<DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:89242.wais]
MANAGEMENT AND THE PRESIDENT'S BUDGET
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
AND FINANCIAL MANAGEMENT
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
MARCH 26, 2003
__________
Serial No. 108-45
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
89-242 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri
CHRIS CANNON, Utah DIANE E. WATSON, California
ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma C.A. ``DUTCH'' RUPPERSBERGER,
NATHAN DEAL, Georgia Maryland
CANDICE S. MILLER, Michigan ELEANOR HOLMES NORTON, District of
TIM MURPHY, Pennsylvania Columbia
MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee
JOHN R. CARTER, Texas CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota ------
MARSHA BLACKBURN, Tennessee BERNARD SANDERS, Vermont
(Independent)
Peter Sirh, Staff Director
Melissa Wojciak, Deputy Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Philip M. Schiliro, Minority Staff Director
Subcommittee on Government Efficiency and Financial Management
TODD RUSSELL PLATTS, Pennsylvania, Chairman
MARSHA BLACKBURN, Tennessee EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio PAUL E. KANJORSKI, Pennsylvania
JOHN SULLIVAN, Oklahoma MAJOR R. OWENS, New York
CANDICE S. MILLER, Michigan CAROLYN B. MALONEY, New York
MICHAEL R. TURNER, Ohio
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Mike Hettinger, Staff Director
Kara Cralles, Professional Staff Member
Larry Brady, Professional Staff Member
Amy Laudeman, Clerk
Mark Stephenson, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on March 26, 2003................................... 1
Statement of:
Dalton, Patricia A., Director, Strategic Issues, U.S. General
Accounting Office; Edward R. McPherson, Chief Financial
Officer, U.S. Department of Agriculture; Angela B. Styles,
Administrator for Federal Procurement Policy, Office of
Management and Budget; and Mark A. Forman, Associate
Director, Information Technology and E-Government, Office
of Management and Budget................................... 11
Sessions, Hon. Pete, a Representative in Congress from the
State of Texas............................................. 7
Letters, statements, etc., submitted for the record by:
Dalton, Patricia A., Director, Strategic Issues, U.S. General
Accounting Office, prepared statement of................... 14
McPherson, Edward R., Chief Financial Officer, U.S.
Department of Agriculture:
Followup questions and responses......................... 96
Prepared statement of.................................... 40
Platts, Hon. Todd Russell, a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 4
Sessions, Hon. Pete, a Representative in Congress from the
State of Texas, prepared statement of...................... 9
Styles, Angela B., Administrator for Federal Procurement
Policy, Office of Management and Budget:
Followup questions and responses......................... 93
Prepared statement of.................................... 70
MANAGEMENT AND THE PRESIDENT'S BUDGET
----------
WEDNESDAY, MARCH 26, 2003
House of Representatives,
Subcommittee on Government Efficiency and Financial
Management,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:30 a.m., in
room 2154, Rayburn House Office Building, Hon. Todd R. Platts
(chairman of the subcommittee) presiding.
Present: Representatives Platts, Blackburn, Towns, and
Maloney.
Staff present: Mike Hettinger, staff director; Dan Daly,
counsel; Kara Cralles and Larry Brady, professional staff
members; Mark Stephenson, professional staff member; and Jean
Gosa, assistant clerk.
Mr. Platts. I want to welcome you to the Subcommittee on
Government Efficiency and Financial Management's first hearing
in the 108th Congress. I am eager to investigate some of the
issues that face the operation of the Federal Government and
build on some of the ideas that the distinguished former-
Chairman Steve Horn examined. At a time of increasing
government deficits, greater efficiency and financial
accountability in administration of Federal Government
operations is an ever-increasing top priority. I look forward
to working with my esteemed colleagues on this subcommittee
throughout the 108th session.
Today the Subcommittee on Government Efficiency and
Financial Management is holding the first of a series of three
hearings on ``Governing With Accountability.'' This hearing
will focus on the President's Management Agenda and the impact
the agenda has had on the improvement and operational
efficiency and effectiveness of the executive branch. We will
also explore how the President's Management Agenda has impacted
the budget numbers included in the President's fiscal year 2004
budget.
Since I was first elected to office as a member of the
Pennsylvania State Assembly, one of my main concerns has
consistently been to ensure that government entities operate in
the most efficient and accountable manner possible. In the
State Assembly, I sat on a committee that examined many of
these issues at the State level and since being elected to the
U.S. House of Representatives, my interest in accountability
and efficiency has grown significantly. I am pleased to have
the opportunity to explore these issues with my colleagues at
the Federal level.
The Federal Government has a responsibility to the
taxpayers of this country to be productive and accountable.
Unfortunately, many agencies are unable to demonstrate the
value that they provide for the tax dollars that are spent on
the programs they administer. Unfortunately, waste and
inefficiency are found throughout the Federal Government. Only
improved management and accountability will begin to address
these problems.
President Bush and his administration are to be strongly
commended for having made improving the efficiency and
effectiveness of Government a top priority. The President's
Management Agenda, which was unveiled in August 2001, targets
five major areas of Government that need well-focused
attention: first, hiring and retaining a skilled, motivated
Federal work force; eliminating the Government's pervasive
inability to properly manage its money; ensuring that Federal
programs achieve effective results from their massive
investment of tax dollars; expanding electronic government; and
increasing public-private competition for commercial-type
Federal functions.
Building on the Government Performance and Results Act, an
executive branch management scorecard was developed to evaluate
agencies' performance in each of these five areas. The
scorecard uses a traffic light approach: green for success,
yellow for mixed results, and red for unsatisfactory. The
Office of Management and Budget does the scoring. This is the
second year that agencies have been graded on each of these
five areas. The initial agency scores for fiscal year 2001 were
predominantly red. In fiscal year 2002, agencies were not only
graded on their current status in implementing these management
initiatives, they were also graded on their level of progress.
Since last year, in the fiscal year 2002 report, agencies'
status scores continue to show red results. However, the
agencies are making progress, as evidenced by the large number
of agencies with green lights on their progress scorecards.
Today we will have several witnesses who are well versed on
the President's Management Agenda and the progress that
agencies are making. We are honored to have one of our esteemed
colleagues, Congressman Pete Sessions from Texas, who is the
chairman of the Results Caucus. Congressman Sessions is joining
us today as our first witness and as a participant in the
hearing. After Mr. Sessions' statement, we will proceed to our
seated panel of witnesses: Ms. Pat Dalton, Director of
Strategic Issues at the General Accounting Office; the
Honorable Mr. McPherson, who is the Chief Financial Officer at
the Department of Agriculture and as a proud Member of the
Congress representing the 19th District, also a native of the
19th District of Pennsylvania, so I am especially glad to have
a fellow native 19th District resident here; the Honorable
Angela Styles, Administrator for Federal Procurement Policy at
the Office of Management and Budget; and, finally, Mr. Mark
Forman, Associate Director of Information Technology and E-
Government at the Office of Management and Budget. I certainly
look forward to hearing each of your testimonies here today.
