Personnel Ceilings: A Barrier to Effective Manpower Management

Published by the Government Accountability Office on 1977-06-02.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Federal    manpcwr      management       can be inI.
pawed    by empioying      or otherwse      acoulrlng
the most approoriatc       type5 of personnel         re.
sources    for spectfic  circumstances      and pur.
posc?s rather than by linx~ing       the numb- - of
pvsnn~    that may be reported      on the Fe”eral
payroll cm t pa titular day.

FPCI? 76-W
      Many cff ici?ls       are dissat isf ied with ;ersonnel            ccilinqs
w5ish provide     little      incentive     fx  improwinq    manpawcr t;.anaqe-
mcnt . This report        discusses     effects    of yearend     ceilings       on
agency onerations        and suqysts       a practical    alternative.

       Copies of this    report arc being sent to the Dfrectnr,
Office    of Manaq event and Budget;   the Chairman,  Civil  Serwi-e
ColTxRiss ion ; and the heads of depirtments    and agencies  included
in   GUr        r’?VieW.

                                         Comptroller   General
                                         of the United   State.5


           ~hc Federal      work force    should  be no larger
           than needed to do the essential          work re-
           quired    to accomplish     the programs   and func-
           tions   authorized    by the President     and the

           Federal   employment         is controlled         primarily
           through   personnel        ceilings        which the Office
           of Management and Budget establishes                     for
           each agency.         Also,     since     fiscal    year 1975
           the Congress      has set an additional               ceiling
           on the Department          of Defense.          (See p. 11.1
           In a recent     fireside         chat,     the President
           said he would put a ceiling                  on the number
           of Federal    employees          as part of his effort
           to reform    and reorganize            the Government
           and to bring       its growth         coder control,
            (See p 28.)

           In the budget process        the agencies,        Office
           oL: Hanagement   and Budget,        the President,
           and the Congress     gir*. considerable          atten-
           tion  to agencies’     programs       and functions
           and the estimated      funds and manpower needed
           to accomplish    them.      (See pp* 14 to 17.)
           This should provide       effective      control      over
           the agencies.

            In addition,       the Office        of Management and
            Budget imposes a personnel                ceiling      which
            limits     the number of employees               an agency
            may have on its payroll              on the last        day
            of the fiscal        year,     regardless        of the work
            that mtist be accomplished               and the funds
            available.        Distributing         this    ceiling     among
            its organizational           elements       and monitoring
            actual     employment       by these elements           to in-
            sure that      the leiling        is not exceeded          on
            1 day of the year creates                an administrative
            burden and an illusion              of control.         f See
            p. 27.)
            Many,officials        are dissatisfied          k.ith perscnnel
            ceilings      which   provide    iittle      incentive    for

improved         management          and frustrate   effective
manpower         management.            (See p* 22.1
Personnel         ceilins?         affect      Government      agencies
in several         ways:

--Services   to          the      public      and other     agencies
   are reduced.

--Essential    work is               deferred       or canceled     and
   work backlogs   are               increased.

--Imbalances    between                  clerical     and professional
   staff   and shortages                   in certain    skills    occur.
    (See p. 7.)
--Managers      become more concerned       with the
   number of persons       actually    employed on
   I particular      day than with getting       essen-
   tial     work done through      the most effective,
   efficient,     and economical      use of people.
   (See p. 3.)

--If        Government      agencies       cannot    directly
       hire     enough pecple         to accomplish       programs
       and functions        approved       by the President
       and the Congress,           they must pay employees
       overtime      or obtain        the services      of addi-
       tional      people indirectly          through     contracts
       with private       firms       or through     grants     tc
       institutions       and State and local             govern-
       ments.       These people are neither              included
       in employment         ceilings      nor counted        as part
       of the Federal         work force,        but must be
       paid from Ffjderal           funds.      (See p* 1.)

--Emphasis    on limiting      the number of persons
   on the Federal     payroll     may obscure   the
   reality  that the Government        incur;   the
   cost of all manpower resources          devoted
   to Federal   programs      even though many of
   the people are not on the Federal           payroll.
   (See pa 2.)
Although    employment  ceilings   may be a tool    to
assure   that concerns    about the total    number
of Federal    employees   are met, ceilings     are
at best an inferior     substitute   for effective
management.      Management at all   le.vels  needs


                                  ,. :
     to aggressively     seek ways to improve  produc-
     tivity.    Improved   coordination of workload,
     funds,  and manpower is needed.      (See F. 27.)

     in earlier      reports,     GAO suggested          to the
     Congress     that    funding   or program limitations
     would control        the number of pers’ns             Federal
     agencies     can employ.       Additional         controls
     imposed by personnel          ceilings--setting             a
     limit     on the number of persons             that actually
     may be employed         on a particular          day--deprived
     agency management of options               for accomplishing
     essential      work.     (See p. 21.)

     During   fiscal    year 1975 shortage           of funds was
     a more severe      constraint       than personnel          ceil-
     ings on the miLitary          services     and the Customs
     Service.      This showed that         funds do control
     employment , An agency cannot              hire    tiorkers
     unless   it has funds tc pay them.                (See p. 7.1

     The basic framework           for a practical        and effec-
     tive    alternative        to yearend   personnel       ceilings
     already      exists    and is in operation         in the bud-
     get process.          (See pp. 14 to 17.)          What is
     lacking      is confidence       in the soundness        of the     .
     estimates       prepared     and submitted      by the agen-
     cies and in the ability            and reliability         of
     aqency     managers      to adhere to their        estimates.
     (See p. 22.)

     With direction        and guidance       from the Office
     of Management and Budget the agencies                   could
     develop      methods for preparing          sound estimates
     of the minimum manpower requirements                  of
     all   types to accomplish          authorized     programs
     and functrons.         The agencies        snould   fully
     document      the processes       and data used and make
     this    information      available     to the Office          and
     the concerned        congressionai       committees       for
     evaluation.         (See p. 22.)

     This alternative       to yearend     personnel    ceilings
     would respond      to the concerns       of the President
     and the Congress       and the objectives        of :he
     proposed     Sunset Act of 1977.         Since the budget
     process    takes place every year and budget
     examiners     and constessional       committees    and
     subcommittees      monitor     agency activities      during
     the year c agency managers would have a hard

-1                                  iii
time dcviat kng 3ubatantiaPly                                from their                  ez3ti+
mates        without       approval.                (See p*            22.)

QfficiaJ.6         of     most agcncierj      reviewed       support
a 3eaLch         for      an effective       alternative       to -
externally             imposed    personnel.      ceiPif.gs.     (See
p.   30.1

The former             Director,           Office           of       Management            and
Eudget,         proposed           establishing                  a    task       force         to
develop    criteria       and plans     for a controlled
and rigorous        test   to determine       the feasibil-
ity of ccntrolling           employment     levels     by means
other   than direct        employment      ceil inya.      Tk@
present    Director,       Office    of kanagement        and
Budget i said he did not beiieve                this    is the
time to discontinue           employment      ceilings     for
some agencies         even on a limited,          2xperimental
basis.      (See p. 29.1

Aggressive action   should    be taken to improve
manpower management.      Since some officials
have      reservations               about        whether             employment
would       be controlled
                       without     ceilings,      a test
would be’ useful   in demonstrating        the effec-
tiveness  of the budget process          to require
agencies  to prepare   sound estimates         OF their
minimum manpower needs of 83.1 types and
ayency wanagtirs   to adhere   to these estimates.
GAO recommends that    the                        Director,                  Office       of
Management  and Budget:

--Establish          a task   force     at the earliest            prac-
   ticable       time to develop          criteria        and action
   plans      for a controlled          and rigorous          demon-
   stration        of th: feasibility            and general         ap-
   plicability         of the budget process               as a con-
   trol     over total      manpower resoi*rces,               includ-
   ing direct         employnlent.        The demonstratfon
   Frojett       should be undertaken              simultsneously
   In sevreral        agencies     wlt.h different           types of

 --Consult     and coordinate        closely    with congres-
    sional   committees      involved      to invite    their
    support    of this    project      and fprnish    the
    committees    periodic      reports      on the progress
    of the desonstration          effort.

                             -....---*--     . ..-11


DIGEST                                                                          i

       I    XNTPODUCTJON                                                        1

                CEI CINCS                                                       3
                   Internal      controls  over employment                      3
                  Actions      taken to meet yearend          ceilings          4
                   Effects     of ceilings    on operations;                    7
           e      Agencies ’ views on how personnel
                      ceilings      affect their  flexibility
                      to manage manpower                                        9

              CONTROL CIVILIAN        EEfPLOYlwWT                          I.1
                Congressional       action                                 11
                Executive     action
                The budget process                                         :a
                Estabi ishing      personnel   ceilings
                  and reporting        actual  employment                  37
                Proposed legislation                                       38

              RECOMMENDATIONS                                              20       ,
                Agency comments                                            23
                Recommendation:                                            30

       5    SCOPE OF REVIEW                                                31

       I    Persortnel  ceilings            and reported
              employment                                                   33

   IX       Excerpts   from certain             public     laws
              sn?,zted to control              Federal     employment      34

 III         Bureau of the Budget              Circular  Fdo. A-64
                (revised)-- Position            management and
               empZoyment       cei!.ings                                  36

   IV        Effects     of personnel          ceilings     on
                operatiot?s                                                42








    --In        t4ovember   1975 rh@ Vctcrans       Admirifs-
           kratbon     (VA) Aeckb 4 Pield    Dirrector
       fne3esucted      the tes An~ele~ RegionaS office
       to ~m?ediately         csncentrats      on hiring     to
       met     incceased      ce8.linga.      The mefao sefd:
       ‘br’e will     be ewiewing        pksghess   in ‘-his
       Beea cloa;ely*        88 it if3 necessary       that we
       fill    these    ~witiane       that we have in-
       dicated      to WB 3r.e desperately          needed.”

    --At   the Bsantwood    VA &xqifal,       bs                      kngeles,
       employees   weee hired     on a part-:Lme                         (3%
       hcus weekf    OK eempsasry     bssis   w.th                     0 prom-
           ise of conversion        to FTP status        bn the
           fc?llawfng   ffscal     year.     Lm July     6, 1975,
           22 erpdoyees      hired    during    fiscal     year 1974
           tag%rnst the “crehcr”       ceiling     were converted
           to FTP ststus.         Qccasicnally,        oEPicia3k.i at
           the hasp +;a1 asked        employees      in a leave-
           without-pay            E&tstus    not     to   retuen     to    work
           until     July.

    --On           June   20,      19’45. at       the r*adswort?l        VA
           305pfta1,            Los Angeles        c Tti cmplcyees         hired   .
           far late       June     were     notreported      against      the
           hOSpital’5        Ceiling.         Also,   when ic: appeared
           that the hospital             would have too many FTP
           or other       employees         on board as of June 30,
           actions      were taken through            the computer          to
           reverse      the recor;ed          caeeer status         of an
           approprfate        number of employees.                fhangcs
           made in June were reversed                  in July,       the
           following       fiscal       year.     140 kotificatioc
           of Pereonnel           Action     (SF 50) forms were pre-
           parei      or recorded         in the affected         cmplu;Jees’
           personnel       records.



                                 _I_- OPERATIONS
         Use of personnel         ceilings      to control       civil     employ-
  ment affected       the agencies        we reviewed      in several         nays,
  Services    to the public        and to other        agencies        were re-
  duced.     Essential       work was deferred         CL canceled         and
  wof. k backlogs      increased.       Alternate      sources      of manpower
  were used.      Imbalances       between      cler icaf and profes-
  sional   staff    and shortages          in certain     skills       occurred.

        We examined documents            and obtained      informat     ion
  on these effects       and others        from agency officials           at
  headquarters       and field    installations       and activities.
  (See app. IV.)        We did not verify        essentiality         of the
  workI   substantiate       manpower requirements,           or evaluate
  the cost effectiveness         of alternative        actions      taken or
  that might have been taken,
         Cfficials      attributed     some problems          the agencies
  encountered       to a combination        of personnel         ceilings,
  shortage      of fundsl      and other    constraints.           Dui ing
  fiscal    year 1975 shortage         of funds provided             a more
  severe    constraint        on the military      services        and the
  Customs Service        than did personnel          ceilings         imposed by
  the Congress        or QMB. This showed that              funds do con-
  trol   employment.          An agency cannot       hire workers          unless
. it has funds to pay them.
         Officials    of some agencies      said problems    resulted
  solely     from personnel   ceilings.      In two cases officials
  of the parent      agency and headquarters       disagreed     with
  their   eleme;lts   that ceilings     .lone contributed      to certain

          --Social       Security     Admirlistration          (SSA) officials
             said that personnel             ceilings,       among other
             things,      had caused them to use overtime                    labor
             extensively         and to defer        essential       work.
             iiOWWeK,       Department       of Health,        Education,       and
             Welfare       [HEW) officials          said that SSA’s pro-
             blems      were not caused by overly               restrictive
             OMB personnel         ceilings,        but   resulted       from (1)
             hiring      employees       before     receiving      authoriza-
             tion     for ixreased          employment       and (2) hiri.ng
             full-time       employees        instead     of term employees.

  In July 1974 SSA requested         HEW to approve         an
  increase    in SSA’?   position    authorization        by
  more than 12,000 FTP Dositions.             These
  increases    were requested      so that SSA could
  clear    up existing   backlogs,    including       those
  associated     with the supplemental        security
  income program,      and complete     certain     one-
  time work projects.

  On March 11, 1975, the President               authorized
  a redistritution        of HEW’s total        employment
  ceiling      fur SSA, involving      an increase          of
  1,500 FTP employees         and 6,000,     2-year
  limited-term       employees     (to be counted         as
  permanent       employees   for ceiling       ourposes),
  and 4,000 temporary         employees.        Before      this
  action     was taken,     SSA had started        hir inq
  additional       FTP employees.      A hiring       freeze
  was imposed to prevent          SSA from exceeding
  its authorized        FTP position     level.       HEW
  said that SSA used extensive             overtime       in
  fiscal     year 1975 because of increased               work-
  load caused by the supplemental               securitb-
   income program.
--Department        of Housing        and Urban Development
   (HUD), Region 3, officials                said operating
   problems     were caused by personnel                 ceilinq
   controls,      including       reduced      service      to the
   public;     deferral     of essential           work; and
   contracting        for personal        services.         However,
   HUD headquarters         officials        said that
   Reqion 9 problems         were independent             of
   personnel      ceilings      and were common to all
   HUD regions.          Headquarters        officials        said
   that    if Region 9 had problems                of personnel
   shortages      it was because the Congress                   had
   not authorized         cnouqh positions             and not
   because of OME-imposed              ceil inqs.
--w-                HOW PERSONNEL CEILINGS
                                -- .*-
        Most agency officials              responding      to oulf inquiries
said that personnel            ceilings       which apply only to the
last    day of the fiscal           year allow        some flexibility        in
their    manpower management.                Ceilings    do not affect        the
agencies * ability          to adjust       manpower levels          of their
organizational          elements      during      the year.      However t
certain     limitations        were identified,          and some officials
were dissatisfied           with intra-agency           controls       over

       --Federal         Aviation      Administration           (FAA) of-
          ficials        said that        limitations        on
          flexibility           include       (1) minimum yearend
          employment          levels      prescribed       for specific
          programs,         such as the Air Traffic                and
          Airway       Facilities         Program,     by OWB and/or
          the Office          of the Secretary           of Transporta-
          tion,       (2) delays        in e::her      office      in
          obtaining         adjustment         of ceilings        by
          transfer        of positions           to or from other
          Federal        agencies       to accompany transfer             of
          functions,          and (3) problems           from reimburs-
          able agreements             negotiated       during      the year
          with nan-Federal              organizations,          including
          foreign        governments.

