Part 2. Financial Management

AHRQ'S Financial Performance, FY 2003

Overview of Financial Performance

AHRQ's Chief Financial Officer (CFO) is responsible for overseeing all financial management activities relating to the programs and operation of the Agency, and is accountable for ensuring that financial management legislation, such as the Chief Financial Officers Act of 1990, the Federal Managers Financial Integrity Act (FMFIA) of 1992, and the Government Management and Reform Act (GMRA) of 1994, are implemented.

AHRQ's Office of Performance Accountability, Resources, and Technology (OPART) takes the lead in directing financial management activities including:

• Budget formulation and execution.
• Funds control, and appropriation legislation.
• Developing automated financial management systems.
• Supporting the linking of the budget and planning processes.
• Ensuring that program planning is integrated with budget formulation and performance.
• Serving as the Agency's focal point for Government Performance and Results Act activities.

AHRQ purchases its fund accounting, financial reporting, debt management, and other related fiscal services from the Program Support Center's (PSC) Division of Financial Operations (DFO) on a fee-for-service basis. To facilitate meeting the earlier audit cycle deadlines mandated in the Reports Consolidation Act, OPART staff worked closely with PSC staff to develop AHRQ's financial statements and participate in the Department's top-down annual audit process in FY 2003.

Budgetary Resources

AHRQ receives its funding through an annual discretionary appropriation that includes Federal funds and miscellaneous reimbursements. The reimbursements come from other Federal agencies (Figure 1), usually in the form of expenditure transfers (payments made from one account to another). In FY 2003, AHRQ reimbursements totaled about $26.0 million, and the funding partner for about $15.0 million of these funds was the National Institutes of Health (NIH). AHRQ's health services research complements the biomedical research of the NIH by helping clinicians, patients, and health care institutions make choices about what treatments work best, for whom, when, and at what cost.

The Secretary of the Department of Health and Human Services is authorized to reallocate up to 2.1 percent of the funds appropriated to Department agencies in any given fiscal year. These funds are known as PHS Evaluation Funds. AHRQ's $303.7 million FY 2003 appropriation was comprised entirely of PHS Evaluations Funds (Figure 2). Because PHS Evaluation Funds are provided from the appropriations of other HHS agencies, they are considered reimbursements and as such, are classified as exchange revenue on AHRQ financial statements.

AHRQ also receives modest funds from Freedom of Information Act (FOIA) fees. The FOIA provides individuals with the right to request records in the possession of the Federal government, and the fees collected allow an agency to recover part of the costs associated with responding to these requests.

Mechanisms of Support

AHRQ provides financial support to public and private nonprofit entities and individuals through the award of grants, cooperative agreements, contracts, and interagency agreements (IAAs).

Program Announcements (PAs) are employed to invite applications for new or ongoing grants of a general nature, and Requests for Applications (RFAs) are used to invite grant applications for a targeted area. In FY 2003, 54 percent of AHRQ grants and cooperative agreements were in response to RFAs and 46 percent were in response to PAs.

AHRQ also supports small grants that facilitate the initiation of studies for preliminary short-term projects, dissertation grants undertaken as part of an academic program to earn a research doctoral degree, conference grants that complement and promote AHRQ's core research and help the Agency further its mission, and training grants that support a variety of training and career development opportunities through individual and institutional grant programs (Figure 3).

The Agency also awards minority supplements to ongoing grants that have a least 2 years of committed support remaining. These supplements are used to train and provide health services research experience to minorities or to support research on minority health issues.

AHRQ uses the contract and Interagency Agreement (IAA) mechanisms to carry out a wide variety of directed health services research related activities. AHRQ announces its contract opportunities by publishing Requests for proposals (RFPs) in the Commence Business Daily. Proposals received in response to these RFPs are peer-reviewed for scientific and technical merit by a panel of experts in accordance with the evaluation criteria specified in the RFP.

What Determines the Mechanism?

