Message to the Congress Transmitting the Annual Management Report of the President

February 5, 1986

The budget I am submitting offers a blueprint for reducing the deficit by curbing the growth of Federal spending without weakening our ability to carry out essential Federal responsibilities. One means of furthering this goal is to increase the cost-effectiveness of essential programs through improved management, enhanced productivity, and consolidations or diversion of activities now provided by the Federal Government.

My administration has devoted particular attention to improving the way the Federal Government's vast resources are managed. Of course, good management does not always yield immediate benefits, tends to be complex to define and implement, and does not easily capture the imagination of the public. Nevertheless, its pursuit is vital, and we shall be unfailing in our efforts.

In 1980, I promised the American people not only less government, but better government. To meet the goal of better government, in 1982 I initiated Reform '88 -- a program designed to modernize a Government that, in many respects, still relied upon technology and processes more appropriate to the 1960's than the 1980's. Now in its fourth year, Reform '88 has demonstrated that sound business practices can be brought to bear on Government programs, and yield positive results.

Already the results of Reform '88 are beginning to pay dividends to the American people. Let me just cite a few highlights of our recent efforts:

• Installation of the first comprehensive system to manage the Government's $10 trillion annual cash flow. One impressive result is that 99% of all payments to firms doing business with the Government are made on time. Previously, 30% were made too late and 45% too early. Another result is the replacement of cardboard checks by multicolored paper checks that are lighter in weight, easier to store, and more difficult to counterfeit.
• Initiation of a comprehensive program to manage better the $257 billion Federal loan portfolio -- which has $24 billion in delinquent accounts.
• Coordination of our efforts to reduce waste and fraud, resulting in an estimated $63 billion in improved use of funds since 1981.
• Elimination of useless or duplicative Federal publications -- amounting to 150 million copies per year, or 25% of the total.
• Reduction of some 500 million hours required to complete Government forms.
• Avoidance of $627 million in annual Government travel costs.
• Introduction of a simplified system that eliminates nearly 30,000 pages of procurement regulations.
• Curtailment of non-Defense civilian employment by over 78,000 full-time equivalents over 4 years, and
• Initiation of other service improvements, such as obtaining passports in 10 days rather than 4 weeks, and issuing Social Security cards in 11 days instead of 6 weeks.

The initial thrust of Reform '88 was to fix the most obvious problems first -- controlling administrative costs, checking the spread of waste and fraud, reducing essential service backlogs, and installing modern financial management systems to control the cash flow and assets of the world's largest spender and lender. We have now embarked upon the tougher challenge that is the principal focus of this report: extending those ideas to a broader range of services the Government provides to the public. Accordingly, we expect significant additional improvements in service delivery and cost savings as time goes on.

Management initiatives during calendar year 1985 reflected this evolution of emphasis. Consider the following measures designed to improve service delivery:

• Productivity. A comprehensive program was announced to boost employee productivity by 20% in selected Federal programs.
• Payment Integrity. New regulations were issued to help ensure that only those eligible receive entitlement payments, releasing program funds for others who qualify.
• Procurement Reform. A legislative proposal for a Simplified Competitive Acquisition Technique (SCAT) was advanced to reduce from an average of 224 days to 85 days the time it takes the Government to procure goods and services worth $28 billion annually.
• Credit Management Standards. Exacting standards were established covering every aspect of credit management; the objective was to put rigor into Federal credit practices and make the Government truly a ``lender of last resort.''
• Cash Management. New regulations were issued to ensure adoption of the most effective cash management techniques throughout the Government.
• Information Resources Management. A broad policy framework was established for more effectively managing the Federal Government's information resources, which amount to over $15 billion in cost and involve over 100,000 employees.

In addition, to make sure Reform '88 is carried out in the most effective manner, we've established two well-organized, interagency groups: the President's Council on Integrity and Efficiency (PCIE), and the President's Council on Management Improvement (PCMI).

The PCIE was created in 1981 and charged with spearheading the attack on fraud, waste, and abuse. This effort has been a special priority from the very beginning of my administration. Not only do fraud, waste, and abuse drain scarce resources, but their frequently exaggerated representation plays to the worst suspicions of the public. Since its creation, the PCIE and the agency Inspectors General who comprise it have reported over $63 billion in improved use of funds; moreover, they have reported 14,291 successful prosecutions and 14,146 administrative actions against Federal and contractor employees who have taken unlawful advantage of the Government. While fraud, waste, and abuse have not been eliminated entirely, we have made great strides toward winning the battle.

