oversight

Small Business Administration: Review of Selected Personnel Practices

Published by the Government Accountability Office on 1999-04-23.

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

                United States General Accounting Office

GAO             Report to the Chairman, Small Business
                Committee, U.S. Senate



April 1999
                SMALL BUSINESS
                ADMINISTRATION
                Review of Selected
                Personnel Practices




GAO/GGD-99-68
GAO                United States
                   General Accounting Office
                   Washington, D.C. 20548

                   General Government Division




                   B-278977

                   April 23, 1999

                   The Honorable Christopher S. Bond
                   Chairman, Committee on Small Business
                   United States Senate

                   Dear Mr. Chairman:

                   The 1990s have been a time of rapid and sweeping change at the Small
                   Business Administration (SBA). In response to the Clinton
                   administration’s initiative to reinvent the federal government, SBA
                   underwent a major reorganization and downsizing. From August 1993 to
                   March 1997, SBA’s workforce was cut by about 15 percent. The regional
                   office structure, a layer of management between SBA headquarters and
                   district offices, was a prime target of this reduction. In addition, new
                   administrators were appointed at the agency in 1993, 1994, and 1997,
                   which brought about further changes in SBA’s executive offices, and
                   following the change in control of Congress in 1995, SBA provided
                   noncompetitive, career appointments to some displaced congressional
                   staff members under the Ramspeck Act then in effect.

                   Because of the changes that were occurring, the reorganization and
                   downsizing in particular, the 1990s have been turbulent times for SBA
                   employees. Questions arose that improper personnel practices--such as
                   political favoritism and the improper hiring of district office directors and
                   improper salary setting for political appointees--had taken place at the
                   agency. In response, the Committee asked us to examine several events
                   related to personnel reassignments, appointments, and activities at SBA.

                   SBA made hundreds of appointments during the 1990s using competitive
Results In Brief   procedures for career appointments, special noncompetitive hiring
                   authority for the Office of Advocacy, and political appointment procedures
                   for other appointments. For the appointments that we reviewed, we found
                   that SBA adhered to the different procedural requirements. For example,
                   although 6 of the 46 District Director appointees were hired from outside
                   SBA to the career positions, and 2 of them had political backgrounds, we
                   found nothing procedurally amiss in the hiring process.

                   We determined however, that in several cases SBA did not follow
                   applicable federal regulations when setting the starting salary at a rate
                   higher than the minimum rate for the grade; SBA could not provide the



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                           documentation required by federal regulations to support the advanced
                           salary settings. SBA has developed draft procedures that, if properly
                           implemented, should help prevent such situations from recurring.

                           We also determined that SBA poorly controlled its interagency detailing of
                           employees, with the result that cost reimbursements were not always
                           being collected. SBA officials advised us that they are developing new
                           procedures to better control interagency details and collections of
                           reimbursements. Recommendations to the SBA Administrator on these
                           matters are included at the end of this letter.

                           SBA, an independent agency within the executive branch, offers numerous
Background                 programs and services to owners of small businesses in the United States
                           and in U.S. territories. The programs and services are meant to help aid,
                           counsel, assist, and protect the interests of small business concerns and
                           include a variety of loan guarantee programs, surety bond guarantees,
                           technical assistance, and other services targeted to small businesses in
                           general and to women-owned and minority-owned businesses in particular.

                           SBA’s headquarters is in Washington, D.C., but SBA’s programs and
                           services are delivered through 97 regional, district, branch, or post-of-duty
                           offices located throughout the United States and in Guam, Puerto Rico,
                           and the Virgin Islands. These 97 offices are organized within 10 geographic
                           regions.

                           Just prior to reorganizing and downsizing, SBA employed about 5,600 full-
                           and part-time employees, of whom about 1,000 were employed in the
                           Washington, D.C., metropolitan area. By March 1997, as the major portion
                           of reorganizing and downsizing ended, SBA employed about 4,750 full- and
                           part-time employees, of whom about 750 were employed in the
                           Washington, D.C., metropolitan area.

                           As agreed with your office, our specific objectives were to determine the
Objectives, Scope, and     following:
Methodology
                         • What was the status of SBA regional office employees following
                           reorganization, and were SBA employees shifted to regional offices after
                           those offices were downsized?
                         • Did SBA follow applicable policies and procedures when appointing--and
                           setting the starting salaries of--individuals hired during the period January
                           1, 1993, through December 31, 1998, from outside of SBA for the position
                           of District Director, and what procedures did SBA’s Office of Advocacy




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    use in hiring Regional Advocates and Assistant Advocates during calendar
    year 1998?
•   Did SBA follow applicable federal laws and regulations to set the salaries
    of, and provide salary increases to, political appointees and former
    congressional (Ramspeck Act) employees hired between October 1, 1991,
                              1
    and September 30, 1998?
•   Did SBA adequately control the interagency detailing of its employees
    during fiscal years 1992 through 1998?
•   What positions were newly created or abolished between March 1996 and
    March 1998 in SBA’s Office of the Administrator, Office of the Deputy
    Administrator, Office of the Chief of Staff, Office of the Chief Operating
    Officer, and Office of the Associate Administrator for Field Operations;
    and what were the sources of appointees to the newly created positions
    and the status of those employees in the abolished positions?
•   What was the status of SBA’s response to a December 1997 congressional
    mandate to establish a Senior Executive Service (SES) position within
    SBA’s Office of Women’s Business Ownership? and
•    Did SBA Regional Advocates attend a White House-sponsored political
    appointee meeting during fiscal year 1997?

    In addressing our seven objectives, we

• relied extensively on personnel listings provided to us by officials of SBA’s
  Office of Human Resources;
• examined SBA’s records of personnel actions, position descriptions, and
  vacancy announcements;
• conducted numerous interviews of SBA officials; and
• relied heavily on records and employment application material in the
  official personnel folders (OPFs) of those present and former SBA
  employees who were within the scope of our review.

    SBA provided us the names of (1) SBA field personnel and the offices to
    which they were assigned, both before and after SBA’s reorganization and
    downsizing; (2) district directors who were appointed between January 1,
    1
     For purposes of this review, we defined political appointees as those receiving appointments to
    executive schedule positions, those appointed to noncareer Senior Executive Service positions, those
    appointed under excepted service schedules A and C authorities, and those appointed to positions
    involving administratively determined (AD) pay rates. The Ramspeck Act of 1940 (5 U.S.C. 3304(c))
    permitted former congressional employees who met certain eligibility requirements to obtain
    noncompetitive, career appointments in the executive branch of government. Appointment eligibility
    requirements included, among other things, that the former congressional employee must have (1)
    been separated from his or her congressional employment involuntarily, such as when an employing
    Member of Congress retired or was defeated for reelection; and (2) obtained a career appointment
    under the Ramspeck Act hiring authority within 1 year of being separated from congressional
    employment. The Ramspeck Act was repealed by Congress effective December 19, 1997.




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  1993, and December 31, 1998; (3) political and Ramspeck Act appointees
  who were appointed between October 1, 1991, and September 30, 1998;
  and (4) employees detailed from SBA to other federal agencies during the
  period October 1, 1991, through September 30, 1998.

  Some of the personnel action records we examined came from SBA’s
  personnel records database, which is managed and maintained for SBA by
  the U.S. Department of Agriculture’s National Finance Center in New
  Orleans, LA. We also examined travel authorizations and vouchers of SBA
  Regional Advocates to identify those who might have attended a political
  meeting at the White House. These authorizations and vouchers were for
  fiscal year 1997 and part of fiscal year 1998.

  We interviewed officials from the Office of Human Resources (HR) at SBA
  headquarters and from SBA’s Denver Human Resource office about many
  topics and issues, such as the reasons for certain personnel actions. We
  interviewed current and former officials from SBA’s Office of Advocacy
  about that Office’s hiring authority and procedures as well as to identify
  employees hired by the Office in calendar year 1998.

  For the current and former SBA employees who were within the scope of
  our review, we obtained the OPFs of

• current employees from SBA; and
• former employees from either the National Personnel Records Center in
  St. Louis, MO, or from the federal agencies where they were then working.
  In the rare cases in which we were unable to locate a former employee’s
  OPF, we relied instead on personnel records contained in SBA’s personnel
  database. (App. I contains a detailed description of our objectives, scope,
  and methodology.)

  We did our work in Washington, D.C.; Denver, CO; and St. Louis, MO; from
  March 1997 through January 1999 in accordance with generally accepted
  government auditing standards. We requested comments on a draft of this
  report from the Administrator of SBA. The comments are discussed at the
  end of this letter and are reprinted in appendix VI.




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                          Regional offices were greatly affected by reorganization and downsizing.
Status of Regional        Staffing was drastically reduced, and some responsibilities that regional
Employees After           offices once held were transferred to SBA headquarters and district
                                  2
Reorganization and        offices. Between September 1993 and April 1997, the 10 regional offices
                          together lost 94 percent of their employees. Most of these employees were
Shifting of Personnel     either reassigned to nonregional offices or retired. As a result of the
to Regional Offices       significant reduction of employees in regional offices, employees from
                          district offices have, from time to time, been temporarily assigned to
                          regional offices.

                          According to data SBA’s HR officials provided, a total of 504 employees
                          were assigned to the 10 regional offices as of September 2, 1993, which
                          was shortly before the reorganization and downsizing began. Of these 504
                          employees, we found after reorganizing and downsizing had ended that

                        • 10 employees remained with their regional offices;
                                                                                                 3


                        • 306 employees remained with SBA but had transferred to district, branch,
                          and other nonregional offices; and
                        • 163 employees had separated from SBA, most of whom retired.
                          Information on the employment status of the remaining 25 employees was
                          not available. The status of the 504 employees was as of April 1997, and
                          we determined their status from personnel records. Appendix II provides
                          further details on the status of the 504 employees.

