The Budget and Performance Integration initiative is intended to provide a very useful tool to OMB in its budget development processes. More importantly, OMB intends that it will also be an important tool for federal managers, with the results being better program performance and better cost control and accountability. These benefits were described in the August 2001 announcement of the President's Management Agenda.

The Expected Near-Term Results

In describing what it expected to achieve over the near term through performance budgeting, OMB signaled a serious intention to base agency and program funding on tangible results, and to use comparisons between various programs to make such budget decisions. Two of these uses of performance budgeting were described as follows:

• "Starting in 2003, the President's Budget will shift budgetary resources among programs devoted to similar goals to emphasize those that are more effective."
• "In the 2003 Budget, the Administration will set performance targets for selected programs along with funding levels."

By early 2004, OMB’s use of the Program Assessment Rating Tool (PART) had greatly facilitated its ability to understand exactly how agency programs were (or were not) implementing performance budgeting. Use of the PART had also begun having a significant impact on OMB’s decisions on program funding levels.

The Expected Long-Term Results

OMB understands the important point that effective Budget and Performance Integration is dependent upon the agency having the necessary financial management and accounting systems. The principles of managerial cost accounting, and especially Activity Based Costing and Cost Management (ABC/M), are key enablers for the agency to realize the full benefits of performance-based budgeting through improved day-to-day program management. OMB mentions the following as being among the expected long-term benefits of this reform:

• "Better performance…"
• "Better control over resources used and accountability for results by program managers…"
• "Better service…"
• "Standard, integrated budgeting, performance, and accounting information systems at the program level that would provide timely feedback for management and could be uploaded and consolidated at the agency and government levels. This would facilitate the goals of the President's initiative to improve financial performance."

The last item cited above is fully consistent with the experience of John Mercer in the model performance budgeting system that inspired GPRA. Based on that experience, it is Mr. Mercer's conviction that the most effective Performance Budgeting system is one that integrates all three elements of program performance, budget, and financial management.

OMB's core criteria for determining compliance with this reform reinforce the importance of an integrated approach. The 33-page guide to Cascade™ Performance Budgeting on this web site also underscores this point by illustrating the effective integration of budgeting, performance and accounting information systems at the program level, as desired by OMB.