Grants and Cooperative Agreements	Used when there is a public purpose authorized by statute that must be accomplished.
Contracts	Used when the required product or service is for the direct use or benefit of the Federal government.
Interagency Agreements	Used when a Federal agency provides to, purchases from, or exchanges goods or services with another Federal agency.

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Analysis of Financial Statements

In accordance with the Chief Financial Officers Act of 1990 and subsequent laws, Federal agencies are required to prepare and have audited five principal annual financial statements.

These financial statements provide an accountability for the federal monies used, resources consumed, and level of performance and program effectiveness achieved. AHRQ's financial statements report the Agency's financial information on an accrual basis—where transactions are recorded when they occur, regardless of when cash is received or disbursed. This method of accounting allows an accurate evaluation of operations during a given fiscal period, and takes into account future operations.

Statement Name	Purpose
Balance Sheet	Conveys a snapshot of the an organization's financial standing at an instant in time. Provides information on financial position—what an organization owns (assets), and what an organization owes (liabilities).
Statement of Net Cost	Presents the net cost of operations—the total costs incurred by the organization less any earned revenue.
Statement of Budgetary Resources	Reports information on how an organization's budgetary resources were obtained and the status of the remaining balances.
Statement of Financing	Reflects the relationship between proprietary accounts (cost-based financial transactions) and budgetary accounts (budget-based transactions).
Statement of Changes in Net Position	Presents the beginning net position (i.e., unexpended appropriations and the budgetary resource available less expenses), the transactions that affect net position for the period, and the ending net position.

How AHRQ's PHS Evaluation Funds Are Reflected in the Financial Statements

Starting in FY 2003, AHRQ's PHS Evaluation Funds, which comprised the Agency's entire budget in FYs 2002 and 2003, were deemed to be exchange revenue as opposed to non-exchange revenue. Exchange revenue arises when a Government entity provides goods and services to the public or to another Government entity for a price.

In the past, when AHRQ's PHS Evaluation Funds were considered non-exchange revenue, these funds would be billed and collected in the same fiscal year they were appropriated. Now that AHRQ's PHS Evaluation Funds are deemed exchange revenue, these funds are billed and collected for a given fiscal year over a three year period. The amounts billed and collected are based on actual PHS Evaluation Fund expenses (disbursements and accruals) incurred by AHRQ plus estimated accruals for grants and contracts. For example, AHRQ's PHS Evaluation Funds totaled $303.7 million in FY 2003. Based on actual usage and accruals, $84.4 million—28 percent of the total PHS Evaluation Funds made available to AHRQ in FY 2003—was billed and collected in FY 2003. The remaining $219.3 million will be billed over the next 2 fiscal years as actual expenses are incurred.

The accounting treatment and presentation for exchange versus non-exchange revenue differs greatly. Consequently, the amounts shown on AHRQ's FY 2003 financial statements reflect a significant change (decreases in most cases) from the amounts reported on AHRQ's FY 2002 financial statements. These reductions are due to the change in the billing and collecting process—AHRQ is collecting its PHS Evaluation Funds over a three-year period instead of in the same fiscal year the funds were appropriated. Accordingly, AHRQ's assets, collections and financing sources as shown on our financial statements are less than in prior fiscal years.

Balance Sheet

The major components of the balance sheet are assets, liabilities, and net position.

Assets

Assets represent tangible or intangible items owned that have future economic benefits, and with some exceptions, are initially recorded when received regardless of when payment is made or the asset is consumed. AHRQ's FY 2003 assets totaled $158.7, a decrease of $198.9 million from the FY 2002 amount of $357.6 million (Figure 4). The decrease, realized in the fund balance with Treasury, displays the impact of treating AHRQ's PHS Evaluation Funds as exchange revenue as opposed to non-exchange revenue.

