oversight

Results Act: Observations on the Office of Personnel Management's Fiscal Year 2000 Annual Performance Plan

Published by the Government Accountability Office on 1999-07-30.

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

                 United States General Accounting Office

GAO              Report to the Chairman, Subcommittee
                 on Civil Service, Committee on
                 Government Reform,
                 House of Representatives

July 1999
                 RESULTS ACT
                 Observations on the
                 Office of Personnel
                 Management’s Fiscal
                 Year 2000 Annual
                 Performance Plan




GAO/GGD-99-125
United States General Accounting Office                                             General Government Division
Washington, D.C. 20548




                                    B-283035

                                    July 30, 1999

                                    The Honorable Joe Scarborough
                                    Chairman
                                    Subcommittee on Civil Service
                                    Committee on Government Reform
                                    House of Representatives

                                    Dear Mr. Chairman:

                                    As requested, this report provides our observations on the Office of
                                    Personnel Management’s (OPM) fiscal year 2000 annual performance plan.
                                    The Government Performance and Results Act of 1993 (the Results Act)
                                    requires executive agencies, beginning with fiscal year 1999, to develop
                                    annual performance plans covering each program activity set forth in the
                                    agencies’ budgets.

                                    Successful implementation of a performance-based management system,
                                    as envisioned by the Results Act, represents a significant challenge that
                                    requires sustained agency attention. Our observations are intended to
                                    assist OPM in its continuing efforts to improve its plan. We assessed
                                    whether OPM’s plan complies with the criteria set forth in the Results Act
                                    and related guidance.

                                    Past work done by others and us has documented poor workforce
Results in Brief                    planning in federal agencies that can hinder their movement toward
                                    performance-based management. Major human capital challenges are also
                                    emerging, such as the aging of the federal workforce, skills imbalances
                                    that arose during downsizing, and a highly competitive market for the
                                    kinds of talented employees federal agencies need to meet modern
                                    demands for efficient and effective services. Because OPM is the central
                                    management agency responsible for assisting the President and agencies in
                                    managing the workforce, OPM’s leadership will be critical to addressing
                                    the government’s human capital challenges.

                                    OPM’s fiscal year 2000 annual performance plan provides a general picture
                                    of intended performance across the agency. We found that the plan’s
                                    performance goals address OPM’s major programs and priorities. For
                                    example, the plan identifies designing a workforce planning, analysis, and
                                    forecasting model to be used by agencies to prepare them to deal with
                                    future potential staffing challenges as a fiscal year 2000 priority for OPM.



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             However, OPM’s plan could have been more useful to decisionmakers in
             some areas, if it contained cost-based performance measures to show how
             efficiently OPM performs certain operations and activities, such as
             processing civil service retirement payments.

             OPM’s annual performance plan includes a general discussion of strategies
             and resources the agency will use to achieve its goals. For each of its
             goals, the plan discusses a strategy for achieving that goal. For example,
             the plan discusses OPM’s strategy to enhance its information security
             program by conducting internal and external evaluations of its systems.

             OPM’s fiscal year 2000 annual performance plan provides a fuller
             discussion of its performance information than its fiscal year 1999 annual
             performance plan but overall provides limited confidence that agency
             performance information will be credible. Although the plan discusses
             OPM’s verification and validation of its performance measures, the
             discussion does not always provide assurance that the methods used will
             be reliable. For example, the plan proposes using results of several surveys
             for verification and validation with response rates ranging up to 57
             percent. The plan proposes using survey results of a sample of human
             resources specialists as a key element in its measurement program, but the
             survey received only a 29 percent response rate. In general, the lower the
             response rates the larger the uncertainty about the reliability and validity
             of the survey results.

             Overall, OPM’s fiscal year 2000 annual performance plan represents a
             moderate improvement over the fiscal year 1999 plan in that it addresses a
             number of the weaknesses that we identified in our assessment of the
                                   1
             fiscal year 1999 plan.

             OPM is the central management agency of the federal government charged
Background   with administering and enforcing federal civil service laws, regulations,
             and rules and aiding the President in carrying out his responsibilities for
             managing the federal workforce. OPM has policy responsibilities related
             to hiring, managing, compensating, and separating federal employees.
             Moreover, OPM endeavors to ensure compliance with civil service policies
             through a program of overseeing the personnel activities of covered
             federal agencies.



             1
              Results Act: Observations on the Office of Personnel Management’s Annual Performance Plan
             (GAO/GGD-98-130, July 28, 1998).




