Slide 1 PMB Conference 22 May 2006 Budget-Performance Integration: Map to the Future ABC Performance...

Slide 1

PMB Conference22 May 2006

Budget-Performance Integration:Map to the Future

ABC

Performance

Finance

Budget

Slide 2


Objectives of Budget and Objectives of Budget and Performance IntegrationPerformance Integration

Measure and improve performance

Drive decision making through performance information

Institutionalize focus on performance

Slide 3


Government-wide Emphasis on Government-wide Emphasis on Increasing Demonstrated Increasing Demonstrated

Performance and EfficienciesPerformance and Efficiencies

OMB is requesting that all agencies:

Report the full cost of achieving performance goals accurately in budget and performance documents and accurately estimate the marginal cost of changing performance goals

Have at least one efficiency measure for all PARTed programs

Use PART evaluations to direct program improvements, hold managers accountable for those improvements

Use PART ratings findings and performance information consistently to justify funding requests, management actions, and legislative proposals

Use marginal cost analysis to inform resource allocations

Improve efficiency each year/achieve efficiency targets.

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Integrating Performance Planning Integrating Performance Planning with Budget Formulationwith Budget Formulation

Performance planning process is being integrated with the budget formulation process

– Performance expected to be reviewed in concert with, and not after, budget formulation

– Budget estimates need to be reviewed in context with performance information, both achieved and predicted

– Table formats in bureau budget submissions include provision of total costs and costs-per-unit-of-performance along with performance results and targets from FY 2004 thru FY 2008

– Performance targets through FY 2008, and a FY 2012 long term target, need to be provided as part of bureau FY 2008 budget submission

– Need to review trends in how funding levels and performance results relate over time

– Providing costs of achieving performance at the Strategic Planning level provides an added overarching context to the collective benefits of various programs

Slide 5


BPI -- The Road So FarBPI -- The Road So Far

Our progress can be gauged in three areas

InfrastructureBudget Documents and Decisions

Our Performance

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Budget Documents and DecisionsBudget Documents and Decisions

What are we looking for in budget formulation?– Bureaus and programs are using performance and cost information to:

• Maximize performance (even when no budgetary changes are proposed)• Direct resources to higher priority goals in both budget formulation and budget execution

– Bureaus and programs implement PART recommendations to improve program performance

– Bureau and program performance targets are ambitious, yet achievable, in relation to reliable baseline and trend data

– Performance targets and cost projections factor in planned performance improvements from management efficiencies and strategic reallocations of resources across programs, projects, and operating units (adjustments to historical cost information)

– Performance and cost information to support Departmental level budget decisions– Performance and cost information distinguishes between performance of programs

that share common goals, but are managed differently– Cost information presented to allow comparisons across bureaus, programs, and

with other Federal agencies (full costs)

What is the outcome?– Limited budgets are applied to maximize priority results

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Budget Documents and DecisionsBudget Documents and DecisionsFirst integrated Performance Budget based upon unified Strategic Plan and Budget in

Brief by Mission Goals; array funding by Goals

Performance information focused at program level; performance information presented in request to DOI and OMB for programs with proposed budget changes only; Budget Justifications required to include performance summaries at the budget line item level

First PARTs

2004

2005 OMB requires Integrated Performance Budget. For OMB submission, first time include budget and performance information on same table – but only for budget changes and performance by year (not incremental or out-year)

Budget Justifications focus on program performance – required reporting of 100% of strategic plan measures at program level. Bureau-wide information limited in scope.2006

2007

Experiment with incremental performance table for President’s budget.

Full suite of 2007 performance targets due with budget submission to the Department. Program specific limited to most important.

Goal performance table modified to provide explanation of changes

Experimented and perfected formats for presenting performance attributable to budgetary changes in the budget year and outyears – Program Performance Change Table (key to presenting projected marginal cost for Budget Year)

Have 2004/2005 trend data available to assess proposed target levels (but not until President’s Budget preparation)

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Budget Documents and DecisionsBudget Documents and DecisionsFor the 2008 budget:

– Stabilized formats, improving content– Emphasis on cost information at performance measure level (total and per

unit)– Increased trend data available for target setting– Cost information in program performance change table important to

demonstrate that we can accurately estimate the marginal cost of changing performance goals

Presently we can determine through ABC/M system how much funding has been applied to pursuing an end outcome goal (helps with priority setting)

We are progressing to defining how much results can be achieved for how much funding by costing to Strategic Plan performance measures (maximizing performance)

Slide 9


Infrastructure to Support Infrastructure to Support Performance BudgetingPerformance Budgeting

Current State: – Performance Budgets are paper documents– Extensive manual effort to complete budgets – not all data elements

needed for budget documents in ABC/M system• Bureau specific measures• Program level contributions to Strategic Plan measures• Impacts of budgetary changes (marginal costs and change in performance)• Outyear impacts of budgetary changes• Rationale/Documentation for target changes• Textual explanations

– Different Methodologies to cost performance measures – Not all bureaus can cost to measures– Limited capability to present cost information at various levels relevant to

different users (e.g. Department versus unit manager)

Future State:– Performance and cost data included in performance budgets is derived

from a single system– Reduction in the size of the budget documents

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Our PerformanceOur Performance

To achieve green in BPI, we must demonstrate that:

– We are improving performance and that we achieve planned improvements in program performance and efficiency in achieving results each year

– PART findings and performance information are used to justify funding requests, management actions, and legislative proposals

Increased trend data will allow us to determine if we are improving performance levels, however, cost information is required to put performance levels in context

Demonstrating efficiency improvements depend upon PART efficiency measures, including establishing targets for improving performance and meeting those targets

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Road to Come: Budget-Performance Integration

