oversight

Major Management Challenges and Program Risks: Office of Personnel Management

Published by the Government Accountability Office on 2003-01-01.

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

               United States General Accounting Office

GAO            Performance and Accountability Series




January 2003
               Major Management
               Challenges and
               Program Risks
               Office of Personnel
               Management




GAO-03-115
               a
A Glance at the Agency Covered in This Report
The Office of Personnel Management provides human capital leadership,
guidance, and expertise to the President, and to federal agencies and their
employees. It also ensures compliance with personnel laws and regulations and
provides retirement, health benefits, and other insurance services to employees,
annuitants, and beneficiaries.
OPM is in the midst of a major transformation effort and has revised its strategic
plan to both drive and reflect that effort. The strategic plan outlines the following
three goals for the agency:
●    ensuring that federal agencies adopt human capital management systems that
     improve their ability to build successful, high-performing organizations;
●    ensuring that federal agencies use effective merit-based human capital strategies
     to create a rewarding work environment that accomplishes the mission; and
●    meeting the needs of federal agencies, employees, and annuitants through the
     delivery of efficient and effective products and services.


The Office of Personnel Management’s Budgetary and Staff Resources


Budgetary Resources a, b                                                Staff Resources b
Dollars in billions                                                     FTEs in thousands

140                                               134                   4
                                      126
                             120
         112       116
                                                                                                                      3.0
105                                                                     3     2.8      2.8       2.8      2.8


 70                                                                     2


 35                                                                     1


    0                                                                   0
        1998      1999      2000      2001        2002                      1998      1999      2000     2001         2002
        Fiscal year                                                         Fiscal year
Source: Budget of the United States Government.

a Budgetary resources include new budget authority (BA) and unobligated balances of previous BA.

b Budget and staff resources are actuals for FY 1998-2001. FY 2002 are estimates from the FY 2003 budget, which
    are the latest publicly available figures on a consistent basis as of January 2003. Actuals for FY 2002 will be
    contained in the President’s FY 2004 budget to be released in February 2003.




This Series
This report is part of a special GAO series, first issued in 1999 and updated in
2001, entitled the Performance and Accountability Series: Major Management
Challenges and Program Risks. The 2003 Performance and Accountability Series
contains separate reports covering each cabinet department, most major
independent agencies, and the U.S. Postal Service. The series also includes a
governmentwide perspective on transforming the way the government does
business in order to meet 21st century challenges and address long-term fiscal
needs. The companion 2003 High-Risk Series: An Update identifies areas at high risk
due to either their greater vulnerabilities to waste, fraud, abuse, and
mismanagement or major challenges associated with their economy, efficiency, or
effectiveness. A list of all of the reports in this series is included at the end of
this report.
                                                    January 2003


                                                    PERFORMANCE AND ACCOUNTABILITY SERIES

                                                    Office of Personnel Management
Highlights of GAO-03-115, a report to
Congress included as part of GAO’s
Performance and Accountability Series




This is GAO’s first performance                     OPM has implemented important initiatives and has others under way to
and accountability series report on                 improve its mission and management performance. Building on these efforts,
the Office of Personnel                             OPM has additional opportunities to overcome the following management
Management (OPM), the federal                       challenges.
government’s human capital
agency. OPM faces challenges in                     •   Leading strategic human capital management governmentwide.
four key areas: leadership,                             Many agencies continue to experience human capital shortfalls. They
oversight, internal management,                         want and need greater OPM leadership and assistance to help them
and administration of the federal                       strategically manage their human capital and address challenges in
retirement and health insurance
programs. The data presented in
                                                        recruiting, retaining, and rewarding talented staff—caused, in part, by
this report are intended to help                        long-standing problems with the federal pay, classification, and hiring
sustain congressional attention and                     systems.
an agency focus in addressing
these challenges and ultimately                     •   Overseeing agency human capital management systems. Merit
overcoming them. This report is                         system surveys and studies continue to show a need for strong oversight
part of a special series of reports                     of agency human capital systems. Surveys show employees continue to
on governmentwide and agency-                           believe agencies are not adhering to several of the merit principles.
specific issues.
                                                    •   Transforming OPM and managing its internal operations. As in
                                                        other areas, OPM has major efforts under way to address this challenge.
                                                        It is realigning its organizational structure, has prepared a draft
Consistent with OPM’s ongoing
internal transformation efforts,                        succession plan, is implementing a new financial management system,
GAO believes that OPM should                            and is addressing several information security weaknesses. But more
                                                        remains to be done as OPM transitions to its new structure. For
•    accelerate efforts to seek and                     example, OPM should implement workforce and succession planning
     implement solutions to                             strategies to address the expected staff losses from retirements and to
     problems with the federal pay                      close skill and knowledge gaps, fully implement an agencywide security
     and hiring systems,                                program and conduct security risk assessments of its information
                                                        systems, and continue to take steps to address historical weaknesses in
•    ensure that agencies establish                     activities of its discretionary appropriation funds.
     and maintain merit-based
     human capital management
                                                    •   Administering the retirement and health insurance programs.
     systems and promote agency
     self-monitoring programs, and                      OPM has made major strides in managing these programs, which have
                                                        received high ratings from customers over the past few years—for
•    ensure that it effectively                         example, over 90 percent of federal annuitants are satisfied with OPM’s
     transitions to its new                             retirement services. But customer satisfaction could fall if OPM is not
     organizational structure while                     able to handle the impending retirement wave or implement measures to
     continuing to address its                          limit health care premiums.
     human capital, financial
     management, and information
     security challenges.

www.gao.gov/cgi-bin/getrpt?GAO-03-115.

To view the full report, click on the link above.
For more information, contact Chris Mihm at
mihmj@gao.gov or (202) 512-6806.
Contents



Transmittal Letter                                                                                                1


Major Performance                                                                                                  2

and Accountability
Challenges

GAO Contacts                                                                                                      37


Related GAO Products                                                                                              38


Performance and                                                                                                   40
Accountability and
High-Risk Series




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                        Permission from the copyright holder may be necessary should you wish to reproduce
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                       Page i                                                        GAO-03-115 OPM Challenges
A
United States General Accounting Office
Washington, D.C. 20548
                                                                                           Comptroller General
                                                                                           of the United States




           January 2003                                                                                          T
                                                                                                                 ransmL
                                                                                                                      ta
                                                                                                                       ileter




           The President of the Senate
           The Speaker of the House of Representatives

           This report addresses, for the first time, the major performance and accountability challenges facing
           the Office of Personnel Management (OPM) as it seeks to ensure that the federal government’s human
           capital management systems are merit-based and support agencies in recruiting, hiring, and retaining
           the high-quality, diverse workforce necessary to meet the current and emerging needs of the
           American people. It includes a summary of actions that OPM has taken and that are under way to
           address these challenges. It also outlines further actions that GAO believes are necessary.

           This analysis should help the new Congress and the administration carry out their responsibilities and
           improve government for the benefit of all Americans. For additional information about this report,
           please contact J. Christopher Mihm, Director, Strategic Issues, at (202) 512-6806 or at mihmj@gao.gov.




           David M. Walker
           Comptroller General
           of the United States




                                     Page 1                                              GAO-03-115 OPM Challenges
Major Performance and Accountability
Challenges

              The Office of Personnel Management (OPM), the President’s agent and
              advisor for human capital matters, is charged with overseeing the
              management of the federal government’s most important asset—its people.
              In January 2001, we added strategic human capital management to our list
              of federal programs and operations that we have identified as high risk.1
              OPM’s charge entails leading agencies and holding them accountable for
              shaping their human capital management systems in a manner that ensures
              that (1) the federal government acquires, develops, manages, and retains
              employees with the knowledge, skills, and abilities needed to deliver
              services the American people want and deserve and (2) governmentwide
              values, such as the merit system principles, veterans’ preference, and
              workforce diversity, are consistently upheld. OPM is also charged with
              providing retirement, health benefits, and other insurance services to
              employees, annuitants, and beneficiaries.

              OPM’s leadership in helping agencies shape their human capital
              management systems has become more crucial as a result of the tragic
              events of September 11, 2001. These events led to a change in our world
              and the priorities of our policymakers and produced new challenges to
              create and staff new governmental structures and restructure some
              existing ones to fight terrorism and secure our homeland. At the same
              time, agencies across the federal government need to transform what they
              do, how they do it, and with whom they partner. These transformations
              will have enormous implications for the federal government’s “people”
              policies and procedures as well as cultures of government organizations.
              OPM plays a key role in helping individual agencies and the government as
              a whole overcome the broad range of human capital challenges, which are
              at the root of transformation. The four pervasive governmentwide human
              capital challenges, identified in our 2001 High-Risk Update, are (1)
              strategic human capital planning and organizational alignment, (2)
              leadership continuity and succession planning, (3) acquiring and
              developing staffs whose size, skills, and deployment meet agency needs,
              and (4) creating results-oriented organizational cultures. OPM carries out
              its leadership role in a decentralized environment where both it and the
              agencies have shared responsibilities for addressing the human capital and
              related challenges facing the government.




              1
              U.S. General Accounting Office, High-Risk Series: An Update, GAO-01-263 (Washington,
              D.C.: January 2001).




              Page 2                                                     GAO-03-115 OPM Challenges
Major Performance and Accountability
Challenges




OPM is in the process of transformation—from less of a rulemaker,
enforcer, and independent agent to more of a consultant, toolmaker, and
strategic partner in leading and supporting executive agencies’ human
capital management systems. As OPM’s transformation evolves and it
seeks to constructively partner and consult with other executive agencies
in shaping their human capital management systems, it must also strive to
maintain the degree of institutional independence needed to oversee
agencies’ human capital efforts objectively.

OPM’s transformation has been occurring against the backdrop of at least
15 reorganizations since its inception in 1979 and a nearly 50 percent drop
in staff over the last decade, largely due to governmentwide downsizing in
the mid-1990s. OPM’s total workforce dropped from nearly 6,800 in 1990 to
about 3,700 in 2002. OPM’s operating budget was also affected during this
time frame but not to the same degree. From fiscal years 1990 through
2002, OPM’s operating budget fluctuated—ranging from a high of
$227 million in fiscal year 2002 to a low of $186 million in 1998.2 Overall,
after adjusting for inflation, OPM’s funding declined 10 percent over the
1990 through 2002 period.

