Introduction

During the second half of the 20th century, and until 1993, numerous attempts were made in the United States of America (USA) to improve the performance of the budgeting process. The results obtained did not match the expectations. In 1993, the Congress, taking the initiative, passed the Government Performance and Results Act1 (GPRA) and used its General Accountability Office (GAO) to audit and assess the degree of its performance. In this manner, it urged the Executive Power to give its support and cooperation in the new budgeting process.

GPRA made a Copernican change in the US budgeting system. This act initiates the introduction into the system of the culture of assessment (Llosas, 1997, 2001).

By the end of the 20th century, some progress had been made, but more political support from both powers was necessary. From the early years of the new century, the Executive power, through the Office of Management and Budget (OMB)2, contributed with some new institutions, with the purpose of making the reform process advance, thus taking up its leadership. The Congress cooperated by passing some supplementary acts with the aim of reinforcing the legal framework of the budgeting process.

In chapter 1, the new tools the OMB contributed in the first years of the present century are analyzed3. In chapter 2, we study GAO´s reports about these new tools and about the evolution of the reforms. Finally, some conclusions are drawn, oriented to be useful as suggestions to improve the ongoing budgeting reform process in our country.

1. Recent changes

The main new institutions created by OMB are: (a) the Tool for Program Assessment Rating Tool (PART)4 and (b) the Initiative for Budget and Performance Integration (BPI), which is part of the President Managerial Agenda (PMA). In this Agenda, the priorities proposed by the President of the Nation are explained. We will focus on two of the new documents, Performance Budget (PB), which is supposed to encompass and extend the Annual Performance Plan (APP) created by the GPRA, and the Annual Performance and Accountability Report (APAR) which encompasses and extends the Annual Performance Report (APR).

Budgeting system

(i) A new definition of the budget

 The budget is considered as the financial proposal formulated by the president; a proposal in which recommendations are made about resource allocation.

 OMB made several efforts to align resources with performance, it:

1.         placed BPI among the five items of the PMA,

2.         elaborated Circular A -11 for 20045, supplying guides to the agencies, for restructuration of (a) their accounts and (b) their legislative justifications

3.         asked the organizations to prepare a PB for FY 2005, to be subject to OMB and the Congress.

4.         created a tool, PART, for program assessment and measure.

(ii) Budgeting.

Jour 73 - Art Recent Reforms - Fig 1 

(iii) The Budgeting presentation made by the organization, should include, for example,

-          Support and justification material.

-          Justification of management financial budget.

-          Report about resources for management activities.

-          Summary of management financial plan.

Support or justification material comprises, as an essential element, information about performance. This supposedly adds the assessments performed internally as well as externally. The latter are a result of the use of PART. This tool has become a core element of the process.

In the analysis of the organizations’ presentations, it is mainly taken into account, to what extent the presentations have taken into account the priorities stipulated in the PMA. In case any of the objectives of the Agenda cannot be met to the desired extent, due to shortage of funds, other funds will be cut, starting by those allocated to programs that have already fulfilled their mission, and low efficiency level programs.

After the president has analyzed the estimations and made his decisions, the organizations are notified (feedback). The organization may appeal the presidential decisions. In that case, first, it should justify its appeal with relation to the PMA´s strategic objectives. Second, it should indicate which budget allowances, corresponding to which programs within its organization, suggests reducing, and with the purpose of funding the allowances of the programs it deems a priority6.

(iv) Central Financial Organizations

The OMB assists the president in the supervision of the budgeting process, assesses the programs, policies and procedures’ effectiveness7, estimates the competences among agencies for funds, and proposes funding priorities. It ensures that all the documentation prepared by the agencies complies with budgetary and administrative standards.

The GAO is the investigational arm of Congress. It helps to improve performance and accountability to the citizens by the Executive power.

The institutions recently created by OMB

(i) Program Assessment and Rating Tool (PART)

This tool consists of a questionnaire8 that the organizations should answer, with the intention of assessing the degree of performance, by the programs of each of the five initiatives contained in the PMA.

To determine the integral effectiveness of the program and the organization, it evaluates the purpose, design, scheduling, management, results and accountability.

PART was designed to assess the individual performance and management of the programs. It is applied to discretional programs as well as to the compulsory ones. The agencies must use their results to inform and justify their budgetary orders. The organizations´ presentations should include the funding levels and the actions planned to solve the weak points detected in PART´s assessments.

This tool is far from being perfect. It was used for the first time in 2003 and some deficiencies have already been identified and corrected. It is an ongoing job that still shows faults. Among the issues to improve, we can mention the need of further consistency, of defining “suitable” performance indicators, minimizing subjectivity, measuring the progress achieved, institutionalizing program assessments, evaluating the global context [to solve transversality problems] and using the information coming from further assessments.

The purpose is to enrich budget analysis, and not to replace it. It is aimed to achieve that the program beneficiaries also render accounts. To ensure that the most relevant information is accessible for policy-makers9.

Only those programs showing results must survive. This poses the problem of what to do with the needs that should be covered by the programs that do not survive. Should they be abandoned? Should these deficient programs be reformed [and not deleted]? Will it be necessary to create new programs? Neither OMB nor GAO provides responses to these questions.

Submitting information about budget accounts for PART´s programs, which allow to:

-          Show further performance-resources ratio.

-          Relate budget accounts and sub accounts with programs, in particular, those assessed by PART.

-          Provide information about the accounts and funding levels.

The organization must send to OMB, by electronic means, a datasheet for each program that has been assessed by PART, for the agency. The datasheets shall provide:

•          present and proposed funding levels– current, in force and budgeted year– for all the programs assessed by PART, in any fiscal year,

•          a list of all the Treasury´s accounts funding the program,

•          budget resources and commitments associated to the program for each account; this information will be used to show the extent in which the programs are related to the budget, and to integrate the budget with the performance information.

For the programs to be assessed by PART, the activities shall be aligned with the financial programming schedule.

Information for the public. Information must be disclosed to the public after being sent to the Congress.

 Follow up of the programs analyzed using PART in the budgeting execution reports10. It is an important part of planning and of the determination of the future funding levels. OMB estimates that it is essential to know whether the agency has achieved its long-term performance goals, and that this is achieved with PART.

PART information should be included in all the reports produced by the organizations, in particular, in the budget execution and PB reports.

Follow up of PART´s recommendations. PART´s primary goal is to improve program performance. The assessments are useful to:

•          Identify programs’ strengths and weaknesses

•          Inform about the measures aimed to improve performance and achieve better results:

•          Management actions

•          Recommendations for funding

•          Legislative proposals

PART´s assessments are carried out annually for a subset of programs of each agency, before the latter submits the PB to OMB. Subsequently, OMB shall use the current and the previous year assessments to help in decision-making to formulate the president’s budget. The performance goals included in PART and the parliamentary justifications should be updated to reflect budgetary resources and the associated performance goals that had been chosen for the president’s budget.

OMB insists on the fact that follow up of PART´s recommendations is essential to improve performance.

PART´s data in the PB include performance data (performance indicators with goals and schedules) based on PART. The information contained in a PB should comply with the standards set forth in the PART11 guide. A PB includes performance data about the fiscal year covered in the report and from three previous years. This information should be taken from PART.

