DOL Annual Report, Fiscal Year 2006
Performance and Accountability Report

Management's Discussion & Analysis

The President’s Management Agenda

On June 30, 2005, the U.S. Department of Labor became the first Executive Branch department or agency to achieve green status scores for all five government-wide President's Management Agenda (PMA) initiatives. This achievement is not an end in itself — but it represents an ongoing commitment to good management to bring quality services to the American people. In FY 2006, DOL maintained green status scores in all five government-wide initiatives and achieved one additional green status score in agency-specific initiatives (see table below).

President George W. Bush's Management Agenda, announced in 2001, is a strategy for improving the management and performance of the Federal government. The objective is a Federal government that is:

• Citizen-centered, not bureaucracy-centered;
• Results-oriented, not output-oriented; and
• Market-based, actively promoting rather than stifling innovation through competition.

Together, initiatives created to achieve these goals are referred to as the PMA. The five government-wide initiatives are Strategic Management of Human Capital, Competitive Sourcing, Improved Financial Performance, Expanded Electronic Government, and Budget and Performance Integration. DOL also participates in three additional initiatives referred to as agency-specific initiatives that apply to selected agencies: Eliminating Improper Payments, Faith-Based and Community Initiative, and Federal Real Property Asset Management.

The Office of Management and Budget (OMB) regularly assesses all Federal agencies' implementation of the PMA, issuing a quarterly Executive Branch Management Scorecard rating of green, yellow or red for both status and progress on each initiative. The breakdown by initiative, comparing last year's ratings with those for FY 2006, is indicated in the table below. Now into the OMB-led Proud to Be IV campaign — which runs through June 30, 2007, DOL has set ambitious goals and continues to demonstrate measurable results in all five government-wide initiatives. The Department continues to be rated highest of all Cabinet agencies in overall implementation of the PMA. Highlights of achievements associated with each initiative follow the table. The Department uses a similar scorecard on a semi-annual basis to measure individual agency progress on the PMA.

Strategic Management of Human Capital
The Human Capital initiative requires Federal agencies and departments to develop and use a comprehensive human capital plan, with the aim of significantly reducing mission-critical skill gaps. The PMA has provided the impetus for DOL to overhaul the Department's entire performance management system in order to hold executives, managers and employees accountable for achieving results. At DOL, 100 percent of mission-critical occupations at the Department are linked to DOL's strategic goals — and in January 2006, the Office of Personnel Management and Office of Management and Budget determined that DOL's Senior Executive Service appraisal system met the criteria for full certification for the 2006-2007 calendar years. DOL is the first Cabinet Department to receive full certification — which is premised on making clear distinctions in pay and performance recognition and on having an effective oversight system in place.

Electronic government solutions like eOPF continue to bolster our Strategic Management of Human Capital efforts. Launched in 2006, eOPF — or the electronic Official Personnel Folder — allows employees to securely access their personnel folder from any DOL network computer connected to the Internet or from home. The eOPF provides employees with timely access to view and print their personnel documents — and employees are notified by e-mail when personnel actions are added to their file, reducing the need to contact Human Resources Offices for information.

Competitive Sourcing
DOL won the 2005 President's Quality Award for its Competitive Sourcing program under the PMA and also achieved a green status score and has maintained a score of green for 6 consecutive quarters. Competitive Sourcing allows the government to take advantage of market-based competition while simultaneously allowing the existing Federal employees to compete for the work. Competitive sourcing requires Federal employees to compete against private sector bidders for work that is deemed commercial activity. The skills and competencies that are not required to be performed by government personnel can often be performed more effectively and efficiently when subject to the competition of the marketplace.

The competitive sourcing process includes the development of a Most Efficient Organization (MEO), which is designed by affected employees, DOL managers and union representatives to make the function more competitive. Notably, of the 28 competitions undertaken to date, 21 have been completed and seven are in progress. Of the 21 completed competitions, the Department's employees have won 19 (90 percent). The competitions completed to date yielded efficiencies totaling $40.6 million over multiple performance periods, which included savings of about $29.4 million and cost avoidance of approximately $11.2 million.