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OPM helps federal program managers in their personnel responsibilities
through a range of programs. For example, OPM sponsors various
seminars on human resources issues, runs executive and leadership
programs, provides guidance, and develops special materials such as its
self-paced materials for managers dealing with poorly performing
employees. OPM also promulgates regulations related to federal employee
benefits, including retirement, health, and life insurance benefits. OPM
directly administers all or major portions of these benefit programs, which
serve millions of current and former federal employees.

Top OPM officials said they envision OPM as providing human resource
management (HRM) leadership for the federal government. Through that
leadership, OPM officials said they intend to ensure that the merit
principles that are the basis for the federal civil service system are
followed throughout the government and that HRM is effective.

As the government’s central personnel management agency, OPM has a
critical role in ensuring that the Results Act’s goal of improved
performance throughout the government is complemented by supportive
and effective human capital management policies and practices. Although
Congress has provided statutory frameworks for financial and information
technology management and the Results Act for performance-based
management practices, it has not addressed human capital management
practices in a systematic fashion since the 1978 Civil Service Reform Act.
In the interim, additional challenges to effective human capital practices
have arisen.

OPM’s success in ensuring that human capital management policies and
practices support results-oriented management depends on addressing
these emerging challenges. The standard way of managing human
resources is under pressure, as Congress and the public expects better
performance and agencies compete in an increasingly tight labor market.
Agencies like the Internal Revenue Service, the Federal Aviation
Administration, and the student financial assistance function in the
Department of Education have been granted broad new flexibility in
managing HRM with expectations that organizational performance will
improve. At the same time, a principal tool for achieving organizational
high performance—meaningful recognition of excellent individual
performance—is impeded by a performance appraisal system that
routinely identifies zero, or virtually zero, employees as performing
unacceptably and nearly 80 percent of employees as performing in the
highest two performance categories. These and other challenges impose a
high expectation for planning, thereby communicating a vision for the



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              federal workforce, if OPM is to be an effective leader during this period of
              dynamic change.

              The Results Act is intended to improve the efficiency and effectiveness of
              federal programs by establishing a system to set goals for program
              performance and to measure results. Specifically, the Results Act requires
              executive agencies to prepare multiyear strategic plans, annual
              performance plans, and annual performance reports. OPM and other
              agencies submitted their first cycle of agency multiyear strategic plans to
              OMB and Congress in September 1997. Like other agencies, OPM has now
              submitted two annual performance plans to OMB and Congress. In these
              plans, agencies are required to identify annual performance goals that
              reflect the agency’s strategic goals and mission. Agencies initial annual
              performance plans are submitted to Congress after the release of the
              President’s budget each February.

              To develop our observations, we compared the OPM fiscal year 2000
Scope and     annual performance plan to the Results Act requirements, OPM fiscal year
Methodology   1999 annual performance plan, and OPM fiscal years 1997 to 2002 strategic
              plan. We also discussed these plans with OPM staff in Washington, D.C. In
              addition, our observations were generally based on our knowledge of
              OPM’s operations and programs, our numerous reviews of OPM and
              federal workforce issues, and other existing information available at the
              time of our assessment.

              Specifically, we used the criteria in the Results Act; the Office of
              Management and Budget’s (OMB) guidance on developing the plan
              (Circular A-11, part 2); our guidance on assessing agency performance
                     2                                               3
              plans; and our report on agency performance plans, which cites examples
              of practices that can improve usefulness to decisionmakers. We did our
              work between March and June 1999 in accordance with generally accepted
              government auditing standards. We obtained written comments on a draft
              of this report from the Director of OPM. These comments are discussed at
              the end of this letter and are reprinted in appendix II.




              2
               See Agencies’ Annual Performance Plans Under the Results Act: An Assessment Guide to Facilitate
              Congressional Decisionmaking (GAO/GGD/AIMD-10.1.18, Feb. 1998) and The Results Act: An
              Evaluator’s Guide to Assessing Agency Annual Performance Plans (GAO/GGD-10.1.20, Apr. 1998).
              3
               Agency Performance Plans: Examples of Practices That Can Improve Usefulness to Decisionmakers
              (GAO/GGD/AIMD-99-69, Feb 26, 1999).




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                       The plan includes performance goals and measures that address major
OPM’s Performance      programs and priorities and provides a general picture of intended
Plan Provides a        performance across the agency. OPM’s plan specifies over 100
General Picture of     performance goals, with each OPM unit linking its planned activities and
                       processes to OPM’s 5 strategic goals. However, the plan only partially
Intended Performance   discusses its coordination with other agencies on crosscutting activities
Across the Agency      and could have been more useful if it had contained cost-based
                       performance goals and measures.