       --GSA officials     in San Francisco       said they
          were unable to transfer      staff     within      and
          between services     without   central      office
          approval,    nor could they exceed their            FTP
          ceiling   at any time during       the year.

       --GSA officials          in San Francisco           and VA
          officials      in Los Angeles           said that when
          personnel      ceilings       prevent       them from in-
          creasing     the size of their              FTP work force,
          use of temporary          and intermittent           employees
          to do permanent-type              functions      is not always
          an effective        alternative.            A minimum of 1
          year of on-the-job            training        is required     to
          train     new employees,          and temporary        appoint-
          ments are usually           limited       to 700 hours.         It

  is     not    practicable          to invest     time    and    money
  in persons    who will leave the                   agency      after
  a shoict period   of employment.

--Navy        officials       said  that flexibility             existed
  if       they were      given    one overall       ceiling        free
  of       subsidiary      controls     or constraints.
--%A        officials   said that flexioility  of manag-
   ing      manpower controlled    by ceilings decreases
   the      further   down one goes in the organiza-
--Soii     Conservation      Service      (SCSI officials
   said that the agency's            tentative    employment
   ceiling      was established        early   in the
   budgetary      process.      Later c additional        re-
   sponsibilities        are often      assigned    that had
   not been considered          when the employment
   estimates      were made or when firm ceilings             were
   established,           and they       must    perform       both      the
  originally    planned work and the--additional       work
  with no increase      in ceiling.       AR example is the
  agricultural     conservation     program which often
  is eliminated     or reduced wher. the President’s
   budget     is prepared  but which b-he Congress      restores
   each year e SCS has responsibility         for technical
   assistance      to the program and this    generates
   a need for about 5313 staff-ye;lrs      for which
   no provision      has been made.

--VA officials            in Los Angeles       said they had
   little     flexibility        in manaqzng       emplbjyment
   levels.       Although       ceilings     apply tc only 1
   day of the year,           only a certain         number of
   employees       can realistically           be carried    on
   the rolls       at any one time.            If too many
   employees       were hired        during    the fiscal
   year and attrition            was less than antic-
    ipa ted,    the region       would be unable         to
  ‘meet the ceiling           without      conducting      a
    reduction      in force.


                   CONGRESSIONAL AND----e-e
                   ---                EXECUTIVE ACTION

                      TO CONTROL CIVILIAN            EMPLOYMENT

       Cancer   n about  the number of Federal       employees         is not
new.     Act ion by the Congress      or the erecuti.v?       branch,     dis-
cussed below and cited         in more detail    in appendix        II,
has been primarily       in the Lnterest      of economy and effi-
ciency    and in the effective      use of personnel.          The pre-
dominate     method of control     over employment      has been the
establishment      of persmnel     ceilings.

       Public    Law 77-823,      December     22, 1942, required                           .. .
department     and agency heads in the executive                branch    to
present    to  the Director,        Bureau of the Budget,          such in-
formation    as he needed to justify            the number of emaloyees
in i;heir   departments      and agencies.         The act author’ized         “he
(1) Director       to reduce the number of personnel               by the
number he found to be in excess of their                   minimum require-
ments and (2) Civil         Service     Commission      to transfer     any
employees    released     to other      departments       or agencies     lgho
needed and could use their            services     effectively.
        Public       Law 79-106,     the Federal         Employees       Pay    Act    of
1945, in section           607 entitled         “Personnel       Ceilings”         (see
aw.     II)    required     the executive          branch     agencies       to give the
Director,        BOB, any information            as he needed,         at least
quarterly,         to determine      the number of full-time                 civilian
employees        required     for the proper          and efficient          per-
formance       of their     authorized        functions.         The act required
the Director,           BOB, to determine          at least      quarterly
the number of full-time              permanent        employees       and
staff-months          of part-time      employment        needed by each agency,
in his      opinion,      and order any excess personnel                   to be
released       or terminated.

         Public    Law 79-390,    May 24, 1946, in section            14
entitled       “Personnel   Ceilings”      amended section       607 of
Pub1 ic Law 79-106.         This act required          the Director,       BOB,
to determine        the number of full-time          civilian    employees
and the staff-months          of part-time     employment      on the basis

of needs of the departments               and agencies    of the execul
tive    branch and G&Q. The act established                 maximum
fiscal     yearend    ceilings      for the Departments       of War and
the Navy and quarterly            ceilings     on the agqreqate      em-
ployment      of all other       departments     and agencies.       The
act permitted       the Director,         BOB, t5 set lower ceilings
where he determined           the number of employe@s         to  be more
than necessary         fcr the proper       and efficient     exercise   of
authorized      functions.
        Public    Law 81-784,    Budget and Accounting     Procedures
Act of 1950,        on September   12, 1950, repealed     section   607
of Public      Law 79-106,     as amended, and terminated
statutory      ceilings.

         On June 28, 1968, the Congress              enacted        the Revenue
and Expenditure         Control    Act of 1968 (Public              Law 90-364).
Section      201, Limitation       on the Number of Civilian                Officers
and Employees         in the Executive        Branch,      prescribed       that,
with certain        exceptions,     no full-time          civilian      employee
be appointed        to a permanent       position       in the executive
branch during         any month when the number of employees
was greater       than on June 30, 1966.             During        any such month
an agency could appoint            persons      to fill      75 percent       of the
vacancies      in permanent      positions.        The act gave the
Director,      BOB, responsibility          for administering            the hiring
limitations,          The Congress      repealed      section       201 of the
Revenue and Expenditure            Control      Act of i968 on July 22,

       Public    Law 93-365.     the Department     of Defense
Appropriation      Authorization      Act. 1975, established                    separate
fiscal    yearend   civilian     personnel  ceilings     for the                Army,
Navy, Air Force,       and other     DOD agencies     combined.

         Public    Law 94-106,       the Department          of DeEensc       Appro-
priation       Authorization       Act, 1976, established               single
numerical       civilian      personnel     ceilings       for all of DOD for
the end of fiscal            year 1975 and for the end of the
fiscal     year transition         period,     September        30. 1976.         The
single     ceiling       covered   not only civilians             hired    directly
by the Government            but all foreign         nationals       hired     indirecLly
through      special      agreements     with     foreign      governments.

The act directed    the Secretary    al L@fer.sa Car spportton       the
ceilings    hn swch numbers as he prescribed        aSOng the Army.
Navy, Air Force,    2nd other    D3D sgencreY.      The act   alscz
gave the Secretary     of defense   auehority    to irocredse    tRe
ceiling   by J/2 percent   when necessary      in the nataonal

       Pubiic    Law 94-351,      the Dcpartzcnt     of fkfer,se
Appropriation       Authcrizstion     Act,    1977, establ Lshed a c angle?
numerical     ceiling     for DOB for the end of fiscal.         year 1917
with the     same authority       to increase     the ceiling    by B/2

       Sureau of the Budget Cifcular            A-44,    issued June 13#
1451, communicated          the views of the executive         branch <rn
the COtlSf?rVatiC?n      and ime of menpower in t!;e: Federal
Govezrnment to the heads of cxecrltive             deparrmnec      and
?stabl ishmenta.         This circular    srsid that     the i?resic?cnt
stressed     the importance       of conacrvinq     a~rgowce     andi F>at
all aganciep        would be responsible       for giving     rhis oaije-c-
tive   top priority,

      On June 28, 1965, 808 issued CircuLnr        A-64 (revrfwdt
on position    management systems and employmt:r;t      ci*rl LI;~R
to the heads of executive      departments   and aqonc~cs.
(See app. III.   ) This circuldf,      still in effect,

       “(a) establishes           criteria       ‘5r the Operation        of
       an effective       position          management     systemr    and
       (b) sets forth         information          on the concepts       and
       procedures      to be fo?lowed            with reqc;rd to
       employment      ceilings,          their    observance,     and re-
       lated   reporting        to the Bureau          of the Budget.”

       Circular      A-64        (revised)            defines         executive    branch     pcfisy
on   these   matters:

        “Consistent        wirh      the     policy              of  reducing      Govern--
       menu. costs        (see     Bureau        of        the      Budget Circ**lar
       No. A-44,     Revised,    Harch 29,                        19651, the Prestdem?
       expects    each agency head to                            pursue vigorously
       the efforts     of his agency to                           azhieve     lower em-
       ployment    levels     and increased                         pro,quct ivity

                                                                                                           a ..
                                                      13                                               b


    “f3efore       eonsfderdng          apprQprf%eions            for  B
      spcci:ic         progr%a,       the     Congress      first     enacts
      legislation           that    ailthorrtes         an agency      tQ
      carry       0a;t that      progra!P.         Such legislation
      authorizes          an appropriation              for    thn pro-
      grsm,       and,    in ‘3orde cases,           sets a liPnit       an
      “,he amount         that     can be? appropriated.”

vork throuqh   using Federal     employees               or   by contract-
ing for services    or products.

        Agencies-report       to CSC their        actual     yearend
employnent--      full  time in permanent           positions        reqard-
less of employee        status     or type of cppointment               held,
and total      employment,       CSC sum~ari~cs          the data       for
all agencies       and reports      to OMB. To more accurately
reflect     the permanent       or continuirtq       wr,rk    force.      CX
has recommended to OF!B that aoencies                  report      enaloyees
accordinq      to their    appointment       sfatus      rather      than    by
type of position        held.

       On February        3. 1976, the Government                Economy and
Spendixq      Reform Act.of         1Yfb. S. 2925. was introduced
in the Senate,         The bill        was to require          review   and
evaluation      of Government           proqsams on a regular           basis
ta eliminate       duFli.cativc         aru inactive        programs    and
insure     that those proqrsms              which the Congress         con-
tinues     accampl ieh their         objectives       efficiently       and
dt d reasonable         cost,       On May 12, 1976, a Senator.                who
cosponsored       5. 2925 and submitted             an admendment that
would require       standing        committees      to decide        in advance
and pehio~icallv          reassess        the amount and t:fnec of
personnel      resources       needed t-o perform           Government      pro-
Grams effectively,           efficiently.         and responsibly.
commented in part.           that:

        “The heart        of S. L92.5 is the reouircmcnt                 that
         Congress       and the executive           branch con-
          siic;r   the quantity          and auslity      of seroices
          that can ne ~taviaed             by alternative         fundinq
          levels.       It seems to me that            it is esualfy                 i
          iinpor tant     for Conqress        to consider       alter-
          native     methods of. accomplishing              program
         goals,      for there are several             ways of getting
          the Government’s            work done.       We hire
         emplcyees        directly.        he create      public     or
          semipublic        cor?srations.         bie make qrants          to
          State    and local         governments.        Pie let contracts
          with private         nonprofit      and for-profit         organiza-
          tions    to provide         goods and services.             I 1-l s2ar.y
          instances       we 3i-e deliberate         and open in making
          these choices.            * * *

       “Despite             the   proliferstion                  of agancles     ad.
           program% and b,ha almost            tripling       of
           Federal    spending     from 1465 to r975,              the
           number of Federal         civilian        erqzloyees      ra-
           ctaina about the same, 2.8 million,                   as it
           was a Zecade ago.           Federal       workers     actually
           constitute     a smaller        proportion       of t!z
           population     today--13.0         per 1,000,        estimated
           for 1976--than       they did 20 years ago--14.0
           per 1,000 in 1956.           But since there            has
           been no moratorium                   on adding             to the
           Government's    workload,                   agencies    have ex-
           ploited   other  ways of                   doing their     jobs,            One
           of them is the use of                      private   contractors.”
                        *             *           *               *          *

       “The contract         workforce        must be counted         as
        part of the Government                bureaucracy,       and yet
        neither      Congress       nor the executive           exercises
         anything     like    the degree of control              over con-
         tracting     that we have over Fedl?ral employ-
        merit . Because very few agencies                    maintain
         adequate      inventories,         we have very little
         idea how many contracts                there are or how
        much they cost and only a superficial
         notion     of what they aare for.               our recent
        experience        with limitatiors             on the number
         of Federal       ecployees       il.lustrates       the
         point    that citizens         still      pay the cost of
         government       regardless        of the type of
         manpower used. ”
                    *             *         *                *           *

           “The lesson        is clear    that  reducing        the
             PederaL workforce         without    reducing        the
            workload       creates    a dangerous       and mislead-
             ing illusion        of control.      It controls         the
             number of Federal         workers,     all    right;     but
             it does not control.         costsP does not pro-
            duce efficiency,          and often     forfeits
             accountability.        ”

           The Government   Operations                    Committee   approved               S.   2925,
but   it     was not enacted    by the                   94th Congress,

       On January  lC, 1977, the Sunset Act of 1977, S. 2, was
introduced    into the Senate by 43 members.   The purpose  of
this   act is substantially   the same as the purpose  of S. 2925.