Fund balances represent undisbursed cash balances from appropriations-dollars maintained at the Treasury Department to pay current liabilities, accounts payable, and undelivered orders. AHRQ's fund balance with Treasury comprised about 97 percent of the Agency's total assets. AHRQ does not maintain any cash balances outside of the U.S. Treasury and does not have any revolving or trust funds. The remaining 3 percent of AHRQ's assets were made up of accounts receivable—funds owed to ARHQ by other Federal agencies under reimbursable agreements, funds owned to AHRQ by the public, or purchases of equipment less accumulated depreciation.

Liabilities

Liabilities represent funded and unfunded activities that require future budgetary resources. In FY 2003, AHRQ's liabilities totaled $43.0 million, an increase of $17.2 million over FY 2002 (Figure 5). The largest liability component was accrued grant liability at $14.7 million, followed by accounts payable at $13.3 million. Accrued grant liabilities represent the difference between grant advances paid through the Payment Management System (PMS) and estimated grant accruals for expenses incurred but not yet reported by the grantees. Accounts payable reflect funds owed primarily for contracts and other services.

Net Position

AHRQ's net position, which reflects the difference between assets and liabilities and signifies the Agency's financial condition, totaled $115.8 million, a decrease of $216.0 million from FY 2002 (Figure 6). Net position is broken into two categories: unexpended appropriations—the amount of authority granted by Congress that has been obligated but not expended ($9.9 million)—and cumulative results of operations—the net results of operations since inception plus the cumulative amount of prior period adjustments ($105.9 million).

The downward change in net position between FY 2002 and FY 2003 was driven primarily by the decreased fund balance with Treasury—a byproduct of treating AHRQ's PHS Evaluation Funds as exchange revenue as opposed to non-exchange revenue. As shown below, AHRQ's net position parallels assets, while liabilities remain relatively constant during the past six years.

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Consolidated Statement of Net Cost

The Consolidated Statement of Net Cost displays the Agency's total costs less all revenues attributed by program. Net costs recognize costs when incurred, regardless of the year the money was appropriated. The line items on this statement reflect AHRQ's budget activities (major programs), thus making it possible to relate program costs to GPRA performance measures and other programs. AHRQ's FY 2003 net cost of operations totaled $216.8 million: $320.0 million in gross costs less $103.2 million in earned revenues (Figure 7). The Agency's Research on Health Costs, Quality, and Outcomes program comprised about 90 percent of the total. The FY 2003 net cost amount of $216.8 million reflects a decrease of $58.9 million from the FY 2002 net cost amount of $275.7 million. This drop represents the fact that AHRQ's PHS Evaluation Funds were treated as exchange revenue in FY 2003 as opposed to non-exchange revenue as was the case in prior fiscal years.

Consolidated Statement of Changes in Net Position

The Consolidated Statement of Changes in Net Position reports all financing sources available to AHRQ. This statement takes account of amounts accumulated over the years, less expenses and losses, including imputed financing costs paid for by others. AHRQ ended FY 2003 with a consolidated net position total of $105.9 million: $322.7 million in budgetary resources available offset by $216.8 million in net cost of operations. The FY 2003 net position of $105.9 million is $190.6 million less than AHRQ's FY 2002 net position of $296.5 million. Again, this decrease is due to considering AHRQ's PHS Evaluation Funds as exchange revenue as opposed to nonexchange revenue in FY 2003.

Statement of Budgetary Resources

The Statement of Budgetary Resources focuses on budgetary resources available to AHRQ (appropriated and reimbursable funds), the status of those resources (obligated or unobligated), and the relationship between the budgetary resources and outlays (collections and disbursements). AHRQ's FY 2003 budgetary resources totaled $355.1 million, with most of the resources coming from spending authority from offsetting collections ($298.0 million), which includes PHS Evaluation Funds and reimbursable funds received from other organizations. This statement shows that about 93 percent ($329.7 million) of the resources available to the Agency in FY 2003 were obligated.

AHRQ's FY 2003 net outlays totaled $202.1 million: $312.2 million in disbursements less $110.1 million in collections (Figure 8). Because PHS Evaluation Funds are considered reimbursable funds, they are treated as collections and as such offset disbursements. As illustrated below, the proportion of PHS Evaluation Funds to AHRQ's total budget has steadily increased, which has resulted in a progressive decrease of AHRQ's net outlays and a negative outlay in FY 2002. The increase in AHRQ's FY 2003 outlay amount is the result of collecting PHS Evaluation Funds over a three-year period instead of in the same fiscal year the funds were appropriated.