                       OPM’s key responsibilities as a central management agency include
                       providing HRM leadership and services to federal agencies and
                       administering governmentwide compensation, earned employee benefits,
                       and automated information systems. Many of OPM’s performance goals
                       address these programs. For example, the Employment Service (ES) has a
                       goal to develop a model for workforce planning, analysis, and forecasting
                       so that agencies can enhance workforce quality for mission-critical
                       occupations, by selecting from a diverse pool of well-qualified applicants
                       and by conducting effective succession planning.

                       In several cases, OPM’s fiscal year 2000 plan also includes projected target
                       levels of performance for multiyear goals. For example, OPM’s plan has an
                       objective for fiscal year 2002 to simplify and automate the current General
                       Schedule position classification system, reducing the number of position
                       classification standards from more than 400 to fewer than 100. The plan
                       shows that OPM projects that it will reduce the number of classification
                       standards to 320 by the end of fiscal year 1999 and further reduce the
                       number to 216 by the end of fiscal year 2000.

                       OPM’s plan in several instances makes use of baseline and trend data on
                       past performance to assess and set targeted performance levels. For
                       example, the Retirement and Insurance Service (RIS) reported customer
                       satisfaction rates, claims processing times and accuracy rates for fiscal
                       years 1996 through 1998 and targets for fiscal years 1999 and 2000.
                       Specifically, for customer satisfaction with RIS’ claims processing
                       services, OPM reported that in fiscal year 1998, 88 percent of annuitants
                       surveyed indicated an overall satisfaction with the handling of their
                       retirement claims. The proposed customer satisfaction performance goal
                       for fiscal year 2000 is 90 percent. Similar past performance and target data
                       for processing times and accuracy rates were provided.

                       OPM’s plan acknowledges that internal and external reviews and audits
                       have identified internal and management control weaknesses in its
                       financial administrative and trust funds areas. The identification of these



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weaknesses and corresponding goals to be met for improvement are a
positive step toward improving OPM’s operations. The plan states that
improving its financial management operations, systems, policies, and
procedures is a top priority for fiscal year 2000; and it includes goals to
resolve material weaknesses and to improve the Financial Management
System, the Employee Benefits System, and internal controls. However,
the plan does not detail how these goals will be achieved, and some of the
goals appear unachievable. For example, for accounts receivable
delinquency, the percentage went from 49 percent in fiscal year 1997 to
37.8 percent in fiscal year 1998. The goal for fiscal year 1999 is 5 percent.
Achieving this percentage in fiscal year 1999 seems questionable based on
past experience and because OPM does not have total control over
payment of accounts receivable. The plan identifies actions the agency
plans to take to maintain the integrity of the earned employee benefits
trust funds and OPM’s appropriated and reimbursable funds, such as
expanding overall system capabilities to include functions currently
performed by stand-alone systems.

OPM’s plan partially addresses the need to coordinate with other agencies
and individuals who have an interest in OPM’s mission and services. In
many cases, the plan discusses OPM’s planned efforts to coordinate
crosscutting functions with the federal community. For example, OPM’s
plan states that the agency will work in collaboration with federal
agencies, various federal organizations (e.g., Chief Financial Officers,
Information Technology Association, Critical Infrastructure Coordination
Group), and educational institutions to conduct occupational studies and
to develop strategies for recruitment, selection, training, and retention.
However, in some cases, a more explicit discussion of OPM’s intended
coordination with other agencies would be useful. For example, OPM has a
performance goal in which information and strategies are to be available to
help agencies increase the levels of underrepresented groups in key
federal occupations and at key grade levels. The means, or strategies, that
OPM proposes to achieve this goal do not describe either the extent or
status of OPM’s proposed coordination with the Equal Employment
Opportunity Commission, the federal agency with responsibility for
eliminating the historic underrepresentation of women and minorities in
the workforce. In commenting on our report, OPM agreed that they only
partially addressed the need to coordinate with other agencies that have an
interest in OPM’s mission and plans do a better job of this in its fiscal year
2001 plan.

We previously reported that OPM’s fiscal year 1999 plan could have been
more useful if the plan contained cost-based performance goals and



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                          measures. OPM’s fiscal year 2000 annual performance plan also does not
                          contain cost-based performance goals and measures, where it appears
                          appropriate to do so, to show how efficiently OPM performs certain
                          operations and activities. Such measures might include, for example, the
                          cost of doing business per unit of output, such as the cost to process civil
                          service retirement payments made either by electronic funds transfer or
                          check. The Social Security Administration’s Fiscal Year 1998
                          Accountability Report includes operational efficiency measures such as
                          the unit cost to process earnings information and the unit cost to process
                          claims. Cost-based efficiency measures could be useful to managers as
                          they attempt to improve their operations. If such cost-based measures
                          were developed, however, it would be important for OPM’s salaries and
                          expenses fund to have accurate financial and cost data. The reliability of
                          this data is not currently determinable since OPM’s Inspector General (IG)
                          has been unable to express an unqualified opinion on this fund’s financial
                          statements because of inadequate internal controls and standard
                          accounting policies, procedures, and records.