I also look forward to working with our distinguished
ranking member, Mr. Ed Towns, whose experience and insight will
be very valuable for this committee. I respect his deep
involvement in the community he serves and look forward to
working closely with him and all members of the committee.
[The prepared statement of Hon. Todd Russell Platts
follows:]
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Mr. Platts. I now yield to the gentleman from New York, Mr.
Towns, for the purpose of making an opening statement.
Mr. Towns. Thank you very much, Mr. Chairman. Let me
congratulate you on being chosen to lead the subcommittee and
thank you for holding this hearing. I am looking forward to
working with you, and let me just say to you that in spite of
the negative things you heard about me, you should wait and let
time answer that question. Mr. Chairman, in spite of all the
negative things you heard about me, you should wait around and
let time answer that question. But, anyway on a serious note,
there is a long history of working together in a productive
manner in this committee. I am confident we will continue that
tradition in this Congress.
Today's hearing focuses on the President's Management
Agenda to improve the performance and accountability in Federal
Government. Initiatives such as these have been going on for
more than 50 years and have been undertaken by administrations
of both political parties. This should come as no surprise
because increasing the efficiency of the Federal Government
requires a sustained and concerted effort. Additionally, it has
not been a partisan issue.
While some of these efforts have been more successful than
others, they are all worthwhile. The public deserves a
Government that is effective and responsive.
Improving the management of the Federal Government may be
more critical now than ever before in the history of this
country. The impending retirement of a significant number of
workers from the Federal Government requires agencies to plan
and forecast their staff skills, needs, and competencies. The
rise of global terrorism and the creation of the new Department
of Homeland Security require the Government to be focused on
performance-based measures.
With that said, I do have some concerns, Mr. Chairman, with
the agenda. Although I do believe that we should look to the
private sector as a model to make the Government more
efficient, we cannot forget that the Federal Government is not
a private business. There are some distinctions that should not
be eliminated. For example, the Civil Service system has served
this Nation well and it should not be systematically
dismantled.
Additionally, the President's agenda would grade agencies
on their success in contracting out government jobs to the
private sector. I oppose this objective. I think it is
wrongheaded to measure agencies in their ability to meet such a
goal.
I look forward to hearing from today's witnesses on the
progress the administration is making on its management agenda
as well as their response to some of the concerns that I have
raised.
On that note, Mr. Chairman, I yield back, and I am eager to
listen to the witnesses.
Mr. Platts. Thank you, Mr. Towns.
I would now like to welcome our esteemed colleague from
Texas, Mr. Pete Sessions. Mr. Sessions is a former member of
the Government Reform Committee and is currently chairman of
the House Results Caucus. The Results Caucus is comprised of
eight members who are dedicated to making the Government more
fiscally responsible and efficient. We are honored to have Mr.
Sessions today as both a witness and a participant in the
hearing.
We appreciate your joining us, and we welcome you now to
proceed with your statement.
STATEMENT OF HON. PETE SESSIONS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS
Mr. Sessions. Chairman, thank you so much. It is a great
honor for me to be with you at this important event today.
And for those people with longer tooths, and there are a
good number of them in the audience today, including Angela
Styles and Robert Shay, who have been a part of this process
for a long time.
I want to say, Mr. Chairman, that I believe that you will
be a part of a legacy that was established by Chairman Horn,
who, years ago, when he undertook this task as subcommittee
chairman, began the process to deal with not only Government
efficiency, but also what I think was inherently good for
employees of the Federal Government, and that is to make their
jobs better so that they would find more enrichment in what
they did, as well as pay. And I think that Chairman Horn had
that legacy.
One of the other things, Mr. Chairman, that he brought to
the table was the scorecard. The scorecard that we have before
us today is the one that is immediately to my left that is the
newest one that we are working from. And today, in particular
today, what I would like to do is to highlight at least one
area, and that is if we look at competitive outsourcing or
competitive sourcing, as it is called. As we look at that, you
will see that it is entirely red on the left side of the chart.
This is as of the end of last year; it is an internal rating;
it is how each of the agencies are rated on the kind of
performance that they have had.
Without jumping all over people, I would like to say it is
probably the toughest area. It is an area that there is not
complete agreement on, certainly not within the administration,
nor within Government employees who comprise not only the
union, but other governmental bodies.
What is important to look at is that we are seeing progress
that is being made, and this is one thing that Chairman Horn,
through this subcommittee and through other factors, put into
play. We want to find where we are moving from one color to the
next, obviously from green to yellow, yellow to red. But you
will see that on this chart there are a good number of arrows
which designate an upward mobility and upward trend. I think
today part of the focus of this hearing is going to be about
competitive sourcing, and it will be important to hear what
those witnesses who we have in front of us will say.
The good part of this is that from the scorecard there has
been an 11 percent improvement since September 11, 2001, and
that means that the Government has had to become more efficient
and look at, inherently, those things that it should be doing,
and I am proud of that.
Also, I would like to note today that the private sector
has really been a huge part of this success; they have not only
worked with the Government and government employees, but they
have worked to find ways to solve problems that the Government
has had, and I think it has had, in a big sense, a way for the
Government to work together with these outside industries to
find success in what they are doing.
Also, Mr. Chairman, I would like to note and also to ask
unanimous consent that it would be accepted into the record an
article that appeared in the Washington Post, dated March 25,
that talks about more than one-third of Federal employees who
took part in a governmentwide survey said they were considering
leaving their jobs. And I think that should be something that
should be part of some discussion and certainly what this
subcommittee would look at, but I would ask unanimous consent
that be accepted.
Mr. Platts. Without objection, it is accepted.
Mr. Sessions. Last, the things that I wanted to focus on
today that I believe have a lot to do with the success of this
administration, a lot of it to do with Angela Styles. Angela
Styles, as Administrator for Procurement Policy for the Bush
administration, I believe has been a part of a new A-76
process. And there are three things in particular that I would
like to highlight which I think that are good, and that is that
the new A-76 process will speed up competitions. The current
average today is about 3 years within DOD for A-76s to be
accepted, and there are new initiatives that will encourage
agencies to take no more than 12 months to complete
competition. That is important because people don't want to get
into a competitive circumstance if they do not know what the
end result would be for time.
No. 2, it makes government functions visible to the public.
What they are doing is that we are requiring the Government
agencies to now make public all the things that they wish to do
when they deal with commercial inventories and how they are
dealing with the circumstances to have commercial and
competitive sourcing.
And, last, it implements the President's Management Agenda.
And I believe that this President is well on target to
understanding Government efficiency and the things that in this
new era Government needs to do to assume its role so that the
taxpayers of this country and the people are well served.
With that said, Mr. Chairman, I want to thank you for the
opportunity to be here with you today. I do intend to be here
for a few minutes and hear the testimony that comes forth.
Thank you.
[The prepared statement of Hon. Pete Sessions follows:]
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Mr. Platts. Thank you, Mr. Sessions, for your statement and
again for joining us and giving your years of focus and
experience on the issues of Government efficiency and results.
We certainly look forward to continuing to work with you and
all members of the Results Caucus as we move forward this
session.
