Preparing a Performance Budget

Dianne Shaughnessy

Office of Budget

Session Objectives

Overview of basic content of budget justifications

The Size 2007 Content Changes Changes on the Horizon Presenting Performance in the Budget

Justifications

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

This % represents the percentage change from 2007 – i.e., 4%/24%=17%

Goal Performance Table End Outcome Goal 1.1: Resource Protection. Improve Health of Watersheds, Landscapes, and Marine Resources

End Outcome Measure/Intermediate or PART Measure/PART Efficiency or Other Outcome Measure

Typ

e 2004 Actual

2005 Actua

l

2006 Enacte

d

2007 Pres

Budget

2008 Reque

st

Change from

2007 Pres

Bud to 2008

Long-term

Target

20082007 Pres Bud

Long-term Targ

et2012

Comments (see preceding narrative guidance for areas

that must be explained)

GPRA End Outcome Measures

Wetland areas - Percent of acres achieving desired conditions as specified in management plans consistent with applicable substantive and procedural requirements of State and Federal water law. (SP)

C 15%(1,500/10,000)

15%(1,500/10,000)

22%(2,200/10,000)

24%(2,400/10,000

)

28%(2,800/10,000

)

+17% 33%(3,300

/10,000

)

33%(3,30

0/10,00

0)

Change in 2008 target reflects net effect of an

estimated decline of $22 million in resources

proposed in 2008 for wetlands restoration,

offset by performance increase attributable to prior year’s restoration

activities impact expected to accrue in 2008. Decline in unit cost due to improved

restoration techniques that reduced costs by

27%.

Total Actual /Projected Cost ($000)

$100,000

$100,000

$125,000

$160,000

$138,000

-$22,00

0-16%

-- --

Actual/Projected Cost per Acre Restored (in dollars)

$67 $67 $59 $67 $49 -18-27%

-- --

2006 Enacted

2007 President's

budget

Fixed Cost

ChangesInternal

Transfers

Distributed Program

Change #1 ***

Program Changes

2008 Request

Appropriation: Surveys, Investigations and ResearchActivity (if high enough that does not need to be listed distinctly)

Next Level of Budget StructureNext Level of Budget Structure

Short Program Change Description

Water Resources Investigations Hydrologic Monitoring, Assess, & Rsch 145,297 142,454 4,142 -366 -557 -8,272 137,4011 Begin Broad, multi-state assessment of groundwater NA NA 400 NA2 Roubidoux Aquifier-Unrequested Earmark [0] [1,460] -1,460 [0]3 Petroleum Contamination -- Lower priority project [227] [227] -227 04 Berkeley Pit lake-Unrequested Earmark [0] [195] -195 [0]5 Potomac River Basin Groundwater Study- Unrequested Earmark

[0] [296] -296 [0]6 Rathdrum Prairie/Spokane Valley acquifery system (Oregon and

Washington) - Unrequested Earmark [493] [493] -493 [0]7 Chesapeake Bay Program-Unrequested Earmark [247] [247] -247 [0]8 Hood Canal Fish Mortality Study (Washington) - Unrequested

Earmark [0] [345] -345 [0]9 San Pedro Partnership - Unrequested Earmark [247] [247] -247 [0]10 Reduce Water Quality Monitoring at Lake Champlain [754] [825] -291 [1,116]11 Reduce monitoring of water resources in Hawaii [1,511] [1,232] -437 [1,669]12 Complete collection of Hydrologic Data at Tongue River Dam

(Montana) [2,540] [877] -877 [1,754]14 Reduce lower priority Research at 5 facilities in the Pacific

Region [2,540] [877] -877 [1,754]

Cooperative Water Program 63,995 62,337 -278 -278 61,78113 Initiate new cooperative program in the northeast

Water Resources Rsch Act Program 6,422 6,409 -6,409 0Eliminate funding for 54 State Water Resource Institutes -6,409

Subtotal, Water Resources 215,714 211,200 4,142 -366 -835 -14,959 199,182

XyZ Subactivity 5,000 5,000 5,000

TOTAL APPROPRIATION 220,714 216,200 4,142 -366 -835 -14,959 204,182

NA

*** This column would be used when there are program changes that cross a significant number of budget line items; e.g., Fleet & Travel Reductions.The column head should include a descriptive title; e.g., fleet & travel reductions.

2008 Budget at a Glance (dollars in thousands)

Include NA when base funding is not budgeted at the level of the program change.

To Format Program Change ### to display in Brackets (this will allow you to add ##'s): Highlight Cells; Go to Format Menu; Select Cells; Select Number Tab; Select Custom; Type in \[#,##0\]

Fixed Cost Changes

Additional Operational Costs from 2006 and 2007 January Pay Raises 2006

Budget Change

2006 Revised Change

2007

Change 2006 Pay Raise, 3 Quarters in 2006 Budget.............................................................................................. +$ee,eee +$ee,eee NA Amount of pay raise absorbed ............................................................................................... [$x,xxx] [$x,xxx] NA 2006 Pay Raise, 1 Quarter……………………………………….. +$ee,eee Amount of Pay Raise Absorbed……….………. [$x,xxx]

2007 Change

2007 Pay Raise............................................................................................................................................. +$x,xxx Amount of pay raise absorbed……………......... [$x,xxx ]

These adjustments are for an additional amount needed in 2007 to fund the remaining 3-month portion of the estimated cost of the, on average, 3.1 percent pay increases effective in January 2006 and the additional costs of funding for an estimated 2.2 percent January 2007 pay increase for GS-series employees and the associated pay rate changes made in other pay series.

