It makes a difference now more than ever.
If you doubt it, just ask the folks at the Interior Department. They found out the hard way last December. The 2001 Federal Performance Report's findings about mismanagement at the Bureau of Indian Affairs kicked off a series of events that ended with all of Interior being cut off from the Internet and e-mail to and from outside the department. Some bureaus remained offline for months. Our story about BIA, which received an overall grade of D in our ratings last year, prompted an investigation of Interior's computer networks that revealed serious security lapses. A federal judge ordered the department off-line until the holes could be plugged.
BIA's failure to properly manage and secure information plunged Interior back into the pre-Internet Dark Ages and left 71,000 employees scrambling to communicate with the public or each other by phone, fax or mail. Interior employees lost access online to real-time weather information, crime data, the Federal Register and the government's online contract announcement site, among other things. Citizens no longer could see Interior Web sites, and lost the ability to reserve campsites at national parks online. They no longer could join e-mail "blasts" responding to proposals to change rules and other Interior actions. The 40,000 American Indians who have trust fund accounts at Interior suffered most grievously. The department was unable to process payments to them from the users of their land. Some Indians rely on those checks for sustenance.
The BIA story, "Trail of Troubles," ran in April 2001 and quoted Dominic Nessi, then BIA's chief information officer. "For all practical purposes we have no security; we have no infrastructure. Our entire network has no firewalls on it. I don't like running a network that can be breached by a high school kid. I don't like running a program that is out of compliance with federal statutes, especially when I have no ability to put it into compliance," he said. Nessi's quote caught the attention of Indians pursuing a class action suit against Interior for mishandling Indian trust funds. They filed a complaint in May 2001, prompting U.S. District Court for the District of Columbia Judge Royce C. Lamberth to order an investigation.
A team of hackers hired by Alan Balaran, special master in the Indian trust case, easily penetrated the bureau's computer systems three times last year, once setting up a bogus account in Balaran's name. Lamberth is hearing the 1996 class action, the largest ever filed by American Indians, charging that BIA has mishandled trust fund accounts set up more than a century ago to compensate Indians for the use of their land and resources. Lamberth wrote in 1999 that Interior's handling of the trusts is an example of "fiscal and governmental irresponsibility in its purest form." After receiving Balaran's scathing report on BIA computer security, Lamberth ordered Interior in December to disconnect from the Internet all computers that could provide access to Indian trust data. Unsure which computers might be conduits, Interior took them all offline.
While we couldn't have known the full extent of BIA's security weaknesses in 2001, the Federal Performance Project certainly foresaw trouble for the agency, handing it a D for information management. We found BIA's technology was so deficient that data often was accessible only by phone, fax or mail. What systems there were frequently crashed. At various times, computer service interruptions-due sometimes to faulty technology and sometimes to unpaid bills-have left BIA unable to communicate with Interior headquarters or Indian schools and without Internet service. We found BIA's capacity to manage information as bad as anything we had seen, save for the Internal Revenue Service's abysmal handling of its Tax Systems Modernization project, which was scrapped in 1997 after $3.4 billion had been spent with little to show. That earned the IRS a D for information management in 1999. Today, the tax agency is several years into a technology turnaround. At BIA, however, the news just keeps on getting worse.
That management matters is a core belief of the Federal Performance Project, a partnership of Government Executive and The George Washington University Department of Public Administration. The project is funded by The Pew Charitable Trusts. For four years we've rated federal agencies' management abilities. We've assessed management of human resources, information, physical assets and finances as well as ability to manage for results at 27 agencies. We focus our reviews on management capacity because it is an indicator of agencies' health and ability to deliver results. We also believe that reporting what stands in the way of good management can help political leaders and the public understand the challenges involved in running government programs and what needs to be done to help them run better.
This year, for the first time, we are re-evaluating agencies we've graded in the past. All six-the Social Security Administration, Federal Aviation Administration, IRS, Environmental Protection Agency, Centers for Medicare and Medicaid Services and Immigration and Naturalization Service-received grades during the project's first year, 1999. Three, the IRS, FAA and EPA, have improved in three years; IRS from an overall C to a B-, FAA from a C to a B, and EPA from a B- to a B. Others, SSA, CMS and INS have fallen in the rankings; SSA from an A to a B, CMS, which was called the Health Care Financing Administration when we graded it last, from a C to a C-, and INS from a C- to a D. The overall grades of 1999 and 2002 aren't precisely comparable, though, because we've changed how we weigh grades in each of the management issue areas we examine. We've also altered our focus in a number of management issue areas.