I would like now to administer the oath to our witnesses
and would ask that each witness and anyone who might be
advising each of the witnesses during their testimony to stand,
raise their right hands, and take the oath together. We will
then proceed to the testimony.
[Witnesses sworn.]
Mr. Platts. Thank you. You may be seated. And the clerk
will note that all witnesses have affirmed the oath.
I would like to now proceed to the testimonies. Ms. Dalton,
we will begin with you, followed by Mr. McPherson, Ms. Styles,
and Mr. Forman. The subcommittee appreciates the substantive
written testimonies that each of the witnesses have submitted
and we have had the chance to review, and I would ask that each
witness keep their oral testimony to less than 5 minutes.
Before we begin, I would also like to recognize that we are
delighted to have Ms. Styles' soon to be 4-year-old daughter
Ellie here with us today and, my understanding, getting to
witness her mother testifying for the first time.
Ms. Styles. Thank you very much. She is here today in the
back. Or she was. She may have already had to leave.
Mr. Platts. Well, hopefully we didn't scare her off. I will
have to do better and have my little 4-year-old girl Kelsey
with me next time so they can have a joint effort to be more
entertained than maybe hearing us speak. But we are delighted
to have her with us.
Ms. Styles. Thank you very much.
Mr. Platts. Ms. Dalton, if you would please proceed with
your testimony.
STATEMENTS OF PATRICIA A. DALTON, DIRECTOR, STRATEGIC ISSUES,
U.S. GENERAL ACCOUNTING OFFICE; EDWARD R. MCPHERSON, CHIEF
FINANCIAL OFFICER, U.S. DEPARTMENT OF AGRICULTURE; ANGELA B.
STYLES, ADMINISTRATOR FOR FEDERAL PROCUREMENT POLICY, OFFICE OF
MANAGEMENT AND BUDGET; AND MARK A. FORMAN, ASSOCIATE DIRECTOR,
INFORMATION TECHNOLOGY AND E-GOVERNMENT, OFFICE OF MANAGEMENT
AND BUDGET
Ms. Dalton. Thank you, Mr. Chairman, Mr. Towns, Mr.
Sessions. It is a pleasure to be here today to discuss the
continuing progress in implementing the President's Management
Agenda.
There are clear links between the agenda's initiatives in
the high-risk areas and major management challenges recently
identified by GAO in our Performance and Accountability and
High-Risk Series. Many of these issues are complex and
longstanding.
Overall, there has been continuing progress in implementing
the governmentwide initiatives. This progress, however, has
been uneven, and a continuing focus is needed to improve the
management and performance of the Federal Government and ensure
proper accountability. Further, it is important to recognize
that fundamental management practices and principles cannot be
addressed in an isolated or piecemeal fashion, but must be
addressed in an integrated way.
Today, my statement will focus on the five crosscutting
initiatives identified in the President's agenda, and the next
steps that our work shows will be key to effectively enhancing
the management and performance of the Federal Government.
The first area in the agenda is strategic human capital
management. People are an agency's most important asset, and
strategic human capital management should be the centerpiece of
any serious change management initiative or any effort to
transform the cultures of government agencies. Considerable
progress has been made in this area since we designated it as a
high-risk area in 2001. However, agencies continue to face
challenges in leadership; human capital planning; acquiring,
developing, and retaining talent; and developing results-
oriented cultures. It is important for agency leaders to
identify and make use of all appropriate administrative
authorities available to them to manage their people both
effectively and equitably.
We recently reported on a set of practices that are key to
the effective use of flexibilities. They include: plan
strategically and make targeted investments; ensure stakeholder
input in developing policies and procedures; educate managers
and employees on the availability and use of existing
flexibilities; streamline and improve administrative processes;
build transparency and accountability into the system; and
change the organizational culture.
Another step in meeting the Government's human capital
challenges is for policymakers to continue to pursue
legislative reforms to give agencies additional tools and
flexibilities to hire, manage, and retain the human capital
they need, particularly in critical occupations.
The second area in the President's Management Agenda is
budget and performance integration. Performance-based budgeting
could help shift the focus of debate from inputs to outcomes
and results, enhancing the Government's ability to gauge
performance and assess competing claims for scarce resources.
More explicitly, infusing performance information into resource
allocation decisions is critical for further progress in
government performance and management.
Last year, OMB introduced a formal assessment tool into the
deliberations: the PART, the Program Assessment Rating Tool.
Potentially, PART can complement the Results Act's focus on
increasing the supply of credible performance information by
promoting the demand for this information in the budget
formulation process. Though progress has been made,
improvements are still needed in the quality of both
performance and cost data. If Members of Congress and the
executive branch have better information about the link between
resources and results, they can make the tradeoffs and choices
cognizant of the many and often competing claims on the Federal
budget.
Improving financial performance is a third area in the
agenda. This initiative, to improve financial performance, is
aimed at ensuring that Federal financial systems produce
accurate and timely information to support operating, budget,
and policy decisions. It focuses on key issues such as data
reliability, clean financial statement audit opinions, and
effective financial management systems and internal control.
Though significant progress has been made, we have pointed out
that the Federal Government is a long way from successfully
implementing the statutory reforms that Congress enacted during
the 1990's.
Widespread financial management system weaknesses, poor
recordkeeping and documentation, weak internal controls, and
lack of information have prevented the Government from having
all the cost information needed to effectively and efficiently
manage its operations. Steps need to be taken to continuously
improve internal controls in the underlying financial and
management information systems to ensure quality data.
Expanded electronic government is the fourth area in the
agenda. It offers many opportunities to better serve the
public, make Government more efficient and effective, and
reduce cost. Though many of the initiatives are showing
tangible results, progress has been uneven. Our review of
planning documents from the e-government initiatives have found
important aspects, such as collaboration and a focus on
identifying customer needs, that need to be better incorporated
into the plans. We have made a number of recommendations on
improving these efforts to the Director of OMB. Also, adequate
security and privacy protection must be built into the
initiatives.
The final area of the President's Management Agenda,
competitive sourcing, is an area where the administration has
committed to simplifying and improving the procedures for
evaluating public and private sources. As has been noted here,
the OMB has just proposed changes to Circular A-76. The
proposed circular is consistent with many of the sourcing
principles and recommendations adopted by the Commercial
Activities Panel that was chaired by the Comptroller General.
The proposal should promote sourcing decisions that reflect the
best overall value to the agencies, rather than just the lowest
cost. There are several areas, however, where the proposed
revisions to the circular were not consistent with the
principles or recommendations of the panel. Specifically, these
include the absence of a link between sourcing policy and
agencies' missions, unnecessarily complicated source selection
procedures, and certain unrealistic time-frames and
insufficient guidance on calculating savings.
In conclusion, my testimony today has highlighted that
serious and disciplined efforts are needed to improve the
management and performance of Federal agencies and to ensure
accountability.
Mr. Chairman, thank you for the opportunity to participate
in today's hearing, and I welcome any questions.
[The prepared statement of Ms. Dalton follows:]
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Mr. Platts. Thank you, Ms. Dalton, for your testimony.
And before we proceed with Mr. McPherson, I would just like
to recognize that our subcommittee vice chairwoman, the
honorable lady from Tennessee, Ms. Blackburn, has joined us.