The PCMI is composed of the key management officials in large agencies and is leading the implementation of management improvements as well as looking ahead to identify possible problems and opportunities for the future. The Council also has overseen such major management initiatives as reducing the number of payroll and personnel systems, and is currently focusing on improved financial systems and implementation of my productivity improvement program.

Another important contributor to progress toward better management is the President's Private Sector Survey on Cost Control (PPSSCC), commonly known as the Grace Commission. The PPSSCC was established in 1982 to obtain advice from business leaders on where and how management of the Federal Government might be improved.

Included in this volume is a status report on the disposition of 2,478 PPSSCC recommendations. We have accepted or are in the process of implementing some 1,741, or over 80%, of the 2,160 unduplicated recommendations the Commission has produced. As with the PPSSCC recommendations proposed with the 1986 budget, all of those proposed with the 1987 budget require Congressional action to implement. The PPSSCC recommendations proposed with the 1987 budget have the potential of approximately $69 billion in budget savings through 1991.

Our management emphasis has also been geared toward improving the efficiency of Government at all levels. One of the principal goals of my administration has been to streamline and restore the proper balance between Federal, State, and local roles. Initially undertaken in 1981 and greeted with skepticism, this program of ``Federalism'' has since garnered praise from the General Accounting Office, various professional and academic organizations, and, most importantly, from the States themselves. Since 1981, when 58 categorical programs were consolidated into 9 block grants, Federal paperwork burdens have been reduced from about 6.5 million hours annually to less than 600 thousand.

In part because of this success, I am recommending in this year's budget that additional specific Federal endeavors be turned over to State or local authorities. Provisions are made for additional block grants, especially in the areas of transportation and environmental protection; further relief from regulatory burdens; and simplification of requirements common to all agencies.

Last year we stated that support of Congress would be critical to full implementation of the administration's management improvement program. That support grows more necessary with each passing year. Congress now has before it 18 legislative proposals which fall into five categories: (a) reorganization, (b) prevention of fraud, (c) payment integrity and improved financial procedures, (d) procurement, and (e) reduction in regulatory and paperwork burdens.

In the months ahead, we will transmit to the Congress additional proposals designed to complete the management legislative agenda:

• The Intergovernmental Financing Act of 1986 would establish general guidelines to assure that States and the Federal Government accord each other the same equitable treatment with regard to the timing of transfers and the management of Federal funds;
• Amendments to the Truth in Negotiations Act would strengthen the Government's ability to enforce the Act, particularly with regard to a false statement by a contractor; and
• The Payment Integrity Act of 1986 would build on the 1984 Deficit Reduction Act's income and eligibility verification provisions to further reduce abuse in entitlement programs.

I urge the Congress to enact these proposals, as well as those submitted in 1985. In addition, I urge the removal of other barriers to better management, such as employment floors, prohibitions on the reform of field structures, and obstructions to cost comparisons with the private sector. These and other impediments make management reforms more difficult to effect and cost taxpayers and service recipients very dearly.

Of course, Congress already has enacted many key pieces of legislation contributing to effective management -- particularly the Debt Collection Act, the Deficit Reduction Act, and the Federal Managers' Financial Integrity Act. We look forward to more progress in the immediate future.

Reform '88 is an ambitious management improvement program. Already it has had much success. But many items on its long-term agenda have not been achieved, and we must not rest until these reforms have been fully implemented.

The pressing need to reduce the deficit, and hence Federal spending, lends impetus to the pursuit of good management. But even absent the present fiscal difficulties, improved management would be a high priority for this administration. The Constitution is rooted in certain fundamental ideas, among which is the people's right to presume a capable, efficient Federal Government in return for taxes duly paid. It is their birthright, and affirming it will be one of my legacies.

Ronald Reagan

February 5, 1986

Note: The President's management message was printed in the report entitled "Management of the United States Government, Fiscal Year 1987 -- Executive Office of the President, Office of Management and Budget."