In four years, we've refined and deepened our evaluations in a number of ways. The biggest change came last year, when we began basing each agency's overall grade 50 percent on its performance in managing for results, as opposed to giving grades in all five categories equal weight. We made the change to give results-based management the attention we feel it merits as a predictor of success, or at least improvement, in the other areas and in overall agency performance. This clearly has been true at the IRS, for example. IRS Commissioner Charles Rossotti's reorganization divided the agency into four primary business units, each focusing on a separate segment of the taxpayer population Designed to sharpen the focus on assisting taxpayers, the reorganization also is driving the agency's business systems modernization, which promises better information management and customer service; a pay-for-performance system that is increasing managers' accountability; and better allocation of and accounting for funds, staff and other resources.
Four years' experience rating agencies also has taught us to be less mechanistic in assessing how finances and information contribute to management success within agencies. Where we once based financial management grades largely on success or failure in achieving a clean audit opinion, we now consider the cost of achieving clean opinions. In far too many cases, clean opinions are won only by dint of excruciating manual data reconciliation by agency finance staff at the close of the fiscal year. Clean audits that come at such expense no longer win agencies as much credit for financial management ability. We've also moved away from evaluating information technology systems toward assessing whether managers and employees get the right information in the right form at the right time in order to achieve strategic goals. Thus, we're now at least as interested in the quality of data agencies use to measure performance as we are in the quality of their enterprise architecture.
Grading management capacity-the degree to which an agency sets clear and appropriate goals, girds itself to achieve them and then measures performance and improves-is a tricky task. Many agencies are assigned contradictory or confused missions. They are blocked by politicians' objections or badly conceived laws from closing unneeded facilities, shifting staff to match workload, collecting data to assess performance and from taking many other actions that would be considered no-brainers in the private sector. As we grade, we must weigh whether to hold such failures against the agencies or chalk them off as insurmountable limitations. For the most part, we've chosen to let our grades reflect these problems, but to explain them in the accompanying stories. In some past cases, such as the Coast Guard and the Postal Service, we've credited agencies for mustering their management resources to frankly predict the consequences of externally imposed limitations.
But it's not always easy to make the call, especially in cases where management appears to be good or getting better, but some combination of limitations and management weaknesses contributes to disaster. That was the case this year as we evaluated the Federal Aviation Administration. Though the FAA had improved in all five of our areas of study since we last rated it in 1999, we struggled to properly assess the FAA's responsibilities with respect to the Sept. 11 terrorist attacks.
FAA Administrator Jane Garvey has vastly improved human resources management at the agency since negotiating a five-year, $1 billion labor agreement with the National Air Traffic Controllers Association in 1998. The pact raised controllers' pay and provided higher salaries at the busiest airports. Three quarters of the FAA's employees now work under a pay-for-performance system. The agency has gotten control of its constantly criticized technology modernization program. Financial management still is a weak point-cost accounting is rudimentary and bookkeeping requires painstaking manual intervention-but the FAA won a clean audit for 2001, and improvements are on track. Clear, well-constructed strategic goals encompass all parts of the agency. Corporate performance measures focus on achieving results and Garvey has signed contracts with top officials linking their compensation to performance against agency goals.
The FAA sounds like a success, until you remember Sept. 11. The fact that the hijackers carried box cutters aboard the doomed airliners with apparent ease and purchased tickets in their own names, even when they appeared on FBI terrorist watch lists, casts a cloud over the FAA's indisputable management improvements. After all, the FAA was ultimately responsible for regulating airport security. Recognizing this, in December, Garvey reversed her plan to award FAA executives bonuses totaling $1 million, instead spending the money to offset unplanned security costs resulting from the attacks. "The impact of Sept. 11 has disrupted the U.S. air transportation industry and the personal lives of people throughout the U.S. In this unprecedented time in the history of the FAA, I do not think it would be appropriate to grant incentive payouts," Garvey wrote in a memo announcing her decision.
Some argue Garvey was wrong, that the FAA responded admirably to the attacks, safely grounding thousands of planes in short order. Controllers won a Transportation Department gold medal for their performance. And Garvey acknowledged executives' role in the successful shutdown in her memo. "You responded magnificently to these attacks," she wrote. "Still, I know you, like I, have asked yourselves what we could have done better to help prevent the attacks in the first place."