                          After the downsizing, according to SBA’s HR officials and officials from
                          some of the regional offices we spoke with, district office administrative
                          employees were shifted from time to time to colocated regional offices for
                          temporary periods to provide administrative support. Most of the regional
                          offices were located in the same buildings as the district offices. These
                          officials explained that this shifting usually occurred when the regional
                          office Staff Assistant was temporarily out of the office; that is, when sick
                          or on vacation. In one case, however, a district office employee obtained a
                          temporary promotion to the position of Public Affairs Specialist and was
                          assigned to the colocated regional office. According to SBA’s HR officials,
                          this was only a temporary measure because SBA wanted whoever would

                          2
                           The responsibility for providing oversight of some programs and services and for providing all
                          administrative services was transferred from the regional offices to SBA headquarters or to district
                          offices.
                          3
                           In addition to the 10 employees who remained, Regional Administrators were later appointed to each
                          of the regional offices; 9 other employees were either reassigned to, or hired for, positions within the
                          regional offices. As of April 1997, the 10 regional offices together had 29 employees, or an average of
                          about 3 employees each generally consisting of a Regional Administrator, a Public Affairs Specialist,
                          and a Staff Assistant.




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                          fill the then-vacant Regional Administrator position to participate in
                          selecting the permanent Public Affairs Specialist.

                          Unlike Regional Administrator positions, which are held by political
Appointments of           appointees, SBA’s District Director positions are filled through career
Individuals From          appointments. Normally, SBA fills vacant District Director positions by
Outside SBA to District   reassigning current SBA District Directors or by appointing graduates of
                          the District Director candidate development program. However, at times,
Director Positions and    SBA hires new District Directors from sources outside of SBA.
the Setting of Their
Starting Salaries         SBA made 46 appointments to the position of District Director between
                          January 1, 1993, and December 31, 1998. Forty of these appointments
                          went to SBA employees. For six appointments, SBA hired individuals from
                          outside the agency to fill the positions. In two of these cases, the
                          individuals’ application materials made reference to elected officials, thus
                          introducing the possibility of political favoritism in the hiring process.
                          However, SBA officials denied the use of favoritism. On the basis of
                          available evidence, SBA appeared to have properly followed federal
                          regulations in hiring all six individuals. However, we did note a problem
                          with how SBA set the starting salary in one case.

                          The six outside individuals were hired to fill District Director positions in
                          Washington, D.C.; Cleveland, OH; Puerto Rico; Denver, CO; New Orleans,
                          LA; and Sacramento, CA. They were not all hired at the same time--two
                          were hired in 1994, one was hired in 1996, another was hired in 1997, and
                          two were hired in 1998. Four were either employed by the federal
                          government when they applied for the SBA position or had been federal
                          employees some time earlier.

                          We examined the steps SBA took in the appointment process and
                          determined that SBA appeared to follow all relevant federal laws and
                          regulations in making the appointments. SBA used a competitive
                          examination process to hire each appointee. Under this process, SBA
                          publicized the vacancy announcements for all six positions. SBA compiled
                          lists of best-qualified applicants from among those who applied, and SBA
                          management selected those hired (the appointees) from among the
                          applicants who were on the best-qualified lists. The competitive
                          examination process, it should be noted, does not preclude persons who
                          have political experience and support from applying and being selected for
                          open career positions.

                          During our review, we became aware of possible political overtones in two
                          cases, the Denver District Director position and the New Orleans District



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                                Director position. There were allegations that the individual appointed to
                                the Denver position obtained the appointment through her political
                                connections. She had worked for a governor of Colorado and, at the time
                                of her appointment to the District Director position, the governor chaired
                                the Democratic National Committee. According to an SBA memorandum,
                                a panel of six officials interviewed her along with two other best-qualified
                                applicants, and each interviewer found her to be the top candidate. One of
                                the panel members, the Assistant Administrator for Human Resources, told
                                us that there was no pressure on the panel to recommend this individual
                                for selection.

                                The application material submitted by the individual appointed to the New
                                Orleans position cited the names of members of Congress and local
                                politicians as references and contained letters of recommendation from
                                local politicians. SBA HR officials said that except for the names in the
                                application material, they were unaware of any political connections the
                                individual had within the administration, and they were under no pressure
                                of any kind to recommend this individual for selection.

                                In neither of these cases did we find evidence of political favoritism and
                                improper hiring. However, the question of whether such political
                                favoritism or support has an impact on the selection of an individual from
                                among other applicants is extremely difficult to determine and requires
                                that the intent and motivation of the selecting official be known.

                                Appendix III provides more information on each of the six cases. It also
                                provides information about the appointments of SBA employees to District
                                Director positions.

Setting the Starting Salaries   Federal regulations govern the salary-setting process for new appointees.
                                We determined that SBA HR officials properly followed regulations in
for the Six Directors           setting the starting salaries of five of the six outside hired District
                                Directors. However, in one of the six cases, SBA did not consider the use
                                of a recruitment bonus when it set the District Director’s salary at a level
                                higher than the minimum rate for the pay grade.

                                Title 5 of the Code of Federal Regulations, part 531, section 203 (5 C.F.R.
                                531.203) states that new appointments are to be made at the minimum step
                                of the pay grade. However, provisions exist for making an appointment
                                above the minimum step. For example, a new employee’s salary can be set
                                above the minimum step when the employee possesses superior
                                qualifications or the agency has a special need for the employee’s services.
                                The C.F.R. refers to an appointment under these circumstances as a



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“superior qualifications appointment.” However, the regulations also state
that in determining whether a candidate should receive a superior
qualifications appointment and, if so, at what level the employee’s pay
should be set, the agency must consider the possibility of authorizing a
recruitment bonus. The regulations also state that each agency that makes
superior qualifications appointments must establish documentation and
record-keeping procedures sufficient to allow reconstruction of the action
taken in each case. According to the regulations, documentation must
include the superior qualifications of the individual or the special need of
the agency that justified use of the superior qualifications authority; the
factors considered in determining the individual’s existing pay; and the
reasons for authorizing an advanced rate instead of, or in addition to, a
recruitment bonus.

An appointee who has previously worked for the federal government is
also eligible to receive a salary that is above the minimum step of the pay
grade. According to regulations, the salary can be set above the minimum
step in order to match the appointee’s previous highest federal salary or
pay grade level.

In the five cases where SBA followed federal pay-setting regulations, two
cases involved appointments at the minimum step of the pay grade.
Another case involved an SES appointment for which there is greater
latitude in setting pay. A fourth case involved an appointment of a former
SES member to a lower graded District Director position. And the fifth
case involved the transfer of an employee from another federal agency to
SBA with SBA matching his previous highest federal salary.

In the one case in which SBA did not follow regulations, it set the
individual’s salary above the minimum step of the pay grade. But in doing
so, it did not consider the use of a recruitment bonus as required by
applicable regulations. In commenting on a draft of this report, SBA said
that it had made a policy decision not to offer recruitment bonuses. After
we discussed this matter with SBA officials, however, SBA decided to
implement a recruitment bonus policy.

The Assistant Administrator for Human Resources told us that her Office
had drafted a new standard operating procedure (SOP) that would cover
the procedures for setting advanced salaries and considering use of
recruitment bonuses. We obtained a copy of the draft procedures, which
said that SBA would offer a recruitment bonus or a superior qualifications
appointment only in those rare situations where, after extensive
recruitment, SBA determined that an incentive was necessary to attract



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                          qualified applicants or to compete with nonfederal employers. The draft
                          SOP also stated that SBA would always consider using a recruitment
                          bonus before considering a superior qualifications appointment because a
                          one-time payment was more economical than a higher salary that is paid
                          every year. The draft SOP also states that information supporting the
                          action is to remain on file for 3 years. According to SBA’s comments on
                          the draft of this report, the SOP is now in SBA’s clearance process and is
                          expected to be published this spring.

                          According to information provided to us by Office of Advocacy officials,
Office of Advocacy        the Office hired four Assistant Advocates and five Regional Advocates in
Hired Nine Regional or    calendar year 1998. All nine advocates were hired under the special hiring
                                                                                                     4
Assistant Advocates       authority that federal statute provides to the Chief Counsel for Advocacy.
                          Under this special authority, the Office can hire individuals without having
During 1998               to use a formal competitive process.

                          According to the Chief and Deputy Chief Counsels for Advocacy,
                          candidates for the nine positions were identified either through word-of-
                          mouth recommendations or through their personal knowledge of the
                          individuals. Because all of the positions were excepted service positions
                          being filled under the Chief Counsel for Advocacy’s special hiring
                          authority, it was not necessary for SBA to publicly advertise the positions
                          or to follow the other appointment procedures that apply when positions
                          in the competitive service are filled. Because the individuals in all nine
                          cases received excepted service, term appointments, they effectively
                                                                                     5
                          served at the pleasure of the Chief Counsel for Advocacy. In addition,
                          SBA set the salaries of all nine appointees in accordance with the
                          administratively determined (AD) pay-setting authority provided by law to
                          the Chief Counsel for Advocacy.

                          In order to examine SBA’s salary setting and salary increase practices for
SBA’s Salary Setting      political and former congressional (Ramspeck Act) employees, we
and Salary Increase       reviewed available information regarding the appointments and salaries of
Practices for Political   all 310 political or Ramspeck Act appointees hired by SBA during the
                          period October 1, 1991, through September 30, 1998. Of the 310 cases, 289
Appointees and            involved appointments of political appointees, and 21 involved
Former Congressional      appointments of former congressional employees hired by SBA under the
Employees                 Ramspeck Act.