The changes that have been occurring in OPM’s culture and organization
since its creation, as well as the different operating philosophies of each of
its directors, have influenced how the agency has carried out its leadership
role and mission. OPM’s overarching challenge today is to lead agencies in
shaping their human capital management systems while also undergoing its
own internal transformation. As it addresses this overall challenge, OPM
faces several performance and accountability challenges that affect its
ability to effectively execute its mission and become a high-performing
organization focused more on results and less on process. These include
the following:




2
 These amounts do not reflect OPM’s total budget. OPM’s total budget, which is shown in
the inside cover of this report, primarily consists of the trust funds for civil service
retirement and federal health benefits. For the last 5 years, OPM’s total budget increased
each year from $112 billion in fiscal year 1998 to an estimated $134 billion in fiscal year 2002.




Page 3                                                            GAO-03-115 OPM Challenges
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     Performance and
     Accountability Challenges
         Define and exert a stronger leadership role in helping to strategically manage the
         federal government’s human capital

         Oversee human capital management, including ensure agency adherence to the
         merit system principles

         Successfully transform its organization and workforce to better meet its clients’
         needs as well as continue to improve management of three key internal areas-
         human capital, information security, and financial management

         Administer the governmentwide retirement and health insurance programs
         efficiently and economically to ensure proper delivery of benefits and services and
         continuation of high customer satisfaction ratings




Page 4                                                           GAO-03-115 OPM Challenges
Major Performance and Accountability
Challenges




OPM has taken a number of important steps and has several initiatives
under way or planned to address each of its challenges. For example, OPM
has exerted greater human capital leadership by issuing agencies its
Human Capital Scorecard3 to assist them in improving strategic
management of their human capital and administering an annual
governmentwide survey on human capital to help assess agencies’ progress
in achieving performance goals for each of the five dimensions of human
capital management contained in its Human Capital Scorecard. For
example, OPM will be able identify the extent to which workforces in
individual agencies as well as the federal government as a whole lack the
necessary job-relevant knowledge and skills to accomplish organizational
goals. In addition to using the results of the survey to assess and report on
federal agency progress overall in achieving the human capital
management performance goals contained in its scorecard, OPM intends to
compare and benchmark the human capital survey results with private
sector organizations. OPM has also exerted greater human capital
leadership by developing a set of legislative proposals for providing agency
managers the additional flexibilities and tools they need to manage their
human capital effectively.4 OPM is addressing its oversight challenge, in
part, by encouraging agencies to develop and maintain internal
accountability systems in line with its HRM Accountability System
Standards.

Internally, OPM has launched an effort to transform its organizational
structure and workforce to be more customer-focused and results-oriented.
OPM outlined its new organizational structure in September 2002 and is
currently implementing it. OPM has also taken several steps to manage its
human capital more strategically (such as aligning its human capital goals
with program-specific goals), correct financial management weaknesses
(such as implementing a new financial management system), and secure its
information resources (such as issuing an agencywide security policy).
Given its governmentwide leadership responsibilities, it is particularly
important that OPM seeks to “lead by example” in its internal management,
particularly with its own human capital approaches and initiatives.



3
 OPM’s Human Capital Scorecard, issued in December 2001, contains dimensions for
strategic alignment, strategic competencies (talent), leadership, performance culture
(strategic awareness), and learning (knowledge management).
4
 Some of the proposals were included in the governmentwide human capital provisions in
the Homeland Security Act of 2002.




Page 5                                                        GAO-03-115 OPM Challenges
                      Major Performance and Accountability
                      Challenges




                      In addition to launching the new federal long-term care insurance program,
                      OPM has made significant strides in administering the federal employees
                      retirement and health benefits programs, which customers have rated
                      highly. For example, OPM has taken steps to modernize its retirement
                      systems and limit the extent of the health care premium increases.
                      Although customers have rated the retirement and health benefits
                      programs highly, these high satisfaction rates could fall if OPM is not
                      prepared to handle the expected retirement wave and implement cost-
                      containment measures that limit health care premium increases.

                      Building on these efforts, OPM should also exert greater leadership in
                      seeking and implementing solutions to long-standing problems with the
                      federal pay and hiring systems and in working with other interested parties
                      to prepare the way for more comprehensive civil service reform; ensure
                      that agencies establish and maintain merit-based human capital
                      management systems and promote agency self-monitoring programs; and
                      ensure that it effectively transitions to its new organizational structure
                      while continuing to address its internal human capital, financial
                      management, and information security challenges.



Leadership of Human   Strategic human capital management is a pervasive challenge facing
                      agencies across the federal government, and overcoming this challenge will
Capital               require vigorous and sustained leadership from multiple parties—OPM as
                      well as other key human capital players, such as the President; the Office of
                      Management and Budget (OMB); Congress; and department and agency
                      leaders. Since designating strategic human capital management as a high-
                      risk area in January 2001,5 our work and the work of others continues to
                      show that agencies need and want greater leadership from OPM in helping
                      them to address their human capital challenges. OPM recognizes the
                      importance of exerting a stronger and more visible leadership role. It,
                      along with several other key human capital players, including GAO, has
                      taken or proposed actions within the last 2 years that are aimed at
                      improving human capital management across government and a real
                      momentum for reform is now evident. Nevertheless, while addressing the
                      challenge of strategic human capital management is a shared responsibility
                      among multiple parties, continuing and augmented leadership from OPM,



                      5
                      GAO-01-263.




                      Page 6                                               GAO-03-115 OPM Challenges
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as the President’s primary advisor on human capital issues, is critically
needed in addressing this challenge.

Our work and that of others has shown that many agencies are continuing
to experience human capital shortfalls that erode their ability, as well as
threaten the ability of others, to perform their missions economically,
efficiently, and effectively. The following examples illustrate the
seriousness of the human capital challenges facing agencies.

• The federal government is facing several human capital challenges in its
  civilian acquisition workforce. This workforce declined by 22 percent
  over the last decade. As the number of acquisition workers declines, the
  demand increases for an acquisition workforce with more sophisticated
  technical, financial, and management skills to handle the procurement
  of $200 billion in goods and services annually.6

• The Federal Aviation Administration (FAA) will likely need to hire
  thousands of air traffic controllers in the next decade to meet increasing
  traffic demands and to address the anticipated attrition of experienced
  controllers, predominately because of retirement. Yet, we reported in
  June 2002 that FAA had not developed a comprehensive human capital
  workforce strategy to address its impending controller needs.7

• The Securities and Exchange Commission’s (SEC) workload has
  increased in volume and complexity over the past decade due to the
  tremendous growth in the U.S. securities markets. SEC’s growing
  workload has caused staffing imbalances and put the agency under
  increasing pressure. In addition, staffing shortages have delayed critical
  regulatory activities, such as reviewing rule findings and issuing
  guidance, and affected its oversight and supervisory functions.8




6
 U.S. General Accounting Office, Acquisition Workforce: Status of Agency Efforts to
Address Future Needs, GAO-03-55 (Washington, D.C.: Dec. 18, 2002).
7
 U.S. General Accounting Office, Air Traffic Control: FAA Needs to Better Prepare for
Impending Wave of Controller Attrition, GAO-02-591 (Washington, D.C.: June 14, 2002).
8
U.S. General Accounting Office, SEC Operations: Increased Workload Creates Challenges,
GAO-02-302 (Washington, D.C.: Mar. 5, 2002).




Page 7                                                        GAO-03-115 OPM Challenges
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• The Department of Homeland Security is bringing together 170,000
  federal employees from 22 agencies with their own cultures and often
  differing performance management, personnel, and payroll systems.
  Merging these disparate entities into a coherent, unified, and high-
  performing department represents a great challenge for the new
  leadership as well as for OPM in advising and supporting the
  leadership.9

Although federal departments and agencies have primary responsibility for
strategically managing their people and addressing their human capital
challenges, OPM has an important role and responsibility in leading agency
and governmentwide human capital efforts. OPM defines its human capital
leadership role as supporting agencies in achieving their strategic goals and
managing their human capital more effectively and strategically by

• creating a personnel system (policies, procedures, and tools) that gives
  agencies the flexibility they need to recruit, retain, train, and manage
  employees and to align their workforces in a manner appropriate to
  their unique needs;

• providing guidance and assistance through its Web site as well as
  through other means to alert agency managers to their human capital
  responsibilities and authorities;

• making the hiring process more effective and efficient, including
  improving the attractiveness of the federal government as an employer
  to people of diverse backgrounds;

• providing expert advice on performance management, classification,
  and compensation, including proposing options for market-based,
  performance-oriented compensation reform to enable agencies to
  recruit and retain high-quality employees;

• promoting demonstration projects that help agencies develop more
  effective human capital programs and practices as well as providing




9
 U.S. General Accounting Office, Homeland Security: Critical Design and Implementation
Issues, GAO-02-957T (Washington, D.C.: July 17, 2002), and Highlights of a GAO Forum:
Mergers and Transformation: Lessons Learned for a Department of Homeland Security
and Other Federal Agencies, GAO-03-293SP (Washington, D.C: Nov. 14, 2002).




Page 8                                                     GAO-03-115 OPM Challenges
Major Performance and Accountability
Challenges




     them a wide range of human capital products and services, such as
     examining and testing job applicants;

• encouraging agencies to use workforce and succession planning to
  strategically manage the impact of demographic and other workforce
  changes;

• disseminating information about the federal labor-management
  relations program to agencies, labor organizations, and the general
  public and consulting with labor organizations on the national level
  about governmentwide human capital issues; and

• ensuring that essential governmentwide values—such as merit system
  principles and accountability, veterans’ preference, workforce diversity,
  and family-friendly policies—are sustained.

While important efforts have recently been taken and more are planned or
under way, there are additional opportunities for OPM leadership. For
example, as a part of our work on human capital flexibilities for a
forthcoming report, half or more of the human resource (HR) directors we
surveyed in 2001 and 2002 at 24 agencies and departments told us that OPM
had not sufficiently assisted them in identifying new flexibilities. Our
ongoing review of the federal hiring process is identifying additional areas
where OPM can target its efforts. We reported in July 2001 and in an earlier
report that OPM should take a more active role in agency workforce
planning efforts in light of the expected retirement wave. 10 Our July 2001
report also pointed out that OPM should focus its performance goals more
squarely on the degree to which the federal workforce has the right skill
mix. Twenty-six percent of the HR directors responding to OPM’s fiscal
year 2001 customer satisfaction survey said employees in their agencies
lacked the skills needed to meet their agencies’ missions.