Thanks for being with us.
Mr. McPherson, the floor is yours.
Mr. McPherson. Mr. Chairman, members of the subcommittee,
thank you for the opportunity to represent this administration
in discussing results of the Financial Management Initiative of
President Bush's Management Agenda.
I am particularly honored to appear before Chairman Platts'
Subcommittee on Government Efficiency and Financial Management,
as I was raised in your district, in Gettysburg, PA, where we
still have our family home built there by my great-grandfather
130 years ago.
My remarks today focus on two elements. First, let us look
briefly at selected results thus far of the President's
Financial Management Initiative across the Federal Government.
Second, I will describe the valuable results we have achieved
at the Department of Agriculture as a way of providing the
subcommittee with a practical sense of what is possible in
financial management for the benefit of the American taxpayer.
As the members of this subcommittee know, the President has
made improving financial performance a key initiative of his
management agenda. To give just a few examples of our progress
governmentwide, 21 of the Government's 24 Chief Financial
Officer Act agencies received clean opinions on their audited
financial statements. The Department of Education, FEMA, and
NASA reclaimed the clean audits they had recently lost. The
Department of the Treasury and the Social Security
Administration produced audited financial statements by
November 15, implementing 2 years early the administration's
goal to have audited financial statements 45 days after the end
of the fiscal year. The Departments of Energy and Labor have
improved their status scores and the Department of Energy
successfully addressed major management challenges identified
in its most recent performance and accountability report. Labor
has addressed problems with its financial management systems
and is aggressively working to reduce erroneous Unemployment
Insurance payments.
We are by no means out of the woods, Mr. Chairman. The
Department of Defense is still unable to produce audited
financial statements, and the Small Business Administration's
status deteriorated because its auditor found inconsistencies
between the budget and accounting for asset sales.
Now let us focus on the valuable results at the Department
of Agriculture simply as a way of providing the subcommittee
with a practical sense of what is possible in financial
management to the benefit of the American taxpayer.
As context, at the Department of Agriculture, I am
responsible for the financial leadership of an enterprise that,
were it a private company, would be one of the largest
companies in the United States. With $72 billion in annual
spending, 112,705 full-time equivalent staff years, and $123
billion in assets, the Department of Agriculture is exceeded
generally in size only by four companies: General Motors, Ford,
Exxon, and Wal-Mart. So we are about the same size, roughly,
and in diversity of lines of business as General Electric.
In addition, through our National Finance Center in New
Orleans, LA, we operate an item processing and recordkeeping
service in executing payroll for one-third of all Federal
employees and providing administrative services for more than
120 government entities, including the Thrift Savings Plan that
has 3 million participants with $100 billion in investment
assets. Last year alone, the National Finance Center processed
$26 billion in payroll disbursements and $12 billion of
retirement plan contributions.
Here is a description of what is possible to achieve in
financial management. The Department of Agriculture, and all of
its agencies, including the Forest Service, for the first time
received unqualified or ``clean'' opinions on annual financial
audits from the Office of the Inspector General in fiscal year
2002. In all previous audits, the Office of the Inspector
General was unable to express any opinion on USDA's
consolidated financial statements because the value of assets,
liabilities, budgetary resources, net costs and related items
could not be determined. In short, Agriculture, one of the
largest enterprises in America, had never before produced
timely financial statements free of significant errors or
misstatements in its entire 140-year history.
With slightly more than a year's worth of work, the
Department of Agriculture and all its agencies for the first
time received a clean opinion in fiscal year 2002. This
valuable breakthrough was achieved using existing taxpayer
funding by skilled career government executives and dedicated
associates already in place. Specific results that led to our
achieving sufficient internal control and data integrity to
merit a clean audit opinion include the following items:
massive revamping of business, financial management and
accounting processes, and completing the installation of a
standard general accounting system requiring 17 major
conversions; determining the program cost or present value
cash-flows of $100 billion in loans; reconciling accurately and
timely over $100 billion in annual cash receipts and
disbursements in 393 Treasury accounts; transforming the Forest
Service financial management activities effectively; correcting
accounting deficiencies on $10 billion of real and personal
property; implementing a unified corporate controller
organization that integrates accountability for financial
management processes and systems throughout USDA; and reducing
the number of material deficiencies by more than 40 percent, a
noteworthy achievement that reflects an environment of
improving internal control.
Meanwhile, our associates in New Orleans, LA, at the
National Finance Center, which is a strategic Federal asset
within USDA with over 4 million customers, also achieved
valuable results in financial management. Specifically, the
Office of Personnel Management and the Office of Management and
Budget selected the National Finance Center to serve as one of
the Government's payroll providers under the President's e-
Payroll initiative to consolidate Federal payroll functions.
The National Finance Center became one of four government
Inaugural Agencies receiving certification to deliver trusted,
secure electronic transactions through a public key
infrastructure encryption system. Public key infrastructure is
an important global competitive advantage in the conduct of
electronic commerce. The National Finance Center integrated
members of the uniformed services into the Thrift Savings Plan
System in fiscal year 2002. To date, over 300,000 members of
the uniformed services have enrolled in the Thrift Savings
Plan. The National Finance Center developed the Centralized
Enrollment Clearing House System to match and reconcile over 32
million insurance carrier and enrollee records annually for 4
million participants in the Office of Personnel Management's
Federal Employees Health Benefits plan.
We have also taken effective financial management actions
to improve our lending for farmers, housing and rural
development in terms of transaction approval, portfolio
management, and debt collection. At the end of fiscal year
2002, USDA had approximately $100 billion in loans and $29
billion in credit guarantees, or a total of $129 billion of
credit risk, about 32 percent of the entire debt owed to the
Federal Government.
USDA's problem credit at the end of last year totaled $14.5
billion, consisting of $8.3 billion of non-performing assets,
$4.9 billion of defaulted guarantees that have been
restructured, and $1.3 billion of gross charge-offs in fiscal
year 2002.
About $10.5 billion of this $14.5 billion relates to
international sovereign risk credit in the Commodity Credit
Corporation, leaving $4 billion in domestic credit that is
combined from Farm Service Agency and Rural Development.
Importantly, during 2002, USDA collected $945 million of
delinquent debt, $682 million through agencies using our
internal tools, and $263 million through the Department of
Treasury's Administrative Offset Program and other Debt
Collection Improvement Act techniques. In fiscal year 2002 USDA
referred to the Treasury Offset Program 98 percent of the $1.4
billion of eligible delinquent receivables and 96 percent of
the $364 million of loans eligible for cross-servicing compared
to only 14 percent in the prior year.
Our lending agencies are focused on managing these loan
portfolios effectively, including reviewing transaction
approval processes, loan systems, collateral management, and
evaluating the piloting of loan sales.
In summary, I have seen during the past 18 months that
bureaucracies produce results with leaders who instill laser-
like clarity of ownership, or individual accountability.
