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Jacob J. Lew - March 2, 1999

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MARCH 2, 1999

Mr. Chairman, Representative Hoyer, Members of the Subcommittee, I am pleased to be here this afternoon to discuss the President's FY 2000 budget request for the Office of Management and Budget.

I will make a short statement and then I would be pleased to answer any questions that you have.


For FY 2000, the Office of Management and Budget (OMB) requests budget authority of $63,495,000. This request is an increase of $2,878,000 over the FY 1999 enacted level of $60,617,000. The requested OMB funding level will provide 518 full-time equivalent (FTE) positions for OMB, the same FTE level as 1999.

The Office of Management and Budget has played a central role in producing the first budget surplus in a generation. OMB continues its work to maintain the fiscal discipline that helped this country accomplish that goal, while maintaining critical investments for our nation's future. We are proud of this contribution to the nation's economic and fiscal health. Additionally, we are proud of the contributions OMB has made in making the government work better for the citizens we serve.

We also believe that this office, as the chief management and budget office of the executive branch, has a special obligation to adhere to budgetary discipline and to maximize the productivity of our resources.

OMB is committed to maintaining budgetary restraint, even though recent Congressional action has created numerous additional responsibilities and significantly added to the organization's workload. Even so, we propose to maintain the current staffing level, while requesting an important funding increase in our information technology infrastructure that will continue enabling staff to meet our additional responsibilities by building upon and enhancing the current level of productivity. I will speak in more detail about our information technology needs shortly.

Additional Responsibilities

First, I would like to address the scope of OMB's expanded workload. The 104th Congress and the 105th Congress have created numerous new and important responsibilities for us and has significantly increased the organization's workload. In the fall of 1998 alone, Congress enacted a dozen new requirements. The Government Performance and Results Act also has added to the existing workload of OMB. In addition, we are working to ensure that vital computer systems throughout the government will operate efficiently through the year 2000.

Government-wide implementation of the Government Performance and Results Act of 1993 (GPRA) is now in its third year and has created a steadily increasing workload for OMB. In FY 1997, the main OMB tasks were oversight of the development and submission of agency strategic plans to Congress and review of the initial set of agency annual performance plans. This initial set of annual plans was used to prepare the President's FY 1999 budget, and the government-wide performance plan that is now a key feature of the budget.

The scope of OMB's review and coordination effort on GPRA is already substantial and will grow further in 2000. GPRA related efforts require the active participation of virtually all program examiners, analysts, and managers in OMB. OMB will continue its work overseeing strategic plans, annual performance plans, and program performance reports from approximately 100 Cabinet Departments and independent agencies. OMB will continue to work with Congress to improve the usefulness of these plans and to ensure the plans meet GPRA requirements.

In FY 2000, OMB will begin reviewing the annual plans for the next year, and will work with agencies on preparing the agency annual program performance reports covering FY 1999. These performance reports, which are to be submitted to Congress and the President by March 31, 2000, are the first program performance reports to be completed under GPRA. In FY 2000, agencies are also required to prepare and submit their updated and revised strategic plans to OMB and Congress. Agencies are required to consult with Congress during plan preparation. OMB will oversee and, as appropriate, assist agencies as they develop these revised strategic plans.

OMB, along with the President's Y2K Conversion Council, is managing the preparation for the Federal government's computer conversion for the Year 2000. In 1997, 27 per cent of the Federal Government's mission-critical systems were Y2K compliant. At the end of 1998, more than double that number -- 61 percent -- met that standard. I am pleased to inform the Subcommittee that in a report to the Committee that will be forthcoming shortly, we now estimate that as of January 31, 1999, 79 percent of mission critical systems are Y2K compliant.

We have set the date of March 31, 1999 as the deadline for all mission-critical systems to be Y2K compliant. This year, with OMB oversight, agencies will focus primarily on testing their systems and their interactions with other systems, and will develop contingency and continuity of operations plans. This activity will continue through early FY 2000.

Examples of important new responsibilities for OMB designed by laws enacted by the 104th Congress and the 105th Congress include:

  • The Unfunded Mandates Reform Act of 1995: Title II of this Act requires that -- before promulgating any proposed or final rule that may lead to annual spending by State, local and Tribal governments, or the private sector of over $100,000,000 -- each agency must conduct a cost benefit analysis and select the least costly, most cost-effective or least burdensome alternative. Also, each agency must seek State, local, and Tribal government input. OMB must issue guidelines to agencies, monitor compliance with Title II, and publish an annual report on agency compliance.

  • The Paperwork Reduction Act of 1995: This Act requires that OMB review and approve (or disapprove) over 3,000 proposed agency collections of information each year. It explicitly added third-part disclosures to OMB's review. The Act also requires agencies to plan more carefully and explicitly for each new information collection, and OMB must ensure compliance with this requirement in reviewing each collection. Finally, the Act requires agencies to reduce information collection burdens by set percentages each year, and OMB must promulgate guidance and track agency compliance with these goals.

  • The Single Audit Amendment Act of 1996: This Act requires OMB to provide guidance to implement the Act, which includes revising the single audit circular (OMB A-133) and annually updating the Compliance Supplement to help auditors perform audits under the Act. The Act also authorizes the OMB Director to review and approve pilot projects to test alternative methods of achieving the Act's purposes.

