oversight

Human Capital: The Department of Health and Human Service's and Environmental Protection Agency's Use of Special Pay Rates for Consultants and Scientists

Published by the Government Accountability Office on 2012-09-14.

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

                             United States Government Accountability Office

GAO                          Testimony
                             Before the Subcommittee on Health,
                             Committee on Energy and Commerce,
                             House of Representatives

                             HUMAN CAPITAL
For Release on Delivery
Expected at 10:00 a.m. EDT
Friday, September 14, 2012



                             The Department of Health
                             and Human Service’s and
                             Environmental Protection
                             Agency’s Use of Special Pay
                             Rates for Consultants and
                             Scientists
                             Statement of
                             Robert Goldenkoff,
                             Director, Strategic Issues
                             Robert Cramer
                             Managing Associate General Counsel




GAO-12-1035T
                                              September 2012

                                              HUMAN CAPITAL
                                              The Department of Health and Human Service’s and
                                              Environmental Protection Agency's Use of Special
                                              Pay Rates for Consultants and Scientists
Highlights of GAO-12-1035T, a testimony
before the Subcommittee on Health,
Committee on Energy and Commerce, House
of Representatives



Why GAO Prepared This                         What GAO Found
Testimony
                                              The Department of Health and Human Services’ (HHS) use of special hiring
HHS and EPA have been using special           authorities under 42 U.S.C. §§ 209(f) and (g) has increased in recent years, from
hiring authority provided under 42            5,361 positions in 2006 to 6,697 positions in 2010, an increase of around 25
U.S.C. §§209(f) and (g)—referred to in        percent. Nearly all HHS Title 42 employees work in one of three HHS operating
this testimony as Title 42—to appoint         divisions: the National Institutes of Health (NIH), the Food and Drug
individuals to fill mission critical          Administration (FDA), and the Centers for Disease Control and Prevention
positions in science and medicine and,        (CDC). Title 42 employees at HHS serve in a variety of areas, including scientific
in many cases, pay them above salary          and medical research support and in senior, director-level leadership positions.
limits usually applicable to federal          At NIH, one-quarter of all employees, and 44 percent of its researchers and
government employees. GAO was                 clinical practitioners, were Title 42 appointees.
asked to review the extent to which
HHS and EPA have (1) used authority           HHS reported that Title 42 enables the agency to quickly fill knowledge gaps so
under Title 42 to appoint and                 medical research can progress and to respond to medical emergencies. HHS
compensate employees since 2006,              further reported Title 42 provides the compensation flexibility needed to compete
and (2) followed applicable agency            with the private sector. In 2010, 1,461 of HHS’s Title 42 employees earned
policy, guidance, and internal controls       salaries over $155,500. The highest base pay amount under the General
for appointments and compensation.            Schedule – the system under which most federal employees are paid – was
GAO was also asked to determine if
                                              $155,500 in 2010. Under certain types of Title 42 appointments, statutory pay
there are statutory caps on pay for
                                              caps may apply. 2010 was the last year of HHS data available at the time of
consultants and scientists appointed
                                              GAO’s review.
pursuant to Title 42.
This testimony is based on GAO’s July         HHS does not have reliable data to manage and provide oversight of its use of
2012 report (GAO-12-692) and a legal          Title 42. Moreover, HHS did not consistently adhere to certain sections of its Title
opinion on whether there are statutory        42 section 209(f) policy. For example, the policy states that 209(f) appointments
caps on pay for consultants and               may only be made after non-Title 42 authorities have failed to yield a qualified
scientists appointed pursuant to 42           candidate, but GAO found few instances where such efforts were documented.
U.S.C. §§ 209(f) or (g). (B-3223357)          HHS has recently issued updated 209(f) policy that addresses most of these
                                              issues. HHS is developing agencywide policy for appointing and compensating
What GAO Recommends                           employees under Title 42 section 209(g), but it is not clear the policy will address
                                              important issues such as documenting the basis for compensation.
In the report on which this testimony is
based, GAO made recommendations
to HHS to improve oversight and               Since 2006, the Environmental Protection Agency (EPA) has used section 209(g)
management of its Title 42 authority          to appoint 17 employees. Fifteen of EPA’s 17 Title 42 employees earned salaries
and a recommendation to EPA to                over $155,500 in 2010. EPA appointment and compensation practices were
improve enforcement of its ethics             generally consistent with its guidance; however, EPA does not have post-
requirements. HHS agreed with GAO’s           appointment procedures in place to ensure Title 42 employees meet ethics
recommendations, while EPA                    requirements to which they have previously agreed.
disagreed, citing actions already taken.
                                              In its legal opinion, GAO concluded that an appropriations pay cap applies to
GAO acknowledged EPA’s plans to
address these issues, but maintained          certain, but not all, employees appointed under 42 U.S.C. §§ 209(f) and (g). If
the recommendation was needed to              Congress desires upper pay limits for appointments not currently subject to the
ensure implementation.                        pay cap, it may wish to consider legislation to specifically establish such limits.