Combined Statement of Financing

The Combined Statement of Financing links proprietary and budgetary accounting information and reconciles obligations incurred with the net cost of operations. While the budgetary accounting system tracks resources and the status of those resources, the financial accounting system facilitates the translation of budgetary resources into financial statements on an accrual basis. Financial data based on accrued costs are essential to measuring performance and determining total financial resources needed to achieve a particular output or outcome. For FY 2003, the resources used to finance AHRQ activities totaled -$2.0 million, which represents obligations incurred and any other resources used to finance activities ($331.4 million), less spending from offsetting collections ($333.4 million) (Figure 9). AHRQ's offsetting collections principally consist of PHS Evaluation Funds.

Note: The financial statements have been prepared by the Division of Financial Operations, Program Support Center (PSC), to report the financial position and results of operations of AHRQ, pursuant to the requirements of 31 U.S.C. 3515(b). While the statements have been prepared from the books and records of AHRQ in accordance with generally accepted accounting principles and the formats prescribed by OMB, these statements are in addition to the financial reports used to monitor and control budgetary resources, which are prepared from the same books and records. The statements should be read with the realization that they are for a component of the U.S. Government, a sovereign entity. One implication of this is that liabilities cannot be liquidated without legislation that provides the resources to do so.

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Other Performance Issues

Federal Managers' Financial Integrity Act (FMFIA)

The FMFIA Act of 1982 requires that Federal agencies establish processes to develop and implement appropriate, cost-effective management controls; assess the adequacy of management controls within programs and operations; identify needed improvements; take corresponding corrective action; and submit a summary report at the end of the year. Management controls are defined as the organization, policies, and procedures used to reasonably ensure that:

1. Programs achieve their intended results.
2. Resources are used consistent with agency mission.
3. Programs and resources are protected from waste, fraud, and mismanagement.
4. Laws and regulations are followed.
5. Reliable and timely information is obtained, maintained, reported, and used for decisionmaking.

In accordance with the Act, AHRQ has implemented a streamlined Management Accountability and Control Program (MACP) that uses periodic reviews, audits, and studies to met the aforementioned management control goals. This program integrates efforts to meet the requirements of FMFIA with other Agency efforts to improve effectiveness and accountability.

A representative sample of MACP activities undertaken in FY 2003 are outlined below. Based upon an evaluation of these activities, the Agency did not identify any high-risk areas, critical weaknesses, or non-comformances in FY 2003. In addition, AHRQ does not have any financial systems as defined by FMFIA.

The Agency remains committed to developing more efficient and effective ways to perform its mission while maintaining and protecting the integrity of the resources that have been entrusted to us. AHRQ has and will continue to use this activity as an opportunity to ensure that its financial and internal management systems and controls adequately support the accomplishments of the Agency's mission.