For one thing, the FAA could have speeded up a regulation that took six years to draft requiring tighter training requirements and higher standards for the private firms hired by airlines to screen passengers and their baggage. The rule was approved in July 2001 and finally took effect two months after the hijackings. For years, the FAA had issued warnings and fines to airlines and airports for security failings. But the agency did nothing to raise standards for screeners, who were paid as little as $6 an hour and not even required to hold high school diplomas. As it turns out, rule-making is one of the FAA's persistent management weaknesses. The FAA's failures in regulating airport security result not only from management weaknesses, but from limitations in political will and national vision. Until Sept. 11, airport security just wasn't the paramount concern of the 2 million passengers boarding 40,000 flights each day in this country. On-time arrival and efficient baggage handling ranked far higher on the scale for fliers, businesses, airlines, lawmakers and, ultimately, the FAA. In such an environment, why hold the FAA responsible for failing to force the security issue? How about because the agency's own mission statement says: "The FAA provides a safe, secure and efficient global aerospace system that contributes to national security and the promotion of U.S. aerospace safety." According to the agency itself, security is a key element of its mission.
Had the FAA focused more closely on securing airports, planes and the flying public; had it pushed out its regulation more quickly and found more painful punishments for lax security; the agency surely would have faced the wrath of industry and consequently of Congress. Had such steps slowed air travel, the public, too, would have been aroused. The FAA might well have been ordered to back off or had its funding shifted in order to reinforce other duties. But then at least Garvey and her executive team wouldn't have found themselves asking in December what they might have done better to prevent the horror of September. Such recriminations became moot when, in November, apparently with Garvey's support, Congress voted to create the Transportation Security Administration and have it take responsibility for airport security away from the FAA.
In the end, we gave the FAA a B for managing for results. Despite its failures in regulating security, the FAA's management abilities are more similar to those of agencies we've given Bs-NASA, the Food and Drug Administration and the Administration for Children and Families, for example-than those we've given Cs-such as the Forest Service, Bureau of Consular Affairs and the National Park Service.
The FAA's failure to rigorously enforce screening and security rules is in part a result of a mission conflict dating back to 1958, when the agency was born of the merger of the air travel-regulating Civil Aeronautics Board and the airline-promoting Civil Aeronautics Administration. It wasn't until 1996 that consternation over a number of accidents prompted a rewrite of the FAA's charter, making safety the top priority. But the FAA still struggles with its relationship to the airline industry. For four years, we've found that such mixed missions create huge hurdles to good management. The Immigration and Naturalization Service exemplifies the problem.
The D we gave the INS this year is a dishonor shared by only one other agency in the project's history, BIA in 2001. Most of the fault for the INS' poor showing lies with its enforcement side, which spends two-thirds of the agency's budget. The agency has doubled in size over the past 10 years-the staff has grown from 18,400 to 36,400 since 1993; the budget from $1.5 billion to $5.5 billion. But the INS still has just 2,000 investigators to apprehend the estimated 9 million illegal immigrants in the United States. An estimated 3.5 million of them overstayed visas, but the INS hasn't enforced visa time limits for years, instead focusing solely on catching illegal immigrants convicted of crimes. Several Sept. 11 hijackers were among the 3.5 million.
The agency's border control efforts have focused disproportionately on the Southwest, where the number of agents has risen from 3,389 to 10,000 over the past decade. But despite their numbers, frustrated Border Patrol agents in the Southwest aren't allowed to pursue every illegal immigrant they see. Instead, the agency strives to create a safe, manageable border in order to protect local communities. Agents' primary duty is keeping the peace, so chases and other enforcement techniques that might upset or endanger the locals aren't pursued. Nor does the INS put much effort into policing the nation's workplaces. The agency says its mission within the United States is to address any harm to citizens caused by illegal immigration. So unless illegal immigrants are displacing citizens from jobs-not likely during recent years of near-full employment-workplaces are left undisturbed.
The INS' services side must handle more than 6 million applications for immigration benefits a year. It has had some success reducing the backlog of pending citizenship applications but the overall backlog of applications for immigration services is nearly 5 million. The INS has begun hiring new staff, offering more training and buying technology to track applications and reduce backlogs. It's able to make these improvements on the strength of fees it collects by offering faster visa processing to those able to pay $1,000.
The INS' 33 district offices traditionally have been fiefdoms lorded over by directors who apportioned money and resources between service and enforcement efforts as they chose. Field managers face a daunting set of competing imperatives, including detention and removal of illegal immigrants, investigations, criminal prosecutions, inspections, reducing the backlog of citizenship applications and handling immigration services. The Justice Department inspector general says a "culture of non-accountability" pervades the agency. To address the accountability gap, the Bush administration has begun restructuring the INS into two bureaus-one for enforcement, the other for services. Every employee would fall in one or the other organization and regional and district offices would be replaced by nine enforcement areas and six service areas across the United States, thus ending divided loyalties and battles over resources. Legislators' efforts to split the INS and Office of Homeland Security Director Tom Ridge's plan for an overall border reorganization could thwart the restructuring, but the INS clearly is headed for change. Sadly, a new organizational chart won't cure the confusion at the root of the INS' problems. As long as America cannot reach consensus on whether to welcome immigration or restrict it, immigration enforcement will be an exercise in frustration.
