Message on the Management of the United States Government


January 18, 1989


In July 1980, I promised the American people, ``I will not accept the excuse that the Federal Government has grown . . . beyond the control of any President, Administration or Congress. . . . We are going to put an end to the notion that the American taxpayers exist to fund the Federal Government. The Federal Government exists to serve the American people . . . I pledge my Administration will do that.''


We have delivered on that promise, and I take great pride in transmitting to the Congress, my fifth and final Management of the United States Government Report.


1980 -- A Government Out Of Control


When we took office in 1981, Federal outlays were increasing almost 17 percent a year -- an unsustainable rate. There was no organized approach toward reducing waste, fraud, and mismanagement; no Governmentwide management systems; no cash and credit management systems; and there were nearly 400 incompatible accounting systems.



In 1981 the annual cash flow of the Government was approaching $1.3 trillion with no system to manage it. Hundreds of millions of dollars in interest payments were being lost simply because the Federal Government could not get its financial house in order.



Federal agencies were giving tax refunds, loans, contracts, grants and jobs to people who had defaulted on their Federal loans or otherwise defrauded the Government.



Almost 400 separate and distinct financial management systems were in place and unable to communicate with one another or keep up with the impact of our expanding Government.



There was great concern about the quality of service provided to the public, but the sporadic and infrequent efforts to improve productivity were misguided and unsuccessful.



The purchase of huge computer systems was done without adequate strategic planning.



Government performed tasks that could and should have been done by the private sector.



In 1981, the Federal Government was incapable of adequately determining whether funds were being spent for the intended purpose.


This mismanagement, combined with increased regulation of the private sector and State and local governments, meant that Federal inefficiency was being exported to the rest of the economy.


Eight Years Of Accomplishments


Early in 1981, we initiated a Governmentwide strategy to correct the management problems we faced.


Waste, Fraud, and Abuse. At the outset of our Administration, I formed the President's Council on Integrity and Efficiency (PCIE) to utilize fully the capabilities of the Government's Inspectors General to reduce waste, fraud, and mismanagement. The PCIE consists of the Inspectors General of the major departments, the Federal Bureau of Investigation, and the Office of Personnel Management. Since its formation, the PCIE has saved, or put to better use, funds totalling over $125 billion -- and continues to do so at a rate of over $20 billion a year. Our war against fraud and waste has also produced 27,000 successful prosecutions.


Cash Management. The Federal Government now recognizes that cash is an asset and that there are major cost benefits to be achieved by managing cash intelligently. The application of business-like practices to manage the Government's annual cash flow have saved $4.3 billion since 1983. In FY 1988 alone, the Government realized interest savings of almost $1 billion. And, Federal agencies now pay 87 percent of their bills on time -- making us not only a desirable, responsible business partner, but also saving the Government millions of dollars in interest payments and late payment penalties each year.


Also, the Federal Government now uses modern, private sector business technology to manage its accounts, including electronic fund transfers and direct deposit. These electronic links enable 450 financial institutions around the country to wire funds to the U.S. Treasury within one business day. Further, 234 lockboxes operated by financial institutions have reduced from one month to three days the time required by agencies to receive and process payments.


The Government now accepts credit cards. Examples of Government credit card acceptance include: duties and seized property sales, medical services, Government publications, passports, and recreational facilities fees.


Credit Management. We put into place routine private sector practices to better manage the Government's credit portfolio. Applicants for Federal loans, contracts, grants, and jobs are now prescreened for their creditworthiness.


Loan asset sales allow the transfer of loan management responsibilities, and risks, to the private sector. In 1987, the loan asset sales pilot program at the Departments of Agriculture and Education yielded $3.1 billion in third-party sales. In 1988, proceeds from sales and prepayments were $8.2 billion.


In addition, the Federal Government is now engaged in aggressive efforts to collect money owed it. These efforts include the use of private sector collection firms, offsetting tax refunds due delinquent debtors, offsetting the salaries of Federal employees who owe the Government, and Justice Department litigation and contracting with private attorneys for debt collection. Since 1982, an additional $3.7 billion owed the Government has been collected through these initiatives.


Financial Management. The Government is now building an effective system for managing the Government's over $2 trillion cash flow, processing more than 900 million payments, and paying its 5 million civilian and military personnel. For the first time, Governmentwide standards and systems have been established to provide consistency in financial and payroll reporting among all Federal agencies.


To assure consistency and adherence to sound financial management principles throughout the Government, a Chief Financial Officer (CFO) has been designated within the Office of Management and Budget, and CFOs for each agency are now in place.


Quality and Productivity Improvement. As in the best-managed American companies, a major push is underway to instill a ``Total Quality Management'' environment in the Federal Government workplace. The goal of this program is to provide error-free, timely, and inexpensive services and products to the public. This commitment requires a fundamental change in attitudes and ways of doing business. One example of results that have been achieved is a reduction in the amount of time it takes to process a HUD property improvement loan, down from 86 days in 1985 to just 22 days in 1988.


Information Technology. Efficient use of computers, information technology, and management information systems are benefitting numerous programs that touch the lives of many Americans, including modernization of the social security system; redesign of the income tax system; improved weather forecasting; and safer air travel.


Agencies are now emphasizing better use of technology to deliver services and improve quality and timeliness. For example, in 1988, 2 million tax returns were filed electronically, reducing processing time and providing refunds in less than 3 weeks; and 12 of 20 air traffic control centers have been modernized, increasing reliability twentyfold.


Privatization. The Federal Government cannot compete efficiently with the private sector in providing most services or producing commercial goods. For that reason, we have come to rely on the A - 76 program, ``Performance of Commercial activities,'' which permits agencies to decide whether or not the Government should produce a service in-house or buy it from the private sector. The Government's performance of commercial activities under this program is becoming part of every Federal agency's operations and saved the Government over $830 million in 1988 alone. And, we have increased the number of Government contracts awarded competitively from 44 percent in 1982 to almost 60 percent in 1988.


Planning For The Future -- The Year 2000


Management inefficiencies can be caused as a result of poor planning, bad process, or lack of commitment. We have improved the latter two substantially, and have included, for the first time, a 10-year plan -- to the year 2000 -- for continuing to pattern the Federal Government services to the needs of the future.


In my 1990 budget, I have requested that $84 million, over and above that included in individual agency budget requests, be appropriated to the President for distribution to agencies to complete Reform '88 management initiatives. These funds will greatly enhance the capabilities of agency financial and accounting systems, and help introduce better quality in the services and products provided to the American public by its Government.


It is to the collective credit of Federal managers and employees that the Federal Government has made remarkable achievements in managing and streamlining its operations over the past eight years. The Federal Government rarely has the opportunity to take pride in its many accomplishments. This report allows the record to speak for itself. Our management improvement program, Reform '88, has achieved measurable results, saving billions of dollars for the American taxpayer and providing better, more efficient services to every American.


Ronald Reagan