FY 2003 FMFIA Activities Performed periodic audits of travel documentation processed through the Travel Management System to ensure that travel expenditures conform to Department and Federal travel regulations. Performed periodic audits of government IMPAC credit card holders, focusing on the adequacy of documentation and compliance with established procedures and regulations governing credit card usage. Conducted a semiannual review of FTE allocation and utilization. The Agency has a uniform procedure for requesting, reviewing, and making FTE allocation decisions. The procedure, as documented, requires managers to specify the organizational need for the position, to identify the specific skill and content gaps to be filled, and to describe the position's relationship to objectives in the Agency's strategic plan. Adopted the Information Technology Security Policy Manual that contains necessary policies for management, operational, and technical areas relating to IT security. Completed an analysis of certain financial management practices within the Agency in association with Clifton Gunderson, through an OIG contract with this firm. The final report identified efficiencies and presented options and recommendations for operational improvements, as well as mapping budget execution processes including Interagency Agreements (IAAs), contracts, other types of procurement, and grants processes. Office of Performance Accountability, Resources, and Technology (OPART) staff are currently developing an action plan to address the financial management process issues. It is likely that any improvements in efficiency or changes to procedures that are identified would be pilot tested in FY 2004 and FY 2005. Continued to work towards efficiencies in the areas of administrative consolidation, strategic workforce planning, and organizational delayering. The new Agency structure reduces the number of organizational components from 10 to eight and has created a flattened organizational structure, which will allow AHRQ to achieve the 1:15 supervisor/employee ratio encouraged by the Department. Entered into a contract agreement with the Center for Organizational Excellence (COE) to assist in the development of performance-based contracts for the Agency's Director and 14 senior managers. Additionally, COE will provide training to other managers in order to replicate the process throughout the Agency. The desired outcome is a sustainable performance management process that serves AHRQ in strategically prioritizing and focusing its operational activities to achieve the Agency mission and relevant Department level goals.

President's Management Agenda

In August 2001, the President launched a Management Reform Agenda that focuses on improving the management and performance of Federal government through the following five management initiatives:

• Strategic Management of Human Capital.
• Competitive Sourcing.
• Improved Financial Performance.
• Expanded Electronic Government.
• Budget and Performance Integration.

AHRQ continued as well as initiated many activities in FY 2003 to address the five President's Management Agenda (PMA) initiatives, and plans to continue and expand upon these efforts in the coming years. A brief discussion of the PMA activities undertaken in FY 2003 follows.

Strategic Management of Human Capital

AHRQ's human capital initiative focuses on identifying gaps in workload and workforce to help build the workforce of the future, restructuring the existing workforce to achieve efficiencies, and placing grater emphasis on performance and accountability.

Strategic Workforce Planning

Like several other OPDIVs, AHRQ is facing an aging workforce. Forty-eight percent of Agency staff are at least 50 years of age with approximately 12.2 percent of employees currently eligible for optional retirement, and 22.6 percent eligible for early retirement. In the next 5 years, approximately 32 percent of non-supervisors and 44 percent of managers will be eligible for optional retirement. The Agency has historically filled vacated positions with "seasoned" staff at the higher grade levels. Though this fills an immediate need, AHRQ has a limited number of entry-level professionals who are able to fill the void left by retirement-eligible staff. In order to ensure continuity and continued growth in Agency programmatic areas, measures must be initiated immediately to cultivate and nurture new talent. That said, AHRQ has been engaged in strategic workforce planning to ensure highly educated, adaptable staff are recruited to replace current employees lost through attrition. Progress to date includes:

• Focusing efforts on recruiting professional, mission-critical staff to create a more balanced and efficient organization to support and conduct health services research and support flagship research programs.
• Hiring two Emerging Leaders from the 2003 class. One individual was hired under the public health path to support Agency efforts in the area of bioterrorism, and the other was hired from the information technology path and works with leading AHRQ researchers in the field of clinical informatics. The Agency plans to hire an additional Emerging Leader in FY 2004.
• Expanding the number of applicants selected to participate in the AHRQ summer intern program. This is an opportunity for the Agency to infuse new talent into programs and activities.
• Working with the HHS to develop an Agency brochure that emphasizes the "One Department" philosophy and also articulates AHRQ's contributions to health services research. This will be used at national meetings, job fairs, college/university recruitments, and other venues.
• Implementing the use of "Quick Hire" for a majority of the Agency's recruitments to streamline the process and reduce the amount of time it takes to fill critical vacancies.

Workforce Restructuring/Delayering

Over the past year, AHRQ has undergone a number of changes. With the appointment of Dr. Clancy as Director, the Agency has expanded its outreach beyond conducting, supporting, and disseminating research findings and has increased its role to help the health care system translate research into improved practice and policy. AHRQ's revised mission emphasizes working with public and private-sector partners to translate research supported and conducted by the Agency into practical knowledge and meaningful information that can be used to improve health care for all Americans.

