The Budget Formulation

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• The Budget Formulation Execution Line of
  Business
• USDA Representative Paula Geiger
• PMO Lead Sandi McCabe
• Managing Partner, U. S. Department of Education

June 6, 2007
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Budget Formulation Execution LoB
Vision Modern, interoperable, flexible, cost
effective, and optimized solutions supporting all
phases of the formulation and execution of the
Federal Budget and linking budget formulation,
execution, planning, performance, and financial
information.
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Budget Formulation Execution LoB

• Relationship With
• Financial Management and
• the FM LoB

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Budget Formulation, Budget Execution,
Financial Management per the Constitution (1787)

• No Money shall be drawn from the Treasury, but
  in Consequence of Appropriations made by Law
• (Budget Formulation and Execution)
• and a regular Statement and Account of the
  Receipts and Expenditures of all public Money
  shall be published from time to time.
• (Financial Management)
• (Article I, Section 9)

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Budget Formulation, Execution, and Financial
Management - A Complete Cycle

• Policy Making Resource Allocation
• ________________________________________
• Post-decisional Accounting, Control, Reporting

Policy Making
Policy Making
Post-decisional
Post-decisional
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Budget Formulation, Execution, and Financial
Management - Components

• Policy Making ? Decisional
• __________________________________________________
  __________________________________________________
  _____________________________________
• __________________________________________________
  _____________________________
• Post-decisional ? After-action
• __________________________________________________
  __________________________________________________
  _____________________________________
• Financial Management

• Budget Execution
• Apportionments
• Allotments, Suballot., Allowances
• Commitments
• Obligations
• Reprogramming

• Budget Formulation
• Agency Budget Requests
• Presidents Budget Request
• Legislative Action (Appropriations)

• Accounting
• Payments
• Asset and Liability Mgmt

• Funds Control
• Collections Receivables
• Reporting

• Cost Accounting Performance Measurement

Key BFE LoB and FM LoB touch points
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BFE LoB and FM LoB Coordination Activities

• BFE LoB representatives are participating in
  regular meetings with the FM LoB including the
  CFO Councils FSIO Transformation Team meetings.
• BFE LoB PMO disseminates information on
  FMLoB/FSIO exposure draft documents to the
  budgeting community and consolidates and submits
  comments (e.g. CGAC and Funds Control Exposure
  Draft comments).
• Conducting a study and developing a Touch-Points
  document to highlight key intersections between
  Budgeting and Financial Management.
• BFE LoB is partnering with Treasury Financial
  Management Service (FMS) on a Budget Execution
  solution swim lane.

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Budget Formulation Execution LoB

• Budget Formulation and Execution
• The Nature of Federal Budgeting

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Nature of Federal Budgeting
No Money shall be drawn from the Treasury, but
in Consequence of Appropriations made by Law
(US Constitution Article I, Section 9)

• Budgeting is the process by which limited Federal
  resources are allocated among competing demands.
• It is a policy-driven process - inherently
  dynamic and fast-paced in response to political,
  economic, global, and (as witnessed last year)
  environmental events.
• Key participants are the President, Congressional
  leaders, over two dozen House and Senate Budget
  Appropriations committees, OMB, CBO, and senior
  agency officials.
• Each of these key participants has the power to
  demand information in their own formats in their
  own time frames.

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Federal Budgeting is Dynamic

• Illustrative examples (nostalgia for US
  Budgeteers)
• August 1985 Gramm-Rudman-Hollings Act established
  deficit targets and sequestration requirements.
• Fall 1987 Bipartisan Budget Agreement following
  the Black Monday Stock Market crash.
• Oct. 1990 Budget Enforcement Act - new rules for
  constructing baselines PAYGO for receipts
  entitlements.
• Winter 1994 Republican Revolution and the
  government-wide shutdown. The current 2006
  Democratic Revolution.
• Oct. 2001 decision to show Federal retirement
  costs on an accrual basis.
• Major disasters such as 9/11 and Hurricane
  Katrina.
• Presidential Transitions (every one is unique).