PART´s data in the APARs. PART´s data also incorporate the APARs. The PART section in the APAR should be updated to reflect the performance in the current fiscal year, including the actions organized based on PART´s recommendations. It may also include already decided actions that will have effect on successive fiscal years.

PART and the Initiative for Budget and Performance Integration (BPI). The latter is much wider than PART. OMB has formulated the PMA which establishes five initiatives that mark the government´s priorities:

1.         Strategic management of human capital.

2.         Competitive supply.

3.         Improvements in financial performance.

4.         Expansion of electronic government.

5.         Integration of budget and performance.

For each initiative, the PMA established clear objectives that encompass the entire government, called “standards of success”. Based on this, the organizations must develop and implement aggressive and detailed action plans. These organizations should render account of their decisions.

PART establishes to what extent each program and organization contributes to the achievement of these initiatives or purposes. In the case of the BPI, the standards of success include (a) having at least one efficiency indicator for each of PART´s programs, and (b) using PART´s assessment to direct the improvements of the programs. Each quarter, the organizations are assessed for their state of achievement of general goals for each initiative and in the progress to implement their own action plans. OMB quarterly publishes a chart that contains each agency´s ratings with relation to each of its initiatives. Ratings are the following: ineffective (red), intermediate (yellow) and effective (green).

(ii) Initiative for Budget and Performance Integration (BPI)

In GPRA´s methodology, the three central documents are the SP, APP and APR. OMB said that these plans and reports appeared parallel to the budget, without integration between the physical and the financial.

Consequently, it added as one of the president’s priorities, contained in his PMA, the Initiative for Budget and Performance Integration (BPI). To that effect, OMB elaborated two new central documents, which are not supposed to replace, but to encompass and extend the three original ones.

PB includes and extends the APP, whereas the BPI does the same with relation to APR.

The agencies are required not only to meet the basic requirements, but also to describe the real links between the expected results and the resources being required12. Thus, the financial aspect is related to the physical. The agency´s submission to OMB must explain the activities planned for 2006, including the already ongoing ones, which justify their financing requests.

(iii) The President Managerial Agenda (PMA)

It contains the great outlines of the Administration Plan, its “priorities”, defined by the highest authority of the Executive Power. The content of this agenda has a public nature and therefore, is known by all public managers, from whom it is expected that they align their programs and activities with the realization of the strategic objectives it contains.

(iv) Budget restructuring13. Operative structure

During the course of the tasks performed by OMB, along with other organizations, this seems to have proved that the structure of the US federal public economy is not suitable for the purposes of the integration between budget and performance.

As a consequence, OMB encourages the organizations to modify their account structure and their budget submission before the Congress14. It considers that these reforms will allow a more thematic or functional submission, facilitating the understanding of the performance programs and indicators.

OMB aims to the achievement that each program serves only one purpose, and that no purpose needs more than one program. In my opinion, this is conceptually correct, but its compliance can only be partial. In economy, interdependence among sectors exists [transversality]. The only thing left is to attempt that the program charges/ pays the others whose purposes it contributes / that contribute to its own purposes.

Budget structure reflects fundamental choices about how decisions of resource allocation are assembled and about the types of controls and incentives considered as most important. Restructurations imply significant substitution relations between the type of information provided and the accountability frameworks used, and have implications for the balance between management flexibility and control by the Congress.

(v) Relation of APP with the budget: Performance Budget (PB)

APP is an annual plan and as such, is the GPRA´s element that may be and must be aligned with the Budget Law, which is also an annual plan. For that purpose, in 2004, OMB set forth that the organizations submitted annually, from FY 2005, the PB15, which includes the APP and intends to relate it to the annual budget. Circular A -11 requires that the organizations submit to the Congress and OMB, their PBs for FY 2005. With the submission of the PB, the organization also meets the requirements of the GPRA. Something similar happens with the APAR with respect to the APR, also required by the GPRA.

These PBs must meet all the GPRA´s requirements and must also include the performance purposes used to calculate PART. The expectation is that the organizations replace the purposes that deem unacceptable for new purposes.

What is a PB? OMB considers it is a document which relates the strategic purposes with the long-term and annual performance objectives, and with the costs of specific activities which help achieve those purposes and objectives. For OMB, it is the link between the GPRA and the budgeting process.

PB should be aligned with the SP and should incorporate all the actions identified in the program’s performance assessments.

It starts with a summary of what the agency attempts to achieve in the fiscal year, structured in accordance with the SP purposes. For each strategic purpose, this summary provides:

•          background of the achievements,

•          analysis of the strategies used by the agency to have influence on performance, explanation of how these strategies may be improved,

•          analysis of the programs that contribute to these objectives, including the relative roles and effectiveness,

All this should be done using PART´s assessments, as far as they are available.

The summary should also include the expected performance for each strategic purpose, and in the case of support programs, for each performance purpose. It should summarize how the agency expects to manage its program “portfolio” for each strategic purpose, in its entirety, with the aim of maximizing the strategic result.

The summary charts and text should show the “pyramid”, indicating how the program performance and goals support the performance for the strategic purposes and objectives. The charts should show the “overall cost” paid by the agency for each strategic purpose, open for each program.

General principles: Physical purposes should be consistent with financial supplies, and they must be consistent with the budget financial requirements16. The link is produced in the program and funding schemes (P&F) contained in the president’s budget. Each scheme lists the program’s specific activities, to be funded by budget credit. The structure of programmatic activities is the basis to define performance purposes and indicators.

The PB is a document that, according to OMB, relates performance goals (physical) with the costs of reaching those levels (financial).

When several programs are needed to achieve one same goal, the organization should elaborate charts showing the total cost paid for each agency, for each strategic purpose, and for each program17.

The President´s Budget”18. The addition of the PBs of the different organizations integrates the so called “president’s budget”. The latter sets the strategies to be used at the macroeconomic level. For 2006, they include the reduction of fiscal deficit until 2009 and tax reduction, but in a lower degree than public spending. The criteria for spending reduction at the program level will be the national priorities, the president’s principles about which is the appropriate use of the taxpayer’s money, the enforcement of the program goals and the results obtained.

The organizations were instructed to (a) provide an overview of their strategic goals, indicating the results obtained and expected for each of them, (b) explain how the support programs will work together to achieve these goals, and (c) list the past deficiencies indicating how they are planning to remediate them. Each office and organization must study its contribution to the strategic goal and analyze the support programs in detail.

The organizations should consult with the legislative committees “before” submitting their preliminary projects, to inform the Congress about the changes that will take place in the budget structure.

OMB issued Circular A -11 for FYs 2005 and 2006, suggesting to the organizations that they should restructure their budgets to align accounts and programmatic activities with the “programs or components of the programs that contribute to a strategic goal or purpose”19.

The concept of “full cost” and its relation to the results obtained. Direct and indirect costs. The calculation of costs in the case of transversal programs20.

The organizations should align their programmatic activities with PART´s programs, including in the PB, the “full costs” of a program. Each organization should elaborate charts wherein the “full cost”21 paid by the organization for each strategic goal and program is shown. The problems appear when several organizations concur to a same strategic goal.

