APPENDIX
Legislative and Regulatory Requirements
Chief Financial Officers Act of 1990
The Chief Financial Officers Act (CFO Act), enacted in 1990, established the foundation for agencies to produce more accurate financial information.1 The CFO Act gives OMB broad authority and responsibility for directing federal financial management, modernizing the government’s financial management systems, and strengthening financial reporting.
The CFO Act also created a new position in OMB—the deputy director for management—to act as the government’s chief official responsible for financial management. The deputy director for management is responsible for overseeing many of the federal government’s general management functions, including information policy, procurement policy, property management, and productivity improvement. The CFO Act also created chief financial officer positions in 23 major agencies. In most agencies, the CFO is a presidential appointee. The CFO oversees all financial management activities relating to the programs and operations of the agency.
OMB Circular A-94
OMB Circular A-94 provides general guidance for conducting cost-benefit and cost-effectiveness analyses.2 This guidance serves as a checklist for determining whether an agency has considered and included all necessary elements for sound cost-benefit and cost-effectiveness analysis. The circular also provides specific guidance on the discount rates to be used in evaluating federal programs in which benefits and costs are distributed over time.
The Government Performance and Results Act of 1993
The Government Performance and Results Act of 1993 (GPRA or the Results Act) is the centerpiece legislation for contemporary management reform in the federal government.3 GPRA differs in important ways from prior attempts at management reform. Unlike previous initiatives that were instituted by the executive branch, GPRA has a statutory basis with its requirements set in law. GPRA requires executive branch agencies to develop strategic plans that define their missions, establish outcome-oriented goals, and identify strategies needed to obtain those goals. It also requires agencies to develop annual performance plans with performance measures that are aligned with their strategic plans. The annual performance plans must be tied to budget requests by linking annual goals to the program activities contained in the budget presentations. Agencies are also required to issue annual performance reports that provide information on planned and actual results.
OMB has played an active role in shaping agency implementation of GPRA requirements, including the integration of budget and performance. OMB provides budget guidance to federal agencies through Circular A-11, which is revised annually and is usually available in the summer for preparation of the next fiscal year budget. In 1995, OMB began expanding Circular A-11 to address GPRA requirements, including instructions for developing strategic plans, annual performance plans, and performance reports.
In June 2002 OMB issued a substantially revised version of Circular A-11 that described specific steps agencies need to take to integrate budget and performance. In 2003 OMB mandated performance budgeting for the fiscal year 2005 budget. Specifically, OMB instructed agency heads to prepare performance budgets that could be used for the annual performance plan required by GPRA.
Government Management Reform Act of 1994
The Government Management Reform Act (GMRA) of 1994 expanded the CFO Act by, among other things, requiring the 24 major agencies responsible for 99 percent of federal spending to prepare and submit audited financial statements, starting in fiscal year 1996.4 The purpose of the audited financial statements is to present a picture of the overall financial position of each office bureau’s assets and liabilities and give a clear accounting of the results of operations. Beginning in fiscal year 1997, the Department of the Treasury was required to produce a consolidated financial statement for the federal government, which the GAO is to audit annually.
The Paperwork Reduction Act of 1995
The Paperwork Reduction Act (PRA) of 1995 was designed to minimize the burden that the government imposes on the public and to improve the quality and use of federal information.5 It requires agencies to establish an independent review process for information collections and to obtain OMB approval before undertaking a collection of information directed to ten or more persons.
The PRA also contained important IT planning and management requirements. Specifically, the act requires federal agencies to define program information needs and to develop strategies, systems, and capabilities to meet those needs. It also requires each agency’s program officials to develop and maintain a strategic information resources management plan that describes how information resources management activities help accomplish agency missions. Agencies must develop and maintain an ongoing process to ensure that information resource management operations and decisions are integrated with organizational planning, budget, financial management, human resources management, and program decisions.
Federal Financial Management Improvement Act of 1996
The Federal Financial Management Improvement Act (FFMIA) of 1996 requires that agencies develop and maintain financial management systems in compliance with federal requirements, applicable standards, and the U.S. Standard General Ledger (USSGL) to provide uniform, reliable, and more useful financial information.6 The FFMIA includes requirements to develop managerial cost-accounting information to evaluate program activities on their “full cost and merits” to allow users of financial data to make fully informed decisions. Agency heads are required to report to Congress on the implementation of remedial actions needed to bring systems into compliance.
