President's Management Agenda

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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET

THE PRESIDENT’S

MANAGEMENT AGENDA


FISCAL YEAR

2002


Table of Contents


Page

President’s Message.......................................................................................................

1


Introduction—Improving Government Performance ..................................................

3


Government-wide Initiatives
1.

Strategic Management of Human Capital ..................................................

11


2.

Competitive Sourcing ....................................................................................

17


3.

Improved Financial Performance.................................................................

19


4.

Expanded Electronic Government ...............................................................

23


5.

Budget and Performance Integration ..........................................................

27


Program Initiatives

33


6.

Faith-Based and Community Initiative ......................................................

35


7.

Privatization of Military Housing................................................................

39


8.

Better Research and Development Investment Criteria ...........................

43


9.	 Elimination of Fraud and Error in Student Aid Programs and

Deficiencies in Financial Management ..............................................

47


10.

Housing and Urban Development Management and Performance ........

51


11.

Broadened Health Insurance Coverage through State Initiatives ..........

55


12.

A “Right-Sized” Overseas Presence ...........................................................

59


13.

Reform of Food Aid Programs ...................................................................

65


14.	 Coordination of Veterans Affairs and Defense Programs and

Systems... ..............................................................................................

The President's Management Agenda

69


i


GENERAL NOTES
1. All years referred to are fiscal years unless otherwise noted.
2. Web address: http://www.whitehouse.gov/omb/budget

ii

The President's Management Agenda

President’s Message
I am pleased to send to the Congress a bold strategy for improving the management
and performance of the federal government. Government likes to begin things—to de­
clare grand new programs and causes. But good beginnings are not the measure of suc­
cess. What matters in the end is completion. Performance. Results. Not just making
promises, but making good on promises. In my Administration, that will be the stan­
dard from the farthest regional office of government to the highest office in the land.
This Report focuses on fourteen areas of improvement where we can begin to deliver on
our promises. The recommendations we have targeted address the most apparent defi­
ciencies where the opportunity to improve performance is the greatest. These solutions
are practical measures, well within our reach to implement.
These proposals will often require the cooperation of Congress. Congress’ agenda is a
crowded one, and there is an understandable temptation to ignore management reforms
in favor of new policies and programs. However, what matters most is performance and
results. In the long term, there are few items more urgent than ensuring that the fed­
eral government is well run and results-oriented.
This Administration is dedicated to ensuring that the resources entrusted to the federal
government are well managed and wisely used. We owe that to the American people.

GEORGE W. BUSH

The President's Management Agenda

1

Improving Government Performance
“Government likes to begin things—to declare grand new programs
and causes and national objectives. But good beginnings are not the
measure of success. What matters in the end is completion. Perform­
ance. Results. Not just making promises, but making good on prom­
ises. In my Administration, that will be the standard from the far­
thest regional office of government to the highest office of the land.”
Governor George W. Bush

To reform government, we must rethink government.
The need for reform is urgent. The General Accounting Office (GAO) “high-risk” list
identifies areas throughout the federal government that are most vulnerable to fraud,
waste, and abuse. Ten years ago, the GAO found eight such areas. Today it lists 22.
Perhaps as significant, government programs too often deliver inadequate service at
excessive cost.
New programs are frequently created with little review or assessment of the
already-existing programs to address the same perceived problem. Over time, numerous
programs with overlapping missions and competing agendas grow up alongside one
another—wasting money and baffling citizens.
“Congress and the new administration face an array of challenges and opportunities to
enhance performance and assure the accountability of the federal government. Increased
globalization, rapid technological advances, shifting demographics, changing security
threats, and various quality of life considerations are prompting fundamental changes in
the environment in which the government operates. We should seize the opportunity to
address today’s challenges while preparing for tomorrow.”
Comptroller General David M. Walker

Though reform is badly needed, the obstacles are daunting—as previous generations of
would be reformers have repeatedly discovered. The work of reform is continually
overwhelmed by the constant multiplication of hopeful new government programs, each
of whose authors is certain that this particular idea will avoid the managerial problems
to which all previous government programs have succumbed. Congress, the Executive
Branch, and the media have all shown far greater interest in the launch of new
initiatives than in following up to see if anything useful ever occurred.

The President's Management Agenda

3

So while the government needs to reform its operations—how it goes about its business
and how it treats the people it serves, it also needs to rethink its purpose—how it
defines what business is and what services it should provide.
The President’s vision for government reform is guided by three principles.
Government should be:
— Citizen-centered, not bureaucracy-centered;
— Results-oriented;
— Market-based, actively promoting rather than stifling innovation through

competition.
The President has called for a government that is active but limited, that focuses on
priorities and does them well. That same spirit should be brought to the work of reform.
Rather than pursue an array of management initiatives, we have elected to identify the
government’s most glaring problems—and solve them. The President’s Management
Agenda is a starting point for management reform.
•	 The Agenda contains five government-wide and nine agency-specific goals to

improve federal management and deliver results that matter to the American
people.
•	 It reflects the Administration’s commitment to achieve immediate, concrete, and

measurable results in the near term.
•	 It focuses on remedies to problems generally agreed to be serious, and commits to

implement them fully.
•	 The goals in this Agenda are being undertaken in advance of, not instead of other

needed management improvements.
•	 Additional goals will be undertaken, as tangible improvements are made in this

initial set of initiatives.
A COHERENT AND COORDINATED PLAN
The five government-wide goals are mutually reinforcing. For example,
•	 Workforce planning and restructuring undertaken as part of Strategic Management

of Human Capital will be defined in terms of each agency’s mission, goals, and
objectives—a key element of Budget and Performance Integration.
•	 Agency restructuring is expected to incorporate organizational and staffing changes

resulting from Competitive Sourcing and Expanded E-government.
•	 Likewise, efforts toward Budget and Performance Integration will reflect improved

program performance and savings achieved from Competitive Sourcing and will
benefit from financial and cost accounting and information systems which are part
of efforts in Improved Financial Management.

4

The President's Management Agenda

IMPLEMENTING THE PLAN
The President has not only set an initial agenda, but is already implementing this plan.
• In July, the President directed Cabinet Secretaries and agency heads to designate a

“chief operating officer” to have responsibility for day-to-day operations of
departments and agencies.
• At the same time, the President

Typically the department’s No. 2 official, its

“chief operating officer,” has agency-wide
re-established the President’s
authority and reports directly to the agency
Management Council (PMC) con­
head.
This assignment places “management”
sisting of the chief operating offi­
with
Presidential
appointed officials, primar­
cers. The PMC provides an inte­
ily at the deputy secretary level, where polgrating mechanism for policy
icy and management meet.
implementation within agencies
and across government. Impor­
tantly, the PMC is a way for the departments and agencies to support the
President’s government-wide priorities and to build a community of management
leadership that learns, solves problems, and innovates together.
• First results have already been achieved in several reform categories.

See
Competitive Sourcing, Privatization of Military Housing, and Elimination of Fraud
and Error in Student Aid Programs and Deficiencies in Financial Management for
examples.

FREEDOM TO MANAGE
Federal managers are greatly limited in how they can use available financial and
human resources to manage programs; they lack much of the discretion given to their
private sector counterparts to do what it takes to get the job done. Red tape still
hinders the efficient operation of government organizations; excessive control and
approval mechanisms afflict bureaucratic processes. Micro-management from various
sources—Congressional, departmental, and bureau—imposes unnecessary operational
rigidity.
The Administration will sponsor a three-part Freedom to Manage initiative to clear
statutory impediments to efficient management:
• Statutory cleanup. As part of the 2003 budget process, OMB has asked departments

and agencies to identify statutory impediments to good management. Agencies are
reviewing government-wide statutory provisions which, if repealed, would remove
barriers to efficient management.
• Fast-track authority. We will propose legislation to establish a procedure under

which heads of departments and agencies could identify structural barriers imposed
by law, and Congress would quickly and decisively consider and act to remove those
obstacles.

The President's Management Agenda

5

• Managerial flexibility and authority.

OMB will package affirmative legislation
comprising proposals to free managers in areas such as personnel, budgeting, and
property disposal.
• For years NASA was expressly prohibited by statute from relocating aircraft based
east of the Mississippi River to the Dryden Flight Research Center in California for
the purpose of the consolidation of such aircraft.
• The 2001 Defense Appropriations Act requires the U.S. military installations in
Kaiserslauten, Germany to use U.S. coal as their energy source for heat. The same
provision allows U.S. bases at Landstuhl and Ramstein to acquire their heat energy
from any source, but they must consider U.S. coal as an energy source in making
their selection. The provision restricts use of the most economical energy source and
imposes higher costs on the Defense Department as a result.
• The Department of Agriculture is prohibited by statute from closing or relocating a
state Rural Development Office.

As the barriers to more efficient management are removed, we will expect higher
performance. With Freedom to Manage will come clear expectations of improved
performance and accountability.
A SHARED RESPONSIBILITY
All too often Congress is a part of the government’s managerial problems.
Many
members find it more rewarding to announce a new program rather than to fix (or
terminate) an existing one that is failing. The Congressional practice of “earmarking”
special projects in appropriations bills has exploded—growing more than six-fold in the
last four years. Excessive earmarks lead to wasteful spending and hogtie executive
decision-making, making it more difficult for agencies to fund higher priorities and
accomplish larger goals as needed funds are diverted.
The President has made solving these problems a top priority. Congress can help in a
number of important ways, among them:
• actively supporting government management reforms;
• using its oversight powers to insist that agencies fix their problems;
• providing the investments and the tools necessary;
• helping agencies remove barriers to change; and
• not placing limitations on reform efforts.

6

The President's Management Agenda

THE EXPECTED LONG-TERM RESULTS
The impetus for government reform comes, in part, as a reaction to chronic poor
performance and continuing disclosure of intolerable waste. Agencies will take a
disciplined and focused approach to address these long-standing and substantial
challenges and begin the steps necessary to become high performing organizations in
which:
•	 hierarchical, “command and control” bureaucracies will become flatter and more

responsive;
• emphasis on process will be replaced by a focus on results;
•	 organizations burdened with overlapping functions, inefficiencies, and turf battles

will function more harmoniously; and
•	 agencies will strengthen and make the most of the knowledge, skills, and abilities

of their people; in order to meet the needs and expectations of their ultimate
clients—the American people.
A MANAGEABLE GOVERNMENT
The most difficult, but most important, job of a good leader is to ask tough questions
about the institution: Is this program needed? Is it a wise use of the organization’s
finite resources? Could those resources be used better elsewhere? These are questions
that the structure and incentives of government do not encourage. We need to:
•	 Shift the burden of proof.

Today, those who propose to shift priorities or adjust
funding levels are expected to demonstrate that a program or activity should be
changed. It is time, instead, that program proponents bear the burden of proof to
demonstrate that the programs they advocate actually accomplish their goals, and
do so better than alternative ways of spending the same money.

•	 Focus on the “base” not the “increment.”

Policy and budget debates focus on the
marginal increase (or cut) in a program—failing to look at whether the program as
a whole (the base) is working or achieving anything worthwhile. We need to
reverse the presumption that this year’s funding level is the starting point for
considering next year’s funding level.

•	 Focus on results. A mere desire to address a problem is not a sufficient justification

for spending the public’s money. Performance-based budgeting would mean that
money would be allocated not just on the basis of perceived needs, but also on the
basis of what is actually being accomplished.
•	 Impose consequences.

Underperforming agencies are sometimes given incentives to
improve, but rarely face consequences for persistent failure. This all-carrot-no-stick
approach is unlikely to elicit improvement from troubled organizations. Instead,
we should identify mismanaged, wasteful or duplicative government programs, with
an eye to cutting their funding, redesigning them, or eliminating them altogether.