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Budget Formulation and Execution LoBAs Is State
- Impetus for Change

• Most agencies do not have integrated automated
  systems to support their budgeting activities
  they depend on basic desktop office software to
  prepare and justify multi-billion dollar budgets.
• Hundreds of budget exercises are conducted
  annually without the benefit of electronic
  collaborative technologies.
• Agency budget personnel spend too much time
  entering and reconciling data and merging numbers
  into their submissions, and publications.
• Only one agency currently submits data to MAX
  electronically.
• Agencies pursuing automated systems have done so
  unilaterally with little coordination (until the
  BFE LoB).

• Agency Analysis - Findings
• Primary agency tools for budgeting are Excel and
  Word
• A few agencies have integrated Excel Word with
  databases
• A few agencies have successfully implemented
  elements of budget systems that contribute
  significantly to their productivity
• There have also been quite a few unsuccessful
  attempts at implementing systems some fairly
  expensive
• BFE modules from FM vendors have not worked

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Business Analysis Findings

• Nine major business processes were identified as
  common to all agencies.
• Within these nine major processes, 59 business
  activities were identified with a high degree of
  commonality.
• However, at the next level of business
  specificity, there were significant process and
  workflow variances - reflecting inherent agency
  diversity characteristics.
• Also, the dynamic nature of budgeting
  necessitates that systems be flexible enough to
  readily accommodate changes to business processes.

• Nine Business Processes
• Pre-budget formulation
• Strategic business assessments
• Dept / agency budgeting
• Dept / agency submission to OMB
• OMB internal decision making
• Preparation and publication of the Presidents
  Budget and Mid-Session Review
• Congressional submission and negotiation
• Tracking congressional action
• Budget execution

• Agency Diversity Characteristics
• Budget size
• Political sensitivity
• Mission complexity
• Funding type (mandatory vs. discretionary,
  credit, revolving)
• Activity type (operational, services, regulatory,
  capital investment, grant-making,
  commercial-like, military)
• Organizational complexity (centralized,
  federated, field, international)
• Budgeting sequence (top-down vs. bottom-up)
• Different (and multiple) Congressional
  constituencies

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LoB Common Solutions Framework

• Focus on Functional Capabilities
• The diversity and dynamic nature of budgeting
  business processes precludes traditional business
  process engineering approaches.
• However, these difficulties can be effectively
  bridged by focusing on solutions that enhance
  core functional capabilities of budgeting.
• These same core functional capabilities often
  apply to multiple business activities.
• Therefore, an architecture based on core
  functional capabilities will have broad
  applicability in transforming budgeting
  activities.

• Core Functional Capabilities
• Numbers manipulation (spreadsheets, reporting)
• Word processing and document publishing
• Database/data warehouse
• Tracking
• Collaboration (meetings, documents)
• Data collection (numbers text)
• Information sharing
• Analysis and modeling

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LoB Target Architecture

• Solutions consist of Functional Capabilities that
  support multiple business processes.
• Applications are flexible integrations of modules
  that connect via open data exchange technologies
  and can be reused.
• Functional Capabilities Modules in turn consist
  of service components consistent with a Services
  Oriented Architecture.
• Federated application solutions are a
  combination of central, shared, agency-unique,
  Open, GOTS, and COTS components.

• Capabilities Solutions that enhance the
  effectiveness of performing budgeting functions
• Technology
• Agency Budgeting Tools
• Analytical Tools
• Budget Performance Integration
• Collaboration
• Data Collection Tracking
• Document Production
• Knowledge Management
• Human Capital
• Governance
• Program Mgmt Office
• Architecture
• Standards

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The LoB Approach

• Improve Federal budgeting without compromising
  the ability of agencies and OMB to perform
  essential budgeting functions.
• Based on a value proposition - agencies
  voluntarily participate in the LoB and pay a flat
  funding (or in-kind) contribution to gain the
  benefits and government-wide services the LoB
  provides.
• Agencies optionally implement LoB sponsored tools
  and services that they either procure and deploy
  themselves or obtain via fee-for-service.
• Governed by the contributing agencies under the
  auspices of the Budget Officers Advisory Council
  (BOAC) and the Small Agency Council.