Information Technology Management Reform Act of 1996 (Clinger-Cohen Act)
The Information Technology Management Reform Act of 1996, known widely as the Clinger-Cohen Act, repealed Section 111 of the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 759), often referred to as the Brooks Act, which gave the GSA exclusive authority to acquire computer resources for all agencies in the federal government.7 Under Clinger-Cohen, overall responsibility for the acquisition and management of IT is assigned to the director of OMB. It also gives authority to acquire IT resources to the head of each executive agency and makes them responsible for effectively managing their IT investments. In practice, this means that agencies do the actual buying, but do so under OMB guidelines.
Among other provisions, Clinger-Cohen requires agencies to:
Base decisions about IT investments on quantitative and qualitative factors associated with the costs, benefits, and risks of those investments
Use performance data to demonstrate how well the IT expenditures support improvements to agency programs
Appoint a CIO to carry out the IT management provisions of the act and the broader information resources management requirements of the Paperwork Reduction Act.
OMB sets out guidance for compliance with the act through OMB Circulars A-11 and A-130. In conjunction with the budget process, agencies have to develop detailed justifications for IT systems and track cost and schedule variances.
OMB Memorandum M-97-02, “Funding Information Systems Investments”
On October 25, 1996, OMB Director Franklin D. Raines issued guidance for submission of the FY1998 President’s budget.8 This guidance, commonly referred to as the Raines Rules, establishes eight decision criteria that OMB would use, starting with fiscal year 1998 budget proposals, to evaluate major information system investments proposed for submission in the President’s budget. The first four decision criteria specifically address capital planning. The fifth criterion establishes the critical link between planning and implementation and the information architecture, which aligns technology with mission goals. The last three criteria establish risk-management principles intended to help provide assurance that the proposed investment will succeed.
The Raines Rules are:
Ensure that IT investments support core/priority mission functions that need to be performed by the government.
Ensure that the investment is needed because no alternative private-sector or other governmental source can better support the function.
Proactively improve or reengineer business processes prior to automating those business processes.
Demonstrate expected returns on investment that are superior to alternative uses of the required capital.
Promote IT investments that are congruent with architectures, strategic plans, work processes, and emerging technical standards.
Reduce risk through the use of prototypes, simulations, and pilots, and avoid custom-designed, in-house approaches.
Implement systems in phased, logical, and successive chunks that each address a part of the overall mission problem and deliver a stand-alone benefit.
Reduce risk by utilizing acquisition strategies that spread risk between the government and private sector, effectively use competition, and take advantage of commercial off-the-shelf technology.
OMB Circular A-130
OMB Circular A-130 provides uniform government-wide information resources management policies as required by the Paperwork Reduction Act.9 Section 8(b) of the circular addresses information systems and IT management policy, including evaluation and performance measurement, strategic IRM planning, information systems management oversight, use of information resources, and acquisition of information technology.
ENDNOTES
1. Chief Financial Officers Act of 1990, U.S. Public Law 101-576, November 15, 1990. Online at http://www.dol.gov/ocfo/media/regs/CFOA.pdf (accessed December 2007).
2. Office of Management and Budget, Circular A-94 (Revised): Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, October 29, 1992. Online at http://www.whitehouse.gov/omb/circulars/a094/a094.html (accessed December 2007).
3. Government Performance and Results Act of 1993, U.S. Public Law 103-62, August 3, 1993. Online at http://www.whitehouse.gov/omb/mgmt-gpra/gplaw2m.html (accessed December 2007).
4. Government Management Reform Act of 1994, U.S. Public Law 103-365, October 13, 1994. Online at http://govinfo.library.unt.edu/npr/library/misc/s2170.html (accessed December 2007).
5. Paperwork Reduction Act of 1995, U.S. Public Law 104-13, May 22, 1995. Online at http://www.reginfo.gov/public/reginfo/pra.pdf (accessed December 2007).
6. Federal Financial Management Improvement Act of 1996, U.S. Public Law 104-208, September 30, 1996. Online at http://www.whitehouse.gov/omb/financial/ffs_ffmia.html (accessed December 2007). Clinger-Cohen Act, U.S. Public Law 104-208, September 30, 1996.
7. Online at http://www.cio.gov/Documents/it_management_reform_act_Feb_1996.html (accessed December 2007).
8. Office of Management and Budget, “Technical Memorandum M-97-02: Funding Information Systems Investments,” October 25, 1996. Online at http://www.whitehouse.gov/omb/memoranda/m97-02.html (accessed December 2007).
9. Office of Management and Budget, Circular A-130 (Revised): Management of Federal Information Resources, November 28, 2000. Online at http://www.whitehouse.gov/omb/circulars/a130/a130trans4.html (accessed December 2007).