The President's Management Agenda

7

•	 Demand evidence.

Many agencies and programs lack rigorous data or evaluations
to show that they work. Such evidence should be a prerequisite to continued
funding.

Over the past three decades, reform initiatives have come and gone. Some genuine
improvements have been made. But the record on the whole has been a disappointing
one. That must change—and this report is a primer on how that change can be
achieved.

8

The President's Management Agenda

GOVERNMENT-WIDE INITIATIVES


1. Strategic Management of Human
Capital
‘’We must have a Government that thinks differently, so we need to re­
cruit talented and imaginative people to public service. We can do
this by reforming the civil service with a few simple measures. We’ll
establish a meaningful system to measure performance. Create
awards for employees who surpass expectations. Tie pay increases to
results. With a system of rewards and accountability, we can promote
a culture of achievement throughout the Federal Government.’’
Governor George W. Bush

THE PROBLEM
• The federal government has reduced its workforce by 324,580 full-time equivalent

employees since 1993, with most of these reductions coming from the Department of
Defense. At 1.8 million employees, the federal civilian payroll has been reduced to
its lowest level since 1950. The bad news is that this downsizing was accomplished
through across-the-board staff re­
ductions and hiring freezes, rather
Much of the downsizing was set in motion
than targeted reductions aligned
without sufficient planning for its effects on
agencies’ performance capacity. Across gov­
with agency missions. A conse­
ernment, federal employers reduced or froze
quence is that the average age of
their hiring efforts for extended periods of
the federal workforce has risen to
time.
This helped reduce their number of
46 years, compared to 42 in 1990.
employees,
but it also reduced the influx of
And even as the workforce
people with new knowledge, new energy, and
shrinks, the number of layers of
new ideas-the reservoir of future agency lead­
hierarchy continues to increase,
ers and managers (GAO Report 01-263, 2000).
especially near the top. The para­
doxical result: a workforce with steadily increasing numbers of supervisors and
steadily declining accountability—a workforce that feels more and more overworked
at the same time as its skills move
further and further out of balance with
According to OPM, using the initia­
the needs of the public it serves.
tion of the improvement period as
• The managerial revolution that has

transformed the culture of almost
every other large institution in Ameri­
can life seems to have bypassed the
federal workforce. Federal personnel

The President's Management Agenda

“notification” of poor performance,
and assuming an average improve­
ment period of three to four months
plus a 30-day advance notice period,
the time from notification to dismiss­
al is about five to six months.

11

policies and compensation tend to take the same “one-size-fits-all” approach they
took in 1945. Excellence goes unrewarded; mediocre performance carries few
consequences; and it takes months to remove even the poorest performers. Federal
pay systems do not reflect current labor market realities: under current law, the
entire General Schedule that covers almost every kind of white-collar occupation
must be adjusted by a single percentage in each of the 32 localities in the
contiguous 48 states.
• In most agencies, human resources planning is weak. Workforce deficiencies will be

exacerbated by the upcoming retirement wave of the baby-boom generation.
Approximately 71 percent of the government’s current permanent employees will be
eligible for either
regular or early retire­
ment by 2010, and
2000 Civilian Non-Postal Federal Workforce Expected to Retire
then 40 percent of
Percent of workforce
those employees are
60
expected to retire.
Without proper plan­
50
Supervisor
ning, the skill mix of
the federal workforce
40
will not reflect tomor­
row’s changing mis­
30
sions.
Non-Supervisor
• A

20
survey of nearly
2,000 new employees
10
by the Merit Systems
Protection
Board
0
(MSPB) revealed that
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
they encountered nu­
merous problems dur­
ing their job search. For example, 47 percent were not aware that federal job
vacancies are posted on the Internet; 14 percent did not think that job
announcements provided enough information to decide if they were interested in
the position; and 25 percent did not think that hiring decisions were made within a
reasonable period of time (MSPB, 2000).

• In February 2001, GAO added human capital management to the government-wide

“high-risk list” of federal activities. Inspectors General at nine major federal
agencies have listed workforce problems among the top 10 most serious
management challenges that their agencies face.
• These realities contribute to the growing consensus that action is required.

The
federal government has a unique opportunity to redefine the way it manages
human capital.

12

The President's Management Agenda

The Energy Department’s staff lack project and contract management skills required to
oversee large projects, such as the cleanup of radioactive and hazardous waste sites.
Downsizing at NASA over the last decade through attrition and buyouts has resulted in
an imbalance in NASA’s skill mix. Through a series of workforce reviews, NASA has iden­
tified these imbalances and developed a plan to meet future needs. NASA received extended buyout authority last year to specifically address skill mix imbalances by allowing
targeted buyouts in skill areas that exceeded needs, then hiring an equal number in skill
areas that needed strengthening for the future.
In a November 1999 report, the Overseas Presence Advisory Panel concluded that the
State Department needed to reform its human resource practices because it did not have
the flexibility, tools, or strategic organization required to support its mission.

THE INITIATIVE
• The first priority of the President’s management reform initiative is to make

government citizen-centered. The number of layers in government must be
compressed to reduce the distance between citizens and decision-makers, and
agencies should redistribute their alloted staff from higher-level positions to
front-line service-delivery. Each agency has been asked to prepare a five-year
restructuring plan as part of its 2003 budget request, based upon a workforce
analysis, to accomplish this important goal.
• Agencies will reshape their organizations to meet a standard of excellence in

attaining the outcomes important to the nation. Each agency will identify how it
will reduce the number of managers, reduce the number of organizational layers,
reduce the time it takes to make decisions, change the span of control, and increase
the number of employees who provide services to citizens.
• The Administration will adopt information technology systems to capture some of

the knowledge and skills of retiring employees. Knowledge management systems
are just one part of an effective strategy that will help generate, capture, and
disseminate knowledge and information that is relevant to the organization’s
mission.
• While the Administration will be seeking some targeted civil service reforms,

agencies must make better use of the flexibilities currently in place to acquire and
develop talent and leadership. Such authorities are largely underutilized across the
federal sector because many agencies are unaware of the existence of such
flexibilities. The Administration will assess agencies’ use of existing authorities as
well as the outcomes achieved under demonstration projects. This assessment will
help us determine what statutory changes are needed to enhance management
flexibility, permit more performance-oriented compensation, correct skills imbal­
ances, and provide other tools to recruit, retain, and reward a high-quality
workforce.

The President's Management Agenda

13

THE EXPECTED NEAR-TERM RESULTS
• Human capital strategies will

be linked to organizational
mission, vision, core values,
goals, and objectives.
• Agencies

will use strategic
workforce planning and flex­
ible tools to recruit, retrain,
and reward employees and
develop a high-performing
workforce.

• Agencies will determine their

The State Department implemented a recruit­
ment strategy for certain information technol­
ogy workers using existing pay flexibilities. It
pays retention allowances ranging from 5 to
15 percent of an employee’s base salary to cer­
tain information technology workers who ob­
tain job-related degrees and certificates. After
one year of operation, this program has helped
to significantly reduce turnover and increase
the skills base of State’s information technol­
ogy workforce (GAO Report 01–565T).

“core competencies” and decide whether to build internal capacity, or contract for
services from the private sector. This will maximize agencies’ flexibility in getting
the job done effectively and efficiently.
• The statutory framework will be in place to make it easier to attract and retain the

right people, in the right places, at the right time.

The Bureau of the Census has used technology to significantly reduce hiring time.
The agency has an electronic hiring system that provides managers with desk-top,
web-based access to an electronic applicant tracking feature that allows managers to
see images of applicant resumes and transcripts within twenty-four hours of receipt.
The system has helped the Census Bureau reduce the time required to fill computer
specialists, statisticians, and mathematical statistician positions from six months to
as little as three days. Since September 1998, the agency has filled 1,000 vacancies
using this process (GAO Report 01–357T, 2001).

THE EXPECTED LONG-TERM RESULTS
• Citizens will recognize improved service and performance and citizen satisfaction

will increase.
• Agencies will build, sustain, and effectively deploy the skilled, knowledgeable,

diverse, and high-performing workforce needed to meet the current and emerging
needs of government and its citizens.
• The workforce will adapt quickly in size, composition, and competencies to

accommodate changes in mission, technology, and labor markets.
• Government employee satisfaction will increase.

14

The President's Management Agenda

•	 High performance will become a way of life that defines the culture of the federal

service.
— The system will attract and retain talented people who will demand and

deliver sustained excellence and high levels of performance.
— The civil service will use clear and carefully aligned performance incentives for

individual employees, for teams, and for its leadership. In turn, these
incentives will be tied clearly to reaching their agency’s mission objectives.
— Agencies will meet and exceed established productivity and performance goals.
— Accountability for results will be clear and meaningful, with positive rewards

for success and real consequences for failure.

The President's Management Agenda

15

2. Competitive Sourcing
“Government should be market-based—we should not be afraid of com­
petition, innovation, and choice. I will open government to the disci­
pline of competition.”
Governor George W. Bush

THE PROBLEM
• Nearly half of all federal employees perform tasks that are readily available in the

commercial marketplace—tasks like data collection, administrative support, and
payroll services. Historically, the government has realized cost savings in a range of
20 to 50 percent when federal and private sector service providers compete to
perform these functions. Unfortunately, competition between public and private
sources remains an unfulfilled management promise.
By rarely subjecting
commercial tasks performed by the government to competition, agencies have
insulated themselves from the pressures that produce quality service at reasonable
cost.
• Because agencies do not maintain adequate records on work performed in-house,

they have often taken three to four years to define the jobs being considered for
competition.
• To compare the cost of in-house performance to private sector performance, detailed

estimates of the full cost of government performance to the taxpayer have to be
calculated. The development of these estimates has devolved into a contentious
and rigid exercise in precision.
THE INITIATIVES
To achieve efficient and effective competition between public and private sources, the
Administration has committed itself to simplifying and improving the procedures for
evaluating public and private sources, to better publicizing the activities subject to
competition, and to ensuring senior level agency attention to the promotion of
competition.
• In accordance with the Federal Activities Inventory Reform (FAIR) Act, agencies

are assessing the susceptibility to competition of the activities their workforces are
performing. After review by OMB, the agencies will provide their inventories to
Congress and make them available to the public. Interested parties may challenge
the omission or inclusion of any particular activity.

The President's Management Agenda

17

• Agencies are developing specific performance plans to meet the 2002 goal of

completing public-private or direct conversion competition on not less than five
percent of the full-time equivalent employees listed on the FAIR Act inventories.
The performance target will increase by 10 percent in 2003.
• The Administration will adopt procedures to improve and expand competition. As a

first step, OMB has proposed that reimbursable (fee-for-service) work involving
performance by a federal agency be recompeted every three to five years, similar to
standard contract review, renewal, or solicitation procedures.
• The Administration will seek to implement findings of the Commercial Activities

Panel, a commission created by Congress to examine the policies and procedures
governing public-private competition.
• Finally, the Administration is pursuing administrative and legislative actions to

incorporate the full costs of agency work into the daily budget and acquisition
process. This will eliminate the complex, after-the-fact calculation of public-sector
costs.
THE EXPECTED RESULTS
Increased competition consistently generates significant savings and noticeable
performance improvements.
�
• Recent competitions under OMB Circular A–76 have resulted in savings of more

than 20 percent for work that stays in-house and more than 30 percent for work
outsourced to the private sector.
• From 1995 through 2000, the Department of Defense completed over 550 A-76

initiatives, which resulted in an average 34 percent reduction in cost. DoD expects
to achieve $11.7 billion in savings as a result of A-76 competition between 1997 and
2005.
• Numerous studies conducted by the GAO, the Center for Naval Analyses, and

others confirm the magnitude of these savings.
• Competition promotes innovation, efficiency, and greater effectiveness.