10
 U.S. General Accounting Office, Office of Personnel Management: Status of Achieving
Key Outcomes and Addressing Major Management Challenges, GAO-01-884 (Washington,
D.C.: July 9, 2001), and Senior Executive Service: Retirement Trends Underscore the
Importance of Succession Planning, GAO/GGD-00-113BR (Washington, D.C.: May 12, 2000).




Page 9                                                    GAO-03-115 OPM Challenges
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The Merit Systems Protection Board (MSPB) has also called for greater
leadership on the part of OPM. MSPB, which is required by statute to
periodically review OPM’s activities, reported in December 200111 that OPM
has made commendable progress in a number of areas, such as
decentralizing the civil service and improving HR oversight. However, its
leadership needs to be more vigorous in responding to a number of critical
program areas, such as applicant examining, staffing, and employee
compensation policies and practices. MSPB said that OPM is in an ideal
position to demonstrate leadership by championing the development and
use of the best assessment tools for evaluating candidates. Regarding
staffing, MSPB said that many managers and HR specialists continue to be
convinced that they are not getting high-quality candidates because
policies, laws, and regulations impose restrictions on how agencies are to
select, appoint, and promote employees. As the government’s human
capital leader and expert, MSPB said that OPM should forcefully use its
influence to help bring about changes in civil service laws, policies, and
practices that either conflict with or detract from a merit-based
employment system.

MSPB’s 2001 report also noted opportunities for greater OPM leadership in
improving the federal government’s classification and compensation
systems and in addressing key obstacles within the hiring process. For
example, MSPB reported that critics of the classification system, which
remains the primary determinant of employees’ pay after over 50 years,
view it as antiquated and irrelevant to the work and workers of today.
MSPB also reported that several HR directors said that OPM has relied on a
piecemeal approach to solving problems with the compensation system,
while others expressed frustration with OPM’s lack of progress in creating
a system that helps them recruit and retain high-quality workforces. In
particular, MSPB has called on OPM to address key problems with the
hiring process, including revamping the system for compensating workers,
reducing the number of hiring authorities, and developing new candidate
assessment tools.




11
 U.S. Merit Systems Protection Board, The U.S. Office of Personnel Management in
Retrospective: Achievements and Challenges After Two Decades (Washington, D.C.:
December 2001).




Page 10                                                    GAO-03-115 OPM Challenges
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OPM also has a key role to play in improving the governmentwide systems
in place for managing employee performance at all levels and holding
employees accountable for results, adequately compensating employees at
all levels, and maintaining effective employee and labor relations. As we
discuss in our 2003 High-Risk Series: Strategic Human Capital
Management,12 modernizing agency performance management systems
and linking them to agency strategic plans and desired outcomes should be
a top priority. We also noted that (1) long-standing issues and concerns
over executive compensation and pay compression need to be carefully
examined in the context of how to make any pay increases variable and
performance-based rather than across-the-board and fixed and (2) effective
employee-management relations can aid in achieving organizational
outcomes by fostering an environment in which managers and employees
work collaboratively. OPM can also assist agencies as they seek to form
high-performing organizations. Agencies need to form high-performing
organizations to better determine competitive sourcing strategies.

OPM is taking several steps to exercise broad overall leadership over
federal human capital management. OPM has the key role leading the
administration’s efforts to address strategic human capital management, a
critical part of the President’s Management Agenda for improving federal
management and performance, and has dedicated staff to work directly
with agency leaders to ensure that they are effectively transforming their
strategic human capital management. In December 2001, OPM issued its
Human Capital Scorecard, which is designed to help agencies achieve the
human capital standards for success that are part of the Executive Branch
Management Scorecard. In November 2002, OPM posted on its Web site
the administration’s revised Human Capital Standards for Success that
were based on a collaborative effort by OPM, OMB, and us. The revised
standards replaced OPM’s Human Capital Scorecard and more fully reflect
the key themes in our strategic human capital model.13 OPM says it is using
these standards to assess agencies’ human capital practices.

To increase agencies’ awareness and use of effective human capital
flexibilities, OPM published two reports in 2001. One report,


12
 U.S. General Accounting Office, High-Risk Series: Strategic Human Capital
Management, GAO-03-120 (Washington, D.C.: January 2003).
13
 U.S. General Accounting Office, A Model of Strategic Human Capital Management, GAO-
02-373SP (Washington, D.C.: Mar. 15, 2002). The model, which was issued as an exposure
draft, is intended to be a tool to help federal agency leaders better manage their people.




Page 11                                                       GAO-03-115 OPM Challenges
Major Performance and Accountability
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Demonstration Projects and Alternative Personnel Systems: HR
Flexibilities and Lessons Learned, describes best practices and lessons
learned from testing a variety of flexibilities, such as pay banding,
categorical ranking, and market-based pay, under demonstration projects
and alternative personnel systems. The other report, Human Resources
Flexibilities and Authorities in the Federal Government, is a handbook
that is designed to provide agencies information on how they can use the
HR flexibilities to address their human capital challenges. Also in 2001,
OPM began sending “strike force” teams of HR experts to agencies that
requested specific assistance in using existing HR flexibilities.

OPM has also begun to exercise more leadership to address the long-
standing problems with the federal government’s cumbersome hiring
process and inadequate pay and classification systems. OPM began an
initiative in the spring of 2002 to improve the hiring process. The hiring
initiative will, in part, entail revising the vacancy announcements to make
them more reader friendly; providing federal job seekers a single
application point through Recruitment One-Stop, an electronic government
(e-Gov) initiative;14 and taking steps to build the image of public service.
OPM is developing a resource guide for managers and HR professionals
that will highlight efficient and effective hiring practices that can be
implemented under existing authorities available to agencies. The
resource guide is scheduled to be released in 2003, according to OPM. In
addition, OPM’s 2003 performance plan indicates increased attention to
improving applicant assessment tools, a key obstacle to effective hiring.
One of the strategic objectives in OPM’s 2003 plan states that by 2005,
governmentwide hiring selections are to be based on assessment tools that
are more comprehensive in assessing the full range of competencies
needed to perform the jobs of the future.




14
  Recruitment One-Stop is one of five crosscutting e-Gov projects initiated under the
President’s Management Agenda that OPM is charged with leading. The other four projects
are e-Clearance, e-Payroll, e-Training, and the Enterprise Human Resource Integration
initiative. These projects cover a spectrum of human capital activities.




Page 12                                                     GAO-03-115 OPM Challenges
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Regarding pay and classification, OPM issued a white paper in April 200215
describing the need for reform of the white-collar federal pay system to
make it more flexible, market-sensitive, and performance-oriented as well
as a better tool for improving strategic human capital management. The
paper characterized the federal government’s pay and classification (also
called job evaluation) systems as rigid and antiquated with work level
descriptions dating back over half a century that are not meaningful for
today’s knowledge-driven organizations. In July 2002, we testified before
the National Commission on the Public Service that OPM’s white paper
provides a good foundation for the results-oriented pay reform discussion
that now needs to take place and noted that the greater use of
broadbanding is an option that deserves to be discussed. In that testimony,
we also noted that Congress may wish to explore the benefits of (1) giving
OPM additional flexibility that would enable it to grant governmentwide
authority for all agencies (i.e., class exemptions) to use broadbanding for
certain critical occupations and/or (2) allowing agencies to apply to OPM
(i.e., case exemptions) for broadbanding authority for their specific critical
occupations. However, agencies should be required to demonstrate to
OPM’s satisfaction that they have modern, effective, and validated
performance management systems before they are allowed to use
broadbanding.16

OPM also had a central role in the development of key personnel reforms
that were part of the administration’s reform legislation. Some of these
reforms were included in the recently enacted Homeland Security Act of
2002,17 which created the new Department of Homeland Security.
According to OPM, it has been the principal advisor on HR flexibilities for
the new department and is working with the department’s leadership to
develop specific HR recommendations in the six areas of management
flexibility provided in the legislation—performance management, pay
systems, position classification, hiring, labor-management relations, and
disciplinary actions and appeals. In addition to providing the President
with additional authority to create new policies for managing the


15
 U.S. Office of Personnel Management, A Fresh Start for Federal Pay: The Case for
Modernization (Washington, D.C.: April 2002).
16
 U.S. General Accounting Office, Managing for Results: Using Strategic Human Capital
Management to Drive Transformational Change, GAO-02-940T (Washington, D.C.: July 15,
2002).
17
     Pub. L. No. 107-296, Nov. 25, 2002.




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                      workforce within the new department, the legislation includes provisions
                      that authorize agencies across the federal government to use additional
                      personnel flexibilities. For example, agencies will now be permitted (1) to
                      offer early outs and buyouts to their employees without the requirement to
                      reduce their overall number of employees and (2) to use a more flexible
                      approach in the rating and ranking of job candidates during the hiring and
                      staffing process. In addition, under the legislation agencies will be required
                      to incorporate strategic workforce planning into their performance plans
                      and reports and appoint “chief human capital officers” to oversee
                      workforce management.

                      Although OPM has initiated several actions to help address
                      governmentwide strategic human capital management challenges, there
                      are opportunities for OPM to augment its leadership. As we have noted
                      earlier in this report and MSPB has outlined in several studies, OPM can
                      build on the steps it has taken and exert aggressive leadership in seeking
                      and implementing solutions to key human capital challenges. Continuing
                      efforts are particularly needed to address hiring and compensations issues,
                      which have plagued federal human capital management for years.



Oversight of Agency   Agencies and OPM share responsibility for ensuring that human capital
                      practices are effective and carried out in accordance with the merit system
Human Capital         principles18 and other national goals. Effective implementation of human
Management Systems    capital practices in accordance with the merit system principles and other
                      national goals is important to ensuring a skilled and qualified federal
                      workforce as well as maintaining the integrity of and public confidence in
                      the federal civil service. In recognition of the importance of this issue, one
                      of the dimensions of effective human capital management in the
                      administration’s Human Capital Standards for Success is “Agency human
                      capital decisions are guided by a data-driven, results-oriented planning and
                      accountability system.” While agencies are primarily responsible for
                      managing their human capital, OPM has governmentwide oversight
                      responsibilities. OPM recognizes that oversight is important to improving
                      governmentwide strategic human capital management, especially in the
                      changing human capital environment of increased flexibility in managing
                      human capital both inside and outside the requirements of title 5 of the U.S.