        If Government       agencies     are to effectively,        efficiently,
and econumically         accomplish      the programs     and ftinctions
authorized       by the President        and the Cong~e?55,      they must
judiciously        use the most appropriate         kinds of manpower capable
of producing        the desired      results.     There is general         agree-
ment    that civilian       employment       must be controlled,        but
opinions     differ    about the effectiveness          of different         control
        The predominate     method of control               over employment      has
been the establishment          of personnel          ceilings       for each agency
by the Office      of Management and Budget.                   Since fiscal     year
1975 the Congress has set an additional                      ceiling     on the De-
partment    of Defense.       The President           and the Congress are
concerned     about effective,         efficient,        and economical        use of
manpower,     but they lack assurance              that the agenczes would
effectively      control   emplovment         levels      if they were not con-
strained    by numerical       ceilings.
        This lack of asrurance        was expressed   by the Senate
Committee      or Appropriations,      commerting   on the removal of
ceilings     from industrial      fund activities,    in its report    94-446
on the Department,      of Defense appropriation        bill for 3.976.
       “Removal of ceiling              controls       from industrial
        funded activities             (whose civilians            now
        account      for about 27 percent                of the DOD
        civilian       force)      would inevitably            mean that
        activities         would clamor to become industrially
        funded so that they would no longer                          need to
        justify      their     civilian        manpower requirements
        to the Congress.              This is a cr,ucial            point     to
        the Appropriations              Committee,         since although
        we agree in concept               with the position             taken
        by the General Accounting                  Office      that finan-
        cial controls          are more effective              than ceil-
        ings in promoting             efficient       management of
        personnel,         we find it particularly                difficult
        to obtain        clear-cut        and adequate         justjifica-
        tion of workload             needs and funding            require-
        ments      at industrially            funded activities.              The


         justif        ication      materizl          supporting         opera-
         tions        and maintenance               (Q&M] funding            re-
         quests,          the appropr istion               that     is the
         principal            “customer”         of the industrial
         funds,          does not cleariy              differentiate             the
         pcrtion          of funding          for either          current        or
         new programs              that will         go to industrial
         funded activities,                  and the portion               that
         will       go to direct            Eunded activities.
         These justifications                    do not directly                ex-
       . plain         or justify         the reasons           for in-
         creases           in industrial-funded                 civilians.
         Finally,            and most critically,                 at the
         present           time,     there can be no financial
         control          exercised         on industrially              funded
         civilians.              This is so because the pro-
         visions          of O&M funds            in the appropr iathm
          act does not identify                     the portion          that
         will       go to pay for people I and the portion
       \ that will            buy contracted             services        or
          materials,            nor does the Committee                   believe
          that       it should do this.                   1 f industr       ial
          funded civilians                were removed from
          ceiling          controls       and subjected             to funding
          constraints            only,      the Committee              would be
          forced         to place a limitation                   in the bill
          on the amount of the Operation                            and
          Maintenance            funding        that could be spent
          for the pay of civilians.                          We believe           that
          such a step would be unwise,                           would promote
          inefficiency,              and ultimately              become more
          difficult            to manage than the present
          author izat ion ceiling                   controls.        If

        Xe do not recommend creating              new kinds of ceilings              on
personnel       dollars      or staff-years.         In earlier        reports     to the
Congress      (see app. V), we suggested               thdt    funding     or pro-
gram limitations           seemed to be an effective              means of
controlling        the number of persons          an agency can em:?loy.
Additional        controls      imposed by personnel           ceilings      deprive
agency      management       of options      for accomplishing           essential
work through         the most effective,         efficient,         and
economical        use of the most appropriate               type of manpower in
specific      circumstances.
        This study has reaffirmed              our understanding         that the
main concern        of the President          and the Congress      is that
agencies      manage 2nd cse needed manpowes resources                     of all
kinds as effectively,           efficiently.        and economically         as
possible.         The President       and the Congress,       and OftB. the
Civil     Service     Commission,      other agency officials            are dis-
satisfied       with personnel        ceilings    which provide       little
incentive       for improved      management.        Further,    they are
a barrier       to effective      manpower management.

        We believe      the basic    frame work for a practical               and
effective     alternatrve      to yearend       personnel     ceilings
already    exists     and is in operation.           In the b&get          process.
sumnarized      on pages 14 to 17’. the agencies,              OMB. the
President,      arid the Congress       give considerable          attention
to agencies*       estir,jated   manpower needs.        includrng       employ-
merit levels.       What is lacking         is confidence       in the sound-
ness of the estimates          prepared       and submitted      by the
agencies    and in the ability          and reliability        of agency
managers    to adhere to their          estimates.

       We believe     that,      with direction       and quidance     from OMB,
the agencies      could develop         methods for preparing         sound
estimates    of the minimum manpower requirements                 of all t,pes
to accomplish      authorized        programs    and functions.        The
agencies   should     fully      document    the processes      and data
use3 and make this          information      available      to Op4B and
the concerned      congressional         committees      for evaluation.

         After  the estimates       have been reviewed            and approved
by the President         ana the Congress,         ONB should require                      ,
the agencies       to document and report            the reasons      for any
major changes.         Since the budget process             takes place
every year and budget examiners              and congressional
oversight      committees     and subcommittees         monitor      agency
activities      during    the year,     it will      be difficult       for
agency managers        to deviate      substantially        from their                 a
estimates      without    approval.                                                   i
       We recognize       that modification         of the budget process
will   initially     require    intensive      effort    by OMB and the
agencies.        However,    we believe     that sound estimates      of
manpower requirements          would be responsive         to the concerns
of the President         and the Congress        and the objectives     of
the proposed       Sunset Act of 1977.
          presented our findings                   to the Director,              OMB, far
comment, and to the Chairman,        CSC, and the heads of all
agencies      included in our review   (see pp* 31 and 32) for
their    information,
        By letter   of November            8, 1976         (see   spp.   VII),      the
Director,      OHB, said:
        &Ke are      full   agreement       with     the     report's     statement
                ‘The    Congress,      the President:,       and OMB
                 are concerned        about effective,
                 efficient,       and econamical       use of
                 manpower,      but they lack assurance               that
                 the agencies        wooid effectively           control
                 employment       levels   if they were not
                 constrained        by nu~ericai      ceilings.”
        "Chapter        3 of the draft          report      is replete      with
        illustrations,            anecdotsl       in characterI        that
        stronqly        reinforce       our lack of assurance             that
        agencies        would control         employment        levels
        without       the ceiling         constraint.         * * * Clearly,
        the thread         running      through       chapters      3 and 4
        of the draft           report     is that more Federal
        employees,         added funding,           less interference
        and fewer constraints                by the Congress,          th?
        President,         OMB, the Civil           Service     CommissLon,
        and higher         level      agency officials          will   result
        in more effective              program management in the
        "* * * although      previous  GAO reports        * * *
        have emphasized      the need to consider         the full
        cost of employee benefits        (e.g.,   retire-
        ment),    the draft    report does not seem to
        recognize     the substantial   hidden costs
        associated      with use of Federal     employees.

          In this     relipectr      the report     seems to
          accept     statements        concerning    alleged
          additional       costs     of contracting       without

           “Likewise,        the fact that employment                ceil-
             inga might result             in increased       eontract-
             ing in areas where the Federal                   Government
             ie competitive          with prdvate        firms      and in
             increased       grants      to State and Local
             governments        in areas where those govern-
             ments     are as able as the Federal                Govern-
             ment to carry          out the program          is not a
             valid     argument       against      employment
             ceilings.         On the contrary,          it has been
             the stated        policy      of this    and prior
             Administrations           to favor private           firms
             an3 State and 1ocsi”governments                    in such
             circumstances.            In-.piic&ly,      your draft
             report      takes    issue with that policy,”

           “We are also concerned              that   in developing
            the report        the GAO solicited           adverse
            comment concerning            pprsonnel,       :eilings
            without      taking      into account-normal
            predilections          in favor      of hi-ring      more
            Federal      employees.         It is natural           for
            managers       to desire      more personnel            under
            their     direct     control      without     restraint.
            It is also natural            to disregard          all
            indirect       costs.”
           The Federal        work force       should be no larger            than needed
    to do the essential           work required         to accomplish         the pro-
    grams and functions           authorized        by the Presfdcnt          and the
    Congress.       If agencies       need more manpower than allowed                   by
    their    assigned      personnel      ceilings,       they must acquire          the
    additional      manpower by other            means.       Even though the
    Government      ultimately       bears the cost of all *nanpower used
    in Federal      programs,      reports       on Federal       employment      give
    no recognition         to man;rower acquired            through    contracts
    for personal        services     or through       grants      to institutions
    and State and local           governments.


       We ace not      suggesting   that agencies be relieved     of
all   coneerainta      or that tcfta1 costs bc ignored.     Neither
are we questioning           the policy      that certain          types of work
be contracted.           This study     is directed           to the effects     of
personnel      ceilings      which  deprive       agency management          of
options    for    carrying      out their      responsibilities          by
using the most effective,             efficient,         and economical        means
      Bureau of the         Budget (now OPlE3) Circular             A-64,   paragraph
4d (see app. HII),          provides  that:

       wAny decision        to substitute        the use of service
        contracts       for direct       employment.    or to change
        the proportionate           use of full-time        (permanent
        or temporary),         part-time,      or intermittent
        employment        must be based on considerations              of
        effectiveness         and economy in administering
        Federal      FroqrSms,      and mu.& not be used as a
        device     to avoid compliance          with the ceilings.”
        kie believe     consideratio&l        of   available       manpower options
should     include     comparisons       of the      total     cost of di,<ect
employment       with the total        cost of       contracting.          Nowever y
in Circular       A-76 on policies          for    acquiring       commercial      or
industrial       products     and services         for Government          use, OMH
does not require          agencies     to make       cost   comparisons        before
contracting        below certain       dollar      amounts.        Further,     OMB
seems to be moving away from the                   policy      of requiring
agencies      to make cost comparisons.
       The President       and the Congress      control      the agencies
and hold agency management accountable                through     exercise
of the budget process         each year and oversight            of their
operations      during   the year.     (See p. 14.)         These    processes
should     reveal. any significant      wasteful      practices      or
circumvention        of approved   Government     policies.

       The Director       p OMB, also      said:

        “The report     indicates         that officials         of most.
         agencies    responding         to GAO inquiries
         stated   that personnel            ceilings     allow     them
         some management        flexibil.ty,         since     they
         apply only to the last               day of the year-.
         This approach       permits        the agencies       to

            adjust   employment   levels   of their   orpnt~iza-             '
            tional   components   during   the ccurle    of the
            year.    ?iany of the problems    cited   in the
            report   are due to inadequate      of inf3erible
            internal    personnel   management practiceu,
            rather   than to the broad agency-wide,
            year-end    2mpPsyment ceilings,"

       Most   agency  officials  do not agre2 with OIdB because
use of externally       imposed ceilings      is affected     by other
constraints      on manpower management,        including   CSC regula-
tions    which must be applied      in hiring      and separating
employees        l

       CSC regulations          provide     a major      limitation       on an
agency’s     ability     to increase        its ft;ll-time         permanent     work
force during         the year and decrease           this      work force     to meet
the firm     yearend     ceiling.       CSC hens encouraged            agencies     to
hire  part-time         or temporary     employees         to meet     the needs of
peak workloads          or special     work,    but CSC regulations             deCine
the circumstances          and types of positions                in which theee
employees        may be used and OMB requires                that   they   must be
counted        against the ceiling        for total        employment,
       Nearly     all agency officials           with whom we discussed
the use of personnel          ceilings       said that considereble
time throuqhout       the year is spent keeping             the combined
enployment      of headquarters         of. ices and all organizational
elements     within   assigned       ceilings.       We found no agency
that   had attempted       to segregate         and accumulate    the cost
of administering        their    ceilings.

        In addition,         the   Director,        ONE%, said:

       “As we have stmted   in previous      communications
       on this subject,   we believe    that:
          .  .  . employment          ceilings       exist    to constrain
        increases,       primarily         because      of the proper      con-
        cern of the President,                many members of Congress,
        and the public           in the number of employees               on the
        Federal      payroll,       regardless         of any other     con-
        siderations.           Without       ceilings,     there   would be
        no effective          control      over these numbers,          and
        employment       probably        would increase         at a faster
        pace than is now the case.                     . . .’

      *It   is the ldn\st phrase of the p@nultiaatP
      sentence    Kegardress    of any other   conaidera-
      Lions that      has never Seen properly     addressed
      in the many reports       on the subject    of employ-
      mcnt        ceilings            that   )‘sur   Office    has    ifsfsued.

      mPoc        these           reasms,      we continue         to believe
      that        it         is   funrtamentally       dcsirehle      to con-
      ‘,rnf.   the .nu;rSer  of employees    an the Pederal
      payroll      and that such a position       correctly
      reflects      the preferences    of the Congress,
      the President,        and the public.*

       The phrase      "regardless     of any other     considerations”       has
not been clearly         defined.     Off5 officials      informally    have
indicated   that     it may refer,       in part,    to the advantage      of
precisely   identifying          the number of persons       on the Federal
payKOll*    In our opinion:

       --Excessive    emphasis      on limiting     the number of persc6ns
          on the federal      payroll     may obscure   the reality     th.mt
          the Government      lncu-s    the cost of getting      essentb 21
          work   done regardless      of the type of manpower used.

       ---Diatr      ibut ing peL sonnel        ceil ir!gs by agent ies amor~g
             their     organizational        elements      and monitoring    dctual
             employment       by these     elements      to insure    that the
             ceiling?      are not exceeded on 1 day of the year
             creates      an administrative         burden and an illusion
             of control.

       --Although    employment       ceilings      may be a: tool      to assure
          the President      and the Congress         their    concerns    as to
          the total    number    of employees        are met, they are at
          best an inferior       substitute       for effective       managemert.
          Hanagement    at all     levels     needs to aggressively          seek
          ways to improve productivity,                Improved    coordination                          ,
          of workload,     funds,     and manpower is needed.

       --The budget and appropriatio.1    processes      provide  the
          President   and the Congress with effective        means of
          controlling   the number of persons    that    can be hired.
          An agency cannot have more employees        than it has
          funds to pay.

       Personnel ceilings   can force    agencies                                 to   reevaluate
program and work priorities     , consolidate                            work          groups,      or
“In       a recent         ffneside      talk        tG the     Wmerisan
people,        Fresidant          Caster        reaffirmed          his
Administration’s                cGmlitnwnt      atrd   to  refGrm              4
reorganize       the Federsl Governwent a3d to
bring    its growth under contrcrl.       As pert of
this effort,       he promised to put a ceiling
on the number of Federal       employees.
“It hi& neaorandum                 of March 1, the President
stated      that,      preparatory          to estahlishnng           new
employmcr.t         C@il ings, a through             evaluation
of personnel           requirements           would be made to
determine         thF lowest           number needed to operate
the Govecnmer t ef, ?ct ively.                    In the interim.
the President            k:bi ordered         that 8 liElitL3tiGt-1       Gn
hiring      be imposed so as to maximize this Admin-
istration’s          flexfbiii*:y         in meeting       personnel
requirements           within        the new ceilings.             This
procedure         accepts        the consensus       of the advice


          expected  tc) be lower than those provided          uftk’the
          1978 Budget by the pcevious         Administration.        TfkUS‘
          the Issue of whether      executive    bPmK”h employment
          ceblingo  will  be continued       has been ecsmlved
          foe ttra imediate    future.
          “t#bdee the cfecumetances,               f do ncrt believe
          that     this   is tke     tine    to discontinue        employ-
          ment ceilings         for    some agcncf~s--eoen           on a
          limited,      experimental        .basis.      Suck an action
          would      be fncquitable        to the vast       map3rity
          of sqt?ncies,       who could        not be dnclnded         in
          ttie expecfment,           NO&T, if past experience             is
          any guide.       would    ft   further        the   Presidb:rt’s
          objectives.      *

        We support    the President‘s         plan to tkorougkly         evaluate
personnel     requirements       to determine       tke lowest     nultber needed
to operate      the Government      effectively.        Ncr: dcl we disagree
with his decision        to continue       to control     Federal     employment                  .
through    pe: sonnel    ceilings     in the immediate        future.       We
belfeve,    however,     that aggressive         action   should be taken to
improve manpower management.