                          4
                              Section 204 of Pub. Law 94-305, June 4, 1976 (15 U.S.C. 634d(1)).
                          5
                          The nine Office of Advocacy appointees received term appointments, which means their appointments
                          were for only specified periods of time. In each of the nine cases, the term was 13 months. The Chief
                          Counsel for Advocacy may reappoint individuals.




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                              In 169 (55 percent) of the 310 appointments that we reviewed, SBA set the
                              appointees’ starting salaries at the minimum step of the pay grades for the
                                                         6
                              positions they accepted. In each case, on the basis of available evidence,
                              it appeared that SBA followed appropriate salary-setting procedures. In
                              141 (45 percent) of 310 appointments we reviewed, SBA set the salaries at
                              levels higher than the minimum step of the pay grades. In several of those
                              cases SBA did not consider the use of recruitment bonuses and could not
                              provide the documentation for the actions taken in each case as required
                              by regulations. In another of those cases SBA set the advanced starting
                              salary incorrectly and in still another case insufficient documentation was
                              available for us to determine the basis SBA used in setting the salary. For
                              essentially all of the 310 political and Ramspeck appointments, SBA
                              appeared to have followed applicable rules in awarding periodic salary
                              increases. Rules on setting salaries for, and providing salary increases to,
                              career appointees are also generally applicable to political and Ramspeck
                              Act appointees.

Analysis of 141 Cases         Federal regulations permit agencies to provide appointees with advanced
                              starting salaries on the basis of superior qualifications or highest previous
Involving Advanced Starting   pay. Furthermore, agencies have flexibility to set pay in cases involving
Salaries                      SES appointments and in cases where AD pay authority is provided, e.g.,
                              the Office of Advocacy. Of the 141 cases in which advanced starting
                              salaries were set, 69 involved SES appointments or involved appointments
                              in which AD pay rates were authorized. In each of those cases, based on
                              available evidence, it appeared that SBA set the starting salaries
                              appropriately.

                              In 43 cases the advanced pay rates were authorized by regulations on the
                              basis of highest previous pay rates. In 1 of those 43 cases, discussed later,
                              SBA set the starting salary incorrectly.

                              In 28 cases the advanced pay rates were made on the basis of superior
                              qualifications. In 11 of the 28 cases, however, SBA was unable to provide
                              the documentation required by regulations to allow reconstruction of the
                              action taken in each case. (In commenting on a draft of this report, SBA
                              said it is conceivable the documentation that it had prepared was either
                              misplaced or destroyed as the agency downsized.)




                              6
                              Three of these appointments involved executive level positions for which the pay levels for the
                              positions are determined by law.




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Finally, in one case insufficient information was available for us to
                                                                  7
determine the basis SBA used when setting the advanced salary.

For the 28 superior qualifications appointments that SBA made, SBA, as a
matter of practice, did not consider on an individual case basis the
possibility of authorizing a recruitment bonus. As stated earlier, SBA
reported to us in its agency comments on a draft of this report that it had
decided as a matter of policy not to offer recruitment bonuses. In a
followup conversation with an SBA HR official we were told that this was
an unwritten policy. The official believed the policy decision was made
sometime after October 1990 but didn’t remember the precise date. Also,
no substantial rationale for the decision was offered beyond that
regulations require a recruitment bonus plan be established before paying
a recruitment bonus and SBA did not have such a plan. One of the benefits
of a recruitment bonus compared to an advanced salary is that the former
is a one time expense and in the long term should be less expensive than a
permanent advanced salary rate. During our review SBA revisited the
issue of recruitment bonuses and developed a draft SOP covering
recruitment bonuses, as well as salary-setting procedures, and
documentation requirements.

One of the 43 cases in which the advanced salaries were set on the basis of
highest previous pay rates involved a former employee of SBA. In that
instance, SBA officials--during our review--determined that the salary had
been set incorrectly. This appointee had previously worked for SBA,
resigned to accept a position with another federal organization, rejoined
SBA, then resigned again. According to SBA officials, when the appointee
rejoined SBA, HR staff apparently based her new SBA salary on her highest
previous federal salary as reported in her application rather than on her
highest previous salary as reported in her official salary transcript. The
salary she reported in her application was $18,000 higher than the salary
reported in the transcript. SBA determined that using her higher reported
salary caused HR staff to set her SBA salary at a higher level than they
would otherwise have done, resulting in an overpayment of approximately
$6,000 for the affected period.



7
 In a draft of this report we stated that there were 31 cases for which there was either no documented
evidence or insufficient documented evidence for us to make a determination as to whether SBA
followed appropriate procedures when setting the advanced salaries. During the period when SBA was
reviewing the draft report and preparing written comments, SBA officials provided us with additional
evidence that supported the advanced salary setting for several of those cases, leaving 12 cases in
which no justifying documentation could be provided.




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                          In a memorandum to SBA’s Chief Financial Officer, the Assistant
                          Administrator for Human Resources requested, and obtained, a waiver of
                          the erroneous overpayment. According to SBA’s HR officials, they
                          believed the salary-setting error was their fault and not the appointee’s
                          fault.

                          In addition to examining the procedures used in initial pay settings, we
                          also examined the procedures that SBA used in later providing periodic
                          salary increases to the 310 political and Ramspeck Act appointees.
                          According to federal pay rules, GS pay grade employees are eligible for pay
                          step increases based on their satisfactory work performance and their
                          amount of time in the pay grade. These rules also permit step increases,
                          regardless of time in grade, in recognition of quality performance. On the
                          basis of the records we reviewed that pertained to salary increases, SBA
                          appeared to have followed applicable federal laws and regulations in
                          providing salary increases in 309 of the 310 cases. For the remaining case,
                          the information available was not sufficient for us to make a
                          determination. The periodic salary increases included within grade step
                          increases due to either performance awards or time in grade.

                          An interagency detail is the temporary assignment of an employee to a
SBA Lacked Adequate       different agency for a specified period, with the employee returning to his
Procedures to Obtain      or her regular duties at the end of the detail. In accordance with principles
Reimbursement and         of appropriation law, the receiving agency should generally reimburse the
                          loaning agency for the salary and expenses of the detailed employee.
Record Ending Dates
for Interagency Details   This rule was enunciated in a 1985 decision by the Comptroller General of
                          the United States. He concluded that except under limited circumstances,
                          nonreimbursable details (1) violate the law that appropriations must be
                          spent only for the purposes for which they are appropriated and (2)
                          unlawfully augment the appropriations of the receiving agency.
                          Specifically, the Comptroller General held that nonreimbursable details are
                          improper except where the detail (1) involves a matter related to the
                          loaning agency’s appropriations or (2) will have a negligible impact on the
                          loaning agency’s appropriations. An additional exception to the
                          reimbursement requirement is provided by 3 U.S.C. 112, which permits
                          nonreimbursable details of up to 180 days in a fiscal year to five Executive
                          Office of the President (EOP) agencies—the White House Office, the
                          Executive residence at the White House, the Office of the Vice President,
                          the Office of Policy Development, and the Office of Administration.

                          SBA records showed that 20 SBA employees were on interagency details at
                          some time during fiscal years 1992 through 1998. Ten of the 20 employees



                          Page 12                                   GAO/GGD-99-68 SBA Personnel Practices
                        B-278977




                        were assigned to reimbursable details and 10 were assigned to
                        nonreimbursable details. SBA had not taken action to obtain
                        reimbursement for the services of 7 of the 10 employees assigned to
                        reimbursable details until we brought the matter to its attention. Further,
                        the actual lengths of the details were not adequately documented, which,
                        for reimbursable details, makes it difficult to accurately determine the
                        amount of reimbursement that is due. SBA officials acknowledged the
                        need to improve the agency’s procedures for obtaining reimbursement and
                        said steps would be taken to make improvements.

SBA Had Not Requested   For the 10 employees who were assigned to reimbursable details, the total
                                                                                    8
                        potential reimbursable value amounted to more than $873,000. However,
Reimbursement for All   SBA records indicated that the agency had not sought reimbursement for
Reimbursable Details    the services of 7 of the 10 employees.
                                                              9




                        According to SBA, officials from SBA’s finance office in Denver were
                        responsible for seeking reimbursements from other agencies for details
                        arranged on a reimbursable basis. Officials from that office told us that
                        they overlooked their collection responsibilities in the seven cases because
                        they were not aware that the employees had been detailed. They said they
                        did not receive copies of the interagency agreements that authorized the
                        details. An SBA official surmised that the interagency agreements, which
                        are prepared by HR in Washington, D.C., with a copy going to the SBA
                        finance office in Washington, D.C., were not being sent to the Denver
                        office, which initiates the actual billing.

                        After we brought these seven cases to the attention of the finance officials,
                        the finance center began to make efforts to bill the appropriate agencies.
                        Officials from the finance center have since told us that SBA has received
                        reimbursement for the services of six of the seven employees and in its
                        comments on a draft of this report, SBA said it has collected all but a small
                        amount in the seventh case. The amounts of reimbursement SBA received
                        were based on limited or incomplete information on each detail, did not
                        always include amounts for employee benefits, and therefore were likely
                        different from the amounts that should have been reimbursed.


                        8
                         Although nearly all of the interagency agreements called for reimbursement of salaries and benefits,
                        the agreements usually provided values only for the salaries. Therefore, this figure represents potential
                        salary costs only.
                        9
                         In addition to employees who SBA detailed to other agencies, nine employees from other agencies
                        were detailed to SBA during fiscal years 1992 through 1998. Seven of those details were on a
                        reimbursable basis. SBA reported that, as of March 1999, it had contacted the agencies asking them to
                        bill for the reimbursable details and had paid the one bill it had received to date.