View GAO-12-1035T. For more information,
contact Robert Goldenkoff at (202) 512-2757
or goldenkoffr@gao.gov, or Robert Cramer at
(202) 512-7227 or cramerr@gao.gov.
                                                                                       United States Government Accountability Office
Chairman Pitts, Ranking Member Pallone, Members of the
Subcommittee,

Thank you for the opportunity to be here today to discuss a special hiring
authority used by the Department of Health and Human Services (HHS)
and the Environmental Protection Agency (EPA) to help them overcome
difficulties in recruiting and retaining individuals in medicine, science,
engineering, and other fields in support of their missions. One reason for
these difficulties, according to agency officials, is that salaries available
under typical federal government hiring authorities are not always
competitive with those in the private sector for individuals in these highly
specialized fields. Since 2001, we have designated strategic human
capital management a government-wide high-risk area in part because of
the need to address current and emerging critical skills gaps that are
undermining agencies’ abilities to meet their missions. 1 Effective use of
various human capital flexibilities such as special hiring authority is one
way agencies can be more competitive in the labor market for top notch
employees. At the same time, adequate internal controls are needed to
ensure the flexibilities are used cost-effectively and in accordance with
applicable laws and agency guidance.

One such human capital flexibility that is available only to HHS and EPA
is known informally as Title 42 because it is provided under 42 U.S.C.
§§209(f) and 209(g). 2 Section 209(f) authorizes the employment of
special consultants to assist and advise in the operation of HHS’s Public
Health Service (PHS), while section 209(g) authorizes fellowships in the
PHS for scientists who may be assigned to studies and investigations for
the term of their fellowships. 3 In 2005, Congress provided EPA with the
authority to use section 209 to make a limited number of appointments in
its Office of Research and Development. Congress initially granted this
authority to EPA for fiscal years 2006 through 2011, but Congress
amended the authority twice and currently EPA is permitted to employ up



1
GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: Feb. 2011).
2
 HHS has other special hiring authorities provided under Title 42 of the U.S. Code, but this
testimony deals exclusively with the special hiring authorities under 42 U.S.C. §§ 209 (f)
and (g).
3
 The PHS is comprised of most operating divisions within HHS—including the National
Institutes of Health, the Food and Drug Administration and the Centers for Disease
Control and Prevention—as well as some staff divisions within the Office of the Secretary.




Page 1                                                                        GAO-12-1035T
to 30 persons at any one time through fiscal year 2015. HHS has used
sections 209(f) and (g) and EPA has used section 209(g) to appoint
individuals from the private sector and academia as well as to convert
federal government employees under other pay systems—such as the
General Schedule—to Title 42.

In implementing Title 42, HHS and EPA can set higher pay limits than
those provided under typical civil service hiring authorities. According to
HHS and EPA officials, the pay setting flexibility is needed to compete
with the private sector and academia to recruit and retain critical
personnel. For example, the highest base pay amount in the General
Schedule in 2012 is $155,500. In comparison, per HHS policy, the annual
base salary for many appointments under Title 42 at HHS cannot exceed
$250,000 per calendar year, with total compensation not to exceed
$275,000 unless approved by the Secretary. 4 Similarly, EPA policy caps
annual base salary for Title 42 employees at $250,000, with total
compensation that may not exceed $275,000. As discussed below, under
certain types of Title 42 appointments, statutory pay caps may apply.

To obtain a better understanding of the appointment and compensation
practices under sections 209(f) and 209(g), we were asked to review the
extent to which HHS and EPA have (1) used the authority under sections
209(f) and (g) to appoint and set pay for employees since January 2006,
and (2) followed applicable agency policy, guidance, and internal controls
for appointments and compensation. 5 We were also asked to determine
whether there are any statutory caps on pay for consultants and scientists
appointed under sections 209(f) and (g). This testimony is based on our
report (GAO-12-692) and related legal opinion (B-323357) issued in July
2012 that both addressed the questions above.




4
 The salary and compensation limits were lowered in HHS policy issued in February 2012.
In March 2007, HHS limited annual base salary for employees hired under section 209(f)
to $350,000 and $375,000 in total compensation. These higher limits were in place during
most years of our review of HHS’s Title 42 use (2006 through 2010). Total compensation
at HHS includes base pay; recruitment and retention incentives; and cash awards, such
as performance bonuses.
5
 According to HHS human resource officials, personnel data prior to 2006 were likely not
reliable for our analysis. EPA began using Title 42 in 2006. HHS data are available
through the end of 2010, the last year of complete data available at the time we did our
study; and at EPA, through the end of 2011.




Page 2                                                                      GAO-12-1035T
                        For the report and legal opinion, we analyzed agency Title 42 data,
                        interviewed agency officials, and conducted file reviews. 6 Details on our
                        objectives, scope, and methodology are contained in those two products.
                        The audit work upon which this statement is based was conducted in
                        accordance with generally accepted government auditing standards.
                        Those standards require that we plan and perform the audit to obtain
                        sufficient, appropriate evidence to provide a reasonable basis for our
                        findings and conclusions based on our audit objectives. We believe that
                        the evidence obtained provides a reasonable basis for our findings and
                        conclusions based on our audit objectives.