          As we kave       discussed      in this    report    and others,   we
believe        Federcnl    manpower      management     can bc fmtlroved    by employ-
iny=or    othecwise      acqlairing         the most    appropri  :‘-e types of
personnel      re2;ources     for specific      circumstances                 and purposes
rather    than    by limiting       tk@ ilumber     of persons               that      may   be
reported     on the Federal         payroll   on i particular                   day.
      The former     Director,    Of+B, proposed     fo                estatjlisk    a task
force  ts develop     criteria    and action    plans                  for a controlled
and rigorous    test    to determine    the feasibility                       of concroil   in9

                                                                                          .. ---

as~loyment      levels  by means other     then direct        employment
ceilings.       Since fxme officials     have reservations           about
whcth@r a;mploymcnt      MOUld SECccmtrolled         without    ceilmgs,
we believe      such a test’ would be useful         in demonstratirq
the effectiveness       and general    applicabilfty         of that budget
process      TV require  agencies    to prepare      sound estimates       of
their     minimum manpower needs of all         types and eger.cy man-
agess to adhere to these estimates.
        Officials         of CSC, the Departrwnt          of Agriculture,          the
Department         of Housing and Urban Devefopment,                  the Department
of Transportation,              and the General       Services      Administration
commented that employment                  controls   other    than personnel.
ceilings       should       be explored.         (See apps. VIII,        TX, X, XI,
;rnd XII,)         Officials       of DOD; the Department           af Health,
Education,         and Welfare;         and the Department         of the Treasury
expressed        their      support     of a search for an effective             altcr-
native     to externally            imposed perssnnel       ceilings.       The
Veterans       Administration           did not comment,
      In view of the cpncern       about how effectively                    agencies
would control   employment    if personnel   ceilings                   were not used,
we recommend that    the Director,      ORB:

       --Establish    a task force at the earliest                practicable
          time to develop      criteria     and actIon        plans for a con-
          trolled   and rigorous        demonstration       of the feasibility                     I

          and general    applicability        of the budget process              es a
          control   over total      manpower resources           including       direct
          employment.     The demonstration           project      should be tlnder-
          taken simultaneously          in sever?1     agencies       wit!? ilirferent
          types of operations.
       --Consult     and coordinate       closely   with          tke   congressional
          committees     involved    to invite    their           support    of this
          project,    and furnish      the committees             periodic     reports
          on the progress       of the demonstration               effort.


                                      4                                            v         .
                                          .   .
       We examined Office     of Manqement      and Budget and Civi*
Service    Commission   guide1 fnee; and sblbtsry     ar.r.3 civil   sgency
procedures    and practicers    for ;: ztnayzng and repotting      civilian

         We selected       the military        inst2llations            and   civilian
activities        on the basis of It) large civilian                        employee
populations,         [2) stable        or increasing            worklG,ads,     or [3)
known problems          with personnel         limitations,             :qe selected
certain     military       installations         because they ore industrially
funded or have B large mix of civf1ia.n                          p?d military          personnel.
Several     civil     agencies       WPCCI also       selected       because           of    their

public     service      or revenue-producing                 functions.
         Listed     below are the sgeneies          reviewed,       We ubta fned
genctel       information      and responses      to specific       questions      f~0,0
military        and civilian      agency headquarters          and military     corn-
mands.        At headquarters       and field     installations        and a~tlvi-
ties,     we reviewed        or obtained    information,        to identify   2nd
document specific            cases showing effects          of manacjinq through
personnel        ceilings,
            Army Material  Command
            Major Item Data Asency
            Army Garrisnn  (Post),   San Antonio,   Texas
            Braoke Army Medical    Center,  San Antonio,                               Texac,
            Red River Army Depot, Texarkana,      Texas
                Naval     Air Systems Command
                Naval     Sea Systems Command
                Naval     hir Rework Facility,             North     Island,           San Diego,
                Philadelphia        Naval     Shipyard,       Philadelphia,                 Pennsylvania
      air Force:
                Logistics      Command
                Hilitary      Airl%ft    Commsnd
                Ijl,ilitary   Airlift    Command Units,            Scott       liFD,        Illinois
                Ogden     Air  Logistics    Center,   Hill           AFB, @den,                 litah

     General  Service8      Adminl%tration:
           Federal   Supply Service
           Pub1 ic 5uilding      Service
            Ndtionai    Aochivtts    arti3 Rwanda    Service
            Automated  5ata and Tcleeommunlcations                  Service
            Rcgisn IX, San Fteneisscrr, California
     Social -Sewrity    Administretion,         Brrltimera,      Ptaryl~snd
     Region 7c Kansas    City,     #issouri
     5ureau of 5istrict     Qffice      Operations,      Kansas City,
 .   Bureehl of Retirement     arid Survivors         XndOrance:r Hid-
       Amari%sn Proqrem Center,          Kensas City,       ?-$issoat~L

     Pkk Crest Lakes Region,   Des Plaines,              Illinois
     Customs Service,      Region XX, Chicago,            fPlincirs
     Custms      District  Office,    Chicago,      Illinois
     Customs 5iatr ict Off icec Minneapolis,                Hinnesoka
     Internal     Revenue Service     Hid-Atlantic          Region,
        Philadelphia,     Pennsylvania
     IRS Philadelphia      Service    Center,      Philadelphia,              PennayLvanls
     Regional. Office*    Loo Angeles,    California
     5rcntwood  Hospital,    LGS Angele~,      California
     Wadswcrth  Hospital   F Los Angeles,      Cal ifotnia



                                                                              9        w
                                                                                                       m--e-        --.--_        ._-                ..--   .-._   _,

APPENDIX f                                                                                                          APPENDIX f

             --__-----_-._-------      CLILlKGS      AND        PEPCWTED        pJIPLOY#IXT

                                     --~---         rot.31
                                                    ----                                       Total
                                                                                               _-__             fL$EJmrnt
                                     80.250        112.590                                    llB.9bb              81 “OLI              314.701
                                     1 J.575         lb.23%                                     l6.195             13.175                 16.018

                                         tc3       995,QfiQ                Y55.721            989,123                 (Ci                     iCl
                                    li%.11U        337.519                 3!5.611            13B.Oli                 (Cl                     IC)
                                         (P)       llli.POG                     IC)               tcb             111.437               Ill.701
                                    JUT.847        118.112                 306.74b            JlQ,YlU                 fCl                     tC)
                                      4I.W5           63.514                 4J.Wb              41.602                WI                      ICI
                                      PI.JId          91.526                 91.651             93.240                ICI                     1Cl
                                    24).     104   265.578                 261.528            263.71d                 fC>                    ICI
                                         (%I1         tl9.661                90. JbG            90.4Y4                ICI                     (t-1
                                         fdt          16.151                 15.527             IS.SB7                ICt                    tc1

                                      36,WG           J4.806                lb.400              38.219              3b.697                39.517

                                                   143.932                 12Y.2(15           14L.604          ~/132.639                144,Lbf

                                                     %5A4i                  T2.?33              7Y .95B             78.341                85.617

                                      15.200         17.321                 15.142              16.681              15,200                 I?.;?4

                                     10.129          72.128                 ‘70.345             72.575              71.967                 73.961

                                      54.884         f5.E@2                 54.8l35             55.elM               56.092                57.08Y
                                    109.057        120.891                 108.1’8            119.281.             112.454               121.954
                                      18.i88         15.811                  14.546             15.450               13.YI    3            15.236
                                      72.74t         B2.24L                 71,710              01.064               75.143                83.162
                                    186.207        209.436                 364.502            209,12:              1’15.725              P2l.OjO

                                                                                   ;4PPENDIX I I

1!M8,      title       It,    ssct$an   201,entitted    "LMtPftlof~    on the Himber of

Civilian           Offtcsrs     %nd Employees      'In the ExecutSve   I3r%nch~* in part:

                    HQ*   Excep% IS other&se     pravfded In thfs ssctlm--
                           (1) wo perml   shall k Ecppofnted as % full-t,fLIBE! civfl4an
                    employee to a pmment        pattion   9n tha cmxd&Ive      branch
                    during my mm';h when the number of such employees 1s
                    greater then ttie, ntier    of such mployeeo    on June 30, 1!266.
                           (2) 7,~ nmber of temporary and pert-tl~         ertqloy~s
                    fn any tiegartmnt   or %genty ln the executfve      branch
                    during any month sh%ll not k greater than the mm&m af
                    such %mplsyem during the corwpondlng         mnth     04 1961.

                         -v-----      --_--_

    APPENDXX”-I I                  APPENDIX X 1

     APPENDIX 1x1        APPElZDIX III


APPENDIX 11.X                                                    APPENDIX III


The requirtm-mnta       for t?w snuthcrized      position   structur@     erhouL-8
bea datednerd      principally   tirough      the budget proc~s8,        But albia
through    the usa off such tools as work mewmsx.ment,               work
standards,     prsdcctiwit~*   analysis,      and manpaws and workload
rerportin?g . An adequate Position           authorization      and ex~pbo~aat
control    eyetem t3hould provide        cantxol    over total.    mgloymmt
sr3 we311 a3 over full-the       employmrirnt in psnneanant p0sebtisn.f~.
           (41 Vacancy control.      Baforer. my vacar,q   fs fill@&,
Q mview     shadd be made to determine       whe#er   the duties    0%
the posrftlton    cm bo eliminated,   assigned    to othar pukaiticna,
or modified     to pwruit  pesfo-nca     at a lower grade.

APPENDIX III                                                       APPENDIX III

                  (b)  The number     of occupied     positiono,       by @mploy-
raent category     and grade.
                  (cl    Any new arrangements       entered    into    for   &ha
provision      of services   by contract.
              (d)   An analysis     and explanation          of any sigtifi-
cant changes in the position      structure,        tcqethar    witi  an
analysis  of any longer-tern    trends      indicated.

      APPENDIX I II                                                             APPENDIX ITI

             CC Gansrallyr          ~~pkoyment      c&lfngs        reflect      bubge3t prroposab~
      and assumption6          with regard ra workload,                 efffcfency,        propa8ed
      new legislation,           interagency      reimbura.3.M.e        arka.ngeme~tf3,       and
      other special         financing      methods.       Employment Pncluded              %cr pro-
      posed legislation,            or fcx carrying         out preposed          suppfcmntal
      approprfarions,          must be. reserved         unti.l    the additionsl.         funds
..-   become available           by congressional         PrctiQn.        gGplopent        under
      estimated      retiuraable          arra3gemente        must aXso be reserved
      until     such arrange~~~nta          have? been negotiated.                      ..
             d.   Any decision         to subrrtitutfz      the ilse of semice             contmcts
      for direct       empkoyment,        or to change the groporedanata                   use of
      full-time       Qpemank          or teq~rar-yl~         part-time,        or intsrmittcsnt
      employment must be baa& on conefd~ratkana                            of sffectiveneea         and
      asonomy in ac%Rt%nioter%ng x--ed@ral pragrama 8 LrJla must xnot be+ umxi
      as a device to avoid compliance                  with the ceilings,
       5.   Adjustments       TV emplayment ceilinsr.         unaer nsrctcbl circum-
       stances     &t would be expecteci that rem~est~            5x sevf~$mm         in
       amplq~~ent     cefJ.fngs    fok the crarrent      year in progreaa       ~~2uPd I32
       considtsred    by tha Bureau of the Budgee during              the exaslinatien
       Qf agency budget submissions          fGK    the following       year.    I&h the
       case of urausual       or emergency   situations,      reqr;ests      for revisL0ns
       may be s&mittcd          at other thee.
M??EMBI# 111   APPEE?IDfX I Pf


   . \
APPEND&X PV                                                                APPRNDfX XV

                                                 -.a.. hJ

       --Custom3     Service   provides       reimbursable      mrvfce     to
          entrepreneurs      engaged in bonded warehouee~opsrations
        . and duty-free      shops.       Customs frequently        has co reject
          requests3 from warehcuse          proprietors       to open new a’dre-
          houses or to expand services              in existing     warehouses
          because ceiling       limitations       did not permit       Customs to
         hire    enough     employees           to staff   them.

       --Inadequate       staffing      has prevented      the Federal         Aviation
           Administration         (FAA), Great Lakes Region,            from opera-
           ing a proper       flight    standards    surveillance         program which
           includes     monitoring      the airworthiness         of airmen rand air-
           craft * Officials         said that FAA must apply continuous
           pressure     on air carriers        and others      involved      in the Ply-
           ing industry       to insure     that they follow         approved prac-
           tices    and procedures.
         FAA’s Chicago Flight              Service       Station,        DuFage County Air-
         port,     has been unable to provide                   timely      service      zo
         pilots     requesting       weather       briefings         and flight        planning
         services.        Incoming      callls     are counted           and records        are
         maintained       on the number (sf calls                 which are not com-
         pleted     because service           station       lines      are tied up
         (abandoned       calls).       There were 6,653 abandoned calls
         in fiscal.     year 1?72; the number increased                        to 25,696
         in fiscal      year 1975.          Although        officials        attributed
         this   situation         to staffing        shortages,          they felt       that
         purchasing       additional        automated         equipment        would be
         the most practical            solution        for handling          increasing

       --In    February    1975 GSA Region 9, San Francisco,             requested
           137 additional      Federal    Protective     Service  positions      to
           provide   security    services     and to help monitor        and sup-
           port contracted      guards.      Local officials     based this
           request   on increased       subversive   activity,    such as

L/We examined documents              and obtained      information     on these
   effects      and others       from agency officials          at headauarters
   and field       in;taflations       and activities.          We did not verify
   essentiality          of the work,    substantiate        manpower requirements,
   or evaluate         the cost effectiveness          of alternative     actions
   taken or that might have been taken.