If the INS is suffering from end-stage "unaccountability disease," the Centers for Medicare and Medicaid Services is at mid-stage and the prognosis is not all that positive. CMS managers are frank about the historical lack of appreciation for performance and accountability at the agency. In May 2001, GAO found that CMS ranked second to last among 28 agencies in the number of managers who reported that they were held accountable for results. The agency's overseers on Capitol Hill and at the Office of Management and Budget have paid far more attention to how much health care providers are being paid than to whether the agency is being well run. Agency leaders generally have focused more closely on policy debates than management. CMS' new Bush administration leaders talk as though improving management is high on their priority list. Whether they'll walk the talk remains to be seen.
Creating a performance culture takes more than simply getting the attention of political appointees. Sometimes, it takes remaking the agency. The Environmental Protection Agency has struggled with the strictures of structure for years. The agency is utterly stovepiped-its program offices for air and radiation, water, pesticides, drinking water, hazardous wastes, toxic substances, food protection, and scientific research and development don't communicate or cooperate well. The system results in duplicative efforts and a fragmented approach to enforcement. The agency also must pay obeisance to some two dozen congressional committees, further complicating its efforts. Though the EPA has made admirable progress in setting performance goals and is beginning to get a handle on measuring its progress, future improvements may hinge on creating systems for setting standards and issuing permits that cut across its current structure, an outcome likely only after the agency's stovepipes are connected or dismantled.
The IRS offers an example of the power of restructuring to address myriad management ills, especially the need to improve accountability. Like the INS, the IRS was little more than a collection of competing geographic fiefdoms until the Senate blew up the agency in 1998 and Commissioner Charles Rossotti began reassembling it. Senate Finance Committee hearings in 1997 focusing on taxpayers' claims of mistreatment led to passage of a reform act in 1998. In 2000, Rossotti initiated a sweeping reorganization, dividing the agency into four business units focused on segments of the taxpaying population-individuals, large- and medium-sized businesses, small businesses, and tax-exempt and government agencies. Gone are the offices that once were responsible for all those segments in each of 33 districts across the country. Gone too, are the competing fiefdoms centered in those offices.
Management capacity is not the only prerequisite for achieving results. As in Rossotti's case, leadership may be key, especially where it has been absent. And while restructuring is possible without legislation, congressional support-or lack thereof-can make or break the effort, as the INS and the EPA have learned. Another determinant of performance, especially in today's government, is courage, both among agency leaders and as an element of agency culture. The Social Security Administration, this year's most highly graded agency, as it was in 1999, has a clear mission, a performance-oriented culture, financial and information management systems to die for and a structure that appears to suit its mission well. But Social Security lacks daring.
SSA rightly emphasizes efficient and effective administration of programs, but it continues to fall short on exercising leadership in shaping the future of Social Security programs. We noted in 1999 that SSA was ducking the policy debates that will determine its future, and that shortcoming remains today. As in the case of the FAA with respect to airport security, it could be risky for SSA to take positions in debates about how Americans' financial security should be ensured. Politicians have a history of smacking down appointees and agencies when they assert themselves. But like the FAA, SSA is failing to fulfill part of its mission by shirking its role in anticipating and advocating for program change. True, that mission begins with ensuring economic security, but it directs SSA to do so "through compassionate and vigilant leadership in shaping and managing America's Social Security programs." SSA has nailed the parts of management that count. But it has fallen down on the part that matters most.
Federal Performance Project Team
Government Executive: Timothy B. Clark, editor; Anne Laurent, project editor; George Cahlink, Brian Friel, Shane Harris, Jason Peckenpaugh, Katherine McIntire Peters, Matthew Weinstock, Cyril T. Zaneski, Shawn Zeller, writers; Susan Fourney, Martin W. G. King, Tom Shoop, editors; Eileen Wentland, designer.
George Washington University, Department of Public Administration: Philip Joyce, associate professor and principal investigator; Kathryn Newcomer, professor and department chair; Howard Smith, project manager; Sarah Fabirkiewicz, Amanda Hazelwood, Cesar Rodriguez, Noah Wepman, and Melissa Zimmerman, research assistants.