Fiscal Year 2003 Congressional Budget Justification and Annual Performance Plan

Summary

We have incorporated our FY 2003 Congressional Budget Justification and our FY 2003 Annual Performance Plan required by the Government Performance and Results Act into this single, comprehensive document.

OPM provides human resources management leadership and compensation expertise to the President, federal agencies, and their employees. It oversees the federal civil service merit systems, covering nearly 1.8 million employees, and provides fast, friendly, accurate, and cost-effective retirement, health benefit, and other insurance services to federal employees, annuitants, beneficiaries and agencies.

OPM is leading agencies in implementing the President's human capital initiative. This initiative is designed to make Government more citizen-centered, results-oriented, and market-based, and to enable agencies to meet a standard of excellence by managing the federal workforce to attain goals important to the nation. OPM is working closely with agencies to ensure that they strategically use the broad range of existing human resources management tools to recruit, retain, manage, and develop a high-performing workforce. In addition, OPM will work both to enhance those tools, focusing particularly on modernizing compensation, and to help agencies improve the links between human capital strategies and organizational mission, goals, and performance.

To support its role in assisting agencies to improve their use of human capital, OPM is focused on full implementation of the President's Management Agenda inside the agency. In addition, we are engaged in significant workforce restructuring which will fundamentally realign our agency to focus on our primary customers, the Federal agencies we are here to serve.

In the area of Competitive Sourcing OPM is building on its record of reduced operating costs and increased efficiency through greater reliance on the private sector to perform commercial activities. We have prepared a comprehensive plan to meet the 50% target by the end of FY 2004, and are on target to complete competitions or conversions to meet the 15% goal by the close of FY 2003.

In Financial Management OPM is poised to achieve a green rating as, beginning in FY 2002, our financial management systems are fully compliant with the Federal Financial Managers Improvement Act requirements. In addition, we expect to receive an unqualified audit opinion for the second year on our consolidated financial statements.

Since FY 1999, OPM's budget request and performance plan have been integrated in a single document. By the end of FY 2003, we will complete full implementation of an improved cost allocation system that will clearly demonstrate how past resources have been spent to achieve our stated annual performance goals thus achieving full integration of budget and performance information.

Total discretionary funding of $274 million in FY 2003 is almost evenly divided between OPM's two major missions -- managing and overseeing government-wide human resources and administering the Federal employees benefits trust funds (retirement, health insurance, and life insurance). It also includes $60 million for information technology projects aimed at increasing efficiency and maximizing citizen service. OPM will be the managing partner for five e-Gov projects with governmentwide impact -- Human Resources-Data Network, Payroll Modernization, e-Clearance, e-Training and Recruitment One-Stop. These e-Gov initiatives will streamline and automate the exchange of federal personnel information, integrate HR and payroll processes, cut the cost and time to complete security clearances, deliver training services electronically, simplify federal job applications while reducing hiring times and make retirement claims processing faster, cheaper, and more accurate.

In addition to the discretionary funding, OPM will pay employee benefits totaling $80.3 billion in 2003: $52.8 billion in annuities to more than 2.4 million retired Federal employees, their survivors and other beneficiaries; $25.5 billion in health insurance for 9 million enrollees and dependents participating in 180 plans in the Federal Employees Health Benefits program; and $2 billion in life insurance claims. In 2002, OPM plans to begin to offer group long-term care insurance products to approximately 20 million members of the federal civilian and uniformed services, their families, and retirees. By the start of FY 2003, the open enrollment period will have concluded and the program will be fully operational.

OPM BUDGET REQUEST

OPM's total FY 2003 request of $40.7 billion, an increase of $11.8 billion over FY 2002, is composed of appropriations that are 1 percent discretionary and 99 percent mandatory. OPM's budget request consists of two discretionary appropriation accounts containing general funds and trust funds totaling $273.8 million and three mandatory payment appropriations totaling an estimated $40.5 billion. In FY 2003, OPM's administrative accounts will support 2,945 FTEs, 39 fewer positions than in FY 2002, in part the result of OPM's efforts to streamline the agency, remove excess supervisory layers and conduct competitive sourcing. At a time when OPM is increasing focus on directly serving customers, the agency is using zero-based, activity-based budgeting to redirect resources to support these priorities.

DISCRETIONARY APPROPRIATIONS

Requested appropriations include amounts necessary to fund the full accruing costs of civil service retirement system pensions and post-retirement health benefits for OPM's employees as proposed by the Administration's Managerial Flexibility Act.

Salaries and Expenses:

General Fund: OPM's general fund request for basic operating expenses totals $134.4 million and 802 FTE, which includes a total increase of $34.8 million over FY 2002. The request includes $24.0 million for the governmentwide Human Resources Data Network (HR-DN) project, an increase of $20.8 million, to remain available until expended. It includes $2.5 million for improved governmentwide payroll service delivery, to remain available until expended, and $5.8 million to manage the e-Gov projects of Recruitment One Stop, e-Training and e-Clearance. It also includes $5.7 million for the full cost accrual for pension, health benefits and workers' compensation costs.

Transfers from Trust Funds: For the administration of the civil service retirement and insurance programs, OPM is requesting a total of $126.6 million in transfers from the trust funds for 1,226 FTEs, a total increase of $10.7 million over FY 2002. The request includes $27.6 million for the Retirement Systems Modernization (RSM) project, an increase of $5.9 million, to remain available until expended. The remaining increase of $4.8 million is composed of an increase of $5.8 million for the full cost accrual for pension and health benefits costs offset by a decrease of $1 million in annual transfers from the trust funds.

