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Financial Management

Federal Spending and Performance Based Budgeting in Alaska

 

Contents

Introduction
Frequently Asked Questions
Narrative
Additional Resources
Applicable Laws

 

Introduction    Back to Top

The federal government provides a large share of the money spent in Alaska to fund capital projects and various programs. Because of this, both the state and federal government have a vested interest in each other's financial management decisions. In 1993 the federal government took steps to more closely monitor use of federal funds across the nation by enacting the Government Performance and Results Act (GPRA). The Program Assessment Rating Tool (PART), was later devised to standardize reporting for GPRA reviews.

The intent of the GPRA and PART is to require more stringent reporting on the use of federal funds, rate the performance of federal programs and agencies supported by federal funding, and standardize reporting. These two enactments form the basis of “performance based budgeting” and a federal spending plan that places less emphasis on significant unmet needs, or “needs based budgeting,” in favor of demonstrated program performance and results. In the president’s 2005 State of the Union Address he stated that his budget substantially reduces or eliminates more than 150 government programs that are not getting results, or duplicate current efforts, or do not fill essential priorities.

 

Frequently Asked Questions    Back to Top

What stake do Alaskans have in federal spending?

Federal spending in Alaska is very important to the state’s economy and, consequently, so is the GPRA and PART. According to a report compiled by the University of Alaska’s Institute of Social and Economic Research (ISER) in November 2003, federal spending accounts for 33% of the state’s economy and funds one out of every three jobs in the state. In 2002, the federal government spent $7.6 billion in Alaska on a variety of programs - this equates to roughly $11,700 per person in Alaska ($5,150 more than the US average). Following is a breakdown of federal disbursements in Alaska:

  • 41% to individuals (wages, retirement, SSI, Medicare, unemployment, etc.);
  • 28% to state and local government;
  • 18% for federal purchases of goods and services;
  • 13% to tribes, non-profits, universities, schools, etc., mostly in the form of grants.

How can we prepare for GPRA and PART reviews?

Providing the information required by these new reporting standards requires recipients of federal funds to maintain complete records and carefully track how money was received and spent. To do this effectively requires a well organized records management system that not only tracks the funds, but also what was accomplished with the funds. To ensure the ability to provide the required information, it is in the best interests of recipients of federal funds to develop and implement records management systems and reporting standards that reflect each organization’s unique circumstance, while also meeting federal reporting requirements.

For those interested in finding out more about records management and reporting, information is available in the LOGON chapters on Records Management, Grant Records and Administration, Budgeting, and Evaluating and Reading Financial Reports. For additional information on Alaska’s finances, see the ‘Additional Resources’ section below.

How does the federal government disperse funds in Alaska?

Federal spending makes up a significant portion of money going to rural Alaska. Aside from military spending, which accounts for a large part of federal spending, there are three major components of federal spending in Alaska:

  • Grants (comprised of Formula Grants and Project Grants);
  • Purchases, through federal procurement; and
  • Direct payments to organizations other than individuals.

The 2003 ISER Federal Spending and Revenues in Alaska report states that overall total funding is fairly equally distributed across urban and rural Alaska; however, each receive varying shares of different components. As an example, defense spending is higher in urban areas and formula grants are higher in rural areas. The ISER report indicates that on a per capita basis, nearly $2,500 went to “rural” areas and approximately $1,500 went to “urban” areas. On a comparative basis, per capita project grant funding broke down as nearly $3,000 “rural” and slightly over $2,000 “urban”.

According to a United States Government Accountability Office (GA0) report dated August 2005, between 1998 and 2003 $483 million in federal funds were dispersed to 216 Alaska Native villages and about $3 billion to 33 regional Native nonprofits.

How do the GPRA (Government Performance and Results Act) and the PART (Program Assessment Rating Tool) work?