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LoB Transformation Strategies

• Governance processes that
• Maintain a year-round PMO staff to advance
  budgeting interests
• Set standards for data, data exchange, and
  modularization
• Extend the architecture to further understand
  business processes
• Provide centralized services (and service
  components) where functions are mandated or
  conducive to standardization.
• Help agencies be Smart Consumers
• Share information on what has and hasnt worked
  (best and worst practices)
• Consolidate acquisitions (e.g. Smart Buys)
• Arrange for shared service providers (for
  functions multiple agencies are acquiring)
• Leverage new custom development in a reusable way
  as GOTS and Open Source.
• Encourage Collaboration - establish a community
  of practice for the budgeting profession.

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LoB Benefits

• Cost avoidance more efficient acquisition of
  agency budgeting systems reuse of custom
  development as GOTS consolidated purchases.
• Improved effectiveness faster turnaround more
  collaboration reduction of labor intensive
  activities freeing up and leveraging valuable
  analyst resources better workforce professional
  development.
• Reduced risk avoiding solutions that havent
  worked fewer errors in agency publications.
• Enhanced budget decision making, execution,
  planning, performance, and financial integration.
  
• Supports the Presidents Management Agenda

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Budget Formulation Execution LoB

• Capabilities as
• Common Solutions

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Capabilities as Common Solutions
Agency Budgeting Tools
(New) Budget Execution (including Touch-Points
with the FM LoB)
Analytical Tools
Budget Formulation Execution Line of Business
(BFE LoB)
Budget Performance Integration
Budget Formulation Execution Line of Business
(BFE LoB)
Collaboration
Data Collection Tracking
Document Production
Knowledge Management
Human Capital (the Federal Budgeting Profession)
Program Management (Coordination, Standards,
Architecture)
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Agency Budgeting Tools
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Budget Execution (New)
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Collaboration
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Data Collection Tracking
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Human Capital (the Federal Budgeting Profession)
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Governance(Coordination, Standards,
Architecture)
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Current Progress - Highlights

• Established the PMO within the LoBs managing
  partner, the Dept. of Education (e-mail
  BudgetLoB_at_ed.gov).
• Established a government-only collaboration
  website for the budget community. Used to
  coordinate agency comments on FM LoB exposure
  drafts, and for collaboration by the Earmarks
  Workgroup.
• Piloted a quick-turnaround data collection
  approach that collected the earmarks database in
  just six weeks.
• Productized our first agency system for use by
  other agencies Treasurys Budget Formulation
  Execution Manager (BFEM) available via shared
  service provider or as GOTS software.
• Well along with the development of a budget
  systems decision matrix that compiles
  requirements from multiple agencies and assesses
  available budget system solutions against them.
• Started a new Budget Execution Solutions
  workgroup in partnership with Treasury FMS, and
  including the new MAX Apportionment application
  and a study of key intersections (touch-points)
  with Financial Management.

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Budget Formulation Execution LoB

• Summary

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Vision The Budget of the Future

• The MAX A-11 data collection application as we
  know it would disappear - it would be replaced by
  agencies using their own automated systems to
  formulate their budgets and pass the data to OMB
  electronically.
• Budget numbers and supporting text would move
  seamlessly from stage to stage of the budget
  process.
• Budget exercises even fast-turnaround ad hoc
  exercises would be performed using nation-wide
  web-based applications.
• Collaboration within agencies, between agencies
  and OMB, with the Hill would be facilitated by
  easy-to-use secure capabilities.

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Engaging agency CFOs on the BFE LoB

• Opportunities BFE LoB presents for each agency
• Touch-Points Study
• Communicating the BFE LoB to Departmental
  Components
• Be a good consumer of budget formulation
  execution tools
• Use the new BFE decision matrix and participate
  in the workgroup. Look at the Treasury BFEM
  tool.
• Reconsider any procurements of BFE modules that
  are part of FM systems they have generally not
  worked.
• If you have a system, form a consortium for
  development, modernization, and enhancement.
  Consider making it available for other agencies
  as an LoB productized system.