For many
activities, citizens do not care whether the private or public sector provides the
service or administers the program. The process of competition provides an
imperative for the public sector to focus on continuous improvement and removing
roadblocks to greater efficiency.

• By focusing on desired results and outcomes, the objective becomes identifying the

most efficient means to accomplish the task.
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1

18

The President's Management Agenda

3. Improved Financial Performance
“Without accountability, how can we ever expect results? Under my
Administration, we will bring this cycle of failure to an abrupt end.
As President, I will hold all affected agencies accountable for passing
their audits not later than 2002. I will say to those I put in place, get
your audits right.”
Governor George W. Bush

THE PROBLEM
• Federal agencies recently identified $20.7 billion in erroneous benefit and

assistance payments associated with just 13 programs. That amount represents
more than the total annual expenditures of seven states.
• Examples of erroneous payments:
— The Medicare Fee-for-Service Program had estimated erroneous payments of

$11.9 billion (6.8 percent) in 2000. Erroneous payments included payments for
medically unnecessary services, unsupported claims/services, and miscoded
claims.
— The Department of Agriculture estimates $976 million in food stamp overissu­

ances, and $360 million in underissuances, for a total of $1.34 billion in
erroneous payments, representing a total error rate of approximately 8.9
percent in 2000.
— Regional Veterans Benefits Administration offices made erroneous initial VA

benefit decisions 32 percent of the time in 1999.
— In 2000, the IRS reported that $7.8 billion in unrecovered Earned Income Tax

Credit claims were erroneously paid to taxpayers for tax year 1997.

“It takes the Federal Government 5 months to close our books…This is not the stuff
of excellence.”
Paul H. O’Neill, Secretary of the Treasury

The President's Management Agenda

19

“…accurate and timely information to manage your financial program activities on a
day-to-day basis are part of a core value set that world-class organizations have
adopted.”
Paul H. O’Neill, Secretary of the Treasury

• A clean financial audit is a basic prescription for any well-managed organization,

yet the federal government has failed all four audits since 1997. Moreover, most
federal agencies that obtain clean audits only do so after making extraordinary,
labor-intensive assaults on financial records.
• Without accurate and timely financial information, it is not possible to accomplish

the President’s agenda to secure the best performance and highest measure of
accountability for the American people.
THE INITIATIVE
• The Administration will first establish a baseline of the extent of erroneous

payments. Agencies will include in 2003 budget submissions information on
erroneous payment rates, including actual and target rates, where available, for
benefit and assistance programs over $2 billion. Using this information, OMB will
work with agencies to establish goals to reduce erroneous payments for each
program.
• To ensure that federal financial systems produce accurate and timely information to

support operating, budget, and policy decisions, OMB will work with agencies to:
— Improve timeliness by:
• re-engineering

reporting

processes

and

expanding

use

of

web-based

technologies;
• instituting quarterly financial statements;
• accelerating end-of-year reporting; and
• measuring systems compliance with agencies’ ability to meet OMB and

Treasury requirements accurately and timely.
— Enhance usefulness by:
• requiring comparative financial reporting;
• reporting specific financial performance measurements; and
• integrating financial and performance information.
— Ensure reliability by obtaining and sustaining clean audit opinions for:
• components of agencies;
• agencies; and
• the government as a whole.
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The President's Management Agenda

— We will make changes to the budget process that will allow us to better

measure the real cost and performance of programs.
THE EXPECTED RESULTS
•	 More accurate benefit and assistance payments to current recipients will enable

programs to serve additional eligible recipients without increasing their budgets
and will reduce program costs. For example:
— Reducing erroneous payments in federal housing programs will result in being

able to provide housing subsidies to currently eligible people who are not being
served due to limited funding.
— Reducing erroneous payments in entitlement programs, such as Food Stamps

or Social Security, will decrease the cost of these programs to the American
taxpayer. As an indication, with heightened scrutiny, the estimated erroneous
payment rate for the Medicare program was reduced from 14 percent in 1996
to 6.8 percent in 2000.
— Preliminary data from test matches between the Departments of Education

and the Treasury suggest that the Pell Grant program is making over-awards
of up to $400 million each year because students or their parents do not report
their income accurately on their student aid applications. If those erroneous
overpayments were eliminated, the savings could be used to increase the
maximum Pell Grant award by up to $100, providing more grant assistance to
low-income students to help them afford college.
• Improved accountability to the American people through audited financial reports.
— Financial systems that routinely produce information that is:
• timely, to measure and effect performance immediately;
• useful, to make more informed operational and investing decisions; and
•	 reliable, to ensure consistent and comparable trend analysis over time and to

facilitate better performance measurement and decision making.

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21

4. Expanded Electronic Government
“I will expand the use of the Internet to empower citizens, allowing
them to request customized information from Washington when they
need it, not just when Washington wants to give it to them. True reform involves not just giving people information, but giving citizens
the freedom to act upon it.”
Governor George W. Bush

The federal government can secure greater services at lower cost through electronic
government (E-government), and can meet high public demand for E-government
services.
This administration’s goal is to champion citizen-centered electronic
government that will result in a major improvement in the federal government’s value
to the citizen.
THE PROBLEM
The federal government is the world’s largest single consumer of information technology
(IT). IT has contributed 40 percent of the increase in private-sector productivity growth,
but the $45 billion the U.S. government will spend on IT in 2002 has not produced
measurable gains in public-sector worker productivity. At least four major causes for
this failure can be discerned.
• Agencies typically evaluate their IT systems according to how well they serve the

agency’s needs—not the citizens’ needs. Systems will often be evaluated by the
percentage of time they are working rather than the performance gain they deliver
to the programs they support. In general, agencies do not evaluate their IT
systems by standards relevant to the work the agency is supposed to do.
• Just as private-sector companies in the 1980s tended to use computers merely as

souped-up typewriters and calculators, so government agencies in the 1990s have
used IT to automate pre-existing processes rather than create new and more
efficient solutions.
• IT offers opportunities to break down obsolete bureaucratic divisions. Unfortu­

nately, agencies often perceive this opportunity as a threat and instead make
wasteful and redundant investments in order to preserve chains of command that
lost their purpose years ago. Financial systems are often automated separately
from procurement systems, which are in turn carefully segregated from human
resources systems, significantly increasing costs and minimizing potential savings.
Likewise, with rare exceptions—the Department of Defense’s Finance and
Accounting System being one—agencies shun opportunities to work together to
consolidate functions like payroll.

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23

Many agencies do not take care to ensure that their IT systems can communicate with
one another. The Department of Veterans Affairs (VA), for example, built a new online
form for veterans in one office and then discovered they had to print out the
information and mail it to another office of VA because the two systems were not
interoperable. VA is now devoted to interoperability—but not all agencies are as
zealous.
THE INITIATIVES
The Administration will advance E-government strategy by supporting projects that
offer performance gains across agency boundaries, such as e-procurement, e-grants,
e-regulation, and e-signatures. It will manage E-government projects more effectively by
using the budget process to insist on more effective planning of IT investments by
government agencies. A task force of agency personnel in coordination with OMB and
the President’s Management Council will identify E-government projects that can
deliver significant productivity and performance gains across government. The task
force will also identify the systematic barriers that have blocked the deployment of
E-government advances. The task force will work to:
• Create easy-to-find single points of access to government services for individuals.
•	 Reduce the reporting burden on businesses—businesses should not have to file the

same information over and over because government fails to reuse the data
appropriately or fails to take advantage of commercial electronic transaction
protocols.
•	 Share information more quickly and conveniently between the federal and state,

local, and tribal governments. We must also do a better job of collaborating with
foreign governments and institutions.
•	 Automate internal processes to reduce costs internally, within the federal

government, by disseminating best practices across agencies.
To support the task force’s work, OMB will scrutinize federal IT investments to ensure
that they maximize interoperability and minimize redundancy. The President’s Budget
proposes a $20 million E-government fund for 2002 ($100 million over the three years
2002 through 2004) to pay for collaborative E-government activities across agency lines.
The Administration will also improve the federal government’s use of the Web.
•	 It will expand and improve the FirstGov (www.FirstGov.gov)

web site to offer
citizens a convenient entry to government services. OMB will engage the agencies
and state and local governments in this venture, to help citizens find information
and obtain services organized according to their needs, and not according to the
divisions created by the government’s organizational chart.

•	 Agencies will undertake a Federal Public Key Infrastructure (PKI) to promote

digital signatures for transactions within the federal government, between
government and businesses and between government and citizens. The digital

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The President's Management Agenda

signature initiative should be coordinated with state and local governments as well
as the private sector.
•	 By the end of 2002, all agencies will use a single e-procurement portal,

www.FedBizOpps.gov, to provide access to notices of solicitations over $25,000. A
fully operational government-wide entry point on the Internet represents a first
step in capitalizing on electronic business processes and making e-procurement the
government-wide standard. The next step: agencies will make use of the single
portal to consolidate procurement on the way to the broader E-government goal of
supply chain management.
•	 Agencies will allow applicants for federal grants to apply for and ultimately manage

grant funds online through a common web site, simplifying grant management and
eliminating redundancies in the same way as the single procurement portal will
simplify purchasing.
•	 Major regulatory agencies will use the Web to inform citizens of the cases before

them, allow access to the development of rules, and make more transparent the
decisions they make, as the Department of Transportation already does through its
Docket Management System.
THE EXPECTED RESULTS
The E-government initiative will make it simpler for citizens to receive high-quality
service from the federal government, while reducing the cost of delivering those
services. The PKI effort will ensure that electronic transactions with and within
government are private and secure. The e-procurement and grant-management portals
will make transactions with the government—or obtaining financial assistance from the
government—easier, cheaper, quicker and more comprehensible. The work on supply
chain management will enable agencies to eliminate redundant processes and save
resources. And putting the federal regulatory process on-line will offer citizens easier
access to some of the most important policy decisions: better informing the citizenry and
holding government more effectively to account. In short, by improving informationtechnology management, simplifying business processes, and unifying information flows
across lines of business agencies will:
•	 provide high quality customer service regardless of whether the citizen contacts the

agency by phone, in person, or on the Web;
• reduce the expense and difficulty of doing business with the government;
• cut government operating costs;
• provide citizens with readier access to government services;
•	 increase access for persons with disabilities to agency web sites and E-government

applications; and
• make government more transparent and accountable.

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25

5. Budget and Performance Integration
“Government should be results-oriented - guided not by process but
guided by performance. There comes a time when every program must
be judged either a success or a failure. Where we find success, we
should repeat it, share it, and make it the standard. And where we
find failure, we must call it by its name. Government action that fails
in its purpose must be reformed or ended.”
Governor George W. Bush

THE PROBLEM
• Improvements in the management

of human capital, competitive sourcing,
improved financial performance, and expanding electronic government will matter
little if they are not linked to better results.

• Everyone agrees that scarce federal resources should be allocated to programs and

managers that deliver results. Yet in practice, this is seldom done because agencies
rarely offer convincing accounts of the results their allocations will purchase. There
In May 2001, the General Accounting Office reported
that the majority of federal managers are largely
ignoring performance information when allocating resources. In only six federal agencies did 51 percent or
more of the managers indicate they used this informa­
tion to a great or very great extent in resource alloca­
tion. Of the 28 agencies covered in the survey, fewer
than 40 percent of the managers in 11 agencies said
they used the information in this manner, and in one
agency, only 24 percent of the managers did so.

is little reward, in budg­
ets or in compensation,
for running programs ef­
ficiently. And once
money is allocated to a
program, there is no re­
quirement to revisit the
question of whether the
results obtained are solv­
ing problems the Ameri­
can people care about.