                          OPM agrees that its performance plan could be improved by including
                          cost-based measures that are related to program outputs and said it will
                          provide such measures in its fiscal year 2001 plan.

                          The fiscal year 2000 annual performance plan indicates moderate progress
                          in addressing the weaknesses that we identified in our assessment of the
                          fiscal year 1999 annual performance plan. Among improvements in OPM’s
                          fiscal year 2000 plan are the addition of explanatory information on the
                          goals and performance measures that help show the relationship among
                          results-oriented goals, measures, and program outputs and services. For
                          example, unlike OPM’s fiscal year 1999 plan, OPM’s fiscal year 2000 plan
                          includes a goal that explains not only that OPM intends to identify needed
                          changes in all significant OPM program policies but also that the changes
                          are intended to help equip federal agencies to respond to changing human
                          resources and agency needs in the 21st century.

                          OPM’s plan provides a general discussion of the resources the agency will
OPM’s Performance         use to achieve performance goals and identifies strategies for achieving
Plan Provides a           each of its performance goals. The plan generally links the agency’s
General Discussion of     strategies to specific performance goals and describes how the strategies
                          will contribute to achieving those goals. OPM’s plan could have been
the Strategies and        improved by identifying how external factors like the current legal
Resources the Agency      framework for the civil service and a highly competitive labor market
Will Use to Achieve Its   might affect OPM in achieving its goals and in how it will mitigate adverse
Goals                     effects.



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OPM’s plan generally relates funding from its program activities, which are
frequently managed by dedicated units within OPM, to sets of performance
goals. In addition, for a few individual goals, the plan also shows how
budgetary resources are related to achieving these goals. For example, to
achieve its goal of governmentwide adherence to the merit system
principles, OPM’s budget request included 9 additional full-time
equivalents (FTE) and $600,000 to increase the number of review sites
from 120 to 134 annually (a 12 percent increase) and to augment the
provision of technical assistance and oversight of agencies outside the
standard civil service system.

Also, OPM’s plan includes a goal that its information security program will
provide adequate computer security. OPM’s strategies for achieving this
goal include conducting internal and external evaluations of its systems,
such as engaging the assistance of the National Security Agency to review
its security capabilities, and implementing appropriate recommendations
to improve its security. In addition to training staff, OPM said it would
have in place a tested disaster recovery capability for information systems.

OPM’s plan also identifies major management challenges raised by OPM’s
IG, such as internal and management-control weaknesses in its financial,
administrative and trust funds. The plan introduces strategies the agency
said it will take to strengthen the financial oversight of the employee
benefit trust fund, such as expanding overall system capabilities,
establishing adequate cost accounting standards, and building on carrier
financial reporting requirements implemented in fiscal years 1998 and
1999.

We previously reported that OPM’s fiscal year 1999 plan did not discuss
external factors that could significantly affect performance. Although
OPM’s fiscal year 2000 annual performance plan’s analysis suggested that
its ability to carry out its goals is influenced by several external factors, the
plan does not specify how external factors might affect OPM and how the
agency is planning to mitigate the effects of these external factors. For
example, changes in the labor market may affect recruitment, delivery of
employment information, and staffing policies and processes. However,
the plan does not identify the likely changes in the labor market or which
of OPM’s goals would be affected or how.

For many of its program activities, OPM discusses the size and
composition, in terms of knowledge, skills, and abilities, of the human
capital needed to support the achievement of that activity’s performance
goals. For example, the ES has designed and implemented a capacity



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                        model that reflects core competencies and skills needed to carry out its
                        mission. Based on that model, ES intends to recruit skilled individuals
                        from a variety of sources. According to OPM’s plan, the ES also utilizes a
                        contingent workforce of temporary and term employees and experienced
                        staff from other agencies, who can offer operational experience to
                        supplement its existing professional staff in areas where the ES is
                        designing new and innovative policy. As needed, the ES is to contract with
                        leading private sector companies and contractors to provide functional
                        and technical expertise in application development, Y2K (Year 2000)
                        compliance, operational support, and other areas.

