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entitled 'President's Management Agenda: Review of OMB's Improved 
Financial Performance Scorecard Process' which was released on November 
17, 2006. 

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Report to the Subcommittee on Government Management, Finance, and 
Accountability, Committee on Government Reform, House of 
Representatives: 

United States Government Accountability Office: 

GAO: 

November 2006: 

President's Management Agenda: 

Review of OMB's Improved Financial Performance Scorecard Process: 

Scorecard Process: 

GAO-07-95: 

GAO Highlights: 

Highlights of GAO-07-95, a report to the Subcommittee on Government 
Management, Finance, and Accountability, Committee on Government 
Reform, House of Representatives 

Why GAO Did This Study: 

The President’s Management Agenda (PMA) focuses attention on ensuring 
resources entrusted to the federal government are well managed and used 
wisely. The Office of Management and Budget (OMB) developed standards 
to measure success and a PMA scorecard that gives a “green”, “yellow” 
or “red score” by agency. Green indicates success, yellow indicates 
mixed results, and red indicates unsatisfactory results. For the 
Improved Financial Performance Initiative, GAO was asked to (1) study 
and evaluate OMB’s process and criteria for awarding a green score for 
current status and progress and (2) provide examples of how agency 
managers use financial data to better manage on a day-to-day basis. To 
fulfill these objectives, GAO interviewed OMB and agency officials and 
examined OMB and agency documentation relevant to OMB’s scoring 
process. 

What GAO Found: 

OMB has established a reasonable process for assessing and scoring 
agencies’ current status and progress (two separate scores) under the 
Improved Financial Performance Initiative of the PMA. OMB’s established 
scoring criteria address the fundamental aspects of sound financial 
management and are geared toward achievement of the goals envisioned in 
the Chief Financial Officers (CFO) Act. Seven of the nine current 
status scoring criteria (yellow criteria) are objective and verifiable 
using publicly available information. The remaining two green criteria 
are more subjective and require OMB to make judgments about whether 
agencies (1) currently produce accurate and timely financial 
information that is used by management to inform decision making and 
drive results in key areas of operations and (2) have acceptable plans 
(referred to as a Green Plans) to continuously expand the routine use 
of financial data in decision making in additional areas of operations. 
GAO found OMB’s staff were actively engaged in the scoring process and 
met regularly with agency officials to discuss progress in meeting 
scoring criteria and to provide input into agencies’ efforts to expand 
the use of financial data in their day-to-day management of key agency 
operations. GAO also found opportunities for OMB to enhance the process 
by better documenting its assessments of the more subjective green 
scoring criteria and by systematically tracking the receipt and 
approval of key documents used in the process. 

Agency officials generally supported the scorecard process and stated 
that it has helped to focus top management’s attention on financial 
management issues. The six agencies GAO visited (those with green 
scores as of September 30, 2004, as requested) provided examples on how 
they use financial data as well as performance data to make management 
decisions related to controlling costs, budgeting, allocation of 
resources, and management of contracts and grants. Agency officials 
told GAO that some of the examples or activities demonstrated to GAO 
were also previously demonstrated to OMB to show that the agency was 
using financial data to help inform management decision-making. OMB 
officials said they considered these and other examples in rendering 
the green scores. However, the documentation issues discussed above 
prevented GAO from specifically determining which examples were used by 
OMB in making these scoring decisions. 

The Improved Financial Performance Initiative scorecard process has 
clearly been a catalyst to improve financial management and to 
encourage agency managers to use financial data to enhance decision 
making as envisioned under the CFO Act. Better documenting the key 
decisions would help strengthen what is already a useful management 
tool by helping ensure consistency and continuity in the process and 
would enhance the value of the process to external users. 

What GAO Recommends: 

To help strengthen OMB’s scoring process for the Improved Financial 
Performance Initiative, GAO made two recommendations for OMB to 
establish a process to more systematically document (1) the basis for 
all key decisions and judgments made in determining agency green scores 
and (2) the receipt and review and approval of Green Plans, including 
updates, used in the scoring process. OMB generally concurs with these 
recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-95]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Linda Calbom at (206) 287-
4809 or calboml@gao.gov. 

[End of Section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

OMB Has a Reasonably Designed Scorecard Process, but Documentation of 
the Process Could Be Enhanced: 

Agency-Provided Examples Describing the Use of Financial Data to Manage 
Programs: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: September 30, 2006, Executive Branch Management Scorecard: 

Appendix II: Comments from the Office of Management and Budget: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Dates When Agencies Received Their Current Status and Progress 
Green Scores: 

Figures: 

Figure 1: Improved Financial Performance Initiative Scorecard Criteria: 

Figure 2: Current Status Scores and Progress Scores for Improved 
Financial Performance Initiative: 

Abbreviations: 

BAJA: Budget Automation, Justification and Administration: 

CFO: Chief Financial Officer: 

DOE: Department of Energy: 

EBSA: Employee Benefits Security Administration: 

Education: Department of Education: 

EPA: Environmental Protection Agency: 

ETA: Employment and Training Administration: 

FFMIA: Federal Financial Management Improvement Act: 

FSA: Federal Student Aid: 

Labor: Department of Labor: 

NSF: National Science Foundation: 

OCFO: Office of the Chief Financial Officer: 

OMB: Office of Management and Budget: 

ORBIT: OCFO Reporting and Business Intelligence Tool: 

OSRTI: Office of Superfund Remediation and Technology Innovation: 