                        During calendar year 2010, HHS had 6,697 employees who were
HHS Has Increased Its   appointed under sections 209(f) or (g). 7 All but 27 of these employees
Use of Title 42, but    served at the National Institutes of Health (NIH), the Food and Drug
More Reliable Data      Administration (FDA), or the Centers for Disease Control and Prevention
                        (CDC), while the remaining employees served in the Office of the
Could Improve HHS’s     Secretary or within other operating divisions, as shown in figure 1.
Oversight




                        6
                         See GAO, Human Capital: HHS and EPA Can Improve Practices Under Special Hiring
                        Authorities, GAO-12-692 (Washington, D.C.: July 9, 2012), and GAO, Pay for Consultants
                        and Scientists Appointed under Title 42, B-323357 (Washington, D.C.: July 11, 2012).
                        7
                         All years are in calendar years unless otherwise stated. 2010 data was the last year of
                        complete HHS data available at the time of the study.




                        Page 3                                                                       GAO-12-1035T
Figure 1: Most Title 42, Sections 209(f) and (g) Employees Served at NIH, FDA, or
CDC, 2010




The number of employees appointed under sections 209(f) and (g)
increased overall at HHS by 25 percent from 2006 through 2010. Since
2006, the number of Title 42 employees grew by 15 percent at NIH, by 54
percent at FDA, and by 81 percent at CDC, while declining by 48 percent
at the Office of the Secretary and all other operating divisions. HHS
officials attributed the increases in Title 42 employees to, among other
factors, the agency’s response to urgent public health matters. For
example, according to HHS officials, the agency used Title 42 authority to
quickly hire experts needed to develop a vaccine in response to the H1N1
flu pandemic of 2009. HHS officials told us appointment agility associated
with Title 42 is important because many research projects, particularly
those at NIH, are not meant to be long-term and Title 42 appointments –
which are indefinite or temporary term – can align with project time
frames better than hiring full-time permanent staff under regular hiring
authorities. In some cases, the temporary appointment of a researcher
with highly-specialized skills to assist with a limited-scope, limited-
duration study may be more appropriate than a permanent position.

As shown in table 1, NIH relies on Title 42 authority for a greater
percentage of its total workforce than does FDA and CDC. In 2010, 25
percent of all NIH employees were Title 42 employees, while 6 percent of
FDA employees and 10 percent of CDC employees were Title 42. Also,


Page 4                                                                 GAO-12-1035T
                           NIH relied on the use of Title 42 authority for a substantial portion—44
                           percent—of its total research and clinical practitioner workforce.

                           Table 1: NIH Relied on Title 42 for a Greater Percentage of its Total Workforce and
                           Research and Clinical Practitioners than FDA and CDC, 2010

                                                                                          Title 42                                Title 42
                                                          Total                    percentage of                   Total   percentage of
                                                      operating                   total operating          researchers       researchers
                                             Title 42  division                          division           and clinical      and clinical
                            Agency         employees workforce                         workforce          practitioners     practitioners
                            NIH                    4,879           19,292                            25         11,040                 44
                            FDA                       862          14,617                             6         10,025                  9
                            CDC                       929            9,707                           10           5,817                16
                           Source: GAO analysis of HHS and OPM’s Central Personnel Data File data.




Title 42 Employees Serve   Title 42 employees at HHS serve in a variety of functional areas, including
in Various Functions       scientific and medical research support and in senior, director-level
                           leadership positions. Base salary ranges for Title 42 employees varied by
                           operating division and occupation. In 2010, almost 60 percent of Title 42
                           employees at NIH served in one of five general occupations: staff
                           scientist, research fellow, senior investigator, clinical research nurse, and
                           clinical fellow. Table 2 describes some of the general responsibilities and
                           duties, and salary data for these occupations at NIH.




                           Page 5                                                                                           GAO-12-1035T
Table 2: Most Common Title 42 Occupations at NIH and Characteristics

Occupation (number of Title 42
employees in 2010)                     Characteristics                                          Salarya
Staff Scientist (1,103)                Supports the long-term research of a senior              •    Base salary range: $82,000-200,000
                                       investigator and independently designs                   •    Average base salary: $118,000
                                       experiments, but does not have
                                                                                                •    Median base salary: $114,000
                                       responsibilities for initiating new research
                                       programs
Research Fellow (666)                  Scientists obtaining experience in biomedical            •    Base salary range: $45,000-112,000
                                       research while providing a service relevant              •    Average base salary: $70,000
                                       to the NIH’s program needs
                                                                                                •    Median base salary: $69,000
                                                                          b
Senior Investigator (521)              Has been granted tenure.                                 •    Base salary range: $117,000-350,000
                                       Some senior investigators are assigned                   •    Average base salary: $192,000
                                       organizational responsibilities in the institute         •    Median base salary: $195,000
                                       or center, that is, section or branch chief
Clinical Research Nurse (347)c         Specializes in the care of research                      •    Base salary range: $62,000-96,000
                                       participants and is responsible for assuring             •    Average and median base salary:
                                       participant safety, formulating patient care                  $78,000
                                       plans, integrity of protocol implementation,
                                       accuracy of data collection, and recording
Clinical Fellow (249)                  Participates in protocol-based clinical                  •    Base salary range: $57,000-137,000
                                       research (i.e., research with people serving             •    Average base salary: $84,000
                                       as volunteer participants) as well as
                                                                                                •    Median base salary: $82,000
                                       laboratory research
                                        Source: GAO analysis of HHS data and documents.
                                        a
                                            Salary figures as of 2010. All figures are rounded to the nearest thousand dollars.
                                        b
                                         Tenure at NIH differs from tenure at an academic institution. Tenure at NIH is defined as the long-
                                        term commitment of salary, personnel, and research resources needed to conduct an independent
                                        research program within the scope of the institutes’ missions, and subject to regular review. Tenure
                                        may be conferred on Title 42 employees despite the nonpermanent nature of the position.
                                        c
                                         As part of the sunsetting of the Clinical Research Support pilot, NIH is currently phasing out Title 42
                                        appointments for nurses.


