of different Federal, State and local entities. Minimizing this duplication will allow a business owner to file wage information only once. Early recognition and correction of reporting errors will also lower costs. Participating agencies will begin the design phase and pilot limited facets of wage reporting simplification in 1994. Electronic benefits transfer (EBT): An extension of electronic payment transfers first popularized in electronic banking, EBT is another example of how information technology may improve the delivery of government services. Though automated teller machines, access cards, and electronic networks are now commonplace, government benefits still are distributed primarily through paper-based systems of checks and food stamps. For the more than 26 million monthly recipients of food stamps, Federal and State governments spend several hundred million dollars annually just to print, distribute, and destroy coupons. EBT adopts commercial electronic payment practices for the delivery of government assistance services, improving efficiency and ultimately lowering costs. Building on commercial practices, Maryland implemented a State-wide pilot program in 1993, serving 200,000 recipients of Aid to Families with Dependent Children, food stamps, child support, and general assistance. OMB has established an interagency EBT Task Force to develop by March 1994 a plan for interagency cooperation among EBT users that will bring the benefits of the Maryland pilot to other States. Facilitating Agency Customer Surveys The President's Customer Service Executive Order requires surveys of Government customers and their levels of satisfaction on a scale unprecedented for most agencies. OMB has undertaken two initiatives to facilitate the development, review, and operation of customer surveys. First, in November 1993, it released the Resource Manual for Customer Surveys that outlines a general approach to customer survey planning and provides a directory of services available from statistical agencies. Second, in December 1993, OMB issued to the Social Security Administration and the Indian Health Service the first generic clearances for customer surveys under a new streamlined process. During 1994, OMB will continue to develop and disseminate regular updates to the Resource Manual, expedite generic clearance reviews for customer surveys, and coordinate group consultations and training in customer survey methods. MOVING TOWARD A MORE RESULTS-ORIENTED GOVERNMENT ---------------------------------------------------------------------- The law simply requires that we chart a course for every endeavor that we take the people's money for, see how well we are progressing, tell the public how we are doing, stop the things that don't work, and never stop improving the things that we think are worth investing in. President Bill Clinton August 3, 1993 ---------------------------------------------------------------------- The President made these remarks as he signed into law the Government Performance and Results Act of 1993 (GPRA). This Act, complemented by other Administration actions, introduces a results-oriented focus for government managers and can transform how our government is managed. In the course of making these changes, the Federal Government will adopt many of the best practices used by business to improve operational and financial results. The GPRA shifts attention from program inputs (such as resources, staffing levels, and rules) to program execution: what results (outcomes and outputs) are being achieved, and how well are programs meeting intended objectives? Emphasis will be given to improving program effectiveness, including service quality and customer satisfaction, and to increasing individual and organizational accountability for program performance and achieving pre-set goals. Under GPRA, agencies are required to prepare: (1) strategic plans that define an agency's mission and long-term general goals; (2) annual performance plans that contain specific goals (targets) and are derived from the general goals (a government-wide performance plan will be prepared using the agency performance plans); and (3) annual reports that compare actual performance with the targets. Additionally, as Federal managers are to be more accountable for how programs perform, the Act allows managers to be given more flexibility and discretion in how they manage. Implementation of GPRA will occur over the next six years. The first stage, already underway, consists of agency pilot projects during 1994-1996. In January 1994, 21 departments and agencies were designated as pilot projects for performance plans and reports. These pilot projects cover about 375,000 employees (nearly 20 percent of the Federal non-postal civilian work force) and programs, activities, and operations with aggregate annual spending of $48 billion. Additional pilot project designations for performance plans and reports are expected in the Spring of 1994. ---------------------------------------------------------------------- Examples of GPRA Pilot Projects Pilot project covers entire organization: Defense Logistics Agency, Forest Service, Internal Revenue Service, Small Business Administration, Social Security Administration Pilot project covers specific programs: Post-secondary Student Loan and Grant Programs, Department of Education; Organized Crime and Drug Program, FBI; Air Traffic Control and Navigation Facilities and Equipment, Federal Aviation Administration Examples of Pilot Project Performance Goals and Measures Bureau of Engraving and Printing Reducing unit production cost, spoilage, and increasing productivity Environmental Restoration and Waste Management, Dept. of Energy Eliminating and reducing risks to human health and safety and environment at inactive and surplus sites and facilities. National Oceanic and Atmospheric Administration Building sustainable fisheries, reducing wasteful, incidental catch of recovered species. ---------------------------------------------------------------------- Also, in early 1994, Cabinet Secretaries are drafting performance agreements, as recommended by the NPR. Cabinet Secretaries and agency heads will use the agreements to increase their focus on the accomplishment of organizational goals. A second set of GPRA pilot projects involving managerial flexibility and accountability will be designated this