                                        c   .
APPENDIX IV                                                           APPENDIX IV

       bombings,       shooting~~    and thefts.        5ecause the ceiling
       increase      ~equ42~t wof3 denLed,      protective        service23 ttt
        some facilities        had to be reduced.          Officials      aaid
        that teductions        in manpower would mean Iess protection
        for Federal   facilities,         and could result   In a serious
        shcrrtage of personnel         ql~aPiEied  to teepond during
        emergency situations.
     --Because   of staffing    shortages,        GSA’s National          Archives
        and Records Service     has been unable to provide                 services
        to agencies   in southern     California.
        GSA, San Franciscor         officials,       said 8,000 to 9,000
        records     relating   to the Bureau of Indian              Affairs’     work
        had not been properly           stored     and indexed      by the Na-
        tional     Archives  and Records Service              because personnel
        ceilings      did not permit       adeauate     staffing.        As a re-
        sult,    the records     are not readily         available       for GSh’s
        Indian     Claims Division,         lawyers,    and others       to use.
     --HUD’s    Equal Employment       Opportunity    Division      is responsi-
        ble for investigating         and answering    discrimination       com-
        plaints    from the pt-:?lic,     The law stipulates          that com-
        plaints   must be answered within          30 days, but Region 9,
        San Francisco,     answers     few complaints      within     this peri-
        od and takes 4 to 6 months to answer many.
        Because of ceiling          limitations,         HUD’s Housing Manage-
        ment   has been unable          to monitor       multifamily      and sub-
        sidy projects      until      they     are about to, or actually
        do, run out of funds.               It has not monitored          open-
        space projects       as closeiy          as required      by statute    and
        has not closed      out completed           projects.        Also, because
        of inadequate      staffing         in most cases HUD is unable to
        review    community      grants       at least    once every 2 years
        as required.
     --At      SSARegion 7, Kansas City,          reduced service       to the
        public    resulted     in delays      in processin?   claims      and
        answering      telephone   inquiries,       increased   waiting     lines,
        and reduced dissemination            of information.
       -Soil Conservation      Service      {SCSI, Colorado,       has been
        able to grve technical         assistance      on conservation
        measures to only about 1,000 of 6,230 farmers                  and
        ranchers  &.ing    each of fiscal          years 1975 and X976.
        SCS could use 20 additional           soil    scientists     to assist
        farmers  and ranchers.         Funding would not be a prob-
        lem and equipment      and facilities         are available,      but
        the 20 persons    will    not be employed         because of per-
        sonnel ceilings.

APPENDIX IV                                                                  APPENDIX IV

           In 1975 SCS, Colt>rado,             could not give Earmrs              end
           ranchers       technical      assistance       on water msnsqcment
           construction         projects     estimdtcd      to c6st: $1.5 miIPion
           because of insufficient              engineerins       and design        staff.
         * The backlos        of reouests        for this     type of assistance
           has been increasing            about 10 percent         annually       for
           the past       4 years.       SCS’ failure       to maintain        contact
           with farmers         and tanchet-s       has cawsed them to revert                to
           old conservation           methods which may lead to soil                  erosion
           in later       years.      The farmers       and ranchers        have keen
           advised      to contract       with private        enqincerinq       firms.

            SCS, Colorado,         was able to schedule     only P of 23 flood
           hazard  studies         GUD reouested  in fiscal     year 1976.

            SCS, New York, provides              technical      assistance     to the
            Environmental      Protection         Agency      (EPA] on a reimbursable
            basis.    One study,         reauired       by Public     Law 92-500,     is
            currently     underway.         After     its  completion       SCS will    be
            unable to provide          further      technical      assistance    because
            of employment      limitat      ions , even thouah          EPA is ready to
            provide   the nccessBry           funds.

         --VA officials          in Los Angeles         said tP.at ceilings         h,ld
            hindered      them from hiring           the appropriate       mix of per-
            sor.nel    needed      to carry     out the region’s        workPosd        irt a
            satisfactory        manner,       and that they had been able               to
            sive only minimum levels               of service      to tnc public.
            c;ervices     affected       include    answer inq written,          telephone,
            and walk-in        inauiries       about veterans’       benefits.          Heavy
            workload      pressures        cause some VA claims         and awards to
            be processed         inaccurately        because employees         at times
            were more concerned             with getting      claims    processed          than
            with accuracy.
~mKmx~~E~-.-           W’SPK:
                   -m--------                INCREASED
         --Recurrinq        preventive   maintenance   at Oqdcn Air Losistics
            Center,     Hill    Air Force Ease, has been severe1.y   lkmlted
            because     of insufficient      manoower.

         --Military     Airlift       Command airlifts    men and supplies      for
            DOD,    and maintenance       of the aircraft      used for this
            mission    cannot     be deferred     or canceled.     Hcwever , some
            base support        work,   such as maintenance      of family   hous-
            ing, has been delayed.

                     --SSA’S P,uceauof Petircmt?r.t and SurvAvara Xnsurance has
                       had to defer many preqects over t.hc glast few yeaxs.
                        aecauzc of the lack of hesined staff, the RU$e?BU~S
                          Mid-Arwrrcan       IjrQqram Center,               Kansas Cityl         sa;+-S that
                          50,000 automatic          earninrrs          recom:utation          pruqtiss    cases
                          that    it should      have jxac?~~ed               in fiscal,      year 1375
                          were ca;ried       owcr to ftscsP                year 1976.         SSA headcrLrar ters
                          instructed     commnent          G~-~~~~i243tdG~~          not   to    exceed     their
                          personnel     O?ifiners      at BUY t ime durrnq               the year,        and
                          they were prever?tcd           from htrinq            to fiI.1 a~tieipsted
                           future    Posses*

            ALTERNATE               SOURCES       cSF W.Nlw*iER      t.!SEEl
            I --_---------I-c--P-u---------

                   The noencies      WC :cvtcwed     used s6urCes     of mripowce: cPthec
            tilan their     requjisr  work force because ceifim          1 imitations
            prevented     then from hirir.q      needed cmplayccs.       Alecrnirre    SOUhQeS
            of manpower inchuded coritrsctina            for personal    services     an? use
            fff crvt~rt~me labor.

           --e--e---                 for   perscmnel
                                   ---.bw-_m----              services

                      --As        of   ;iJovezbcr       26, 1975,    the       approved        workload       for
                          quard        services         at GSA Feqion          9 was      641,194    hours:         the
                          region’s          ceiling of 184 positions      provided     for only
                          326,784          hours of the approved    workl-oaci to be dCcC)m-
                          pliched          thsouqh use of the Federal       Protective     Servzcc
                          guards         it was authorized   to employ.

                           In response         to GSA hcaduuarter’s           denial    of it? reouest
                           for additronal           positions     for the Federal         Protective
                          ‘SeKViC’.?,     the Region 9 Administrator              wrote     the Admin-
                           istrator       of Generali Services         that    “Practical        field
                           exprrf~f;ce       has consistently         demonstrated        that security
                           contractors         provide      watchman service         at best.        Sccur ity
                           contractors,           wath rare exception,         lack authority,
                           eraininq,        skill,     or inclination       to perform        police    pro-
                           tection      functions.”



          _-- /---
APPEHDIX IV                                                                        APPENDIX XV

       For three    contracts    of about $8Slp500    awarded for
       security   guards,     GSA cuat s?~udies prepared     during
       fiscal   year 1975 showed the work cauld hnve been
       done for about $836,800        or 5 percent  less if in-
       house guards were used.         For three additional.      con-
        tracts          awarded    for     about       $l,382,600,         GSA cost      studies
       for fiscal   years 1975 and 1976 showed that contract-
       ing saved about $430,000,      or 31 percerAt: in each case
       where guards   were contracted    there were complaints
       about the service.

       The extensive    need for contract          guards has resulted
       in an unbalanced     work force--l77          productive      Federal
       officers   and 206 contracted         guards.        Approximately
       60,000 hours   of productive        time    {3S staff-years)
       was spent by Federal      protective        officers      in monitor-
       ing contract   guards,    resulting       in reduced effective-
       ness of the Federal      Protective       Service.

     --Becsuse     of        persorinel      ceiling        limitations,           GSA San
        Franciscu,  awarded four custodial                            contracts       totaling
        $1,171,000  in fiscal  year 1975.                            GSA cost      studies
        showed that   $153,000 cou3d have                        been      saved    by d?incj
        the      work     with    its     own employee::

     --HUD’s      San Francisco       Area    Office     appri-ised      t5,SlCl     hous-
        ing units     for mortgage         insurance       in fiscal       year 1975;
        7,242 of these        appraisals,         46 percent?       were made by
        contrcict    appraisers.          HUD officials         said contract          ap-
        praisers     were used because of underctaffing                     resulting
        from personnel        ceilings.        Central      oirice    officials
        said that     the cost of using            contract      appraisers        is
        approximately       40 percent        more than the cost of using
        HUD staff,      and that contracting             for more than 25 per-
        cent of the appraisals             could cause the quality               of
        processing      the appraisals         to deteriorate          because       of
        inadequate      supervision.

     --Navy     ship overhauls      must be shifted       to the private
        sector     or deferred     when sufficient        work force    is not
        available     to accomplish       scheduled     work in the naval
        shipyards,      even though the funding          may be available.
        Because of uncertainties            about   what the fiscal     year
        1975 ceilings       for the shipyards        would be and when the
        ceilings     would be approved,         15 ship overhauls     were
        deferred     and/or    rescheduled.

i   -4   i

                                    --.--      .   .   .._          _.__

                                            APPENDIX XV                                                                          APPENDIX        XV

                                                                    19 hr,S.C.    267,     an amended.        Thus, a large share of
                                                                    the compensation           to the inspectors        for Sunday,
                                                                    holiday,     and night        overtime    work is reimbursed       to
                                                                    the Government          by the parties       requesting    tht? berv-
                                                                    icea     such as common carriers.               In fiscal    year 1972
                                                                    reimbursable         overtime     accounted     for $2.4 million      of
                                                                    the $3.5     million       paid    CO Region    9 employees.
                                                             --Wring    fiscal          year 1975, GSA’s Federal         Supply Scrv-
                                                                ice warehouse           at Stockton,   California,       used 17,477
                                                                    overtime     hours.     A service  manager said that about
                                                                    CO percent      of this overtime      could have been handled
                                                                    by intermittent        employees  but    th;t  additional   em-
                                                                    ployees    could not be hired because of personnel
                                                                   -GSA officials        in San Francisco         said that a consider-
                                                                    able amount of overtime            in Region 9 resulted          from
                                                                    personnel     ceilinqs,        fn June 1975 overtime         costs
                                                                     in the region       increased     74 percent      over the 1975
                                                                    monthly    average.        A Public     Building     Service   official
                                                                    said the increase          was st,tributable       to the layoff        of
                                                                    temporary     employees      to meet yearend         ceiling   limita-
                                                             --SCS         received     an increased       number of claims        from con-
                                                                    tractors      involved     in the construction          of watershed
                                                                    projects     e SCS does not hz,ve enough inspectors                 be-
                                                                    cause     of employment      limitations,         and those it does
                                                                    have must work long hours over extended                   periods.
                                                                    Employees have complained              that   the extra    work    hours
                                                                    interfere       with their     personal     lives.      Morale and
                                                                    performance        have been %.f‘octcd,         and one result      has
                                                                    been the increase          in contiactor        claims.
                                                             --Personnel     ceilings      have made it necessary       for SSA
                                                                to use more overtime          than its manaqers.would       prefer
                                                                since this     is the only way to achieva        the staff-
                                                                years needed to process           its work.  Overtime      used
                                                                by two bureaus        in iiegion 7, Kansas City,      is sum-
                                                                marized   below.


                                                                                                                                                      ’      -   -

.   _L       . .._
                     -------u-i-,                             .~

                                                                                                                                                  -   /‘--


APPENDIX IV                                                                              U’PENDIX   IV

                                                                              Overtime        cof3t of
                                                                              pt?rcent        overtime
                                                        Hours       -            Of           at $2.74
                                                  -I       --           ime   ;edular         ----- hour

Bureau of District
  Orfice   Opera-
      FY 1975                               3.707,705           260,205          7.02        $725,972
     1st          quarter              l

            FY              1976            1.022.729            62,404          6.10         174,107

      FY 1975                               5,052,923           293,683          5.81         819,376
      1st quarter,
            FY 1976                         1.392.087            97,282          6.99         271.416

                 The regional      representative         estimated      that    about     50
                 percent   of the overtime          work in District          Operations
                 and about 75 percent          in the Program Center could ..ave
                 been converted        to FTP positions.           Local SSA officials
                 said that    overtime      has become a way of life.                Because
                 of its use over an extended              period,    errors      havt? in-
                 creased   and productivity          decreased.        Overtime      ilt3S
                 caused labor      relation      problems      since   it is paid to
                 higher   grade technicians          wit0  are capable        of doing the
                 work and lower grade union members who do not work
                 overtime    feel    that they are discriminated                against.
           --VA officials        in Los Angeles     said that overtime      is
              used as an alternative        to more FTP employees.          Over-                          ..
              time is used on a regular          basis because     the regional
              office    does not have enough FTP employees            to process
              financial     assistance   claims     on a timely    basis.     In
              fiscal    year 1975 overtime       hours accounted      for 4,4
              percent     of the total   labor hours used.         For fiscal
              year 1975 and the first         quarter    of fiscal    year i9i6,
              the region’s      overtime   costs amounted to approximately
              $1 million.

--IflBALANCES                      IN THE WORK FORCE
           --Air      Force headquarters      directed      that     no reduction      in
               force of permanent        personnel      would be undertaken          in
               fiscal     year 1975 if the yearend          ceiling     could be met
              by other       means.   This policy       and an unusually         low at-
              trition      rate severely     restricted       hiring    persons     with

       -.-_ __
 APPENDIX IV                                                                APPBNDIX IV

            needed skills    at most Logistics         Command installations.
            nassive    skill imbalances       resulted   with hundreds      of em-
            ployees    with surplus    skills     and hundreds   of vacancies
            in needed skills      that could not be filled         because of
            the ceilings.
         --Separate       ceilings    for FTP and total         employment   have
            limited    management’s       ability      at Red River Army Depot,
            Texas, to mqfntain          a balanced       work force because of
            the difficulty         of employiny       certain   types of skilled
            workers@ such as welders,             machinists,      and sheet metal
            mechanics,       on a temporary       or part-time      basis.   Opeca-
            tions   have been adversely           affected.
         --HUD and GSA officials             in San Francisco          said that
            personnel      ceilings     created        imbalances    betweet?  pro-
            fessional      and clerical        staffs.        During staff    reduc-
            tions,    clerical      personnel       with lower retention         rights
            tended to be the first             released.
         --A    BUD Housing Production       Mortgage  Credit    single
            family   housing    program study showed that 35 to 37
            percent   of HUD’s Region 9 work force          should be cleri-
            cal personnel.       In several    of the regicn’s      ins;rring
            offices,    this ratio     w.23 as low as 22 percent.        with
            skilled   personnel     doing clerical    work.