                        The fiscal year 2000 annual performance plan indicated moderate progress
                        in addressing the weaknesses that we identified in our assessment of the
                        fiscal year 1999 annual performance plan, as it relates to providing a
                        complete discussion of strategies and resources that the agency plans to
                        use to achieve performance goals. In reviewing the fiscal year 1999 plan,
                        we observed that OPM’s performance plan could have more fully
                        discussed the strategies and resources that the agency is to use to achieve
                        its performance goals. Among improvements in the fiscal year 2000 plan
                        are some fuller discussions of proposed strategies and resources and their
                        relationships to the performance goals. For example, OPM has a goal to
                        modernize its Central Personnel Data File (CPDF). The performance plan
                        specified that to implement the CPDF modernization, its budget request
                        included $1,200,000 and five FTEs in fiscal year 2000, as the first
                        installment of a multiyear program to be completed by fiscal year 2002. In
                        addition to allocating the resources among specific tasks, the plan
                        documented strategies that were clearly related to CPDF plan
                        modernization, such as contracting for the design of a CPDF information
                        retrieval system that identifies the most appropriate database management
                        systems and telecommunication requirements and also estimates the
                        maintenance costs.

                        OPM’s fiscal year 2000 annual performance plan provides limited
OPM’S Performance       confidence that its performance information will be credible. The fiscal
Plan Provides Limited   year 2000 plan has an overall verification and validation section for its
Confidence That         performance measures as well as more specific sections on verification
                        and validation. However, these sections do not always indicate the
Agency Performance      methods that are to be used to ensure reliability nor do they fully address
Information Will Be     overcoming known problems, such as not being able to routinely produce
Credible                valid and reliable financial management data in a timely manner and
                        coming into compliance with the Federal Financial Management
                        Improvement Act of 1996.




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Although OPM addresses verification and validation in its fiscal year 2000
annual performance plan, several areas raise concerns. For example, in its
overall section on verification and validation, OPM discusses several
customer satisfaction surveys that are key elements in OPM’s
measurement program, with varied response rates of up to 57 percent. One
of these surveys, a nationwide survey of a sample of human resources
specialists at all grade levels and geographic locations, received only a 29
percent response rate. However, this survey was used to provide baseline
data for OPM’s strategic goal to provide advice and assistance to help
federal agencies improve their HRM programs. Customer satisfaction
levels with OPM assistance in various program areas are given based on
this initial survey--ranging from 54.3 to 83.7 percent--and a modest 2-
percent increase in overall levels of satisfaction is established as a fiscal
year 2000 performance target. The verification and validation section for
this goal states that ongoing customer service assessment efforts through
daily contacts and regularly scheduled meetings provide continuous
feedback about program delivery and customer service. Also, plans to
develop an executive survey are cited.

At this point, it appears too early to tell how well OPM will be able to
verify and validate information related to this performance measure due to
the low survey-response rate and the prospective nature of other
verification methods. Lower response rates generally increase the
uncertainty about the reliability and validity of the survey results. OPM
acknowledges the low response rates for its surveys but believes enough
surveys were returned to provide confidence in using the data to establish
baselines for improvement. In addition, OPM plans to take steps to
improve the response rates in the next year. For example, OPM said it is
(1) making changes to the survey-delivery process to reduce the impact of
undeliverable surveys, (2) shortening the questionnaires and revising
specific questions to ensure that survey respondents are not confused by
them and therefore reluctant to fill out the surveys, and (3) providing more
follow-up to survey recipients. In addition, OPM plans to administer the
survey at other times than in the summer.

OPM’s Office of Contracting and Administrative Services has several
quantitative goals and measures. These goals include reducing
procurement costs and reducing telecommunications costs. OPM’s related
performance measures include reduced cost of purchases, as a result of
increased purchase-card use and lower monthly charges for
telecommunications due to corrections of billing errors. The
corresponding verification and validation section is short and states
“Compile data from existing tracking systems and refine tracking system



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as necessary.” This does not appear to be an adequate verification and
validation section. Rather, a discussion on how the data are to be verified,
such as through periodic audits of data, would seem more appropriate.

In some cases, the plan’s verification and validation sections cite the
financial audits performed under the Chief Financial Officers Act as the
source of data verification. For example, OPM’s Retirement and Insurance
Service states that the identical performance information is reported in the
Program Performance Overviews of OPM’s Annual Financial Statements
and, therefore, is included in the independent audits of these statements.
However, a measure that is reported in the overview of an audited report
actually may not have been audited. For example, the report on OPM’s
fiscal year 1998 retirement program financial statements stated that the
information in the overview of the retirement program was not audited.
For fiscal year 1998, as in past years, OPM’s salaries and expenses and
revolving funds continued to receive disclaimers of opinion on their
financial statements. To have reliable financial data, OPM would need to
receive unqualified opinions on all its financial statements. In addition,
specific cost data would also need to be audited to ensure the accuracy of
performance measures. On a positive note, the fiscal year 1998 financial
statements of OPM’s Retirement, Health, and Life Insurance Programs
                                4
received unqualified opinions.