year. These pilot projects will waive certain administrative requirements to provide this added flexibility; these waivers could significantly expand managers' authority to make decisions and spend administrative monies. Several of these pilots are expected to waive selected administrative requirements that are applied to state and local governments. The second stage of GPRA implementation--full-scale and government-wide--commences in the Fall of 1997, with completion of agency strategic plans and submission of the first of the annual performance plans. Agencies are required to consult with Congress and other interested and potentially affected parties when preparing the strategic plans. As a result of these efforts, starting next year, budgets will contain more information on what taxpayers are getting for their money. This information will provide the basis for the initial government-wide performance plan that is required to be submitted to Congress early in 1998 as part of the 1999 budget. To encourage Government managers to think of new ways of how to get the best results for the public, under the aegis of the NPR, agencies established over 100 "Reinvention Labs." The reinvention laboratories are designed to accelerate the introduction of new ways of doing business, with particular emphasis on cutting "red tape", unleashing innovative improvement ideas from employees, encouraging risk-taking, and placing value on the customer. The "Reinvention Labs" and Executive Order 12861 (September 30, 1993)--which calls on agencies to eliminate half of their internal regulations within three years--complement provisions in GPRA for reducing certain types of controls and limitations imposed on managers and make Government more results oriented. MAKING GOVERNMENT WORK BETTER AND COST LESS REINVENTING FEDERAL PROCUREMENT ---------------------------------------------------------------------- Our system is based on a premise that extensive controls will result in more efficient purchasing decisions. But these excessive controls, stemming from mistrust, tie the hands of government managers and produce tremendous inefficiencies and poor business decisions for the taxpayers. President Bill Clinton October 26, 1993 ---------------------------------------------------------------------- Getting Value for Money On October 26, 1993, the President and Vice President announced a major overhaul in the way the Federal Government buys its goods and services. Over the years, the Federal procurement system has evolved into a complex and burdensome maze of laws and regulations affecting both private sector vendors and Federal personnel. Furthermore, the procurement system fails to provide significant incentives for contractors to deliver quality. Both the NPR and the Acquisition Law Advisory Panel to the U.S. Congress on Streamlining Defense Acquisition Law (known as the Section 800 Panel) have documented the need to streamline procurement procedures to increase access to and competition in Federal procurement, provide the best technologies available, and save the government money. "American taxpayers have a right to expect that their Federal dollars are being put to the best possible use. The current Federal procurement system is inefficient and wasteful. It adds significant costs without providing extra value," President Clinton emphasized as he announced the major overhaul of government buying. "It's time the Federal Government viewed Federal purchasing as a major source of savings by creating a more efficient and responsive Federal procurement system." Government-wide Initiatives Legislative and administrative initiatives recommended by NPR and the Section 800 Panel comprise the basis of the Administration's procurement reform agenda. The Administration seeks to remove unnecessary or special burdens imposed by legislation and regulation, simplify acquisition procedures, encourage innovation to promote greater value, and allow the Government to buy commercial items more like a commercial customer. ---------------------------------------------------------------------- A Wake-Up Call During Operation Desert Shield, the U.S. military placed an emergency order for 6,000 Motorola commercial radio receivers. Because Motorola's commercial unit lacked the record-keeping systems to show the Pentagon that it was getting the lowest available price, the deal reached an impasse. How was it resolved? The Air Force asked the Japanese to buy the radios for the U.S., so the U.S. could circumvent its own process. "When the government of another nation has to step in and buy something for the U.S. military because our procurement regulations are so crazy, that's a clear wake-up call that we have got to have the reforms that are being announced today," Vice President Al Gore said on October 26, 1993. ---------------------------------------------------------------------- Procurement Reform Legislation: Congress' commitment to procurement reform is clear. In 1993, two significant pieces of legislation were introduced. Both seek to streamline the process and encourage acquisition of commercial products. The Administration supports the principles behind these legislative proposals and seeks swift passage of a procurement reform bill in 1994. Electronic Commerce: In an October 26, 1993, memorandum, the President ordered the Federal Government to move from the current paper-based system to an electronic exchange of procurement information, including solicitations, bids and invoices. An interagency task force will develop the required system architecture by March 1994. When implemented, electronic commerce will improve access to Federal contracting opportunities for the more than 300,000 vendors currently doing business with the government, particularly small businesses. Initial electronic commerce capability is anticipated in 1995. Making Supplier Past Performance Count: Considering past performance in making new contract awards provides a powerful incentive to improve the quality of goods and services provided by vendors. Judgments of suppliers' past performance are crucial in contract award decisions in the commercial world--but are minimally considered in government. The Administration seeks to change this. A number of Federal agencies (The Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Interior, Justice, Labor, State, Transportation, Treasury, and