         --Some SCS State         Conservationist          Offices       are staffed
            with one-of-a-kind          disciplines,        such as geologists,
            foresters,      financial      managers,       and sanitary        engineers.
            Because of employment            limitations.        offices      are unable
            to train     replacements        because the authorized              positions
            are needed for employees              to carry      out program respon-
            sibilities.        When an office          loses one of these special-
            ized employees,         valuable       time is l&t         in training       the
            About 12 clerical      positions        in 12 field     offices  were
            permanently   abolished.         As a result,       G-9 and 11 soil
            scientists  had to type,         file,     and do other clerical
            work in addition     to their        professional      duties.
     ---   EFFECTS
          --Air     Force Logistics       Command officials           said that con-
             verting     positions     from military         to civilian,       even when
             desirable     and economically          advantageous.         is restricted
             by the personnel        ceiling     limitations.          There are no
             provisions       for increasing       the civilian        ceilings      for
             military     positions      converted       to civilian      positions.

AP?EEDIX IV                                                                   APPENDIX IV

         .- -At    Brooke Army Nedical        Center,   every department,              serv-
              ice,    and activity     has been affecter?        by personnel          shor+
              ages resulting       from fund limitations          and the hiring
              lag caused by difficulties           in recruiting         eligible
              candidates     and processing       personnel      actions.         Stringent
              actions    were taken to keep within            the limits        of the
              fund authorization         document.     Military       personnel        with
              required    skills     were used when available.

          --Personnel     of other    agencies      may be designated        customs
             officers   (excepted)       without     additional     compensation
     P       to perform     any of the duties         of customs officers.
             (See 19 U.S,C.      1401(i).)        At July 1, 1975, Customs’
             Region 9 had 707 military            and civilian      employees
             from other     agencies     authorized      to perform    these
             duties.    One reason for using military               and other
             agency personnel       was the limited          Customs staff,
             The regional      commissioner       said that      the quality    of
             Customs inspection       was reduced when personnel             other
             than Customs inspectors           were assigned.

          --HUD officials         said that personnel    ceilings  did not
 ,           discourage       automatic   promotion   of employees   or hir-
             ing persons       at higher   grade levels   than needed.
          --SC5 trains       employers       of State and county       units   af
             government      cooperating        in the National     Cooperative
             Soil Survey in conservation              work.    These units     provide
             funds and soil        ccientists       to help meet the demand for
             soil   surveys.       A SCS survey       of States   with cost-sharing
             agreements      indicated       that at least     $1 million     of addi-
             tional    State and local          funds would be available         annually
             for conservation         work,     if no Federal    employment      limita-
             tions   exist.

          --Host    agencies     we reviewed   said that            managing employ-
             ment levels      with personnel    ceilings            requires    more
             administrative       effort.    None of the            ayencies     had
             determined     the cost of administering                 the ceilings.

           --Personnel     ceilings       have frequently         made it necessary
              for agencies      to defer        the effective       reporting        date of
              new employees       until     after    the end of the fiscal              year.
              For some agencies         thi:      has resulted       in inability        to
              hire needed college           graduates      available      in Way or
              June who are unable to wait for employment                       until
              after    July 1.

r   -
f       APPENDIX IV                                                         ABPENDEX      XV

             --Several    agencies        said that employees       on extended    sick
                leave   awaiting      dPsability     retirement     had caused pro-
               blcmts.    Although        these emplsyees       WE:Z not on duty
               to cls the required           work, they were counfcd       against
               the agency’s        ceiling     as long as they were an the
               agency’s     rolls,
               Officials     at FAA’s Great Lakes Region identified                   staff-
               ing shortages        cause& by extended         absences of sir traf-
               fic controliers         as a serious      problem.      Controllers
               excused for medical         reasons continued         to count against
               ceilings    and prevented       FiW from filiir,g        vacant posi-           .
               t ions,   This reduced FAA’s ability               to function      effec-
               tively.     In November 1975 the Air Route Traffic                   Con-
               trs4 Center at Aurora,          Iiiin~is,       had 25 controller
               vacancies     resulting     from extended        medical    absences.
                Federal   Personnel      Manual ILetter     296-32,     dated June 17,
                1976, allows    agencies      to exclude     employees       on extended
                sick leave from their         monthly    reports    cf civilian      em-
                ployment   Qhen (1) the disability           retirement       of the
                employee   has been approved         by CSC and (2) the employee’s
                use of sick ieave exceeds or is scheduled                  to exceed
                30 days.    These guidelines         were effective        with the
                June 1976 report       for agencies      capable    of impLemantation
                by that date.       Other agencies       were required        to imple-
                ment the guidelines        with the July 1976 report.

APPENrlIX v                                                             APPENDIX V

                   ~HER    STUDXES ~FJ%RSOM~EZL Ca;EL~Il~                  /
        We have sent to the Congress other report8           on the ef-
fects    of personnei     ceilings     on agency management and the use
of civilian     personnel       to carry out assigned  programs    and
functiona.      Summaries of five of our reports        follow.
(B-165959, APRIL,?10, 1971)
         The Department      of Defense absorbed          the reduction         of
civilian     personnel     resulting      from the hiring         restrictions
imposed by the Revenue and Expenditure                  Control      Act of 1968
(see pp. 12 and 13) without            serious     effects       on its programs.
In some cases,        imbalances     of work-force        skills     resulted--too
many brorkgrs      in some skilis      and not enough in others.                 Those
imbalances,      combined with personnel           shortages,        could have
affected     programs    adversely      if the restrictions            had remained
in effect.
        The hiring  limitations,        along with the spending     recfuctions
 required   by the act,      increabyed emphasis on setting     priorities
 for the allocation      of personnel         and funds. This emphasis should
 have lony-range    beneficial       effects,
        Personnel  management was more flexible            under ceilings         in-
posed by :-he executive       branch than under hiring           limitations
directed     by the statutory     restrictions       whrch prescribed        that
only three of every four civilian              employees   leaving      DOD could
be replaced.
         As a result     of our review,        the Deputy Secretary       of Defense
 proposed    eliminating      ceilings      on a trial    basis so that DOD
 and the Office        of Management and Budget could jointly               assess
 the effectiveness         of fiscal      an3 program constraints        on em-      .
 ployment     levels.      In December 1970 the Director,            OMB, agreed
 to eliminate       employment     ceilings       for DOD for a l-year      trial
 period.      DOD action     on this      authorization     is discussed      on
 p. 66.
  (B-16595r, JUNE 21, I$-
         Project     REFLEX was a DOD d.nonstration              project   in which
 several.    laboratories        operated    solely    under financial       controls
 without     personnel      ceilings      so that management could adjust
 personnel       levels   to match workload         requirements       and available

                                    .       .   .   .   .   l
     APPENDXX V                                                                            APPENDIX V

             The Dcpartmente   of the Army, Navy, and Air Force beqa3
     Project    REFLEX in 1990.       After    praoidinq     initial   guidance,
     the Office     of the Secretary       of Defense gave the services
     complete    freedom in implementing          and monitoring     the project.
     The services      needed some flexibility          because of the differ-
     ences in laboratory      operations.
             Although     the project  was to operate   witi;out                         persome
     ceilings,      REFLEX laboratory      managers were under                          some     con-
     straints      during    the test period.
f            --Hiring   freezes    were             imposed,     and in spme            cases,      ceilings
i;              were only partially                 lifted.
             --Government-wide                programs    for reducing           emclloymeat            and
                average grade              levels    were instituted.
             --Civil       Service   Commission             and agency       regulations            limited
                the     ability    of laboratories             to hire       or separate            employees.

               OEfPciaPs     involved       in REFLEX made extensive             efforts      to
     develop       techniques       to measure      project     success.       The Office
     of the Secretary            of Defense and Army, Navy, and Air Force
     officials        had not developed           such a system.         We analyzed        a
     substantial         amount     of statistical         data but found it to be
     of little        value in evaluating            the project.        This is character-
     istic      of the difficulty           of measurinq       performance       of research
     and development           activities,        whether     Federal    or private,         ‘How-
     ever,      both   the services         and we made evaluations            which showed
     that benefits          had been realized           even though constraints             were
     not entirely         removed.         Managing     with fiscal      controls        and with-
     out personnel          ceilings       helped operations.
             --Planning      for          and matching       funds,      workload,         and manpower
                 impx oved .
             --Delegation            of    responsibility    and authority                 to lower           man-
                 agement        levels       was encouraged.
             --Management    was provided    with                more     options         to use,        i.e.,
                direct  hire or contracting.
             --Manaqement’s            capability     for advancing               new     technoloqy
                 in-house         improved     and more effective                technim-!        Zizrction
                 was    given      tn contractors.

             --High-level            manaqement       *as    relieved       of    costly   and time-
                consuming          administration           associated       with     personnel
APPENDIX       v                                                                APPENDIX v

         -+snage~ent    was slloweff      the flexdbiliey        of acauirKng
           employeeo   with appropriate         skills    and~LeveIs       of ex-
           periencc   and organizing        them in baraneed         working
           groups   to increase    efficiency         and productivity.

        kill REFLFX labofirtory          mm~agers agreed the prc;ect           hsd
btten   successful       because an environment         created     by encoureg-
ing flexibility          permitted     management to meet rapid change.
They conceded,          however,    that some of the economies            and other
benefits       probably     could   hbve been achieved        without     REFLEX
through      sound management         practices.     We suqgested       that    th2
concept      of holding       local   management officials         accountable
for resources          made available        to them hzs merit       and should     be
tested      further.

       Comments         on our findings       by the         Director,     OHB, and our
evaluation   of         his Comments    follow.

         ‘* * * The Of%3 aqrees     with   the general  objective
         of the tests   naskly,   to improve management by
         allowing   more flexible    correlation    of workload,
         funds q4i-d manaower. *

         Ot’It should      be noted       * * * that   the        prerent     ceiling
         control       system     is   such that   agency         hear.s   hsve wide
         latrtude  in which to maneuvCrp         i.e.(               employment                *
         ceilings  are assigfied     to each agC.?iICy               ds a whole,
         and the p~ency   head may re-allocate--intra-asency--
         as he sees fit.     As a result,      all agency heads
         already  have the flexibility       to further     test the
         REFLEX concept.”

         Commenting        on   this    report    to   the      Chairman of         the   Senate
Committee          on Goeernment        Uperations,       the     Director,         QMB, said:

         “* * * the        present      employment        ceiling      control
         system,  in       which ceilings          are assigned          to each
         agency as a whole,             affords      agency heads wide
         latitude       in which      to voluntarily           test    the
         REFLEX concept          through      intta-agency          realloca-
         tion of cerl ings 2s they see fat.                        Nowever,
         since     the Congress,          the President,          and the
         public      are concerned          about the absolute             number
         of civilian        employees        on the Federal           oaytoll,
         there     is a need for continuing                 emphasis       on
         effective        agency personnel           management        systems
         to administer         the ceilings          within      agencies.

APPEMDIXv                                                                          APPEMDIX V

           ‘Thue,     while WB are anxious        to realize     whatevar’
           benefits     may QCC~UB from further         ewploratian       of
           the concept,       there are ct~gent indicationa          that     i
           additional      examination     of the DOD experience           is
           warrarited     before! urging     widespread     implementa-
           tion of the test        throughout     other   Federal
        Even in the laboratory              environment,       for which no effec-
tive productivity             measurements      had been devised,            the test
of entrusting         local     msnagers with 8uthcrLty             and responsibility
for    conductinq       their    operations       with fiscal      controls        improved
management.         We recommended          that the test        of management khraugh
firscPrk-controls         be extended       to other     Federal     laboratories         and to
other DOD and civil             agency activities,         including         some activi-
ties    in which productivity             measurements       could     be developed,’
We also recommended that further                   testinq    of management through
fiscal     controls       be made using        common criteria         and guidelines
to provide        a basis for identifying             and comparing          actions    taken
and results        experienced       by the participating            activities.
TN C:TVfLlmi,                            FLtSCAL Usm;!
-3               I n -mm741
      In August 1971 the President     directed      Federal   departments
and agencies   to reduce civilian    employment      by 5 percent     to
check the rise    in tne cost oi the Government.          We studied
the impact of the reductions      on 15 installations        and nctivi-
ties of 7 departments    and agencies.
           Ttic agencies       used    a partial        freeze      on hiring,      encouraged
eligible        employees        to   retire,       and made      reductions      in force
to    meet     ceilings        imposed    for      a particular       date,    June    30, 1972,
the    end of        the   fiscal.    pear.
                                    TSe.7 s after                   July   1 some installa-
tions  and activities     rehired   some recently                      separated      employees
and increased     employment    to meet worklaifd                     needs.
        Accelerated      actions    taken primarily       to reduce civilian
employment       to meet petsorknel      ceilings    were disruptive       to
management.         Headquarters      imposed reductions       in ceilings      on
installations        and activities      without    corresponding      reductions
in workload,
        Since much of .the work still              had to be done@ agencies
substituted         other    sources   of manpower such as overtime
labor,     military       personnels     or contracting    for personal     serv-
ices:    backlogs       increased    : work was deferred      or not done;
and services          were teduced     01: terminated.     Employees    having

                                                                                                       i ‘t
      APs#.JmlX v

      needed skills    and experience           retired        snsnec and in Iarger
      number8 than expected.           Employees        receiutng       izeduceion-in-
      force   notice:3 whcrt their       poeit~one        were abolished            dispfaced
      other   employws   with lower         retentio:,         r;qkts   as t&q         competed
      EGr the remdining       positions.          The employees         who remained
      :+ere imt always    the    best gua!ificd           for      the pcsitsma          they
      occupied * &my had to be trained.

              The lesson  from this    @Xpetie!?ce                 is thst  persOnW2.3 ceilings
      hurriedly     set by agency officials                 are      not the moat effective
      way to reduce civilian        employment.
             Comments      C\LI our findings       by the          Director,           O&%3, and oux
      evaluation   of      his comments      follow.