For fiscal year 1998, all five of OPM’s programs were reported by its
auditors as not complying with the Federal Financial Management
Improvement Act of 1996. The three benefit programs (retirement, health,
and life insurance) were reported as being in noncompliance because of
their (1) core financial management system, (2) recording of transactions,
and (3) financial management system not supporting all program
decisionmaking. OPM’s fiscal year 2000 annual performance plan does not
specifically address its noncompliance with the Federal Financial
Management Improvement Act of 1996. However, it does have several
goals to make improvements in this area, such as its goal to improve
financial systems and receive unqualified opinions on its financial
statements.

Overall, OPM’s fiscal year 2000 plan provides limited confidence that the
data used to measure performance would reflect actual performance. The
plan’s recognition that data reliability is important is a good step. But, data
integrity is critical to the success of any performance measurement

4
 An unqualified opinion means that in the opinion of the auditor, the financial statements are
presented fairly, in all material respects, in conformity with the applicable basis of accounting.




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                         initiative, and as such, decisionmakers must have assurance that the
                         program and financial data being used are complete, accurate, and reliable.
                         The fiscal year 2000 annual performance plan would be improved if OPM
                         were to describe the major controls it plans to use to verify and validate
                         performance information on an ongoing basis. Such controls could include
                         periodic data reliability tests, computer edit controls, and supervisory or
                         independent review of data used to develop performance measures. The
                         fiscal year 2000 plan relies on many different types of data for its measures
                         and indicators. Although OPM may not be able to verify all data in a given
                         year, it should be able to do so over a period of time. Thus, a schedule
                         showing when data are to be verified, by whom, and how would provide
                         useful information. OPM said it would be improving future plans by
                         strengthening discussion of the verification and validation of its
                         performance information.

                         OPM’s fiscal year 2000 annual performance plan indicated moderate
                         progress in addressing the verification and validation of data weaknesses
                         that we identified in our assessment of its fiscal year 1999 annual
                         performance plan. For example, it included specific goals for improving
                         the reliability of some data, such as those provided by the salaries and
                         expenses fund. However, in other areas, the fiscal year 2000 plan does not
                         provide assurance that reliable data will be used because of low survey-
                         response rates or because of reliance on financial audits that generally do
                         not provide assurance that performance measures are reliable. The fiscal
                         year 2000 plan also fails to identify or discuss any significant data
                         limitations and their implications for assessing the achievement of
                         performance goals.

                         In reviewing the fiscal year 1999 annual performance plan, we observed
OPM’s Fiscal Year 2000   that the plan’s goals typically were activity or output oriented rather than
Annual Performance       results oriented, and that the plan could also be improved by including
Plan Presents a          more information on how resources would be used to achieve goals. We
                         also noted that the fiscal year 1999 annual performance plan did not
Moderate                 discuss known data limitations that could affect the validity of various
Improvement Over the     performance measures that OPM had planned to use. Among
1999 Plan                improvements in the fiscal year 2000 plan are the increased number of
                         results-oriented performance goals and quantifiable measures and the use
                         of baseline and trend data for past performance. For example, the plan
                         includes a goal to further simplify the General Schedule classification
                         system to fewer than 225 classification standards and another goal to
                         maintain or increase the fiscal year 1999 level of customer satisfaction,
                         processing times, and accuracy rates for processing new claims for annuity
                         and survivor benefits.



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                      We provided OPM a copy of our draft report on its fiscal year 2000 annual
Agency Comments and   performance plan and on July 19, 1999, the Director of OPM provided us
Our Evaluation        written comments. The Director said OPM officials were pleased to
                      receive our overall favorable review of its fiscal year 2000 annual
                      performance plan and were particularly pleased that we noted many
                      improvements--often made at our suggestion--compared with its fiscal year
                      1999 plan. The Director also agreed that some areas in OPM’s future plans
                      would need more attention. Finally, she suggested some corrections and
                      offered a few comments that we have addressed and incorporated into this
                      report as appropriate.

                      OPM concurred that it has a critical role in ensuring that the Results Act
                      goal of improved performance throughout government is achieved and
                      said it has taken steps to provide agencies a performance management
                      framework to achieve that result. OPM said that until timely, reliable, and
                      objective measures of output and outcome efficiency and effectiveness are
                      readily available, managers will remain reliant on less meaningful
                      measures that are more vulnerable to inexorable inflationary pressures
                      and that fail to support making robust distinctions among levels of
                      performance. OPM also said it looks to leaders of the program and
                      financial communities, including GAO, to improve the availability of better
                      measures. We are encouraged that OPM has expressed concern that
                      current measures for assessing employees’ performance have been subject
                      to inflationary pressures and fail to support robust distinctions among
                      levels of performance. We look forward to progress in achieving a
                      performance management framework that more realistically differentiates
                      among employees’ performance and supports an effective pay-for-
                      performance approach.