PAR: performance and accountability report: 

PMA: President's Management Agenda: 

SSA: Social Security Administration: 

United States Government Accountability Office: 
Washington, DC 20548: 

November 16, 2006: 

The Honorable Todd R. Platts: 
Chairman: 
The Honorable Edolphus Towns: 
Ranking Minority Member: 
Subcommittee on Government Management, Finance, and Accountability: 
Committee on Government Reform: 
House of Representatives: 

In August 2001, the Bush administration launched the President's 
Management Agenda (PMA) with the stated purpose of focusing attention 
on ensuring that the resources entrusted to the federal government are 
well managed and wisely used. The PMA targets five management 
initiatives--strategic management of human capital, competitive 
sourcing, improved financial performance, expanded electronic 
government, and budget and performance integration. The Office of 
Management and Budget (OMB) developed criteria to measure success and a 
PMA scorecard to track agency progress for each of the five 
initiatives. The scorecard employs a traffic light grading system to 
indicate both the agencies' current status in achieving the PMA goals 
and the periodic progress made by agencies for each of the five 
initiatives --"green" indicates success, "yellow" indicates mixed 
results, and "red" indicates unsatisfactory results. While the PMA is 
primarily intended to be an internal management tool to drive 
improvements for these five management initiatives, the resulting 
scores are publicly disseminated on OMB's Web site, in the annual 
Financial Report of the United States Government, and the annual Budget 
of the United States Government. 

The goals of the Improved Financial Performance Initiative (the focus 
of this report) are consistent with the goals envisioned in the Chief 
Financial Officers (CFO) Act, which, among other things, are to improve 
agencies' financial management and provide for the production of 
complete, reliable, timely, and consistent financial information for 
use by the executive branch and Congress in the financing, management, 
and evaluation of federal programs. As of September 30, 2006, 8 of 26 
agencies scored by OMB had a green current status score in the area of 
Improved Financial Performance and 24 of 26 agencies had green progress 
scores. To better understand the process and criteria by which OMB 
assesses agencies in the area of Improved Financial Performance, you 
requested that we (1) study and evaluate OMB's process and criteria for 
awarding a green designation for current status and progress and (2) 
provide examples of how agency managers use financial data to better 
manage their agencies on a day-to-day basis for those agencies that had 
achieved a green current status score for the Improved Financial 
Performance Initiative, as of September 30, 2004. At that time, six 
agencies had green current status scores: the Departments of Education 
(Education), Energy (DOE),[Footnote 1] and Labor (Labor); the 
Environmental Protection Agency (EPA); the National Science Foundation 
(NSF); and the Social Security Administration (SSA). 

To address the first objective and obtain an understanding of the 
scoring process, we interviewed OMB and agency officials and reviewed 
relevant literature, including documents available on OMB's Web site 
and agency performance and accountability reports (PAR), which include 
audited financial statements. We reviewed OMB's published scorecard 
criteria and the reference guide OMB prepared to help agencies 
understand the green criteria and prepare for discussions and 
demonstrations with OMB on how the agencies were meeting the scoring 
criteria. Also, we independently assessed whether agencies had met the 
seven yellow current status scoring criteria. Initially, OMB would not 
provide us access to the key documents used in the scoring process 
because it considered these documents to be deliberative and 
predecisonal. These documents, which are described in the background 
section of this report, included the agency quarterly scorecards, Proud 
to Be documents, and Green Plans. After OMB received a draft of our 
report for comment describing this initial scope limitation, OMB 
granted us access to review these documents on its premises but still 
would not provide us access to its written comments on agency plans or 
other communications, such as emails, relating to the scoring 
determinations. This particular restriction did not significantly limit 
our ability to fulfill the objectives of this review. 

To address the second objective, we reviewed agency documents, 
including agency PARs. We interviewed agency officials and attended 
briefings by personnel of the six agencies in our review, at which 
officials demonstrated examples of how financial information was used 
to make decisions about their programs. However, we did not determine 
how widespread the use of these examples was throughout the agencies. 
We also did not verify that the use of the information ultimately 
resulted in better decisions or better-managed programs. We did not 
obtain information from the agencies that obtained a green current 
status score for Improved Financial Performance subsequent to September 
30, 2004, including the Department of Commerce, the Department of 
State, the General Services Administration, and the Smithsonian 
Institution. 

We performed our work in accordance with generally accepted government 
auditing standards. We conducted our initial work from April 2005 
through March 2006. We updated our work from July 2006 through November 
2006 after OMB provided us access to the agency quarterly scorecards, 
Green Plans, and Proud to Be documents. 

Results in Brief: 

Overall, OMB has established reasonable scoring criteria and helpful 
guidance describing what agencies must do to achieve "green scores" for 
the Improved Financial Performance Initiative. OMB has also designed 
and implemented a quarterly scoring process to assess whether agencies 
have met these criteria and are making progress in expanding the 
routine use of financial data in management decision making in key 
areas of operations. OMB's established scoring criteria address the 
fundamental aspects of sound financial management and require clean 
audit opinions, sound internal controls, compliance with applicable 
laws and regulations, and financial systems that are compliant with 
federal standards. Seven of the nine current status scoring criteria 
(i.e., the yellow or compliance criteria) relate to these aspects and 
are objective and verifiable using publicly available information. The 
remaining two green or results criteria are more subjective and require 
OMB's staff to make judgments about whether the criteria have been 
satisfied. These two criteria require agencies to (1) demonstrate that 
they currently produce accurate and timely financial information that 
is used by management to inform decision making and drive results in 
key areas of operations and (2) have a plan (referred to as a Green 
Plan) to continuously expand the routine use of financial data in 
decision making in additional areas of operations. We found OMB's staff 
were actively engaged in this scoring process and met regularly with 
agency officials to discuss progress in meeting the scoring criteria 
and to provide input into agencies' data expansion efforts. 