Veterans Affairs--and NASA, EPA, GSA, FEMA, the Bonneville Power Administration, and the Nuclear Regulatory Commission) are pledging to make past performance a major factor in the source evaluation of a number of specific contracts they will compete this year. Better guidelines will be developed for measuring supplier performance, and the use of this information will be pilot tested in these acquisitions. The results from the pilots will serve as the basis for changes in regulations, procedures and management practices government-wide. Voluntary Cooperation to Improve Procurement Performance: The Office of Federal Procurement Policy (OFPP) in OMB has initiated a cooperative program with agency procurement executives to obtain from agencies voluntary joint "pledges" to take specific action to improve their procurement processes. The pledge to consider contractors' past performance is being signed by almost all major agencies. To reduce paperwork while maintaining accurate records, nine agencies pledged last October to boost use of government purchase cards (instead of purchase orders) this fiscal year for small purchases. Several agencies have estimated significant administrative savings when making a purchase card transaction, which could apply to millions of small purchases made each year. Pledges are being developed to help convert some of the $100 billion spent each year on contracting for services to performance-based contracting and, when appropriate, from a cost-based to a fixed price contract to generate significant savings. Moving From Rigid Rules to Guiding Principles: Adequate guidance for Federal procurement officials should not require 1,600 pages of government-wide regulations and 2,900 more pages of agency-specific supplements. In 1994, a task force of procurement professionals and Federal managers, with the advice of Congress and industry, will begin rewriting the Federal procurement regulations to enable procurement personnel to meet the customer's needs and obtain the best possible deal for the government. This will end unnecessary regulatory requirements while still fostering competition and emphasizing best value in Federal procurement. STREAMLINING THE FEDERAL GOVERNMENT Beginning in 1993 and continuing throughout the decade, the Federal Government will identify and implement opportunities to reduce waste, eliminate unneeded bureaucracy, improve service to taxpayers, and create a leaner, more productive government. Overall, these reforms will result in the net elimination of 252,000 full-time equivalent (FTE) employment, reducing the civilian, non-postal work force by 12 percent. Agencies are targeting administrative control and headquarters functions, such as budgeting, personnel, and procurement and unnecessary layers of middle management as the principal focus of "right-sizing." They are considering every opportunity for streamlining, including: reengineering work processes; elimination of certain programs; closing or consolidating field offices (over 75 percent of the Federal work force is located in 34,000 field offices across the country); making fuller use of new--especially information--technology; reducing regulation and red tape in administrative control areas; and enhancing employee training. Much of the personnel reduction will be accomplished through normal attrition. The Office of Personnel Management will give agencies broad authority to offer early retirement and to expand their retraining, out-placement efforts, and other tools to accomplish right-sizing. In addition, the Administration will seek swift enactment of legislation permitting agencies to offer cash payments to those who leave Federal service voluntarily, whether by retirement or resignation. Right-sizing the Federal Government should save the taxpayer approximately $40 billion over five years. "Right-sizing"--A Progress Report On February 10, 1993, the President issued Executive Order 12839, "Reduction of 100,000 Federal Positions"--the first step toward reducing Federal employment by 252,000 by the end of 1999, as ordered in the subsequent September 11, 1993, Presidential memorandum. Actual employment in 1993 achieved the reduction targeted for that year, and the planned employment levels for 1994 and 1995 will meet the 100,000 reduction goal. (See Chapter 12, "Federal employment and compensation" in the Analytical Perspectives volume. Federal Agencies Leading the Way As a result of the declining force structure, the Department of Defense is making a major effort to reduce the defense infrastructure. (See DoD streamlining section in Chapter 6 of this volume.) The Department of Agriculture (USDA), Department of Housing and Urban Development (HUD), Internal Revenue Service (IRS) in the Department of the Treasury, Bureau of Reclamation and U.S. Bureau of Mines in the Department of the Interior, Army Corps of Engineers and United States Agency for International Development (USAID) stand out as early leaders in the streamlining effort. These agencies are aggressively restructuring and reengineering services to create greater value for customers and taxpayers. USDA: The Secretary has announced plans to restructure the Department along six mission lines, merging 42 separate agencies into 30, eliminating waste and administrative overhead, and consolidating the field structure. Over the next five years, these reforms are estimated to reduce staffing by at least 7,500 and save over $2 billion. Authorizing legislation for the headquarters reorganization is being actively considered by both houses of Congress. HUD: The Secretary has announced plans to change all of its regional offices into field offices directly serving the states and metropolitan areas where they are located. This streamlining effort simultaneously reduces a level of review and gets more HUD employees closer to their customers. IRS: The IRS has announced a major restructuring plan to improve service to taxpayers and increase voluntary compliance and tax collections. The plan, scheduled to be implemented fully by 2001, envisions a new IRS which will take full advantage of information technology to provide faster, more accurate service to customers, reduce taxpayer time and cost, and provide better targeted and more productive tax enforcement. IRS plans to right-size its field structure, wherever possible redeploying agency financial and human resources