                      In relation to our observation that a 5-percent accounts receivable
                      delinquency rate seems unachievable in fiscal year 2000, OPM said it
                      established the 5-percent delinquency rate for this fund as a “stretch goal.”
                      OPM said that it has collected over $7 million and resolved over $2 million
                      in accounts receivable that have been delinquent for many years. In
                      addition, OPM said that a comprehensive analysis of the collectibility of all
                      these accounts and the appropriate level of the “bad debt” allowance is in
                      progress for all the revolving fund programs/subfunds. OPM also said that
                      it is working aggressively with its programs and customers to achieve its
                      “stretch goal.” We believe this more complete description of OPM’s efforts
                      to reduce accounts receivable delinquencies provides a better perspective
                      on the commendable, but challenging, goal OPM has set for itself.




                      Page 13              GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
B-283035




Concerning our observation that OPM’s plan had only partially addressed
the need to coordinate with other agencies that have an interest in its
mission, OPM said future plans would describe more fully how it regularly
coordinates with other agencies. In response to our specific example
regarding OPM’s coordination with EEOC, OPM said that both agencies
jointly identify, using OPM’s Federal Equal Opportunity Recruitment Plan
report, where underrepresentation exists and where “best practices” are in
place that have a positive impact on the historical underrepresentation of
women and minorities in the workforce. OPM said that its fiscal year 2001
plan will clearly describe that OPM and EEOC share the common objective
of seeking a diverse federal workforce and that both agencies continue to
work together toward that goal.

OPM agreed that its performance plan could be improved by including
cost-based measures that are related to program outputs. OPM said that it
has tracked such measures for internal management purposes for many
years and will include them in the Transfers From the Trust Funds Section
of its fiscal year 2001 plan. Specifically, regarding its salaries and expense
fund, OPM said it maintains a disciplined work-reporting system that
tracks the cost of salaries; and in fiscal year 2000, it plans to develop and
begin testing data validation reviews to ensure the accuracy of its cost-
based measures. We believe that OPM’s plans could be more useful if they
contained cost-based performance goals and measures, and we look
forward to OPM’s plan including this data in fiscal year 2001.

OPM shares our concerns about the response rates to several of the
surveys used in its measurement process. On the basis of OPM’s
comments, we included additional information in this report on OPM’s
plans to improve the response rates in future years.

In relation to our observations on the results of audits of OPM’s financial
systems, OPM stated that the most recent fiscal year 1998 audit of the
three benefit programs administered by OPM resulted in an unqualified
opinion. OPM also stated that, effective October 1, 1998; a new financial
system was implemented for these programs, which is fully compliant with
OMB Circular A-127. Although we have not reviewed these systems, we
commend any progress toward achieving unqualified opinions.

Finally, OPM said it would strengthen its discussion in future plans on
steps it has taken to assess the validity of its performance plans.

We are sending copies of this report to the Honorable Elijah E. Cummings,
Ranking Minority Member of your Subcommittee; the Honorable Janice R.



Page 14              GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
B-283035




Lachance, Director of OPM; appropriate congressional committees; and
other interested parties. We will also make copies available to others on
request.

This report was prepared under the direction of Steven J. Wozny, Assistant
Director. Clifton G. Douglas was also a major contributor to this report.
Please contact Steven J. Wozny or me at (202) 512-8676 if you or your staff
have any questions regarding this report.

Sincerely yours,



Michael Brostek
Associate Director, Federal Management
  and Workforce Issues




Page 15             GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Contents



Letter                                                                                             1


Appendix I                                                                                        18

Management
Challenges
Appendix II                                                                                       20

Comments From the
Office of Personnel
Management
Tables                Table I.1: Management Challenges at OPM                                     18




                      Abbreviations

                      CPDF         Central Personnel Data File
                      EEOC         Equal Employment Opportunity Commission
                      ES           Employment Service
                      FTE          full-time equivalent
                      HRM          Human resource management
                      IG           Inspector General
                      OMB          Office of Management and Budget
                      OPM          Office of Personnel Management
                      RIS          Retirement and Insurance Service




                      Page 16           GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Page 17   GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Appendix I

Management Challenges


                                      In January 1999, we reported on governmentwide major management
                                      challenges and program risks that must be addressed to improve the
                                      performance, management, and accountability of federal agencies. The
                                      Office of Personnel Management (OPM), as the federal government’s
                                      central personnel agency, has a leading role in many of these areas. In
                                      December 1998, OPM’s Office of Inspector General (OIG) reported on the
                                      10 most serious management challenges in OPM. The following table lists
                                      the issues covered in those two reports and the applicable goals and
                                      measures in OPM’s fiscal year 2000 annual performance plan.