Each entity should start by analyzing its contributions to the strategic goals, followed by a detailed analysis of the support programs, based, as far as possible, on PART information. Its budgetary request should be justified based on the necessary resources to make the progress planned towards the strategic goals.

The resources requested by each program should be the necessary amount to achieve the target objectives for the program performance purposes. Resources must, at least, be aligned at the program level within this setting. The recommendation for the agencies is to align the resources at the performance level. The resources should be fully paid for, allocating for that purpose, centrally funded services as well as the supporting costs (resources funded by third programs).

OMB informs that in the previous fiscal year (2005), the well-organized and well-written justifications obtained better reception. With this, it encourages the organizations to improve their submissions.

Performance data to be included in the PB. The PB includes performance goals (performance indicators with goals and schedules) based on PART. The information contained in a PB must fulfill the standards established in PART´s assessment. PB shows data for six years for each performance goal: year budgeted, current year, previous year and three previous years. All the means and strategies that the agency intends to use to achieve its performance goals should also be included.

Relations between PB and SP. The PB is organized as a hierarchical structure of goals, in the same manner as the SP. Strategic purposes are at the top of the pyramid (statements of purposes established in the agency´s SP). They are supported by the strategic goals, performance goals and so on, as explained above.

For each strategic goal, there are usually several performance objectives, and for each of the latter, there are several product goals. Performance and product objectives of the programs are the performance indicators and objectives validated during PART´s process, and included in the PB.

(vi) Annual Performance and Accountability Report (APAR) 22

Starting by FY 2004 report, the agencies prepare an APAR, more comprehensive than the GPRS´s APR, which submitted information about how well the agency has reached the levels for the last fiscal year goals.

The agencies should match their PBs with their APARs, including the data about the programs’ performance objectives and indicators and convey the matched reports for each FY, before November 15th each year. This clarifies the requirements of completion and reliability of performance data.

Budget legislation23 demands that the agencies submit an audited financial report. OMB24 demands that the agencies match the PB report with the financial report and the accountability report (OMB, 2001).

PARTs for 2004 should be conveyed to the president, the Congress and OMB until 11/15/04, and so on. The agencies should submit a draft to OMB, at least 10 days in advance.

Coverage of the programs assessed by PART. The PART section of the APAR should be updated to reflect the performance in the current fiscal year, including the actions started based on PART´s recommendations. They can also include previously determined actions that will have an effect on subsequent fiscal years.

Content of the Annual Performance and Accountability Report (APAR). Elements required

a)         Comparison of the effective performance with the levels set to the performance goals in the annual PB. Executed vs budgeted, that is, effectiveness.

b)         Explanation of the non compliance with a performance objective. A specific explanation is provided when the deviation is significant and substantial. It should demonstrate why it happened and the consequences.

c)         Plans and schedules to correct deviations. A schedule should be included. Except when the deviation is exclusively due to external factors25.

d)         Assessment of the level of future performance objectives in relation to the effective performance.

e)         Assessment of completion and reliability of performance data.

Integration will be considered complete if the execution of each objective is reported in the PB, including preliminary data, and the agency identifies in PART, the objectives and indicators for which no data are available, or if they are preliminary or estimated.

Data will be considered reliable if, at least, the managers and decision-makers use the information contained in the APAR during the regular course of their duties and if the informed data supporting the performance indicators are adequately recorded, processed and summarized to allow for the elaboration of information about performance according to the criteria set by the management.

This same law requires that PART includes a summary of the agency´s main managerial and performance challenges, and the agency´s progress to face them, according to the General Inspector´s identification.

This decision has been questioned by the organizations’ staff and authorities and by the staff of the congressional budgeting committees. Because of this, GAO was in charge of enquiring about the actions taken up by the organizations, in compliance with OMB’s mandate.

To that effect, GAO started from the managerial reform framework composed by the DGR, OFJ, and GMR26. These reforms aim to illustrate legislative supervision and executive decision-making, by means of the supply of objective information about the programs’ relative effectiveness and efficiency and the federal spending. Consequently, progress has been made in the creation of federal organizations having high performance.

2. Gao´s Reports about the Budgeting Reforms introduced by the Executive Power27

Ten years after passing GPRA, the Congress asked the GAO for an assessment of its effectiveness to create an approach about performance in the federal government28.

This report discusses:

1.         The effect of GPRA on the creation of a result-oriented approach and on the government´s ability to produce results in the benefit of the American citizen. This includes the assessment of changes in the strategic plans (SP) quality, that is, pluriannual budgets (PABs), of the APPs and the APs.

2.         The challenges the organizations encounter upon measuring performance and using information about performance in the management´s decision-making

3.         How the government can continue the progress towards approaches more result-oriented.

Why (and how) GAO carried out this study. The Executive power had called the attention to BPI upon including it in the 2001 president’s agenda. In order to supervise the different restructuring efforts made, GAO (1) summarized OMB and nine organizations’ accomplishments to align their budgets with performance and to better capture performance costs in budgets, (2) analyzed the potential implications of those efforts for the supervision by the Congress and for the flexibility and accountability of the departmental executive management, (3) described the experiences and challenges of implementation, and (4) identified lessons that may shed light on current and future restructuring efforts.

GAO´s comments about different aspects of the budgeting system reforms

(i) About budgeting restructuring29

GAO investigated the progress of the organizations in that restructuring, finding that the latter consists of changes in the structure of (a) the requests of budget justification to the Congress, and (b) credit accounts (“appropriations”) to better align the budget resources with the programs and performance.

To achieve this approach, annual plans should separately show the amounts intended to achieve each of the performance purposes and indicators. OMB deems it is convenient that the organizations modify their budget financial structure, to make it consistent with the physical structure of the plan´s purposes and indicators. The organizations should consult OMB´s representative about the level of details to provide in the financial area.

In GAO´s opinion, the first question to ask is whether it is really necessary to restructure. If the answer is yes, should appropriations or budget justifications to the Congress be restructured, or both? And, to what extent?

The final plan may or may not be integrated with the budget requirement. We recommend the organizations to coordinate with the Congressional committees about the format of these documents. If integrated information is submitted, it is necessary to highlight what part of the information represents the APP, the PB´s physical aspect and which part is the fund requirement.

In the case of introducing changes in the organization´s budget structure, it will be necessary to submit the information about purposes and indicators, according to structures, the previous and the new one.

Consistent with GPRA, OMB tried to make stronger relations between plans and budgets and to give more attention to the results in the resource allocation process. During the last ten years, OMB has insisted on the need to reexamine the structures of information accounts to better align with the programs’ products and results, and to debit the appropriate account with the significant costs used to obtain results. OMB says that multiple accounts that fund one same product or result may prevent a manager from achieving those same products and results. The ideal would be one account for each result.

The task performed by GAO reveals different opinions about the potential benefits and the weaknesses of budget restructuring. OMB and the organizations’ officers give credit to restructuring for the support of a more result-oriented management, through an increasing attention to the strategic planning, performance and results, supplying more thorough information about the budget resources associated to performance and, in some cases, to the increase of efficiency and effectiveness.

