The federal government spent over $4 trillion in fiscal year 2018, but according to a Gallup poll, more than 60 percent of Americans are dissatisfied with federal government services. When pressed to explain which services cost too much or why they think Americans don’t get what they pay for, there’s no clear answer. Instead, a general perception exists, often created by partisan politics and the media.
How do we correct the record? How do we help Americans become more engaged citizens, empowering them with objective information that allows them to hold their elected officials more accountable for the programs they care about most? How do elected officials make more informed resource allocation decisions, and ultimately ensure the federal government satisfies its citizens?
At the highest level, the answer is simple: Create and implement a comprehensive, standardized way to evaluate the cost-benefit trade-offs for each federal program. As with most things, the devil is in the details.
There are currently 2,277 domestic assistance programs offered by the federal government, according to the General Services Administration. Federal agencies administer these programs, reporting their cost and performance to the public according to federal management legislation such as the 1990 CFO Act and the 1993 Government Performance and Results Act. While these decades-old laws have gotten us far, they didn’t carry us over the finish line of fully-functioning performance-based management. We now have the opportunity to go the rest of the way.
Current Budget Process Problems
During the annual federal budget process, the administration and Congress each consider program costs and performance, along with political priorities, to propose and ultimately enact an annual appropriation. The budget process relies on the collection of unstructured cost and performance data about the programs, conversations among decision-makers, and a significant amount of manually-prepared briefing materials. There is no comprehensive analysis of the 2,277 programs that administration and congressional staff can use to assist with their investment portfolio decisions.
Compounding the complexity caused by the size of the U.S. investment portfolio, the very nature of government investment decisions makes portfolio management exponentially more complex than in private industry. The private sector analyst is able to translate both costs and benefits for each investment into dollars and compare them as a return on investment calculation. Unfortunately, this is not so for the public servant trying to decide where to invest public funds.
Public servants seldom are able to translate results—such as healthier and more educated citizens or lower unemployment rates—into dollars. Therefore, the ROI calculations are a set of discrete unit rates, such as cost per job created, all of which are expressed in incomparable terms.
So Now What?
Allocating resources across a portfolio of 2,277 programs requires a more standardized and comprehensive framework for federal management. The fact that the government ROI is not a neat financial percentage comparable across programs complicates the budget formulation process enough; there is no need to further complicate it by not standardizing and integrating cost and performance data for decision-makers. So how do we do that?
Like any effort to produce useful reports, we should first identify the users of cost and benefit data and understand how they will use the data. There are four key decision-making groups to target with reporting improvements: program managers, senior administration leaders, Congress and the American public.
How do we more clearly report the government’s performance in a way that explains to citizens what they got for their money? And how do we help Congress and administration leaders better understand the public’s priorities? With the 2006 Federal Funding Accountability and Transparency Act, Congress required OMB to create USASpending.gov, which has begun to organize our financial data according to the 19 budget “function” categories to create a complete spending picture for the federal government.
We must also develop a complete performance picture, consistent with the spending data, and as consistent as possible across similar functions. Each of the 2,277 programs may have unique goals and metrics, but they all must be assessed for their impact on the goals of the 19 budget functions. At the end of each fiscal year, the government should update USASpending.gov with all financial and performance data and publish a performance evaluation report to the American public, highlighting our overall performance as it relates to the cost of our services.
How Do We Get There?
Merging cost and performance data in a way that significantly alters how Congress and the administration allocates resources and how Americans objectively gauge the performance of their elected officials has been the Holy Grail of performance-based budgeting for decades. It took a huge commitment of resources just to get to this point. What is going to change to get us over the finish line and, in this time of financial austerity, how can we possibly pay more annually to get there?
While the requirements established by the CFO Act and GPRA laid a strong foundation for reporting, we have an opportunity to modify these requirements, redirecting resources from lower priority reporting, such as agency financial statements, to reporting that can have a much more significant impact, such as a governmentwide performance evaluation report. An independent, rigorous review of program performance aligned with current financial reporting would give a more accurate picture not only of what government spends, but what it gets for the money.
Now is the time to modify federal management laws to get us across the performance-based budgeting finish line, achieving true transparency that the American public can use.
Jay Hurt, former CFO of the Office of Federal Student Aid, is a Managing Director with Grant Thornton Public Sector.