• In 1993, Congress enacted the Government Performance and Results Act (GPRA) to

get the federal government to focus federal programs on performance. After eight
years of experience, progress toward the use of performance information for
program management has been discouraging. According to a General Accounting
Office (GAO) survey of federal managers, agencies may, in fact, be losing ground in
their efforts to building organizational cultures that support a focus on results.
• Agency performance measures tend to be ill defined and not properly integrated

into agency budget submissions and the management and operation of agencies.
Performance measures are insufficiently used to monitor and reward staff, or to
hold program managers accountable.

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27

• The single goal for Department of Defense (DoD) procurement is the percentage of
procurement funds requested and appropriated by Congress compared to DoD identified
needs. This is a measure of inputs and lobbying success, but talks nothing about results
achieved.
• The U.S. Fire Administration exists to reduce the loss of life from fire-related incidents.
One of the performance indicators used is the quantity of information to constituents
and to those who can have a positive impact of targeted populations. This is a
description of activity and an input measure.
• The Health Resources and Services Administration provides grants to increase the
number of primary care providers, encourage better distribution of health professionals,
and increase the number of minorities in the health professions. Program performance
has been measured not by the number or distribution of health care professionals, but
rather by the number of grants made to academic institutions, hospitals or students.

Managers responsible for producing public services often do not have control over the
resources they use or flexibility to use them efficiently; authority is not aligned with
accountability. In the GAO survey cited above, in 22 agencies more than half the
managers reported they were held accountable for the results of their programs.
But only in one agency did more than half the managers report that they had the
decision making authority to help the agency accomplish its goals to the same
extent.
• Managers do not have timely and complete information with which to monitor and

improve their results. Information is
collected and filed away for use
“somewhere else.”
• The structure of the federal budget

About the time GPRA was signed into
law, President Clinton requested informa­
tion on the impact of a proposed increase
in funding for a children’s program.
Neither the agency nor OMB was able to
calculate this impact.

makes it impossible to identify the
full cost associated with individual
programs. Because the budget does
not identify full cost, competition for
services has been forced to substitute a separate process governed by complex,
artificial rules for cost measurement—and this, in turn, has acted as a barrier to
competition and a source of constant confusion.
• The American people should be able to see how government programs are

performing and compare performance and cost across programs. The lack of a
consistent information and reporting framework for performance, budgeting, and
accounting obscures this necessary transparency.
In the mid-1990’s, the government could not
determine the environmental changes that
had resulted from the spending of billions of
dollars in federal monies over two decades.

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The President's Management Agenda

• Public Housing Drug Elimination Program: This program has shown little or no impact
on drug activity, is less effective than other approaches in reducing drug traffic, and
goes beyond the Department of Housing and Urban Development’s (HUD’s) core mission
by adding a law enforcement role.
• Amtrak is a private company that receives substantial government funding to provide
national passenger rail service throughout the country. Amtrak’s precarious financial
state is well-known; the corporation holds over $3 billion in debt, has never made a
profit in its 30 year history, and has extensive long-term capital needs. Many analysts
and oversight agencies predict that it will not meet the statutory deadline of December
2002 to be operationally self-sufficient.
• The Department of Labor’s (DOL’s) current process for certifying foreign workers as
eligible for permanent employment in the United States is duplicative, labor-intensive,
and unnecessarily complex. It can take up to six years for DOL to complete the
certification process that allows the immigrant to petition for a work-based visa.

THE INITIATIVE
• To provide a greater focus on performance, the Administration plans to formally

integrate performance review with budget decisions. This integration is designed to
begin to produce performance-based budgets starting with the 2003 Budget
submission.
• Initially, OMB will work with agencies to select objectives for a few important

programs, assess what programs do to achieve these objectives, how much that
costs, and how effectiveness could be improved.
• Over time, agencies will be expected to identify high quality outcome measures,

accurately monitor the performance of programs, and begin integrating this
presentation with associated cost.
Using this information, high performing
programs will be reinforced and non-performing activities reformed or terminated.
• The Administration is also transmitting legislative changes that will make

budgeting and management in the Executive Branch more performance-oriented
and improve accountability. The Administration will propose a bill to fully fund
employee retirement benefits, taking a step toward simplifying the rules for
opening government support services to more competition by substituting a
budgetary cost measure for the current complex cost comparison. A second bill will
align other costs with results, and provide a framework for a more transparent
budget presentation.
• Ultimately,

the Administration will attempt to integrate more completely
information about costs and programs performance in a single oversight process.
This would include budgeting for the full cost of resources where they are used,
making budget program and activity lines more parallel with outputs, and, where
useful, improving alignment of budget accounts.

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29

THE EXPECTED NEAR-TERM RESULTS
•	 Starting in 2003, the President’s Budget will shift budgetary resources among

programs devoted to similar goals to emphasize those that are more effective.
•	 In the 2003 Budget, the Administration will set performance targets for selected

programs along with funding levels.
•	 In the 2003 Budget, agencies and programs will budget for the full costs of

retirement and health care programs that are currently budgeted centrally.
•	 The 2003 Budget will present to the American people the objectives the

Administration seeks to achieve in the coming year and provide better information
on the linkage between objectives and the matching cost.
THE EXPECTED LONG-TERM RESULTS
•	 Better performance, based on an assessment of the expected outcomes relative to

what is actually being achieved, including results expected from the President’s
electronic government initiative.
•	 Better control over resources used and accountability for results by program

managers. This is consistent with the President’s strategic management of the
human capital initiative, which increases staff and responsibility at the “front line”
of service delivery and links rewards to performance.
•	 Better service as a result of more competition based on full costing of resources

used by working capital funds and other support service providers, and a simpler
competitive process consistent with the President’s competitive sourcing initiative.
•	 Standard, integrated budgeting, performance, and accounting information systems

at the program level that would provide timely feedback for management and could
be uploaded and consolidated at the agency and government levels. This would
facilitate the goals of the President’s initiative to improve financial performance.
•	 Eventual integration of existing segregated and burdensome paperwork require­

ments for measuring the government’s performance and competitive practices with
budget reporting.

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The President's Management Agenda

PROGRAM INITIATIVES


Program Initiatives
In addition to the five government-wide management initiatives, this Report presents
nine agency-specific reforms. While there is a long list of critical management and
performance problems facing agencies of the federal government, we have chosen these
to begin the effort, based on several criteria:
• severity of the problem and the importance of the problem to those served;
• direct and demonstrable benefit to citizens;
•	 opportunity to make a dramatic and material difference in program performance;

and
• probability of achieving improvements in the near term.

As stated in the introduction, this is the beginning of a comprehensive effort, and these
reforms will provide significant improvements. As we begin to see the results, we will
focus our attention on additional reform opportunities.

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33

6. Faith-Based and Community
Initiative
“The paramount goal is compassionate results, and private and chari­
table groups, including religious ones, should have the fullest opportu­
nity permitted by law to compete on a level playing field, so long as
they achieve valid public purposes, like curbing crime, conquering addiction, strengthening families and overcoming poverty.”
President George W. Bush

THE PROBLEM
• Despite a multitude of programs and renewed commitments from federal and state

governments to battle social distress, too many of our neighbors still suffer poverty
and despair amidst our abundance.
• Traditional social programs are often too

bureaucratic, inflexible, and impersonal
to meet the acute and complex needs of
the poor.

• About 1.5 million children have a
father or mother in prison.

• The federal government too often ignores

• Over half a million children are in
foster care, more than one fifth of
whom are awaiting adoption.

or impedes the efforts of faith-based and
community groups to address social
problems by imposing an unnecessarily
and improperly restrictive view of their
appropriate role. In some programs, year
after year the same providers get the
bulk of the funds, even though there is
little or no evidence of results.

• In 1997, more than one million
babies were born to unwed moth­
ers, many of whom are barely past
their teen years.

• Despite heartening exceptions, officials seem generally to doubt the full legitimacy

of explicitly faith-based groups as partners, whether or not statutes or regulations
include restrictive language. In some cases, organizations that officials deem “too
religious” are not even permitted to apply for funding. The Department of Housing
and Urban Development, for example, has categorized some faith-based
organizations as “primarily religious” thereby excluding them from receiving
Community Block Grant Development Funds, even when the services provided by
such organizations meet program requirements for providing social services. In
other cases, restrictions are placed on religious expression that go beyond what the
Constitution requires. Although religious organizations have a Title VII exemption

The President's Management Agenda

35

that allows them to take religion into account in their employment policies, the
Department of Justice requires all providers to agree not to discriminate on a
religious basis in hiring—even when the pertinent statutes make no such
requirement.
•	 Community-based organizations and all newcomers to federal funding have great

difficulty understanding the federal grants system and how federal funds are often
distributed through state and local agencies. The Department of Justice’s Weed
and Seed Grant Program application kit for new applicants is 74 pages and it
references some 1,300 pages of federal statutes.
•	 Agencies often create requirements that go well beyond what the law defines. Even

though statutes often require providers only to incorporate as a nonprofit group,
agencies often require them to gain 501(c)(3) status, which can be expensive and
time-consuming. Some programs require applicants to demonstrate past receipt of
government funds or to gain the cooperation or approval of public entities that are
likely to see them as competitors. For example, the Department of Labor’s Susan
Harwood Training Grant Program requires applicants to prove past receipt of
government funding or a firm commitment from an organization that has managed
government funds in the past. The Department of Health and Human Services
(HHS) requires applicants for the National Caregivers Support Program to gain the
support of the local area Agency on Aging, which is competing for the same pot of
funds.
•	 Charitable Choice legislation, first enacted into law as part of the 1996 federal

welfare reform law, provides explicitly that community-serving faith-based
organizations may seek direct or indirect federal support for the provision of certain
social services on the same basis as any other non-governmental providers without
having to strip themselves of every vestige of faith. Nearly five years after
enactment, however, Charitable Choice has not been well or fully implemented, as
evidenced by the fact that in most States no new faith-based organizations have
become service providers with access to federal funds. In addition, HHS has not
given any guidance or encouragement to State and local authorities to comply with
Charitable Choice as adopted in 1998 to cover the Community Services Block
Grant. As little as seven percent of urban faith-based organization leaders know
about Charitable Choice.
THE INITIATIVE
The Faith-Based and Community Initiative will identify and remove the inexcusable
barriers that thwart the work of faith-based and community organizations.
Legislatively, it builds upon existing Charitable Choice legislation, which safeguards
both the religious character of providers and the religious liberty of beneficiaries. It
does so while simultaneously affirming that no public grants or contracts shall be
expended for “sectarian worship, instruction or proselytization.”

36

The President's Management Agenda

The President initiated action on the Faith-Based and Community Initiative by issuing
two executive orders on January 29, 2001 creating the White House Office of
Faith-Based and Community Initiative and parallel offices at five key Departments:
Health and Human Services, Justice, Housing and Urban Development, Labor, and
Education.
The Initiative has three goals:
• Identify and work to eliminate im­

proper federal barriers to effective
faith-based and community-serving
programs through legislative, regula­
tory, and programmatic reform.
• Stimulate an outpouring of private

giving to nonprofits, faith-based programs, and community groups by
expanding tax deductions and
through other initiatives.

