Preparing a Performance Budget

1. Preparing a Performance Budget Dianne Shaughnessy Office of Budget

2. Session Objectives • Overview of basic content of budget justifications • The Size • 2007 Content Changes • Changes on the Horizon • Presenting Performance in the Budget Justifications

3. Justification Contents • Bureau-Level Information • General Statement • Goal Performance Table • Budget at a Glance Table • Account Sections • Appropriations language • Fixed costs changes and related changes • Program Component Justifications • Program Overview • Performance by Fiscal Year (PY, CY, BY) • Narrative and Performance Overview Table • Justification of BY Program Changes • Narrative and Program Performance Change Table

4. Goal Performance Table End Outcome Goal 1.1: Resource Protection. Improve Health of Watersheds, Landscapes, and Marine Resources This % represents the percentage change from 2007 – i.e., 4%/24%=17%

6. Fixed Cost Changes

7. Fixed Cost Changes

9. The Size • The 2007 budget justifications for the Department totaled 4,060 pages. • Each page justifies on average about $2.7 million. • Growth with publishing the Annual Performance Plan beginning in 1999. • Most justifications increased by 100 pages or more.

10. Dollars Justified Per Page

12. 2007 Content Changes • Consulted with OMB and Interior Subcommittee • Performance information • New Program Performance Change Table • Accommodates situations where budget dollars and performance may accrue over different time periods • Distinguishes between BY base performance levels and PY performance levels • Modified Goal Performance Table • Comprehensive, and under a separate tab • Explanation of Changes • Budget at a Glance Table • With summary of program changes if requested by staff • Changed order of program component justifications • Subcommittee staff most interested in budget changes • Less interested in narrative accomplishment reporting for PY and CY

13. Changes on the Horizon • Consultations on 2007 budget formats identified need for additional changes for 2008 and beyond • OMB Interior branch staff desire a return to budget structure presentation similar to the greenbooks for the September submission to OMB. • Lengthy narrative, particularly for reporting PY and CY accomplishments, not always read. • FBMS is expected to have text functionality that makes it important that we increase standardization of the budget formats • As the elements of the budget justifications are captured systematically, likely to reduce what needs to be printed out for major budget submissions; although data available in the system to respond to specific inquiries. • Increased standardization could also be driven by OMB’s Budget Formulation and Execution Line of Business

14. Changes on the Horizon • Based upon OMB’s feedback for a budget submission in the budget structure, the format for the 2008 request to the Department (May) follows the budget justification structure. • A work group comprised of Bureau and Department budget and performance staff has been tasked with developing budget guidance, initially for the 2008 OMB submission. • Goal is to develop guidance that will result in a more efficient production and more effective document • That for most bureaus and offices, would be shorter!

15. Presenting Performance in the Budget Justifications • Presenting performance in the congressional budget structure • Program versus Bureau Level Performance • Incremental Performance and Cost

16. Presenting Performance in the Congressional Budget Structure • From 1999 to 2003, Annual Performance Plans were included as a distinct exhibit in the Budget Justifications. • Beginning with 2004, performance plans and actual results were integrated with the budget justifications. • The congressional budget structure is how congress wants us to present and justify our budget requests. Similarly, internally, we have additional budget structures that help us execute the budget. • While most bureaus and offices have a largely program oriented structure, this is not usually the case across the board, and it creates challenges for presenting the budget on a performance basis. • Non-program constructs include organizational, project, and work activity. • Examples of inconsistencies – Indirect costs are typically funded by line item appropriations; Land acquisition, Construction, and Grants typically funded in separate accounts, yet advance the programs funded in the operating accounts. • Changing the budget structure is usually not the answer; but there are options in how present our budget requests.

17. Have a Roadmap • Common Question: Do I have to include the performance overview table for each budget subactivity? • Answer: It depends where your program lies. • Budget guidance outlines elements of “program component justifications” • Invest time defining your programs and how each budget line item maps to a program to determine options for presenting in the budget justifications. • Low consult option: retain order of the budget structure and present performance information in principal budget line item with cross-references to other supporting budget line items. • Higher consult option: reorder the presentation of you budget. OSM has done this. • Minimize the layering effect • Layering is presenting summary level and lower level(s) of information • Can result in significant repetition • Get an understanding from POB, OMB and Subcommittees as to what level of information they require, and present at that level – look for two basic levels– Bureau and Program.