While OMB's scoring process is reasonable and useful as an internal 
management tool, we did note some opportunities for OMB to enhance the 
process. Specifically, the factors supporting OMB's key decisions and 
judgments relating to the more subjective green criteria were not fully 
documented. Some of the factors were discussed in the documentation OMB 
made available for our review, but OMB officials had to provide us with 
additional verbal explanations in order for us to better understand the 
rationale for awarding the green scores. Further, the Green Plans and 
updates to these plans, which are key documents used in the scoring 
process, lacked evidence of OMB's review and approval. Also, there was 
no formalized process to track the receipt of Green Plans or subsequent 
updates. Consequently, it was difficult to readily identify the most 
current plan on file. To help ensure consistency and continuity in the 
scoring process over time and as the staff involved change, it would be 
advantageous to OMB to more systematically document these and other 
factors that are critical to these decisions. 

Agency managers we contacted generally supported the Improved Financial 
Performance Initiative because it has helped to focus top management's 
attention on the financial management challenges confronting the 
agencies. Managers and staff at each of the six agencies we visited 
provided examples of how they were currently using financial as well as 
performance data to make management decisions related to controlling 
costs, budgeting, allocating resources, and managing contracts and 
grants. These activities, if performed routinely, provide management 
with valuable, decision-enhancing information. For example, Education's 
office of Federal Student Aid (FSA) developed an activity- based cost 
accounting system to better analyze and manage its costs. As a result, 
FSA reported to us that it had reduced the unit cost for loan 
consolidations from $115 per unit to $66 per unit over an 18-month 
period. Agency officials told us that some of the examples or 
activities demonstrated to us were also previously demonstrated to OMB 
to show that the agency was using financial data to help inform 
management decision making. However, because of the documentation 
issues discussed above, we were not able to determine specifically 
which example or examples formed the basis for OMB's green decisions. 

To help strengthen OMB's scoring process for the Improved Financial 
Performance Initiative, we recommend that the Director of OMB direct 
the Office of Federal Financial Management to establish a process to 
more systematically document: 

* the basis for all key decisions and judgments made in determining 
agency green scores and: 

* the receipt and review and approval of Green Plans, including updates 
used in the scoring process. 

We provided a draft of this report for comment to the Director of OMB. 
We also provided applicable sections of the draft report to officials 
of Education, DOE, Labor, EPA, NSF, and SSA. In comments on a draft of 
this report, OMB stated that it generally concurs with these 
recommendations and outlined steps it is taking in response to our 
recommendations. 

Background: 

In August 2001, the President launched a Management Reform Agenda to 
"address the most apparent deficiencies for which the opportunity to 
improve performance is the greatest." OMB, in conjunction with the 
President's Management Council, developed standards for success in each 
of five governmentwide initiatives. The five governmentwide initiatives 
include strategic management of human capital, competitive sourcing, 
improved financial performance, expanded electronic government, and 
budget and performance integration. 

OMB utilizes an Executive Branch Management Scorecard to track results 
toward achieving the goals of the PMA. The scorecard, issued quarterly, 
employs a traffic light grading system. Scores for each of the five 
initiatives are given for both "current status" and "progress." Initial 
scores were developed in 2001 for 26 executive agencies, including 23 
of the 24 CFO Act agencies, the U.S. Army Corps of Engineers, the 
Smithsonian Institution, and OMB itself.[Footnote 2] The first current 
status scorecard was issued by OMB on September 30, 2001, while 
progress scores were first issued on June 30, 2002. See appendix I for 
the September 30, 2006, OMB scorecard. 

There are separate current status criteria for each of the five 
governmentwide initiatives. Scores for "current status" are based on 
the scorecard standards for success developed by OMB with input from 
the President's Management Council[Footnote 3] and experts throughout 
government and academe. According to OMB, these standards have been 
refined based on continued experience implementing the PMA. For all 
five governmentwide initiatives, OMB assesses an agency's "progress" on 
a case-by-case basis against the deliverables and time lines 
established for each initiative. The green, yellow, and red score 
criteria range from successfully implementing plans to plans being in 
serious jeopardy of failure absent significant management intervention. 

This report, as requested, focuses on the Improved Financial 
Performance Initiative, which OMB has described as a management tool. 
Under this initiative, agencies are expected to implement integrated 
financial and performance systems that routinely produce information 
that is timely, useful, and reliable to facilitate better performance 
measurement and decision making. This should help achieve the goals 
that Congress established in the CFO Act, including: 

* provide for improvement, in each agency of the federal government, of 
systems of accounting, financial management, and internal controls to 
ensure the issuance of reliable financial information and to deter 
fraud, waste, and abuse of government resources and: 

* provide for the production of complete, reliable, timely, and 
consistent financial information for use by the executive branch of the 
government and Congress in the financing, management, and evaluation of 
federal programs. 