                                        At FDA and CDC, the most common occupation of Title 42 employees is
                                        a fellow. In 2010, 340 (40 percent) of FDA’s Title 42 employees were staff
                                        fellows. These positions are for promising research and regulatory review
                                        scientists. FDA staff fellows’ base salary range in 2010 is approximately
                                        $42,000 to $224,000, with an average base salary of about $96,000 and
                                        a median salary of about $92,000. According to FDA policy, total
                                        compensation for staff fellows may not exceed certain pay limits
                                        ($155,500 in 2010) unless the FDA Director of Human Resources and
                                        Management and Services grants an exception. Three of 340 staff fellows
                                        at FDA earned more than $155,500 in 2010.




                                        Page 6                                                                                    GAO-12-1035T
                           Of CDC’s Title 42 employees in 2010, 687 (74 percent) were senior
                           service fellows or associate service fellows appointed to study areas such
                           as basic and applied research in medical, physical, biological,
                           mathematical, social, biometric, epidemiological, behavioral, computer
                           sciences, and other fields directly related to the mission of CDC. Senior
                           service fellows had a base salary range in 2010 of approximately $49,000
                           to $155,500, with an average base salary of about $103,000 and a
                           median salary of about $100,000. Associate service fellows had a base
                           salary range of approximately $44,000 to $93,000, with an average base
                           salary of about $69,000 and a median salary of about $71,000.


Some Title 42 Employees    The average base salary for all HHS Title 42 employees in 2010 was
Are Paid Above Executive   about $116,000 and the median salary was about $101,000. More than
Salary Levels              one-fifth of all Title 42 employees at HHS, however, earned a base salary
                           above Executive Level IV ($155,500 in 2010). There were Title 42
                           employees that earned above $155,500 at NIH, FDA, and CDC.

                           Table 3: HHS Title 42 Employees with Base Salaries within or Exceeding Federal
                           Executive Salary Levels, 2010

                                                                                                      Number of Title 42
                               Executive level                                                             employeesa
                               At or above Executive Level I ($199,700)                                               629
                               Within Executive Levels I and II ($179,700-199,699)                                    319
                               Within Executive Levels II and III ($165,300-179,699)                                  295
                               Within Executive Levels III and IV ($155,500-165,299)                                  218
                               Total                                                                                 1,461
                           Source: GAO analysis of HHS data.
                           a
                           The remaining 5,236 Title 42 employees had salaries below Executive Level IV ($155,500)


                           HHS officials said compensation flexibility helps HHS compete with the
                           private sector and academia to hire and retain highly qualified employees
                           with rare and critical skill sets. Officials further stated the salaries HHS
                           can offer to its top researchers are often not commensurate with private
                           sector salaries. However, they said the higher compensation limits under
                           Title 42 combined with other benefits—such as name recognition and
                           access to advanced research equipment and technology not often
                           available in the private sector or academia—can help offset
                           compensation disparities and make HHS attractive to researchers,
                           doctors, and scientists.




                           Page 7                                                                            GAO-12-1035T
HHS Does Not Have             Our analysis of HHS data found thousands of cases where the section
Reliable Data on the Use of   authority applicable to the Title 42 appointment (section 209 (f) or (g))
its Title 42 Authority        was not recorded in the HHS central personnel transaction system.
                              Although HHS relies on Title 42 authority to fill some of its most critical
                              scientific and medical research positions, the lack of complete data and
                              guidance may limit the agency’s ability to strategically manage the use of
                              the authority. For example, the lack of section authority data in its
                              personnel system has made it difficult for HHS to provide accurate
                              headcounts of employees hired under sections 209(f) or (g) and resulted
                              in HHS overstating the number and operating division of its employees
                              hired under these sections to oversight bodies, including Congress, and
                              in response to our audit. HHS also erroneously reported appointments
                              made under sections 209(f) and (g) that would have been prohibited by
                              law, indicating the agency’s data management practices may preclude
                              effective oversight of the program and workforce planning. Effective
                              oversight is particularly important in light of HHS’s increasing use of Title
                              42 and the number of employees earning salaries higher than most
                              federal employees.

                              To address this issue, we recommended that HHS ensure section
                              authority—sections 209(f) or (g)—be consistently entered in appropriate
                              automated personnel systems, such as making section authority a
                              required, drop-down field in its personnel system where this information is
                              initially entered. HHS agreed with our recommendation and stated that,
                              as it moves forward with the implementation of a new human resources
                              system, it will explore the possibility of using a drop-down field to enter
                              Title 42 section authority. HHS also said that its Office of Human
                              Resources will continue to work with Operating and Staff Divisions to
                              ensure that Title 42 personnel actions are processed in a consistent and
                              accurate manner.