18. Budget Structure Budget Justification Presentation OSM Example

19. Program versus Bureau Level Performance • Common Questions: • Performance is only meaningful at the Bureau level, why does the budget guidance require bureaus to detail specific contributions by program? • The budget guidance wants me to figure out how much performance and cost was related to a particular budget line item, but how do I separate a specific line item’s contribution? • The Department, OMB, and Congress need performance and cost information that distinguishes between performance of programs that share common goals, but are managed differently. • Many, but not all, bureaus have multiple programs that contribute to similar goals. • Example: FWS has multiple programs that support habitat restoration (direct restoration on Federal lands through the refuge program; restoration on private lands through the partners program; and grants to States for habitat restoration) • Clues for knowing when to distinguish: • OMB’s 2006 PART guidance includes helpful criteria, but keep in mind PARTs may include multiple programs. • Several programs are working on restoring the same parcel of land, contributing to the same study, etc, usually means program contributions need not be distinguished. Conversely, if programs are working on restoring different parcels of land or different studies, each program’s relative contributions should be distinguished. • Remember: The performance and cost information you include in your program component justifications are being used to assess, and develop agreed upon targets of, program performance; there is no rule that limits the performance and cost information presented in the program component justifications to that achieved solely by that budget line item. • Narrative discussion should clarify other budget line items that contribute to presented performance.

20. Excerpt from 2006 PART Guidance • The following list of criteria should be considered in determining whether to combine more than one program, either within an agency or operated by different agencies, for PART assessment: • 1. Program Purpose. The proposed combination of programs should share a common purpose and mission. Issues to consider include: program mission, beneficiary characteristics, target populations, grant recipients, etc. • 2. Program Design/Administration. Programs should be similarly designed and administered. For example the grantee role, grant type (e.g. competitive, formula), benefit structure, oversight roles, data collection, and/or link to performance measurement should be common across the programs. • 3. Budgeting. The identification of programs should relate to budget decisions because one goal of assessing programs is to develop information that will be useful to the budget process. This does not necessarily mean the definition of programs should be restricted to accounts and activities in the budget (i.e., a single budget line), but rather that the programs are managed as a single unit. If programs are chosen that are not aligned within the budget structure, budget justifications must include a cross-walk between the program(s) and the budget structure for public presentation. • 4. Performance. The programs should support similar long-term outcome goals. The conclusions/recommendations on program performance should apply to each of the programs or involve each one.

21. Incremental Performance and Cost • OMB BPI Scorecard Green Criteria: • Reports the full cost of achieving performance goals accurately in budget and performance documents and can accurately estimate the marginal cost of changing performance goals • OMB states marginal cost is the additional cost or savings a program incurs when it increased or decreases its level of outcome. • One place to demonstrate that we can estimate marginal costs is the Program Performance Change table – in both the base performance and impact of program change columns.

23. Program Performance Change Table Guidance • The data in column C has a different mathematical relationship than Columns A, B, and D. Please note carefully the mathematical relationships between the performance and cost data in the sample template. Specifically, note: • All three line items (Performance Level, Total Projected Costs, and Projected Cost per Unit, should add across (B+C=D). • For total Columns (A, B, and D), the Total Projected Costs divided by Performance Target equals Per Unit Costs. • For Column C, the relationship cited in the previous bullet is not the case; that is, generally it would be expected that Total Projected Costs divided by Performance Target will not equal Per Unit Costs. This is because the marginal cost of the incremental change in performance may be different from the total per unit cost. For example, the fixed costs per unit may decline as fixed costs are spread over a higher level of performance units resulting in a lower cost per unit. • In addition, the incremental Total Projected Cost amount in Column C may not be equal to the program change being justified. This might be the case in the following situations: • Indirect costs (or other program costs supporting the measure) are funded in another subactivity and are projected to change as well. • There are timing differences between when budgetary resources are available and when costs are incurred. In these situations, it would be expected to see costs in column E – the amount expected to be incurred in the outyears that is funded from 2008 budget authority.

24. Questions? • Name, program area (budget, finance, procurement, etc), bureau.