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Budget Formulation: U.S. Federal Executive Experience

Bill Dorotinsky

Seoul, Republic of Korea

October 16, 2003

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OutlineI. The Office of Management and Budget

a. Organization Chartb. Brief Historyc. Staffing

II. Aspects of the Budget Processa. Budget Calendarb. Features of the Processc. Other actors

I. Key Interactions

III. Budget Documentation a. Sample

IV. Reference Slides

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What is OMB?• OMB is the staff office to the President responsible for helping the President

carry out his Constitutional duties. • Key OMB responsibilities include:

– preparing the annual President’s Budget• funds and staffing limitations

– providing policy analysis and advice to the President– government-wide management, including financial management and

procurement– budget execution: monitoring and control of all Federal Government

spending after its Appropriation by Congress– review and approval of all Federal Government regulations and data

collections– reviewing and coordinating all Executive Branch legislative proposals,

testimony (policy enforcement role)– providing other staff support to the President, as necessary

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OMB Organization Chart

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Brief History of OMB

• OMB was created in 1921 as the Bureau of the Budget (BOB) within the U.S. Department of Treasury.

• In 1939, BOB was moved from Treasury to the Executive Office of the President.

• While BOB always played a role in agency and government-wide management issues, this role was formalized in 1970 when BOB was renamed the Office of Management and Budget.

• The most recent change: OMB 2000. OMB was reorganized to combine the management and budget offices into Resource Management Offices.

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Neutral Competence• A critical point: OMB staff are career staff to the Office of the

President, providing neutral competence.

• Although referring strictly to OMB’s ‘management function,’ the following quote nicely summarizes the over-all nature of OMB:– “The Budget Bureau must be humble. If it ever becomes obsessed with the

idea that it has any work except to save money and improve efficiency in routine business, it will cease to be useful. Again I say, we have nothing to do with policy. Much as we love the President, if Congress, in its omnipotence over appropriations, and in accordance with its authority over policy, passed a law that garbage should be put on the White House steps, it would be our regrettable duty, as a bureau, in an impartial, nonpolitical, and nonpartisan way, to advise the Executive and Congress on how the largest amount of garbage could be spread in the most inexpensive and economical manner.”

• General Dawes, 1st Director of Bureau of the Budget, 1921

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OMB Staffing

• OMB employs roughly 535 staff

– approximately 35 of these staff are political appointees and staff, or 6.5 % of all staff

– the remaining staff are career civil servants

• of these, over 50% are ‘program examiners,’ who have responsibility for individual programs or agencies budgets.

• the remainder are staff in OMB-wide support offices or statutory offices.

• Most OMB professional staff have at least a Masters degree.

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Aspects of the Executive Budget Process

• Preparation of the President's Budget typically begins in the spring (or earlier) each year,

– at least eleven months before the budget is submitted to Congress,

– about 17 months before the start of the fiscal year to which it pertains, and

– about 29 months before the close of that fiscal year.

• The early stages of budget preparation occur in federal agencies. When they begin work on the budget for a fiscal year, agencies already are implementing the budget for the fiscal year in progress and awaiting final appropriations actions and other legislative decisions for the fiscal year after that.

• The long lead times and the fact that appropriations have not yet been made for the next year mean that the budget is prepared with a great deal of uncertainty about economic conditions, presidential policies, and congressional actions.

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Budget CalendarMonths Before Fiscal Year

Activity

-22 •Prepare macroeconomic estimates

-21 •Revenue estimates

•Agency request preparation begins

-20 •Broad expenditure estimates

-19 •Fiscal Policy set

-18 •Ceilings set, call circular to agencies

-17 •Additional guidance to agencies

-16 •Budget requests submitted

-16 to –14 •Requests analyzed, advice provided, decisions taken

•Macroforecast updated

-14 •Passback of decisions, appeals

-13 to –12 •Preparation of Budget documents

-11 •Budget transmittal to Congress

-6 •Budget update to Congress reflecting macroeconomic changes

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U.S. Federal Budget Features

• Multi-year projections– Since 1974, OMB has been required to produce five-year estimates

(budget year plus four years)

• Transparency of Policy Changes– Beginning in 1974, OMB was required to submit two sets of budget

estimates for every account: • Current Services: estimate of budget authority necessary if current law and

programs were continued with no policy changes.• President’s Policy: actual budget proposed by the President for enactment

• Modified Cash Basis of Accounting– Since 1956, OMB has been required to produce accrual-based budgets– In practice, there are some significant exceptions– Nonetheless, for each account OMB includes estimates of total

obligations (incurred financial commitment), budget authority (new authority to commit resources), and outlays (cash).

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CONSTITUTION Legislative BranchExecutive Branch

CONGRESS

General Accounting Office

Accounting policiesAccounting and information systems developmentClaims and risk managementPerformance evaluationInternal controls

Congressional Budget Office

Economic forecasting and projectionsFinancial and budgetary analysis

PRESIDENT

Office of Management and Budget

Accounting and information systems developmentOperating budgetFinancial and budgetary analysisInternal controlsEconomic forecasting and projectionsAdvice and consultationFinancial (strategic) planning and control

General Services Administration

Inventory managementReal property managementData processing and communication systems

Treasury

Credit managementBankingBanking relationsDebt/equity managementInvestor relationsCash managementInvestment portfolio managementForeign currency managementAccounting policiesCollections and disbursementsMaintenance of accounting recordsFinancial reportingEconomic forecasting and projections

Office of Personnel Management

Compensation and employee benefits

Council of Economic AdvisorsEconomic forecasting and projections Economic Advice

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Key Interactions

OMB

Line Ministries

PresidentCongress

CBO

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Budget DocumentationBudget of the United States Government. A summary of the President’s budget proposals.

Budget of the United States Government--Supplement. The budget message of the President and information on the President’s proposals.

Analytical Perspectives. Analyses designed to highlight specific subject areas, and to put the budget data in various perspectives. Includes detailed economic and accounting analyses; information on Federal receipts and collections; analyses of Federal spending by department, function, and program; detailed information on Federal borrowing and debt; the Budget Enforcement Act preview report; current services estimates; and other technical presentations.

Historical Tables. Budget data of the Federal government from 1940 to present.

Budget of the United States Government, Appendix. Contains detailed budget plans for the

coming fiscal year.

Performance and Management Assessments. Contains evaluations and analyses of programs and management at federal departments and agencies.

Economic Report of the President. Detailed information and discussion o f the economic situation, forecasts, etc.

Agency Budget Justifications. Detailed budget information for each agency.

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Sample

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Sample2

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Reference

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Sources of Fund 2003

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Uses of Funds 2003

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Executive Branch Management Scorecard 2003