HHS Did Not Consistently      HHS did not consistently adhere to certain sections of its policy for hiring
Adhere to Sections of its     and converting employees under section 209(f). For example,
Title 42 Policy and Lacks
                              •   Special consultants may only be appointed under section 209(f) to fill
Guidance for Some                 scientific positions; however, the policy included no formal criteria and
Authority Provisions              did not define “scientific.” We reviewed the statement of duties for 28
                                  section 209(f) cases and found in 5 cases that it was unclear the
                                  position was scientific.

                              •   Appointments can only be made after other available personnel
                                  systems have failed to yield candidates that possess critical scientific



                              Page 8                                                            GAO-12-1035T
    expertise. These recruitment and retention efforts, according to the
    policy, are to be documented prior to making an appointment under
    section 209(f). In only 5 of the 28 section 209(f) case files we
    reviewed was there documentation showing HHS considered other
    personnel systems before using Title 42.

•   209(f) policy also includes guidance for converting employees from
    other pay systems into special consultant positions under Title 42.
    The policy states conversions are only to be used in exceptional
    circumstances and employees may only be converted to the Title 42
    program if they meet all conversion criteria, such as providing
    leadership in a field equivalent to a full-tenured professor in academia
    and recognition as a national or international expert in the field. In our
    case reviews of six conversions to section 209(f), two cases met each
    of the requirements for converting employees. For other case files we
    reviewed, documentation provided by HHS did not support the basis
    for conversion.

In August 2010, HHS’s Office of Human Resources reviewed the
agency’s use of section 209(f) authority and found two issues similar to
those found in our review. Recommendations from the audit report
became the basis for a new 209(f) policy, which was issued in February
2012. 8 Significant changes to the 209(f) policy include a definition of
“scientific position”; a requirement that the same recruitment plan be used
for both Title 5 and Title 42 employees to demonstrate that other available
personnel systems failed to yield qualified candidates, and identifies
specific positions and/or categories of positions at NIH that may be filled
through section 209(f) without “exhausting” other recruitment mechanisms
or authorities.

While these changes to 209(f) policy are a step in the right direction, they
still do not address the need to strengthen documentation to better
support the use of Title 42. Therefore, we recommended that HHS, as
part of its effort to implement new section 209(f) guidance, systematically
document how policy requirements were fulfilled when hiring or
converting 209(f) employees. HHS agreed with our recommendation and
stated that its updated policy was, in part, due to our findings.




8
 HHS Human Resources Manual, Instruction 42-1: Appointment of 42 U.S.C. § 209(f)
Special Consultants (Feb. 15, 2012).




Page 9                                                                 GAO-12-1035T
For appointments made under Title 42, section 209(g), HHS has no
agencywide implementing policy for appointing and compensating
employees hired as fellows, including details about what documents are
needed to support the basis for appointments and compensation. We
have previously reported that agencies should have clearly defined, well-
documented, transparent, and consistently applied criteria for appointing
and compensating personnel. 9 In lieu of guidance from HHS, the
individual operating divisions established their own policies and guidance
for appointing and compensating fellows under 209(g), each with different
levels of detail, compensation limits, and documentation requirements.
The lack of an HHS-wide policy poses the risk that compensation
decisions for section 209(g) fellows at HHS may not be made consistently
across operating divisions. Although some guidance exists at the
operating division level for setting compensation targets, in 11 of the 20
case files we reviewed of section 209(g) fellows, we found either no or
insufficient documentation to support the basis for compensation. Without
an agencywide policy, an agency cannot be assured that it is allocating its
resources most appropriately.

Therefore, we recommended that HHS, as part of its ongoing effort to
develop agencywide policy for appointing and compensating employees
hired under section 209(g), ensure the policy requires and provides
guidance for documenting the basis for employee compensation. HHS
agreed with our recommendation and stated that the section 209(g) policy
will be implemented in the near future.




9
 GAO, A Model of Strategic Human Capital Management, GAO-02-373SP (Washington,
D.C.: Mar. 15, 2002).




Page 10                                                            GAO-12-1035T
                        Congress provided EPA with the authority to use Title 42 to employ up to
EPA Employs a           30 persons at any one time through fiscal year 2015. At the time of our
Limited Number of       study, EPA had appointed 17 fellows in its Office of Research and
                        Development from 2006 to 2011 under section 209(g) and all 17 fellows
Title 42 Fellows in     remained with EPA. Appointments for the three fellows hired in 2006 have
Leadership Positions    been renewed for another 5-year term. 10 Figure 2 shows the cumulative
and Could Improve       onboard Title 42 staff, by new hire or conversion.

Procedures for          Figure 2: Cumulative Number of EPA Title 42 Staff, 2006 through 2011
Resolving Potential
Conflicts of Interest




                        10
                          EPA policy provides that at the conclusion of their term, fellows with Title 5 permanent
                        competitive status based on prior employment retain reinstatement eligibility but have no
                        guarantee of return to a Title 5 position. Fellows who do not have Title 5 competitive
                        status based on prior employment obtain no reinstatement eligibility due to service in a
                        Title 42 position. In this case, if the employee is interested in a Title 5 position following
                        the Title 42 appointment, they are subject to the normal application and competitive
                        selection process.