In April, 2003, Dr. Clancy, Director, AHRQ, began a series of dialogues with senior management at the Department to discuss her vision for the Agency's future and the accompanying organizational changes necessary to create a leaner, more efficient organization. Upon the Secretary's approval, the Agency formally announced the organizational changes in the July 25, 2003, Federal Register.

The new AHRQ structure reduced the number of organizational components from 10 to 8, and eliminated subcomponents within the Office of Performance Accountability, Resources, and Technology (formerly known as the Office of Management), as well as the Division of Research, Policy, Coordination and Analysis within the Office of Extramural Research, Education, and Priority Populations (formerly known as the Office of Research Review, Education, and Policy).

These organizational modifications allow for Office synergy in the areas of performance, budgeting, and accountability; review, education and priority populations; as well as knowledge transfer and communications. The elimination of one research component focuses the remaining Centers on:

• Improving information for policymakers and legislators on health care access, economic trends and systems financing.
• Devising strategies that improve the efficiency of the health care system.
• Improving the effectiveness and outcomes of care through the use of evidence based clinical information by patients and providers.
• Improving the quality and safety of health care.
• Increasing consumer and patient use of health care information.
• Development of a strategic focus on primary care and rural health.

AHRQ's recent reorganization has allowed the Agency to reduce, phase out, and streamline program activities that no longer are "priority" areas of study and do not require vast resources (e.g., a dedicated budget as well as human capital) in order to function as a free-standing Office or Center in AHRQ. Rather, Agency management has realigned and restructured programs and staff in order to focus more on the core business reflected in its new mission.

Additionally, AHRQ's new organizational structure reduces the overall size of the organization (both horizontally and vertically), and maintains a "flattened" structure with no more than three decisionmaking layers, which allows the Agency to become more "citizen centered" in its approach to how business is conducted.

Administrative Consolidation

In order to support Departmental administrative consolidation efforts, AHRQ transferred one position to the Program Support Center to support the Small OPDIV IT consolidation efforts. The Agency is also evaluating current administrative practices and protocols in an effort to streamline, improve efficiency and eliminate waste and redundancy. This year, the Agency has been successful in eliminating six administrative support positions.

Accountability

AHRQ established performance contracts for the Agency Director and all senior management officials. First-line supervisors were also placed on cascading performance plans that link to their respective Office/Center Director. Now, the Agency is working to "cascade" throughout certain organizations (where feasible) with full implementation to the general workforce beginning in FY 2005.

Competitive Sourcing

Competitive Sourcing is an examination of commercial activities to determine the most cost-effective and efficient method of acquisition. Commercial activities are defined as those activities resulting in a product or service that could be obtained from the private sector. Competition results in cost savings to taxpayers while maintaining high quality service to the Government.

The President's goal is for Federal agencies to study 50 percent of its commercial workforce by FY 2006. The Office of Management and Budget (OMB) established goals for Federal agencies to study 5 percent of its commercial workforce in FY 2002 and 10 percent in FY 2003.

In May 2003, AHRQ undertook six streamlined cost comparison studies on the following commercial activities to meet OMB's FY 2003 goals:

• Accountant/Contracting Support Services.
• Information Technology Services.
• Office Services Support.
• Program Assistance.
• Program Analysis Services.
• Visual Information Services.

The FY 2003 studies were completed in September 2003. The Government won the competition for all six studies, and all of the studies resulted in the functions being retained in-house.

Improved Financial Management

Federal managers continue to experience growing pressures from their executive leaders, Congress, their customers, and the public to achieve more under the programs they manage. To that end, this initiative asks agencies to evaluate their financial management capabilities to ascertain if sufficient internal controls are in place to safeguard against the misuse of federal funds, and to ensure that these controls provide the accountability required to make certain funds are spent as intended. The goals of this initiative are to:

• Meet the accelerated November 15th deadline for audited financial statements.
• Receive a clean opinion on audited financial statements.
• Resolve auditor-identified and Integrity Act material weaknesses in internal controls.
• Ensure funds are disbursed in strict compliance with appropriations law.
• Integrate financial systems and provide timely and reliable financial information.
• Use financial and performance information routinely to make informed budget decisions.
• Substantially reduce erroneous payments.

