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February 22, 2000 Opinion: Definition of Waste - from the
Majority
 | Last time I promised that we would start focusing on performance management and
measurement, but I could not resist another commentary on the nature of waste.
(And there is a performance management tie-in at the end.) This time it is
due to the House Budget Committee majority staff report on wasteful programs, REVIVING
THE REFORM AGENDA, THE URGENT NEED TO ADDRESS GOVERNMENT WASTE,
FRAUD, ABUSE, AND MISMANAGEMENT. A REPORT BY THE House Committee on the Budget
Majority Caucus. February 2000. And in small
print at the bottom: "This document was prepared by the majority staff of the
House Committee on the Budget. It has not been approved by the full committee and
therefore may not reflect the views of all the committee’s members." (The document is available, as of February 22, 2000, at
http://www.house.gov/budget/FY01budget/wastedoc.pdf. This link is direct to a PDF
file; if you don't want to start a download, got to www.house.gov/budget
first.) |
| The report makes for wonderful reading, especially if you are interested in tales of
crime and of malfeasance in large organizations. There is also some humor ("The
1st Public Relations Brigade (Mechanized) – The Pentagon has 2,718 military and
civilian personnel engaged in public affairs and congressional affairs
activities..."). Unfortunately, names are not named, so it lacks some of the
punch that a novel or a newspaper's report of malfeasance would have. It is obvious
that Federal programs will be subjected to the same criminal activity as the rest of
society is; hanging out the Federal shield is no protection, nor should it be expected to
be. |
| Apart from the wonderful reading it provides, and the political implications of the
authorship and disclaimers, what is of major interest is what is missing: There
are no solutions offered, nor is there an assessment as to how other efforts at
controlling waste (does anyone remember FMFIA, another wastefraudandabuse
fighter?) have brought us to this juncture. The main programs found to be wasteful
are: National Defense, Housing and Urban Development, Medicare, Medicaid, Food
Stamps and Other Nutrition Programs, Supplemental Security Income, and the Earned Income
Credit. I reproduce the key findings below because there is a trend in them that
deserves analytical attention. |
| The National Defense establishment is identified as having the following sins:
 | There are Financial Management problems – ... DOD’s
financial accountability has been growing worse. Its most recent financial statements
(for fiscal year 1998) were more untimely than ever, and a record $1.7 trillion of
unsupported adjustments were made in preparing the statements. In addition, DOD is
responsible for almost half of the Government’s general plant, property, and
equipment – but billions of dollars of its property valuation is unreliable. |
| There are Acquisition Problems – ... leading to costly errors
in purchasing and inflated prices. The IG has described DOD’s procurement practices
as "poorly conceived" and "badly coordinated," and said the Department
"has not yet learned how to be an astute buyer in the commercial marketplace." |
| There are Inventory Problems – Inventory management problems
have plagued the Pentagon for decades, and continue creating large surpluses and shortages
of inventory. At times, officials have been unable to locate equipment such as landing
craft, aircraft engines, and missile launchers. Excess inventories also result in
unnecessary storage costs. |
| Infrastructure – The Armed Forces are top-heavy with
uniformed supervisors, staff officers, chiefs, deputies, and directors – yet some
services have continued asking for more top-level officers. |
And a clue: "During the 1960s,"
says the Pentagon’s inspector general, "DOD financial management was
considered to be exemplary. Unfortunately, this has not been the case for quite some
time," and some more fun:
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| Housing and Urban Development's problems are:
| Troubled Neighborhoods – HUD’s public and assisted
housing projects have become nests of violent crime and drug trafficking. |
| Waste, Fraud, and Abuse – Since 1994, the General Accounting
Office [GAO] has termed HUD a "high-risk" agency – meaning it is
exceptionally vulnerable to waste, fraud, and abuse. It is the only Cabinet-level
agency (emphasis in original) to hold the designation. An example of the problem: HUD
itself estimates that nearly $1 of every $18 it spends in its section 8 assisted housing
program is wasted. HUD also has failed to provide timely and effective enforcement
against those who defraud the system. |
| Deteriorating Housing – While HUD’s Federal Housing
Administration [FHA] has sought to extend mortgage insurance to persons unable to obtain
home loans in the private market, it often has failed to assure properties are in good
condition, or to provide needed financial counseling so buyers can keep up with
their mortgage payments. Properties left abandoned after defaults are allowed to run down,
or be taken over by drug dealers – and this decay, in turn, infects surrounding
neighborhoods. |
| Mismanagement – HUD’s own mismanagement is a major
contributor to the problems listed above. HUD programs continue to proliferate while its
shrinking staff remains poorly matched to program management and oversight. Furthermore,
HUD’s 3-year-old restructuring plan – a major undertaking known as HUD 2020
– appears to be making matters worse. |
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| Medicare has its problems too:
| Improper Payments – Medicare’s fee-for-service program
made $12.6 billion in improper payments in fiscal year 1998 ... this appeared to be better
than the previous year, the improvement was mainly the result of better paperwork, rather
than changes in actual billing practices. |
| Fraud – The improper payments quantified cannot account for
the substantial fraud the program suffers. Indeed, recent accounts show that Medicare has
attracted its own class of organized criminals – persons who specialize in
defrauding health care and health insurance systems. |
| Mismanagement – Program administrators have failed to provide
sufficient safeguards and oversight to assure Medicare funds are properly spent. |
| Flawed Payment Mechanisms – Medicare grossly overpays for
some services because of the nature of its own payment mechanisms – but the
total amount of these excessive payments has not been quantified. |
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| And Medicaid: "Yet, in the face of what appears to be rampant
Medicaid fraud, the Federal Government has not even tried to determine the amount of
improper payments – through fraud or other problems – occurring in the Medicaid
Program. According to ... GAO [there is no] comprehensive quality assurance
program or other methodology in place for estimating improper Medicaid
payments." |
| And for an example of waste is in the eyes of the beholder, the Education Department's
problem: "... Members of the
Committee on Education and the Workforce, ... found more than 760 Federal education
programs (emphasis in original). After further evaluation, the committee found
the total grew to 788 programs, spanning at least 39 Federal agencies, boards, and
commissions, and costing roughly $100 billion a year. |
| So what is to be done? The report does not say, and presumably we will find out as
hearings are held and solutions are cast into legislation. One thing I am sure
about: It is not likely that anyone will seriously look at what were the reasons why
prior highlighting of the problems (by the press, the IG, GAO, or Congress) did not lead
to a solution. |
| The report could have attempted to, at a minimum, categorize the problems. We
cannot expect that overnight we will solve some of the most intractable social problems
faced by some Federal agencies, such as low income housing in area riddled with crime, no
matter what we state about performance measures. But we can attempt to segment the
problems into those that can be solved by management focus and go on with them to at least
solve these issues.
| In the foregoing extracts I have highlighted the keys to the problems presented in italics.
A similar analysis of many of the elements cited in the actual report could be
done. The highlighted items point to items that result from a lack of staffing at
the agencies involved, i.e., past budget cuts have led the current problems, or to
Congress itself not wanting the Federal government to be too hard on the contractors or
state and local agencies involved. But these items also lend themselves to outcomes
definition that would, if properly implemented, allow solutions to be found, and
proper performance measures developed and programs managed towards achieving the goals set
forth by the measures. |
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| Of course, my thesis assumes that performance management is the focus of concern.
I may be wrong. We may be in for nothing more than another round of
fraudwasteandabuse mongering. Let's hope not. |
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