OMB plays a key role in overseeing federal IT investments and how  they are managed. The act also requires OMB to establish  processes to analyze, track, and evaluate the risks and results of  major capital investments in information systems made by executive  agencies. OMB is also required to report to Congress on the net  program performance benefits achieved as a result of major capital  investments in information systems that are made by executive  agencies. To derive  the total number of projects on the list that were reported for fiscal  year 2005, OMB polled the individual analysts and compiled the  numbers. Poorly Planned and Performing Projects Identified, Totaling About $12 Billion in Estimated Expenditures for Fiscal Year 2007

About 300 projects totaling about $12 billion in estimated IT  expenditures for fiscal year 2007 have been placed on OMB’s  Management Watch List or as a high risk project with performance  shortfalls. Specifically, the President’s budget for fiscal year 2007  included 857 major IT projects, totaling approximately $64 billion. In addition, agencies  reported that 79 of the 226 high-risk projects identified as of March  2006, collectively totaling about $2.2 billion had a performance  shortfall primarily associated with cost and schedule variances that  exceeded 10 percent. Improvements Needed to Identify and Oversee Management Watch List and High Risk Projects

While the Management Watch List and high risk processes serve to  highlight poorly planned and performing projects and focus  attention on them, our reviews identified opportunities to  strengthen the identification and oversight of projects for each. Management Watch List May Be Based on Unreliable Data and High Risk Project Criteria Are Not Always Consistently Applied

OMB’s Management Watch List may be undermined by inaccurate  and unreliable data. Moreover, although agencies, with OMB’s assistance, generally  identified their high risk projects using criteria specified by OMB,  these criteria were not always consistently applied. For the projects we identified as appearing to meet OMB’s criteria  for high risk, the responsible agencies reported that they did not  consider these investments to be high risk projects for such reasons  as (1) the project was not a major investment; (2) agency  management is experienced in overseeing projects; or (3) the  project did not have weaknesses in its business case. Without consistent application of  the criteria, OMB and executives cannot have the assurance that all  projects that require special attention have been identified. OMB Does Not Use an Aggregate List to Perform Its Oversight of the Management Watch List or High Risk Projects

While OMB’s Management Watch List identified opportunities to  strengthen investments and promote improvements in IT  management, OMB did not develop a single, aggregate list  identifying the projects and their weaknesses. For example, to improve how the  Management Watch List projects are identified, we have made  several recommendations to improve the accuracy and validity of  exhibit 300s for major IT investments, including that the Director  require agencies to determine the extent to which the information  contained in each exhibit 300 is accurate and reliable, and, where  weaknesses in accuracy and reliability are identified, disclose them  and explain the agency’s approach to mitigating them. Likewise, to  improve how high risk projects are identified, we recommended that  the Director direct federal agency CIOs to ensure that they are  consistently applying the high risk criteria defined by OMB. To improve how the Management Watch List is provided oversight,  in our April 2005 report, we recommended that the Director of OMB  develop a central list of projects and their deficiencies and report to  Congress on progress made in addressing risks of major IT  investments and management areas needing attention. OMB generally disagreed with our recommendations for  strengthening the Management Watch List and high risk projects  processes. Addressing  these recommendations would provide increased assurance that  poorly planned and performing projects are accurately identified  and more effectively provided oversight. The recommendations we made to agencies and OMB to address  these issues are aimed at providing greater assurance that poorly  planned and performing projects are more accurately identified and  receiving adequate oversight, and ultimately ensuring that  potentially billions of taxpayers dollars are not wasted.
Why GAO Did This Study

The Office of Management and Budget (OMB) plays a key role in overseeing federal IT investments. The Clinger-Cohen Act, among other things, requires OMB to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by agencies and to report to Congress on the net program performance benefits achieved as a result of these investments. OMB has developed several processes to help carry out its role. For example, OMB began using a Management Watch List several years ago as a means of identifying poorly planned projects based on its evaluation of agencies' funding justifications for major projects, known as exhibit 300s. In addition, in August 2005, OMB established a process for agencies to identify high risk projects, i.e., projects requiring special attention because of one or more reasons specified by OMB, and to report on those that are poorly performing or not meeting performance criteria. GAO recently issued reports on the Management Watch List, high risk projects, and agencies' exhibit 300s. GAO was asked to summarize (1) the number of projects and the fiscal year 2007 dollar value of Management Watch List and high risk projects, (2) previously reported results on how these projects are identified and provided oversight, and (3) recommendations it made to improve these processes.

What GAO Found

As a result of the Management Watch List and high risk projects processes, about 300 projects totaling about $12 billion in estimated IT expenditures for fiscal year 2007 have been identified as being either poorly planned or poorly performing. Specifically, of the 857 major IT projects in the President's budget for fiscal year 2007, OMB placed 263 projects, representing about $10 billion on its Management Watch List. In addition, in response to OMB's memorandum, agencies reported that 79 of 226 high risk projects, collectively totaling about $2.2 billion, had a performance shortfall. While this information helps to focus both agency and OMB management attention on these poorly planned and poorly performing projects, GAO identified opportunities to strengthen how these projects are identified and provided oversight. The Management Watch List may be undermined by inaccurate and unreliable data. OMB uses scoring criteria to evaluate agencies' exhibit 300s to derive the projects on its Management Watch List. GAO's detailed evaluation of exhibit 300s showed that the information reported in them is not always accurate or supported by documentation. The criteria for identifying high risk projects were not always consistently applied and projects that appeared to meet the criteria were not identified as high risk. Without consistent application of the high risk criteria, OMB and agency executives cannot have the assurance that all projects that require special attention have been identified. For both sets of projects, OMB did not develop a central list of projects and deficiencies that could facilitate tracking progress and reporting to Congress. Without such lists, OMB is not fully exploiting the opportunity to analyze and track these projects on a governmentwide basis and not involving Congress in the oversight of these projects with risks. To improve the way the Management Watch List and high risk projects are identified and provided oversight, GAO has made a number of recommendations to the Director of OMB. These recommendations include directing agencies to improve the accuracy and reliability of exhibit 300 information and to consistently apply the high risk criteria defined by OMB. In addition, GAO recommended that the Director develop a single, aggregate list for both the Management Watch List and high risk projects to facilitate tracking progress, performing governmentwide analysis, and reporting the results to Congress. OMB generally disagreed with these recommendations. However, GAO believes that they are needed to provide greater assurance that poorly planned and poorly performing projects are more accurately identified and provided oversight, and ultimately ensure that potentially billions of taxpayer dollars are not wasted.