However, the changes in the budget do not comply with the needs of some managers, executives and employees of the congressional budget allowances subcommittees. Officers from two organizations selected for the case study said that restructuring may complicate resource management. This may happen when administrative spending is assigned among programs. Also, when two or more programs concur to the achievement of the same goal (transversality). In this case, restructuring potentially reduces the managers’ ability to deviate resources among programs to meet non-anticipated needs.

Similarly, the staff from the budgeting credit subcommittees supported the integration between budget and performance, but they objected to the changes that substitute instead of supplementing the information traditionally used for budgeting credits and for supervision, such as information about the type of object and labor quantity.

Disagreements have been expressed, even about the capacity of the organizations’ management systems to sustain the new budget structures.

The opinions gathered seem to suggest that, if the base information is more reliable, accepted and used by the main decision-makers, it will be possible to introduce a performance prospect in budgeting decisions. Eventually, if the objectives and the basic information are stronger and used by the Congress, budget restructuring may be a stronger instrument to advance towards the integration of budget with performance30. The Congress must be considered a partner.

The federal government is going through a transition period and faces many challenges and opportunities to improve performance, ensure accountability and position the nation in the future. GAO tries to assist the Congress and the executive power in the identification of the necessary actions to achieve the transition towards a government of high performance, result-oriented and that renders accounts.

To improve the relations between budget and performance is not easy31. As explained in the text, attempts have been made since mid 20th century. The experiences with zero base budget and program-oriented budget failed, according to GAO32, because performance structures were not related to the budget. GPRA tried to solve this by requiring that performance plans cover all programmatic activities33.

OMB thinks, however, that this relation between GRPA documents and budget had not been achieved by the end of the last century; therefore, it made the necessary reforms analyzed in the preceding chapter.

From GAO´s work, it can be inferred that the current account structure may meet Congress’s (formal) objectives of control and supervision, but that it does not align well with performance objectives, nor does it capture the programs’ full costs, preventing the monitoring and supervision task.

There is apparently a discrepancy of diagnoses between GAO and OMB. These discrepancies also reflect the difficulties originated when changes are attempted in budgeting culture. Some countries, for example, Sweden, seem to have been more successful in this task (Llosas, 2005). Others, instead, such as Brazil, find it difficult to make progress34.

The structures of budgeting planning have different purposes and the attempts to connect them create strains among the objectives. The issue is whether, by changing account structure, satisfaction would be for the Executive´s users (OMB, organizations), at the expense of causing the Congress dissatisfaction. GAO considers that consensus between both powers and their joint action is a condition to obtain the expected budget improvements.

(ii) The initiative of integration between budget and performance

Budgeting is the basis for the decisions about resource allocation. OMB thinks that matching the budget allowances (authority) with the accounting, or allocating budget credits (budget authority35) per program and product, information is provided and also the incentives to allocate the resources, and the flexibility to execute the budget, focusing on effectiveness.

The nine organizations analyzed (GAO, 2005a) adopted different approaches in the restructuring of their budgets. Most of the organizations associated resources with programs, or sets of programs, that intend to achieve strategic purposes in common.

(iii) Cost calculation36

In general, cost is considered the value of the resources needed to achieve a goal. However, its meaning varies according to:

• When (the moment) cost is taken into account.

In order to make an investment decision, we will need to know the overall cost “beforehand”. This implies knowing the costs that will be incurred during the entire project lifetime. In other cases, what we need are the costs of the resources being used “now” to produce results. The costs may be those accrued but not paid.

• The unit of cost (level of aggregation) being measured – a strategic purpose, a program.

• The extent to which the different components of cost are included –such as plant and equipment, general spending, financial spending amortizations37.

As mentioned above, central administrative spending and those corresponding to the General Inspector Office received different treatments. According to the organization or program, they (a) were distributed among programs, (b) were ignored, or (c) received intermediate treatments. Again, lack of consistency complicates the comparison between what is called “overall cost”, and “overall budget resources”.

Different users of information about performance, budgeting and costs see it from different points of view, all of them valid.

In summary, from the theory, “overall cost” is understood as the addition of all direct and indirect costs. Different criteria may exist to impute the latter, distributing them between different products or results.

On the other hand, from the budgeting practice, all the associated costs are not debited from one account, but they are debited from several different accounts, often mixed with costs corresponding to other results. On other occasions, supplies are emphasized, or overall annual costs of the resources used are not shown. Consequently, the full cost of each result cannot be seen.

Problems of transversality38. One same purpose may be funded with funds coming from different budget allowances. We should highlight the practice in which one same allowance funds more than one purpose. The organizations must do their best effort to distribute fixed costs 39 among different purposes. Until this becomes possible, it may be convenient to allocate fixed costs to a “free” activity.

(iv) Interagency objectives. Coordination. Problems generated by transversality40

The methodology established by OMB described in the paragraphs above, works adequately when each program generates a single product or result, and when this program is the only one that participates in that generation. However, it is usual that any of the following situations occur.

1.         A program generates more than one product or result.

2.         Upon generating one or more products or results, two or more programs work.

3.         Combinations of 1 and 2.

Case 1 is equivalent to the situations known as joint production in private economy. The problem consists in that the overall cost should be imputed to different products or results. This requires some dose of discretionality, but it is always possible to find a satisfactory method. One example is fixing prices of byproducts of oil distillation.

Typical cases of situation 2 are indirect spending and externalities. Whereas it is relatively simple to calculate and impute direct costs –amount of man-hours worked, kilograms of bronze used–, the same does not happen with other elements, such as administrative and commercialization spending or the general management cost. The same happens with costs paid for and not collected by other organizations, companies or families. In any case, cost accounting and public economy sciences have a huge number of case studies to which they may resort to as reference.

To the three items above, it is necessary to add, in the case of public economies, the treatment given, or not given, to the amortizations of plants, equipments and real estate. In recent years, a trend has started, fostered by the international financial organizations, which intends that each country incorporate data about its patrimony in its public accounting. This is necessary, among other things, to be able to complete the study of public production costs, incorporating in them, the amortizations of the capital assets used.

GAO observes that OMB´s methodology does not consider these different situations adequately.

Observed results

Budget is the base for decision-making about resource allocation. In the justifications to the legislative power, the relation between resources and performance is strengthened. Account structure tries to provide managers incentives to manage resources more efficiently.

In view of the multiple actors, the changes in the account structures have the potential to change the nature of management, supervision and relations among decision-makers.

(i) Changes in the account structures and in legislative justifications

Saying no to information replacement. Some officers from the organizations and staff from the Congressional committees and subcommittees think that the changes in budgeting do not meet their needs. There were even opinions that restructuring may complicate resource management (GAO, 2005a). They asked for information about performance to be added to that previously produced and distributed, instead of intending that the new information replaces the previous one.

Similarly, objections were made with reference to the credibility of the new information; this being an obstacle for its use and acceptance by budgeting decision-makers.

In two of the organizations, the officers argued that budget restructuring had already complicated resource management (GAO, 2005a). In general, most of the members of the staff preferred the previous methods. They stated that the new methods derived the interest of the item and programs.