                        Page 11                                                                          GAO-12-1035T
According to EPA officials, the agency has identified mission critical
personnel needs and is actively recruiting to fill the 13 remaining
authorized Title 42 positions. The agency has no plans to use authority
under section 209(f) at this time, but may consider it in the future. Officials
told us EPA would need to develop guidance for implementing section
209(f) before using the authority. 11

Title 42 fellows at EPA lead scientific research initiatives, are considered
experts in the related scientific discipline, and some manage or direct a
division or office. According to EPA officials, Title 42 provides two
important tools EPA needs to achieve its mission: (1) the flexibility to be
competitive in recruiting top experts who are also sought after by other
federal agencies, private industry, and academia; and (2) the appointment
flexibility needed to align experts with specific skills to changing scientific
priorities. EPA officials stated it is not the agency’s intention to hire a
fellow long-term under Title 42, but rather employ the individual as long
as a priority remains high.

Annual salaries for Title 42 fellows at EPA range from approximately
$153,000 to $216,000, with an average salary of about $176,000 and a
median salary of about $171,000. As shown in table 4, 15 of the 17 EPA
fellows had salaries exceeding Executive Level IV.

Table 4: Number of EPA Title 42 Fellows with Salaries in Federal Executive Salary
Levels, 2010

 Executive level                                                    Number of fellows
 At or above Executive Level I ($199,700)                                             3
 Within Executive Levels I and II ($179,700-199,699)                                  3
 Within Executive Levels II and III ($165,300-179,699)                                4
 Within Executive Levels III and IV ($155,500-165,299)                                5
 Below Executive Level IV ($155,500)                                                  2
Source: GAO analysis of EPA data.




11
  In response to a National Academy of Sciences National Research Council report in
2000, EPA modeled its Title 42 program after the NIH program. NIH had already
implemented its program and many structural aspects of the program are similar.




Page 12                                                                   GAO-12-1035T
In December 2010, EPA began a pilot of using market salary data to
estimate salaries of what Title 42 candidates could earn in positions
outside of government given their education, experience, professional
standing, and other factors. EPA used the market salary data to inform
salary negotiations for the five fellows appointed since the implementation
of the pilot. According to EPA officials, the market salary pilot concludes
in December 2012 and its effect will be analyzed at that time.

In appointing Title 42 fellows, EPA generally followed appointment
guidance described in its Title 42 Operations Manual. EPA could,
however, improve procedures for resolving potential conflicts of interest.
We conducted 10 case file reviews of EPA Title 42 employees and in two
cases we reviewed, employees had potential conflict of interest situations
arise after appointment resulting, in part, from the agency’s failure to
ensure Title 42 employees followed agreed upon ethics requirements.
EPA acknowledged it could improve its postappointment ethics oversight
and reported it has plans to ensure that Title 42 employees follow
requirements such as submitting confirmation of stock divestitures to its
General Counsel, for example, and other ethics requirements. However,
at the time of our review, EPA had not provided us with implementation
plans or timeframes for its improved oversight.

To address this issue, we recommended that EPA, as part of its efforts to
improve postappointment ethics oversight, develop and document a
systematic approach for ensuring Title 42 employees are compliant with
ethics requirements after appointment. EPA disagreed with our
recommendation, citing certain actions already taken, such as a plan to
require proof of compliance with ethics agreements. We acknowledged
EPA’s plans to address these issues, but maintained the recommendation
was needed to ensure implementation because the two ethics issues we
reported occurred over 2 years ago.




Page 13                                                        GAO-12-1035T
                        Our legal opinion, issued on July 11, 2012, responded to a Congressional
Legal Opinion           request for our views on whether there are statutory caps on pay for
Whether There are       consultants and scientists appointed pursuant to 42 U.S.C. §§ 209(f) or
                        (g). 12 We concluded that an appropriations law provision enacted as part
Statutory Caps on Pay   of the Fiscal Year 1993 Labor-HHS-Education Appropriations Act
for Consultants and     established a permanent appropriation cap on the pay of individuals
Scientists Appointed    appointed on a limited-time basis under 42 U.S.C. §§ 209(f) or (g) at
                        agencies funded through that Act. With regard to individuals not subject to
under Title 42          this cap, we concluded further that two other pay limitations set forth in
                        Title 5 of the U.S. Code that we considered do not apply to appointments
                        made pursuant to 42 U.S.C. §§ 209(f) or (g).

                        Federal pay systems are extremely complex, and we encountered
                        challenges in attempting to resolve ambiguities arising from pay laws
                        enacted at different times over nearly 70 years. Sections 209(f) and (g) of
                        title 42 were enacted in 1944 and have not been amended since that
                        time. There have, however, been many significant changes in related
                        laws and regulations that were relevant to our consideration of the issues
                        raised. Consequently, we conducted extensive research of legislative
                        history to aid in our understanding of congressional actions and the
                        interplay of the laws addressed below, and examined regulations issued
                        pursuant to these provisions over the last 65 years. We also solicited the
                        views of HHS, the Office of Personnel Management (OPM), and the EPA.