                      18
                       The nine merit principles, defined in law at 5 U.S.C. 2301(b), are broad principles that
                      define how federal personnel management should be implemented. The principles cover
                      topics such as recruitment, pay, and employee performance.




                      Page 14                                                        GAO-03-115 OPM Challenges
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Code, which defines much of the federal government’s personnel system
requirements. In recognition of this growing decentralization of the federal
personnel system, OPM has taken actions to strengthen its oversight
program. Building on these efforts, OPM needs to do more to ensure that
agencies are effectively operating their human capital management
systems and adhering to the merit system principles. Promoting agency
self-monitoring programs is one area needing continued OPM attention.

Effective and strategic oversight of agencies’ systems is even more critical
today because an increasing number of agencies are using human capital
flexibilities, delegating authorities to line managers, and seeking and
obtaining exemptions from the requirements of title 5 of the U.S. Code.
This is taking place at a time when OPM’s and agencies’ human capital
staffs for overseeing these activities have dwindled substantially. In
response to this development, OPM is carrying out its oversight by
encouraging and monitoring agency self-assessment efforts, analyzing
agency-specific and governmentwide data, conducting governmentwide
annual surveys on the merit system principles and human capital to gather
employees’ perceptions of the systems’ fairness and effectiveness, and
conducting on-site reviews of agencies’ human capital management
systems.

The results of several merit principle surveys conducted by OPM and MSPB
continue to raise questions about how effectively the agencies and OPM are
carrying out their responsibilities for ensuring that human capital practices
are carried out in accordance with the merit system principles. Over the
years, these surveys have revealed that a varying and sometimes
substantial percentage of employees have expressed a belief that their
agencies are not adhering to these principles. OPM’s Merit System
Principles Questionnaire results for 1999 through 2001 showed less than
half of the responding employees believed that their agencies protect them
against reprisal and provide equal pay for equal work as well as reward
excellence. OPM’s survey results are broadly consistent with a 1998 MSPB
survey where 40 percent of those surveyed said they believed they had
inadequate protection against the possibility of a prohibited personnel
action being taken against them. MSPB said of these results, “the fact that
such a high percentage felt [this way] is a cause for concern and continued
vigilance.” To its credit, OPM acknowledged in its 2001 performance report
that employees’ low perceptions of their agencies’ adherence to the
aforementioned merit principles were unacceptable and that it planned to
address the perception issue in future plans and strategies. Its 2003
performance plan says it expects improvement to occur over a period of



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years, but it does not address what specific steps OPM and others need to
take to improve the percentage of positive responses.

MSPB survey data collected from 1986 through 2001 showed that
employees are not convinced that favoritism and unfair advantage have
been removed from the government’s hiring and promotion processes. For
example, 28 percent of employees surveyed in 1986 said they believed they
had been denied a job or job reward because of the operation of a “buddy
system” without regard to merit. In a study published in December 2001,
MSPB reported that 69 percent of surveyed employees believed that
“connections to other important people in government” was the single
factor most likely to play a role in promotions or selections for vacant
positions in their organizations.19

To address these ongoing issues in its oversight program, OPM has taken a
number of actions. For example, in January 2002, OPM issued HRM
Accountability System Standards in response to Executive Order 13197.
The standards describe the essential elements of internal human resources
management (HRM) accountability systems, set criteria for agencies in
establishing and maintaining these systems, and provide OPM a framework
for reviewing and assessing agencies’ systems. OPM reported in its 2001
performance report that the executive order gave the agency clear
authority to require agencies to establish and maintain HRM accountability
systems. OPM officials told us it is encouraging agencies to develop an
internal accountability system in line with these standards and has issued a
“toolkit” to assist them in doing so.

Recognizing that it is increasingly important for agencies to have a strong
internal capability for ensuring accountability and compliance with the
merit principles in the currently decentralized HRM environment, OPM
established a strategic objective in its fiscal year 2003 performance plan
that all agencies implement accountability systems by fiscal year 2005 that
“effectively hold responsible officials accountable for their human
resources operations and results.” To achieve this objective, OPM set a
goal to “develop and improve agency accountability for conducting HRM in
accordance with the merit system principles and in alignment with
mission.” OPM expects to meet this goal by assessing agency
accountability systems; improving ways to evaluate the effectiveness of


19
 U.S. Merit Systems Protection Board, The Federal Merit Promotion Program: Process vs.
Outcome (Washington, D.C.: December 2001).




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HRM accountability systems; and promoting and assisting agencies in
developing and improving their accountability systems through sharing of
best practices, developing and distributing educational materials, and
providing guidance and individual consultation. Meeting this important
goal will entail an enormous effort on the part of OPM and the agencies.

OPM also issued a Human Capital Assessment and Accountability
Framework (Framework) in October 2002 that is based on the revised
standards for success contained in the administration’s Executive Branch
Management Scorecard. The Framework provides agencies consolidated
guidance on critical success factors and performance indicators that they
can refer to as they transform their strategic human capital management
programs. It is also intended to support agencies’ internal assessment and
accountability systems and OPM’s evaluation of agency accountability
systems and human capital efforts. According to OPM, under its recent
restructuring, agency human capital efforts, including accountability
systems, are to be evaluated by its Agency Merit System Accountability and
Human Resources Programs Office.

Although the actions OPM has taken and planned to improve
governmentwide oversight of agencies’ human capital systems are
promising, the results of the merit principles surveys and MSPB’s 2001
report show that there continues to be a need for strong oversight of the
merit system from both OPM and the agencies, especially in this era of
delegation and decentralization. MSPB reported in December 2001 that
OPM needs to show strong leadership in fostering agency self-monitoring
programs and find a way for its oversight reviews to address HRM
accountability at the line manager and supervisor levels. While OPM’s
actions to improve governmentwide oversight are promising, the agency
needs to do more to accomplish its oversight mission in a decentralized
human capital environment in which responsibility for human capital
management accountability continues to shift to agencies. Given that
OPM’s oversight approach includes encouraging and monitoring agency
self-assessment programs, it could strengthen this approach by requiring,
rather than encouraging, agencies to establish and maintain internal
oversight programs and to meet its HRM Accountability System
Standards. OPM could also develop standards that agencies’ oversight
staffs would need to meet to be fully qualified to conduct agency oversight
reviews. In short, there are opportunities for OPM to build upon the
positive efforts it has under way to promote agency self-monitoring
programs and ensure that agencies have mechanisms in place for holding
their managers and supervisors accountable.



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OPM’s Organizational      As OPM implements its organizational transformation initiatives, which are
                          shifting its role from less of a rule maker and enforcer to more of a strategic
Transformation            partner in leading and supporting executive agencies’ human capital
Initiatives               management systems, it is addressing the need to strategically manage its
                          human capital, including effectively aligning its organizational structure
                          and people resources to achieve its mission and goals, protect its
                          information technology systems against security threats, and manage its
                          financial resources. OPM has undertaken a number of initiatives to
                          address these challenges. However, the experiences of successful major
                          change management initiatives in large private and public sector
                          organizations suggest that it can often take at least 5 to 7 years until such
                          initiatives are fully implemented and the related cultures are transformed
                          in a sustainable manner. Thus, it is entirely to be expected that as OPM
                          moves forward, there are opportunities to strengthen and deepen its
                          current efforts.



Strategic Human Capital   As the federal government’s human capital agency, OPM must lead by
Management                example in managing its people. While OPM faces many of the same
                          human capital challenges as other agencies, it must serve as a role model to
                          other agencies in how to address these challenges. OPM has taken and
                          planned actions to address its human capital challenges, and its actions are
                          in line with the administration’s Human Capital Standards for Success.
                          OPM’s actions also align with the four cornerstones of effective strategic
                          human capital management outlined in our March 2002 model of strategic
                          human capital management:20 (1) leadership, (2) strategic human capital
                          planning, (3) acquiring, developing, and retaining talent, and (4) creating
                          results-oriented organizational cultures.

Leadership                In addition to demonstrating commitment to strategic human capital
                          management governmentwide, OPM’s top leadership has demonstrated this
                          commitment internally by viewing people as important enablers of agency
                          performance. In November 2002, OPM’s Director changed the makeup of
                          her senior leadership team by appointing four executives to new associate
                          director positions to help implement the agency’s restructuring effort
                          approved in September 2002. The Director noted that the four executives
                          collectively possess special skills in innovative HR reforms, e-Gov, and


                          20
                               GAO-02-373SP.




                          Page 18                                               GAO-03-115 OPM Challenges
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                          labor-management relations as well as knowledge of civil service
                          protections. OPM also (1) sought input on its restructuring from its
                          employees, local union representatives, and key external stakeholders such
                          as departments and agencies, Congress, and academic and other public
                          administration advocates, (2) involved employees in cross-organizational
                          taskforces on other major agencywide projects, and (3) implemented
                          employee-friendly workplace policies, such as telecommuting.

                          The rate of turnover among OPM’s career Senior Executive Service (SES),
                          due largely to retirements, varied widely from 0 percent in fiscal year 1997
                          to 21 percent in fiscal year 2001, according to OPM’s calculations. The size
                          of OPM’s career SES workforce during this 5-year period ranged from 36 in
                          fiscal year 1997 to 40 in fiscal year 1999. OPM’s projected retirement rate
                          for its SES over the next 10 years will be the largest—8 percent each year—
                          of any group in its workforce, according to its June 2001 workforce
                          analysis. The recent and projected losses in OPM’s SES workforce will
                          provide it with a challenge to maintain an effective leadership team.

                          In light of the impending retirements among its SES workforce, OPM has
                          engaged in succession planning to ensure that it has the leadership talent in
                          place to manage a transformed OPM effectively. OPM’s succession
                          planning initiative, begun in 2000, was not fully implemented due to other
                          priorities and the need to consider succession planning in the context of
                          OPM’s transformation and restructuring efforts. These efforts naturally
                          have implications for the competencies and career paths OPM will need to
                          be successful. Nonetheless, now that the restructuring effort is being
                          implemented, OPM can revisit and, if necessary, augment its succession
                          planning strategies.