GAO thinks that decision-makers´ support is needed, from the legislative as well as from the executive power. Budget restructuring is only one of the tools that may help to advance towards a result-oriented management. (íd. p.8).

It is crucial that the Congress “purchases “ this tool to support any managerial initiative because this is the role that the Constitution assigns to it, with regard to setting of national priorities and resource allocation to achieve them.

For this to happen, OMB and the organizations, whenever they create “performance budget”41, must find the ways to supplement, rather than substitute, the key information used by the committees for decision-making.

The major challenge for budget restructuring is to discover manners of reflecting the wider planning perspectives that may add value to the budgeting deliberations and impulse accountability in the manners that the Congress deem suitable to achieve its appropriation and supervision objectives.

To advance without agreements about whether and how to restructure budgets, without consensus about how to measure and report information, and the performance information, and without the ability to make a follow up and explain how resources are spent, may result into excessive work – as the agencies elaborate budgets in several manners – as well as into structures that do not achieve their objectives.

The important objective of including a performance perspective in the decisions may be achieved only when, in budget decisions, the information offer becomes more reliable, compulsory, adapted, and used for every decision-maker in the system. In fact, if the budgeting decisions have to be based on this cost and performance information, there will be more need to improve the information integrity.

Budget restructuring may be a long term, repetitive process. (GAO, 2005a, p.99). Flexibility is needed to explore and experiment different approaches. OMB´s intention would not be to dictate specific standards, but to let the organizations experiment with changes in parliamentary justifications, and in account structures, looking for those that serve one’s own and others´ needs better. It is necessary that they find out which are the substitution relations among resources, in view of improving results. This is what they do in Sweden when they give managers more discretionality, subject to accountability per results (Llosas, 2005a).

(ii) Results of the poll managed by GAO42

The organizations´ managers have varied views about the effects of informing the citizens about results. Only 23% of them consider that GPRA improved the capacity of their organization to provide that information.

Senior politicians, instead, quoted several examples of how GPRA´s structure deepened the result-oriented approach.

The participants in the in depth analysis groups (approach) gave mixed opinions. Some of them said that moving the focus from the activities and processes towards results had been positive. More transparency on government’s results would have operated in this sense. Others, instead, had a hard time attributing the results to the Act.

On the other hand, advances have been spotted. The managers that were consulted said that from 1997 to 2003, there were advances in the different types of indicators: product, efficiency, consumer service, quality and results, all of them statistically significant.

The participants in the groups also commented about the cultural changes that had occurred that had taken place in the organizations since GPRA. The “vocabulary” associated to performance planning is used more now. There was also a reduction in the number of reports about factors that make performance measurement difficult, or the use of performance information.

More managers think that OMB is paying attention to the organizations’ efforts, without this meaning they are concerned because OMB attempts to manage the organizations’ programs.

The organizations have started to establish relations between results and resources43. Whereas in 1999, we found that the organizations did not identify with how the resources for programs were assigned to performance purposes, in subsequent APP studies, the performance objectives relate to the program activities in the budget.

GAO´s revision of the six organizations used as examples indicates that they reflect improvements in their SPs. Whereas in 1997 there was much to do, in 2003, improvements are observed. However, weaknesses remain, in particular, as far as assessment is concerned.

(iii) Limitations and concerns44

The organizations. Some officers declare that the restructuring complicates resource management due to the fact that it reduces flexibility in the light of changing needs, creates difficulties in budget execution and affects the balance between institutional capacity and operative efficiency.

The Congress. Although in general it supports the efforts to relate resources with performance, the reports from the appropriation committees show concern or disagreement about restructuring. They don’t feel very comfortable with the specific change proposals and some officers state that the organizational settings used by the organizations are not aligned with the manner in which the organization operates. They say they are based on units that the organizations cannot follow, and do not provide the information they need, and are not aligned with the approaches of the Congress appropriation committees.

They add that the justifications introduce new perspectives, but they omit information that they (advisors) would use. They complain because justifications are very voluminous, heavy and difficult to use45.

In general, most of the people consulted by GAO suggest that the improvement in underlying financial and performance information should be a pre requirement for restructuring. Others noted that the improvements in performance are much more important.

Challenges46

(a) Institutional challenges

Budget structures reflect fundamental decisions about how to place a framework on budgeting priorities and influence on controls and incentives.

The capacity of the organizations to allocate resources and to make a follow up of costs within the new settings has been questioned. GAO as well as the General Inspector have reported weaknesses in several of the management systems to provide information –including data about costs–, which at the same time are reliable, useful and available in time (punctual).

It is necessary to issue value judgments, such as, when the contribution of several programs in the achievement of a product or result is weighed, or when the resources are distributed among several programs.

The main institutional challenges would be:

a)         lack of consensus among the legislators and other decision-makers,

b)         need of a sustained commitment,

c)         capacity of the organizations to relate resources with performance, and to spot costs in the new budget structures.

(i) Lack of consensus among decision-makers

None of the structures can please everybody. This makes consensus difficult to reach. But, sometimes there has been no dialogue between the actors. This creates frustration and challenges to the efforts of restructuring.

OMB asks the organizations to consult with legislative committees before submitting the budget preliminary project and acknowledges that changes in the account structure should be negotiated with the Congress. There seems to be little progress.

The organizations’ experiences have proved that restructuring budgets without agreement, or the acceptance of the legislative committees, may lead to spending resources in building structures that will be rejected later. This increases both parties’ work without producing positive results. In some cases, the committees considered it was necessary to request further information to the organizations.

In addition to useless work, this restructuration may not be the correct setting for budgeting choices. Staff from the committees report that, in general, they have not used the performance-oriented budget in their work, but instead, they used the program-based information47.

(ii) Need of commitment and leadership

Budget restructuring needs, like all the reforms of “socially built realities” (Zapico-Goñi, 1997), sustained commitment and leadership from those decision-makers who make key decisions.

The process is slow. Managers delay in acquiring experience on “full cost” management and the officers estimate that some more years may elapse before the benefits are obtained.

Some organizations said that their leaders and their personal commitment, OMB´s early assistance and the integration of the budget and planning staff have been very useful in the long term effort to relate resources and performance. OMB staff´s participation in work teams or decisions related to the design is another way of achieving consensus. All the aforementioned, however, is not enough.

(iii) Capacity of the organizations to relate resources with performance, and to spot costs in the new budgeting structures

Imputing costs supposes the realization of value judgments. As the grounds supporting these judgments are arbitrary or deceitful, the new structures will not provide better information.

The capacity of the organizations to, within the new budgeting settings, (a) allocate resources to programs and performance (efficiency), (b) spot and measure costs accurately, and (c) estimate the contribution of each program to the purposes and (efficacy) objectives correctly.

GAO´s report discloses doubts about the capacity of the organizations to keep the accounting of costs per product and performance, to be imputed to each cost.

PART´s assessments suggest that there should be much to do to improve the information of starting point, assessments and the organizations´ internal systems to support performance goals.

(b) Technical challenges

The first challenge is to allocate, among the different products or results, the costs of multipurpose programs. For this purpose, it is necessary to establish relations between programs and purposes.

