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

2. Slide 2 PMB Conference 22 May 2006 Objectives of Budget and Performance Integration Measure and improve performance Drive decision making through performance information Institutionalize focus on performance

3. Slide 3 PMB Conference 22 May 2006 Government-wide Emphasis on Increasing Demonstrated Performance 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.

4. Slide 4 PMB Conference 22 May 2006 Integrating Performance Planning with 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

5. Slide 5 PMB Conference 22 May 2006 BPI -- The Road So Far Our progress can be gauged in three areas Infrastructure Budget Documents and Decisions Our Performance

6. Slide 6 PMB Conference 22 May 2006 Budget 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

7. Slide 7 PMB Conference 22 May 2006 Budget Documents and Decisions First 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)

8. Slide 8 PMB Conference 22 May 2006 Budget Documents and Decisions For 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)

9. Slide 9 PMB Conference 22 May 2006 Infrastructure to Support Performance Budgeting Infrastructure to Support Performance 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

10. Slide 10 PMB Conference 22 May 2006 Our 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

11. Slide 11 PMB Conference 22 May 2006 Road to Come: Budget-Performance Integration #1 Link ABC to performance measures #3 Research Best Practices #2 Develop costing methodology #4 Put linkage & costing in budget guidance #5 Implement BPI methodology #6 Process Refinement 2007

12. Slide 12 PMB Conference 22 May 2006 Plan 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

13. Slide 13 PMB Conference 22 May 2006 Plan 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

14. Slide 14 PMB Conference 22 May 2006 Plan 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 Goal Resource Protection Activity EOG Activity Task 1 Task 2 Task 3 Task 1 Labor (11/1200) Travel (2100) Contract (2500) Supplies (2600) Standard General Ledger 61/6400 6100

15. Slide 15 PMB Conference 22 May 2006 Activities 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 Tasks Activity Cost Code – ASI12 1 Assign inspector – OC Code 11/1200 or 2500 2 Prepare for inspection i.e. checklists, sample kits, etc. OC Code 11/1200 or 2500 3 Travel to site. OC Code 2100 or 2500 4 Conduct inspection. OC Code 11/1200 or 2500 5 Submit samples to lab. OC Code 11/1200 or 2500 6 Prepare final report. OC 11/1200 or 2500

16. Slide 16 PMB Conference 22 May 2006 Best 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

17. Slide 17 PMB Conference 22 May 2006 Work Schedule DateEvent 6 AprBureau aligns bureau and DOI ABC activities to Strategic Plan performance measures 19 AprConsolidate bureau alignments into DOI corporate view (1 st iteration of alignment model) 17 MayPresent corporate view and plan of action to AOT 23 MayReview budget submittals; compare alignment of work activity to performance measures (where applicable) to bureau homework; identify alignment issues 30 MayBureaus submit algorithms for Bureaus cost spread to DOI Strategic Plan Performance Measures 19 JunReview AOT Budget Costing Models and algorithms 19 JunTrace BLM, NPS, FWS Mission Area cost to the Bureau SGL 29 JunResolve issues/develop corporate approach for linking work activities to performance measures (2 nd iteration of alignment model); validate uncostable performance measures Note: Costing Methodology schedule indicated in red

18. Slide 18 PMB Conference 22 May 2006 Work Schedule DateEvent 29 JunAssess impact of new/revised measures in draft Strategic Plan update on alignment model 29 JunValidate algorithms through review of cost reported in the Consolidated Statement of Net Cost 13 JulPresent reconciled alignment model to AOT – (AOT meeting) 17 JulProduce Bureau Algorithm 26 JulDocument and present to the AOT three methodologies to trace standard general ledger cost to cost allocated to performance measures – (AOT meeting) 26 JulSelect best practice 31 JulModify best practice for suitability 4 AugDocument and deliver methodology to trace standard general ledger cost to cost allocated to performance measures to DOI Note: Costing Methodology schedule indicated in red

19. Slide 19 PMB Conference 22 May 2006 Work Schedule DateEvent 9 AugConsolidate alignment model with performance measure costing methodology 14 AugCoordinate model and costing methodology with PPP, POB, bureaus 23 AugPresent alignment model and methodology for costing performance measures to ABC, budget, finance and performance communities Fall 2006POB incorporates alignment model and costing methodology into budget guidance Note: Costing Methodology schedule indicated in red

20. Slide 20 PMB Conference 22 May 2006 Process Refinement Periodic review of new BPI process for refinement will be ongoing throughout FY06/07, particularly as we move to FBMS Validation and verification of information in ABC/M and performance reporting - used in budget formulation - will be an ongoing process throughout FY06/07

21. Slide 21 PMB Conference 22 May 2006 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 budget requests for targeted levels of performance Understand the budget sensitivity of the marginal cost of performance and what results from work done View the data and ask questions about what the data seems to indicate

22. Slide 22 PMB Conference 22 May 2006 Summary 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