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MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT: Money
In the federal government, the budget process is not simply a bean-counting game. The budget process shapes policy-and it inevitably reduces all decisions down to a dollar denomination. The process, including upfront strategic and long-range planning and performance targets, is where policy and strategic decisions are made in the federal government.
Obtain Resources in a Challenging Environment
Resources will be scarce, and the way in which they are allocated and used is crucial to you and your
organization's overall effectiveness. The fiscal pressures on the U.S. government, particularly on discretionary
spending, are unsustainable. The sources of revenue and range of options for funding new initiatives are
becoming broader and more complex. A solid financial strategy can no longer be an afterthought, cobbled
onto a policy proposal or developed as part of an after-the-fact business plan, if at all. Understanding costs
and measuring program performance are critical to effective decision making and need to be part of the
policy and program development process.
One of the secrets that only the initiated know is that budget numbers are the keys to the doors of everything. Spending for everything the government does-whether it is foreign aid, biomedical research, or education- and revenues from every source are all reflected, recorded, and battled over in numbers. And the sum of those numbers, and who gets how much, is fiscal and economic policy. If it matters, there are numbers that define it. For that reason, you need to understand the mechanics of the numbers process. And you have to give these resource numbers meaning-to put them in the proper context at the right time and know what every important player is trying to do to them or with them and the reasons for the different pressures.
Manage the Resources You Receive
Managing money in government is serious business. You can go to jail if you do not do it right. That said,
managing resources means more than simply keeping the books straight and helping to ensure that funds
are not misspent. Resources need to be invested and deployed strategically based on reliable, timely, highquality
information that helps policy makers and program officials make difficult choices in a highly complex
environment. Understanding costs and measuring program performance are critical to effective
decision making and need to be part of the policy and program development process.
By and large, starting with the Chief Financial Officers Act of 1990, financial management legislation has focused more on government-wide reform-particularly developing government financial standards, applying private sector financial standards and processes to the federal sector, aligning spending and performance, and reducing the size of government and competing federal functions that are commercial in nature. Consequently, federal financial management has been elevated to a more sophisticated platform.
While legislation has been put into place to strengthen the role of the federal chief financial officer (CFO), there is a lack of clarity for federal CFO roles and responsibilities. Oversight responsibilities for CFOs in the federal government vary from agency to agency. While CFOs are responsible for the financial management activities of their agency, not all CFOs are responsible for budgeting and planning. Similarly, some CFOs share responsibility for implementation of financial management systems with their agency chief information officer (CIO). Moreover, in some agencies, the CFO is responsible for many other agency activities, including human resources, asset management, procurement, facilities, bankcards, and general administration in addition to financial management. In some agencies, the CFO also reports to the CIO. In other words, there are no standard practices for federal CFO responsibilities.
Show Results from What You Spend
You and your organization will be under increasing pressure to produce-and to demonstrate-results
in terms of your goals and mission. Integrating performance and results with decision making for budget
resources has long been a goal of the U.S. federal government. During the past decade, Congress and the
executive branch have increased their emphasis on improving management across all departments and
agencies. A series of legislative proposals and changes to federal budget guidance have highlighted the presentation
of performance and results information for the annual investment of public dollars. The Government
Performance and Results Act (GPRA) of 1993 was first implemented on a government-wide basis in 1997
with the fiscal year 1999 budget. GPRA seeks to fundamentally change the focus of federal management
and accountability from a preoccupation with inputs and processes to a greater emphasis on the outcomes
and results that programs should be achieving. It brings together managers, workers, and stakeholders to
focus on: (1) the purposes of programs; (2) the means to achieve them; and (3) progress toward achievement.
As noted in the Memo on Performance, you are coming into government at a time when much progress has been made on obtaining and using performance management information for government decision making. Initiatives have been launched to more effectively link budget and performance. George Washington University's Philip G. Joyce writes, "The federal government has never been in a better position to make its budget decisions more informed by considerations of performance."
A focus on results and outcomes can help enhance government's capacity to assess competing claims for budgetary resources by arming decision makers with better information both on the results of individual programs as well as on entire portfolios of policies and programs addressing common goals. The use of performance information is not an end in itself, but rather a means to support better decision making and lead to improved performance and accountability. While performance budgeting will never resolve the vexing resource trade-offs involving political choice, it does hold the promise of modifying and informing policy decisions and resource allocation by shifting the focus of debate from inputs to the program outcomes and results that are crucial to an organization's success and to the nation's security.