Fixed Cost ChangesOther Fixed Cost Changes:

The adjustment is for actual charges through June 2005, in the costs of compensating injured employees and dependents of employees who suffered accidental deaths while on duty. Costs for 2006 will reimburse the Department of Labor, Federal Employees Compensation Fund, pursuant to 5 U.S.C. 8147(b) as amended by Public Law 94-273.

2006 Budget

2006 Revised

2007 Change

Unemployment Compensation Payments.............................................................................................. $ee,eee $ee,eee +$x,xxx The adjustment is for estimated changes in the costs of unemployment compensation claims to be paid to the Department of Labor, Federal Employees Compensation Account, in the Unemployment Trust Fund, pursuant to Public Law 96-499.

2006 Budget

2006 Revised

2007 Change

Rental payments to GSA and others........................................................................................................ $ee,eee $ee,eee +$x,xxx The adjustment is for changes in the costs payable to General Services Administration and others resulting from changes in rates for office and non-office space as estimated by GSA, as well as the rental costs of other currently occupied space. Costs of mandatory office relocations, i.e., relocations in cases where due to external events there is no alternative but to vacate the currently occupied space, are also included.

2006 Budget

2006 Revised

2007 Change

Workers Compensation Payments........................................................................................................... $ee,eee $ee,eee +$x,xxx

Program Performance Change Table Total Performance Change +4,100 Forest Acres Restored

+27,000 Inventory Forest/Woodland Vegetation (acres) A B C D= B+C E Overall Performance Changes from 2007 to 2008

Measure

2007 President’s

Budget Performance

2008 Base Performance

2008 Impact of Program Change on Performance

2008 Budget Request

Performance

Out-year Impact of

2008 Program Change on

Performance Restore Forests (acres)

10,000 12,000 +4,100 16,100 0 Total Projected Cost ($000) $5,111 $5,300 +$1,000 $6,300 0 Projected Cost per Acre Offered (in dollars) $511 $442 -$51 $391 0 Inventory Forest/Woodland Vegetation(acres) 250,000 263,000 +17,000 280,000 +10,000 Total Projected Cost ($000) $4,650 $4,894 +$314 $5,208 +$186 Projected Cost per Acre Inventories (in dollars) $18.60 $18.60 0 $18.60 $18.6 Column B: The performance level expected to be achieved absent the program change (i.e., at the 2007 request level plus/minus funded fixed cost/related changes); this would reflect, for example, the impact of prior year funding changes, management efficiencies, absorption of fixed costs, and trend impacts. Column E: The out-year impact is the change in performance level expected in 2009 and Beyond of ONLY the requested program budget change; it does not include the impact of receiving the program increase again in a subsequent outyear.

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.

Dollars Justified Per Page

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Dollars Justified per Page

BLM/ FireFWSNPSUSGSMMSOSMBIAReclamationAverage

Interior Justification Pages

0

100

200

300

400

500

600

700

800

900

1998 1999 2001 2003 2004 2005 2006 2007

YEAR

Pag

es

BLM/Fire

FWS

NPS

USGS

MMS

OSM

BIA

1st Year APP in Budget

Integrated APP with Budget

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

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

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!

Presenting Performance in the Budget Justifications

Presenting performance in the congressional budget structure

Program versus Bureau Level Performance Incremental Performance and Cost

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.

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.

OSM Example

Budget Structure Budget Justification Presentation

REGULATION AND TECHNOLOGYENVIRONMENTAL RESTORATIONENVIRONMENTAL PROTECTIONTECH DEVELOPMENT & TRANSFERFINANCIAL MANAGEMENTEXEC. DIRECTION & ADMINISTRATION

ABANDONED MINE RECLAMATION FUNDENVIRONMENTAL RESTORATIONTECH DEVELOPMENT & TRANSFERFINANCIAL MANAGEMENTEXEC. DIRECTION & ADMINISTRATION

ENVIRONMENTAL RESTORATIONREGULATION AND TECHNOLOGYABANDONED MINE RECLAMATION FUND

ENVIRONMENTAL PROTECTIONTECH DEVELOPMENT & TRANSFER

REGULATION AND TECHNOLOGYABANDONED MINE RECLAMATION FUND

FINANCIAL MANAGEMENTREGULATION AND TECHNOLOGYABANDONED MINE RECLAMATION FUND

EXEC. DIRECTION & ADMINISTRATIONREGULATION AND TECHNOLOGYABANDONED MINE RECLAMATION FUND

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.

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.

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.

Program Performance Change Table Total Performance Change +4,100 Forest Acres Restored

+27,000 Inventory Forest/Woodland Vegetation (acres) A B C D= B+C E Overall Performance Changes from 2007 to 2008

Measure

2007 President’s

Budget Performance

2008 Base Performance

2008 Impact of Program Change on Performance

2008 Budget Request

Performance

Out-year Impact of

2008 Program Change on

Performance Restore Forests (acres)

10,000 12,000 +4,100 16,100 0 Total Projected Cost ($000) $5,111 $5,300 +$1,000 $6,300 0 Projected Cost per Acre Offered (in dollars) $511 $442 -$51 $391 0 Inventory Forest/Woodland Vegetation(acres) 250,000 263,000 +17,000 280,000 +10,000 Total Projected Cost ($000) $4,650 $4,894 +$314 $5,208 +$186 Projected Cost per Acre Inventories (in dollars) $18.60 $18.60 0 $18.60 $18.6 Column B: The performance level expected to be achieved absent the program change (i.e., at the 2007 request level plus/minus funded fixed cost/related changes); this would reflect, for example, the impact of prior year funding changes, management efficiencies, absorption of fixed costs, and trend impacts. Column E: The out-year impact is the change in performance level expected in 2009 and Beyond of ONLY the requested program budget change; it does not include the impact of receiving the program increase again in a subsequent outyear.

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.

Questions?

Name, program area (budget, finance, procurement, etc), bureau.