Table I.1: Management Challenges at
OPM                                                                            Applicable goals and measures in the
                                      Management challenges                    fiscal year 2000 annual performance plan
                                      Y2K readiness (GAO governmentwide high- OPM’s information technology systems will
                                      risk)                                    operate properly on and after 01/01/00, and
                                                                               an effective contingency plan will be in
                                                                               place.
                                      Information security (GAO governmentwide OPM’s information security program will
                                      high-risk)                               provide adequate computer security
                                                                               commensurate with risk and magnitude of
                                                                               potential harm. Performance indicators
                                                                               include

                                                                                     few security problems are identified, and
                                                                                     those identified are not material and are
                                                                                     rectified promptly;

                                                                                     a tested disaster recovery capability that is in
                                                                                     place for OPM’s general support and major
                                                                                     financial, benefits, and workforce information
                                                                                     systems.
                                      OPM lacks specific, measurable, and            OPM’s fiscal year 2000 annual performance
                                      results-oriented long-term goals in its        plan contains more results-oriented
                                      strategic plan and annual goals that met       performance goals and measures than its
                                      these criteria in their performance plan (OIG) fiscal year 1999 annual performance plan.
                                                                                     No changes had been made to the OPM
                                                                                     strategic plan.
                                      OPM must implement the retirement system Accelerated information technology solutions
                                      modernization initiative (OIG)                 for a modernized retirement system are
                                                                                     designed, developed, and implemented.


                                      Financial management policies and              Financial policies and procedures are
                                      procedures are not documented correctly        documented as planned.
                                      (OIG)
                                                                                     By mid-fiscal year, complete and distribute
                                                                                     an internal Financial Management Manual
                                                                                     that will document the policies and
                                                                                     procedures used in processing and
                                                                                     recording financial transactions.




                                      Page 18                  GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Appendix I
Management Challenges




                                            Applicable goals and measures in the
Management challenges                       fiscal year 2000 annual performance plan
There are inadequate controls over the      Increase accuracy rates for processing new
accuracy of annuity payments (OIG)          annuity and survivor benefit claims over
                                            fiscal year 1999 levels as follows: 96 percent
                                            for Civil Service Retirement System annuity
                                            claims; 95 percent for Federal Employees
                                            Retirement System annuity claims; and 99.9
                                            percent overall accuracy from annuity roll
                                            audit.
Debt collection and the accounts receivable Accounts receivable delinquency of 2
processing systems are weak (OIG)           percent (compared with the fiscal year 1999
                                            goal of 5 percent).

                                              Achieved timeliness of at least 99 percent of
                                              collections (compared with the fiscal year
                                              1999 goal of 95 percent).
Inadequate internal controls related to the   Fiscal year 2000 annual financial statements
accuracy and completeness of payroll          for all three-benefit programs, published in
withholdings and information provided by      fiscal year 2001, receive “unqualified”
other agencies (OIG)                          opinions.

                                              The audit report on the benefit programs’
                                              fiscal year 2000 financial statements,
                                              published in fiscal year 2001, describe no
                                              new material weaknesses in internal
                                              controls.
Enhanced oversight is needed for financial    None specific to FEHBP, but the above
management of the Federal Employees           goals and indicators apply to FEHBP
Health Benefits Program (FEHBP) (OIG)         financial statements.

Unreconciled discrepancies between OPM’s Reconcile cash account differences with
general ledger accounts and Treasury     Treasury within 30 days (same as fiscal year
records (OIG)                            1999 goal).

                                              Improved responsiveness and on-time
                                              compliance for financial reporting to OMB
                                              and Treasury. (No measure for “improved.”)
Material weaknesses in accounts payable       All material weaknesses are resolved and
processing and reporting (OIG)                the Financial Management System, the
                                              Employee Benefits System, and internal
                                              controls are improved.

                                           Achieve timeliness of at least 98 percent for
                                           payments.
Inadequate controls over investments (OIG) All material weaknesses are eliminated.

                                              Improved audit results from independent
                                              public accountant, IG, and GAO.

                                              Fiscal year 2000 trust fund annual financial
                                              statements receive unqualified audit
                                              opinions from an independent auditor.




Page 19                  GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Appendix II

Comments From the Office of Personnel
Management




              Page 20   GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Appendix II
Comments From the Office of Personnel Management




Page 21               GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Appendix II
Comments From the Office of Personnel Management




Page 22               GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Appendix II
Comments From the Office of Personnel Management




Page 23               GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
Page 24   GAO/GGD-99-125 OPM’s Fiscal Year 2000 Annual Performance Plan
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