Federal agencies, as a whole, are failing to explain their performance – what it is they actually accomplish – to taxpayers, according to a new study released by scholars from the Mercatus Center at George Mason University. Agencies singled out for providing the worst reports include the Departments of Defense and Homeland Security, as well as the Office of Personnel Management.
The problem for agencies, and for taxpayers, is that the performance reports are mandated by law.
“Especially on Tax Day, Americans deserve to know what they are getting when they spend $2 trillion on the federal government,” said Jerry Ellig, a Mercatus Center senior research fellow and study co-author. “But our study shows that many agencies are simply not living up to their mandatory reporting obligations.”
The Mercatus Center’s “6th Annual Performance Report Scorecard,” evaluates the performance and accountability reports produced by 24 Cabinet departments and other agencies covered under the Chief Financial Officers Act of 1990.
“The annual performance reports are intended to identify how much public benefit federal agencies produce for citizens, and at what cost,” said Maurice McTigue, a Mercatus distinguished visiting scholar and study co-author. “Half the agencies we studied aren’t meeting reporting requirements similar to those we now demand of publicly traded companies, which means we have no idea whether or not our investments as taxpayers are going towards programs that work.”
For fiscal year 2004, the Departments of Labor, State, Transportation, and Veterans Affairs produced the highest rated reports, with the Department of Commerce seeing substantial improvement. “We saw some modest improvement this year, but the average scores in six out of 12 categories is still below acceptable levels,” said McTigue, a former New Zealand government minister.
The Departments of Defense and Homeland Security, and the Office of Personnel Management had the lowest-ranked reports in FY 2004. Health and Human Services, representing 24 percent of federal spending, missed the reporting deadline and ranked last (24th) since the report could not be included in the study.
“Only 11 percent of the federal budget is covered by good reporting, and two-thirds is in agencies whose reporting is unsatisfactory,” said Ellig, a senior research fellow at Mercatus. “It’s disappointing that some of the agencies with the biggest budgets have consistently failed to produce transparent reports that assess the public benefits they produce and show how their leaders are using this information to improve performance in the future,” he added.
According to the study, the federal government spends 20 percent of what America produces-more than $2.5 trillion in fiscal 2004. Over the long term, federal spending will claim an ever-higher percentage of Gross Domestic Product as an aging population places heavier demands on federal entitlement programs. The Government Accountability Office projects that by 2040, the biggest three entitlement programs plus interest on the national debt could consume as much as 35 percent of U.S. Gross Domestic Product. Such trends can only increase the political pressure for change in both entitlement and non-entitlement programs, the study concludes.
In the past decade, both Congress and the executive branch have taken significant steps to improve accountability for federal expenditures. The Government Performance and Results Act of 1993 requires agencies to produce strategic plans, annual performance plans, and annual performance reports. The purpose of annual performance reports is to identify how much public benefit federal agencies produce for citizens, and at what cost. The purpose of this Scorecard is to encourage improvement in the quality of these reports.
Researchers at the Mercatus Center conducted their sixth annual evaluation of the performance and accountability reports produced by 23 Cabinet departments and other agencies covered under the Chief Financial Officers Act of 1990. The same criteria used in previous Scorecards was used. The scoring process evaluates:
– How transparently an agency reports its successes and failures;
– How well an agency documents the tangible public benefits it claims to have produced; and
– Whether an agency demonstrates leadership that uses annual performance information to devise strategies for improvement.
By assessing the quality of agencies’ reports, but not the quality of the results achieved, researchers wish to learn which agencies are supplying the information that citizens and their elected leaders need to make informed funding and policy decisions.
QUALITY MILESTONE REACHED: For the first time since inception of the Scorecard in 1999, the average (mean) report score exceeded 36 out of a possible 60 points – the score a report would obtain if it received a “satisfactory” rating on all criteria.
SUBSTANTIAL ROOM FOR IMPROVEMENT: Nonetheless, average scores in six of the 12 categories are still below 3 (out of a possible 5), suggesting there is still substantial room for improvement.
QUALITY REPORTING COVERS SMALL FRACTION OF THE BUDGET: The reports receiving an average score of 36 or better account for only 11 percent of federal spending in fiscal 2004. Fully 65 percent of federal spending is in agencies whose reports received average scores below the satisfactory level. Reports that exceed expectations on average, scoring 48 or better, cover only 3 percent of federal spending in fiscal 2004.
UNEVEN IMPROVEMENT: About half of the agencies (12) improved their scores from fiscal 2003 to fiscal 2004. Scores fell for seven agencies and remained the same for three agencies. Scores for two agencies cannot be compared because their reports were not received in time to include in the evaluation in one of the years.
ACCELERATED DEADLINE RARELY AFFECTED QUALITY: Fiscal 2004 reports were due to Congress and the President on November 15-two and one-half months earlier than the January 30 due date for the fiscal 2003 reports. More than 60 percent of the reports had data for the vast majority of their measures. Only one report had significant problems with missing data that might be attributed to the reporting deadline rather than other factors.
BEST REPORTS: For fiscal 2004, the Departments of Labor, State, Transportation, and Veterans Affairs produced the highest rated reports. State’s 2nd place finish caps a sustained surge from 20th place in fiscal 1999.
REPORTS MOST IN NEED OF IMPROVEMENT: The Department of Defense, Department of Homeland Security, and Office of Personnel Management had the lowest-ranked reports for fiscal 2004.
MOST IMPROVED REPORTS: Several agencies produced significantly better reports in fiscal 2004 than in fiscal 2003. The Department of Commerce moved from 16th to 5th in the rankings, reversing its fall from 5th place in fiscal 2002. Justice and Energy rose nine and six places, respectively, to tie with the Small Business Administration for 6th place. The National Science Foundation’s report captured 10th place in fiscal 2004, up from 17th in fiscal 2003.
BIGGEST DROPS: The Department of Agriculture report fell from 4th place to 13th, Interior fell from 6th place to 13th, and HUD and GSA both fell from 10th place to 16th.
MOST CONSISTENT LOW SCORES: Several reports have ranked in the bottom half for most of the past six years, including those from Defense, the Office of Personnel Management, NASA, and Health and Human Services.