Improved Financial Performance
The availability of timely, accurate, and useful information is essential to any well-managed, effective organization. The Improved Financial Performance initiative requires Federal agencies to receive clean audit opinions on their annual financial statements, meet accelerated financial reporting deadlines, implement managerial cost accounting practices, improve internal controls, and have financial management systems that are compliant with Federal laws and regulations. The Office of the Chief Financial Officer (OCFO) has devoted significant resources to secure the Department's achievement of excellence in financial management in the Federal Government. In FY 2006, the Department received its tenth unqualified audit opinion and its sixth Certificate of Excellence in Accountability Reporting (CEAR) Program Award from the Association of Government Accountants. Improving financial performance is a continuous journey of gaining experience rather than a race to the finish line.

The Department also continues to expand the use of integrated financial and performance information in the planning, budgeting, and decision-making activities throughout its agencies. It also remains focused on improving accountability and transparency for how well tax dollars are spent.

Expanded Electronic Government (E-government)
The Expanding Electronic Government (E-government) initiative requires Federal agencies and departments to develop secure Information Technology (IT) systems and strictly adhere to IT project cost, schedule, and performance projections. The Department of Labor's Enterprise Architecture (EA) Program aligns all DOL IT investments with the objectives set forth in the President's Management Agenda (PMA). EA initiatives in support of DOL's PMA efforts include:

• EA was used to identify standardization opportunities and facilitate interoperability across DOL Human Resources functions and systems (Strategic Management of Human Capital);
• The Financial Management Line of Business (FMLoB), which is managed by the General Services Administration, will enable Department-wide visibility of the financial process and a link between finance and performance throughout the planning, analysis, reporting and management procedures (Improved Financial Performance);
• Unified DOL Technology Infrastructure (UDTI) is a unified, end-to-end, IT service management initiative that consolidates the technology infrastructure acquired, deployed, and maintained at DOL. UDTI will result in millions of dollars in cost savings and/or cost avoidance (Expanded Electronic Government); and
• The Departmental Budget Center is using EA to identify redundant budget systems across all agencies — with a projected Return-On-Investment for the Departmental Electronic Budget System (DEBS) of 110% and an anticipated payback period of 3.8 years (Budget and Performance Integration).

On March 31, 2006, the Office of Management and Budget completed evaluating 29 Federal agency consolidated Enterprise Architectures for how EA is used to guide and inform IT investments to achieve strategic objectives. Evaluations included scoring agency EAs in three assessment areas — Completion, Use, and Results. Out of all the agencies assessed, the Department of Labor ranked second in terms of EA maturity and met all the criteria to receive a green score under the PMA.

Budget and Performance Integration
Budget and Performance Integration (BPI) seeks to ensure that performance is routinely considered in funding and management decisions — and that agency programs achieve expected results while working toward continual improvement. At DOL, BPI has helped exact a gradual cultural shift that fosters a closer dialogue among program, performance, budget, and finance staff.

In support of DOL's BPI efforts, DOL launched the pilot of the DEBS — an electronic government initiative designed to automate the budget formulation process. DEBS provides budget analysts the ability to more easily, accurately, and electronically merge budget data. Having completed the successful pilot project, DEBS was used in 2006 in selected agencies to build DOL's FY 2008 budget. The expectation is that all DOL agencies will access the tool in time for the next budget cycle: 2009. BPI efforts have also continued to be bolstered through the Program Assessment Rating Tool (PART). Over the last five years, almost 800 Federal programs — including 32 at DOL — have been assessed through the PART. The PART consists of 25 questions about a program's performance, design and management. Once assessments are completed, programs develop improvement plans to address PART findings.

DOL's overall efforts are being folded into a BPI green plan — which will be in effect in December 2006 and will capture our ongoing efforts to improve agency performance and efficiency.