Agency quarterly scorecards; corrective action plans; Green Plans, 
including updates; annual Proud to Be documents; and the annual PAR 
plus some additional documentation are used by OMB in the scoring 
process for the Improved Financial Performance Initiative. The 
following summarizes the content of these documents and describes how 
they relate to one another. 

The agency quarterly scorecards have three columns and are prepared 
using a standardized template. The first column shows the current 
status color score and a checklist that shows whether an agency has met 
each of the green and yellow criteria. The second column shows the 
progress color score and some of the factors for the score, including 
actions taken and actions planned to expand the use of financial data 
in day-to-day operations. The third column provides space for general 
comments, including comments on the status of efforts to prepare or 
update the agency Green Plans, matters relating to individual 
initiatives, and in some cases explanations for changes to agency's 
scores. 

An agency is required to file a corrective action plan when it has a 
material weakness or has received a current status red score. 
Corrective action plans state how an agency plans to correct its 
financial management deficiencies. Filing the corrective action plan 
may enable an agency to obtain a green score for progress.[Footnote 4] 

The Green Plan is a living document that an agency will periodically 
update and expand. It acts as the agreement between OMB and the agency 
on the agency's near-and long-term areas of focus and what key actions 
and goals will be tracked on the quarterly agency scorecard. Green 
Plans must be approved by OMB. Beginning in fiscal year 2005, for 
current status, if an agency has a yellow score, and therefore is 
working toward a green score, or had a green score, it is required to 
provide OMB a Green Plan. 

Agencies submit the Proud to Be document to OMB in June following a 
standardized template. It documents the goals an agency would be proud 
to achieve during the next 12 months. There is a section for each PMA 
initiative (all five management areas), which gives the status for the 
Standards for Success (scoring criteria) and lists key milestones. For 
the Improved Financial Management sections the following information is 
included: (1) checklists for green and yellow standards, (2) key 
milestones for the last quarter of the current fiscal year and the 
first three quarters of the next fiscal year and also ongoing items, 
and (3) key results that the agency would be proud to achieve. These 
milestones cover initiatives included in the agency Green Plans. 

The PAR is completed each November and, among other things, contains an 
agency's annual financial statements and the related independent 
auditor's report on those statements. It also includes the auditors 
report on internal controls and compliance with laws and regulations. 
The PAR is the principle support for whether the yellow criteria have 
been met. 

According to an OMB official, the specific documentation maintained by 
OMB to support the Improved Financial Performance scores varies by 
agency and can include but is not limited to the following: 

* agency quarterly scorecard; 

* the Green Plan (beginning first quarter fiscal year 2005); 

* Proud to Be document; 

* PAR (also includes the major management challenges used by OMB to see 
if agency plans are dealing with these challenges); 

* corrective action plans (submitted by an agency if there is a 
material weaknesses in its financial performance); 

* reports on Anti-Deficiency Act violations;[Footnote 5] 

* written OMB questions and the agency's responses; and: 

* briefing documentation, including slides and system screen prints. 

OMB Has a Reasonably Designed Scorecard Process, but Documentation of 
the Process Could Be Enhanced: 

OMB has developed reasonable scoring criteria and helpful guidance 
describing what agencies must do to achieve "green scores" for the 
Improved Financial Performance Initiative. OMB has also designed and 
implemented a quarterly scoring process to assess whether agencies have 
met these criteria and are making progress in expanding the routine use 
of financial data in management decision making in key areas of 
operations. Implementation of OMB's scoring process has clearly been a 
catalyst to improve financial management and to encourage agency 
managers to use financial data to enhance decision making as envisioned 
under the CFO Act. While OMB's scoring process is reasonable and useful 
as an internal management tool, based on the six agencies we reviewed, 
we noted some opportunities for OMB to enhance its documentation of the 
scoring process. 

OMB Has Reasonable Scoring Criteria and Helpful Guidance for Developing 
Green Plans: 

OMB has developed reasonable scoring criteria for the Improved 
Financial Performance Initiative. Separate criteria exist for the 
current status and progress scores. There are seven yellow (or 
compliance) criteria and two additional green (or results) criteria 
that must be satisfied to receive a green current status score. The 
seven yellow criteria address the fundamental aspects of sound 
financial management and require clean audit opinions, sound internal 
controls, compliance with laws and regulations, and financial systems 
that comply with federal standards. Most of the yellow criteria are 
assessed annually and are verifiable using the agencies' annual PARs. 
OMB considers meeting the yellow criteria as a proxy for having timely, 
reliable financial information. The two additional green criteria are 
more subjective and require OMB to make judgments about whether the 
agencies have met the criteria. These green criteria require agencies 
to (1) demonstrate that they currently produce accurate and timely 
financial information that is used by management to inform decision 
making and drive results in key areas of operations and (2) have plans 
(i.e., the Green Plans) to expand the routine use of financial 
information in decision-making in additional areas of operations. 

According to an OMB official, the progress scores depend on agencies' 
success in implementing the Green Plan initiatives or corrective 
actions needed to address identified financial management weaknesses 
(when an agency has not achieved a green current status score) within 
established milestones. Based on OMB's criteria, if an agency is 
successfully implementing its plans within expected time frames, the 
agency will receive a green progress score. Conversely, if an agency's 
plans are not likely to achieve the objectives or if there are 
significant slippages in meeting the milestones, the agency would 
receive a yellow or possibly even a red progress score. 

Current status and progress criteria in effect as of the December 31, 
2005, scorecard, when the last change was made to the scoring criteria, 
are as shown in figure 1. 