Strategic Human Capital   OPM, like other agencies, was required by OMB to analyze its workforce
Planning                  and develop a plan for restructuring the agency that would meet the
                          President’s goals of creating agency organizational structures that are
                          citizen-centered, results-oriented, and market-driven.21 OPM prepared and
                          submitted its workforce analysis and restructuring plan to OMB and has




                          21
                             OMB Bulletin No. 01-07, dated May 8, 2001, required agencies to conduct workforce
                          analyses and to develop restructuring plans based on the workforce analyses. OMB
                          directed agencies to submit their workforce analyses by June 29, 2001. The restructuring
                          plans were to be submitted as a part of the agencies’ 2003 budget submissions and annual
                          performance plans.




                          Page 19                                                       GAO-03-115 OPM Challenges
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taken and planned actions to address human capital challenges identified
as a result of its workforce analysis.

In analyzing its workforce, OPM found that 4.2 percent of its employees
(about 123 per year), on average, are projected to retire each year over the
next 10 years, and as we discussed earlier, the largest percentage of
projected retirements,22 about 8 percent per year, will come from members
of its career SES. OPM’s expected retirement rate for its workforce overall
is more than the annual retirement rate of 2 percent governmentwide
identified in our April 2001 report.23 OPM’s projected career SES retirement
rate also exceeds the career SES governmentwide rate of 6 percent, on
average, each year identified in our May 2000 report.24 In addition, OPM’s
workforce analysis found that of the 123 employees expected to retire each
year over the next 10 years, about 25 percent of those retirements will
come from employees in OPM’s human resources specialist and retirement
benefits specialist positions—two positions OPM has identified as being
critical to its mission.

Significantly, the workforce analysis also found that skill gaps exist at
varying levels in the majority of the jobs occupied by OPM employees as of
September 30, 2000. These gaps exist in competencies needed by


22
 OPM based its retirement projections on the yearly retirement patterns of permanent
employees on board as of October 1, 1995, and then applied these patterns to determine
retirement probabilities in each of the next 5 years. OPM controlled for variables, such as
gender, occupational category, retirement system, and length of retirement eligibility, in
determining the retirement probabilities. It then averaged the 1-year probabilities to obtain
a composite 1-year probability estimate.
23
  U.S. General Accounting Office, Federal Employee Retirements: Expected Increase Over
the Next 5 Years Illustrates Need for Workforce Planning, GAO-01-509 (Washington, D.C.:
Apr. 27, 2001). In that report, we calculated a retirement rate of 2 percent per year until 2006
for employees at 24 executive branch agencies, which comprise about 98 percent of the
federal workforce, excluding Postal Service, Federal Reserve, Tennessee Valley Authority,
and intelligence agency employees. Our retirement projections covered the period from
1999 through 2006. For more information on our retirement projections, their assumptions,
and methodology, see that report.
24
  U.S. General Accounting Office, Senior Executive Service: Retirement Trends Underscore
the Importance of Succession Planning, GAO/GGD-00-113BR (Washington, D.C.: May 12,
2000). In that report, we calculated the average estimated annual SES retirement rate for
fiscal years 1999 through 2005 on the basis of OPM’s estimate of the SES retirement rate for
that entire 7-year period. OPM’s retirement estimate was based on the actual number of
career SES retirements during fiscal years 1996 through 1998 to eliminate the effect of
downsizing during the mid-1990s and the increase in retirements during fiscal year 1994
following the substantial 1991 SES pay raise.




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employees to perform OPM’s work both now and in the future. The skill
gap analysis revealed that, overall, OPM’s long-term skill needs were
greater than its short-term needs, which according to OPM, reflects the
impact of the agency’s changing work and the high predicted turnover in
mission-critical occupations. OPM employees’ competency needs were
determined through a survey of OPM executives, managers, and
supervisors. Gaps were identified in competencies such as attention to
detail, customer service, interpersonal skills, writing, oral communication,
planning and evaluation, and technical competence.

OPM has developed plans to prepare for the expected retirements in its
workforce and address skill imbalances. Its plans and strategies for
addressing these and other human capital challenges are described in its
Restructuring Plan and Human Capital Scorecard Action Plan submitted
to OMB in September 2001 and January 2002, respectively. For example, in
its Restructuring Plan, OPM identified strategies such as training to
address skill gaps and recruiting and hiring from all sources to replace
expected staff losses due to the impending retirements. And in its Human
Capital Scorecard Action Plan, OPM identified goals and plans that related
to (1) recruiting, hiring, developing, and retaining employees with the
strategic competencies for its mission-critical occupations and (2) aligning
its human capital policies and organizational structure with its mission,
vision, and strategies. OPM’s plans and strategies for addressing its human
capital challenges represent important steps toward strategic human
capital planning.

OPM’s Restructuring Plan identified goals and strategies for addressing
human capital challenges in each of its program offices. This action is in
line with a recommendation we made in our July 2001 report as a result of
reviewing OPM’s fiscal year 2002 performance plan and fiscal year 2000
performance report as part of our Government Performance and Results
Act work.25 In that report, we recommended that OPM better link its
internal strategic human capital management goals to specific OPM
programs and outcomes. Its Human Capital Scorecard Action Plan lays
out specific action items and target dates for completing each item that
align with dimensions of its Human Capital Scorecard, released to
agencies governmentwide in December 2001.




25
     GAO-01-884.




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Realigning its organizational structure and workforce in a way that will
best achieve its mission, goals, and results has been challenging for OPM
for several years. Since its creation in 1979, OPM has undergone a number
of reorganizations26—three of which, including its most recent one that was
approved in September 2002, have involved major restructurings of the
agency. Some of the reorganizations resulted, in part, from different
operating philosophies of its directors. OPM’s latest restructuring, which it
intends to complete by March 2003, is designed to create a new, flexible
structure that will “de-stovepipe” the agency; enable it to be more
responsive to its primary customers, federal departments and agencies; and
focus on the agency’s core mission. For example, OPM has decided to put
its various program development offices under the control of one associate
director and its product and services functions under another associate
director to ensure that it appropriately and efficiently responds to its
customers. Effective implementation of OPM’s latest organizational and
workforce realignment will be crucial to maximizing its performance as the
federal government’s human capital leader, assuring its own and other
agencies’ accountability, and ultimately achieving its goals.

OPM has also decided that its Equal Employment Opportunity (EEO)
Officer will have direct access to the agency head on EEO case and policy
issues but will directly report to, be rated by with input from the agency
head, and be supervised by the Associate Director for Management on a
day-to-day basis. Although OPM recognizes that regulatory and
implementing guidance issued by the Equal Employment Opportunity
Commission (EEOC) requires an agency’s EEO Director to report to and be
directly supervised by the agency head,27 OPM officials indicated the
reporting arrangement between its EEO Officer and agency head is in line
with the intent or spirit of EEOC’s requirement because it will allow the
EEO Officer to report directly to the agency head on EEO case and policy
issues when the EEO Officer deems it is necessary, which is critical. The
OPM officials also indicated that an advantage of the reporting


26
 For purposes of this report, a reorganization is defined as a change in the agency’s
organizational structure and/or reporting relationships, including adding or abolishing an
office or function.
27
  EEOC’s regulation, 29 C.F.R. 1614.102(b)(4), and guidance (EEOC Management Directive
110, Chapter 1) require an agency’s EEO director to report to and be supervised directly by
the agency head for the purposes of demonstrating the importance of EEO to employees
and ensuring that the EEO director’s independence is not undermined, particularly in
situations where the person to whom he or she reports is involved in or would be affected
by the EEO director’s actions in implementing the agency’s EEO program.




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         arrangement between OPM’s EEO Officer and agency head is that it does
         not separate the EEO function from other HR functions that are the
         responsibility of the Associate Director for Management.

         In implementing this arrangement, we believe that it is important for OPM
         to ensure that its EEO Officer’s independence is not undermined as a result
         of placing him/her under the direct supervision of the Associate Director
         for Management who is responsible for the overall management of the
         agency, including overseeing EEO functions, which could affect HR
         functions. We also believe that it is important for the EEO Officer to have
         regular one-on-one meetings with the agency head in order for this
         reporting arrangement to work.

Talent   Similar to other agencies, OPM faces challenges in recruiting and retaining
         a high-quality, diverse workforce. In its workforce analysis, OPM said that
         its challenges in attracting and retaining employees are the result of lack of
         competitive pay with the private sector, cumbersome recruitment and
         hiring procedures for certain occupations, and a declining attraction of the
         public service—reasons that are not unique to OPM.

         OPM will need to hire and develop employees to replace the loss of
         knowledge and expertise caused by departing employees and to address
         gaps in employees’ skills identified through its workforce analysis. In
         addition, OPM will need to address shortfalls in employees’ knowledge in
         two areas—non-title 5 personnel systems and a modernized retirement
         system environment. OPM recognizes that because an increasing number
         of agencies are being exempted from title 5 requirements, it will need to
         ensure that its employees are trained in the various laws, rules, and
         regulations that govern non-title 5 systems as well as the multiple
         environments in which they operate to oversee and evaluate them
         effectively. OPM also recognizes that as the focus of the retirement
         program shifts from transactions to customer service under its retirement
         systems modernization initiative28 currently under way, it will need to
         ensure that its employees have the knowledge and skills to operate in this
         new environment. Our interviews with OPM officials and a review of
         OPM’s workforce analysis, Restructuring Plan, and related documents


         28
          The retirement systems modernization initiative, which is being implemented in phases, is
         OPM’s long-term strategy for reengineering business processes in order to improve all
         aspects of the delivery of retirement services. OPM expects the initiative to be fully
         operational in 2010.




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indicate that OPM has strategies in place to meet these challenges. These
strategies include expanding its hiring and recruitment sources and
providing a variety of training and developmental opportunities to broaden
employees’ skills. While OPM does not have any numerical hiring goals
over the next 5 years, it plans to hire and recruit from the widest sources
possible to ensure that the agency has an available group of diverse and
skilled candidates in line to assume future leadership responsibilities.
OPM also plans to continue to use the Presidential Management Intern
program.

