FY 2006 Performance Budget Justification
Salaries and Expenses

The following summarizes the total request for salaries and expenses in 2005, compared with prior years.

1/ Reflects rescission.

2/ Includes the estimated cost of the Administration's legislative proposal to show the full cost of retirees' annuities and health benefits.  

The totals for salaries and expenses in FY 2004 reflect a program level of $65.611 million, after rescission.  The requested totals for FY 2006 are based on maintaining staffing levels currently in effect for FY 2004 and to implement the requested $65.472 million program

The request for salaries and expenses provides for the full costs of the Office of the Federal Co-Chair, its immediate staff, and the Office of the Inspector General.  The request also includes the 50 percent federal contribution to the Commissions Trust Fund for administrative expenses of the non-federal Commission staff. Subtotals for each are in the Table 11.

As required by the ARDA, member states collectively contribute the other 50 percent of the Commission's non-federal staff and related costs.

Office of the Federal Co-Chair

The request of $1.488 million for the Office of the Federal Co-Chair provides for an immediate staff of eight positions, with related benefits, rent, travel, services, and other expenses. This includes the estimated cost associated with the Administration's legislative proposal of having agencies show the full costs of retirees' annuities and health benefits.  The increase in rent costs reflects a change in cost allocation resulting in direct charges to the federal account for the federal staff share of Commission rental space. Previously, the trust fund paid all rental costs.

The Federal Co-Chair's staff is paid entirely by the federal government and assists in carrying out the Federal Co-Chair's responsibilities.  These include working with federal agencies and chairing an interagency organization as provided in the ARDA; serving as the Commission's liaison to the Congress and the Administration; representing the Administration in working with the Member states to formulate regional strategies and other policy; and reviewing projects for final approval by the Federal Co-Chair.

Office of Inspector General

The Inspector General Act Amendment of 1988 (P.L. 100-504) requires ARC to maintain an independent Office of Inspector General (OIG), which reports directly to the Federal Co-Chair. The OIG workload includes a variety of headquarters and grantee reviews/inquiries/investigations that are performed by permanent and contract staff.  For certain investigations and legal issues, the OIG uses reimbursable agreements and Memoranda of Understanding with other federal OIGs.

The OIG requests $476,000 for the expenses of a three-person staff, related expenses, and required contract audit/investigative/legal support. Inspector General activities will continue to emphasize the effectiveness and efficiency of program operations and compliance with laws and regulations affecting grant programs. This includes review and evaluation activities in connection with the GPRA, the Single Audit Act, and GISRA, as well as coordination and cooperation with other oversight offices on crosscutting issues and legislated reviews. Audit activities enable the Commission to produce audited financial statements, as other agencies are required to do under the Accountability of Tax Dollars Act. The request will cover expenses for necessary investigative and legal support, which will be obtained through reimbursable agreements and Memoranda of Understanding with other federal offices of inspector general. 

Commission Non-Federal Operating Expenses

Annual appropriations for ARC fund half of the costs to maintain a professional staff to provide technical support to the states and the federal staff in implementing Commission programs. These funds, and an equal contribution from member states, are deposited into a Treasury trust fund account.  Together with prior year balances, these resources finance all non-federal Commission operating expenses.

The Commission's authorizing legislation specifies that ARC staff employed under the Trust Fund shall not be considered federal employees for any purpose.  Accordingly, these professionals are neither state nor federal employees, even though they work directly for the joint federal-state partnership agency.  An Executive Director, who is appointed by the states and the Federal Co-Chair, manages this staff and is the chief executive officer of the Commission. Table 14 shows the plan for financing Commission operations.

The request would provide minimum operations to support regional planning and programs at the requested level and to manage the 2,000 ARC grants in force. Staff operations have included a significant effort by ARC to assure performance accountability and strong financial management, as well as to implement e-government business processes.

Each year, the states and the Federal Co-Chair must approve the Commission's operating budget.  Following completion of appropriations action, final non-federal staffing decisions are made and must be approved at a Commission meeting of the member states with the Federal Co-Chair. As a result of this consultative process, final allocations may differ from the estimates in Table 15 of amounts by object class. 

The ARC management goal remains to develop effective and efficient management systems and processes and to promote a high-performance organizational culture supporting the strategic plan.  Commission staff will continue to use available resources to promote innovation, improve core competencies and internal communications, enhance technical assistance, improve the monitoring and evaluation of project operations, stress customer service, and deploy affordable technology wherever possible.

Personnel compensation for Commission staff generally follows that of federal employees in the metropolitan area. Benefits are budgeted accordingly, and also include an additional increase for the Administration's legislative proposal to show the full costs of CSRS retirees' annuities and health benefit costs during retirement for those few employees affected. The reduction in rent reflects revised cost allocation policy whereby the rental space used by the federal staff will be a direct cost in the federal staff budget rather than in the trust fund.

Commercially purchased benefits plans for non-federal personnel are projected to increase well above inflation, as is the case with telecommunications and commercial insurance.  In 1999 the Commission revised its retirement program for its non-federal employees.  These changes contained costs for new hires by instituting a fixed contribution 401(k) plan. However, in the short term, the Commission's defined benefit retirement plan remains in effect for some staff, and that plan will continue to require periodic infusions of funds to remain actuarially sound. In recent years, the poor performances of investment markets have required additional funding significantly above plan assumptions.