                        Page 13                                                  GAO/GGD-99-68 SBA Personnel Practices
                          B-278977




                          Although we found documentation indicating when details began, we
                          noted that no systematic process existed to record the actual ending dates
                          of the details. For example, in one case involving a nonreimbursable
                          detail, SBA determined the actual duration of the detail on the basis of a
                          handwritten notation in which an unknown source wrote the ending date
                          of the detail in the bottom margin of a document evidencing the detail.
                          Actual ending dates of details are important because although the
                          interagency agreements contain the planned beginning and ending dates,
                          the actual detail may be of a longer or shorter duration.

                          During our review SBA officials said that a special project would be
                          undertaken to examine how the reimbursable process should work, what
                          appropriate paperwork requirements are needed, and what controls will be
                          needed to ensure that interagency details are properly controlled in the
                          future. In commenting on a draft of this report, SBA said that the not-to-
                          exceed date is clearly stated in the documentation of the detail and that
                          there is no requirement to document details that end on their not-to-
                          exceed date. SBA said that it documents extensions of details and the
                          termination date of details that end early, although it recognized that it
                          failed to do so in one of the cases we reviewed. SBA said that it is revising
                          its procedures to ensure program managers know extensions and
                          terminations of interagency details are to be documented on a Notification
                          of Personnel Action (SF-50) and that the new procedure will ensure that
                          SBA’s personnel/payroll system provides automated “ticklers” to help
                          eliminate the possibility of any funds from reimbursable details not being
                          collected.

                          SBA’s comments are unclear as to whether the new requirement to
                          document terminations on a SF-50 will apply to all details or just to those
                          that are extended or end early. If this requirement applies to all details,
                          then we believe it should help serve as a reminder that reimbursement
                          should be sought. However, if the requirement applies only to cases where
                          details are extended or end early, then we believe the potential to overlook
                          collections will continue to exist.

Actual Length of Most     SBA had interagency agreements or other documentation specifying the
                          planned duration for each of its 10 employees assigned to nonreimbursable
Nonreimbursable Details   details. However, it was unable to determine the actual duration of the
Also Unknown              details for 4 of the 10 employees. In the other six cases, actual ending
                          dates were supported by handwritten notations to the file in five cases, and
                          by documentation provided by the borrowing agency in the sixth case. As
                          in the case for the reimbursable details, SBA officials said they will




                          Page 14                                   GAO/GGD-99-68 SBA Personnel Practices
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determine the appropriate paperwork requirements and controls needed
for nonreimbursable details as well.

Six of the 10 employees were detailed to EOP offices included in Public
Law 95-570, which permits nonreimbursable details of up to 180 days in a
fiscal year.

Five of the six were career employees who were detailed to the Office of
                                                                          10
the Vice President to participate in the National Performance Review.
The sixth was a political employee who was detailed to the White House
Office. This employee had been working at SBA for about 1 year at the
time of the detail. SBA documentation did not indicate an expected length
of the detail, although it did indicate the detail was to begin on April 16,
1995. After discussing this case with SBA officials, they determined that
the employee resigned from the SBA position and transferred to the White
House on July 29, 1995.

Of the remaining four employees assigned to nonreimbursable details, SBA
used the allowable exception in two cases that the employees would be
performing duties related to SBA’s appropriations. In the other two cases
SBA used the allowable exception that the details would have negligible
impacts on SBA’s appropriations.

Additional information on the interagency details is contained in appendix
IV.




10
  The National Performance Review is a major management reform initiative begun by the President in
1993 and placed under the direction of the Vice President to make the government work better and
cost less. In January 1998, the name of the initiative was changed to the National Partnership for
Reinventing Government.




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                                            B-278977




                                            During the 1996 through 1998 time frame, several personnel changes
Position Changes in                         occurred in key SBA management offices in which both the number of
SBA Headquarters                            positions and the number of political appointees increased. These changes
Offices                                     are summarized in table 1.

Table 1: Personnel Changes Made in Key SBA Offices From 1996 to 1998
                                                                                                      a
                                                                                      Positions (P)
Office                                      Eliminated                                       Added
Office of the Administrator                 Executive Assistant (P)                          Executive Assistant
                                            White House Liaison                              Project Director for Lender Oversight (P)
                                                                                             Special Assistant (P)
                                                                                             Staff Assistant
Office of the Deputy Administrator          Senior Advisor (P)                               Program Support
Office of the Chief of Staff                Special Assistant                                Deputy Chief of Staff (P)
                                            Receptionist                                     Special Assistant (P)
                                                                                             Staff Assistant
                                                                                             Staff Assistant
Office of the Chief Operating Officer                                                        Chief Operating Officer
Office of the Associate Administrator for   Program Support Specialist                       Associate Director (P)
Field Operations                            Program Analyst                                  Office Automation Assistant
                                            Program Analyst
                                            Note: Additional personnel changes may have occurred during this period. This table reflects
                                            positions identified from SBA’s 1996 and 1998 telephone books.
                                            a
                                            (P) Denotes the position was held by a political appointee.
                                            Source: SBA telephone books for March 1996 and 1998 and GAO analysis.


                                            Table 1 reflects a net increase of four positions and three political
                                            appointees. It is not unusual for key personnel changes to occur when a
                                            new head of an agency is appointed. Generally, political appointees serve
                                            at the pleasure of the agency head; when the head of the agency changes,
                                            the political appointees often change as well.

                                            The incumbents of the eight positions that were eliminated either were
                                            transferred to other SBA positions or resigned. Those individuals who
                                            were appointed to the 12 new positions transferred into SBA from another
                                            federal agency, were reassigned from other SBA positions, or were newly
                                            hired. (See app. V for descriptions of these 20 position changes.)




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                          B-278977




                          The Small Business Reauthorization Act of 1997, which became law on
Status of Legislatively   December 2, 1997, mandated that the position of Assistant Administrator
Mandated Position in      for SBA’s Office of Women’s Business Ownership was to be upgraded to
                                                                                   11
Office of Women’s         the SES level and held by a noncareer SES appointee. The legislative
                          history of the Small Business Reauthorization Act of 1997 does not
Business Ownership        elaborate on the mandate to upgrade the Assistant Administrator position
                          to the SES level. Neither the statute nor its legislative history set a time
                          frame for upgrading the position. The position was filled with a noncareer
                          SES appointee on April 5, 1999.

                          During our review, we asked SBA officials to explain why the position had
                          not been upgraded earlier, especially considering that during fiscal year
                          1998--when the act was passed--SBA had established and filled at least nine
                          other SES positions, including two noncareer (political) positions. SBA
                          officials we interviewed told us that the Assistant Administrator position
                          was already filled with a Schedule C, GS-15 political appointee, and other
                          critical need positions existed and had to be filled.

                          According to an SBA document, the position of Assistant Administrator for
                          SBA’s Office of Women’s Business Ownership had previously existed as an
                          SES position; however, after the position became vacant in 1993, it was not
                          refilled at the SES level. In 1994 the Clinton administration--as part of its
                          early efforts to reduce the size of the federal government--directed that the
                          total allocation of SES positions in the executive branch departments and
                          agencies be reduced by 10 percent.

                          According to SBA’s HR officials, in SBA’s case, the directive resulted in
                          OPM reducing SBA’s total SES position allocation from 60 to 55, and the
                          position of Assistant Administrator for Women’s Business Ownership was
                          1 of the positions that SBA downgraded as a result of the reduced SES
                          allocation. According to SBA officials, during fiscal year 1998, SBA’s total
                          SES allocation remained at 55, of which 10 could be filled by noncareer
                          (political) SES appointments.

                          SBA’s HR officials told us that in April 1998 SBA management officials
                          began reevaluating the agency’s SES needs. This exercise resulted in a
                          June 18, 1998, letter from the SBA Administrator to the Director, OPM,
                          requesting an increase in SBA’s SES allocation from 55 to 60. The SBA
                          Administrator made a case for establishing five new SES positions,
                          including an upgraded position of Assistant Administrator for Women’s
                          Business Ownership. By letter dated October 29, 1998, OPM’s Director
                          11
                               Public law 105-135, Dec. 2, 1997 (15 U.S.C. 656(g)).




                          Page 17                                                     GAO/GGD-99-68 SBA Personnel Practices
                        B-278977




                        responded to SBA’s request by increasing SBA’s allocation from 55 to 58.
                        One of the three new allocations OPM provided was specifically for the
                        position of Assistant Administrator for Women’s Business Ownership.
                        However, at the end of December 1998, the appointment had not been
                        made. According to SBA officials, all noncareer (political) SES
                        appointments are controlled by the White House; and, although OPM had
                        approved the position as part of the increased SES allocation, SBA officials
                        were awaiting clearance by the White House before requesting OPM’s
                        approval of the individual expected to receive the appointment. Clearance
                        was received and OPM approved the individual’s appointment on April 5,
                        1999. The appointee was the same employee who had been been serving
                        as the Assistant Administrator in the Schedule C, GS-15 position.

                        During our review, we received information--and confirmed--that some
Regional Advocates      Regional Advocates employed by the Office of Advocacy had attended a
Participated in White   political appointee meeting that was sponsored by the White House during
House Political         fiscal year 1997. Regional Advocates are not political appointees and,
                        according to SBA, have a mission that is significantly different than that of
Appointee Meeting       political appointees. Nevertheless, Regional Advocates share many of the
                        characteristics of political appointees. For example, like political
                        appointees, Regional Advocates can be hired noncompetitively. Also like
                        political appointees, Regional Advocates serve at the pleasure of the head
                        of their agencies--in this case, the Chief Counsel for Advocacy. One
                        additional factor that would further demonstrate the similarity of Regional
                        Advocates and political appointees is that according to (1) the Chief
                        Counsel for Advocacy, (2) a former Regional Advocate, and (3) a current
                        Regional Advocate, new Regional Advocate appointees are frequently
                        cleared though the White House personnel office before being appointed.
                        The Chief Counsel for Advocacy said, however, that this is done more as a
                        courtesy to the White House than because it is a requirement to obtain the
                        White House’s concurrence on the appointment.

