LITMIR.BIZ

      The Political and Budget Environment

      Scholars have noted that “the politics of administration involves agency interactions with those outside the formal structure as well as interactions among those within administrative agencies.”14

      Arguably, two of the biggest risks that public servants face stem from the political and budget arenas, where interaction is a key ingredient to agency success. Politically, the consistent gridlock of Congress over the past few years has made the government worker’s task more unpredictable. The level of uncertainty in funding programs and projects and the cuts to the levels of discretionary spending continue to make budgets a moving target, making it harder for agencies to nail down agency-specific goals and objectives. While the push-and-pull dynamics of congressional inner workings may be temporary, the realization of long-term financial constraints is not.

      At the end of fiscal year 2012, the total federal debt was about $16.1 trillion.15 In its Fiscal Update for 2012, the Government Accountability Office (GAO) acknowledged that addressing the long-term federal fiscal challenges will likely require difficult choices affecting both government revenue and spending – challenges for which there are no quick or easy solutions. GAO noted that many of the long-term drivers, including health care cost growth and the aging population, have already begun to affect the federal budget.16 Within its simulations of long-term federal deficits, GAO projected that spending for the major health and retirement programs will increase in coming decades, putting greater pressure on the rest of the federal budget. The GAO reported that for the first few decades this spending is driven largely by the aging of the population, with the oldest members of the baby boom generation already eligible for Social Security retirement benefits and for Medicare. The number of baby boomers turning sixty-five is projected to grow in coming years, from an average of about 7,600 per day in 2011 to more than 11,000 per day in 2029.17

      Another budgetary risk that continues to have a profound impact on government performance and operations is that of continuing resolutions (CR). Annually, Congress faces difficult decisions on what to fund, with the available resources, among competing priorities and interests. When these decisions aren’t agreed upon within a certain time frame, CRs are used as a stopgap measure to keep the government operating. Historically, continuing resolutions have created budget uncertainty; they have complicated agency operations as well as produced inefficiencies. Because CRs provide funding only until agreement is reached on final appropriations, they create uncertainty for agencies about both when they will receive their final appropriation and what level of funding will ultimately be available. In all but three of the last thirty years, Congress has passed CRs to provide funding for agencies to continue operating until agreement is reached on final appropriations. The biggest risks to agencies when CRs are enacted stem from the provisions and restrictions that prohibit agencies from beginning new activities and projects. This forces agencies to take only the most limited funding actions and makes it difficult to pursue their missions and plans for the future. Though the effects of CRs vary by agency and program, overall the residual impacts have been disruptive, resulting in operational challenges such as delayed hiring, a shifting of grant and contract award cycles, and the need to perform additional work to manage CR constraints.18

      The Upside of Risk

      Not all change in government has been negative. There have been positive outcomes as well as opportunities to expand missions and ensure sufficient services for American citizens. In the middle of the twenty-first century’s first decade, the merging of several intelligence agencies (for example, the FBI, CIA, U.S. Marshal’s Service) was proposed to Congress to create what is now the Department of Homeland Security (DHS). The DHS was established in response to a national safety and security breach, but it also brought with it bountiful opportunities to create a more streamlined agency responsive to threats and natural disasters. Over time, the biggest benefit anticipated from the restructuring was a reduced risk of terrorism for the nation.

      The transition to a more effective homeland security approach was also part of a larger transformation that the government needed to undertake to meet the expectations of the American people for timely, high-quality, and cost-effective public services. Within nine months of the events of September 11, 2001, the Bush administration and Congress responded with important and aggressive actions to protect the nation. The establishment of DHS was seen as a remedy to long-standing issues and concerns in the government’s domestic security functions by instituting greater consolidation and agency coordination. Given the global challenges the government will face in the coming years, the consolidation was considered a unique opportunity to create an extremely effective and performance-based organization to strengthen the nation’s ability to protect its borders and citizens against terrorism.19

      INTRODUCTION

      Since the first introduction of this material in 2009, the practice of risk management and, more so, that of enterprise risk management (ERM), has expanded in the federal space. For example, the Association for Enterprise Risk Management (AFERM) has been

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