Ultimately, people are the only source of a sustainable
competitive advantage, and I believe in people. In most every
instance that I have cited today, one person with courage led
valuable change by substituting new successes in place of
rhetoric or business as usual. I assure you, Mr. Chairman and
members of the subcommittee, that the people who produced these
results are honored to serve the American taxpayer and will
continue to do so as part of President Bush's Management
Agenda.
[The prepared statement of Mr. McPherson follows:]
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Mr. Platts. Thank you, Mr. McPherson, for your testimony.
And before we proceed, I was challenged and restrained in
cutting a fellow native 19th District resident off on the time
limit, but if we can try to stay to our 5 minutes, and then we
can have more time to get into questions, that would be great.
You may proceed.
Ms. Styles. Chairman Platts, Congressman Towns, Congressman
Sessions, and members of the subcommittee, I am pleased to have
this opportunity to discuss competitive sourcing and our
proposed changes to OMB Circular A-76.
As most of you know, competitive sourcing is a
governmentwide initiative to encourage competition for the
performance of government activities that are commercial in
nature. Using OMB Circular A-76, departments and agencies have
been asked to ``determine whether commercial activities should
be performed under contract with commercial sources or in-house
using Government facilities and personnel.'' Competitive
sourcing is a means to an end, with the means being public-
private competition and the end being better management of our
Government, better service for our citizens, and lower costs
for our taxpayers.
I cannot emphasize enough that competitive sourcing is not
about outsourcing; nor is it about downsizing the work force.
Rather, competitive sourcing is about creating incentives and
opportunities for efficiency and innovation through
competition. No one in this administration cares who wins a
public-private competition. But we care very much that
government service is provided by those best able to do so in
terms of cost and quality, be that the private sector or the
Government itself.
After nearly 2 years of hard work with the agencies, I am
pleased to see a large number of our Federal managers accepting
this difficult challenge. They are, for the first time,
building an infrastructure for and institutionalizing public-
private competition. For example, the Department of Veterans
Affairs is opening up 52,000 positions to competition over the
next 5 years, initiating studies of 25,000 of them in 2003
alone. At the Federal Aviation Administration, 2,700 Federal
flight services personnel are participating in a public-private
competition across the country. Similarly, the Department of
Energy has started public-private competition for a variety of
functions, such as computer personnel, graphic designers, and
financial services personnel, at locations nationwide.
Despite our progress, overall use of competitive sourcing
remains weak. This is not surprising when considering that the
current processes governing sourcing decisions are time-
consuming and unnecessarily complicated. We are committed to
improving how agencies determine whether commercial activities
will be performed by the public or private sector.
Last November, we proposed major changes to this process,
OMB Circular A-76, including changes to help agencies more
easily distinguish between commercial and inherently
governmental activities; making processes simpler and easier to
understand, using the well-tested practices in the Federal
Acquisition Regulation; more fully accommodating a program's
need for best value and innovation, while still requiring cost
to remain a factor in all competitions and the deciding factor
in many competitions. We also are committed to ensuring that
sourcing decisions are made in real time by imposing deadlines
that would reduce the cycle time from the current delay-plagued
3 years that Congressman Sessions mentioned, to an average of 1
year, 12 months.
We have been working aggressively to consider the more than
700 comments that were submitted on the proposed rule. In
analyzing the public comments, we are keeping a keen eye for
areas where the processes and results may fall short of
expectations.
We are aiming to complete our review of the public comments
shortly so that agencies may take advantage of a transformed
process.
In conclusion, we are asking Federal agencies to reconsider
how they accomplish their missions. We are also asking them to
test assumptions about the best provider through the
competitive process. Competitive sourcing is laying the
groundwork for improved mission performance with quality
service at the lowest possible cost.
Like any other effort that seeks to fundamentally transform
the way we do business, this initiative has its challenges. But
if we are steadfast in our commitment to competition, which
lies at the heart of competitive sourcing, we will no doubt
deliver the quality service that our taxpayers deserve.
That concludes my prepared remarks.
[The prepared statement of Ms. Styles follows:]
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Mr. Platts. Thank you, Ms. Styles.
Mr. Forman.
Mr. Forman. Chairman Platts, Mr. Sessions, and members of
the committee, thank you for holding this important hearing
today.
The vision for the President's Expanding Electronic
Government Initiative is an order of magnitude improvement in
the efficiency and effectiveness of Government operations. The
initiative is already providing enhanced services directly to
the citizens over the Internet and improving the management of
the Government's almost $59 billion investment in information
technology. This investment continues to make the Federal
Government the largest buyer of IT in the world, and agencies
are deriving better value from that spending. You know, it is
said that IT, information technology, spending does not
automatically provide good management, but there is no question
in today's environment of e-business, you cannot have good
management without technology. Indeed, more effective use of
information technology will improve the Government's overall
performance. This is occurring within agencies by re-
engineering their operations to support their missions more
effectively and improve their own infrastructure, and it is
also occurring across agencies by simplifying and unifying
activities of the Government around the needs of citizen.
Mr. Chairman, I would like to talk a little bit about the
elements of the scorecard. We have very simple criteria, and
they are documented in the President's performance chapter of
the budget. And I want to make that very clear because they are
well embedded in the law of e-government strategy that we
produced a year ago.
First of all, we grade agencies on their status and their
progress with respect to two requirements of the Clinger-Cohen
Act. First, do they have a decent enterprise architect and,
second, are they using business cases and a capital planning
and investment control process. The explicit criteria in the
score is whether or not they have 100 percent of their major IT
investments with a solid business case. And I will talk a
little bit more about what we look for in a solid business
case. That is directly out of the Clinger-Cohen Act. If you are
less than 50 percent, you get a ``red''; if you are between 50
and 100 percent, you get a ``yellow.'' It is quite that simple.
The second area is IT program management that we grade on.
Are the agencies running greater than 10 percent cost schedule
or performance overruns. Again, this is well embedded in the
law directly out of the Federal Acquisition Streamlining Act
[FASA], Title V. So if agency IT projects have cost overruns
greater than 30 percent, the agency gets a ``red''; if they
have cost overruns, schedule overruns, or performance
shortfalls less than 10 percent, they get a ``green''; and if
it is in between, they are ``yellow.''
Last, one of the key elements that we grade agencies on is
how well they are doing in securities. It is required in the
business case. This was established under Clinger-Cohen; the
Computer Security Act of 1987; the Government Information
Security Reform Act of 1998; and most recently the Federal
Information Security Management Act that passed out of this
committee and was enacted into law, signed by the President
last December.
Under the process that we have set forth, each agency has a
listing of their gaps that is validated by inspectors general
audits, and there is a plan of action and milestones
established for each department. We track progress quarterly,
and the status, obviously. We will be submitting more
substantial detail on that in our report to Congress from the
Director of OMB in the next couple weeks or so.
The other element of the scorecard is whether or not the
agencies are participating in cross-agency solutions. We know
we have lots of redundancies in the way agencies buy their
information technology, but the truth is the Federal Government
cannot be agency-centered and citizen-centered when we move
onto the Web; and the President recognized this. He focuses on
teamwork and the messages and guidance that has been sent out
to the agency. But at the heart of the President's Management
Agenda is this notion that we have to become citizen-centered,
not agency-centered.
