Roi in the Public Sector

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ROI in the Public Sector

Interest in return on investment (ROI) by public sector organizations continues to grow. This interest is not isolated to large federal agencies. Myths regarding the use of ROI in government abound, prevents many agencies from developing a comprehensive approach to evaluating human resources, training, and performance improvement initiatives. The key is distinguishing what is myth versus what is reality.

Efforts have been made toward more responsible performance management and measurement in the public sector. The Chief Financial Officers Act of 1990 was enacted to improve the management practices of the federal government and to ensure the production of reliable and timely financial information for use in managing and evaluating federal programs. The government Management Reform Act of 1994 added to the Chief Financial Officers Act by requiring all federal agencies to prepare and make public annual financial reports. It also authorized the Office of Management and Budget to implement a pilot program to streamline and consolidate certain statutory financial management and performance reports into a single, annual accountability report. One piece of legislation that has had influence in enhancing accountability in government agencies is The Government and Performance and Results Act of 1993. GPRA (or the "Results Act") is the primary legislative framework through which agencies are required to set strategic goals, measure performance, and report on the degree to which goals are met. Basically it requires government agencies to develop performance plans that outline the link between strategic goals and day-to-day operations.

ROI is not the first private sector practice to be applied to public sector organizations. Total quality management (TQM), zero-based budgeting, and the balanced scorecard all had their initial beginning in the private sector and to some extent have been applied in government. While the fundamental use of ROI...
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