Opinion surveys consistently show that
wide and diverse majorities of Americans fa­
vor government collaborating with qualified
faith-based organizations that supply social
services, although there is significant dis­
agreement about the specific terms and con­
ditions of such collaboration, and that most
citizens rate local community-serving con­
gregations as the country’s top problem-solv­
ing non-profit organizations.
Rallying the Armies of Compassion,
The White House, January 2001

• Pioneer a new model of cooperation through federal initiatives that expand the

involvement of faith-based and community groups in after-school and literary
services, help the children of prisoners, and support other children in need.
The White House Office for Faith-Based and Community Initiatives has the lead in
promoting a policy of respect for, and cooperation with, religious and grassroots
organizations.
It will establish policies, priorities and objectives for the federal
government’s comprehensive efforts to enlist, equip, enable, empower, and expand the
work of faith-based and community organizations. The White House office will work to
increase the capacity of faith-based and community groups to effectively deliver
federally-funded social services through executive action, legislation, federal, and
private funding and regulatory relief.
THE EXPECTED RESULTS
• Greater participation by faith-based and community groups in delivering social

services because of regulatory and statutory reform, streamlined contracting
procedures, and improved coordination and outreach activities to disseminate
information more effectively at the grassroots level to faith-based and community
organizations.
• Improved

participant outcomes by
placing a greater emphasis on ac­
countability and by making federal
assistance better tailored to local
needs through the use of faith-based
and community groups. Devolution of
services should not stop at state and

The President's Management Agenda

“The delivery of social services must be re­
sults oriented and should value the bedrock
principles of pluralism, nondescrimination,
evenhandedness, and neutrality.”
President George W. Bush

37

local governments, but should move to support neighborhood-based caregivers,
where appropriate.
THE NEAR–TERM RESULTS
Centers for Faith-Based and Community Initiatives established in key Cabinet agencies
have conducted a comprehensive review that will result in the removal of unnecessary
and counterproductive regulatory or administrative barriers to full participation by
faith-based and secular grassroots organizations. This will ensure that:
• Community-serving faith-based leaders, who decide in good faith to attempt to

collaborate with government for the purposes of administering social service
delivery programs, will be treated fairly.
• The religious character of these institutions will not be treated as a stigma. The

institutions will not be made to remove all religious symbols before so much as
getting a fair chance to demonstrate how they might qualify to administer
programs in partnership with government and achieve measurable civic results.
• Existing Charitable Choice laws are fully implemented.

Survey data show that
once faith-based organizations learn about Charitable Choice, 60 percent express an
interest in entering into public-private partnerships to deliver social services.�

• Community-based organizations, which are deeply rooted and often have strong ties

with people in need, will be utilized more extensively to provide federally-funded
services, as their administrative and service capacity is expanded and unneeded
federal requirements are relaxed.
• The ongoing process of streamlining the federal grants process will take into

account the specific concerns and needs of grassroots groups and faith-based
organizations.

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38

The President's Management Agenda

7. Privatization of Military Housing
Department of Defense

“Two-thirds of military family housing units are now substandard,
and they must be renovated.”
Governor George W. Bush

THE PROBLEM
About 20 percent of the nation’s military families live in inadequate housing.
• Inadequate Military Family Housing.

Last year the military services identified
about 177,000 of the Department of Defense’s (DoD’s) 290,000 military family
housing units as inadequate.
DoD estimates that fixing this problem with
traditional military construction funding would cost about $16 billion and take over
20 years.

• Excess Military Family Housing Units. Last year, the military services identified

that they maintain 9,000 out of 290,000 housing units that they do not need, and
indications are that there are even more excess units in DoD’s inventory. Building
and maintaining unneeded housing units diverts funding from higher priority
defense needs.
THE INITIATIVE
The Administration’s military housing initiative has four components:
• increased reliance on public-private partnerships;
• increased funding for housing construction and public-private partnerships;
• increased funding for housing allowances to eliminate out-of-pocket expenses by

service members; and
• increased reliance on private-sector housing as the primary source of housing.

1. The Public-Private Partnership Opportunity. Public-private partnerships provide
private-sector capital and expertise to build and manage housing for America’s military
families. DoD is using temporary authority to enter into arrangements with private
developers to renovate and construct more modern housing for military families. These

The President's Management Agenda

39

arrangements can be formal public-private partnerships with direct government
investment or more informal partnerships with government loans or loan guarantees.
Experience to date shows that with such public-private partnerships, it is possible to
construct and renovate many more “privatized” housing units, quickly, at substantially
reduced costs to the government than through normal military construction. To assess
customer satisfaction with these projects, DoD plans to do an annual tenant survey.
• At Fort Carson, CO, the Army has obtained 210 of the 840 new housing units and

177 of the 1,823 renovated units from the private sector. The renovation and
construction is projected to be completed by the end of 2004. Based on limited
customer response, the Army indicates personnel are pleased with the new and
renovated housing. The cost to the Army to privatize the housing is $10 million to
guarantee a loan. Using traditional military construction funding, it would take 12
years or more and cost $229 million (23 times the cost of privatization) to upgrade
these same housing units.
• At the Naval Station Everett, WA, the Navy entered into a 30-year limited

partnership with a private developer to construct 288 housing units off base, of
which 40 are expected to be completed by October 2001. Construction is expected
to be completed by July 2002. The Navy invested $12 million in the partnership
and provided $6.7 million in differential lease payments to make the housing more
affordable. Using traditional military construction funding, the project would have
cost $53 million (three times the cost of privatization) to upgrade these same
housing units.
• At Camp Pendleton, CA, the Marine Corps is providing land and a direct loan to a

private developer to renovate 512 existing units and construct 200 new units. The
project is expected to be completed by January 2002. The cost to the Marine Corps
is $19 million. Using traditional military construction funding it would take six
years or more and cost $87 million (4 1/2 times the cost of privatization) to upgrade
these same housing units.
• On March 15, 2001, the Air Force awarded a contract at its base in Elmendorf, AK

for the construction of 420 new housing units, renovation of 200 existing units, and
conveyance of another 208 units. The Air Force is providing $23 million to
guarantee a private-sector loan and provide a government direct loan to help
finance the development. Using traditional military construction funding, it would
take $128 million (5 1/2 times the cost of privatization) to upgrade these same
housing units.
2. Increased Funding for Housing Construction and Partnerships. The President
included an extra $400 million in the 2002 budget to improve the quality of housing
available to military personnel and their families.
At Fort Hood, TX, the Army is preparing to sign a contract for the construction of 973
housing units and the renovation of 4,939 existing units. This will be DoD’s largest
housing public-private partnership project to date.

40

The President's Management Agenda

• $195 million, almost half of the $400 million, will be used for public-private

partnerships to privatize about 14,675 housing units.
• $107 million will be used to construct Bachelor Enlisted Quarters for 1,396 sailors

and marines.
• $98 million will go toward construction or renovation of 900 family housing units,

(predominantly) overseas.
3. The Housing Allowance Opportunity. The Administration is committed to reducing
to zero by 2005, the average out-of-pocket expense of military families living in private
housing in local communities. This will enable more military families to leave
inadequate government housing and rent quality private-sector housing in the local
communities around DoD’s installations.

Plan to Eliminate Out-of-Pocket Housing Expenses
Percent

25

20

20

15

15

11
10

8
5

4
0

0

2000

2001

2002

2003

2004

2005

4. Reliance on Private-Sector Housing. As private housing becomes more affordable to
military families, DoD needs to fully implement its longstanding policy to rely first on
private-sector housing in local communities for housing military families. DoD’s process
for determining on-base housing requirements needs to be updated, standardized, and
implemented. Savings realized from not building or renovating unneeded housing units
can be used for more pressing defense priorities.

The President's Management Agenda

41

THE EXPECTED NEAR–TERM RESULTS
• DoD is executing the 2001 enacted appropriations that provided funding to support

eliminating 11,000 inadequate housing units through new construction, renovation,
and public-private partnerships (“privatization”), more than double the total units
privatized between 1996 and 2000.
• The 2002 amended DoD

budget funds construction
and renovation of 6,363
housing units and privati­
zation of 28,174 units, of
which about 18,600 are
currently inadequate. So
in all, with the 2002
budget, about 25,000 inadequate units will be
upgraded.

Inadequate Housing Units
Thousands of units

200
180

177
166

160

141

140

116

120
100

91

80

• DoD should issue an up-

66

60

dated housing require­
ments process to ensure
that DoD relies on privatesector housing first for its
housing needs.

41
40

16

20

0

0
2000

2001

2002

2003

2004

2005

2006

2007

2008

• DoD reports current lifecycle costs for private-public partnerships are five to ten

percent less than the traditional construction projects.
THE EXPECTED LONG-TERM RESULTS
• If DoD continues using public-private partnerships to privatize housing at the rate

in the 2002 budget, DoD should be able to eliminate all inadequate military family
housing units by 2008, two years before its original goal of 2010. Increased use of
public-private partnerships could accelerate progress even more.
• Secretary Rumsfeld has observed that housing is not a core military competency

and “can be performed more efficiently in the private sector.” To move in that
direction, the percentage of military families living in private housing should be
increased, thereby reducing the government-owned housing requirement.

42

The President's Management Agenda

8.	 Better R&D Investment Criteria
Department of Energy

Science and technology are critically important to keeping our nation’s economy
competitive and for addressing challenges we face in health care, defense, energy
production and use, and the environment. As a result, every federal research and
development (R&D) dollar must be invested as effectively as possible.
THE PROBLEM
•	 The federal government will spend approximately $90 billion in 2001 on R&D, an

investment representing 14 percent of all discretionary spending. The ultimate
goals of this research need to be clear. For instance, the objective of NASA’s space
science program is to “chart our destiny in the solar system,” and the goal of the
U.S. Geological Survey is to “provide science for a changing world.” Vague goals
lead to perpetual programs achieving poor results.
•	 The federal government needs to measure whether its R&D investments are

effective. We can rarely show what our R&D investments have produced, and we
do not link information about performance to our decisions about funding. Without
this information, decisions about programs tend to be made on the basis of
anecdotes, last year’s funding level, and the political clout of local interest groups.
•	 Many R&D projects have ended up stepping beyond the legitimate purposes of

government to compete with—or unnecessarily subsidize—commercial ventures.
Last year, the Department of Energy (DOE) funded a midsize turbine development
project at a rate of more than $30 million a year—even though the market had
advanced to the point where all manufacturers had backlogs of orders. Unwisely
invested federal dollars merely replace private research dollars, without increasing
the nation’s total commitment to research. In the worst case, misguided research
funding merely inflates the cost of doing research by bidding up the price of human
and capital resources. Federal R&D should not compete with or supplant private
investments.
•	 Finally, many R&D projects directly benefit corporations that could fund their own

R&D projects without federal assistance. For instance, DOE continues to fund
gas-to-liquid conversion research even though the process has been commercialized
to the point that one multinational oil company is considering investing up to $6
billion for new plants based upon this technology.

The President's Management Agenda

43

THE INITIATIVE
• The Administration is developing objective investment criteria for federal R&D

projects. These criteria will also be used to assess the performance of research
programs. A well directed R&D portfolio should demonstrate progress towards the
portfolio’s strategic goals, without necessarily expecting success from each and
every project.
• DOE, which will spend more than $7.7 billion (more than 40 percent) of its 2001

budget on a broad range of research activities, will pilot this initiative.
supports diverse R&D activities (see figure at right).