Agency-specific PMA Initiatives

In addition, DOL is responsible for three of the PMA components found in selected departments: Eliminating Improper Payments, Faith-Based and Community Initiative, and Federal Real Property Asset Management. DOL's status scores for Eliminating Improper Payments and Faith-Based and Community Initiative are green — with a yellow status score for Federal Real Property Asset Management. DOL's progress score for implementing each initiative is green.

Eliminating Improper Payments
In September 2005, DOL achieved a green status score in Eliminating Improper Payments. The Improper Payments Act of 2002 defines improper payments as payments made to the wrong recipient; in the wrong amount; or used in an improper manner by the recipient. Better detecting and preventing improper payments to ensure taxpayer dollars are wisely and efficiently spent is the goal of the Eliminating Improper Payments initiative.

At DOL, developing strategies and the means to reduce improper payments is good stewardship — and good business. Accurate payments lower program costs, thus maximizing our resources. The Department has three programs classified as high-risk for improper payments. Two are benefit programs — Unemployment Insurance (UI) in the Employment and Training Administration (ETA) and the Federal Employees Compensation Act program in the Employment Standards Administration — and the third is an ETA grant program administered under the Workforce Investment Act.

While Eliminating Improper Payments is still a fairly new PMA initiative, we are making progress and achieving results. Last year, the Department's Office of the Chief Financial Officer and ETA launched a UI pilot program in three states to determine how a cross-match between the National Directory of New Hires data and State UI claimant data could help identify individuals no longer eligible to receive UI benefits.

Faith-Based and Community Initiative
In June 2006, DOL achieved a green status score in the Faith-Based and Community Initiative, which is designed to strengthen and expand the role of faith-based and community organizations in addressing the Nation's social problems. Through this five-year march to green, DOL has significantly expanded opportunities for partnerships with faith-based and community non-profit organizations (FBCOs) to better serve Americans in need. Critical to this effort is removal of any unnecessary barriers to the participation of small and faith-based and community organizations in DOL grants and programs, thus establishing a level playing field for all. The Department has also employed a wide range of grants, technical assistance and other tools to draw upon the unique strengths of FBCOs in efforts such as serving the unemployed and underemployed, aiding homeless and incarcerated veterans, helping ex-offenders transition from prison to work and reducing exploitative child labor abroad. A significant priority for DOL in the coming year is to build on its record of national achievement in strengthening partnerships between faith-based and community organizations and the workforce investment system at the state and local levels.

In 2006, DOL's Center for Faith-Based and Community Initiative worked with the Employment and Training Administration to triple the funding of Grassroots grants, which feature simplified application and reporting requirements. This allows DOL to draw upon the strengths of smaller organizations with significant potential to augment the workforce system. The Grassroots solicitation in 2006 drew a record 556 applications.

Federal Real Property Asset Management
Better managing the Department's properties is at the core the Federal Real Property Asset Management effort. This PMA initiative is intended to eliminate surplus assets; better manage the cost of inventory, and improve the condition of critical assets. The Department's ongoing efforts in real property management have yielded important benefits. In the last year, DOL closed ten offices, releasing more than 10,000 square feet of space and saving more than $300,000 annually. DOL also implemented an on-line Space Management System — with data imported from GSA's database — to monitor space utilization and identify targets for improvement through consolidation and co-location. DOL has enhanced its internal budget guidance beginning with FY 2008 to require that agency budget submissions address the real property management improvement goals of mission dependency, utilization, condition, and cost containment through prioritizing planned capital initiatives, disposing of assets, identifying opportunities for operating cost efficiencies and cost reduction, and reviewing leasing agreements.

President Bush has stated that "Government likes to begin things — to declare grand new programs and causes. But good beginnings are not the measure of success. What matters in the end is completion. Performance. Results. Not just making promises, but making good on promises." In 2006 — with two upgrades to green in Eliminating Improper Payments and Faith-based and Community Initiative — DOL continued to make good on promises.