The second challenge is the imputation of indirect, general spending. This requires in many cases, to estimate how much time each employee dedicates to each goal. One tool is the use of the “equivalent to full time”. It becomes necessary to assess the advantages and the costs of achieving a more accurate distribution of indirect spending.

Often during the execution stage, no strict follow up of costs is done to detect deviations regarding what had been planned. This takes the sense away from the effort made during the planning stage. For this reason, some say that the priority should be the improvement of cost and performance information. Others, instead, argue that the requirement that budgets be structured based on programs and performance provides the incentives for the organizations to cope with the financial management issues.

The third challenge. Transversality. GAO estimates that the methodology imposed by OMB, that may be adapted to the president’s needs, however, repeats the program-per-program approach of the budget, and ignores the possible importance of transversal relations, wherein a program may generate more than one product, and a purpose may require the assistance of two or more programs, even corresponding to more than one organization. This methodological limitation has given place to many criticisms by part of the budgeting drama actors.

What is not clear is the extent to which PART´s purposes and measurements compete with long term, strategic, GPRA´s goals, which have been established in consultation with the Congress and other groups of interest. This shows, in a veiled manner, a conflict of interests between the Executive and the Legislative powers.

The opinions about PART are ambiguous. Advantages: use of uniform criteria and goals. Weak points: incomplete assessments, few levels, only 3.

Lessons learnt (GAO, 2005a, p.101)48

Budgeting restructuring is a tool that may make result-oriented management advance.

On the other hand, it implies important substitution rates between the information supplied and the accountability setting used. The Congress, OMB and the organizations have different opinions about information and the necessary incentives to sustain the efficient decision-making and supervision.

Budget restructuring have implications for the balance between managerial flexibility and supervision and control by the Congress, and finally, for the relation between the different primary budgeting decision-makers– the Congress, OMB and the organizations. Consequently, the Congress should be considered as a partner in this effort. For the success of any important management initiative, it is necessary that the Congress “buys it”, especially when the issue is establishing national priorities and allocating resources to meet them.

“In the elaboration of ‘performance budgets’, OMB and the organizations should adapt the information about the organizations’ performance so that they meet those needs, supplementing and not substituting the key information used by the appropriation committees to make decisions.” The lessons learnt in previous initiatives and the recent experience of the organizations suggest that “the Congress must feel comfortable with the property and usefulness of the budget’s new structures, because they shape the appropriation decisions approach and the nature of controls by means of which the Congress supervises the spending of the executive organizations49. Consequently, if performance purposes and indicators are going to become the base for the budget new structures, the Congress should see them as the driving setting through which it is possible to achieve their own appropriation and supervision objectives. GPRA takes the premise of the existence of a cycle where the indicators and purposes have to be established and validated during a development period before being subject to the rigor of the budgeting process (GAO, 2005ª)”50, 51.

Since in the USA it is the Congress that determines national priorities and that allocates the resources to achieve them, its approval is essential for any initiative about management. And this is so, even more when the issue is the PB. This suggests (p.102) that the goal of strengthening the issue of information about performance in the budgeting process is a challenge with multiple faces. To achieve it, it is necessary to build solid foundations with reference to accepted purposes, trustworthy indicators, reliable costs and data about performance, proved models that relate resources with results, and performance management systems that make the managers and organizations render accounts for the performance. Account restructuration of appropriation accounts, and of the presentations that better capture performance “full costs” is part of the agenda.

“Going beyond, the important objective of providing a performance perspective in budgeting decisions can only be achieved when the underlying information offer becomes truer, more necessary, more accepted and used by all significant decision-makers in the system. If budgeting decisions have to be based on this information about costs and performance, there will be a stronger need to improve data integrity. PART´s assessments performed by OMB suggest there is a lot left to do in order to improve the underlying information, the assessments and the systems within the agencies to support performance objectives. Improving the reliable information offer about costs and performance, as well as generating consensus about the objectives themselves, are essential parts of the long term strategy to promote performance in budgeting decisions” (GAO, 2005a).

The Congress, OMB and the organizations do not see eye to eye about the information and the necessary incentives to support effective decision-making and supervision. The history of budget reform suggests that the budgeting structures reflect multiple views about resource allocation. A lesson is that no definition or structure may include all the needs and all the interests of decision-makers.

Problems with pending resolution (GAO, 2005c)

Some of the main ones are tax spending and regulation programs. Budgeting restructuring and the need to reexamine existing methodologies and practices.

Need of joint action of the powers

GAO clearly emphasizes the need of coordinated and combined action between the Executive and the Congress. It denounces that OMB has not issued a national level plan – required by GPRA – since 1999. Instead, it has created PMA and PART, instruments that provide information that, although is useful, is not enough to provide a wide and integrated prospect of the performance planned by the government in terms of results (GAO, 2004b).

(i) A strategic (mid-term) plan for the entire public economy

GAO has recommended that the Congress amend GPRA so that it asks the president to develop a strategic plan (in the middle term) for the entire public economy, in order to provide a framework to identify long term goals and strategies to challenge issues which interest several federal organizations (GAO, 2005c, p.16).

A strategic plan for the federal government, based on national product key indicators, to evaluate government performance, its position and progress, may be a valuable tool for reexamination of the existing programs, as well as of the proposals of the new programs. Developing a strategic plan might help to clear priorities and gather the interested sectors in the search of shared purposes.

Developing a strategic plan for the government might be an important first step to articulate the government’s role, purposes and objectives. If fully developed, it might provide a consistent perspective about the long term purposes and provide a very necessary base to fully integrate, more than merely coordinate, a wide group of federal activities.

The development of a set of national key indicators might be used as the base to inform about the development of strategic plans (SPs) and annual performance plans (APPs). These indicators might also relate to, and provide information to support, result-oriented goals and objectives in performance annual plans at the organization level. A successful strategic planning requires the commitment of the main interested parties. It might serve as a mechanism to build consensus. Moreover, it might provide a vehicle for the president to articulate long term purposes, and a road map to achieve them. Finally, a strategic plan may provide a more integral framework to consider organizational changes and to make decisions about resources.

(ii) The role of the federal government in the 21st century

The multiple challenges faced by the US federal government (GAO, 2005c, pp.17-18) makes it necessary to reconsider the federal government´s role in the 21st century, including what it does, who does it and how it is funded. All this claims the use of a variety of instruments and methods.

There is a lot at stake in the development of a cooperative budgeting process for performance. This is the time for the Legislative and Executive powers to consider how they must take advantage of the committees and the organizations, new information and the prospects deriving from the reform agenda.

The Executive power has taken important steps such as the President Management Agenda and PART. Some of the improvements in the programs may originate only in the Executive, but for PART to get its full potentiality, the assessments it generates must be significant for the Congress and used by the latter and other interested parties.

GAO proposes the successful integration of strategic planning and performance processes, inherently separated but interrelated, in order (p.18)

(a) to ensure that the increasing offer of information about performance be reliable, useful, trustful and used,

(b) that there is a growing demand of said information, developing relevant purposes and measurements for the wide and diverse community of interested parties in the federal budget and planning processes,

(c) that a “transversal” and integral methodology be adopted.