to enhanced front-line operations. For example, the agency will consolidate the 44 geographical locations where it currently has telephone operations into 23 Customer Service Centers, with on-line access to comprehensive tax data bases, allowing taxpayers to resolve many issues concerning their tax accounts in a single call. In addition, headquarters and regional office restructuring is moving forward: the agency has collapsed Assistant Commissioner positions by more than 50 percent and will reduce its regional offices from seven to five. The IRS is committed to reinvesting its human resources by redeploying, as appropriate, affected staff to customer service and compliance activities. Interior Department's Bureau of Reclamation and U.S. Bureau of Mines: The Bureau of Reclamation has removed a thick layer of bureaucracy that has long stood between the commissioner and the field offices. Two deputy commissioners and all five assistant commissioner positions have been abolished, and staff in Denver has been reoriented to provide fee-for-service support to the field. In addition, the size of the 2,000 person Denver staff will be reduced, both to reflect the end of an era of constructing large water projects and to move functions and personnel to regional and field offices closer to the customer. The U.S. Bureau of Mines (USBM) recently completed a comprehensive review of its activities, organization, and facilities. The bureau has begun to build consensus with its customers and Congress to refocus USBM efforts, over a transition period of several years, into three program areas: environmental technology, health and safety research, and mineral data collection and dissemination. The bureau seeks to consolidate more than a dozen field offices into five Centers of Excellence, each specializing in a distinct research area. Army Corps of Engineers: The Secretary of the Army is developing a streamlining plan to realign the Corps' organization structure--substantially unchanged since 1942--according to current needs. The Secretary will consider reorganizing the Corps' headquarters, reducing the number of division offices, and restructuring district functions to increase program and administrative efficiency. USAID: Its streamlining plan includes closing 21 posts overseas--the first time since USAID programs were introduced with the Marshall Plan that the agency has reduced the overall number of countries with which it is working. The agency also has conducted right-sizing reviews of each of its 20 Washington bureaus and offices, identifying ineffective, wasteful management structures, systems, and processes. AID also has begun to streamline its procurement and personnel system. REFORMING THE PERSONNEL SYSTEM Over the years, the Federal personnel system has become so complex that no one person understands it and few can work efficiently within it. Ten thousand pages of guidelines from the Federal Personnel Manual are piled on top of 1,300 pages of regulations that put into effect 850 pages of personnel law. Managers face months of delay in hiring new employees from a central Office of Personnel Management register, while they are unable to hire a local well-qualified candidate who is not on the register. A complex and rigid classification system that requires sorting Federal employees into one of more than 450 specific occupational series further delays hiring and reduces employee mobility. The performance management system, which was supposed to recognize and reward performance is widely viewed as burdensome and ineffective. The labor-management relations program is excessively adverserial and elevates form over substance and litigation over problem-solving. To reform the system, the NPR recommended: o Sunsetting the Federal Personnel Manual; o Legislation to give agencies authority to conduct their own recruiting and examining and to abolish all central registers of job applicants; o Legislation to simplify the classification system and give agencies greater flexibility in classification and pay decisions; o Allowing agencies to design their own performance management and reward systems to improve performance of individual workers, managers, and organizations; o Forming Labor-Management Partnerships to harness the energies of employees and management to work cooperatively across the government from the local to the national level. Thus far, OPM has worked with employees, union representatives, and agency managers to identify the portions of the Federal Personnel Manual that should be abolished, retained, or issued in alternative formats. This "sunset" of the Federal Personnel Manual was accomplished on January 27, 1994, almost a year ahead of the NPR target. Legislation authorizing the discredited performance management system that previously applied to Federal managers was not renewed when it expired October 31, 1993. The President established the National Partnership Council by Executive Order. The Council, composed of employee representatives and management, has begun working to assure establishment of labor-management partnerships at the local level, and to develop the draft legislation for the President called for by the NPR. The challenge to both labor and management is to put aside the old way of doing business and to work together to achieve a true partnership. The measure of success will be the creation of a personnel system that provides for cooperation and accountability and allows all employees--front-line workers, supervisors, and managers--to take pride in producing better public service. Pay in the budget: An estimated $2.1 billion is included in agencies' budgets in 1995 to fund the locality pay raises granted to employees in January 1994. This budget provides $1.1 billion for additional civilian employee pay raises in 1995. This $1.1 billion would permit a raise of 1.6 percent across the board for all civilian employees effective January 1, 1995, but the Administration plans to consult with employee organizations and other interested parties on the best approach to distributing pay increases; i.e., a national pay raise, locality pay, or some combination of the two. The Department of Defense budget includes $0.7 billion for a January 1995 across-the-board military pay raise of 1.6 percent. IMPROVING MANAGEMENT OF THE GOVERNMENT'S FINANCES ---------------------------------------------------------------------- If