The GPRA requires each federal department and agency to prepare:

A strategic plan covering a period of not less than five years and containing:

  • a comprehensive mission statement;
  • a goals and objectives statement and description of how the goals will be achieved;
  • a description of program evaluations and a schedule for when evaluations will occur;

Annual performance plans and performance reports that are due each year by March 31 and establish:

  • annual performance goals in objective, measurable terms;
  • operational processes, human, capital, and other resources needed to meet the goals;
  • performance indicators to assess outputs, service levels, and outcomes;
  • method of comparing program results with performance goals;
  • method to verify and validate.

In response to difficulty with implementation of GPRA, the federal Office of Management and Budget developed the Program Assessment Rating Tool (PART) to standardize performance review and reporting.

The federal government’s website describes PART as follows:

“The PART was developed to assess and improve program performance so that the Federal government can achieve better results. A PART review helps identify a program’s strengths and weaknesses to inform funding and management decisions aimed at making the program more effective. The PART therefore looks at all factors that affect and reflect program performance including program purpose and design; performance measurement, evaluations, and strategic planning; program management; and program results. Because the PART includes a consistent series of analytical questions, it allows programs to show improvements over time, and allows comparisons between similar programs.”

Programs are reviewed on a schedule and, based on this review, findings and recommendations are made on program performance.

What is the goal of the GPRA and PART?

Information obtained through GPRA and PART is intended to ensure federal money is spent wisely, that program performance is documented, that performance documentation is standardized, and there is value received for money spent. Another goal is to use this information in making informed decisions to reduce the federal deficit. There are eight primary performance goals standards that federal agencies have been directed to strive for. These are:

  • Strategic Management of Human Capital
  • Competitive Sourcing
  • Improved Financial Performance
  • Expanded Electronic Government
  • Budget and Performance Integration
  • Eliminating Improper Payments
  • Faith-Based and Community Initiative
  • Federal Real Property and Asset Management

In addition to program performance, this review process looks for program duplication across multiple agencies, as well as programs with similar missions to identify best practices, and coordination. Another part of the review process is reassessment of programs to ensure recommendations are being followed, if a program warrants the time and resources to reassess. PART scores may be appealed.

The results of a PART score can affect the program budget in several ways. As an example, a high rating could mean increased funding, or it could mean a program's mission is accomplished and the program should be terminated. A low rating could mean a program is ineffective and should be discontinued or it could mean a program needs increased funding to meet its goals if it appears well designed and well managed.

How might GPRA and PART affect Alaska?

In the past, the funding formula for many federal programs was “needs based,” and areas and programs that demonstrated a significant unmet need were targeted for funding. Given the fact that Alaska is a relatively new and developing state with many areas lacking a developed infrastructure or economic base, needs are great. Under the performance based model, this may not work in the state’s favor, because the administrative systems are also in the process of developing and may not yet have the level of sophistication required to adequately document performance.

In many cases there is a relationship between reporting and subsequent increases or decreases in funding. As an example, using the 2002 Bureau of Indian Affairs (BIA) school operations and construction PART scores and the Indian Health Service (IHS) PART scores to make a comparison, the school scores were low – 20 for operations and 28 for construction – and the IHS scores were relatively high – 74 for federally-administered activities and 67 for facilities construction out of a possible 100 points. The subsequent federal budget for BIA school operations and construction allocations were essentially level funded for FY 2004 and the school construction budget lost $65 million in FY 2005, while IHS received an increase of $25 million for contract health care and an increase of $20 million for the sanitation facilities program.

Under the new "performance based budgeting” system, if organizations and programs receiving federal money aren’t providing the desired information and demonstrating value received for money spent, it may be assumed the money isn’t needed. To help assure this doesn’t happen, entities receiving federal money directly, or receiving pass through money from the state need to review their tracking and reporting systems to ensure they clearly provide information on where money came from, how it was used, and what benefit was received. It is in the best interest of those receiving federal funds to develop reporting standards that meet the requirements of the PART. As an example, a significant portion of the BIA budget goes to tribal governments and Indian organizations through self determination contracts and compacting. If recipients of these funds do not participate and provide the type of information needed to document results, BIA will not be able to account for a large percentage of its annual budget. In order to compete effectively for limited Federal funds, the BIA must provide the information gathered by the PART reports.