DOE

• DOE and OMB are devel­

oping performance criteria
for applied research and
development programs.
OMB and DOE will use
these criteria to guide
funding for the 2003
Budget for the Depart­
ment’s Solar and Renewable Energy, Nuclear En­
ergy, Clean Coal, Fossil
Energy, and Energy Con­
servation programs.
• DOE and OMB are coordi­

DOE R&D in 2001: $7.7 Billion

Science
38%

Defense Programs
43%

Applied Energy
Programs

nating this effort with
other White House offices
3%
and are soliciting input
Clean-up and
from other R&D agencies,
Waste Management
experts in research man­
agement, and groups with
an interest in the federal
R&D portfolio to improve investment criteria and their implementation.
• After our initial effort in applying uniform investment criteria to the applied energy

technology programs, OMB will assist in the transfer of investment criteria to the
rest of DOE, and other Departments and applicable agencies with applied R&D
programs in time to assist in the formulation of the President’s 2004 Budget. OMB
and the Office of Science and Technology Policy will also work with NASA, the
National Science Foundation, the Department of Defense, the National Institutes of
Health, and DOE to develop separate criteria, to be issued in Spring 2002, for
evaluating basic research during formulation of the 2004 Budget.

44

The President's Management Agenda

The Expected Near-term Results
• The 2003 Budget will increase the expected efficiency of applied research and
�

development programs in DOE by no less than 10 percent.

• The 2003 Budget will reduce programs that directly benefit individual firms,

(instead of entire sectors) by no less than 50 percent.
• New applied research and development proposed in the 2003 Budget will be

expected to perform in the top 25 percent of the program’s existing R&D, with the
goal of improving the quality of the research portfolio.�
• Application of the criteria will provide a benchmark for future performance

assessments that will inform funding beyond 2003.
THE EXPECTED LONG–TERM RESULTS
• The Administration expects that these investment criteria will better focus the

government’s research programs on performance. The effectiveness of the U.S.
government’s R&D investment will be measurably improved over a period ending
three years from initial benchmarking. Applied research programs will be better
focused on achieving well-defined practical outcomes. Basic research programs will
better target improving the quality and relevance of their research. These
investment criteria will promote our nation’s leadership in important science and
technology areas.

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������ ������� ����� �� �������� �� ��� �������� ��������� �� ��� ����������
2
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1

The President's Management Agenda

45

9. Elimination of Fraud and
Error in Student Aid Programs and
Deficiencies in Financial Management
Department of Education
“[Student] assistance has allowed [Texans] to expand their minds and
improve their job prospects. [Student aid] enhances individual lives
and ensures a brighter future for our state.”
Governor George W. Bush

THE PROBLEM
• Federal student aid programs help nearly nine million students afford college each

year. Better management of these programs is necessary to maximize the
advantages provided to these recipients and protect taxpayer dollars from being
wasted.
• Through
Dollars at Risk Increasing
Aid Available to Students through Education's Student Aid Programs
In billions of dollars

70
62
60
50
40

38

30
20

20

10

the Department of
Education (ED), the federal gov­
ernment supports approxi­
mately $60 billion in student
financial aid annually, in loans,
loan guarantees, grants, and
work-study opportunities. ED
manages the delivery of student
aid benefits to students in
approximately 5,300 postsecon­
dary schools, and oversees the
direct and guaranteed loan sys­
tems affecting 37 million indi­
viduals, 4,100 lenders, and 36
guarantee agencies.

0
1991

1996

2001

The amount of college aid available through ED’s student assistance programs has
tripled in the last decade.

The President's Management Agenda

47

• Financial statement audits during the past five years have exposed numerous

management problems at ED, including an unreliable financial management
system and inadequate technology security. Since its first audit in 1995, ED has
received only one unqualified, or “clean,” opinion on its financial statements.

Basic Accounting Deficiencies
A recent independent audit review revealed that basic accounting functions often have
been ignored at ED. For example, the review discovered 31,000 unreconciled
items—or differences—between ED’s financial records and the cash transactions recorded by the Treasury. ED has allowed these items to pile up over the years.

• Because of these deficiencies, the General Accounting Office (GAO) has, since 1990,

classified the student financial assistance programs at ED among the federal
programs at highest risk of fraud, waste, error, and mismanagement. In its most
recent report, GAO noted that the Department lacks the financial and management
information needed to manage these programs effectively and the internal controls
needed to maintain the integrity of their operations.
GAO also has cited ED’s inability to verify students’ income effectively as a weakness in
the student aid programs that leaves them vulnerable to fraud and error. Students are
awarded Pell Grants and loans based on the financial resources they report on their aid
applications. ED currently verifies
the income information on applica­
GAO 2001 “high risk” series update: A...Contin­
tions by asking 30 percent of
ued weaknesses in information systems controls
applicants to provide copies of their
increase the risk of disruption in services and
tax returns to their schools’ finan­
make the Department’s loan data vulnerable to
cial aid offices.
This process is
unauthorized access, inadvertent or deliberate
vulnerable to fraud and error bemisuse, fraudulent use, improper disclosure, or
cause students can easily change
destruction, all of which could occur without
their returns or claim they did not
detection.
file. The process is also burdensome
to students and schools and raises privacy issues by giving school officials access to
complete tax returns belonging to students and their parents.
— A test match between ED and Treasury compared the income students

reported on their aid applications to IRS income data. Preliminary results of
that test estimate that the Pell Grant program made overawards of up to $400
million in 2000–2001 (and underawards of over $100 million) because students
or their parents misreported their income on their student aid applications.
The Administration does not expect that 100 percent of the benefits of an
income verification program could be achieved when the program is first
implemented, but past experience indicates that immediate benefits could be
substantial and additional benefits would accrue over time.

48

The President's Management Agenda

THE INITIATIVE
•	 The Secretary of Education has launched a major effort to address these financial

and management issues. The goals are to resolve issues preventing ED from
achieving an unqualified audit opinion on its financial statements and to have
student financial assistance programs removed from GAO’s high-risk list by
successfully addressing management deficiencies. When these goals are accom­
plished, ED will have a reliable financial management system that minimizes
vulnerability to fraud, waste, and abuse, and produces accurate and timely data for
oversight and decision-making purposes.
•	 In order to accomplish these goals, the Administration has established a

Management Improvement Team (MIT) within ED. The MIT, comprised of nearly
a dozen senior-level managers, is responsible for identifying, tracking, cataloguing,
and resolving all audit issues and management items. Through the beginning of
June 2001, the MIT had successfully resolved or closed more than three-fourths of
the major audit issues. Concurrently, ED is implementing a new financial
management system.
Through these efforts, the Administration expects to
significantly improve ED’s financial management capacity.
•	 The Administration is analyzing options for improving income verification of

student financial assistance programs while providing for security and protecting
taxpayer privacy. ED and Treasury recently conducted statistical test matches to
estimate the savings that might result from ED’s use of tax data to prevent
overpayments to student aid applicants. The Administration will review the results
and weigh the possible benefits against the risks of a match before deciding
whether to proceed with implementation of an income verification system with IRS.

THE EXPECTED RESULTS
•	 Erroneous payments to students will be reduced, ensuring that aid is targeted to

the neediest students and increasing public confidence in the programs’ integrity.
•	 The student aid programs will be removed from GAO’s “high risk” list by 2002,

reflecting financial management and program improvements that significantly
reduce their vulnerability to waste, fraud, abuse, and mismanagement.
•	 ED will receive an unqualified opinion on its financial statements, indicating a

robust and reliable financial management system that will enable ED to produce
accurate financial and management information. This data can be used to improve
daily oversight of operations, better measure program performance, and inform
policy decisions.

The President's Management Agenda

49

10. Management and Performance
Department of Housing and Urban Development

THE PROBLEM
• The

Department of Housing and Urban Development’s (HUD’s) chronic
management weaknesses harm the people and communities it was created to serve.
Subsidized families are sometimes trapped in substandard, poorly maintained
housing; home buyers are exposed to fraudulent practices; and some families
receive excessive subsidies
that could have been used to
GAO still considers much of what the Department
aid others in need.
does to be high risk. The 2001 update of the GAO

• Many

high-risk list included two of the Department’s major

overlapping, compli­
program areas - Single Family Mortgage Insurance
cated, and poorly designed
and Rental Housing Assistance. The programs ac­
programs burden HUD. The
count for about two-thirds of all the funds for which
Agency must work through
the Department is responsible. GAO also reports that
thousands of intermediaries,
the Department continues to suffer from departmentwith limited recourse when
wide weaknesses in staffing as well as information
and financial management.
the intermediaries perform
poorly, and it has a legacy of
Government at the Brink, Committee on Governmental
troubled real estate that
Affairs, United States Senate (June 2001)
strains administrative resources. Weak information
systems and controls, staff misallocation, and the retirement of many experienced
employees complicate HUD’s problems.

THE INITIATIVES AND EXPECTED RESULTS
• Improve the performance of housing intermediaries. HUD is no longer willing to

subsidize substandard housing. HUD will strengthen oversight of housing
intermediaries using a new database and management rating system to hold them
responsible for results. Using existing statutory authority, HUD will promptly
replace the management of public housing authorities and sanction private owners
of subsidized projects when these intermediaries are in substantial default of their
contractual obligations, to maintain clean, safe housing units.
The Expected Results—The percentage of units meeting HUD’s physical standards for
public housing will rise to 74 percent in 2002 and 84 percent by 2005. For private
housing that is subsidized by HUD, the percent of units meeting physical standards will
increase to 89 percent in 2002 and 92 percent by 2005. HUD’s goal for the near future

The President's Management Agenda

51

is to expand housing choices for those who reside in housing that fails to meet physical
standards. HUD will work with Congress on ways to ensure that families are not
required to live in substandard housing as a condition for retaining their subsidy.
• Reduce overpaid rent subsidies.

HUD will ensure fairness to all rent-subsidized

Public and Subsidized Private Housing
That Meets Physical Standards
Public Housing

Subsidized Private Housing

2000

2000

Fail
15%

Fail
30%
Pass
70%

Pass
85%

households by reducing more than $1 billion in overpaid rent subsidy annually.
Regulatory changes and new administrative controls will correct long-standing
problems, including errors in calculating rents and inaccurate reporting of income.
Based on computer matching with 1998 federal income tax data, HUD estimates
that tenants who under-reported their income received $617 million in unwarranted
rent subsidies. In addition, over
60 percent of subsidized rent
calculations contain some type of
Tenant Rent Contribution:
Existing and Potential Annual Loss
error.
In billions of dollars

The Expected Results—Working
with its stakeholders, HUD will reduce
the high incidence of tenants’ underreporting of income through a combi­
nation of expert systems, simplifica­
tion
where
necessary,
and
accountability. By 2005, HUD will cut
the processing error rate by at least
half, from 60 percent to 30 percent.
As a result of this and better income
verification, the overpayment of rent
subsidies will be cut by at least half.

52

8.0
8
7
6
5
4
3
2
1.0
0.6

1
0
Total Rent
Contribution

Net Loss From
Processing Errors

Potential Loss From
Under-Reporting

The President's Management Agenda

• Improve Federal Housing Administration (FHA) risk management. HUD’s FHA will

improve its procedures and systems to better control risks at all stages of the
mortgage insurance process, from oversight of underwriting, to monitoring loan
servicing, to reforming the way it manages defaulted loans.
FHA borrowers have been exposed to fraud, with some lenders and appraisers
scheming to acquire FHA insurance on properties with falsely inflated prices.
These schemes harm both FHA and the borrowers it serves. HUD’s Inspector
General reports indictments and convictions in FHA fraud schemes in Los Angeles,
Baltimore, Chicago, Brooklyn, and Long Island. These fraudulent activities are
occurring at the same time that FHA delinquencies are rising, even as
delinquencies of conventional loans gradually decline.
The Expected Results—Improving the early stages of the mortgage insurance process,
HUD will prevent fraud by holding lenders accountable for the performance of brokers

FHA vs. Conventional Mortgage Loans
90 Days Delinquency
Percentage of mortgage loans

2.0

1.5

FHA Mortgage Loans

1.0

Conventional Mortgage Loans
0.5

0.0
1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Source: Mortgage Bankers Association

and appraisers by 2002. By 2004, HUD will eliminate most, if not all, falsely inflated
appraisals. It will take strong action against those found culpable of fraud. Improving
the last stage of the mortgage insurance process, HUD will increase amounts recovered
from disposition of its foreclosed properties. By 2003, HUD will move out of the
property management business by implementing its statutory authority to accelerate
the mortgage insurance claim process, helping FHA manage its business more like the
private sector.
• Strengthen program controls. To address long-standing management control

weaknesses—including those in the above-discussed FHA single-family and
low-income rental assistance programs—HUD must improve its human capital and
information technology resource management. With the help of its new workforce
evaluation tools and a rethinking of work processes and assignments, staff and
workload will be realigned to bolster critical oversight and analysis functions.