             “Of course,       the question      might be raised           as ta
             whether   employment       ceil i.nga shculd        be imposed      at
             all.    Certainly,      the merits       ant! defkr     it6 of em-
             pl0yRWFl t ceilings       have been debated           for years.
             The fact    is, however,        that the public,           the Con-
             gress,   and every      President      in recent        memory   kkozre
              been   favorably       disposed      toward         them,        There     has
              been 8 and contihues       to be, an 3vid intereat        in
              reducing    the number of Fedcr~L civilian
              employees      * * *.    And * * * it is a Pact tt..9t,
              occas ronally,     ci~tums~anccs     reqttire  employment
              ceil ings TV- be established       on very short     notice.
              Under these circumstances,         we must put major em-
              phasis   on effective      agency personrzi      management
              systems   to administer       the ceilings    within   ayencics.
              “The employment       cerlings     purposely      apply only to
              year-end     employment.       This give3 agency heads
              considerable      ElexibLlity      during    the course     of
              the year in their        management of personal           employ-
              ment requirements        and &n planning        reductions     so
              that they can be accomplished             in an orderly
              manner by the end of the year.              * * *
              “I am sure that we all agree that                    it is desirable
              to keep Federal        civilian      employment         at the
              mitlimum level      necessary      for the conduct            of
              esscnt  ia; programs.           To attain       that end, a11
              recent    Presidents      have decided          that     it is
              necessary      to maintain       employrwr,C       ceilinqs.
              Foe this     reason,    we can exp-lct          continuation
              of some type of employment              ceiling.           We expect
              and encourage        agencies     CO use a number            of man-
              agement techn L(?ues * * * to befp them operate

,   -
APPBWXX V                                                                           APPENDfX   v

cited    inctances            in which additionaf        part-time   employoee             could
have    been affectively                 uSed hot Were not Erfrsd primarily                be-
CausI    of      fundiq         limitations      and personnea. ceifinge,
        Personnel      ceilings    deprive    agency managcrment of flex-
ibility     in accomplishing        essential    work by most ePE@ctively
and economically           using the aost appropriate      type of manpower
in specific       circumstances.
       ComMents            on our findings   by the              Director,    Qfm,    and OUK
evaluation   of            his comments follow.
        “We certainly      agree with * * * the desira-
        bility   of part-time    f2mp~OyMet’lt  and * * * the
        need   to find appropriate       ways to make it
        easier   for part-time     employees    to be hired.
        Howeve c f we are not at ail certain        that the
        central           personnel.   ceilings    are       producing       t,he
        problems           outlined    in your    report.”
                 *               *           *               *               Q

        “It    is our view that may of the problems                       dis-
        cussed in the * * * report                result    from a fail-
,       ure to take advantage             of the considerable             ffexi-
        bility     that exists     under the current             ceiling
        system.       We believe      that the personnel            ceiling
        system     can accommodate          the varying       rteeds of
        asencies,      especially       for part-time         employment.
        First $ when an agency’s              employment      ceiling       IS
        set during       the fall    budget process,            considera-
        tion     is giveri to requests          for part-time          and
        temporary      employment       commensurate        with the
        agency’s      perceived    needs to cover periods                 of
        unusual      workloads.       Second, ceilings           are provided
        to the agency as a whole,               and each agency           head
        has discretion         to allocate        and reallocate          that
        ceiling      among the bureaus          and elements         of the
        agency.       Finally,    the personnel,         ceiling        is ap-
        plicable      only to one day out of the year--dune
        30.      The agency head can (within              dollar       limita-
        tions)     exceed that      ceiling       during    the year so
        long as the ceiling           can be reached           in an orderly
        manner by the end of the year.

        “However,     employment    ceilings     exist to con-
        strain    increases,    primarily     because of the pro-
        per concern      of the President,       many members  af
        Congress,     and the public       in the number of
APPENDIX V                         a                                                  APPENDIX V

         employees     ori the federal        payroll,     regardless        of
         any other     consfderattons.           Without     ceilings,
         there would be no effective              c6ntrol     over     tkese
         numbers d and employment            probably     would increase
         at a faster      pace thtin la now the casee                Even with
         ceilings     on part-time        and temporary       employment,
         their    numbers    (Executive       Branch less Postal            Serv-                           --
         ice) have increased          by 40,OflO (or 27%) over the
         Pa3t four years.          Full-time      permanent        employment
         has declined      by 400000 over the &ame period.
         “In summary, we believe                that      it is fundamentally
         desirable        to control      the number of employees                  on
         the Federal          payroll   and that the present                 system
         provides       the necessary         flexibility            for agency         -
         heads to accommodate             the needs of their                agencies
         for peak loads for part-time                     employment.         The
         40,000 increase            in part-time          and temporary         em-          ’
         ployment       over the last         four years gives some
         indication         of the present         ceiling         system‘s     ability
         to provide         for new needs through                this means.         We
         do not believe           that  further         relaxation        of these
         ceilings       is necessary        to accommodate the objec-
         tives      that the report         addresses.        II
         Commenting        on this         report        to the        Chairmen,    House and
Senate     Committee4         on       Government            Operations,      the   Bircctor, OM!3,
said :
         “* * * we have some indication                  that rigidity          of
         ceilings     in sc3me agencies         stems      from overly        rc-
         strictive      or non-existent         internal        reallocation
         mechanisms.        It is incumbent           on agency managers
         to make the most effective                use of part-time,
         temporary,      or full-time        staff     to meet the sea-
         sonal     and special      workload       requirements         for their
         respective      programs.        In our estimation,              experience
         has demonstrated         that    employment         ceilings,       when
         properly     administered        by agency officials,               have
         not.been     a deterrent       to adoption          of flexible
         staffing     patterns      to meet the various              and differ-
         ing agency program needs.”
                     *             *                *              *          *

         “We also believe          that it is fundamentally      desirable
         to control      the number of employees       on the Federal
         payroll    and that the present        system  provides      the
         necessary     flexibility      fcr agency heads to


         APPENDIX V                                                               APPENDPX V

               accommodate the respective need8 of their
               agencies     to meet peak load8 with temporary                     1
               or part-time      employment.        We further         believe
               that there      is sufficient      flexibility          in the
               present    system to accommodate the objectives
               of the report       without   further        relaxation       of
               employment     ceilings.”
               By considering        an agency's      personnel    needs in relation
         to its anticipated        workload     during    the budget processI        OEB
         and the President       influence      projected     employment     levels.      When
         the Congress approves         programs      and functions     and appropriates
         funds to implement        them, personnel        requirements     can be deter-
         mined more realistically           and an effective       control     is established
         over an agency's     actual      workload      and employment     levels.      An
         agency cannot hire workers           unless it has funds to pay them.
                  In addition       to these controls,       OMB imposes a personnel
         ceiling     which limits          the number of employees         an agency may
         have on its payroll              on the last day of the fiscal            year,  re-
         gardless     of the work that must be accomplished                    and the funds
         available.         Distribution        of this ceiling       by an agency among
         its organizational             elements   and monitoring       actual     employment
         by these elements            to insure    that the ceiling        is not exceeded
         on 1 day of the year creates                an administrative         burden and an
         illusion     of control.
                  We agree with the Director,       OklB, that the Federal work
         force      should be no larger    than needed to effectively,     ef-
         ficiently,       and economically    carry out the programs    and func-
         tions      approved  by the President     and the Congress.
                  Although      employment    ceilings    may be a tool         to insure  that
         the concerns         of the President        and the Congress         as to total
         number of Federal           employees     are met, they are         at best an
         inferior       substitute     for effective      management.          Management at
         all levels        needs to aggressively         seek ways to        improve produc&
         (B-159896, OCTOBER 5, 1976)
                Congressional     legislation      enacted      in 1949 gave the
         Secretary     of Defense authority        to establish       working   capital
         funds (1) to finance        inventories      of such supplies        as he may
         designate     and (2) for designated         industrial      and commercial-
         type activities      that provide       common services       within   or among
         DOD departments      and agencies.        Industrial      funds are revolving

-.-           _             _   .-.-                    ma-_--   ”   _.

  APPENDIX V.                                                                   APPENCIX V

  funds modeled after        business      financial    arrangements.          in-
 dustrial    fund activities         are given working        capital      to
.finance   the cost of producing             goods and services        ordered     by
 customers     and later     receive     reimbursements       by billingc,
 much as private      business.
        The record     of the past 27 years shows that b0D industrial
  funds have achieved        some of the objectives    intended    by the
  Congress,    but have not been the panacea many hoped for.
  Some private     business-like    methods of operation      could not
  be brought    into the Government.
         Although      patterned       after      private      businesses,       industrial
  funds are subject           to civilian         employee      ceilings      and constraints
  on hiring      and firing      B as arc other OOD activities.                     As a re-
  sult,    industrial       fund management does not have the flexibility
  that private        business      management has to quickly                 increase      or
  decrease     employment        levels      to meet workload           requirements.
  For instance,        when workload           drops off management is not able,
  because of DOD and CiviZ Service                     regulations,        to quickly
  reduce its labor          force.
          Conversely,     when unexpected       work develops,    personnel
  ceilings     frequently    prevent     management from hiring       people
  permanently       to do the work.       Thus, they must use expensive
  overtime,      hire temporary      or part-time      help, use military      per-
  sonnel,    or contract     work out.       But these substitute       sources
  of labor are also subject            to constraints.
           Besides decreasing          managers”        flexibility,           these con-
  straints       also tend to present              a disincentive.            When coupled
  with the need to keep a broad base of skills                             for mobilization
  and the fact that work is largely                     allocated        on the basis of
  capacity       and capability         (that       is, keeping employees                busy)
  rather     than cost,         managers have a strong               incentive         to keep
  the\r     staff--particularly             critical      staff--even          when workloads
  decrease.         They can keep the existing                 personnel         ceiling,
  thereby      retaining        the ability        to be given work and take on
  new or additional             !sork when the need arises.
              It   is important    to recognize      in evaluating   industrial
      funds     that personnel     constraints     also  apply when appropriated
      funds     are used.     While these constraints         reduce the effective-
      ness    of the industrial       fund concept , no advantage       would accrue
      from    returning     to appropriated     funding.
              As an alternative     to personnel    ceilings,    Defense              officials
      and others     have proposed    that industrial       fund activities                 be
      permitted    to use financial      controls    for managing staff                 levels.


                                                                                ._               --

APPENDIX V                                                                    APPENDIX V

This has been tested         at a few industrial      fond actiuities,
and although      the ceilings    were ~,ot totally      lifted   during
the tests,     those  evaluating     the iesults,     including     GAO,
concluded    that scme benefits        were realized.

         The President     and the Congress           have long been concerned
about limiting        the total      number of employees             orp tile    Federal
payrolls     and have used personnel             ceilings      to accomplish            this.
Although     various     congressional        committees       have periodically
considered      excluding       industrial     funds from civilian               personnel
ceilings     (including       the Senate      Committee      on Appropriations
and the House Committee             on Armed Services          in early        155761,
the grevarling        view has been that          such controls           at-e iward-
able and the decision             has been to retain         civilian         ceilings,
Contrary     to the idea of relaxing             ceiling     controls,         toth the
Senate and Mouse &ommittees                on Appropriations           recommended
specific     personnel      reductions       at individcdji        ifidustriaf        funded
activities       in all services.

          We suggested          that DOD make further            tests    of operating
selected         industrial        funds without        personnel      ceilings       to
clearly        and conclusively            demonstrate       whether    financial        con-
trols       could be relied           on to provide        controls     that meet con-
gressional          requirements          while   permitting       managers      greater
flexibility,             In response,         DOD officiais        supported       the idea
of operat ing without                civil ian ceil ings.          However,      they feel
that applying           this      exclusion      only to industrially            funded
activities          would penalize          those DOD activities             remaining
under personnel             ceilings       and deprive       DOD the flexibility            to
respond        to unforeseen          workload      increases      dnd   legislated       man-
ymer        rcduct ions.          DOD is concerned         about the value of resum-
ing a test          program limited            to only industrial          fund activities.
         We agree with DOD that excluding              only industrially           funded
act.ivities       from civilian      personnel    ceilings     cculd    result       in
tighter     ceilings     on other     activities,      and it was not our
 intention      to imply that      this    be done.      Our suggestion        for
further     tests     was intended      to see whether      financial      controls
acceptable        to the Congress       could be developed.           We believe
such tests        would be beneficial.
-e--v---              INVESTIGATIVE STAFF
        Because af its concern,       the House Committee     on Appro-
priations     requested   its investigative     staff  to study and
report    on the effects     of end-of-year    employment    ceilings.
The invest. igat ive staff’s     observations     were included      in the
Committee's      June 1976 report     no. 94-1218 on appropriations

                                              F,A                                                     i-f   ,
‘.                                                               -.   --,

         APPENDfX V                                                                     APPENDIX V

         far   the Department  of the Interior                  and related         agencies     for
         the   fiscal year ending September                  301 1977,
                “~Personnel       ceilings        have not affectively                limit&d
                employment       but have        resulted      in artifically             con-
                trived     staffing      practices.            In the five bureaus
                reviewed r there were over 9,000 employees                            who
                were actually          working      substantially         full--time
                schedules        but who were charged             off for ceiling
                purposes       as seasonal         and intermittent           help * * *.
                The short        term implications           of this artificial.
                staffing       situation       include     recruitment          difficul-
                ties,     morale problems,           wasteful       turnover        and re-
                training,        a watering       down in the quality               of the
                staff     and the buildup           of a caste system with two
                classes      of employees.
                *fContractinq      versus     in-house       performance     deci-
                sions are seldom supported             by cost studies,          even
                though such studies         are required          by WE3 Circular
                A-76.      ft is clear    that     in many instances         con-
                tracting      is more expensive        than in-house        perform-
                ance but bureaus       have little         Incentive      to make
                cost analysis      because additional             personnel    is
                u8ually      not a viable    alternative.’
                aPlaying     the ‘ceiling       game’ (whe:eby     thousands     of
                employees      are separated      just before    the end of the
                fiscal    year and are rehired         when the new fiscal
                year begins)       was criticized      as ‘wasting     manpower,
                generating      volumes of unnecessary        paperwork,     im-                       .
                puqninq the credibility           of Government      employment’
                figures,    confusing      employees,    and accomplishing
                -*Restrictions            on hiring    full-time    staff     have
                generally        impaired      the competitive      recruitinq
                position       of these bureaus * * * Officials
                complained        bitterly       about the frustrations          and
                the time wasted in having to explain                    to bright
                young college           graduates     why employment      with the
                organization          has to be on something          less than
                a full-time         basis,‘”
                The Commit tee         commented :
                “It  is clear  that          personnel   ceilings   greatly   und,er-
                mine the objective            of maximum efficiency       and economy
                in the expenditure            of Federal     funds.  The Committee



    APPENDIX V ’                                                                   APPENDIX       V

            strongly    believes       that doLlat        levels    and pruder.5
            management    , rather       than artificially          contrived
            personnel     ceilings     , shoubd y3vCPn the level              of
            permanent     positions        allocated       to an agerxy.
            The Committee        expects       that    OM5 and the various
            Departments      will    recognize         the wastefulness       and
            futility    of artificially             low ceilings.”
           As noted .above. (see p. S4), in December 1970         the Director,
    OMB,   agreed to eliminate    ceilings   on employment    in DOD for a
    l-year    trial per iod.   The purpose    was to assess the effective-
    ness of fiscal     and program constraints      on employment    levels.