Selected highlights of FY 2003 AHRQ activities:

• Unified Financial Management System (UFMS). The Agency continued to support the development and implementation of the Department's Unified Financial Management System. AHRQ has members on the Steering Committee and the Planning and Development Committee, and participates in meetings for the PSC-serviced agencies. AHRQ staff participated in UFMS workshops including those addressing funds management, reporting requirements, and budget execution, as well as in the UFMS Fit/Gap Workshops, which focused on reconciling the gaps where the software did not meet the technical and functional requirements.
• Improper Payment Risk Assessment Plan. In accordance with the Improper Payment Act (IPIA) of 2002, AHRQ developed a risk assessment plan that looked at whether Agency grant, contract, and simplified acquisition activities are susceptible to significant erroneous payments. AHRQ's preliminary finding was that our programs were not susceptible to significant erroneous payments because of the many safeguards and controls in place. In FY 2004, AHRQ plans to gather evidence of Agency erroneous payments encountered to pinpoint their exact nature to determine whether the errors are administrative in nature—user errors and to a lesser extent, system/process limitations—as opposed to the more consequential causes such as lack of internal controls, oversight, and/or monitoring; inadequate eligibility controls; and fraud, waste and abuse.
• Accelerated Financial Reporting Requirements. To meet the accelerated submission date for accountability reports and audited financial statements, AHRQ staff worked closely with the Department to identify, develop, and implement practical solutions. AHRQ made it a priority to provide sound and timely financial information required by the Department to meet the accelerated schedules, and to make our financial data more easily accessible to the Department and our program managers.

Expanded Electronic Government

AHRQ's major activities regarding the integration and implementation of the PMA through E-Government technologies within the Agency include:

• Government Paperwork Elimination Act (GPEA).
• Security.
• Full participation in HHS PMA activities that intersect with the mission of the Agency, Patient Safety, and Consolidated Health Informatics initiatives that cross Government Agency boundaries.

In line with these program initiatives, AHRQ's Information Technology (IT) services team explicitly defined its mission and vision, buttressed by three strategic goals:

• Provide quality customer service and operations support to AHRQ's centers, offices and outside stakeholders.
• Ensure AHRQ's IT initiatives are aligned with departmental and agency enterprise architectures.
• Continue development of IT systems that link AHRQ's IT initiatives directly to the mission and performance goals of the Agency by developing an electronic planning system. The planning system will allow selection and tracking of business investments (grants, contracts and intramural research) that link directly to the Agency mission and GPRA goals and budget performance.

AHRQ's FY 2003 accomplishments toward meeting the requirements set forth in the aforementioned laws are outlined in the following sections.