Advances and Reimbursements: This account also includes 141 FTE to be financed by reimbursements from other agencies for the provision of human resource management technical assistance, and from OPM programs for the provision of agency-wide services.

Office of Inspector General Salaries and Expenses:

The request for the Office of the Inspector General (OIG) totals $12.9 million and 107 FTE, and includes $1.5 million in general funds and $11.4 million in transfers from the trust funds to enable the OIG to carry out its audit, investigative and review responsibilities. The request includes an increase of $0.75 million to increase criminal investigative oversight of the federal health benefit and retirement programs. It also includes $0.6 million for the full cost accrual for pension and health benefits costs. This account also includes one FTE to be financed by reimbursements from the Department of Treasury's Auditor Training Institute.

REVOLVING FUND

OPM provides a variety of services that are financed by payments from other agencies through the Revolving Fund. For ongoing Revolving Fund programs, the FY 2003 budget includes an estimated $353.0 million in obligations and 669 FTEs to be financed by other agencies' payments for OPM's services. These services include: providing professional development and continuous learning for Federal managers and executives; testing of potential military inductees for the Department of Defense in those locations where it is cost-effective for OPM to do so; providing employment information; providing assessment services; automating other agencies' staffing systems; examining for vacancies when requested by an agency; providing technical assistance and general consultation services on all facets of human resources management; and the selection, coordination and development of Presidential Management Interns. The Investigations Service conducts checks, inquiries, and background security investigations of individuals who are candidates for positions identified as critical-sensitive by the requesting agencies and reinvestigations of individuals occupying critical-sensitive positions.

Estimated Revolving Fund obligations include the additional cost associated with funding the full accruing costs of civil service retirement system pensions and post-retirement health benefits for OPM employees.

MANDATORY APPROPRIATIONS

Requested appropriations include amounts in the proposed legislation to fund the full cost accrual for OPM employees' pension and health benefits costs.

Government Payment for Annuitants, Employees Health Benefits:

A "such sums as may be necessary" appropriation is requested for an estimated $11.0 billion, an increase of $4.9 billion over FY 2002, to finance the Government's share of health benefit costs for 1.9 million annuitants participating in the program.

Starting in fiscal year 2003, as part of the President's Managerial Flexibility Act, the Administration proposes to restructure the financing of the FEHB in order to budget for and to fund the cost post-retirement benefits in the accounts and programs where individuals are employed. The proposal provides for the elimination of the fund's existing liability for post-retirement FEHB benefits through a series of 40 annual payments that amortize this liability.

Government Payment for Annuitants, Employees Life Insurance:

A "such sums as may be necessary" appropriation is requested for an estimated $34.0 million, the same as FY 2002, to finance the Government's share of life insurance premiums for 400,000 annuitants under 65 years of age electing post-retirement coverage.

Payment to the Civil Service Retirement and Disability Fund:

A "such sums as may be necessary" appropriation is requested for an estimated $29.4 billion, an increase of $7.3 billion over FY 2002, to finance liabilities created by legislation enacted since 1969 which affected benefits (primarily pay raises).

Beginning in FY 2003, this payment would liquidate the current unfunded liability by 2042, as provided by the "Accrual Funding of Pensions and Retirement Pay" subtitle of the President's Managerial Flexibility Act.

FOUNDATION OF THE FY 2003 ANNUAL PERFORMANCE PLAN

The foundation for OPM's integrated FY 2003 Annual Performance Plan and Budget Justification can be found in Federal Human Resources Management for the 21st Century, our current strategic plan. This plan was developed with input from our stakeholders and issued in September 2000. It is available on OPM's website, at www.opm.gov. The cornerstone for the plan is its mission statement and four related strategic goals.

OPM's MISSION

In order to support the Federal Government's ability to have the best workforce possible to do the best job possible,

• We lead Federal agencies in shaping human resources management systems to effectively recruit, develop, manage and retain a high quality, diverse workforce;
• We protect national values embodied in law, including merit principles and veterans' preference;
• We serve the President, Federal agencies, employees, retirees, their families and the public through technical assistance, employment information, pay administration, and benefits delivery; and
• We safeguard employee benefit trust funds.

OPM'S STRATEGIC GOALS

HOW OPM'S ANNUAL PLAN IS LINKED TO OUR STRATEGIC PLAN

Our FY 2003 Annual Performance Plan is integrated with our Congressional Budget Justification. Because it is linked to the budget, the details of the Annual Plan are organized by program area and funding source.

Our goal in preparing this performance plan has been to ensure that the reader has a clear sense not only of what we plan to accomplish, but also of the particular strategies and tactics we will employ and the measures of success we will use. Each program plan is presented in the same format and includes the following sections:

• Description of Activity -- describes the primary responsibilities for the program, and includes a description of the skills and systems that are necessary for the program to carry out its responsibilities successfully.

• Annual Plan Goals -- each of which are numbered consecutively within each program, and appear directly below the Strategic Plan goal and objective they support.

• Means -- a list of the specific strategies and actions to be carried out in FY 2002 for each goal.

• Indicators/Performance Results -- a list of the indicators, or measures, of success for the annual goal. Each indicator is followed by information, in italics, on accomplishments for FY 2001, and actions for FY 2002 that relate specifically to the performance measure described.

• Verification and Validation -- at the end of each program plan is a list of specific verification and validation strategies for the indicators included in the plan. This list supplements the section under the tab "Verification and Validation" that covers all of our programs.