To broaden the skills of employees, OPM notes that a particularly effective
strategy has been its use of rotational assignments, special projects, and
details to “cross-train” employees at various levels of the organization.
These opportunities are intended to augment existing staff skills, teach
new competencies, and better prepare employees and their work units for
vacancies in key positions. OPM has made use of cross-organizational task
forces to manage agencywide projects such as the restructuring plan,
succession plan, and revision of its strategic plan. OPM says that
participants serving on these task forces gain exposure to the full range of
OPM’s responsibilities and a deeper understanding of the work performed
by other offices. In order to pass on the knowledge of departing staff
members and expose less experienced staff members to OPM’s
institutional culture and history, OPM is developing a mentoring program
called FOCUS (Facilitating Opportunities & Change that Unleash Success).
This program, also a part of the agency’s succession plan, is intended to
broaden employees’ knowledge and mitigate skill gaps within the agency.




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While OPM’s strategies to address its internal recruitment and retention
needs are moving in the right direction, past studies have raised concerns
about OPM’s training program for new supervisors and its Core
Competency Training and Development Model for all employees. In
particular, a 1999 oversight review conducted by OPM’s Office of Merit
System Oversight and Effectiveness (OMSOE),29 undertaken to assess the
state of human capital management at OPM, reported that “newer
supervisors” expressed concern about their preparation for supervisory
responsibilities and stated that initial training for new supervisors was
“uneven and sometimes nonexistent.” The findings from OMSOE’s report30
are consistent with the findings from a March 2001 “environmental scan” of
OPM’s internal human capital management performed by the National
Academy of Public Administration (NAPA) at OPM’s request.31 NAPA
reported that OPM employees stated in focus groups that there was not a
central focus within OPM on training needs assessment and that
supervisory training within OPM was an area “needing attention.”

In light of the fact that OPM has fewer supervisors now than in the past due
to downsizing; is losing some of its more experienced executives,
managers, and supervisors to retirement over the next few years; and is
increasing its efforts to hire at the entry level, it is important that OPM have
a strong training program for new supervisors in place. Supervisory
training is also important to help OPM transform from a rules-monitoring
organization to a customer-oriented organization that partners with
agencies in managing their human capital. OMSOE recommended in its
1999 report that OPM’s Office of Human Resources and Equal Employment


29
 OMSOE, which is now a part of OPM’s Agency Merit System Accountability and Human
Resources Programs, assesses agencies’ effectiveness in personnel management at the
governmentwide, agency, and installation levels to gather information for policy
development and program refinement, ensure compliance with personnel laws and
regulations, enhance agency capability for human resources management accountability,
and assist agencies in operating personnel programs that effectively support
accomplishment of their primary missions consistent with merit system principles. OMSOE
also works with federal agencies to explore potential improvements in personnel systems
and better and simpler ways to manage federal personnel.
30
 U.S. Office of Personnel Management, Office of Merit Systems Oversight and
Effectiveness, Report of an Oversight Review: Office of Personnel Management
(Washington, D.C.: June 1999).
31
 National Academy of Public Administration, An Environmental Scan for the Office of
Human Resources and Equal Employment Opportunity, U.S. Office of Personnel
Management (Washington, D.C.: March 2001).




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                            Opportunity develop a training course for new supervisors. According to
                            OPM officials, a core training and development curriculum for new
                            supervisors was introduced in the first quarter of fiscal year 2003 that is
                            designed to provide new supervisors with the tools and competencies they
                            need to perform effectively in their current positions and in future
                            leadership positions.

                            OMSOE’s 1999 oversight review also raised concerns with OPM’s Core
                            Competency Training and Development Model for all of its employees.
                            While the review said that the model was a useful tool for new employees,
                            it also reported that (1) experienced employees expressed disinterest in the
                            Core Competency Training and Development Model because they did not
                            believe it would help them advance, (2) managers felt that experienced
                            employees did not want to use the model because they did not want to be
                            viewed as needing training, (3) nonsupervisory employees felt that the
                            training model was not job related, (4) supervisors felt that they could not
                            track the results of the training model back to job performance, and
                            (5) managers and supervisors felt that the model emphasized skills at the
                            basic but not the advanced level. To address these concerns, OMSOE
                            recommended that OPM explore establishing a structured program to
                            provide rotational assignments throughout the agency and suggested that
                            the Core Competency Training and Development Model might be the
                            appropriate avenue for launching the rotational program. To increase
                            employees’ perceived usefulness of the core competency model and
                            encourage greater use of it, OMSOE also suggested that OPM consider
                            linking the model to other HR programs, such as career development and
                            workforce planning. An OPM official told us that the agency is updating
                            the Core Competency Training and Development Model.

Creating Results-Oriented   OPM has taken measures to ensure that the focus of individual
Cultures                    expectations and accountability are centered on contributions to achieve
                            organizational results. For example, OPM set a goal in fiscal year 1999 of
                            aligning all of its employees’ individual performance plans with the
                            agency’s strategic plan. OPM reported in its fiscal year 2000 performance
                            and accountability report that it had achieved alignment for about 90
                            percent of its employees. OPM told us in July 2002 that all of its employees’
                            performance plans have now been aligned with the agency’s former
                            strategic plan, fully accomplishing the goal it set in 1999. However, with
                            the publication of OPM’s new strategic plan in November 2002, OPM
                            officials told us that employees’ performance plans will be revised where
                            needed to provide the critical link between organizational and individual




                            Page 26                                              GAO-03-115 OPM Challenges
                       Major Performance and Accountability
                       Challenges




                       performance and that realignment of the plans will be completed in early
                       2003.

                       In addition to aligning all of its employees’ performance plans with the
                       agency’s strategic plan, OPM told us that the selection criteria for its
                       highest award, the Director’s Award for Excellence, have been revamped
                       and revised to ensure that the award recognizes those who have made clear
                       contributions to the agency’s strategic objectives and furthered the
                       President’s goal of creating a government that is citizen-centered, results-
                       oriented, and market-based. Finally, OPM has taken steps to revise all of its
                       executives’ performance standards to include clear benchmarks for
                       managing human and financial resources, furthering the President’s
                       management objectives, leading positive change, and building effective
                       coalitions.



Information Security   Over the last 2 years, significant weaknesses have been identified in OPM’s
                       information systems’ security program. OPM’s information systems, which
                       support its human capital and financial management operations, are used
                       to manage billions of dollars in the retirement benefits, health benefits, and
                       life insurance trust funds. These systems are also used to process
                       retirement benefits for millions of annuitants and survivors and HR data for
                       millions of active federal employees. And as OPM continues to develop
                       and roll out the five e-Gov projects that the administration assigned it to
                       lead—Recruitment One-Stop, e-Training, e-Clearance, Enterprise Human
                       Resource Integration, and e-Payroll—these systems will also be used to
                       maintain and process HR data. Because OPM’s information systems are
                       used to process significant amounts of sensitive but unclassified data
                       supporting both human capital and financial management operations,
                       protecting these systems from computer-based attacks is crucial. Since
                       1997, we have designated information security as a governmentwide high-
                       risk area because evidence indicated that controls over computerized
                       federal operations were not effective and the related risks were escalating,
                       in part, due to increasing reliance on the Internet. Furthermore,
                       governmentwide audits conducted in 2001 and 2002 continued to show that
                       operations and assets across the federal government were highly
                       vulnerable to computer-based attack.




                       Page 27                                               GAO-03-115 OPM Challenges
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OPM is working to resolve the weaknesses in its information security
program that were identified during audits by an independent accounting
firm, OPM’s Office of the Inspector General (OIG), and us32 during fiscal
years 2001 and 2002. OPM has implemented new security guidance and has
developed a plan to resolve these weaknesses. Also, OPM told us that it
has consistently completed actions contained in the plan and is on
schedule to meet its remaining milestones. OPM’s efforts to address
weaknesses in its information security program are part of its ongoing
actions to achieve compliance with federal financial management statutes
as they relate to information security and with information security
requirements contained in the Government Information Security Reform
provisions (commonly referred to as “GISRA”).33 As part of its fiscal year
2001 financial statement audit, the independent accounting firm assessed
OPM’s compliance with the Federal Financial Management Improvement
Act of 199634 (FFMIA) requirements as they relate to information systems
security. The independent accounting firm found that OPM had not
provided adequate systems security. It also found that OPM’s electronic
data processing (EDP) general control environment continues to be a
reportable condition from the prior year35 and five areas of EDP general
control need to be strengthened: (1) agencywide security program
management, (2) access controls, (3) system software controls,
(4) software development and change controls, and (5) service continuity.


32
  This work was performed as part of our assessment of 24 agencies’ compliance with the
Government Information Security Reform provisions in the National Defense Authorization
Act for Fiscal Year 2001 (Pub. L. No. 106-398, Oct. 30, 2000). Our findings were presented in
testimony before the Subcommittee on Government Efficiency, Financial Management and
Intergovernmental Relations, Committee on Government Reform, House of Representatives
entitled Information Security: Additional Actions Needed to Fully Implement Reform
Legislation, GAO-02-470T (Washington, D.C.: Mar. 6, 2002). In presenting the results of our
work, we reported the results for 24 agencies in the aggregate but did not report the results
for each of the 24 agencies individually.
33
  Similar to other agencies, OPM is subject to the requirements of GISRA, which require, in
part, that (1) agencies establish agencywide, risk-based information security programs,
(2) the inspector general of each agency conduct an independent evaluation of the agency’s
information security program, and (3) OMB submit an annual report to Congress
summarizing the results of agencies’ evaluations of their information security programs.
34
     31 U.S.C. section 3512 note.
35
  A reportable condition is a matter coming to an auditor’s attention relating to significant
deficiencies in the design or operation of the internal controls over financial reporting that,
in the auditor’s judgment, could adversely affect an agency’s ability to record, process,
summarize, and report financial data consistent with the assertions by management in
financial statements.




Page 28                                                          GAO-03-115 OPM Challenges
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According to the independent accounting firm, these conditions could
affect OPM’s ability to prevent and detect unauthorized changes to
financial information, control electronic access to sensitive information,
and protect OPM’s information resources.