                        The appropriations for each fiscal year from 1957 through 1993 included
                        a cap on pay for “consultants or individual scientists appointed for limited
                        periods of time” (underscoring added) pursuant to 42 U.S.C. §§ 209(f) or
                        (g). The appropriations for fiscal year 1993 established a permanent cap
                        on such compensation, providing that pay may be set at rates not to
                        exceed “the per diem rate equivalent to the maximum rate payable for
                        senior-level positions under 5 U.S.C. § 5376.” This cap currently limits
                        base pay to $155,500. Our review of the legislative history of the first
                        appropriation to contain the limit indicated that it was enacted due to other
                        restrictions in law on compensation as an increase over then-existing pay
                        authority.




                        12
                         B-323357, July 11, 2012.




                        Page 14                                                          GAO-12-1035T
We considered the meaning of the phrase “for limited periods of time,”
which has appeared in all of the relevant appropriations provisions from
1956 to 1993. In 1956, when this language was first included in the
appropriations law, the Public Health Service’s regulations included time
limitations on employment. Thus the time limit generally applied to all
consultant appointments made under section 209(f) beginning in 1947,
when the regulation containing the limit was first promulgated, unless
“special circumstances” led the administrator to approve an extension.
Further, the limit was in effect in 1956, when the first appropriations law
provision referring to consultants appointed for “limited periods of time”
was enacted.

However, this time limitation was removed from the regulations in 1966.
31 Fed. Reg. 12,939 (Oct. 5, 1966). Therefore, the appropriations pay
cap applied to all section 209(f) consultants from 1956 until HHS changed
the regulations in 1966 allowing for the hiring of consultants for indefinite
periods.

Although the regulations implementing section 209(f) no longer included a
time limitation on the employment of special consultants after 1966, the
appropriations provisions for 1967 and subsequent years, using virtually
identical language each year, imposed a cap only on pay of “consultants
or individual scientists appointed for limited periods of time pursuant to
[42 U.S.C. §§ 209(f) or (g)].” The appropriations restriction did not impose
any cap on pay for those consultants whose appointments were not
limited in time. As a result, after the 1966 regulations were promulgated
and continuing to the present, HHS has employed two categories of
consultants: those appointed for limited periods of time, to whom the pay
cap applies, and consultants appointed for indefinite periods, to whom the
pay cap does not apply.

Importantly, the appropriations pay restriction is applicable only to
payments made from Labor-HHS-Education Appropriations Acts. Three
components of the Public Health Service (the Agency for Toxic
Substances and Disease Registrations, the Food and Drug
Administration, and the Indian Health Services) are funded by
appropriations acts other than the Labor-HHS-Education Appropriations
Act, and are not covered by a restriction on funds appropriated under that
Act. Thus, we concluded that there is a cap of Executive Level IV on the
pay of consultants and scientists employed for limited periods of time
pursuant to 42 U.S.C. §§ 209(f) or (g) in all but three of the Public Health
Service Agencies.



Page 15                                                          GAO-12-1035T
With respect to individuals not covered by the appropriation cap, we
examined the applicability of two pay limitations found in title 5: section
3109, which limits pay for consultants “procure[d]” on a temporary or
intermittent basis, and section 5373, which limits pay fixed by
administrative action.

Section 3109, enacted in 1946, establishes specific legal parameters,
including a pay cap and a limit on appointment duration, governing the
employment of experts or consultants whose appointment must be
authorized by an “appropriation or other statute.” That pay cap applies
unless a different cap is authorized by the appropriation or another
statute.

Beginning in 1956, Congressional actions signaled that section 3109 did
not apply to section 209(f) appointments. From1956 and continuing until
1993, Congress enacted provisions yearly in appropriations acts that set
a cap (which may or may not have been higher than that found in section
3109 in any given year) for all those appointed pursuant to sections 209(f)
or (g) for a limited period of time and funded out of the Labor-HHS-
Education Appropriations Act. From fiscal year 1970 until the provisions
became permanent in fiscal year 1993, the appropriations acts for HHS
contained separate provisions placing identical compensation limits for
experts and consultants subject to 5 U.S.C. § 3109, and for consultants
and scientists appointed for limited periods of time pursuant to 42 U.S.C.
§§ 209(f) or (g). Identical provisions would have been unnecessary if
Congress believed that the limitations in 5 U.S.C. § 3109 would apply to
42 U.S.C. §§ 209(f) and (g) consultants or scientists.

Further, in 1992, Congress added subsection (d) to section 3109. It
directs OPM to prescribe regulations necessary to administer section
3109. OPM subsequently issued regulations which provide that section
3109 does not apply to the appointment of experts or consultants under
other authorities. 5 C.F.R. § 304.101. It also informed us that it “does not
consider the cap under 5 U.S.C. § 3109 to apply to consultants under 42
U.S.C. § 209(f).” This interpretation is entitled to considerable weight
since OPM is the agency charged with administering section 3109.

Based on our review, we found that Congress had not spoken directly on
the applicability of section 3109 to the authorities in 42 U.S.C. 209(f) and
(g) and that OPM’s interpretation was reasonable. Therefore, we
concluded that the provisions of section 3109 do not apply to consultants
employed pursuant to 42 U.S.C. § 209(f).