a publicly-traded corporation kept its books the way the Federal Government does, the Securities and Exchange Commission would close it down immediately. National Performance Review Report September 7, 1993 ---------------------------------------------------------------------- Sound financial management is indispensable to achieving the goals of efficient and effective government. This is no small task. The Government's assets amount to approximately $2.3 trillion. Its cash flow in 1993 amounted to almost $3 trillion. In this era of increasingly scarce resources and shrinking budgets, it is essential for the Congress and Federal managers to know exactly how the Government's assets are being managed and where the money is being spent. Only then can they make informed choices and ensure the best return for taxpayer investment. Numerous improvements have been made following enactment of the Chief Financial Officers Act of 1990; however, much remains to be done. Strengthen the Financial Management Infrastructure The first step in improving financial management is to assure the existence of a strong framework, with the following key components. Standards: Standards are important to ensure consistent and accurate Federal financial reporting so that Federal managers and the Congress can make informed decisions about program costs and resources, now and in the future. In 1993, the Administration adopted the first recommendations of the Federal Accounting Standards Advisory Board and is working toward the NPR recommendation that a complete set of Federal accounting standards be issued by March 1995. Financial Management Organization and Qualified Personnel: The Administration developed and issued Financial Management for Program Managers to educate program managers on the importance of financial management. The Federal Credit Management Training Institute, established in 1991, will continue courses in accounting and financial statement analysis and add courses in appraisals during 1994. Coordinated training curriculums for financial staffs are in place in the Department of Energy and will be established in the Treasury Department in 1994. Effective Financial Systems: Financial systems that work efficiently, communicate with one another, and contain accurate data are essential to provide information to Federal managers. The Administration is helping agencies to improve their financial management systems through updated guidance, on-site systems reviews, continued development of standard requirements and data standardization to enhance stewardship over budget and financial information. Franchise and Innovation Funds: Following the NPR recommendations, legislation was introduced in Congress to create "franchise funds" that would permit agencies to purchase common administrative services, such as payroll, accounting or computer support, competitively from other Federal agencies. In addition, franchise funds would provide investment capital for administrative support innovations at a time when there is great pressure on Federal agencies to do their jobs better, cheaper and faster. The NPR recommended, and legislation was introduced, creating program-related "innovation funds" which would provide a source for financing projects that improve program services and productivity at reduced cost. Programs that borrow from the innovation fund must repay on a schedule, with interest. Manage Assets Effectively The Government's assets include $310 billion of tax and non-tax receivables, of which $107 billion is delinquent, and $660 billion of guaranteed private sector loans. In 1993, non-tax delinquent receivables decreased from $47 billion to $44 billion--the first significant decrease since government-wide numbers became available in 1985. A significant portion of the delinquent debt is estimated to be uncollectible due to factors such as bankruptcy, inability to locate the debtor, and various legislative restrictions. However, efforts must be made to maximize the Government's recoveries, including the following initiatives: Credit Screening: The Administration reduced the risk in loan origination through expansion of the Department of Housing and Urban Development's automated Credit Alert Interactive Voice Response System ("CAIVRS") for screening loan applicants for defaults on previous HUD loans. Expansion of this system to other agencies is ongoing. Debt Collection Legislation: The Administration will continue to pursue passage of the Government Reform and Savings Act, which passed the House of Representatives in November 1993, in order to strengthen debt collection through the following provisions: (1) allow agencies to retain a small portion of delinquent debt collections for additional debt collection activities; (2) permit greater use of private collection contractors by Federal agencies; and (3) enhance the Department of Justice's ability to use private counsel in civil monetary litigation. Tax Receivables: The Administration will seek legislation that would permit the IRS to use private collection agencies for locating delinquent taxpayers and allow payment of delinquent taxes by credit card. Erroneous Payments: The Death Notification Entry (DNE), a new Automated Clearing House service, was implemented. With an estimated $100 million lost annually due to unrecovered payments to persons not entitled to benefits, usually due to death, Federal agencies are using the DNE to notify banks immediately when a direct deposit customer dies. The Social Security Administration, the first agency to use the DNE, estimates $500 million in outlays will be avoided over five years, leading to program savings of $49 million and 150 FTE. Electronic Funds Transfer: The NPR recommended the Administration commit to a course of action that will lead to electronic transfer of all collections and payments. The initial steps will be to pay businesses with Federal contracts, State and local governments, Federal employees and retirees, and interagency transfers of funds via electronic funds transfer. Improve Accountability Empowerment requires accountability. Financial reporting provides accountability by demonstrating that government agencies are achieving the expected results and disclosing to taxpayers how their tax dollars are actually spent. The NPR recommended, and the Administration is planning, issuance of an audited