In 1993, the Minnesota Legislature required selected state agencies to report annually on the performance of their programs. Proponents of the law hoped that it would result in better information about the activities and accomplishments of state programs, thus improving legislative budgeting and policy making, agency management, and public accountability. Agencies issued their first performance reports in September 1994, and many were a topic of discussion during the 1995 legislative session. The 1995 Legislature also changed the schedule for performance reports from an annual to a biennial cycle.
This report describes the process used by the 21 agencies to develop their first performance reports and discusses agency heads' perceptions of performance reporting. Our research addressed the following questions:
How did Minnesota's state agencies develop their 1994 performance reports, and did the reports contain useful information?
To what extent did worker participation committees and people outside the agencies contribute to the development and use of agency reports?
How much did the 1994 reports cost to produce? Do agencies believe that the benefits of performance reporting justify the costs?
Have the performance reports had an impact on budget, policy, or management choices, and do agency heads think they could in the future?
As part of our evaluation, we surveyed each of the 21 agency commissioners and 164 of the nearly 200 members of worker participation committees in 16 agencies. In addition, we interviewed one or two staff members who coordinate each agency's performance reporting process and maintain contact with our office.
The process of developing the 1994 performance reports was a difficult one for most state agencies. Most developed their reports in a fairly short period of time, often at the same time they were developing biennial budget proposals. Some agencies told us they would have preferred clearer or more timely instructions from the Department of Finance about how to develop their reports, and some would have preferred more timely feedback from the Legislative Auditor on their 1993 draft reports.
Most agencies did not try to involve external parties when developing the performance reports, contrary to the requirements of the performance reporting law prior to its amendment by the 1995 Legislature. In addition, about half of the agencies did not have worker participation committees (as defined in law) that met during the development of the 1994 reports, and many agencies had difficulty understanding how these committees could play an ongoing role in agency improvement. Nevertheless, several agencies used these committees or other approaches to effectively involve employees in the development or review of the reports.
Despite the problems agencies had developing their reports last year,
Most agencies did not develop new statements of agency mission or goals during this process, but some did, and most others developed objectives and performance measures that had not previously existed. Most agencies relied extensively on staff with management responsibilities to write and review significant portions of the 1994 reports, which seems to us a useful step toward integration of performance reporting into agency decision making. A majority of worker participation committee members said that they were satisfied with their committees' impacts on the final reports, and they were particularly satisfied with the attention given by the committees to agency missions and goals.
In our view, there is considerable room for improvement in the content of agency performance reports. In many cases, the 1994 reports lacked sufficient information for readers to evaluate the success of programs, and some were unfocused or gave disproportionate attention to minor programs. However, the 1994 reports were the first reports produced under the performance reporting law, and, given the complexity of the task, it does not surprise us that it will take more time for agencies to define their missions, collect meaningful performance data, and report this information in a way that is helpful to decision makers and the general public.
Performance reports have a variety of potential uses. For example, they could help agency managers or legislators make budget or policy choices. They could also contribute to better public understanding of agencies and their programs, or they could help the legislative and executive branches develop a consensus on goals and objectives.
Although the 1994 reports were the first ones developed under the performance reporting law, we think it is useful to consider agencies' impressions about their impact. We surveyed the commissioners of the 21 agencies required by law to develop performance reports and found that:
Agencies estimate that they spent a total of more than $1.0 million developing their 1994 reports. Eighteen of 21 commissioners said that these reports have helped their agencies' internal operations in some way, and the other commissioners believe the reports will be helpful in the future. A majority of commissioners (52 percent) said that the reports have been "somewhat helpful" for improving employees’ understanding of their agencies missions. Most commissioners said that the reports have not yet helped their agencies during budget or policy development.
Many commissioners and other agency staff told us that they were not satisfied with the attention their reports received from legislative committees during the 1995 session. Legislative committees held hearings on the reports of 16 of the 21 agencies, but some of these discussions were brief. Commissioners of 7 of 21 agencies said they were satisfied with the attention their reports received in the House of Representatives, and only one commissioner expressed satisfaction with the attention the report received in the Senate. Executive officials strongly believe that the benefits of performance reporting would have been significantly increased if legislative committees had used the reports more.
Nevertheless, nearly all agency commissioners believe that Minnesota's performance reporting requirements should continue in law. Most commissioners said that they favor issuing reports every two years, rather than annually, and the 1995 Legislature made this change to the performance reporting law. A majority of the commissioners (12 of 21) said that they would prefer to have the performance reports merged with the Governor's budget proposals, but 8 agency heads think that the reports should continue to be issued separately.
Overall, we conclude that the performance reporting law has had a modest but positive impact so far. We think that the substance and format of the performance reports need to be improved before the reports will have a larger impact. However, while many agencies found the reports difficult to develop and the subject of too little legislative attention, it is noteworthy that agencies generally believe that performance reports are potentially useful and should be continued.
The change in law from an annual to a biennial performance reporting schedule will give agencies until November 1996 to improve their next reports. Legislators are scheduled to receive the reports about three months before they begin to review agencies' next biennial budget requests. We recommend that:
The 1994 reports often lacked adequate performance data and objectives, and some were unfocused or too lengthy. Agencies did not always effectively present the reports to legislative committees and clarify how the reports related to legislative decisions. As agencies improve the content of the next reports, they should also consider ways to highlight issues requiring legislative attention, both in the reports and in their legislative presentations. In addition, the Department of Finance should consider ways to more effectively link the budget proposals and performance reports, perhaps by merging or cross-referencing them, or by including highlights of the performance reports in the budget documents. The department should also consider changes in the reporting format and instructions that would make the reports more useful to legislators, such as executive summaries and improved graphics.
While a few legislative committees devoted considerable time to performance reports in 1995, most did not. In our view, it is important for legislative committee chairs to discuss the purposes of the reports with their members and to set aside committee time early in the 1997 session to discuss agency missions, goals, and objectives, as well as past and projected performance. Agencies need thorough and systematic feedback from the Legislature in order to improve their reports. Also, if legislative committees take the time to discuss agency goals and performance, agencies will be more likely to commit themselves to improvements in performance measurement over the long term.
Employee involvement in the development and review of performance reports could be an effective way to create a better understanding within agencies of goals and objectives, and it is a necessary part of developing an agency-wide commitment to performance measurement in daily work. However, we think the purposes of the worker participation committees, as defined by law, are too broad, and the composition of the committees, also in law, is too prescriptive. We recommend that:
This study was initiated by the Program Evaluation Division under the general authority given to the Legislative Auditor in the Performance Reporting Act to "review and comment" on agency performance reports. For a copy of the full report, entitled "Development and Use of the 1994 Agency Performance Reports," (PR95-22), 48 pp., published on July 20, 1995, please call 651/296-4708, e-mail our office at Legislative.Auditor@state.mn.us, or write to Office of the Legislative Auditor, 658 Cedar St., St. Paul, MN 55155.
Staff who worked on this project were Joel Alter (project manager) and Jeanette Wiedemeier.