#1Link ABC

to performance

measures

#3Research

BestPractices

#2Develop costing

methodology

#4Put

linkage & costing

in budget guidance

#5Implement

BPImethodology

#6Process

Refinement

2007

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Plan of Action - AlignmentPlan of Action - Alignment

Review input from bureau ABC/M program reps; develop consolidated model of work activity linkage to performance measures

Review budget submittals; compare alignment of work activity to performance measures (where applicable) to input from bureau ABC/M program reps

Identify alignment issues:– Inconsistencies between ABC/M program rep input and budget submittal alignment models– Bureau alignment to goals instead of performance measures – validate– Performance measures that could be costed – work can contribute to performance measure

Resolve issues, validate “uncostable performance measures”, develop corporate approach for linking work activities to performance measures

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Plan of Action - AlignmentPlan of Action - Alignment

Assess impact of new/revised measures in draft Strategic Plan update on alignment model; identify adjustments to alignment model that the draft Strategic Plan update would precipitate if adopted as currently presented

Consolidate alignment model with performance measure costing methodology

Coordinate model and costing methodology with PPP, POB, bureaus

Present model and costing methodology to budget, performance, finance, and ABC communities

Incorporate use of model and costing methodology into budget guidance

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Plan of Action – Costing MethodologyPlan of Action – Costing Methodology• Partnership between PFM, GT, AOT and Finance Community• Select three bureaus – FWS, BLM, and NPS• GT will trace Statement of Net Cost to Standard General Ledger expense accounts for selected bureaus

• GT will document three methodologies• PFM, AOT, and Finance Community will select best practice• PFM, AOT, Finance Community and GT will modify best practice for suitability

• Use alignment of activity cost to performance measures to cost performance

Statement of Net Cost

End Outcome GoalResource Protection

Activity

EOG Activity

Task 1Task 2Task 3

Task 1

Labor (11/1200)Travel (2100)

Contract (2500)Supplies (2600)

StandardGeneralLedger61/6400

610061006100

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Activities to Task Relationship ExampleActivities to Task Relationship Example

Administration of Leases

Review New Exploration and Development Plans

Examination of Pipeline Right-of-Way

Annual Safety Inspection

Activities

Annual Safety Inspection TasksActivity Cost Code – ASI12

1 Assign inspector – OC Code 11/1200 or 25002 Prepare for inspection i.e. checklists, sample kits, etc. OC Code 11/1200 or 25003 Travel to site. OC Code 2100 or 25004 Conduct inspection. OC Code 11/1200 or 25005 Submit samples to lab. OC Code 11/1200 or 25006 Prepare final report. OC 11/1200 or 2500

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Best Practice AnalysisBest Practice Analysis

Determine best practice of aligning cost and performance

Gather information from Bureaus on their cost and performance:

– Process – Methodology– Technology

Research non-DOI BPI methodology and recommend best of breed for DOI in aligning cost and performance

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Work ScheduleWork Schedule

Date Event

6 Apr Bureau aligns bureau and DOI ABC activities to Strategic Plan performance measures

19 Apr Consolidate bureau alignments into DOI corporate view (1st iteration of alignment model)

17 May Present corporate view and plan of action to AOT

23 May Review budget submittals; compare alignment of work activity to performance measures (where applicable) to bureau homework; identify alignment issues

30 May Bureaus submit algorithms for Bureaus cost spread to DOI Strategic Plan Performance Measures

19 Jun Review AOT Budget Costing Models and algorithms

19 Jun Trace BLM, NPS, FWS Mission Area cost to the Bureau SGL

29 Jun Resolve issues/develop corporate approach for linking work activities to performance measures (2nd iteration of alignment model); validate uncostable performance measures

Note: Costing Methodology schedule indicated in red

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Work ScheduleWork Schedule

Date Event

29 Jun Assess impact of new/revised measures in draft Strategic Plan update on alignment model

29 Jun Validate algorithms through review of cost reported in the Consolidated Statement of Net Cost

13 Jul Present reconciled alignment model to AOT – (AOT meeting)

17 Jul Produce Bureau Algorithm

26 Jul Document and present to the AOT three methodologies to trace standard general ledger cost to cost allocated to performance measures – (AOT meeting)

26 Jul Select best practice

31 Jul Modify best practice for suitability

4 Aug Document and deliver methodology to trace standard general ledger cost to cost allocated to performance measures to DOI


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Work Schedule Work Schedule

Date Event

9 Aug Consolidate alignment model with performance measure costing methodology

14 Aug Coordinate model and costing methodology with PPP, POB, bureaus

23 Aug Present alignment model and methodology for costing performance measures to ABC, budget, finance and performance communities

Fall 2006 POB incorporates alignment model and costing methodology into budget guidance


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Process RefinementProcess Refinement

Periodic review of new BPI process for refinementwill be ongoing throughout FY06/07, particularlyas we move to FBMS

Validation and verification of information in ABC/Mand performance reporting - used in budgetformulation - will be an ongoing process throughout FY06/07

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What is the Objective?What is the Objective?

Present a summary level view of resource requirements and cost against Strategic Plan end outcome goals and performance measures

Use cost information to develop budgetrequests for targeted levels of performance

Understand the budget sensitivity of themarginal cost of performance and whatresults from work done

View the data and ask questions aboutwhat the data seems to indicate

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SummarySummary

We are making significant progress to the effective integration of financial, performance, and budget information for improved decision making and definition of our future prospects, progress, and resource needs

Success involves the combined talents of the finance, planning, ABC/M and budget communities to ensure the effective application of ABC/M and performance assessment capabilities along with our financial accounting and budget planning activities

These efforts will help improve our own planning and management processes, and increase our credibility with stakeholders to deliver on our commitments, thereby helping to ensure a better future for our programs

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