The President's Management Agenda

53

Information systems and controls will be strengthened through investments in
integrated financial systems and new performance reporting systems.
The Expected Results—HUD will eliminate the specific control weaknesses and
inefficiencies that have caused GAO to place its major programs on the high risk list,
with the goal of removing all HUD programs from that list by 2005 and improving the
lives of the people and communities HUD was created to serve.
• Reduce meaningless compliance burdens. The current consolidated planning process

contributes little of value. States and communities spend millions of their block
grant dollars to produce Consolidated Plans (many of more than 200 pages) that
are hardly looked at by HUD and not useful to communities. Dollars invested in
meaningless paperwork could be used instead to measure the progress communities
are making in revitalizing low-income areas.

Overcoming Chronic Problems
Years of Weakness Reported by GAO or Inspector General
FINANCIAL AND HUMAN
CAPITAL MANAGEMENT

Develop Reliable Financial System
Reallocate Staff to Meet Workload Needs

SINGLE FAMILY
INSURANCE RISK

Improve Loan Origination Process
Better Monitor Lenders and Others

RENTAL
HOUSING PROGRAMS

Reduce Excess Subsidy Payments
Ensure Rental Housing is in Good Condition
Improve Controls to Detect Problems

Year

0

2

4

6

8

10

The Expected Results—By 2003, HUD will work with local stakeholders to streamline
the Consolidated Plan, making it more results-oriented and useful to communities in
assessing their own progress toward addressing the problems of low-income areas.

54

The President's Management Agenda

11. Broadened Health Insurance
Coverage Through State Initiatives
Department of Health and Human Services

On August 4, 2001, President Bush announced the Health Insurance Flexibility and Accountability Demonstration Initiative. This initiative is designed to improve health insurance coverage for low-income Americans through comprehensive state-based approaches under Medicaid
and the State Children’s Health Insurance Program.

THE PROBLEM
• The federal government will spend an estimated $143 billion in 2002 on the

Medicaid program. Recent annual growth in the Medicaid program is the highest it
has been since the mid-1990s. Between 1999 and 2002, Medicaid expenditures are
projected to grow almost 10 percent per year in comparison to the less than six
percent average annual growth between 1994 and 1999. Overall national health
expenditures are projected to follow a similar pattern.

Medicaid Program Expenditures and Enrollment, 1980 - 1999
Expenditures include both federal and state outlays
200
Expenditures in 1999 Constant Dollars
(Billions)

175
150
125
100
75

Enrollment in Person-Years
(Millions)

50
25
0
1980

1984

The President's Management Agenda

1988

1992

1996

1999

55

•	 In recent years, the number of people receiving health insurance under the

Medicaid program has remained constant and the rate of insurance coverage among
low-income Americans has not improved. Medicaid program enrollee growth is
projected to increase only 1.2 percent per year between 2002 and 2006. Census
Bureau estimates indicate that although the number of low-income individuals has
decreased since the mid-1990s, those who remain low-income were no more likely to
have insurance in 1999 than they were in 1995.
•	 The Administration believes that the complex framework of federal Medicaid

requirements restricts states from tailoring their Medicaid programs to effectively
provide low-income individuals with affordable health insurance options.
•	 The Administration believes that Medicaid and the State Children’s Health

Insurance Program (SCHIP) should support, rather than undermine, the private
health insurance market, where two-thirds of nonelderly Americans purchase
health insurance coverage. The Medicaid program currently does not provide states
with the flexibility or incentive to develop programs that are supportive of the
private health insurance market, such as premium assistance programs. As a
result, few states have successfully implemented such programs.
•	 The Administration believes that Medicaid funding is not always being used to

provide health insurance to low-income individuals.
Recent studies by the
Department of Health and Human Services (HHS) Inspector General have
identified provider payment policies that have allowed billions of dollars in federal
Medicaid funding to be used for purposes other than purchasing health insurance.
•	 In the past, little federal guidance existed for states on how to develop

comprehensive demonstrations seeking to improve health insurance coverage.
Additionally, substantial federal effort is expended reviewing demonstration
proposals that do not seek to improve health insurance coverage. Through
guidance to states, the Administration will clarify the goals and the application
process for federal Medicaid demonstrations.
THE INITIATIVE
•	 On August 4, 2001, the Administration announced the Health Insurance Flexibility

and Accountability (HIFA) Demonstration Initiative. This innovative approach is
designed to give states more flexibility to provide health insurance to low-income
individuals. The Administration is seeking to strike a balance between increasing
state flexibility and ensuring the prudent management of federal Medicaid and
SCHIP funds.
• The HIFA initiative:
— Encourages states to develop comprehensive health insurance approaches that

utilize available Medicaid and SCHIP funding to increase insurance coverage
for low-income individuals.
— Simplifies the application process by providing clear guidance on the informa­

tion states should include in their demonstration proposals.
56

The President's Management Agenda

— Gives states greater flexibility in designing benefit packages and cost sharing

in exchange for increasing health insurance coverage, particularly in support of
private health insurance.
— Establishes a firm requirement of budget neutrality requirements and provides

a simplified option for states wishing to minimize the federal/state negotia­
tions.
— Increases accountability in the state and federal partnership by ensuring that

Medicaid and SCHIP funds are effectively being used to increase health
insurance coverage. At the outset of each HIFA demonstration, the state will
set a goal for reducing the number of low-income uninsured and will be asked
to systematically track the impact of their HIFA demonstration on the
uninsured.
— Gives priority review to state proposals that meet the general guidelines of the

HIFA demonstration project.
•	 The Administration also is looking at ways to improve the availability of reliable

and timely national data on insurance coverage.
THE EXPECTED RESULTS
•	 Increase the number of individuals with access to affordable health insurance

without increasing Medicaid costs. We are already making progress on the number
of Americans with access to health insurance. In the first six months of the Bush
Administration, HHS estimates that an additional 800,000 people have obtained
health insurance through the approval of state requests for Medicaid and SCHIP
waivers and state plan amendments.
•	 Increase the number of comprehensive state-based Medicaid and SCHIP initiatives

addressing the problem of the uninsured.
•	 Increase the number of Medicaid and SCHIP approaches that support coverage in

the private health insurance market.
•	 Improve the federal review process of state demonstration requests by streamlining

the paperwork required and reducing the time period required for federal review.

The President's Management Agenda

57

12. A “Right-Sized” Overseas Presence
Departments of State, Defense, Justice, Commerce,
Agriculture, the Treasury, Agency for International
Development, and Other Agencies operating overseas

“Functions that can be performed by personnel based in the United
States or at regional offices overseas should not be performed at post.
In your review, should you find staffing to be either excessive or inadequate to the performance of priority Mission goals and objectives, I
urge you to initiate staffing changes in accordance with established
procedures.”
President Bush’s Guidance to all United States Ambassadors overseas.
May 9, 2001

THE PROBLEM
• The U.S. overseas presence is costly, increasingly complex, and of growing security

concern. U.S. national security interests are best served by deploying the right
number of people at the right posts with the right expertise.

Overseas Full-Time American Staffing by Country

1-50
51-100
101-200
201-300
Over 300

The President's Management Agenda

59

• Currently, the principal mechanism to assess the rational deployment of U.S.

government personnel overseas is the ambassador’s authority to manage staffing at
each particular post. We need to have a more systematic decision making process
to create proper incentives and procedures to manage U.S. government staff
operating overseas.
• No one U.S. government agency can determine with any certainty the total number

of U.S. government Executive Branch personnel under the authority of each
ambassador and other chiefs of mission. Estimates run as high as 60,000 with
people representing over 30 agencies. There is no mechanism to assess the overall
rationale and effectiveness of where and how U.S. employees are deployed.
• Moreover, as there is no common accounting system that captures all costs,

agencies do not know the true costs of sending staff to overseas posts. Agencies are
not bearing the full costs of sending their staffs abroad.
• While Chiefs of Mission have legal authority to manage assignments of other

agencies to their embassies, in practice, this authority has not been used to
significantly alter patterns of deployment of U.S. government staff overseas.
• Following the embassy bombings in Nairobi and Dar es Salaam in 1998, the

Overseas Presence Advisory Panel (OPAP) was formed to assess America’s overseas
presence and to develop recommendations to make it better managed and more
effective. The OPAP report concluded that the distribution of U.S. government
personnel overseas is shaped more by historical legacy or bureaucratic inertia than
by actual long-term foreign policy goals. It criticized staffing at overseas posts for
too often failing to match an embassy’s requirements, called the interagency
coordination on overseas staffing poor and inadequate, and found that decisions
regarding the size and location of U.S. embassies, are “made on an apparently ad
hoc basis without adequate formal planning.” As a result of these findings, the

Authorized Full-Time Permanent American Position
Overseas Under Chief of Mission Authority, April 2001

Commerce
1%

Agriculture
2%

Peace Corps Staff
1%

USAID
4%

State
39%
DoD
41%

Justice
7%

Transportation
1%
Source: Department of State, June 2001

60

Small Agencies
1%
Treasury 3%

The President's Management Agenda

report recommended an interagency review process to determine the size, shape,
and goals of U.S. presence overseas. This present effort intends to follow through
on the OPAP recommendations and ensure that U.S. presence overseas is properly
coordinated and managed.
• As the bombings in Africa have shown, every embassy in the world is a potential

target from terrorist groups. To ensure that all U.S. government personnel work in
secure posts abroad, the Department of State has embarked on an expansive
construction program for embassies and consulates. The construction program is
expected to require a commitment of approximately $15 billion over the next 10
years.
This costly program demands that staffing decisions underlying facility
construction be based on a thorough understanding of U.S. government needs in
each country and a matching of staff with requisite skills and abilities to achieve
mission goals. Faulty staff planning means that the U.S. government may be
building embassies larger or smaller than needed.
• The average full-year cost to the U.S. government of an American official at a post

overseas ranges from post to post but can cost upwards of several hundred
thousand dollars a year, not including salary. The cost of new overseas positions
can range up to $600,000 for certain agencies in certain areas, including all support
costs. Security and cost considerations demand that the overseas staffing process
be improved. The State Department estimates that the full-year cost is $339,100
on average to establish a new State Department position overseas.

Average Full-Year Cost to Establish a Department of State
American Position Overseas
Family of Four

Travel
Security

8%
Salaries & Benefits

8%

27%

Misc.

8%

Allowances

8%
Administrative Support

Housing & Furnishings

23%

19%

Total: $339,100

The President's Management Agenda

61

Approximate Average Full-Year Cost (New Position Family of Four)
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THE INITIATIVE
• The Administration will analyze and review overall U.S. government presence and

develop a credible and comprehensive overseas staffing allocation process. This
process will provide the Administration with a means to link overseas assignment
with overall U.S. government policy, funding, and agency construction planning.
THE EXPECTED RESULTS
• Reconfigure U.S. government overseas staff allocation to the minimum necessary to

meet U.S. foreign policy goals.
• Have a government-wide, comprehensive accounting of total overseas personnel

costs and accurate mission, budget, and staffing information.
• Use staffing patterns to determine embassy construction needs.

