The Role of the Office of Management and Budget in Budget Development
The Role of the Office of Management
and Budget in Budget Development
Bill Heniff Jr.
Analyst on the Congress and Legislative Process
Government and Finance Division
The Office of Management and Budget (OMB) assists the President in carrying out
his budgetary duties. Originally created by the 1921 Budget and Accounting Act as the
Bureau of the Budget, it was reconstituted as OMB in 1970. Its primary function is to
oversee the development and implementation of the federal budget. For more information
on the budget process, see the CRS Guides to Congressional Processes at
[ http://www.crs.gov/products/guides/guidehome.shtml] .
The OMB and its director play a unique role in the preparation of the President’s
budget submission to Congress. As the overseer of budget development for the President,
OMB sets forth the framework by which agencies formulate their budget requests, and is
responsible for ensuring agency budget requests are consistent with the President’s agenda
and policy goals. As a consequence, the OMB director potentially can wield a great deal
of influence over agency budget requests and the final shape of the President’s budget.
Each spring, approximately 10 months before the President’s budget is submitted
to Congress, the initial formation of the budget begins at the agency level. At the same
time, OMB reviews major policy issues and updates its multi-year forecasts for spending
and revenue. Once OMB completes its review, the budget outlook and policy alternatives
are presented to the President. After the President makes his initial policy decisions
regarding the budget, OMB is responsible for notifying federal departments and agencies.
These decisions may include specific budgetary guidelines and spending ceilings to be
used by agencies in the preparation of their budgets. Generally, these instructions vary
from year to year depending on current budgetary and political conditions.
OMB communicates process and policy guidelines to agencies through circulars,
bulletins, and other detailed communications. In particular, OMB Circular No. A-11
contains detailed instructions and schedules for submission of agency budget requests and
other material to ensure that budget requests adhere to standardized conventions and
formats. OMB staff also maintain ongoing contact with agencies as they formulate their
budget requests to provide guidance and to keep apprised of agencies’ budgetary
concerns.
Agencies submit their formal budget requests to OMB in early fall, usually about five
months before the President submits his budget to Congress (and about 13 months before
the start of the fiscal year). OMB staff responsible for each particular department or
agency review the initial budget requests and clarify any policy and technical questions
with agency officials. If an agency includes legislative initiatives in its budget request,
OMB determines whether the proposals are consistent with the President’s policy goals.
Then, based on these evaluations, OMB staff make recommendations regarding program
policy and spending levels to the OMB director. Final decisions are made by the OMB
director, and agencies are notified of these decisions through what is known as an OMB
“passback.” If an agency disagrees with aspects of the passback, it may appeal to the
director, or in some cases, directly to the President. Once a final decision is made, the
agency must revise its budget request accordingly.
The finalized agency budgets, as modified, are then incorporated into the budget the
President submits to Congress. OMB is responsible for preparing the accompanying
budget documents that provide an explanation and justification of the President’s
government-wide budget policy. The budget documents then are printed and submitted
to Congress and the public.
OMB also assists in the integration of program performance and budgeting. For
instance, under the Government Performance and Results Act (GPRA) of 1993 (P.L. 103-
62), OMB is required to have agencies prepare annual performance plans along with their
budget requests. The annual performance plans set out measurable performance goals for
the fiscal year, a description of the operational processes and resources necessary to meet
the performance goals, and a description of how the measured values will be verified and
validated. Like agency budget requests, agency performance plans are submitted to OMB
for review in early fall. OMB staff review the agency performance plans, and the OMB
director gives final approval to these plans. Agencies must revise their performance plans
to reflect these decisions. Based on these agency annual performance plans, OMB is
required to prepare a government-wide performance plan as a part of the President’s
budget.
In addition, as part of President George W. Bush’s Management Agenda, OMB has
developed the Performance Assessment Resource Tool (PART) to evaluate the
performance of programs. The “accountability tool” is intended to assist OMB budget
examiners and agency program managers in making “evidence-based funding decisions.”
For further information on GPRA and PART, see CRS Report RL32164, Performance
Management and Budgeting in the Federal Government: Brief History and Recent
Devel opment s .