So the scorecard for e-government requires that agencies be
involved jointly in three out of the four citizen-centered
groupings: government to citizen; government to business;
government to government, this important work with State and
local governments who deliver directly so many of the services;
and then, finally, how we take care of our own employees, the
internal efficiency and effectiveness.
To get to ``green,'' agencies have to be participating in
three of those areas in developing the solutions, as opposed to
doing their own siloed approach. If they are involved in one or
less, they are ``red''; two, obviously they are ``yellow.'' It
is quite that simple. It is not subjective, it is a very
objective-based scoring to get to that score.
But as a result, we are seeing substantial progress.
Nineteen of these 24 cross-agency initiatives have had key
deployments, and that continues. But perhaps most importantly,
we deployed quite a few initiatives in January this year, and I
have recently received the data. We are No. 4 of all the use of
the Web, the Federal Government, in relation between our
transactions with the business community. Almost 50 percent of
all businesses are on line interacting with us. With citizens
we are No. 6.
So the scorecard and the focus on joint work is working, as
well as the progress as displayed on the chart that Mr.
Sessions referred to showing progress by the agencies.
Thank you.
Mr. Platts. Thank you, Mr. Forman.
And to all of our witnesses, we appreciate your testimony.
With this hearing and future hearings, I certainly encourage
all members of the subcommittee to participate with questions,
and we will follow the 5-minute rule for questioning the panel
with each member who wishes to ask questions, having the
opportunity to question the panel for 5 minutes. And certainly
after each member has had that opportunity, if we have
additional rounds of questions to accommodate members, we will
be glad to continue.
So I believe I will begin my initial 5 minute period, Ms.
Dalton, with you. In your testimony you provided, both here in
person and in your written testimony, you have talked about GAO
working closely with OMB and the lead agencies in kind of
reviewing the standards of success. But it is my understanding
that while you have seen some of the general criteria for
standards of success, you have not had the opportunity to
review some of the more specific criteria with OMB. Is there an
ongoing dialog between you and OMB about having access to that?
And if so, where do we stand?
Ms. Dalton. Well, I think the issue really is transparency
in the whole process, because that provides credibility to what
we are looking at. We clearly have seen the standards in that
they are published in the budget. What we haven't seen is some
of the evidence in terms of what OMB is making their decisions
on. But there is information that has been published, and I
think the point that needs to be emphasized in this whole area
is what the information is showing, you know, is it
demonstrating concerted efforts by the agencies to address
these management challenges; is there leadership by OMB and the
central agencies in making progress; and then is there support
through oversight in terms of looking how the progress is being
obtained. If you have transparency in information on how the
decisions are being made, you have a basis for looking at that.
As I said, OMB has identified some baseline information, they
have published criteria, and they clearly are assessing
progress. Those are very important points.
From the General Accounting Office's standpoint, we are
assessing progress by comparing agency information with models
that we have out, guidelines that we have published, as well as
with the information that is in the public domain. We have
developed best practices in terms of many of these areas that
can be found in our published documents. As I said,
transparency is going to be critical so that Congress can
provide the desired oversight.
Mr. Platts. I certainly share that belief, as we are trying
to make Government more efficient, that all Members of Congress
and the public at large, the more we know, the more helpful
everybody could be to that effort.
Ms. Dalton. Right.
Mr. Platts. Ms. Styles and Mr. Forman, is there additional
detail or more specifics that OMB could share that would allow
GAO to have maybe a more in-depth understanding of the review
process?
Ms. Styles. Well, we have extensive information that was
published in the budget and is backed up on our Web site,
particularly for the PART, the Program Assessment Rating Tool.
We have extensive background information that is available. We
have had an ongoing dialog with GAO; they actually helped
prepare the criteria in two of these areas. We do not have a
current request. I mean, we certainly are very happy to work
with GAO, but this is, quite frankly, the first that we have
heard of this, in the testimony. We have 24 ongoing requests
for information from GAO in-house right now, seven of which we
received in the past 10 days.
So I would submit that we are working extensively with them
in many areas. We are more than happy to continue working with
them in this area; we just need to know the specifics of the
information they are looking for, because we believe we have a
significant amount of transparency and information that is
available on this on our Web site right now.
Mr. Platts. Well, hopefully if there are more specifics
that you believe you aren't having, you haven't been given
access to, that request could be made; and it sounds like we
will have a very receptive ear at OMB.
Ms. Styles. Absolutely.
Mr. Platts. Thank you.
I am going to now yield to Mr. Towns to allow him to begin
his questioning.
Mr. Towns. Thank you very much, Mr. Chairman.
Let me begin with you, Ms. Styles. Today's Washington Post
has an article about a survey of Federal workers, which Mr.
Sessions, I think, alluded to. It indicates that a little over
one-third of the Federal workers are considering leaving the
Federal work force. To me, that is an indication that, first of
all, the moral is low. I think one of the reasons for that low
moral may well be the outsourcing initiative that you are
running out of OMB, telling a large portion of the Federal work
force that the jobs are in danger of being eliminated, and the
private sector is being brought in.
I am just wondering is this a good way to approach the
problem? We are worried about too many retirements. I think you
are encouraging them. What are your thoughts on this?
Ms. Styles. Well, I don't accept the proposition that
competitive sourcing is demoralizing to our work force. I have
seen many good, and some bad, examples of competitive sourcing.
When it is run right and when it is managed well, it infuses
our work force with pride; they become innovative, they become
competitive, they become more efficient, and they beat the
private sector. One of the best examples, the President just
gave an award to Offutt Air Force Base, where they organized,
they put together a competitive bid, and they won the
competitive sourcing. It couldn't be a better example of our
work force winning and being proud of what they are doing.
Certainly there are examples that haven't gone as well.
What we are focusing on is managing better, making sure that
our work force can compete, that they are trained, that they
have the resources, and that they can put forward a competitive
bid, because in the end we are all going to win if we have a
work force that can compete and can put together a bid that is
on par with the private sector.
Mr. Towns. Let me ask you, Ms. Styles, direct conversion of
functions from Federal employees to the private sector is one
way in which agencies can meet their competitive sourcing
quotas. In a recent Senate hearing you made the statement that
agencies over the last 2 years have made decisions directly
convert that have not been in the interest of the taxpayers.
Would you please explain what you mean when you say that?
Ms. Styles. I am not sure that is an exact quote from the
hearing. I stated that I am concerned, as well as other people
at OMB, that agencies could be motivated to make a direct
conversion under the current circular that would be based on
something other than lowest cost or best value for the agency.
When a function is less than 10 people, the current circular
allows departments or agencies to directly convert that work to
private sector performance on a decision that it is a fair and
reasonable cost.
We would like, and we are considering for the final
circular, to put in place some additional criteria.
Mr. Towns. Like what?
Ms. Styles. Pardon?
Mr. Towns. Could you give us some indication of what you
plan to put in, I mean, some idea? You don't have to be
specific, but generally what you plan to put in.