                        The Office of Advocacy has 1 Regional Advocate stationed in each of the
                        10 cities in which SBA has a regional office. These 10 Regional Advocates
                        report directly to the Chief Counsel and the Deputy Chief Counsel for
                        Advocacy. The Regional Advocate’s role is, in part, to help identify issues
                        affecting small businesses in their respective regions of the country.

                        According to the Chief and Deputy Chief Counsels for Advocacy, the
                        Office of Advocacy views itself as being independent of both the
                        administration and Congress. The Deputy Chief Counsel told us that this is
                        an important notion because to successfully mitigate issues affecting small
                        businesses, the Office of Advocacy has to work effectively with



                        Page 18                                   GAO/GGD-99-68 SBA Personnel Practices
B-278977




administrations and Congress. On the other hand, she said that Regional
Advocates, when they are in Washington, D.C., are encouraged to attend
political appointee meetings at the White House or at other locations in
order to gain and maintain a broad awareness of the administration’s
initiatives in many areas, including small business.

Several times a year the Regional Advocates, individually and collectively,
visit Office of Advocacy headquarters in Washington, D.C., to discuss small
business concerns. While in Washington, according to the Deputy Chief
Counsel for Advocacy, they may attend political appointee meetings. This
official said that such meetings are often sponsored by SBA officials, and
attendees include only SBA political appointees and other key SBA
officials. But, on occasion, wider scope political appointee meetings are
sponsored by the White House and are attended by political appointees
from numerous executive branch departments and agencies, including
SBA. According to the Deputy Chief Counsel for Advocacy, although
Regional Advocates are encouraged by the Chief Counsel for Advocacy to
attend such meetings, their attendance is nevertheless voluntary.

By examining copies of Regional Advocates’ travel authorizations and
travel vouchers for fiscal year 1997 and for part of fiscal year 1998, we
identified eight Regional Advocates who had visited the White House on
the same date. We confirmed their visit with the White House Office. We
were able to contact six of these Advocates, some of whom no longer
work for SBA. They each confirmed that on that date they attended a
political appointee meeting at the White House. The meeting, they said,
was for executive branch political appointees who were stationed outside
of Washington, D.C.

According to these six Regional Advocates, the White House meeting was
primarily an opportunity to receive briefings from high-level
administration officials--including the President and the Vice President--on
the administration’s initiatives. One former Regional Advocate told us that
this meeting also served as a morale booster to the political appointees
who attended. The six current or former Regional Advocates we
contacted told us that they had not received instructions of any kind from
officials who attended the White House meeting and did not believe their
independence in carrying out their duties was affected by attending the
meeting.

Each of the six Advocates pointed out, however, that they had ties to
either the Clinton administration or to the Democratic party before they
received their Regional Advocate appointments. For example, several of



Page 19                                   GAO/GGD-99-68 SBA Personnel Practices
              B-278977




              them told us that they had worked on either the Clinton-Gore 1992
              presidential campaign or the 1996 reelection campaign. Another told us
              she had worked with the Democratic party in Colorado during 1996.

              Significant personnel changes have occurred at SBA since the early 1990s,
Conclusions   some of which resulted from the considerable reorganization and
              downsizing that SBA experienced. Regional offices were reorganized and
              drastically downsized, with most regional employees transferring to other
              SBA offices or retiring. During the period, SBA hired outsiders for 6 of the
              46 District Director positions it filled and did so following applicable
              federal hiring procedures. With the exception of one case, SBA also
              followed applicable federal laws and regulations when setting the starting
              salaries. The Office of Advocacy used informal processes for identifying
              and selecting persons to fill Regional and Assistant Advocate positions,
              which was in keeping with its special hiring authority. In other SBA
              executive offices, the number of positions and political appointees
              increased somewhat from 2 years earlier. There was also one position
              change--upgrading (and filling) the position of head of the Office of
              Women’s Business Ownership to the SES level--that Congress said should
              occur but SBA had not done until over a year later. In fiscal year 1997, at
              least six Regional Advocates attended a political appointee meeting at the
              White Office, which was in keeping with an Office of Advocacy’s policy of
              encouraging attendance at political meetings.

              Over the greater part of the 1990s, SBA hired 310 political and Ramspeck
              Act employees, and, as far as we can tell, SBA HR staff usually followed
              applicable laws and regulations in setting their salaries and later in
              providing them periodic salary increases. However, the documentation
              necessary to support certain pay settings could not always be found.
              According to SBA, it had not considered providing recruitment bonuses on
              a case by case basis because it had made a policy decision not to offer
              such bonuses. This reason, however, was not documented as required for
              those cases where employees received advanced salary levels. SBA has
              recognized that its HR staff need further guidance on pay setting and
              recruitment bonuses and has drafted a new set of procedures to provide
              that guidance.

              SBA participates in interagency details of employees but did not have
              adequate procedures to (1) accurately identify when it should bill agencies
              for the reimbursable details of SBA employees and (2) monitor the actual
              length of details. SBA officials agree that an improved system of internal
              controls is necessary and have taken steps in that direction.




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                         B-278977




                         We recommend that the SBA Administrator finalize and issue standard
Recommendations to       operating procedures that include procedures for considering recruitment
the Administrator, SBA   bonuses, setting salaries, and documenting those actions when SBA
                         establishes starting salaries for newly appointed employees at levels above
                         the minimum step of a pay grade.

                         We recommend that the SBA Administrator identify and establish
                         appropriate procedures for better controlling the interagency detailing of
                         its employees. Such procedures should ensure that the specifics of each
                         detail are appropriately documented and monitored and that in the case of
                         cost-reimbursable details, all costs are accounted for and promptly
                         reimbursed.

                         By letter dated April 1, 1999, the SBA Administrator’s designee--the
Agency Comments and      Assistant Administrator for Human Resources--commented on a draft of
Our Evaluation           this report. Although the Assistant Administrator did not address our two
                         recommendations directly, she noted actions that SBA had taken or was
                         taking that were associated with those recommendations. In connection
                         with the recommendation that SBA finalize and issue standard operating
                         procedures for considering recruitment bonuses, setting salaries, and
                         documenting starting salaries that are above the minimum step of a grade,
                         the Assistant Administrator said SBA had finalized a policy document
                         establishing procedures for, and requiring consideration of, recruitment
                         bonuses, which it expected to publish during this spring (1999). We
                         believe this new policy as well as the guidance SBA is developing on pay
                         setting should, if effectively implemented, meet the intent of our
                         recommendation.

                         In connection with our recommendation that SBA identify and establish
                         appropriate procedures for better controlling interagency details, the
                         Assistant Administrator said SBA was revising its detail procedures to
                         ensure program managers know that extensions and terminations of
                         interagency details must now be documented by a formal Notification of
                         Personnel Action (SF-50). This new procedure, she said, will insure that
                         SBA’s personnel/payroll system provides automated ticklers and the
                         combination of these actions should eliminate the possibility of any funds
                         from reimbursable details not being collected. It is unclear from SBA’s
                         comments whether this new procedure is to apply to all details or to only
                         those details that are extended or terminate early. If the former, then we
                         believe such a procedure, if effectively implemented, should meet the
                         intent of our recommendation. If the latter, then we believe the potential
                         will still exist for overlooking collections.




                         Page 21                                  GAO/GGD-99-68 SBA Personnel Practices
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Although the Assistant Administrator said SBA was taking these actions,
she also said SBA found the draft “misleading.” Most of her letter
addresses that statement, conveying SBA’s problems with the draft or
providing additional information. Apparently, SBA officials considered
certain conclusions that we drew from the facts to be overstated and
certain facts that we presented to be incorrect. For example, the Assistant
Administrator cited our conclusion that SBA “usually” followed
appropriate laws and regulations in setting the salaries and later in
providing salary increases for 310 political and Ramspeck Act employees.
The Assistant Administrator indicated that the term “usually” was
misleading because elsewhere in the report we said SBA appeared to have
followed applicable laws and regulations in providing salary increases in
309 of the 310 cases. Information was not available to make a
determination in the remaining case.

Regarding this example, we recognize that for 309 of the 310 appointments
we conclude that SBA appeared to have appropriately provided salary
increases. However, we also report a number of cases in which SBA could
not provide documentation allowing a determination as to whether SBA
followed appropriate procedures when setting advanced salaries at the
time the employees were hired. Since receiving our draft report for
comment, SBA sent further information to us on specific cases. The cases
were of employees for whom SBA had been unable to provide
documentation to support an advanced pay setting. In the draft report,
these cases numbered 31 of the political and Ramspeck Act appointments
that we reviewed in which the starting salaries were set above the
minimum step of the grade. SBA has since found and provided us with the
information justifying the advanced pay setting for several of these cases
and we modified the report as appropriate. We now report that justifying
documentation was not available for 12 cases. Because our overall
conclusion encompasses both the initial salary setting and the periodic
salary increases, we believe our characterization that SBA usually followed
applicable laws and regulations is both fair and accurate.

Regarding recruitment bonuses, the Assistant Administrator said that SBA
had at one time considered recruitment bonuses, but had decided as a
matter of policy not to offer any. Consequently, SBA had not developed a
recruitment bonus plan, as required by regulations. Without such a plan,
the Assistant Administrator said recruitment bonuses could not be offered.
As indicated earlier, SBA has since decided to initiate a recruitment bonus
policy.




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SBA’s policy decision and rationale for not using recruitment bonuses
were never mentioned by SBA officials during the course of our work.
Had the policy decision and rationale been mentioned, we would have
included those facts in the draft report. On the basis of SBA’s comments,
we have reflected that information in this report. The important point, in
our opinion, is that recruitment bonuses can be an effective and cost
efficient alternative to advanced pay setting, and we commend SBA for
revisiting the issue at our suggestion.