THE NEAR-TERM RESULTS
• Develop accurate staffing projections for new construction projects with planning

levels out to 2010.
• Integrate “right-sizing” into the workforce plans of the State Department and other

agencies as part of the 2003 budget process.
62

The President's Management Agenda

• Improve the process for establishing new U.S. government positions overseas.
•	 Develop cost saving tools or models in such areas as: management, hiring practices,

decreasing post size, regional centers, revising the Mission Performance Planning
process, increasing overseas administrative efficiency, or relocating certain
functions to the United States.
• Improve cost accounting mechanisms for overseas presence.
•	 Establish new, and improved, mechanisms to better coordinate all U.S. government

agency policies relating to overseas presence.

The President's Management Agenda

63

13. Reform of Food Aid Programs
Agency for International Development, Department of State,
Department of Agriculture

The President strongly supports aid that feeds hungry people overseas and helps U.S.
farm income. However, we must also avoid adverse commercial or trade impacts.
Food aid saves many lives, and recently averted a famine in the Horn of Africa. But its
humanitarian purpose is being eroded by other uses having little to do with food. To
better meet the President’s objectives, and strengthen U.S. food aid, the Administration
is committed to reforming food aid programs to ensure that overseas food donation
programs target food aid to the genuinely hungry and avoid waste and adverse impacts.
THE PROBLEM
• Six different programs run

by two government agencies
provide international food
aid. They sometimes dupli­
cate each other.
For instance, Indonesia received
food aid under four of these
programs in a single year.
The Department of Agricul­
ture (USDA) and the
Agency for International
Development both have cre­
ated similar bureaucracies
to administer food aid.

U.S. Government Food Aid
Billions of dollars

3.0

2.5
416(b) Program

2.0
CCC/Food for Progress
Humanitarian Initiative

1.5

P.L. 480 Title III

1.0
P.L. 480 Title II

0.5
P.L. 480 Title I

• Food aid programs are af­

0.0

1996
1997
1998
1999
2000
2001
flicted by waste and ques­
tionable spending. For instance, proposed food aid
expenditures have included projects such as building a noodle factory and providing
trucks that were promptly confiscated by the recipient country’s government.
There are other cases of U.S. commodities being discarded because the recipient
country rejected U.S. food standards and implementing partners did not handle the
commodities properly. In addition, food donations to Angola and Central American
countries were discarded because of damage that occurred during shipping. It is
quite common for donated food to be sold for cash in disaster areas while more
efficient cash relief was also available.

The President's Management Agenda

65

• Some of this aid is inefficient. For instance, the General Accounting Office (GAO)

noted that, of the nearly $250 million the United States spent to send wheat to
Russia in 1999, the intended recipients, Russian pensioners, only realized $64
million in benefits because of high adminis­
trative and transporta­
tion costs.
U.S. Food Aid as a Percent of Total
U.S. Agricultural Exports
• Some of the aid may be
counterproductive, a
Percent
condition
agencies
30
strive to avoid.
For
instance, sending food
to a country that does
not need it for serious
20
humanitarian purposes
may undermine local
farmers and efforts to
10
privatize the agricul­
tural sector in transi­
tion countries.
Like0
wise, large food aid
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
shipments
through
state-owned distribu­
tion enterprises in a
number of former Soviet republics in the early 1990s may have inhibited efforts in
those countries to privatize these enterprises.
• Aid may not always help U.S. farmers. First, farm income is much less affected by

food aid than in the past. For instance, the previous Administration used 416(b)
and the Commodity Credit Corporation Charter Act authorities to donate food when
U.S. market prices were very low-precisely the time when USDA already was
paying farms the difference between the market price and a higher price floor. In
addition, food aid has become less important as an export mechanism as
commercial exports have grown. Finally, evidence suggests food aid may displace
commercial sales or substitute for USDA programs intended to boost farm income.
• The sale of U.S. donations in overseas markets to generate cash, a practice known

as monetization, can impede U.S. commercial exports, lower market prices, induce
black market activity, and thwart market development for U.S farm products.
Theft is also an issue. For example, employees of an organization delivering food
aid were prosecuted for stealing commodities in Haiti.
Though praised for its
flexibility, monetization is economically inefficient because the sale price generally
does not cover the cost of providing the commodities, especially when the additional
shipping cost of the U.S. cargo preference requirement are added.
• Some food aid programs are charged by members of the World Trade Organization

as conflicting with U.S. goals of liberalized trade to the extent that aid displaces
commercial sales. U.S. food aid has tended to rise in volume when prices are low,

66

The President's Management Agenda

Food Aid in Times of Need
Dollars per ton

Millions of metric tons

6

10
Average
Wheat Prices

U.S. Food Aid

5

8

4
6
3
4
2
2

1

0

0
1972

1976

1980

1984

1988

1992

1996

2000

NOTE: U.S. government food aid does not always flow when food-deficit poor countries are most vulnerable. As shown above, U.S. food aid actually
decreases when commodity prices (using wheat prices as a proxy) rise and countries are less able to purchase food. This is due to two factors:
1) ongoing programs can provide fewer commodities with the same amount of money, and 2) food aid provided through surplus disposal is limited
to periods of surpluses.

and drop when prices are high—precisely the time when food-deficit countries are
least able to buy food. However, the United States has committed in the Food Aid
Convention to supply a minimum of 2.5 million tons annually, regardless of U.S.
prices or supplies, and the United States has resisted other nations’ support for
lower aid levels when prices are high. The Ad Hoc Humanitarian Food Aid
Initiative, authorized to operate since 1998 when prices were low, unfortunately
enabled some trade partners to misleadingly criticize U.S. food aid policy goals.
THE INITIATIVE
• The Administration is developing

proposals that will be consistent with the

following principles:
— direct feeding of the genuinely hungry populations will be the primary goal;
— foreign policy and economic development programs will be subject to analysis of

benefits, costs, and performance to determine their priorities;
— bureaucratic duplication and inefficiency in Washington, D.C. and overseas will

be minimized; and
— program authorities and guidelines will be followed more consistently than in

the past.
• The Administration will complete the Ad Hoc Humanitarian Food Aid Initiative

and review funding for other aid programs—such as cash grants and direct feeding
programs—that reduce waste and inefficiency in meeting domestic and foreign aid
goals. Funding for such programs could be increased.

The President's Management Agenda

67

•	 Resources

for other programs that promote foreign purchase of domestic
agricultural products may be restructured and/or increased.

•	 The President’s 2003 Budget request will incorporate proposals reflecting the

principles outlined above and the results of an interagency review of all U.S. food
aid activities, authorities, and programs.
THE EXPECTED RESULTS
•	 More reliable levels of food aid, allowing recipient countries, cooperating sponsors,

and U.S. administrators to plan for their needs. The proportion of the total food
aid program that relies on unpredictable surplus commodity availability will not
exceed 10 percent.
•	 More food security for hungry people, through better-focused programs, clear and

consistent policy objectives, and more efficient use of budget resources.
•	 Improved safeguards to avoid any potential displacement of United States or third

country commercial sales, leading to more effective impact of food aid on U.S. farm
income.
•	 Greater efficiency and transparency in the management and implementation of

U.S. food aid programs.
3

68

The President's Management Agenda

14.	 Coordination of VA and DoD
Programs and Systems
Department of Defense
Department of Veterans Affairs

THE PROBLEM
The Department of Veterans Affairs (VA) and the Department of Defense (DoD) operate
comprehensive medical care systems for a combined cost of $40 billion a year. While
the missions differ, there is overlap.
It is estimated that 600,000 military retirees
eligible for DoD TRICARE are also enrolled in VA Medical Care. In addition, many
DoD and VA facilities are located close to each other.
— DoD’s health care system, originally designed to treat primarily younger

active-duty personnel plus some under-65 retirees, has evolved to cover more
beneficiaries over 65. DoD’s patient demographics are thus becoming increas­
ingly similar to those of VA, which has been treating the over 65 population for
many years. These emerging similarities present opportunities for cooperation
between the two health systems, including buying and selling services, shared
staffing, advanced technology, education and training, consolidated procure­
ment, TRICARE, pharmaceuticals and medical/surgical supplies, and joint
facility agreements. So far, few of these opportunities have been put to use.
THE INITIATIVE
•	 Enhance coordination and delivery of veterans benefits and services by implementing

recommendations of the Task Force to Improve Health Care Delivery to Veterans.
This task force, announced by the President on Memorial Day this year, is
co-chaired by former Congressman Gerald Solomon and Gail Wilensky, former
Administrator of the Center for Medicare and Medicaid Services, previously known
as the Health Care Financing Administration.
•	 Enact authority with the goal of having military retirees, who are also eligible for

VA medical care, select a health care program through annual open enrollment
seasons. This legislative proposal was included in the 2002 President’s Budget.
— Quality involves not only the standard of care provided by a health care

program, but also the coordination of all health care services when multiple
doctors or pharmacies serve one patient. Military retirees may obtain health
care from both agencies at any time.

The President's Management Agenda

69

•	 Improve VA’s health care enrollment data system.

VA developed a temporary
system three years ago in response to their new enrollment requirement.
Currently, the Department is implementing a redesigned health care enrollment
database and has initiated a process to develop a One-VA Registration and
Eligibility System. However, these new efforts are in the early stages. DoD has
offered in the past to provide the Defense Enrollment/Eligibility Reporting System
(DEERS) software solution to VA or to incorporate VA beneficiaries and data
requirements into DEERS. VA should consider the feasibility of using DEERS as
an enrollment system for health care and the other benefits available to veterans.
— Improving VA’s Registration and Eligibility system and the Veterans Health

Administration’s Enrollment system are the first steps toward having one
integrated system for all beneficiaries. For over 20 years the DoD has operated
a centralized automated system to enroll and track individuals having
entitlements to DoD benefits and services. DEERS, is a large database that
accurately records the benefits eligibility information for over 20 million
beneficiaries in multiple government agencies and could be expanded to include
VA. DEERS is uniquely positioned to bridge the gap between the two
Departments, and already supports a modest level of data sharing. Starting in
November of 2000, DoD implemented a real-time exchange of information on
veterans from DEERS. This information exchange sets the stage for even
closer cooperation.
— The transition from active-duty to veteran status involves the veteran enrolling

at a VA regional office for benefits and his local VA medical center for health
care. An active-duty member on one day is in a system that tracks all his data,
and on the next he is separated and must report and document his information
to VA in order to obtain VA benefits and services, despite the fact that most of
it is electronically stored in the DoD system. In addition to the current lack of
full DoD/VA interface, duplicative information must be collected and entered
into separate enrollment systems at VA each time a veteran applies for
different benefits such as home loan guarantees, disability compensation,
education, vocational rehabilitation, and health care. Transition should be
seamless from the veteran’s perspective and could be made seamless through
data sharing between VA and DoD, as well as within VA.
•	 Improve coordination of health care and eliminate potentially duplicative budgeting

by sharing data between VA and DoD. These agencies have been working together
for some time to share data on areas of concern and are pursuing a variety of joint
activities under a reinvigorated VA/DoD Executive Council. However, there are
still many unresolved issues that require further data sharing.
The Expected Results
•	 A seamless transition from active duty to veteran status, allowing both the veteran

and VA to save time and money.
• Continuity of care for each patient by a single agency’s health care system.

70

The President's Management Agenda

•	 Greater accuracy in forecasting the patient population and budget for both the DoD

and VA health programs.
•	 Increased sharing of services that will lead to reduced cost and increased quality of

care.

The President's Management Agenda

71

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