Ms. Styles. Sure. We are trying right now, although no
final decisions have been made, to formulate criteria that
would ensure that agencies are making a cost-effective
determination; that they take a look at what the capacity of
the Federal work force is; that they do up-front planning,
management assessment and evaluation; and that they look and
see what are potential private sector costs and compare that to
the public sector costs before they make a determination to
send any work out the door. I think what we are looking at
instead of a direct conversion process is one that has a
streamlined competition process in almost every instance, but
one that would give significant flexibility to the agencies to
do that as they would deem appropriate, and to give them the
flexibility to manage their agencies as they would deem
appropriate when we are dealing with smaller functions.
Mr. Platts. If the ranking member would yield, we will come
back to you.
Mr. Towns. I would be delighted to, yes.
Mr. Platts. I would like to recognize Mr. Sessions.
Mr. Sessions. Thank you, Mr. Chairman. I have two quick
questions, if I could, one for the gentlewoman from GAO, Ms.
Dalton.
Can you please characterize the work that you are doing
currently with SBA? It was mentioned that they did not get a
clean audit.
Ms. Dalton. Yes, they haven't had a clean audit. There are
some issues there. I don't have all the specifics on the SBA
situation; we can provide that for you.
Mr. Sessions. Good. If you could please provide some sort
of written feedback from your perspective to the chairman of
this committee and to this member, and to the gentleman Mr.
Towns, I would appreciate it, and myself.
Ms. Dalton. Yes.
Mr. Sessions. Second question I had, chairman, really deals
with Mrs. Styles.
And, by the way, congratulations on your daughter, who
seems to successfully be in the room. That is pretty good. I
don't know whether she is still here or not, but she was. I
don't think my 4-year-old could have done that at all.
Ms. Styles. And she didn't disrupt the hearing. That was
good.
Mr. Sessions. Well, he would have insisted on coming up and
sitting with me.
The question I have is related to this streamlining and
this A-76 process. I am interested in your feedback from a
Pentagon perspective. The Pentagon is what I would call the
behemoth of the processes that go on, and I am interested in
the feedback from a professional aspect that you see in that
relationship.
Ms. Styles. I have an excellent relationship with the
Department of Defense in examining these issues. They have been
an unparalleled resource in really looking at what works and
what doesn't work. They have sat down with me for literally
weeks at a time to assess the draft circular that we sent out
and to help us in building a final circular that will work not
only for the Department of Defense, but for the civilian
agencies as well. I think they are very happy with where we are
with the circular right now. I think they believe that they can
improve their processes using this new circular, and
extensively, dramatically, I think, improve their processes
under this new circular.
Mr. Sessions. So it sounds like that the interaction has
been successful, that they are agreeing with and have provided
information and feedback to you and are excited about using
this process.
Ms. Styles. Absolutely. They have brought in people from
all over the country that have dealt with the A-76 process, and
Defense has been doing this for a long time, but they brought
in people from all over the country to help me, specifically,
in rewriting the circular and understanding the management
problems that they have had in specific and varied instances.
Mr. Sessions. The last question I have, chairman, deals
with homeland security, and I would direct that to anyone on
the panel who chooses to respond. I will first go to Ms. Styles
for the initial response.
Homeland security has become perhaps the most important
element of our Government. What do you see as the challenges
that this subcommittee needs to look at in terms of a movement
between employees, material, those things that inherently might
shift and move to where we don't lose assets, resources,
people; anything that might be contained on this chart. If you
would characterize that. And if you need to tell us you don't
know, that would be fine, but I am interested in anyone on the
panel address that either here or in a followup with a letter,
specifically related to changes, transfers within agencies as
they move to homeland security and those things, and the impact
that you see from the performance measures that might be on
this board.
Ms. Styles. I have a brief comment on it, although I think
we can answer it more extensively for the record. I think when
we deal with competitive sourcing, people sometimes presume
that the homeland securities aren't taken into consideration
when we have private contractors doing activities. And I would
like to point out that we have private contractors, whether
that is Lockheed Martin or Boeing, making some of our most
advanced military technology with the highest level of security
clearances in secured facilities. So we have, at least since
World War II, trusted our contractors with very sensitive
information related to homeland security, and I think that we
have to realize that we are going to continue to trust our
contractors with that type of information.
Mr. Sessions. Chairman, I would ask that if any of the
other witnesses do have any information that they would like to
provide in writing, I would be interested in that. I think it
is a precursor to this subcommittee understanding the
challenges that are ahead in a massive reorganization for the
Government, and I appreciate the gentleman's time and I thank
each of the witnesses.
Mr. Platts. The Chair thanks the gentleman and certainly
will share with Mr. Sessions and all members of the committee
any followup information that can be provided, whether it be on
the SBA question or homeland security. We preaccept your
following up with us in that manner.
Also on the issue of the Small Business Administration, we
do plan a hearing in May focusing specifically on SBA and the
challenges they seem to be having.
Ms. Dalton. Mr. Platts, I would like to just add, on the
homeland security questions, that the General Accounting Office
has identified the implementation and transformation of the
department as a high-risk area; it is one of our newest high-
risk areas, and we have listed a number of things that need to
be done in order to effectively implement the department,
including developing a long-term implementation plan that will
cover the full transformation period, effective human capital
strategies, and a number of other items; and we do have a
report out on that issue.
Mr. Sessions. Chairman, I would like to thank the
gentlewoman. I would be very interested in this subcommittee
staying involved in that also. I know the administration pays
attention to what you have to say, but this Congress needs to
know those issues too, and I thank you.
Mr. Platts. Thank you again, Mr. Sessions, for your
participation and, again, your work with the Results Caucus.
We have a vote in about 13 minutes, so I am going to try to
push through so we can hopefully get a few more questions in,
and know that you all have busy schedules and try to squeeze as
many in before we run over for the vote, and then for any
additional comments that you want to share as followup in
writing, but not to keep you waiting there while we go over to
vote.
Mr. McPherson, if I could turn to you and your efforts,
certainly, a very commendable 18 months at USDA and the
turnaround we have seen there. If you could touch on a two-part
question. One is, as you referenced, you are dealing with the
people you have there. And as I always sound proud to be a
public servant, I don't look at government service as a bad
thing, I look at it as a good. You spoke very favorably about
the department employees and how you have been able to motivate
them, and if you could share some of the secrets of your
success in motivating USDA employees to take on this financial
challenge.
And then also some of the specific tools. You referenced
both the Debt Collection Improvement Act, but also some
internal changes or tools you have used. If you could expand on
what those internal tools are and how we can hope to see them
replicated elsewhere.
Mr. McPherson. Thank you very much. I would say that I
listened, first, carefully to what was important to the program
managers, that is, the Under Secretaries and the agency heads
first to understand the view of the challenge on this financial
management issue from their perspective. Second, I would say we
developed a very clear and consistent message, that is, we do
focus on results and we encourage people to act and behave as
owners and take full responsibility for these tasks. We operate
at a constructively aggressive pace to get to the essence of a
solution and improve, and we really do value the leadership and
talent.