SBA’s written comments and our further responses to them are in
appendix VI.

As agreed with the Committee, unless you publicly announce the report’s
contents earlier, we plan no further distribution of it until 30 days after the
date of this letter. We will then send copies to Senator Barbara Milkulsi
and to Representative James M. Talent, Representative Nydia M.
Velazquez, Representative James T. Walsh, and Representative Alan B.
Mollohan in their capacities as Chair or Ranking Minority Member of
Senate and House Committees and Subcommittees. We will also then send
copies to the Honorable Aida Alvarez, Administrator of SBA and to the
Honorable Janice R. Lachance, Director of OPM. Also, at that time, we will
make copies available to others on request.

Major contributors to this report are listed in app. VII. Please contact me at
(202) 512-8676 if you or your staff have any questions.

Sincerely yours,



Michael Brostek
Associate Director, Federal Management and
  Workforce Issues




Page 23                                    GAO/GGD-99-68 SBA Personnel Practices
Contents



Letter                                                                                               1


Appendix I                                                                                          26

Objectives, Scope, and
Methodology
Appendix II                                                                                         31

Status of Regional
Office Employees
Following
Reorganization
Appendix III                                                                                        32
                         SBA Hired Six District Directors From Outside the                          32
Appointments of SBA        Agency
District Directors       Two Cases in Which SBA Employees Were Appointed to                         43
                           District Director Positions


Appendix IV                                                                                         47

Additional Information
on Interagency Details
Appendix V                                                                                          49
                         Office of the Administrator                                                49
Additional Information   Office of the Deputy Administrator                                         50
on Position Changes in   Office of the Chief of Staff                                               50
                         Office of the Chief Operating Officer                                      51
Key SBA Offices          Office of the Associate Administrator for Field                            51
                           Operations


Appendix VI                                                                                         52
                         GAO Comments                                                               56
Comments From the
Small Business
Administration


                         Page 24                                  GAO/GGD-99-68 SBA Personnel Practices
                        Contents




Appendix VII                                                                                           58

Major Contributors to
This Report
Related GAO Products                                                                                   60


Tables                  Table 1: Personnel Changes Made in Key SBA Offices                             16
                          From 1996 to 1998
                        Table II.1: Status of 504 Regional Employees as of April                       31
                          1997
                        Table IV.1: Reimbursable Details From SBA to Other                             47
                          Agencies During the Period FY 1992 Through FY 1998
                        Table IV.1: Nonreimbursable Details From SBA to Other                          48
                          Agencies During the Period FY 1992 Through FY 1998




                        Abbreviations

                        AD            Administratively determined pay rate
                        CEO           chief executive officer
                        C.F.R.        Code of Federal Regulations
                        DOD           Department of Defense
                        EOP           Executive Office of the President
                        ERB           Executive Resources Board
                        HR            Office of Human Resources
                        NFC           National Finance Center
                        OFHEO         Office of Federal Housing Enterprise Oversight
                        OPF           Official Personnel Folder
                        OPM           Office of Personnel Management
                        RIF           reduction-in-force
                        SBA           Small Business Administration
                        SES           Senior Executive Service
                        SF-50         Standard form 50, Notification of Personnel Action
                        SOP           Standard operating procedure




                        Page 25                                      GAO/GGD-99-68 SBA Personnel Practices
Appendix I

Objectives, Scope, and Methodology


              Our first objective was to determine the status of Small Business
              Administration (SBA) regional office employees following SBA’s
              reorganization and whether SBA employees were shifted to regional
              offices after those offices were downsized. In addressing the first part of
              this objective--the status of regional office employees--we identified all
              employees assigned to an SBA regional, district, or branch office as of
              September 2, 1993, (which was prior to the reorganizing and downsizing
              efforts), and as of April 1997 (which was after the regional offices had
                                 1
              been downsized.) We obtained this data from SBA’s Office of Human
              Resources (HR) database. We then entered each employee’s name, and
              the office to which he or she was assigned as of those dates, into a
              database that we developed specifically for this purpose. Using our
              database, we sorted the information alphabetically by employee name and
              manually searched for name matches. In cases where (1) there was a
              name match; and (2) that employee had been assigned to a regional office
              as of September 2, 1993, we were able to determine that employee’s
              employment status as of April 1997. In cases where (1) there was no name
              match; and (2) that employee had been assigned to a regional office as of
              September 2, 1993, we took additional steps to determine the employee’s
              status. In those cases, we provided each name to SBA’s HR officials and
              asked that information on the status of each be determined. HR officials
              provided us with documents from their database on each of those
              employees for whom a record existed. The documents showed that the
              employees resigned, retired, died, or were otherwise separated from the
              agency during the period September 2, 1993, through April 1997. In some
              cases employees’ records were no longer in the database, and their status
              could not be determined.

              In addressing the second part of this objective--the shifting of personnel--
              we determined that SBA officials do not usually document the temporary
              shifting of employees from one office to another. So, in order to obtain
              information on such shifting, we interviewed cognizant HR officials. These
              officials, on our behalf, also canvassed appropriate regional and district
              office staff for specific instances in which personnel were shifted to the
              regional offices and provided that information to us. In some cases we
              discussed specific instances of personnel shifts directly with district office
              officials.



              1
               We did not consider SBA’s small number of post-of-duty offices because typically only 1 SBA
              employee was assigned to a post-of-duty office. According to SBA Human Resources officials, the
              downsizing of the regional offices had little, if any, effect on the employees assigned to the post-of-duty
              offices.




              Page 26                                                    GAO/GGD-99-68 SBA Personnel Practices
Appendix I
Objectives, Scope, and Methodology




Our second objective was to determine whether SBA followed applicable
policies and procedures when appointing--and setting the starting salaries
of--individuals hired during the period January 1, 1993, through December
31, 1998, from outside of SBA for the position of District Director, and the
procedures SBA’s Office of Advocacy used in hiring Regional Advocates
and Assistant Advocates during calendar year 1998. In addressing the first
part of this objective--the procedures used to hire District Directors from
outside SBA and to set their salaries--we asked HR officials to identify all
District Director changes that occurred between January 1, 1993, and
December 31, 1998. We then focused upon six cases in which the District
Director positions were filled by outside hires. We identified the starting
salaries set by SBA in each of the six cases and, using previous
employment and salary information contained in the individual’s
application materials, referenced that information to the applicable federal
laws and regulations regarding salary setting to determine if SBA complied
with the laws and regulations. We also determined where the other
individuals who were appointed to District Director positions since
January 1, 1993, had come from; and we focused upon two cases involving
individuals who had held non-District Director SBA positions before being
appointed as District Directors. For each of the eight cases, we reviewed
available information, including available competitive examination process
case files. In some cases the appointments were made over 2 years before
our review began, and SBA did not have a complete case file on the
examination and appointment process. We examined available records and
compared the examination and appointment procedures used to the
competitive examination and appointment requirements contained in the
Code of Federal Regulations (C.F.R.) and contained in SBA’s merit staffing
plan.

In addressing the second part of the objective--the procedures used by
SBA’s Office of Advocacy to hire Regional Advocates and Assistant
Advocates during 1998--we first obtained a copy of, and reviewed, the
federal statute that provides unique hiring authority to the Chief Counsel
for Advocacy. We then interviewed the Deputy Chief Counsel for
Advocacy and obtained information on nine employees hired during
calendar year 1998. We examined information contained in each of their
official personnel folders (OPFs), including the appointment authorities
that were cited and the period of their appointments. Because the Chief
Counsel for Advocacy has special hiring authority that is exempt from
competitive examination procedures, case files and other documentation
that is required under competitive examination procedures did not exist in
these cases. As a result, we had to rely principally upon interviews with




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Appendix I
Objectives, Scope, and Methodology




the Chief and Deputy Chief Counsels for Advocacy in determining the
recruiting and hiring processes that were used in these cases.

Our third objective was to determine if SBA followed applicable federal
laws and regulations to set the salaries of, and provide salary increases to,
political appointees and former congressional (Ramspeck Act) employees
hired between October 1, 1991, and September 30, 1998. We first identified
those employees by obtaining an accession list from HR officials of
political appointees and former congressional employees hired under the
                                       2
Ramspeck Act since October 1, 1991. We then obtained the OPF of each
of those employees and reviewed standard forms 50B (SF-50s) that were
filed in the OPFs. SF-50s contained salary setting and salary increase
information on each employee and are supposed to be a permanent part of
an employee’s OPF. We examined the salaries that SBA set for those
employees and the salary increases SBA provided to them for compliance
with the regulations governing salary setting and salary increases
contained in the C.F.R. and in SBA’s policies. Because OPFs are to be
maintained by the agencies for which the employees work, we obtained
OPFs from (1) SBA’s HR officials in cases in which the employee was still
working for SBA at the time of our review, (2) HR officials of other
agencies in cases where the employees had transferred from SBA to
another agency, and (3) officials of the National Archives and Records
Administration’s National Personnel Records Center in cases in which the
employees were no longer working for the government and their OPFs had
been archived. In some cases, we were unable to locate and obtain OPFs
of former SBA employees. In those cases we relied instead on personnel
records contained in SBA’s personnel database.

