The Office of Management and Budget is telling agencies to take a bigger bite out of their discretionary budgets in fiscal 2017. Unlike in 2016 when OMB required both suggestions for a 2 percent discretionary cut and a 5 percent increase across specific programs, the administration just wants agencies to reduce spending for 2017.
OMB’s annual budget guidance sent to agencies on May 1 highlights the need to cut discretionary spending, but also to be sure to request sufficient money for ongoing presidential priorities and overall efforts to increase effectiveness and reduce fragmentation, overlap and duplication.
“Overall, these investments and your FY 2017 Budget submission should together achieve a level that is no more than the net discretionary total provided for your agency for FY 2017 in the FY 2016 budget, for both defense and non-defense programs,” wrote OMB Director Shaun Donovan in the memo. “These additional investments should be separately identified in your budget submission and ranked in priority order.”
OMB continues to require agencies to use data to make budget decisions, requiring the use of an evidence template to identify barriers, highest priority programs and progress in increasing access to data sets.
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“To further these efforts, agencies are invited to submit: 1) proposals that scale-up interventions or policies that have been tested and shown to work; and 2) proposals that will further develop agencies’ capacity to use evidence, evaluation, and data as tools to improve program outcomes,” the memo stated. “All proposals should be included within your guidance levels. OMB strongly encourages agencies to engage with their resource management officers early in the process of developing these proposals.”
A new stat session
The data should come from PortfolioStat, bechmarking and internal data drive reviews. OMB also is starting a new program called FedStat, which is a single, coordinated approach to prioritizing mission and management issues.
“In their FY 2017 budget submissions, agencies should provide an update on all action items from the FedStat meeting,” the memo stated. “Following the FedStat meeting, OMB may provide additional guidance on specific items for your agency’s FY 2017 budget submission.”
Along with discretionary cuts and data drive decision making, OMB wants agencies to focus on management agenda areas, such as real property, digital services and improper payments as part of their budget request.
In March, OMB introduced the Reduce the Footprint initiative and the 2017 budget process builds on that strategy.
“[E]ach CFO Act agency is encouraged to include in their FY 2017 budget submissions a list of no more than five high priority projects that consolidate disparate operations at a single location, reduce square footage, dispose of unneeded properties, or co-location in proximity to customers served,” the memo stated. “Agencies should include required resources (e.g., renovation or repair and alteration, build-out, IT and telecom cabling, furniture, move,) and projected cost savings and/or costs avoided over a 10-year period.”
OMB is asking agencies to refocus their 2017 requests on reducing improper payments after a spike in 2014. The Government Accountability Office reported in March that the federal improper payment rate rose to 4.02 percent in 2014, up from 3.53 percent, for a total of $124.7 billion.
The administration specifically told the departments of Agriculture, Education, Health and Human Services, Housing and Urban Development, Labor and Treasury and the Social Security Administration to take particular steps as they prepare their 2017 requests.
These seven agencies, which account for the majority of the improper payments across government, should determine whether new program integrity proposals targeted at reducing improper payments are necessary, and funding either the implementation of Treasury’s Do Not Pay Business Center into their payment processes, which would let Treasury stop payments on the agency’s behalf, or implementing internal controls to prevent improper payments before they occur as part of the broader Do Not Pay initiative.
IT modernization funding should be included
OMB also wants agencies to weigh in on a third administration priority, shared services.
For the four financial management and human resources shared service providers — USDA, Treasury and the departments of Transportation and Interior — their budgets should reflect proposals to expand capacity, reduce costs, improve technology, integrate with external centers of excellence and/or introduce data analytics.
“Please explain how these investments will result in outcomes that will increase your ability to better on-board and service additional cabinet-level departments, reduce your operating or implementation costs, and/or improve your suite of service offerings,” the memo stated.
For any agency considering or planning to move to one of the four shared service providers, OMB wants them to identify what potential shared service they may move to, costs estimates for planning and implementation and a high level business case to support the planned acquisition of shared services.