            By letter       of   March    19,   1973,     the   Secretary       of Defense

            n* * * I agree      that the concept      holds promise      as an
            effective mechanism for the control             of our personnel
            strengths without       unduly  limiting     the freedom of
            operating officials       to carry     out their   plogrcms.
            “In fact,         I find    that the Department             of Defense
            has, with one exception,                consistently          fallowed
            this     policy      of controlling         personnel       strengths
            through       funding     limitations         ever since the in-
            itiation        of the one-year         trial      period     for fiscal
            constraints         I which began with Office               of Management
            and Rudget concurrence                on March 19, 1971.               That
            exception         covered     the period       from January          to June
            1972 when late appropriation                   action      by the Con-
            gress required           sharp reductions            in full-time        perm-    .
            anent employment            in Department          of Defense mili-
            tary     functions       by June 30, 1472.              Time simply        did
            not permit         the management communication                   of revised
            objectives         upon which the alternative                 controls
            depend;       nor were the controls              themselves         adequately
            established          at that     time.
            nOnce -the FY 1972 reductions               were achieved,         an
            Assistant       Secretary     of Defense       (Comptroller)
            memorandum of May 22, 1972, reinstituted                      the
            test   of alternative         controls      on civilian       employ-
            ment within        the Defense components            without     the
            use of specific          numerical     ceilings.        This policy
            has been .“ollowed         since that date and should can-
            tinue     i;: effect     in the fdreseeable          future.”

                                                  66                                                  ;-
                                                                     APPENDIX V

      klthouah    we made inauiries      at hrmy, Navy, and Air Force
headauarters     and selected    commands and installations,         we
found no DUD organizatians        that had actually      tested   the con-
cept except    the laboratories      that participated       in Project

      Project   REFLEX, a demonstration         of manasement     through
use of fiscal    controls    without    personnel      ceilinqs,  is dis-
cussed on pages 54 to 57,          In our current        review of controls
over civilian    employment,      we obtained     information    on action:
taken since   the end of the test period,            June 30, 1973.

       Further   testing    of    the ‘R&FLEX concept  was discontinued
in   DCfj for all practicsl         purposes, as a result  of two actions:

       --In     April    1974 DCD initiated       a study     to   (11 determine
           the reuuirements          for and capabilities        of its labora-
           tories     ( (2) identify     excess capacity       and overlaDpin9
           capabilities,        (3) identify    instances      where work could
           be contracted       at a savinqs,      and (4)     define   a Droqram
           to upqrade       the laboratories’      auality.

       --In    the Department    of Defense kppronriation      Authorita-
           tion Acts for fiscal,     years 1975 and 1976, the Cbn-
           gress established     yearend   civilran  personnel    ceilings.
           (See p. 32.)
         By letter     of August 13, 1974, the Director            of Defense
Research      and Engineering       informed     us that   DCD had authorized
and encouraged         the military      departments     to continue    Project
REFLEX.       Rowever,    the April      1975 report     on the DOD 13boratory
utilization        study   recommended a 10- to 15-percent           decrease   of
the approximately          56,000 people       in the labordcory     system.    Ifi
those circumstances:

       --Army     extended     part    of the REFLEX concept,        exemntion
          f ram manpower surveys p to practically                all  its research
          and development         activities      and four instailations
          beginning      July    1, 1973, to June 30, 1976, but did not
          exclude     any part of the program           from personnel      ceilinas.
          A report     on the test         at the four installations        did not
          provide     conclusive       proof    of the effectiveness      of REFLEX.
          Some manpower managers             feel  that as long as ceilinss
          are imposed,        REFLFX is meaningless         and only causes
          extra    accounting.
       --Navy    discontinued     testinca     the REFLiX concept.        The
          administration      necessary      to monitor    manpcwer    levels
          in REFLEX laboratories          and provide    offsets    eJ.sewhere
          was consideeed      a luxury     that    could not be afforded       in

APPENDI:; Y                                                                  APPENDIX V

         light      of reductions     imposed     on support         areas     in the
         past     few years.                                                  I

      -Air    Force reimposed         personnel       ceilings      on laboratories
         that had participated           in Project           REFLEX and the test
         was discontinued.
        We have    identified   no civil        agencies  that have tested
alternatives       to personnel   ceilings        for controlling  employment.
       Commenting on our report       “Part-time      Employment     in Federal
Agencies,*   the Director,     OMB, discussed        a test  that we were
not aware of and on which we have no additional                information.
The Director     in his letter   to the Chairmen,         House and Senate
Committees   on Government     Operations,       said that:
      “You may be interested        in some historical      petspec-
      tive on the issue      raised   in the Comptroller       General’s
      report.      The same issue on the elimination         of ceilings
      on part-time     and temporary    employment     arose in 1965.
      "At that time Congressmen Henderson,                  Chairman of the
      House Subcommittee         on Manpower, qt-estioned           the in-
      clusion   of part-time        Lnd temporary        employees     in the
      numerical   count against          personnel     ceilings     on the
      grounds that this         practice     is restrictive       and tends
      to decrease    flexibility         in the management of employ-
      ment in the Federal          Government.
      "Accordingly,       the Bureau of the Budget adopted the
      policy    that fat      the 1967 Budget (transmitted                to the
      Congress      in January       1966) primary     attention        wouid
      be given to controlling             employment     in full,-time        perm-
      anent positions.            Thus, the allowances           in connec-
      tion with the 1967 Budget established                   firm ceilings
      only‘on     the number       of employees      in full-time         perma-
      nent positions.           Part-time     and temporary        employees
      were not charged          to an employment       ceiling.         Instead,
      the agencies      were expected         to keep their        part-time
      and temporary       employment        to the numbers that were
      needed to accomplish             agency missions      an8 tha: c*ould
      be financed      within      the funds provided         for personnel
      "The effect    of dropping       the numerical      control    an
      part-time    and temporary       employment      was quickly
      evident.     Between January        and September      1966, a
      21.6 percent     increase      in part-time      and temporary
      Federal   employment      occurred,      far more than the
      normal seasonal       increase.      The criticism       from  the

                                         68                                               i
                                                                                          I-   I
APPENDIX V                                                             APPENDXX V

     Cmgreds      and the public      an the significant           rists
     in part-time      and temporary       Fedezak employment
     in 1966 caused a reinstitution              af a ceiling        on
     temporary      and part-time     employment        by direction
     of President      Johnson on September            20, 1966.       We
     believe    that the 1966 experience            just cited       lends
     credence     to the proposition         that en~loymtint        levels
     cannot be adequately         controlled       witi1 dollar      limita-
     tions   alone. R

HP. 83. L. Krl.“2gerr              Direceor
Federa 1 Fersonnel               imd
   Compensation            Division
U.S. General             Rccouneing  Offices
Washington,             D.C.   20548

You noted           in your      letter       that   my predecessor,                Mr.        James T. Lynn,
did     not     agree     with     the    report’s        recommendation                that     the
Director       of OMB issue a policy     statement    declaring    his intention
to <iscontinue       personnel  ceilings      oh an individual     agency basis,
as scari as the agency demonstrates            that it can and wjll      con-
tral     cn:ploymcnt  without  cei?inqs.                        Lynn proposed
                                                              Inste,-ld,      Msr   l

the establrshment         of a task force         to devel.op  criteria   and plans
for a test       cf the feasibility           of controlling   employment    by
means other        than direct     employment       ceilinqs.   The test woul.d
involve    lifting      employment       ceilings     in one or two suitable
agencies      (OK parts     of agexies~.
AS you         know,  on March 1 thz President                    imposed an izrdiate,
tcm;,orary       limitation        on Federal           civilian       hiring     pndirfa        the
cstablrs!xw>t           of revised          cmolovncnt
                                             ---               ceillnas.         n-G----------~
                                                                                         clffl.ce       1s
~~~-h~~~~~r~~~of                      d~~~cloplnq,         under sp&ific            guidance         from
kh@ President,            rcvlsed       ez-nloyment        ceilings        that are expected               to
be lower than those provided                       with     the 1978 Budget by the previous
Administration.              Thus, the issue of whether                      executil'e       branch
emplovment         ceilings       will      be continued          has been resolved               for the
immediate        future.

uncer         the   circunstances,            1 do not       brlicve       tfist        this     is    the
 time to discontinue      cmploynent    ceilings      for some aqcncies--
 even on a limrtcd,      cxpcrimcntal     basks.      Such an action    would
 be inequitable     to the vast maJority         of agencies,     uho could not
 be included    in the cxperinent.        NOf,     if past cxpcri~332     is any
 guide,   would it further      the President’s       objectives.



                                      --   -_-_   we””   -   ..-_-...-_   ^.   _   “,_   -   ,   -...   ..   .   1-   -.   _.   -
.-.--            . u--w--     -I_--

        I   .

                AOPENDHX VT
     APPENDKX           YE I

            .*          .

            .       L



    -. ._..-.- .,_ ,_ .



    APPEIjDIX VII                                                                                         APPEbz’T)IX
                                                                                                                  vr %

        As WC have       stated            in    previous      cor.nanzcstions        on   r!lis   subject,
        we believe       that:
               * ..”    emplo)WC%:.     ccillncs          cxIst       to cGnstra&n            ~ncrcas~5,
               primarily       Scc3r)se     cf the u:o;er               conccrr.      cl tbc PL-es?-
               dent,      many r.enb~~rs of Con.r:2ss,                  and the pubilc             In Lhc
               number      of cnplo~ccs        3.7 th< t’ci!cral            !x.tyro! 1, rcqardlv3s
               of any other        consxtieratlwls.                tiirtdme       ccllin.~r.,        there
               would      be no ef:cctrvc          controf         over     Lhese       nur-.hcrs.      and
               employment       probably       tiould        ~nrrcace       ict a faster           pace
               than     is now the case.            . . . LI

        It   is the lak-      phrd*e      of the pcnults=ntc          Sentence  “reqRrr!-
        less    of any other       coetsrderatlons”        that    has never   bwn
.       properly    addressed        in the many reports           on the subject       of
        employment     ceillngc        that    yox  Offlcr      has Issued,

        For these           reasons,    WC continue       CO believe    that    it 1s funda-
        mentally         desirable      to control      the   number  of exnployces        on the
        Federal         payroll      and that    suci’l a posit:on    correctly       reflects
        the     preferences          01 the   Congress.     the Prcskdcnt,        nr.d the

        GAO note:                      Deleted material  pertain to matters                                   discusss&
                                       in or ifi r@S?onSe to tne draft      repart                                wnich   a~-e
                                       omitted          from      this        final    report-.


                                                                             AP?ENDIX VII

     Should   you be anen?ble    to our SUrJC'StlOn,     p1sase  ask your
     staff  to contact   F!r. Grorqe    M. Strauss   (395-3192)   SO that
     the prelminary     staff  dzscussions     can bcgln    at an early

                                                Yame5           T.   Lynl:
                                                    3   cctor

     cc:   Chairnan,   CSC




Gh@ notes:   1.   Deleted     cornment,r pertain    to suggestions
                  for clarification        of material   contained
                  in the draft      report   but not in the final
                  fepor t .
             2.   Page      references          in   this      appendix    may not
                  correspond           to   page     numbers       in thic   final


                                                                                                                APPEtmIX      IX

        Elarr are the tkparcmnt’r              cotzxoco        regarr!i.~g ehe Ceoerrl Acc~untia~
        Offica’a  Draft Report:              “Yersonne1        Co:lFngrr - A brrfer    to Zffoctive
        kkmgxxir Nauag,cncnr?”

        Ue suggest rlwt thb report                include      two ateas not covered in the draft.
        ‘LA6 Ftrrrr cf these ia >A analysts                  of unftmdcd lin5flitfea                   ot the Civil
        %.rwlcc iletfterccnc      Fund,        If retirscmt              deductions          are currently       not
        adequate to c~aiotaln         rha   retiraznt             fund     at      actuarially      ooilnd levela,
        this odditiooal      coat &irouLd be added to the COSE cf direct                                 Federal
        eiqloymcn:.     This    could      affect       mneqcccnt             dccirions        regardln$    the use
        of Federal euplayxnt            vs. contractrai?l              sarvicea.

        The second area which stould be cc *sidered                                fn the report      bs the lzipsct
        of the Congreaaional                     Bu?;ec and kgou;;dxnt               Contrcl   Act on personnel
        requirements.               In past years, .4p?roprlatian                    Acts were na:mlly         passed
        long after           rha bct:ianmg            of rhc fitictl         year.     Cet.deen the bcginnfng          of
        the fiscal           yaar     and :tx        positoge       of tna Act rjgrncfes      were    req*lrred     to
        operate        i-rider a concir.uinC, resoluifon.                     If congress passed tSc Cull
        kmount      of     the    sppro~riacioo,              ot    fncrcPscd 111~ Levrl       beyond tlur       :cques:cd.
        agencies ce-c required                     to carry out .a yctir’m ptogras of work in -wh 1t.s~
        than A icll year.                    Under &uch condfciot~a,             n large nmber of cnp1o>eca
    .   often had co he added dur3r.g twz latter                              part of rhe year.          The hew ACt ,
        dth      its emphasis on ticcly                     passage of Appropriations            Bills    should
        elftinate          or at least sharply                   reduce thi6 $mxle&

        We appretiate         the    opportunity       to offer       out cocment6.


         Thmas f.    Cody
         Essistant   Secreta+


             AFFENDIX XI


    .   .
          _--x--I-   .--“..-...   .   .   _,.   -..   ^   .   .._   .   _



at the      same time    providing        t.k{e adcouatc   controls    to     insure     the cost

effective      and efficient.        utilization      of nanpxicr     ~hcre     it     jr, needed   the

fmst *

APPEHDIX XXIX                                                                     APPEWDXX XXII

              -..7----        Oi%B ---_------_____----_..--
                                      OF?XCXALS             RESPONSIBLE       FQR

                          -..._I_--               ~.cT~VxTxES

                          DISClJSSED       :x    THIS     REPORT

                                                                -11Tenure         of   office
                    - .                                             FrOR
                                                                   _I_-                         -
     Thomas    B.     Lance                                     Jan,       1977         PrC2SC?nt
    James T. Lynn                                               Feb.       1975         Jan. 1977
    fr;J I+* Ash                                                Feb.       1973          Feb.            1375
    Casper I$. Weinberger                                       June       K972          Feb.            1973