IT Security Related Accomplishments

• Conducted an Asset Based Security Program Assessment that identified all of AHRQ's assets and prioritized their importance against the mission of the Agency. The quantifiable and repeatable approach focused on the business function of AHRQ and provided a documented approach on how AHRQ planned on mitigating weaknesses based on the prioritized list of assets. With the most critical (based on AHRQ's mission) assets identified, risk assessments are being conducted on those assets, and identified weaknesses will be incorporated into the Agency's Plan of Action and Milestones (POA&M).
• Determined the need to develop a set of Baseline Security Requirements (BLSR) that can be applied to all aspects of the Agency's Security Program—an outcome of the Asset Based Security Program Assessment. From developing applications, outlining requirements in the contracting process, and conducting Risk Assessments, the BLSRs provide a complete list of requirements that assets can be assessed against, and from there a prioritized corrective action plan can be developed from identified deficiencies.
• Started implementing this corrective action plan, addressing the weaknesses identified, and laying out a tactical implementation plan for activities that will take greater planning to accomplish. Chief among these is the implementation of the Microsoft Active Directory®, which will serve as a foundation technology for integrating other security enhancements. Accomplishment of this project was put on hold to avoid disrupting the transfer of IT infrastructure support to the newly formed HHS IT Service Center.
• Adopted the Information Technology Security Policy Manual that contains necessary policies for management, operational, and technical areas relating to IT security—the cornerstone of the AHRQ Security Program. Policies were developed, refined, approved, and implemented in FY 2003. Agency personnel were informed of these policies through the launch of the updated Security Awareness Training. The Agency accomplished training for 100 percent of its users during August of 2003, and has plans to accomplish the same level of training for FY 2004.
• Developed Grants-OnLine-Database (GOLD). This application includes an extensive search mechanism for the quick and efficient retrieval of information by end users along with the ability to print and save abstracts. The advent of GOLD established a vehicle that will significantly reduce the volume of hard copy requests for AHRQ grant abstracts and alleviate the time associated with preparing and distributing hard copy responses to requesters.
• Initiated the Publications Clearinghouse project. This initiative, which was started in FY 2003 and will be completed in FY 2004, is focused on the reengineering of legacy Publications Clearinghouse applications as well as establishing new solutions to support the AHRQ publication dissemination process. This project actually crosses all elements of AHRQ work and will lead to a an Agency-wide system that uses the same data repository to track and report publications related to AHRQ funded grants, contracts and other collaborative work, regardless of whether these documents are available for public dissemination or published in trade journals. This project directly relates to the Government Paperwork Elimination Act.

PMA E-Government Activities

AHRQ is quite active in several PMA programs: the Consolidated Health Informatics and the Government wide E-Grants programs. AHRQ has several staff members serving on the Consolidated Health Informatics (CHI) program team, and is the lead agency on another related activity—the Patient Safety Task Force. These programs, taken together can be used to form the basis for another emerging program within HHS that may rise to the level of one of the PMA programs—the Public Health Architecture.

Although the Public Health Architecture concepts are still in the planning stages, it is clear that the type of multi-Agency effort that AHRQ is leading with the Patient Safety network would be a model for such an effort. AHRQ personnel are serving as team members on several HHS cross-cutting projects: the HHS Enterprise Architecture Team, the HHS Public Key Infrastructure Team, the HHS Enterprise E-mail Team, and the HHS Portfolio Management Team.

Budget and Performance Integration

General program direction and budget and performance integration is accomplished through the collaboration of the Office of the Director and the offices and centers that have programmatic responsibility for portions of the Agency's research portfolios. The Agency links budget and performance management through its focus on the Annual Performance Plan.

As a result of the increased emphasis on strategic planning, the Agency has shifted from a focus on output and process measurement to a focus on outcome measures. These outcome measures are being developed to cascade down from our strategic goal areas of safety, quality, effectiveness, efficiency and organizational excellence. Portfolios of work (combinations of activities that make up the bulk of our investments) support the achievement of our highest level outcomes.

In continuing AHRQ's commitment to budget and performance integration, we recently reorganized the management structure. This new structure aligns those who are responsible for budget formulation, execution and providing services and guidance in all aspects of financial management with those who are responsible for planning, performance measurement and evaluation. These functions are now within one office.

Current and future efforts include continuing the development of a software application that maps each AHRQ funded activity to the portfolio structure. This is a work in progress and we look forward to sharing our success as we continue this journey.

Finally, AHRQ completed comprehensive program assessments on four key programs within the Agency:

• The Medical Expenditure Panel Survey (MEPS).
• The Healthcare Cost and Utilization Project (HCUP).
• The Consumer Assessment of Health Plans Study (CAHPS®).
• The grant component of the Agency's Translation of Research into Practice (TRIP) program.

For the FY 2003 budget, the Agency conducted a review of patient safety. These reviews provide the basis for the Agency to move forward in more closely linking high-quality outcomes with associated costs of programs. Over the next few years, the Agency will focus on fully integrating financial management of these programs with their performance.

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