As required by GISRA, OPM’s OIG independently evaluated OPM’s
information security program and reported in September 200236 that OPM
had made significant progress in improving its information security
program since 2001 but could make more improvements. For example, the
OIG noted that OPM had integrated its information security requirements
and costs estimates into its capital planning and investment control
process and took significant steps to meet its governmentwide security
training responsibilities. The OIG also noted that OPM’s agencywide
security policy, originally released in June 2001 and revised in March 2002,
and its efforts to certify and accredit its two general support systems—the
Enterprise server and local area network/wide area network—are two
positive steps that will help OPM to achieve greater compliance with
GISRA’s requirements. However, the OIG said that although no material
weaknesses were found in OPM’s information security controls, a number
of reportable conditions were identified that OPM needs to address. For
example, the OIG said OPM still had not (1) fully implemented its
agencywide security program, although it issued implementation guides
during the year, (2) integrated its information security program with its
critical infrastructure responsibilities, (3) conducted risk assessments for
all of its systems, (4) completed security plans for all of its systems, or
(5) developed a process to track and monitor specialized training
requirements for personnel with significant security responsibilities. These
reportable conditions are addressed in OPM’s action plan, and according to
OPM officials, progress has been made in overcoming them.

The independent accounting firm’s and OPM’s OIG findings are consistent
with ours. In March 2002, we testified on the federal government’s efforts
in implementing GISRA requirements during fiscal year 2001.37 We testified
that OPM and 23 other large agencies had not conducted risk assessments
for all of their systems, and almost half of the agencies had not established


36
 U.S. Office of Personnel Management, Office of the Inspector General, Government
Information Security Reform Act Fiscal Year 2002 Independent Evaluation, Executive
Summary (Washington, D.C.: Sept. 9, 2002).
37
 U.S. General Accounting Office, Information Security: Additional Actions Needed to
Fully Implement Reform Legislation, GAO-02-470T (Washington, D.C.: Mar. 6, 2002).




Page 29                                                     GAO-03-115 OPM Challenges
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effective performance measures to show how well program officials had
assessed the risk to operations and assets under their control. Our review
disclosed significant weaknesses in four out of six major areas of OPM’s
general controls—the policies, procedures, and technical controls that
apply to all or a large segment of OPM’s information systems and help to
ensure their proper operation. In particular, we found weaknesses in
OPM’s (1) security program management, (2) access controls, (3) change
controls, and (4) service continuity.

In its plan of action and milestones (POA&M) report submitted to OMB in
November 2001, 38 OPM proposed corrective actions to address a total of 15
weaknesses in its information security program. As of April 30, 2002, OPM
reported that it had completed actions for 2 of the 15 identified weaknesses
and that corrective actions for the remaining 13 were ongoing. OPM has
also taken steps to implement its agencywide security program. For
example, it issued an updated information technology security policy in
March 2002 that, in part, requires and ensures that security planning is
integrated into each of its systems’ development life cycle processes and
established a formal working group to oversee implementation of the
security policy and security program at OPM. OPM also told us that it is
applying its information security policy to the five e-Gov projects it is
leading and developing a specific e-government Security Management Plan
for each e-Gov project. According to OPM, each e-government project’s
Security Management Plan covers, as appropriate, risk assessment, data
encryption, intrusion detection and repudiation, information availability
and assurance, audit tracking, user authentication, physical site security,
catastrophic disaster recovery, data and power supply redundancy and
backup, and computer virus detection and prevention. OPM expects to
fully implement its agencywide security program in September 2003
according to its POA&M report submitted to OMB in November 2001.

Although OPM has taken positive steps to improve its information security
program, it must continue its efforts to achieve compliance with GISRA
and federal financial management statutes as they relate to information
security. In addition, it is important that OPM continues its plans to
incorporate appropriate information security controls into the design and
development of the five e-Gov projects it has been assigned to lead. These


38
   OPM’s POA&M report is a list of corrective actions that OPM will take in response to
information security weaknesses identified by its Chief Information Officer, independent
auditor, OIG, or us.




Page 30                                                       GAO-03-115 OPM Challenges
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                       controls will help to ensure the integrity, reliability, and availability of data
                       and systems used for the e-Gov projects.



Financial Management   OPM received an unqualified or “clean” opinion on its fiscal year 2000 and
                       2001 consolidated financial statements, and the independent public
                       accounting firm hired by OPM’s OIG to perform these audits reported no
                       material weaknesses39 in internal controls over financial reporting.
                       However, the independent accounting firm identified several reportable
                       conditions40 over financial reporting, many of which relate to long-standing
                       problems with OPM’s accounting for the activities of its two discretionary
                       accounts—the Salaries and Expenses account and the Revolving Fund. In
                       its audit report, the independent accounting firm also stated that the
                       financial management systems supporting OPM’s discretionary accounts as
                       well as its retirement, health benefits, and life insurance programs did not
                       substantially comply with certain requirements of FFMIA41 that relate to
                       federal financial management system requirements and the U.S.
                       Government Standard General Ledger at the transaction level.

                       Historical weaknesses in accounting for and reporting on the activities of
                       the Revolving Fund and the Salaries and Expenses account have included
                       (1) the inability to substantiate and reconcile reported account balances
                       with OPM’s own subsidiary records as well as information maintained by
                       other federal agencies, (2) lack of or failure to adequately implement
                       policies and procedures, and (3) insufficient analyses and review of the
                       financial statements, footnotes, and related adjusting entries. Contributing
                       to some of these weaknesses have been staffing limitations and skill
                       deficiencies as well as weaknesses in computer controls. Evidence of
                       these continuing weaknesses led the independent accounting firm to


                       39
                          Material weaknesses in internal control are reportable conditions in which the design or
                       operation of the internal control does not reduce to a relatively low level the risk that errors,
                       fraud, or noncompliance in amounts that would be material in relation to the financial
                       statements or other required information being audited may occur and not be detected
                       within a timely period by employees in the normal course of performing their assigned
                       duties.
                       40
                            See footnote 35.
                       41
                        Under FFMIA, an agency head must determine whether his or her agency is in substantial
                       compliance with three requirements: (1) federal financial management system
                       requirements, (2) federal accounting standards, and (3) the U.S. Government Standard
                       General Ledger at the transaction level.




                       Page 31                                                            GAO-03-115 OPM Challenges
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conclude that as of the end of fiscal year 2001, OPM’s financial
management systems were not in substantial compliance with FFMIA.
These weaknesses call into question OPM’s ability to produce timely and
accurate financial information for management decision making and
financial reporting purposes relative to these two accounts.

The independent accounting firm and OPM’s OIG both agree that OPM
made progress during fiscal year 2001 in addressing these various
weaknesses. A key step to resolving many of its reportable conditions and
material system nonconformances is OPM’s phased implementation of a
new financial management system that supports the Revolving Fund and
Salaries and Expenses account and that will eventually interface with the
benefit plans’ financial systems to enable timely and accurate preparation
of consolidated agency financial statements. OPM expects to have
completed the last phase of the system implementation by the end of fiscal
year 2003, at which time OPM plans to have audits performed on the stand-
alone Revolving Fund and Salaries and Expenses account financial
statements, in addition to the consolidated agency financial statements, to
demonstrate that the discretionary funds’ financial statements can
successfully pass an audit. OPM has stated that the new system, once fully
operational, will improve its overall financial performance by allowing it to
routinely report the full cost of programs and projects; integrate program,
budget, and financial information; and use this information to measure,
monitor, and report on program performance.




Page 32                                              GAO-03-115 OPM Challenges
                      Major Performance and Accountability
                      Challenges




Federal Retirement    Through its retirement and health insurance programs, OPM delivers
                      retirement and health insurance benefits to millions of federal employees,
and Health Benefits   annuitants, and their dependents totaling billions of dollars annually. In
Program               fiscal year 2001, OPM paid $47 billion in annuities to more than 2 million
                      retired federal employees, annuitants, and their dependents. OPM—which
Administration        is the largest purchaser of employee health benefits—also paid almost
                      $21 billion in health insurance premiums for more than 8 million enrollees
                      and their dependents in fiscal year 2001. Thus, OPM’s accurate, cost-
                      effective, and efficient administration of the retirement and health
                      insurance programs is critical given the substantial dollar outlays. Results
                      of recent independent surveys42 indicated that OPM’s customers have been
                      satisfied with the quality of retirement services and health insurance
                      products and services. The results of OPM’s own client satisfaction survey
                      have also indicated that retirees have been highly satisfied with services
                      provided by the agency. However, customer satisfaction could fall in the
                      coming years if OPM is not prepared to handle the expected federal
                      employee retirement wave and implement cost-containment strategies for
                      limiting health care premium increases while continuing to ensure that
                      employees are provided access to quality health care.




                      42
                       The independent surveys include the American Customer Satisfaction Index, which is used
                      to measure customer satisfaction with OPM’s retirement services, and the Consumer
                      Assessment of Health Plans Study, which is used to get customer feedback on performance
                      of health plans in the Federal Employees Health Benefits Program.




                      Page 33                                                     GAO-03-115 OPM Challenges
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In 2001, as in prior years, OPM’s retiree customers responding to the
American Customer Satisfaction Index survey reported that they were
highly satisfied with services they received from OPM. For example, in
2001 OPM received an overall satisfaction rating of 78 (out of a possible
100) for delivery of retirement services, such as timeliness of benefit
payments and timeliness of OPM’s response to inquiries. OPM’s 2001
satisfaction rating represented an increase over its 1999 and 2000 ratings of
75 and 73, respectively, and surpassed the private sector rating of 70.5. In
addition, over 90 percent of annuitants responding to OPM’s client
satisfaction survey said they were satisfied with overall retirement services
during 1999 through 2001. Moreover, for fiscal years 1999 through 2001,
erroneous retirement payments constituted less than 1 percent of total
retirement payments. OPM also reduced its processing times for
retirement claims in 2001 and surpassed its target.43 However, the level of
customer satisfaction OPM has achieved and its timeliness in processing
claims could dwindle over the next few years if the agency is not able to
handle the dramatic increase expected in the number of employees seeking
retirement services. By 2006, about one-third (493,000 employees) of the
federal workforce will be eligible to retire and about one-half (236,000
employees) of those eligible are expected to retire. OPM’s modernized
retirement systems—the agency’s long-term strategy for delivering more
cost-efficient, timely, and accurate retirement services—is planned to be
fully operational in 2010. Because modernization of the retirement systems
is a complex, long-term undertaking and given the costs and
implementation risks associated with it, OPM is considering outsourcing
the claims processing and customer service functions.