What programs and services are most impacted by federal spending in Alaska?

According to the 2003 ISER report on federal spending, there are three major components of federal spending in Alaska other than military spending. These are:

  • Grants (comprised of Formula Grants and Project Grants);
  • Purchases, through federal procurement; and
  • Direct payments to organizations other than individuals.

Federal Project Grants

Federal Project Grant funding in Alaska totaled approximately $1.9 billion in 2002. The largest percentage of that funding was earmarked for rural areas and Indian Tribes (42% - approximately $798 million). Most federal Project Grant funding to tribal organizations falls under the Indian Health Services Health Management Development Program. The ISER report identifies at least 19 other tribal organizations receiving a variety of other types of Project Grants totaling $137.3 million. As shown in the following examples, some of this funding falls under various Project Grant Programs:

  • Water and Waste Disposal System for Rural Communities $27.8 million
  • Assistance to High Energy Cost Rural Communities $25.0 million
  • Indian Environmental General Assistance Program $15.1 million
  • Native American Program $13.9 million
  • Alaska Native Education Program $13.4 million

A total of $290.7 million was earmarked to the State of Alaska in 2002. The largest allocation was $38.0 million for Infrastructure Grant - Native and Rural Alaska Villages. The majority of these funds went to the Department of Environmental Conservation, which received $54.6 million.

Airport Improvement Program - $123.6 million, to state government for building or improving airports. Per ISER, on a per capita basis approximately $250 was spent in “rural” areas versus approximately $75 in “urban” areas. Total dollars were not included in the report, however a comparison of the per capita ratio of rural versus urban funding would reflect funds required to build and maintain airports in remote areas with no road access.

Federal Formula Grant Funding

The other type of federal grant funding is Formula Grants, which totaled another $1.6 billion in 2002. Formula Grant programs include:

  • Medicaid ($500.0 million),
  • Highway Planning and Construction ($401 .0 million),
  • Impact Aid for Maintenance and Operations of Schools ($104.0 million), etc.

Federal Procurement

In addition to federal grant program funding, a significant source of federal funding comes from federal procurement in Alaska. For example,

  • Defense procurement contracts - $101.7 million went to Alaska Native Corporations in 2002. In 2001, that figure was $1 70.6 million.
  • Federal procurement contracts - $240.2 million went to small businesses owned by identifiable Alaska Natives in 2001 (2002 unavailable) under SBA’s Section 8(a) Minority Business Development Program.
  • Federal civilian procurement contracts - $40.8 million were let in 2002 to Alaska Native Corporations.

Direct Federal Payments

Beyond grants and procurement, there are direct federal payments categorized as ”other than to individuals.” Some of these payments include:

  • Tribal Self-Governance $60.1 million
  • Public and Indian Housing $11.3 million
  • Alaskan Indian Allotments and Subsistence Preference Lands Act $5.7 million
  • Indian Self-Determination Contract Support $ 4.5 million
  • Consolidated Tribal Government Program $ 2.8 million
  • Aid to Tribal Governments $ 2.1 million

Narrative    Back to Top

The information used to prepare the GPRA and PART reports flows from the recipient of federal funds back to the original funding agency and is used when preparing budget justifications and subsequent funding decisions. Recipients of federal funds in Alaska should be aware of this and ensure their tracking and reporting processes are providing the information needed to track funds appropriately and that program success is adequately documented.

For those interested in finding out more about records management and reporting, information is available in the LOGON chapters on Records Management, Grant Records and Administration, Budgeting, and Evaluating and Reading Financial Reports.

Additional Resources   Back to Top