Agencies still in the red on financial performance

President’s Management Agenda

Of all the categories under which the Executive Branch Management Scorecard analyzes agencies, financial performance continues to be the one in which agencies consistently score the worst. Although many agencies have shown noticeable improvements in many areas since the score card’s inception in fiscal 2001, failing financial grades are a constant.

The low scores remain partly because it’s the only category on the score card that is independently verified, some analysts say. The Government Accountability Office is set to publish a report in September that lawmakers hope will shed more light on how the Office of Management and Budget arrives at the scores for the other categories.

In the third quarter of fiscal 2006, 16 of 26 departments and agencies earned red, the lowest grade. Moreover, 12 of those 16 agencies have always gotten red scores in financial performance.

There have been a few positive scores. The National Science Foundation has always scored a green, the highest rating, in financial performance. The Social Security Administration has earned yellows or greens. And after seven straight red ratings, the Education Department jumped to green in the first quarter of fiscal 2003 and has stayed there ever since.

No scores for financial performance changed between the second and third quarters of this year, according to the score card. In case-by-case progress assessments, OMB gave 24 agencies green scores because, in its view, the financial performance objectives were proceeding according to plan. The Homeland Security Department and NASA received yellow ratings, meaning that OMB noticed some slippage in establishing financial performance objectives. The progress assessment is a different measure from the status grade.

A green score means an agency is implementing its initiatives as planned; it is the highest rating an agency can receive. Yellow shows a need for adjustments to achieve the objectives in a timely manner, and red means an initiative is in serious jeopardy. The score card evaluates agencies in five areas on the President’s Management Agenda: workforce, competitive sourcing, financial performance, e-government, and budget and performance integration.

The rationale behind rating many of the score card categories is not well understood outside the agencies and OMB, said Mike Hettinger, staff director for the House Government Reform Committee’s Government Management, Finance and Accountability Subcommittee. Agencies’ financial performance, however, is audited.

“Consequently, there are more reds with independent verification of what they are doing,” he said. The other categories are assessed more subjectively, he said.

The subcommittee commissioned the GAO report that is nearing release.

Linda Combs, controller at OMB, said in a July 26 statement that improving the financial performance category will take a multilayered effort. She said financial processes must be standardized, and financial systems should be moved to shared service providers, which support multiple customers.

Hettinger said OMB should start with standardization and then have agencies outsource the work. The subcommittee has held several hearings on the Financial Management Line of Business, which includes the designation of some agencies or companies as shared service providers. At the latest hearing, on June 28, Combs gave the subcommittee more questions than answers.

Several agencies were already shifting their financial management work to private companies that OMB has not designated specifically as shared service providers.

“My worry is we are getting the cart ahead of the horse more and more,” said Rep. Todd Platts (R-Pa.), subcommittee chairman, at the hearing. Combs told the subcommittee that the new line of business is evolving and OMB is working on the final guidance for standards, which should be issued this fall.

That may be too late for some agencies. Fully instituting the line of business will take 10 or 12 years, Hettinger said. The Bush administration has less than three years left.

More than half of the agencies showed no improvement in any category on the latest score card. Labor continued to be the only department with green scores in all five areas. The Department of Veterans Affairs had the lowest overall scores, with four reds and one green. The VA’s green rating was in the workforce category.

“We are progressively improving our ability to improve program and agency performance,” said Clay Johnson, OMB’s deputy director for management.

Additionally, the e-government initiative continues to make progress and build on its successes. In April, the GovBenefits Web site expanded its services and made state-funded, state-administered programs available, ensuring that benefits offered throughout the different levels of government are found on the Internet at one site.

GovBenefits has provided information to more than 22 million visitors and referred nearly 5 million citizens to benefits programs.

“While we continue to adopt these management disciplines in all agencies, we need to ensure that we, in fact, use these new management abilities to improve performance,” Johnson said.