OPM measures its success in administering the Federal Employees Health
Benefits Program (FEHBP), in part, by active and retired employees’
perceptions of the quality of the health plans and their accreditation. OPM
reported that 82 percent of employees enrolled in FEHBP were in highly
rated health plans in 2001, which indicates that they were receiving high-
quality health insurance products and services. Other measures of OPM’s
success in administering the health benefits program are the agency’s
progress in achieving less fraud and abuse in the program and improving
performance and financial oversight of the program—areas that have been



43
 OPM’s target time for processing Civil Service Retirement System claims was 55 calendar
days; actual time was 54 calendar days. For Federal Employees Retirement System claims,
the target time was 150 calendar days; actual time was 101 calendar days.




Page 34                                                      GAO-03-115 OPM Challenges
Major Performance and Accountability
Challenges




identified as top management challenges facing OPM at some point over
the last 2 years.

In January 2002, OPM’s OIG removed fraud and abuse in FEHBP from its
list of top challenges facing OPM because it found no material weaknesses
and fewer errors in the program. In fiscal year 2001, erroneous health
benefit payments constituted less than 1 percent of total health benefit
payments. However, the OIG still recognizes that health care fraud is a
nationwide problem and that FEHBP continues to be subjected to this
problem.

Regarding improving performance of the health benefits program,
controlling the costs of premiums is a great concern to the government
because it pays, on average, 72 percent of the total premium, according
OPM’s OIG. The OIG noted that OPM is often limited in how it can control
cost increases without also cutting desired health care benefits. We
recently reported that during the period 1991 through 2002, FEHBP
premium increases, overall, have been similar to those for other large
purchasers of employee health benefits, although the increases in the
FEHBP premiums rose slightly faster than other large purchasers from
1997 through 2002. 44 In 2003, health care premiums under FEHBP
increased, on average, 11 percent, continuing a 3-year trend of double-digit
premium increases, although the 2003 premium increase is less than those
for some other large purchasers of employer-sponsored health insurance.
For example, the California Public Employees’ Retirement System
(CalPERS)—the second largest public purchaser of employee health
benefits—announced that its health maintenance organizations premiums
increased an average of 26 percent in 2003. To help mitigate FEHBP
premium increases for 2003, OPM told us that it initiated a four-point
strategy that contributed to these premium increases being below national
trends. OPM’s strategy, in part, included OPM asking FEHBP health plan
carriers to develop and submit innovative benefit proposals that would not
only maintain the quality of but also contain the cost of health care.

We also reported that OPM relies on enrollee choice, competition among
plans, and its annual negotiations with participating plans to help control
premium increases, whereas other large public and private purchasers
adopt different negotiating strategies. For example, we noted that in the


44
 U.S. General Accounting Office, Federal Employees’ Health Plans: Premium Growth and
OPM’s Role in Negotiating Benefits, GAO-03-236 (Washington, D.C.: Dec. 31, 2002).




Page 35                                                   GAO-03-115 OPM Challenges
Major Performance and Accountability
Challenges




past, OPM has encouraged plans to consider cost-containment strategies,
such as increased use of generic drugs and expansion of preferred provider
organizations, to lower the cost of premiums. For the 2003 federal health
benefits open season, OPM encouraged plans to consider cost-containment
strategies such as increasing enrollees’ out-of-pocket costs and
emphasizing care management for enrollees with chronic conditions.
Other major purchasers use other approaches to lower the cost of health
benefit premiums. For example, CalPERS and General Motors negotiate
based on standard benefit packages, and at the end of negotiations can
decide not to include a plan that does not meet their cost or quality
standards.

Regarding financial oversight of FEHBP, OPM’s OIG reported in January
2002 that OPM has taken steps to provide more effective financial oversight
of the program, such as issuing an Audit Guide that requires experienced-
rated carriers to obtain an annual audit of FEHBP activities and to report
on their internal control structures. However, the OIG also reported that
OPM still needs to improve its oversight and monitoring of the
reconciliation of monies paid as premiums to participating community-
rated carriers with the enrollees for whom they were being paid. The OIG
noted that because OPM’s existing systems were not designed to reconcile
differences between enrollment and premium payments, the potential
exists for carriers to provide benefits to employees who are not covered by
their plans at the time services are rendered. To address this problem,
OPM implemented the Centralized Enrollment Clearinghouse System in the
summer of 2002. This system is expected to facilitate the carrier and
agency reconciliation process.




Page 36                                            GAO-03-115 OPM Challenges
GAO Contacts




               Subject(s) covered in this report           Contact person
               Strategic human capital management          J. Christopher Mihm, Director
               leadership and oversight                    Strategic Issues
                                                           (202) 512-6806
               Agency transformation and workforce         mihmj@gao.gov
               realignment
               Information security                        Robert F. Dacey, Director
                                                           Information Technology
                                                           (202) 512-3317
                                                           daceyr@gao.gov
               Financial management                        Linda M. Calbom, Director
                                                           Financial Management and Assurance
                                                           (202) 512-9508
                                                           calboml@gao.gov
               Federal retirement program administration   Barbara D. Bovbjerg, Director
                                                           Education, Workforce, and Income
                                                           Security
                                                           (202) 512-7215
                                                           bovbjergb@gao.gov
               Federal health benefits program             Kathryn G. Allen, Director
               administration                              Health Care
                                                           (202) 512-7118
                                                           allenk@gao.gov




               Page 37                                                    GAO-03-115 OPM Challenges
Related GAO Products



Human Capital          High-Risk Series: Strategic Human Capital Management. GAO-03-120.
                       Washington, D.C.: January 2003.

                       Acquisition Workforce: Status of Agency Efforts to Address Future Needs.
                       GAO-03-55. Washington, D.C.: December 18, 2002.

                       Highlights of a GAO Forum: Mergers and Transformation—Lessons
                       Learned for a Department of Homeland Security and Other Federal
                       Agencies. GAO-03-293SP. Washington, D.C: November 14, 2002.

                       Managing for Results: Using Strategic Human Capital Management to
                       Drive Transformational Change. GAO-02-940T. Washington, D.C.: July 15,
                       2002.

                       Air Traffic Control: FAA Needs to Better Prepare for Impending Wave of
                       Controller Attrition. GAO-02-591. Washington, D.C.: June 14, 2002.

                       A Model of Strategic Human Capital Management. GAO-02-373SP.
                       Washington, D.C.: March 15, 2002.

                       SEC Operations: Increased Workload Creates Challenges. GAO-02-302.
                       Washington, D.C.: March 5, 2002.

                       Federal Employee Retirements: Expected Increase Over the Next 5 Years
                       Illustrates Need for Workforce Planning. GAO-01-509. Washington, D.C.:
                       April 27, 2001.

                       High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January
                       2001.

                       Senior Executive Service: Retirement Trends Underscore the Importance
                       of Succession Planning. GAO/GGD-00-113BR. Washington, D.C.: May 12,
                       2000.



Homeland Security      Homeland Security: Critical Design and Implementation Issues. GAO-02-
                       957T. Washington, D.C.: July 17, 2002.



Information Security   Information Security: Additional Actions Needed to Fully Implement
                       Reform Legislation. GAO-02-470T. Washington, D.C.: March 6, 2002.



                       Page 38                                          GAO-03-115 OPM Challenges
                      Related GAO Products




Office of Personnel   Federal Employees’ Health Plans: Premium Growth and OPM’s Role in
Management            Negotiating Benefits. GAO-03-236. Washington, D.C.: December 31, 2002.

                      Office of Personnel Management: Status of Achieving Key Outcomes and
                      Addressing Major Management Challenges. GAO-01-884. Washington,
                      D.C.: July 9, 2001.




                      Page 39                                          GAO-03-115 OPM Challenges
Performance and Accountability and High-
Risk Series

              Major Management Challenges and Program Risks: A Governmentwide
              Perspective. GAO-03-95.

              Major Management Challenges and Program Risks: Department of
              Agriculture. GAO-03-96.

              Major Management Challenges and Program Risks: Department of
              Commerce. GAO-03-97.

              Major Management Challenges and Program Risks: Department of
              Defense. GAO-03-98.

              Major Management Challenges and Program Risks: Department of
              Education. GAO-03-99.

              Major Management Challenges and Program Risks: Department of
              Energy. GAO-03-100.

              Major Management Challenges and Program Risks: Department of
              Health and Human Services. GAO-03-101.

              Major Management Challenges and Program Risks: Department of
              Homeland Security. GAO-03-102.

              Major Management Challenges and Program Risks: Department of
              Housing and Urban Development. GAO-03-103.

              Major Management Challenges and Program Risks: Department of the
              Interior. GAO-03-104.

              Major Management Challenges and Program Risks: Department of
              Justice. GAO-03-105.

              Major Management Challenges and Program Risks: Department of
              Labor. GAO-03-106.

              Major Management Challenges and Program Risks: Department of State.
              GAO-03-107.

              Major Management Challenges and Program Risks: Department of
              Transportation. GAO-03-108.




              Page 40                                       GAO-03-115 OPM Challenges
Performance and Accountability and High-
Risk Series




Major Management Challenges and Program Risks: Department of the
Treasury. GAO-03-109.

Major Management Challenges and Program Risks: Department of
Veterans Affairs. GAO-03-110.

Major Management Challenges and Program Risks: U.S. Agency for
International Development. GAO-03-111.

Major Management Challenges and Program Risks: Environmental
Protection Agency. GAO-03-112.

Major Management Challenges and Program Risks: Federal Emergency
Management Agency. GAO-03-113.

Major Management Challenges and Program Risks: National
Aeronautics and Space Administration. GAO-03-114.

Major Management Challenges and Program Risks: Office of Personnel
Management. GAO-03-115.

Major Management Challenges and Program Risks: Small Business
Administration. GAO-03-116.

Major Management Challenges and Program Risks: Social Security
Administration. GAO-03-117.

Major Management Challenges and Program Risks: U.S. Postal Service.
GAO-03-118.

High-Risk Series: An Update. GAO-03-119.

High-Risk Series: Strategic Human Capital Management. GAO-03-120.

High-Risk Series: Protecting Information Systems Supporting the
Federal Government and the Nation’s Critical Infrastructures. GAO-03-
121.

High-Risk Series: Federal Real Property. GAO-03-122.




Page 41                                         GAO-03-115 OPM Challenges
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