Page 16                                                           GAO-12-1035T
The other pay cap that we considered is found in section 5373 of title 5 of
the United States Code, which places limits on pay fixed by administrative
action. Pay fixed by administrative action refers to the various pay-setting
authorities in which pay is determined by the agency instead of pursuant
to pay rates under otherwise applicable statutory pay systems, such as
the General Schedule. Congress first enacted section 5373 in 1964, 20
years after it passed sections 209(f) and (g). Section 5373 limits pay set
by administrative action to no more than the rate for level IV of the
Executive Schedule, and lists specific pay authorities which are excepted
from coverage. The rate for level IV of the Executive Schedule is currently
$155,500 per year. 42 U.S.C. §§ 209(f) and (g) are not among the
authorities explicitly excepted from section 5373.

We looked at multiple issues in determining that the section 5373 cap
does not apply to 42 U.S.C. §§ 209(f) or (g) appointees. We found no
evidence that Congress had considered the section 209 authorities when
the administrative pay cap was enacted. Sections 209(f) and (g) allow for
compensation “without regard to the Classification Act of 1923.” We
parsed laws enacted in 1923 and later to see if this language should be
interpreted to create an exemption from section 5373, which of course
was enacted over 40 years after the Classification Act of 1923, and after
several additional pay laws had also been enacted. Finally, we looked at
Congressional action in appropriations passed from 1964 through 1993,
and in extending section 209 authority to EPA in 2005 and in 2009. These
Congressional actions led us to believe that it did not intend for the 5
U.S.C. § 5373 pay cap to apply to consultants and scientists hired
pursuant to 42 U.S.C. §§ 209(f) and (g). Given the evidence of how
Congress viewed the authority, we did not object to HHS’s interpretation
that the 1993 appropriations cap is the only restriction on its authority to
compensate individuals appointed under 42 U.S.C. §§ 209(f) or (g).

In conclusion, with respect to the first issue, the 1993 appropriations act
unequivocally limits the pay of consultants and scientists appointed for
limited periods of time pursuant to 42 U.S.C. §§ 209(f) or (g) at agencies
that are funded by Labor-HHS-Education Appropriations Acts. With
regard to the two title 5 limitations, we think that the pay limitations do not
apply to appointments made pursuant to 42 U.S.C. §§ 209(f) or (g).




Page 17                                                            GAO-12-1035T
               The statutory pay provisions we analyzed, as mentioned earlier, were
               enacted over the course of nearly 70 years, and are in different federal
               pay systems. As one court has observed, “although some pay systems
               are ‘linked’ to one another,” they have not been “fastidiously integrated” to
               achieve uniform federal compensation policies.” 13 In this case, the issues
               raised – in particular the applicability of the two title 5 limitations on the
               title 42 authority to hire special consultants and fellows – reflect the
               difficulty of applying distinct statutory schemes to determine whether
               specific pay limits apply. Thus if Congress desires upper pay limits for
               appointments under sections 209(f) and (g), it may wish to consider
               amending these provisions to specifically establish such limits.


               Both HHS and EPA have used Title 42 to recruit and retain highly skilled,
Concluding     in-demand personnel to government service in order to execute their
Observations   missions. At the same time, HHS’s lack of complete data and guidance
               on its use of Title 42 may limit the agency’s ability to strategically manage
               its use and provide oversight of the authority. Effective monitoring of the
               use of Title 42 is particularly important in light of HHS’s increasing use of
               the authority and the number of employees earning salaries higher than
               most federal employees.

               EPA generally followed its Title 42 policies and has incorporated some
               modifications to improve its appointment and compensation practices;
               however, EPA’s current ethics guidance does not sufficiently ensure Title
               42 employees meet ethics requirements after appointment. EPA
               acknowledged it could improve its post-appointment ethics oversight and
               reported it has plans to ensure that Title 42 employees send its General
               Counsel confirmation of stock divestitures and other ethics requirements.
               However, at the time of our review, EPA had not provided us with
               implementation plans or timeframes. Although its plans appear to be
               prudent steps for addressing the specific issues that arose in the cases
               we reported, it will be important for EPA to implement them as soon as
               possible to mitigate the risk of future potential conflict of interest issues.




               13
                 International Organization of Masters, Mates & Pilots v. Brown, 698 F.2d 536, 539
               (C.A.D.C. 1983).




               Page 18                                                                    GAO-12-1035T
                   Going forward, our recommendations to HHS and EPA to strengthen
                   certain practices under Title 42, if implemented, should help strengthen
                   the management and oversight of this special hiring authority.


                   Chairman Pitts, Ranking Member Pallone, and Members of the
                   Subcommittee, this completes our prepared statement. We would be
                   pleased to respond to any questions you or others may have at this time.


                   For further information regarding this statement, please contact Robert
GAO Contacts and   Cramer, Managing Associate General Counsel, at (202) 512-7227, or
Staff              Cramerr@gao.gov, or Robert Goldenkoff, Director, Strategic Issues, at
                   (202) 512-2757, or Goldenkoffr@gao.gov. Contact points for our Offices
Acknowledgments    of Congressional Relations and Public Affairs may be found on the last
                   page of this statement. Individuals making key contributions to this
                   testimony include Trina Lewis, Assistant Director; Shea Bader, Analyst-In-
                   Charge; Dewi Djunaidy; Karin Fangman; and Sabrina Streagle.




(451013)
                   Page 19                                                        GAO-12-1035T
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