Only by means of the continuous attention of the Executive and the Congress will it be possible to sustain and accelerate this progress. This effort will strengthen the budget and will supply a valuable tool to reexamine the government´s bases. To achieve an integral reexamination of the government´s programs and policies, clear and transparent processes that engage the public in debate”52 are necessary.

GAO’s recommendations to OMB and to the Congress

It suggests (GAO, 2004b) that OMB’s Director:

1.         should fully implement a performance plan for the entire public sector,

2.         should articulate, integrate and implement a complementary relationship between GRPA and PART;

3.         should provide clearer and more consistent action guidelines about how to implement GPRA to the organizations,

4.         should continue conversations with the organizations about their performance measurements,

5.         should work with the organizations to identify the barriers that prevent from obtaining information about progress, and how to act when there are inevitable lags in data availability,

6.         should work with the organizations to ensure that they are investing well in training, in planning for performance and indicators, in order to facilitate the transformation of the organizations’ culture.

The recommendations to the Congress are the following:

1.         to make the changes in the SP every four years, between 12 and 18 months after the new government takes office,

2.         to ask the president for the development of a SP at the government level, to provide the framework to identify long term goals and strategies and to challenge issues that include several organizations. To do this, GPRA should be amended so as to ask the president to develop a national strategic plan.

Conclusions

The facts

The efforts made in the USA to improve the efficiency in public spending started in the middle of the 20th century. The first methodologies failed and had to be discontinued. From the passing of GPRA (1993), and in spite of several changes that were necessary, it seems that the necessary persistence to achieve success has proven successful. Fifteen years from its start, progress has been made and there is proof that budget decision-makers have understood the need for changes.

The main difficulty appears in the different purposes for which this budget information is used. For that reason, it urges to go ahead with the negotiations intended to find consensus among the different budget actors.

In the USA, the Congress plays a very important role in the budgeting process and it took the initiative upon passing GPRA as well as during the first years of its enforcement. In those first years, there have been several stages.

During the first one, the application of the law was only a pilot trial, encompassing only one part out of the entire number of federal organizations. Once this first period was over, the Executive power would schedule a comprehensive plan annually for the entire public sector.

During the second stage, (a) GAO noticed that the Executive power did not design the comprehensive plans required by GPRA, and (b) OMB stated that there was a divorce between the budget and the APPs.

In the meantime, GAO periodically carried out studies of the progress in the application of GPRA and other laws related to the budget. This allowed identifying several challenges that need to be faced and resolved.

From the analysis of the information gathered from OMB and GAO reports, it seems to derive that in some aspects, the Executive power has attempted to lead in the last years. On the one hand, this has favored the budget reform, thanks to the further political support it meant. On the other hand, there have been clashes between the GPRA’s strategies (Congress’s initiative), and those implicit in the several new instruments added by the Executive power. For example, when OMB tends to manage the program assessment process (PART), following the existing structure of organizations and programs, neglecting, for example, the effects of the action of some programs on other programs’ purposes (transversality).

The Executive power, aware of these difficulties, proposed to carry out a wide rescheduling of federal public economy (GAO, 2005c). This will not be easy, given the amount of programs and issues; to rethink the government will take a generation. For that, sustained leadership along the different stages of the process will be necessary. In addition, clear and transparent processes involving the public in the debate will also be necessary to reexamine programs and policies (GAO, 2005b, p.18).

Positive and negative aspects of the recent evolution of the US budgeting system:

1.         Some of the main problems which are obstacles for the budget reform are:

a.         the programs that yield more than one product/outcome, that is, the existence of multipurpose programs;

b.         the presence of “transversal” purposes, whose compliance requires the joint action of two or more programs. It is usually faced by using double entry charts,

c.         combinations of a and b.

2.         PART’s tool is useful for single purpose programs and not for multipurpose and transversal ones.

3.         As a consequence of 1 and 2, GAO recommends that OMB reforms PART so that it may take into consideration the effects external to each program and assess multiprogrammatic goals.

4.         With the same purpose, GAO insists on the need that the executive power elaborate a strategic (mid-term) plan which encompasses the entire federal public sector. This would allow:

a. to take advantage of joint actions more efficiently,

b. to have the government’s priorities clearer, on the side of the Executive power as well as on the side of the Congress and the public.

5.         There seems to be disagreement between the Congress and the Executive power regarding the actions to follow in order to achieve improvements in the budgeting process, provided in GPRA. In GAO’s opinion, OMB would try to replace that law with the new instruments it designed. However, they do not adequately consider transversality problems.

6.         Persistence of budgeting organizations, in particular GAO and OMB, together with the support provided by the Executive power senior authorities, and the Congress’s cooperation, have allowed to make significant progress in the instauration of a culture of assessment, of a public economy oriented to obtaining results in the benefit of the citizens in general, and the tax payers, in particular. Among the achievements, we can mention:

a.         The assessment of performance is carried out in a rotary manner, every five fiscal years.

b.         Accountability by managers.

c.         The interest shown by legislators, shown in their request of reports to GAO.

7.         The existing challenges seem to consist of different types of administrative inertias which delay reforms. In particular,

a.         On the Executive´s side, a delay in the decentralization of decisions towards the managers, in addition to a result-oriented accountability system, associated to an effective reward and punishment system.

b.         On the Congress’s side, rejection to adopt the new manners of taking the budgeting initiative, and of controlling organizations in budget implementation, associated to a reformed budgeting system that joins the financial (traditional budget) with the physical (performance indicators and assessment).

 

Bibliography

GAO (2004a), Performance budgeting: observation on the use of OMB’s program assessment rating tool (PART) for the fiscal year 2004 budget, GAO-05-1 74, Washington, D.C. Jan 30.

GAO (2004b), Results oriented government: GPRA has established a solid foundation for achieving greater results, GAO-04-38, Washington, D.C., March 10.

(2004c), Performance and accountability report, Fiscal Year 2004, Washington, D.C. See it in www.gao.gov/newitems/0562. pdf

GAO (2005a), Performance budgeting. Efforts to restructure budgets to better align resources with performance, GAO-05-1 17SP, Washington, D.C. pp. 103.

GAO (2005b), 21st Century challenge. Reexamining the base of the Federal Government, GAO-05-325SP, Washington, D.C.

GAO (2005c), 21st Century challenges: Budgeting Performance May Help the Necessary Re-examination, GAO-05-709T, and Washington, D.C.

Llosas H.P.(1997), “Presupuesto, auditoria y evaluación: Herramientas para la reforma del estado” (“Budget, audit and assessment: Tools for the state reform”), Annals of the Argentine Association of Political Economy, U.N. de Cuyo, Mendoza.

(1999) La evaluación en el proceso presupuestario: desarrollos recientes con aplicación a la Argentina (“The assessment in the budgeting process, recent developments with application in Argentina”), 32nd Meetings of Public Finance, Córdoba.

(2000), “El proceso de ‘reinvención del estado’ en los Estados Unidos de Norteamérica. Luces y sombras, de las que la Argentina puede extraer enseñanzas” (“The process of ´state reinvention´ in the United States of America. Lights and shadows from which Argentina can learn”), Annals of the Argentine Association of Political Economy, U.N. de Córdoba, Córdoba.