Figure 1: Improved Financial Performance Initiative Scorecard Criteria: 

[See PDF for image] 

Source: OMB. 

[A] Although OMB guidance calls for auditors to provide negative 
assurance when reporting on an agency system's FFMIA compliance, as 
stated in GAO, Financial Management: Improvements Under Way but Serious 
Financial Systems Problems Persist, GAO-06-970 (Washington, D.C.: Sept. 
26, 2006), we believe that a statement of positive assurance is a 
statutory requirement under FFMIA. In addition, negative assurance may 
provide the false impression that the agencies' systems substantially 
comply with the requirements of FFMIA. FFMIA is set forth at 31 U.S.C. 
§ 3512 note. 

[End of figure] 

The Improved Financial Performance Initiative current status criteria 
have evolved over the years, while the progress criteria have remained 
substantially the same. The following are key changes that OMB has made 
to the current status criteria: 

* As of September 30, 2004, the yellow criteria were amended to require 
an unqualified opinion on the agency's financial statements. For fiscal 
years 2001 through 2003, the yellow criteria required only an opinion 
on the financial statements.[Footnote 6] 

* For the first quarter of fiscal year 2006, the yellow criteria for 
internal control weaknesses and the Federal Managers' Financial 
Integrity Act[Footnote 7] were changed from "no material weaknesses" to 
"no repeat material weaknesses." According to an OMB official, the 
criteria were revised to incorporate the December 21, 2004, revision to 
OMB Circular No. A-123, Management's Responsibility for Internal 
Control, effective in fiscal year 2006. This official added that 
agencies can report material weaknesses pursuant to OMB Circular No. A- 
123 without fear of their green current status score for Improved 
Financial Performance being negatively affected. 

* For the first quarter of fiscal year 2006, the words "and timely" 
were added to the second green criterion, which now reads "currently 
produces accurate and timely financial information." 

A summary of the initial and September 30, 2006, quarterly current 
status and progress scores for the Improved Financial Performance 
Initiative for the 26 government agencies scored by OMB is shown in 
figure 2. 

Figure 2: Current Status Scores and Progress Scores for Improved 
Financial Performance Initiative: 

[See PDF for image] 

Source: OMB scorecards. 

[End of figure] 

Table 1 shows when the six agencies we reviewed first received a green 
score for current status and progress for the Improved Financial 
Performance Initiative. 

Table 1: Dates When Agencies Received Their Current Status and Progress 
Green Scores: 

Agency: National Science Foundation; 
Current status--date agency received first green score: 9/30/2001; 
Progress--date agency received first green score: 6/30/2002. 

Agency: Environmental Protection Agency; 
Current status--date agency received first green score: 6/30/2003; 
Progress--date agency received first green score: 9/30/2002. 

Agency: Social Security Administration; 
Current status--date agency received first green score: 6/30/2003; 
Progress--date agency received first green score: 6/30/2002. 

Agency: Department of Education; 
Current status--date agency received first green score: 12/31/2003; 
Progress--date agency received first green score: 12/31/2002. 

Agency: Department of Energy; 
Current status--date agency received first green score: 6/30/2004; 
Progress--date agency received first green score: 6/30/2002. 

Agency: Department of Labor; 
Current status--date agency received first green score: 9/30/2004; 
Progress--date agency received first green score: 6/30/2002. 

Source: OMB scorecards. 

[End of table] 

Since receiving its Improved Financial Performance Initiative green 
scores for current status and progress, each agency included in our 
review, except for DOE and Labor, has maintained its quarterly green 
scores through September 30, 2006. DOE received a red current status 
score for the Improved Financial Performance Initiative as of December 
31, 2005. DOE received the red score because the agency received a 
disclaimer of opinion from its auditor on its fiscal year 2005 
consolidated financial statements, meaning that the auditor was unable 
to express an opinion, and was not in compliance with FFMIA. DOE 
implemented a new financial accounting system in April 2005 and adopted 
a new chart of accounts. Because of various issues with the system, DOE 
was unable to provide accurate financial data and could not always 
provide supporting documents required for the audit. This limited the 
scope of the auditor's work. DOE continued to receive a red current 
status score through September 30, 2006. 

DOE received a yellow progress score for the Improved Financial 
Performance Initiative as of March 31, 2005. This score returned to 
green as of June 30, 2006. Additionally, Labor's progress score slipped 
from green to yellow as of March 31, 2006, but rebounded the next 
quarter. For both agencies, the quarterly agency scorecards provided 
explanations for the change in these progress scores. 

In July 2005, OMB issued a reference guide, entitled Achieving Green in 
Financial Performance, to help agencies understand the green current 
status criteria and what is required to prepare an acceptable Green 
Plan to satisfy these criteria. Agency officials told us that the 
guidance was helpful to them. Specifically the guidance provides the 
following information. First, it explains what is required to meet the 
green current status criteria for (1) producing accurate timely 
financial information used by management to inform decision making and 
drive results in key areas of operations and (2) implementing a plan to 
continuously expand the scope of its routine data used to inform 
management decision making in additional crucial areas of operations. 
Second, it lists three primary areas of information and related 
detailed components of these areas for each initiative in the agencies' 
Green Plans that must be approved by OMB to satisfy the green criteria. 
These areas are: 

* financial (or business) goals that are critical to management, 

* how data are used strategically to achieve the goals, and: 

* how success is measured (e.g., reduce cost, increase efficiency) to 
provide evidence that the desired goal is being achieved. 