consolidated annual report on Federal finances by 1997. The Administration initiated a system in 1993 to report publicly the status of financial management in the 23 agencies covered by the CFOs Act. As Table 3C-1 indicates, significant challenges remain for agencies to make improvements in financial management activities. In 1993, 95 reporting entities submitted audited financial statements, covering approximately $875 billion of gross budget authority; 37 were determined by independent audit to be in conformity with prescribed accounting standards. This is a marked increase from 1992 when 55 reporting entities submitted audited financial statements and only 19 were determined to be in conformity with prescribed accounting standards. Another tool for public accountability is the High Risk Program, which focuses on correcting management control weaknesses that could result in major breakdowns in Government service, or in fraud, waste or abuse. A progress report on agency efforts to correct high risk areas appears in "Analytical Perspectives." Finally, the Administration will revise agency guidance on internal control systems to eliminate prescriptive procedural requirements, and streamline the management control program. To reduce the NPR-identified burden of other mandated reports, the Administration has developed and submitted to Congress a phased program to consolidate duplicative reports and streamline the others. Table 3C-1. CURRENT STATUS OF FINANCIAL MANAGEMENT IN THE U.S. GOVERNMENT\1\ ------------------------------------------------------------------------------------------------------------------------ 1992 Financial Statement Audits Receivables Cash Management 1992 ------------------------------- ------------------------------- -------------------- Budget Percent Unqual- Material Percent Percent Percent Percent Authority Audit fied Weaknesses Percent Change Change Timely Payroll (in billions Coverage\2\ Audit in Account- Delin- in Delin- in Pay- by EFT Agency of dollars) Opinions ing Con- quent\3\ quencies Collec- ments\4\ trols tions ------------------------------------------------------------------------------------------------------------------------ Goals................ ......... n/a All 0 n/a Decrease Increase 95 90 ------------------------------------------------------------------------------------------------------------------------ HHS.................. 559.6 51 1 of 5 10 28 69 28 95 85 Treasury\5\.......... 295.7 81 4 of 10 24 81 0 -10 78 84 Defense.............. 281.9 58 2 of 15 19 7 0 0 93 87 Agriculture.......... 66.3 100 5 of 7 34 10 -16 11 99 75 Labor................ 48.2 100 0 of 1 5 53 9 7 94 74 Transportation....... 36.2 61 1 of 4 9 68 5 -6 85 92 OPM.................. 35.8 20 0 of 4 5 68 13 -5 77 83 Veterans Affairs..... 33.9 100 0 of 1 5 72 -7 18 82 81 Education............ 28.8 23 1 of 2 3 81 -13 4 94 93 HUD.................. 25.0 100 1 of 3 8 15 -1 5 81 88 Energy............... 17.2 21 10 of 11 11 61 5 -9 93 87 NASA................. 14.3 100 0 of 1 5 13 0 -3 97 91 Justice.............. 10.0 11 4 of 5 6 42 -22 15 80 85 Interior............. 7.1 41 0 of 5 12 19 3 32 78 78 EPA.................. 6.5 26 0 of 5 9 52 58 -14 98 89 AID.................. 5.7 2 3 of 5 4 2 -49 -9 79 96 State................ 5.2 12 0 of 2 11 73 -74 -75 54 93 FEMA................. 4.8 13 2 of 4 2 12 0 459 91 83 Commerce............. 3.0 1 1 of 1 0 23 -49 -21 90 86 NSF.................. 2.6 1 1 of 1 0 58 -70 -17 n/a 90 SBA.................. 1.9 86 0 of 1 3 24 2 2 51 85 GSA.................. 0.4 100 1 of 1 1 71 5 12 95 83 NRC.................. 0.02 100 0 of 1 4 20 23 3 52 95 ------------------------------------------------------------------------------------------------------------------------ \1\Boldface indicates the Agency is meeting financial management goals. \2\Agencies that are not in boldface did not achieve the audit coverage required by the CFOs Act. The percent of audit coverage required varies by agency and includes spending authority from offsetting collections. \3\A significant portion of the delinquent debt is believed to be uncollectable due to factors such as bankruptcy, inability to locate the debtor, and various legislative restrictions. \4\Timely payment statistics in excess of 95 percent that are not in boldface could not be verified by a reliable quality control system. \5\The percent audit coverage excludes Interest on the Public Debt. n/a = Not applicable ------------------------------------------------------------------------------------------------------------------------ STAYING IN STEP WITH THE PRIVATE SECTOR REINVENTING REGULATORY MANAGEMENT Regulations, like other instruments of government policy, have enormous potential for both good and harm. Well-chosen and carefully crafted regulations can minimize fraud, limit pollution, increase worker safety, discourage unfair business practices, and contribute in many other ways to a safer, healthier, more productive, and more equitable society. Excessive or poorly designed regulations, by contrast, can cause confusion and delay, give rise to unreasonable compliance costs in the form of capital investments and/or ongoing paperwork, retard innovation, reduce productivity, distort private incentives, and adversely affect living standards. The importance of regulations in our society and the many challenges that regulators face make it imperative that the process for developing regulations be principled, professional, and productive. Regrettably, this Administration did not inherit such a process. On the contrary, the way Federal regulations were developed and reviewed in the recent past has been severely criticized for delay, uncertainty, favoritism, and secrecy. Improvement was clearly needed. Improving Regulatory Integrity ---------------------------------------------------------------------- We can't reject all regulations. Many of them do a lot of good things. They protect workers in the workplace, shoppers in the grocery stores, children opening new toys. But there are others that serve no purpose at all. This executive order will provide a way to get rid of useless, outdated and unnecessary regulations that are obsolete, expensive and bad for business. President Bill Clinton September 30, 1993 ---------------------------------------------------------------------- To meet this responsibility, President Clinton issued Executive Order No. 