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• Supporting Materials

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• Budget Formulation and Execution LoB
• Vision, Goals, Objectives

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Budget Formulation Execution LoB
Vision Modern, interoperable, flexible, cost
effective, and optimized solutions supporting all
phases of the formulation and execution of the
Federal Budget and linking budget formulation,
execution, planning, performance, and financial
information.
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Budget Formulation Execution LoB

• Goals
• Improve the efficiency and effectiveness of
  agency and central processes for formulating and
  executing the Federal Budget
• Improve the integration and standardized exchange
  of budget formulation, execution, planning,
  performance measurement, and financial management
  information and activities across government
• Improve capabilities for analyzing budget,
  execution, planning, performance, and financial
  information in support of decision making
• Enhance capabilities for aligning programs and
  their outputs and outcomes with budget levels and
  actual costs to institutionalize budget and
  performance Integration
• Enhance the effectiveness of the Federal
  budgeting workforce

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Budget Formulation Execution LoB
Goal 1 - Improve the efficiency and effectiveness
of agency central processes for formulating and
executing the Federal Budget

• Objectives
• The tactical targets that lead to achieving the
  goals
• Develop a target architecture, concept of
  operations, and range of common solutions that
  are flexible enough to accommodate the diverse
  and dynamic requirements of agency and central
  budget processes
• Achieve operational efficiencies and cost savings
  via the consolidation and dissemination of
  standardized budgeting solutions and processes
  where possible
• Develop a maturity model that assesses the
  sophistication of each individual agencys
  automated budgeting processes and defines
  transition paths to appropriate common solutions
  for agencies at different maturity levels
• Establish a government-wide capability for
  electronic collaboration on budgeting-related
  exercises and activities by organizations in the
  Federal budgeting community

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Budget Formulation Execution LoB
Goal 2 - Improve the integration and standardized
exchange of budget formulation, execution,
planning, performance measurement, and financial
management information and activities across
government

• Objectives
• The tactical targets that lead to achieving the
  goals
• Ensure that the LoB target architecture, concept
  of operations, and range of common solutions
  facilitates automated exchange of data using
  standards and technologies for electronic
  information exchange
• Improve the collaboration between budgeting,
  planning, and financial management organizations
• Review and reconcile terms and usage between
  budgeting and financial management information

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Budget Formulation Execution LoB
Goal 3 - Improve capabilities for analyzing
budget, execution, planning, performance, and
financial information in support of decision
making

• Objectives
• The tactical targets that lead to achieving the
  goals
• Ensure that the LoB target architecture, concept
  of operations, and range of common solutions
  includes diverse innovative tools and approaches
  for enhancing agency and central budget abilities
  to readily and flexibly extract, manipulate, and
  model budget, execution, performance, and
  financial data
• Ensure that the clearinghouse/repository for
  Federal budgeting and execution activities
  facilitates and promotes agencies adopting best
  practices and common solutions for analyzing data
  and supporting decision making

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Budget Formulation Execution LoB
Goal 4 - Enhance capabilities for aligning
programs and their outputs and outcomes with
budget levels and actual costs to
Institutionalize budget and performance
integration

• Objectives
• The tactical targets that lead to achieving the
  goals
• Establish guidance and best practices relating to
  the alignment of program budget requirements,
  strategic goals, actual costs, and performance
  outcomes
• Ensure that the LoB target architecture, concept
  of operations, and range of common solutions
  includes innovative approaches that facilitate
  integration of planning and performance in all
  phases of the budget formulation and execution
  process
• Establish the standardized processes and data
  definitions necessary to readily align budget,
  planning, and performance information

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Budget Formulation Execution LoB
Goal 5 - Enhance the effectiveness of the Federal
budgeting workforce

• Objectives
• The tactical targets that lead to achieving the
  goals
• Create a Federal Budgeting Community of Practice
• Establish a government-wide capability for
  knowledge sharing among agencies and central
  budget organizations, including a
  clearinghouse/repository for Federal budgeting
  activities of interest (e.g., guidance, best
  practices, lessons learned, etc)
• Develop and disseminate best practices for human
  capital management for Federal Budget offices
• Conduct a skills assessment and gap analysis for
  Federal budgeting develop and disseminate best
  practices for training and education
• Conduct conferences, training, and other
  approaches that facilitate professional
  development of the Federal budgeting workforce.

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Capabilities as Common Solutions
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Capabilities as Common Solutions (cont.)
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Capabilities as Common Solutions (cont.)