So how we have taken that message, it begins with Secretary
Veneman and my associates in the subcabinet level, people like
J.B. Penn, Mark Ray, Eric Bost. I have become very close with
the agency heads, particularly when we are working with areas
like Forest Service and Dale Bosworth. We have a number of
structured mechanisms to include monthly communications with
the chief financial officers of these agencies, but we are just
a meritocracy, an apolitical meritocracy in the financial
management, and so we are very focused on results, and I think
that is satisfying to people.
As to the techniques on the debt collection, the context
here is those are very valuable results because the numbers are
so large, and I think it was a case of using what was available
to us in our own internal tools. We have made some system
enhancements in the Farm Service Agency and Rural Development
dealing with the ability to get on top of the credits, track
collateral. But it really is just basic good banking, effective
banking, where the people know the customers, credit,
collateral, cash-flow, and are exercising the stewardship with
the cash to get effective public policy outcomes. Their mission
is a little different, obviously, than a commercial lender, but
it is a lot of just basic techniques to do a good job.
Mr. Platts. Well, your numbers certainly speak well of the
efforts. And if there are specific things and a way we could
further enhance the Debt Collection Act that would allow you to
continue that success and expand it, and if there are specific
tools that you reference that are internal that you would be
able to share with us, and we certainly would be glad to share
with others that we will be meeting with, like SBA, who aren't
having maybe the same financial success as USDA is now showing,
we would welcome them.
Mr. Towns.
Mr. Towns. Just a quick question to Mrs. Dalton.
In your written statement you indicated that the current
budget does not always help us to consider the long-term costs
associated with some activities that commit the Government to
future spending. First of all, what do you mean by that, and
what are some of these activities and what should we do to
actually get more complete information to be able to make a
decision?
Ms. Dalton. What I was referring to, Mr. Towns, is that
many of the activities of the Government have a long gestation
period, and the budget deals with, by its nature, 1-year
increments, and at times where there is a long-term investment
decision, you are only seeing that 1-year piece. It is
important to see the full life-cycle of what the investment
entails. A more ready example would be probably weapons systems
acquisition, where it is going to take 5 to 10 years to develop
a good system. Well, when you look at government activities and
government programs, oftentimes it takes a long period to see
results; it takes regular investments over that period, and it
is important to see that.
And through the oversight process I think Congress can be
better informed by looking at the performance goals for a
particular activity; looking at them through--not just for the
current year--but looking out 2, 3, 4, and 5 years. When you
look at an agency's strategic plan, it is looking at those
long-term goals. And there needs to be associated costs, what
are the resources that are going to be committed to those
goals, and seeing that progression also is important so that
the Congress can make a more informed decision as to what we
are buying and what services the American people are going to
be receiving.
Mr. Towns. Thank you very much.
Let me just ask a general question, other than Ms. Styles;
we have heard her on this issue.
Outsourcing, of course, and morale. Is there a correlation?
Anyone want to make a comment on that very briefly? Outsourcing
and morale.
Mr. McPherson. Let me offer a thought for your
consideration, Congressman. The purpose, to me, of competitive
sourcing is to create better enterprises and better jobs for
people, and competitive sourcing is really a how to do that as
a choice. So over time I would hope that what was learned in
industry in the last decade, in terms of alliances,
partnerships, teaming, joint ventures, the ability to attract
the best available talent on demand to perform a mission are
all attractive ways to make better enterprises, more of an open
architecture, if you will.
In our own instance, I mentioned the competitive sourcing
competition on the payroll. We competed 288 jobs in Louisiana
as part of a very rigorous and purposeful competition to be a
payroll provider. To date, that is the largest competitive
sourcing transaction at the Department of Agriculture. And in
this instance Government won, we won. More to come as that
process continues. But it just shows the effectiveness, I
think, of people, career people and cultures of can-do, that
can do results.
So those are some overarching thoughts that I have observed
in the time that I have served in the Federal Government.
Mr. Towns. Thank you very much, Mr. Chairman.
Mr. Platts. Thank you, Mr. Towns.
I am going to squeeze in. I am always running for these
votes, trying to be in all these places as once.
But a followup, Mr. McPherson, on some of the things you
highlighted that allow you to achieve success. Is there
anything in particular that is your greatest obstacle to
changing the mind-set, changing the financial accountability of
our Federal Government agencies?
Mr. McPherson. This is my first time of serving at the
Federal level. I experienced no significant barriers. One that
we have had to break through was an amount of deferred work,
work that had been accumulated over a number of years, whether
it dealt with inadequate computer systems, I mentioned 17
conversions, or feeder systems that handle various items across
the department, or various reconciliations in terms of cash and
checking accounts, as I call them, or property records that
just had not been performed over time. So there was a lot of
catch-up, and I would say that was probably the biggest
barrier.
Mr. Platts. OK. Thank you.
One final question, and I apologize that it is here at the
end, for Ms. Styles and Mr. Forman on the issue of the
scorecard and the fact that OMB is assessing all the agencies
and yet shows red across the board on the five governmentwide
initiatives. What is the greatest obstacle to OMB in setting
that example for everyone else of having green all the way
across? I do take note that you are either green or yellow in
the progress, and I am glad to see that, but what is the
challenge that OMB itself is having in getting to yellow and
eventually green on those five governmentwide criteria?
Ms. Styles. I would start off by saying I think we chose
tough initiatives. I think we chose very problematic areas not
just at other agencies, but at OMB as well; and it is good for
OMB to be scored on these. In competitive sourcing, it makes us
realize the difficult questions and problems that agencies
confront when they have to look at competitive sourcing and the
difficult choices that have to be made, and I assume that it is
the same for the other initiatives as well. I am sure Mark
Forman can address electronic government or e-government at
OMB.
But we also, just so people know that our scores are very
honest, we don't just score ourselves, we send them to other
agencies to validate the scores, which they love to do since we
have been scoring them.
Mr. Forman. I think the change that we are seeing within
OMB, largely under the vision of Mitch Daniels, our Director,
is focused on how we are managing and hold the agency up to
that same standard that we are holding all the other
departments and agencies. It is a change. The world has changed
since last time anyone looked at management, so we, like the
other agencies, are going through similar cultural issues. I
don't know if you could say there is any one that stands out,
but very similar, for example, to the ones that Secretary
McPherson raised at Agriculture.
Mr. Platts. Well, we do look forward to all agencies,
including OMB, to get to that yellow and green, as I am sure
you as well do, and that you are scoring the other agencies.
And certainly this effort is very commendable because unless we
start to scrutinize ourselves, we won't improve, whether it be
us personally or as agencies and representatives of our
taxpayers.
I apologize that we are now out of time and we cannot
continue with more questions, but I greatly welcome further
comments that you want to share, and I thank you for your
testimony here today and the in-depth written testimony, as
well.
Working together, the executive branch and Congress,
certainly we know we can make great strides for more financial
accountability and Government efficiency for our taxpayers, who
we all want to serve well.
But I do thank you for your efforts and being here with us
today.
I will quickly thank the staff, both majority and minority
staff members, who have helped put this hearing together. And
we will hold the record open for 2 weeks from this day for
those who want to forward submissions for possible inclusion
after the fact.
And just once again thank you.
This meeting is adjourned.
[Whereupon, at 11:43 a.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
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