  • The Federal Financial Management Improvement Act of 1996 and The Government Management Reform Act of 1994: Both of these Acts require that OMB continue to issue up to date financial reporting and associated audit requirements for Federal agencies, incorporating the provisions of Federal Accounting Standards. The Financial Management Improvement Act requires that OMB staff work with agency staff on a remediation plan when an audit determines that agency financial systems do not comply with the Act. In addition, when an agency head disagrees with an auditor's finding, the OMB Director must review such determinations and provide a report to Congress.

  • The Clinger-Cohen Act of 1996: This act requires that OMB develop government-wide policy and guidance to assist and oversee agencies in implementing the Act. OMB's responsibilities are to examine agency capital investment proposals for information technology, oversee the establishment and evaluate the effectiveness of agency Chief Information Officers, and oversee multi-agency and government-wide procurement programs for information technology.

  • Electronic Commerce (EC) Reporting (Section 850 of the FY 1998 Defense Authorization Act): This Act requires OMB to develop a government-wide strategic plan for the use of EC in procurement and to submit annual reports to Congress on EC activity.

  • The Federal Activities Inventory Reform (FAIR) Act of 1998: This Act requires Federal agencies to compile and submit annually to OMB lists of all commercial activities performed by Federal government sources for the agency. It also requires that the inventory include the name of a government employee responsible for the activity from whom additional information about the activity may be obtained. Accordingly, OMB is augmenting the inventory requirement of OMB Circular A-76 and its Handbook to conform to the FAIR Act. OMB, in consultation with the agencies, will review the lists each year prior to their transmission to Congress.

  • The Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1998 placed a dozen new responsibilities on OMB. Examples include:
-- OMB has oversight responsibilities to ensure that agencies have sufficient resources to address year 2000 computer problems and that emergency funding is allocated to address emerging needs. The law permits emergency funds to be allocated for activities included in the FY 1999 budget that were not funded that year in the appropriations process, and for critical requirements that have been identified since the FY 1999 Budget was transmitted. As such, OMB must coordinate with agencies to determine that each agency has first used other potential funding sources and that agency requests demonstrate reliable, cost-effective conversion strategies;
-- OMB is required to provide an expanded report on the costs and benefits of Federal regulation; and
-- OMB must prepare an annual report describing the total Federal expenditure of all official international travel during the previous fiscal year and the number of individuals in each agency who engaged in such travel. The report is submitted by the President to Congress.

Meeting our Growing Workload

In order to meet these additional responsibilities, we are coordinating and managing our staff with an eye toward maximizing productivity. The resources that we have requested will allow us to maintain our current staffing level and replace our oldest desktop computers. These systems are essential to this mission.

A substantial portion of OMB's desktop systems will be five years or older in FY 2000. The request for an additional $400,000 will allow OMB to execute our plan to retire older desktops, monitors, and printers on a four to five year cycle. OMB has found that older hardware is more expensive to maintain and is more prone to failures. Making sure that OMB employees have access to up-to-date technology on the desktop is part of an overall strategy for helping OMB staff keep pace with mounting workload requirements.

We have also instituted a number of management measures designed to maximize the capacity of the organization to meet its added responsibilities. These include the establishment of the Investment Review Board (consistent with the Information Technology and Management Reform Act) and the Management Committee, as well as its subgroup, the Workload Management Committee.

The OMB Management Committee, created by the comprehensive review "OMB 2000," is comprised largely of career staff and is designed to provide long-term continuity with regard to OMB management issues. Its subgroup, the Workload Management Committee, helps ensure that OMB is managing its limited resources in a way that enables the organization to operate most efficiently and effectively. With the Committee serving as a vehicle to solicit and evaluate employee input, management is able to shape its work assignments, advancing the organization's ability to meet its added responsibilities while continuing to meet our customary high standards and improving the quality of our work environment. We have found that improved communications in both directions increases our productivity and the quality of work produced.

The Investment Review Board (IRB) is an integral part of OMB's strategic plan to leverage information technology resources to help all OMB staff do their jobs. The IRB is composed of senior policy and career line executives from several parts of OMB. In the past year, the IRB has reviewed and made recommendations to the Director of OMB on overall funding requirements and IT funding requirements in OMB; established priorities for information technology spending requirements within OMB; charted and oversaw key information technology initiatives; and established the Integrated Process Team.

The Integrated Process Team is charged with defining the next generation of information technology in OMB, in order to improve staff productivity, reduce costs where appropriate, reduce cycle time needed to complete key processes such as the production of the President's Budget and clearance of legislative proposals, and identify potential new opportunities to enhance OMB's interactions with agencies, congressional offices and the public.


Mr. Chairman, OMB is a fine organization that continues to provide outstanding work. We remain committed to producing the best possible work, which is invaluable for both executive and legislative branch policy decisions, even as staff resources are stretched by new assignments. For this reason, I urge you to approve our request to maintain our staffing level and provide for up-to-date technology to help us meet the requirements of our mounting workload.

We have submitted to you the OMB Performance plan in keeping with the Government Performance and Results Act. We have carefully integrated the performance goals of that plan into the management of this organization, and into the President's budget.

Finally, I would like to say that it is the goal of this organization to maintain the fiscal discipline that brought us to a balanced budget, while continuing to invest in the future.

I am proud, as are the more than 500 employees of the Office and Management and Budget, to be part of that mission.

Mr. Chairman, that concludes my statement. I would be happy to answer any of the Subcommittee's questions.

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