12866, "Regulatory Planning and Review," and other instructions to help create regulations that "work for [the American people], not against them." o The President affirmed the primacy of Federal agencies in the regulatory decision-making process. At the same time, he reaffirmed the importance of centralized regulatory review to ensure that, to the extent permitted by law, regulations are consistent with his priorities and do not interfere with policies or actions taken or planned by another agency. o In choosing among regulatory approaches, agencies were directed to select those approaches that maximize net benefits, and to base decisions on the best reasonably obtainable scientific, technical, economic, and other information concerning the need for, and consequences of, the intended regulation. o Regulatory Policy Officers, reporting directly to the agency head, are to oversee regulatory affairs and examine ways to streamline internal clearance processes for regulations. The President's Regulatory Working Group ensures coordination among agencies and early discussion of regulatory issues affecting more than one agency. o In Executive Order No. 12875, President Clinton directed agencies to establish a mechanism for intergovernmental consultation, and, in light of these consultations, to justify the need for any nonstatutory unfunded mandates they put into a regulation. The consultations are to occur as early as feasible, and should involve not only local program officials but also those more directly responsible for the funding of compliance with the Federal mandate. o In Executive Order No. 12861, President Clinton directed agencies to reduce internal, nonstatutory regulations by not less than 50 percent, over the next three years. Reducing Red Tape and Streamlining the Process The Administration has taken a number of steps to improve cooperation among agencies involved in producing effective regulations and to streamline the regulatory review process. o OMB and the agencies will decide early on which rules are "significant" (based on their economic, social, or legal importance), and OMB will review only those rules that are so characterized. This process is well underway and is resulting in significantly fewer rules being submitted for OMB review. o The time for OMB review is strictly limited. Only in unusual circumstances will such review take more than 90 days. o OMB staff and agency staffs are working together much earlier in the process to identify and resolve problems. Rather than waiting until the agency has virtually completed its work, potential problems are being raised to policy makers while there is still time to respond on the merits. Openness and Accountability Openness and accountability are essential to a regulatory process that works. o Agencies are encouraged actively to seek the involvement of those affected by a regulation even before a proposed rule is drafted; to use consensus-based techniques in rulemaking; and to allow a 60-day comment period for proposed regulations. o The Administrator of the Office of Information and Regulatory Affairs (OIRA) in OMB now meets quarterly with representatives of State, local, and tribal governments to discuss regulatory issues. o As of July 1, 1993, OIRA began making available a list of agency regulations under review. OIRA also discloses contacts with those from outside the Executive branch, and has their views transmitted to the agency. o Each regulatory agency now identifies for the public the substantive changes that it made to the regulatory action between the time it was submitted to OIRA for review and the time the action was publicly announced, indicating those changes that were made at the suggestion or recommendation of OIRA. IMPROVING THE NATION'S ACCESS TO QUALITY INFORMATION The ability of the United States to compete effectively in the world economy is dependent on its ability to manage and effectively use information as well as the vitality of the Nation's statistical infrastructure. How the Federal Government gathers, consolidates, and distributes this information determines how well the United States competes globally. Regrettably, the way the Federal Government manages its information is old-fashioned and outdated. As the Vice President noted when presenting the NPR report to the President: it's the Government using a quill pen in the age of word processing. The budget proposes $3.7 billion for improvements in key Government information systems, supporting both NPR recommendations and the National Information Infrastructure. Improved Information Management Coordinating the management of information that serves more than one agency's programs can significantly improve the quality and timeliness of services delivered to the public as well as Federal decision making. Two recently completed pilot projects illustrate the benefits of sharing data across agencies. o The Department of the Army began transferring medical records directly from military separation centers to the Department of Veterans Affairs' Service Medical Records Center, rather than holding them for storage. These medical records are needed to adjudicate veteran claims for service-connected disability compensation. They may also be required by the Army if the separating individual later joins a Reserve unit. A test conducted under the pilot showed that 98 percent of records requested by the Army were returned within 48 hours. The Army is therefore not disadvantaged by the early transfer, and months of delay under the old process can be eliminated from the time for adjudication of a veteran's disability claim. o The Customs Service and the Food and Drug Administration (FDA) experimented with the electronic filing and distribution of shipping documents between the two agencies. The pilot system has resulted in over 65 percent of incoming FDA-regulated cargo shipments being approved for unloading prior to their arrival, rather than the previous average waiting time of 36 hours after arrival. The electronic filing of shipping documents allows better analysis of the shipments, expediting low-risk shipments and allowing FDA inspectors to focus on more risky cargos. This improved service results in reduced cost and paperwork burden for shippers. "Best Practices" Project for Managing Information Technology A consortium of Federal agencies has begun a project to improve Federal