Our fourth objective was to determine whether SBA adequately controlled
the interagency detailing of its employees during fiscal years 1992 through
1998. We obtained information from SBA’s HR officials that identified the
SBA employees who were detailed to other agencies and the agencies to
which they were detailed during that time period. (SBA officials also
provided us with information on other agency employees who were
detailed to SBA.) We searched federal regulations, Comptroller General
decisions, and the Federal Personnel Manual (now no longer in use) to
ascertain what governmentwide guidance was available to SBA on the
2
 For purposes of this review, we defined political appointees as those receiving appointments to
executive schedule positions, those appointed to noncareer Senior Executive Service (SES) positions,
those appointed under excepted service schedules A and C authorities, and those appointed to
positions involving administratively determined (AD) pay rates. Regarding former congressional
employees, we examined the salary setting and salary increases only for those hired under authority
provided by the former Ramspeck Act of 1940 (5 U.S.C. 3304(c)), which was repealed by Congress
effective December 19, 1997.




Page 28                                                GAO/GGD-99-68 SBA Personnel Practices
Appendix I
Objectives, Scope, and Methodology




matter of interagency details. We also obtained from SBA’s HR officials
agency personnel guidance regarding the detailing of employees and the
interagency agreements that were used to effect and set the terms of the
details. We examined the OPFs of those SBA employees who were
detailed and searched for relevant documentation supporting the details.
Using all available documented information, as well as information
obtained from interviews of officials from SBA’s Office of Human
Resources, we compared the circumstances of each detail to the criteria
for details included within SBA’s personnel guidance. Using available
documented information, as well as information obtained from interviews
with officials from SBA’s Office of the Chief Financial Officer, we
examined (1) the status of recovering costs associated with the
reimbursable interagency details and (2) the length of time each detail was
to last and actually lasted.

Our fifth objective was to determine what positions were newly created or
abolished between March 1996 and March 1998 in SBA’s Office of the
Administrator, Office of the Deputy Administrator, Office of the Chief of
Staff, Office of the Chief Operating Officer, and Office of the Associate
Administrator for Field Operations and what were the sources of
appointees to the newly created positions and the status of those
employees in the abolished positions. We first determined the staffing
changes that had occurred in each of those offices by comparing the
organizational section of SBA’s telephone books for 1996 and 1998. Those
organizational sections identified specific employees of each of those
offices by name and title. For those positions that were newly established
since 1996, we obtained position descriptions from SBA’s HR officials. We
then interviewed SBA’s HR and Chief of Staff officials to discuss
establishing and making appointments to those new positions. We also
discussed with them the circumstances related to positions being
abolished. We examined information contained in the official personnel
folders or examined relevant personnel information otherwise available
and maintained by SBA’s Office of Human Resources to determine the
status of those employees whose positions were abolished.

Our sixth objective was to determine the status of SBA’s response to a
December 1997 congressional mandate to establish a Senior Executive
Service (SES) position within SBA’s Office of Women’s Business
Ownership. We first researched the law mandating that the position be
established. We then obtained information from SBA’s HR officials on all
executive level positions that had been established and filled during the
fiscal year the legislative mandate became effective. We interviewed
cognizant SBA officials and obtained their explanation, as well as relevant



Page 29                                  GAO/GGD-99-68 SBA Personnel Practices
Appendix I
Objectives, Scope, and Methodology




documents, as to the status of the establishment and filling of the
mandated position. We compared this information to information we
obtained from SBA on how it established and filled other Senior Executive
Service positions during the period after the congressional mandate but
prior to compliance with the mandate.

Finally, our seventh objective was to determine whether SBA Regional
Advocates attended a White House-sponsored political appointee meeting
during fiscal year 1997. Our first step in determining which Regional
Advocates attended the White House-sponsored meeting was to obtain
their travel vouchers and review them for evidence that they traveled to
the White House. We then contacted White House officials and confirmed
that the Regional Advocates had visited the White House on the date the
meeting occurred. We prepared a summary schedule of each instance we
found and then contacted six former or current Regional Advocates by
telephone to discuss the circumstances of their visits to the White House.
We also interviewed the Chief and Deputy Chief Counsels for Advocacy
and obtained their perspectives on why the Regional Advocates may have
attended the White House-sponsored meeting.

In addressing our seven objectives, we relied extensively upon personnel
records provided to us by SBA’s HR officials. Some of the information
contained in those records dated back to before October 1991. A
significant portion of the records came from SBA’s personnel records
database. This database is contained on computers maintained by the U.S.
Department of Agriculture’s National Finance Center (NFC) in New
Orleans, LA. NFC provides computer-based payroll and personnel services
to many federal agencies, and the system is periodically examined for
reliability by government and outside auditors.

We did our work in Washington, D.C.; Denver, CO; and St. Louis, MO; from
March 1997 through January 1999 in accordance with generally accepted
government auditing standards. We obtained written comments on a draft
of this report from SBA. These comments are discussed on page 37 of this
letter and are reprinted in appendix VI.




Page 30                                  GAO/GGD-99-68 SBA Personnel Practices
Appendix II

Status of Regional Office Employees
Following Reorganization

                                             On the basis of personnel-related data as of September 2, 1993, and as of
                                             April 1997, and provided to us by SBA Office of Human Resources (HR)
                                             officials, we determined that the total number of employees assigned to
                                             SBA’s 10 regional offices was reduced from 504 to 29. We examined
                                             additional individual records that were available and determined the
                                             status--following SBA’s reorganizing and downsizing efforts--of all but 25 of
                                             the 504 employees. In the 25 cases, individual employee records were not
                                             readily available, so the status of those employees could not be
                                             determined. Table II.1 below shows the status by the regional offices to
                                             which the 504 employees were assigned.


Table II.1: Status of 504 Regional Employees as of April 1997
                                                                       Status
                Employees Employees
Regional        assigned as assigned as Transferred/                                    Appt.
                                                  a                           b
office            of 9/93     of 4/97    remained    Retired Resigned Removed     Died expired                                Unacct’d for
Atlanta                   77           3          44       17       11                2                                                   3
Boston                    41           2          27        6        5                                                                    3
Chicago                   68           3          36       17        6          4     1                                                   4
Dallas/Ft.
Worth                    60            4                 38          13               7                                                    2
Denver                   41            3                 23           9               3                                   2                4
Kansas City              36            3                 22          10               1              1                                     2
New York City             7            3                  4           2                                                                    1
Philadelphia             74            3                 55          14              3               1                                     1
San Francisco            64            3                 45           9              8                                                     2
Seattle                  36            2                 22           8              2               1                                     3
                                         c
Total                   504           29                316         105             46               7        3           2               25
                                             a
                                                 10 employees remained assigned to their regional offices.
                                             b
                                              According to SBA HR officials, these employees were removed from their positions and employment
                                             with SBA after they refused to participate in (1) SBA's transfer program or (2) SBA’s separation
                                             incentives program.
                                             c
                                                 Includes 19 newly assigned employees consisting of 10 Regional Administrators and 9 staff.
                                             Source: SBA personnel database.




                                             Page 31                                                     GAO/GGD-99-68 SBA Personnel Practices
Appendix III

Appointments of SBA District Directors


                         SBA had 69 district offices in 1998 located throughout the United States
                         and in Puerto Rico. During the period January 1, 1993, through December
                                                                                             .1
                         31, 1998, SBA appointed 46 District Directors to 39 district offices In 6 of
                         the 46 cases, the District Directors were newly hired and appointed to their
                         positions from outside SBA after participating in a competitive
                         examination process. In the other 40 cases, the individuals appointed were
                         employees of SBA. This appendix provides case information on the six
                         cases where the District Directors came from outside SBA. It also provides
                         information about the appointments of SBA employees to District Director
                         positions.

                         During calendar years 1994, 1996, 1997, and 1998, SBA filled six vacant
SBA Hired Six District   District Director positions with outside hires under competitive
Directors From           examination processes. In each of the six cases, to the extent that relevant
Outside the Agency       documentation was available to review, we examined the steps SBA
                         followed in the appointment process and determined that SBA appeared to
                         have followed all relevant federal laws and regulations. In each case the
                         individual selected was listed among the best-qualified candidates. In one
                         case, we received allegations that the appointee benefited from
                         favoritism—through use of political connections—in obtaining her career
                         appointment as a District Director. We identified information that
                         indicated that the appointee had worked for the Office of the Governor of
                         Colorado. The Governor of Colorado also served as the Chairman of the
                         Democratic National Committee at the time the appointee obtained her
                         District Director position in Denver, Colorado. Despite obvious political
                         connections to the Democratic party, we did not identify factors that we
                         believe would prove favoritism was involved in the appointment process in
                         this case. Determining whether or not favoritism was used in such a case is
                         extremely difficult and can be done only if the intent and motivation of the
                         selecting officials were known. Each of the six cases we reviewed is
                         presented separately below.

                         Case 1: On May 26, 1994, a former SBA employee was appointed to the
                         position of District Director of the Washington, D.C., District Office. Most
                         District Director positions in SBA are at the GS-14 or GS-15 grade level.
                         However, this position was advertised in the vacancy announcement as an
                         SES career position and was open to all qualified federal employees.


                         1
                         The number of appointments exceeded the number of offices because some individuals received
                         multiple appointments during the time period; e.g., they were reassigned from one District Director
                         position to another.




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Appendix III
Appointments of SBA District Directors




During the years 1985 through 1988 the appointee served in a noncareer
SES capacity at SBA as Associate Administrator for Minority Small
Business. Since then, he had held other high-level positions at the
Departments of Commerce and State as well as in the private sector.
Information contained in his application materials showed that he had
received a Bachelor of Arts degree in sociology from the University of
Puerto Rico. Also, information contained in his application materials
showed that his salary had progressed from about $23,000 per year in 1976
when employed by the former U.S. Department of Health, Education, and
Welfare, to $68,000 per year in 1985 when initially employed by SBA; to
$90,000 per year in 1994 when employed by the Department of Commerce;
and finally, to about $112,000 when appointed by SBA to the SES District
                                      .2
Director of Washington, D.C. position

Relevant documentation regarding the other applicants and the
competitive examination process used to fill this District Director position
was unavailable. According to SBA’s HR officials, there was no
requirement to retain such information beyond 2 years and it is possible
                                                                 .3
that the information was destroyed before we began our review

Case 2: On June 19, 1994, an individual experienced in banking and
mortgage lending was appointed to the position of District Director of the
Cleveland, OH, District Office. Information in his resume showed that he
received a Bachelor of Science degree in International Affairs from
Georgetown University and a Master of Business Administration degree
from the University of Notre Dame. Also, information contained in his
resume showed that his salary had progressed from about $38,000 per year
in 1978 as a Vice President of a bank, to about $75,000 per year in 1991 as a
Vice President of a different bank. This individual’s salary decreased to
about $68,000 when he was appointed by SBA to the GS-15, step 1, District
Director of Cleveland, OH, position.