Third, the guidance gives agencies some general assistance concerning 
discussions with OMB, including demonstrations and describing how the 
criteria are being met. Finally, the guidance provides examples of 
initiatives accepted by OMB under the green criteria. According to an 
OMB official, the guidance is currently being revised and will include 
additional examples of initiatives accepted by OMB in determining green 
scores. 

The useful guidance provided to agencies for implementing the Improved 
Financial Performance Initiative, combined with the specific criteria 
established by OMB, result in a reasonably designed scorecard process 
for this PMA initiative. 

Enhanced Documentation Would Benefit the Overall Scoring Process: 

While OMB's scoring process is reasonably designed and useful as a 
management tool, we noted some opportunities for OMB to enhance its 
documentation of the process for determining green scores and to help 
ensure consistency and continuity of the process over time and as the 
staff involved changes. Specifically, 

* key factors supporting OMB's green designations were not fully 
documented; 

* there was little evidence that the Green Plans and updates to these 
plans, which are key documents used in the scoring process, had been 
reviewed and approved by OMB; and: 

* there was no formalized process to track the receipt of Green Plans 
or subsequent updates. 

As discussed earlier, to obtain and maintain a green current status 
score, an agency must satisfy OMB's seven yellow criteria plus two 
additional green criteria. We were able to independently assess whether 
the six agencies in our review had met OMB's generally objective yellow 
criteria as of September 30, 2004, and December 31, 2005. This was done 
using publicly available agency PARs that included agency audit reports 
and information from OMB on when they received agency interim financial 
reports. However, for the other green current status criteria as well 
as the progress score criteria, which are more subjective, we could not 
tell from the documentation made available to us by OMB the basis for 
their overall agency assessments or key decisions or judgments made 
during the scorecard process. For example we could not determine which 
initiatives were used by OMB to satisfy the green score criteria for 
agencies in our review. OMB officials discussed with us factors they 
considered in determining if agencies satisfied the green current 
status criteria, and these explanations seemed reasonable. We found 
that OMB staff have been actively engaged in the scoring process and 
meet regularly with the agencies to discuss the agencies' progress in 
meeting the scoring criteria and to provide input into agencies' data 
expansion efforts. According to an OMB official, OMB uses emails to 
provide agencies written comments on agency Green Plans in addition to 
comments provided during meetings with agencies, but these 
communications were not made available to GAO for review. However, this 
OMB official also stated, they do not document specifically how an 
agency satisfied the green current status or progress criteria 
including what key activities or initiatives for using financial data 
for decision-making purposes were involved. 

In addition, we could not discern how OMB evaluates and determines the 
sufficiency of individual initiatives or activities, in relation to key 
operations of the agency as a whole, when awarding a green current 
status score. OMB's green current status criteria include implementing 
the Green Plan to continuously expand the scope of an agency's routine 
data use to inform management decision making. According to OMB's Green 
Plan guidance, this requires agencies to provide evidence that 
information is actively being used to help them achieve results in key 
areas of operations. An OMB official stated that OMB personnel have 
reviewed agency Green Plans and are satisfied that the plans meet the 
criteria for covering certain levels of operations. However, the levels 
of operations that were required to satisfy the criteria were not 
defined. In addition, the official stated that there is no written 
documentation or explanation of how an agency has covered a certain 
level of operations and therefore was justified in receiving a green 
current status score. Documenting these types of key assessments would 
help ensure consistency and continuity in OMB's process for awarding 
the green scores. This documentation would be particularly important 
when changes are made in OMB staff involved in the scoring process. 

During our review, we also found that OMB could not readily identify 
the most current Green Plans or updates to the Green Plans for the six 
agencies in our review. For example, we were given access to a Green 
Plan for each of the six agencies and were told by an OMB official that 
they were the current plans. We later saw more recent Green Plans for 
two of the six agencies. We were subsequently given access to updates 
to Green Plans for three of these agencies. However, it was unclear 
whether these were the current updates or if there were any other 
updates, and two Green Plans were marked "DRAFT." Further, the plans 
that were provided to us by OMB lacked evidence of any review or 
approval by OMB. 

An OMB official acknowledged that OMB had no systematic way of tracking 
Green Plans, including identifying what is the current agency Green 
Plan. This official added that the only way OMB personnel have for 
tracking Green Plans or updates to Green Plans is their written 
analysis of Green Plans or updates that are provided to agencies but 
were not available to us. A systematic method for tracking Green Plans 
and documenting the review of the plans would help ensure that OMB 
personnel can readily identify the most current Green Plan on file and 
whether the plan has been approved by OMB. 

Agency-Provided Examples Describing the Use of Financial Data to Manage 
Programs: 

Officials in the six government agencies we contacted generally 
supported the scorecard process saying it helped to focus top-level 
management attention on financial management issues. Managers and staff 
at each of the six agencies we visited provided examples of how their 
respective offices were using financial as well as performance data to 
make management decisions involving controlling costs, preparing 
budgets, allocating resources, and managing contracts and grants. They 
also demonstrated some of the system capabilities that facilitated 
using financial data in the management decision-making process, 
including some of the automated mechanisms used to disseminate data to 
staff and managers in a timely manner. These officials said that many 
of the examples provided to us were also provided to OMB for the 
quarterly scoring process. However, because of previously discussed 
documentation limitations, we were not able to determine specifically 
which example or examples formed the basis for OMB's green decisions. 