information technology management practices. The project is spotlighting "best practices" that improve the ability of Federal agencies to serve the public and increase the efficiency of program administration. To date: o The Office of Personnel Management has streamlined the filling of certain Federal job vacancies by allowing candidates to begin the application process using a touch-tone telephone. Since August 1993, the system has processed over 1,500 applicants for nursing positions. The application process takes less than ten minutes. The improved process makes it easier to locate, screen, and hire candidates, quickly filling vacancies and improving agency performance. o The General Services Administration has established three telecommuting centers in the Washington area. Between 400 and 600 Federal employees use these facilities to communicate electronically with their organization's main workplace from locations closer to their homes. Preliminary results indicate telecommuting improves worker morale, lowers energy consumption, reduces employee time lost to commuting, and reduces pollution. Electronic Information Availability ---------------------------------------------------------------------- I challenge you, the people in this room, to connect all of our classrooms, all of our libraries, and all of our hospitals and clinics by the year 2000. We must do this to realize the full potential of information to educate, to save lives, provide access to health care and lower medical costs. Vice President Al Gore January 11, 1994 ---------------------------------------------------------------------- Thomas Jefferson said that information is the currency of democracy. Federal agencies are among the most prolific generators of this valuable national resource. Recent advances in information technology are now making it possible to dramatically improve the accessibility of Government information, helping to support Jefferson's democratic ideal. The amount of Government information available on electronic bulletin boards, on magnetic and optical media such as CD-ROM's, and over the Internet has been rapidly increasing. One example is the "FedWorld" system established by the Department of Commerce's National Technical Information Service. In its first year of operation, FedWorld handled nearly a quarter million calls from over 45,000 users, who downloaded more than 600,000 files, including over one thousand copies each of the NPR report and the Administration's proposed Health Security Act. FedWorld also links the public with over 130 Federal bulletin boards and information centers. The increasing power of information technology is reducing reliance on traditional printing technology in favor of computer-aided print-on-demand techniques to produce Government information in paper form. Based on the NPR recommendation, the Administration is seeking increased flexibility for agencies in meeting their printing needs while strengthening the role of the Federal Depository Libraries in dissemination of Government information in paper and electronic form. A major challenge, however, is to develop methods to effectively manage the ever growing and increasingly diverse sources of Government information. To this end, OMB is sponsoring the development of an electronic Government Information Locator Service (GILS)--a virtual card catalogue that will indicate the availability of Government information regardless of its form. An initial GILS capability should be available in 1994. Ultimately, the GILS can serve as more than just a pointer to Government information, and will have the capability to link users directly to the underlying data bases. Enhancing Information for Economic Competitiveness The 1995 budget includes an integrated, government-wide effort that will fundamentally reorient statistical programs to recognize basic structural changes over the last thirty years. This initiative seeks to improve the quality of statistics in rapidly changing areas of the economy, where accurate information is most urgently needed to inform public and private responses to challenges facing the United States: national investment, savings, and wealth statistics, including the "Green GDP" initiative proposed by the President on Earth Day; net international investment statistics; construction, service sector, and corporate financial statistics; and output, price, and productivity estimates. Cutting Costs While Improving Census Coverage Escalating costs and the persistent differential under-coverage of certain population groups have brought growing criticism of the Decennial Census of Population and Housing. The NPR underscored concerns of the Administration, the Congress, and the public: the current approach to census-taking appears to have exhausted its potential for accurately counting the population at a reasonable cost. OMB is working on a continuing basis with the Bureau of the Census and representatives of virtually every Executive Branch department to develop, test and evaluate alternatives for the 2000 census that will yield quality improvements and cost savings. These include a variety of new approaches to census-taking, such as respondent-friendly designs of the census questionnaire, statistical sampling to follow up households that fail to respond, and innovative cooperative ventures with the U.S. Postal Service. Eliminating Barriers to Efficient Operations Specific statutory formulas that have been devised to protect the confidential relationship between statistical agencies and survey respondents have produced inconsistent treatment of the public and have created significant barriers to effective working relationships among these agencies. The NPR highlighted legislative barriers that currently impede the exchange of statistical data provided by businesses to various Federal agencies. A uniform confidentiality policy that substantially eliminates the risks of sharing confidential data for statistical purposes would permit significant improvements in data used for both public and private decisions without the current duplication of effort and without compromising public confidence in the integrity and security of reports provided to agencies. OMB currently is developing tools to establish the necessary statistical confidentiality policy within all Executive agencies and statutory language that would permit data sharing.