(2001), “Evaluación presupuestaria en tres países, Argentina, Australia y Los Estados Unidos de Norteamérica. Enseñanzas para la modernización del Estado Argentino” (“Budget assessment in three countries: Argentina, Australia and the United States of America. Teachings for the modernization of the Argentine State”), Annals of the Argentine Association of Political Economy). Buenos Aires.

(2001a), La evaluación presupuestaria (Budget assessment), in Annals of the XXXIV International Meetings of Public Finance, Córdoba.

(2003), El proceso de “reinvención del Estado” en los Estados Unidos de Norteamérica (“The process of ´state reinvention´ in the United States of America”), Social and Economic Issues, UCA, year 1, issue 1.

(2005), “La experiencia internacional en presupuesto plurianual” (“International experience in pluriannual budgeting”), Annals of the 38th International Meetings of Public Finance, Córdoba.

(2006b), Reformas presupuestarias en los Estados Unidos de Norteamérica, No publicado (Budget Reforms in the United States of America, unpublished).

Llosas H.P. y Oliver H (2003a), “La cultura de la evaluación en la ley argentina de administración financiera. El caso de la Prefectura Naval Argentina” (“The culture of assessment in Argentine financial management law. The case of Prefectura Naval Argentina”), Annals of the Argentine Association of Political Economy, Mendoza.

OMB, (2004), Preparación y presentación de estimaciones presupuestarias (Elaboration and submission of budget estimations), Circular No. 11-A, Washington, D.C.

, (2005a), Budget of the United States Government, Fiscal Year 2006. Analytical Perspectives, Supplemental Materials, Washington, D.C.

, (2005b), Circular A – 11, Washington, D.C.

, (2005c), Guidance for completing the Program Assessment Rating Tool l (PART), in www.whitehouse.gov/omb/part/fy2005/2005_guidance.doc #_toc98562580

, (2005d), Part assessments, Department of Education, see the following website: www.whitehouse.gov/omb/budget/fy2006/pma/education.pdf NOTE: for “PART assessments” from other Departments, simply change the last word in the website mentioned above.

, (2005e), Examples of performance measurement. See two websites: a) http ://www.wh itehouse .gov/omb/part/performance_measure_database.xls www.whitehouse.gov/omb/budget/fy2006/sheets/part.xls

Zapico-Goñi E. (1998), Presupuesto por programas y adaptación del estilo de gestión del gasto público: dos pilares para la reforma presupuestaria (Program based budget and adaptation of public spending management style: two landmarks for budget reform), Madrid.

 

 

Notes

1 Government Performance and Results Act. Hereinafter, we will quote in these footnotes, in the source language, in italics, the relevant parts of the consulted documents.

2 Office of Management and Budget.

3 For the analysis of period 1993-1999, the reader may see Llosas (2000)

4 Program Assessment RatingTool.

5 Updated afterwards for 2005 and 2006.

6 Reallocations can only be made by the executive power with relation to the flexible spending allowances. For modification, compulsory allowances require a law passed by the Congress. This introduces a certain degree of rigidity in the budgeting process. This rigidity is common to most of the countries, being at the maximum in some of them, such as Brazil (Cf. Llosas, 2005 and the Brazilian budgeting system website).

7 Using the PART.

8 Cf Llosas (2006b).

9 Cf. www.whitehouse.gov/omb/part/challenges_strategies.htlm

10 In Argentina, Investment Account.

11 Cf. http://www.omb.gov/part/2006_guidance.pdf )

12 OMB (2005), Circular A – 11, chapter 26.3.

13 See comments of the GAO in the next chapter, see GAO (2005b).

14 Ídem. For comments with critics, see GAO, 2005a and Zapico-Goñi E. (1998).

15 OMB, 2005a, Circular A -11. Part 6, chapters 200.1 and 220.

16 With this, physical planning integrates with financial budget.

17 GAO also considers the case in which the necessary programs belong to more than one organization. In this case, the charts should include those other organizations and the corresponding programs.

18 Cf. Executive Office of the President, Office of Management and Budget, Budget of the United States Government, Fiscal Year 2006, Washington, D.C., chapter 2, Overview of the President’s 2006 Budget. www.whitehouse.gov/omb

19 OMB, 2004, pp. 51-53.

20 Those that “go through” two or more organizations, generating costs in each of them; those that appear separately.

21 OMB defines as “full cost”, the addition of all the budget resources used for an organization to achieve the program products. They include not only wages, supplies and transfers, but also the cost of the supporting services and goods centrally used and supplied. GAO suggests adding the costs funded by other organizations.

22 Cf. OMB (2004), Circular A-11, Chapters 26 and 230.

23 Chief Financial Officers Act and Accountability of the Tax Dollars Act.

24 OMB (2001), Bulletin No. 01-09, Sept. 25, 2001.

25 When it is considered that the objective is not achievable, the reason for this should be explained and other actions tending to meet the detected need should be recommended.

26 Government Management Reform.

27 GAO produces numerous documents per year. Among them, we have chosen some which we deem are more related to budget and, in particular, to the reforms introduced in this area by OMB and the Executive power.

28 GAO, 2004b.

29 Hereinafter, the analysis is mainly based on GAO´s document, 2005c.

30 See the Initiative for Budget and Performance Integration (BPI) in the PMA.

31 Recently, the World Bank has created sections intended to improve the monitoring and assessment to enhance the public sector management. See www.worldbank.org/ieg/ecd

32 For further opinions, see chapters 1 and 2 above.

33 The term “programmatic activity” refers to the activities developed within each program.

34 It may be interesting to investigate the possible relation between the type of political organization of the countries, federal or unitary, and the difficulty to introduce budgeting reforms. In fact, those countries facing more difficulties, USA, Brazil and Argentina are federal countries, whereas Sweden and the United Kingdom are unitary countries. Social capital (institutions and their operation) is another important difference.

35 Budget credit is the legal permission to contract financial obligations that will result payments by means of governmental funds.

36 GAO, 2005a, p.9.

37 In general, the US accounting system does not include the patrimonial; therefore, it is not possible to calculate amortizations.

38 GAO, 2004b.

39 Wherever there is a patrimonial accounting incorporating an inventory of the state property, it is possible to include those property´s amortizations.

40 This issue will be developed in detail in Chapter 4, GAO´s Reports.

41 GAO uses inverted commas for those concepts, which in its opinion, may have more than one interpretation.

42 GAO, 2004b, Executive Summary.

43 To relate to GAO´s reports in 2005 about the president’s initiative to relate budget with performance.

44 GAO, 2004b, p.14.

45 All throughout, we can observe resistance to change that is common in all the organizations and countries – it is difficult to burn away chaff and expose the heart.

46 GAO, 2005a, p.91, Section 4.

47 They seem to refer to financial information. They would not have used physical information, in detriment of the presidential initiative of integration between budget (financial aspects) and performance (physical).

48 Section 5.

49 Ministries of Spending is the name in international literature.

50 Italics are used according to the author´s criterion.

51 This is very important – it seems to suggest the separation between physical budget, that would be elaborated before, and the financial,  which would take the  physical as information.