The following are highlights of some of the examples provided to us by 
the six agencies. 

* EPA officials in the Office of the Chief Financial Officer (OCFO) 
demonstrated to us the Web-based OCFO Reporting and Business 
Intelligence Tool (ORBIT), which according to EPA officials, integrates 
financial, administrative, and program performance information to 
assist agency managers in making decisions about their programs and 
operations. One of ORBIT's features is a Management Dashboard, which 
provides users with a quick view of EPA's financial and budgetary 
status and presents information in a series of charts and graphs called 
analytics to alert managers to situations out of normal ranges. For 
example, the appropriation utilization alerts analytics alerts a user 
with a red light if more than 50 percent of an annual appropriation has 
been obligated early in a fiscal year. 

* NSF officials told us that data in grantee financial reports, 
submitted to NSF through FastLane, a real-time Web-based system, showed 
that approximately 10 percent of NSF's grantees reported a cash balance 
at the end of each reporting quarter. This means that grantees had 
either up to a 10-day cash reserve, which NSF permits, or in some cases 
over the 10-day reserve which NSF considers to be excess cash. NSF 
officials added that monitoring procedures, which they implemented 
during fiscal year 2005, produced a recovery of over $3.2 million in 
excess cash held by grantees and a 33 percent decrease in the number of 
grantees reporting cash on hand. 

* A DOE Office of Environmental Management official described to us how 
its Web-based Budget Automation, Justification, and Administration 
(BAJA) tool automatically generates and facilitates changes to its 
annual Congressional Budget Submission. Using BAJA, the effects of data 
changes automatically flow throughout the document, making the process 
much quicker and more reliable than the old manual process. 

* An SSA official described to us how he used workload information from 
SSA's Unified Measurement System and other financial information, such 
as real-time budget allocation and expenditure data, to reallocate 
workloads (i.e., claims to be processed) among two different field 
offices to better match the available staff resources. He told us that 
in past years, SSA managers did not have the allocation tools that are 
currently available. The availability of current budget allocation and 
spending data enabled him to consider the estimated costs of moving 
staff versus moving the work. 

* Officials from Labor's Employee Benefits Security Administration 
(EBSA) told us how they use obligation data from DOLAR$ (Labor's core 
accounting system) and unit cost data from CAM (Labor's cost accounting 
system)[Footnote 8] to allocate funding resources and otherwise manage 
their business in situations where EBSA is uncertain about the amount 
of funding it will have for a year when the amount of its annual 
appropriation is not known until later in the fiscal year. Using the 
DOLAR$ and CAM data for equivalent prior periods and adjusting for 
mandatory cost increases (e.g., payroll and rent), EBSA managers told 
us that they (1) determine the amount of program costs that EBSA can 
afford to finance within the constraints of that funding level; (2) 
assess whether special or extraordinary measures, like a hiring freeze, 
furloughs, or reducing or eliminating certain commitments, are needed 
to remain within that funding level; and (3) then target resources to 
achieve the program's objectives. 

* Officials from Education's FSA office told us they developed an 
activity-based cost accounting system to better manage FSA's costs. 
According to the FSA officials, they used unit cost information 
developed from the cost system as a tool to renegotiate and consolidate 
several contracts relating to the administration of FSA's direct loan 
program and reduced FSA's unit cost for loan consolidations from $115 
per unit to $66 per unit, over a period of 18 months. 

* Labor's Employment and Training Administration (ETA) officials 
described to us how they used financial information to help manage 
construction contracts for the $1.4 billion Job Corps program. ETA 
officials showed us an example of a report that contains contractor 
information, such as company name, contact person, narrative of the 
scope of work, and planned and actual schedule dates, along with 
financial information such as budget, authorized spending, and contract 
modification amounts. ETA officials said they use this report to track 
costs and schedule data in order to make decisions related to the 
contracts during monthly meetings between the contractor and Job Corps 
management. 

* EPA officials in the Office of Superfund Remediation and Technology 
Innovation (OSRTI) demonstrated to us the Web-based system called 
Superfund eFacts, which extracts information from a database containing 
general program information on Superfund sites across the nation and 
also contains financial information from EPA's Integrated Financial 
Management System. OSRTI staff showed us eFact's ability to drill down 
to detailed financial information, such as obligation amounts related 
to a site, by clicking on charts and spreadsheets from a listing of 
Superfund sites. EPA officials told us the information in the charts is 
updated nightly and that prior to the implementation of eFacts, 
managers could only get hard copy reports on an ad hoc basis from a 
contractor and that the program and financial information in eFacts 
allows for information to get to managers much faster than in the past, 
saving time and money. 

Conclusions: 

The PMA has generally been viewed positively by agencies because of the 
attention it has brought to long-standing management deficiencies, 
including financial management. OMB has established reasonable scoring 
criteria and helpful guidance for the Improved Financial Performance 
Initiative and designed a reasonable scoring process to assess whether 
agencies have met these criteria and are making progress in expanding 
the routine use of financial data in management decision making in key 
areas of operations. The scorecard process has clearly been a catalyst 
to improve financial management and to encourage agency managers to use 
financial data to enhance decision making as envisioned under the CFO 
Act. Better documenting the key decisions would strengthen what is 
already a useful internal management tool by helping ensure consistency 
and continuity in the process and would enhance the value of the 
process to external users. 

