Federal Performance Budgeting the Budget's New Clothes
Juszczak, Thad, The Journal of Government Financial Management
Beginning in 2002, the President's Management Agenda (PMA) focused Federal agencies' attention on budgeting for results and required performance budgets beginning with the FY 2003 budget submissions. The PMA is a set of government-wide management initiatives focused on human capital, competitive sourcing, financial performance, electronic government and integrating budgeting and performance.
At first, many thought the Agenda was another "flavor-of-the-month" management scheme, like management by objective (MBO) or zero based budgeting (ZBB), this time with a simplistic, color-coded grading scheme. However, they soon discovered that President Bush regularly reviewed the Scorecard. As a result of this top level attention, agency heads started asking their staffs to explain their yellow and red scores. The simplicity of the scheme turned out to be a major strength; everyone quickly learned what it meant to "get to green."
Today, more and more Federal agencies are "getting to green" in the Budget and Performance Integration (BPI) category of the PMA's quarterly Executive Branch Management Scorecard. A green dot for BPI on the Scorecard's left side means an agency knows its goals and regularly makes decisions that lead to achieving these goals. Yellow means an agency is part-way compliant, while a red dot quarter after quarter could be a career-buster.
But what does it take to get to green in the BPI category? A performance budget that clearly links goals with costs for achieving targeted levels of performance. This is not an old-style budget that simply seeks funding for one or a category of programs. Instead, the new-style budget is based on a target level or quantity of important outcomes or results-an agency's strategic performance goals. Producing such financial plans requires integrating strategy, accounting, budgeting and performance measurement, a new challenge to Federal agencies that, as of September 2004, only seven have achieved: NASA, the Small Business Administration, the Social security Administration, and the Departments of Labor, Transportation, State and Energy.
The U.S. Office of Management and Budget (OMB) has issued standards for integrating budget and performance, which it uses to score agencies on their success or progress in the BPI category. Below, we outline the standards and what agencies must do to comply with them and get to green.
Teamwork Essential to Success
Performance budgeting requires a greater degree of teamwork than is typically found among administrative and support functions. Directly or indirectly, each function may hold the key to success of another function's ability to bring an agency into green status in a particular PMA category.
For example, the first BPI standard is that senior agency managers ".. .meet at least quarterly to examine reports that integrate financial and performance information that covers all major responsibilities of the Department. This information is used to make decisions regarding the management of agency programs." The standard is related to a different PMA initiative on improving financial management, which states that a green-score agency ".. .produces accurate and timely financial information that is used by management to inform decision-making and drive results in key areas of operations." Further, another BPI standard says that a PMA-compliant agency must report full costs in its budget, a challenge that accounting and finance professionals can help to meet.
Likewise, one BPI standard is that "Performance appraisal plans for at least 60 percent of agency positions link to agency mission, goals, and outcomes; effectively differentiate between various levels of performance; and provide consequences based on performance." Virtually the same standard appears in the PMA initiative on strategic management of human capital. Speaking of strategy, yet another BPI standard calls for strategic plans with performance goals. …