Recommendations for Executive Action: 

To help ensure consistency and continuity in the Improved Financial 
Performance Initiative scoring process over time and as the staff 
changes, we recommend that the Director of OMB direct the Office of 
Federal Financial Management to take the following two actions: 

* establish a process to more systematically document the basis for all 
key decisions and judgments made in determining agency green scores, 
and: 

* establish a process to document the receipt and review and approval 
of Green Plans, including updates used in the scoring process. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, OMB's Controller stated 
she generally concurs with our recommendations and outlined steps OMB 
is taking in response to these recommendations. We also discussed 
technical comments with OMB officials, which we have incorporated in 
the final report as appropriate. OMB's written comments are reproduced 
in appendix II. 

We are sending copies of this report to the Director of the Office of 
Management and Budget; the Secretaries of Education, Energy, and Labor; 
the Administrator, Environmental Protection Agency; the Director, 
National Science Foundation; the Commissioner of Social Security; and 
other interested parties. Copies will be made available to others upon 
request. In addition, this report will be available at no charge on the 
GAO Web site at [Hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (206) 287-4809 or calboml@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Major contributors to this report are 
acknowledged in appendix III. 

Signed by: 

Linda Calbom: 
Director, Financial Management and Assurance, and Western Regional 
Director: 

[End of section] 

Appendix I: September 30, 2006, Executive Branch Management Scorecard: 

[See PDF for Scorecard] 

[End of section] 

Appendix II: Comments from the Office of Management and Budget: 

The Controller: 
Executive Office Of The President: 
Office Of Management And Budget: 
Washington, D.C. 20503: 

NOV 14 2006: 

Ms. Linda Calbom: 
Director: 
Financial Management and Assurance and Western Region: 
Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Calbom: 

Thank you for the opportunity to comment on the Government 
Accountability Office's (GAO) draft report entitled "Review of OMB's 
Improved Financial Performance Scorecard Process," GAO-07-95. 

The Office of Management and Budget (OMB) agrees with GAO's assessment 
that the Improved Financial Performance initiative under President's 
Management Agenda (PMA) has been a catalyst for improving financial 
management in the Federal Government. The initiative has focused top 
agency management on financial management issues and has been a driver 
of many of the financial management achievements over the past several 
years including accelerating financial reporting and reducing the 
number of material weaknesses reported government-wide. The Improved 
Financial Performance initiative has also called more attention to the 
critical role that the Chief Financial Officers have in providing 
accurate and timely financial information to program managers to 
enhance decision making. 

OMB generally concurs with your recommendations that key decisions and 
important steps in the scoring process could be more systematically 
documented. We are already taking steps to improve this process 
including: 

* Developing a tracking system for agency green plans and supporting 
materials, and, 

* Preparing summaries of all "approved" Green Plan initiatives, which 
clarify both what initiatives have been approved as well as how each 
initiative meets the Green Plan criteria. 

Finally, personnel from the agencies have been actively engaged in the 
PMA process and the overall improvement of financial management 
practices government-wide. GAO's recognition of their efforts is 
appreciated. 

Again, we want to thank GAO for the opportunity to comment on this 
draft report. We look forward to our continuing work in improving 
financial performance. 

Sincerely, 

Signed by: 

Linda Combs: 
Controller:

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Linda Calbom, (206) 287-4809 or calboml@gao.gov: 

Acknowledgments: 

Staff members who made key contributions to this report include Phil 
McIntyre, Assistant Director; Donald Campbell; Richard Cambosos; Lisa 
Cyre; Abe Dymond; and Diane Morris. 

FOOTNOTES 

[1] DOE's current status score was downgraded to red in December 2005 
because it received a disclaimer of opinion on its fiscal year 2005 
consolidated financial statements and was not in compliance with the 
Federal Financial Management Improvement Act (FFMIA). DOE's current 
status score remained red as of September 30, 2006. 

[2] The Department of Homeland Security was added to the scorecard 
after it was established on January 24, 2003, and the Federal Emergency 
Management Agency was deleted from the scorecard after becoming a part 
of the Department of Homeland Security effective March 1, 2003. 

[3] The President's Management Council advises and assists the 
President in ensuring that government reform is implemented throughout 
the executive branch. The Council's functions include improving overall 
executive branch management; coordinating management-related efforts to 
improve government; ensuring the adoption of new management practices 
in agencies; and identifying examples of, and providing mechanisms for, 
interagency exchange of information about best management practices. 

[4] See Implementation Guide for OMB Circular A-123, Management's 
Responsibility for Internal Control, Appendix A, Internal Control over 
Financial Reporting, 41-45 (July 2005), for detailed guidance regarding 
corrective action plans. 

[5] The Anti-Deficiency Act generally prohibits agencies from making 
obligations and expenditures in excess of the appropriations or 
apportionments of appropriations made to them. 31 U.S.C. §§ 1341, 1342, 
1349-51, 1511-1519. 

[6] For example, a qualified opinion would have been acceptable under 
the previous criteria but not under the current criteria. A qualified 
opinion relates to a nonpervasive departure from generally accepted 
accounting principles or a nonpervasive scope limitation. 

[7] 31 U.S.C. § 3512 (c), (d). 

[8] For more information on CAM, see GAO, Managerial Cost Accounting 
Practices: Leadership and Internal Controls Are Key to Successful 
Implementation, GAO-05-1013R (Washington, D.C.: Sept. 2, 2005). 

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