This individual was selected through a competitive examination process
that began with a vacancy announcement advertising the job as a GS-14/15


2
 SES appointments are not subject to the rules and regulations of title 5 of the U.S. Code that pertain to
competitive service appointments, and heads of agencies have greater discretion in setting the salaries
of SES appointees.


3
 According to 5 C.F.R. 335.103(b)(5) such records may be destroyed after 2 years or after the agency’s
merit promotion program has been formally evaluated by the U.S. Office of Personnel Management
(OPM).




Page 33                                                   GAO/GGD-99-68 SBA Personnel Practices
Appendix III
Appointments of SBA District Directors




position open to all qualified applicants in the United States. Information
obtained from SBA showed that before the position was advertised, an
SBA employee who had graduated from SBA’s District Director Candidate
Development Program had expressed interest in being appointed to the
position. According to SBA’s HR officials, successful graduates of SBA’s
District Director Candidate Development Program can be
noncompetitively appointed to District Director positions. HR officials told
us they conveyed to the SBA Administrator the employee’s interest in
being appointed to the position. However, according to the HR officials,
without explanation the SBA Administrator directed that the position be
advertised to the public.

Information obtained from the Office of Human Resources showed at least
37 individuals applied for the position. After evaluating the qualifications
of the 37 applicants, SBA’s Office of Human Resources established two
certificates of numerically rank-ordered applicants from which a selection
could be made. One certificate contained the names of five applicants
eligible for appointment at the GS-15 grade level. The other certificate
contained the names of five applicants eligible for appointment at the GS-
14 grade level. According to federal personnel regulations, an individual
selected from a rank-ordered certificate should be among the top three
highest-ranked applicants on the certificate, and a preference-eligible
veteran should not be bypassed. In this case, the appointee was selected
from the GS-15 certificate. He was tied with another applicant in having
the highest numerical ranking of those listed on that certificate, and both
of them were awarded 5 extra points because they provided evidence of
being preference-eligible veterans. The appointee was ranked second
highest on the GS-14 certificate. The highest ranking applicant on that
certificate claimed to be a preference-eligible veteran and was awarded 10
extra points because he claimed to be at least 10-percent disabled.

Information regarding the SBA employee who had graduated from the
District Director Candidate Development Program and who had indicated
an interest in being appointed to the position showed that he was serving
as a GS-13 Financial Analyst in SBA. The information also showed that he
had received a Bachelor degree in Business Administration from Howard
University.

Documentation on the other applicants who applied under the vacancy
announcement was not available. According to officials from the Office of
Human Resources, given that the case was over 3 years old at the time of
our review, most of the documentation regarding those applicants was
likely destroyed.



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Appendix III
Appointments of SBA District Directors




Case 3: On May 29, 1996, an individual who had previously served as an
SBA Regional Administrator, and who had since worked as an executive in
banking and communications and in the Government of Puerto Rico, was
appointed to the position of District Director of the Hato Rey, PR, District
Office. According to information contained in his application materials, he
received a Bachelor of Arts degree in government and economics from the
University of Puerto Rico and had met the credit requirements for a Master
of Public Administration degree at New York University. Also, information
contained in his application materials showed that his salary had
progressed from about $16,000 per year in 1970 when employed as an
Assistant Vice President of a bank; to about $50,000 in 1977 when
employed as a GS-17 SBA Regional Administrator for New York; to about
$86,000 in 1996 as the Deputy Administrator for Economic Development
Administration, Government of Puerto Rico; and finally to about $90,000
when appointed by SBA to the GS-15, step 10, District Director of Hato
                  .4
Rey, PR, position

This individual was selected for the District Director position through a
competitive examination process that began with a vacancy
announcement advertising the job as a GS-14/15 position open to all
qualified applicants. Information obtained from SBA’s Office of Human
Resources showed that at least 27 people applied for the position. After
evaluating the qualifications of the 27 applicants, SBA’s Office of Human
Resources established two certificates of numerically rank-ordered
applicants from which a selection could be made. One certificate
contained the names of six applicants eligible for appointment at the GS-15
grade level. The other certificate contained the names of 12 applicants
eligible for appointment at the GS-14 grade level. The appointee was
selected from the GS-15 certificate on which he was the highest-ranking
applicant. He provided evidence of being a preference-eligible veteran and
was awarded 5 extra points. He was also the highest-ranking applicant on
the GS-14 certificate.

Application materials from other applicants for this position were available
for our review. We reviewed the employment histories and education
information contained in those application materials. The applicant who
was ranked second highest on the GS-15 certificate had served as
Secretary of the Treasury of the Government of Puerto Rico in the 1980s.


4
 The SES, established in 1978, incorporated the GS pay grades of GS-16, 17, and 18. Therefore, this
individual’s pay grade during the period when he was Regional Administrator of SBA’s New York
Office was equivalent to today’s SES pay grades.




Page 35                                                  GAO/GGD-99-68 SBA Personnel Practices
Appendix III
Appointments of SBA District Directors




Also, she had served in executive positions with a major bank, a State of
New York finance agency, and in a private sector securities corporation.
This applicant received a Bachelor of Business Administration degree from
the University of Puerto Rico and a Master of Business Administration
degree from the Wharton School of Business. She would have been the
highest-ranked applicant on the GS-15 certificate had the appointee not
benefited from 5 extra points awarded under provisions of veteran
preference laws. The third highest-ranked applicant on the GS-15
certificate was employed by SBA as a GS-14 Supervisory Attorney in a
District Office. He too had received a Bachelor’s degree from the
University of Puerto Rico. In addition, he claimed he had met all credit
requirements for a Master of Public Administration degree from that same
University and a Juris Doctorate degree from the Inter-American
University.

Case 4: On February 3, 1997, an individual who had previously worked in
the State of Colorado Governor’s Office was appointed to the position of
District Director of the Denver, CO, District Office. According to her
application materials, at the time she applied for the District Director
position, she was serving as the Director for Citizen Advocacy and
Outreach and as the Colorado State Diversity Coordinator for the
Government of Colorado State. Before that, she was in business for herself
as a human resources consultant and had worked for OPM as a GS-11
Personnel Management Specialist. Her application materials indicated that
she had earned college credits in business administration courses from the
University of Albuquerque and from the University of New Mexico.
However, there was no indication that she had earned a college degree.
None of the vacancy announcements for District Director positions we
reviewed stated that a college degree was required. Also, her application
materials showed her salary had progressed from about $14,000 per year in
1974 when she was employed as a GS-9 Administrative Assistant working
at the Caribou National Forest; to about $31,000 per year in 1984 when
employed as a Personnel Management Specialist by OPM; to $100,000 per
year in 1990 as a self-employed human resources consultant. This
individual’s salary decreased to about $77,000 when she was appointed by
SBA to the GS-14, step 7, District Director of Denver, CO, position.

She was selected for the District Director position through a competitive
examination process that began with a vacancy announcement advertising
the job as a GS-14/15 position open to all recruiting sources. At least 45
other applicants had applied for the position. After reviewing the
application materials of all of the applicants, SBA’s HR officials prepared
several certificates and rosters of eligibles from which a selection could be



Page 36                                   GAO/GGD-99-68 SBA Personnel Practices
Appendix III
Appointments of SBA District Directors




       .5
made One certificate contained the names of eight applicants, in
numerically ranked order, eligible for appointment at the GS-15 level.
Another certificate contained the names of 18 applicants, in numerically
ranked order, eligible for appointment at the GS-14 level. The appointee
was selected from a separate roster of applicants eligible for appointment
at the GS-14 level under SBA’s Merit Promotion and Placement Program.
This was an alphabetical listing of 11 qualified applicants who already had
competitive service status in the government. The appointee had acquired
competitive service status from her previous employment with the federal
government and was therefore eligible to be reinstated into the
competitive service. According to 5 C.F.R. 335.103(b)(4), agencies may
consider applicants eligible for reinstatement into the competitive service
as part of the agency’s merit promotion program.

We became aware of allegations that the appointee obtained this District
Director position through her political connections. We noted that the
appointee’s application materials showed that at the time she applied for
the position, she was working for the Office of the Governor of Colorado.
The Governor was also serving at the time as the Chairman of the
Democratic National Committee. Through this position, he had dealings
with other Democratic party leaders, including President Clinton. We also
noted that a key official in the selection process was the Regional
Administrator of SBA’s Denver Regional Office. The person selected as the
District Director of the Denver, CO, District Office would be reporting to
the Regional Administrator. The Denver Regional Administrator, as well as
the other nine SBA Regional Administrators, were political appointees.
However, despite these facts, and the appearance they give that favoritism
could have been involved in the selection process, we did not identify
other factors that would conclusively demonstrate that favoritism was in
fact used in the appointment process in this case. According to a
memorandum from the Chairman of SBA’s Executive Resources Board
(ERB) to the SBA Administrator, the ERB Chairman and the Regional
Administrator of SBA’s Denver Regional Office, the Assistant
Administrator of SBA’s Office of Human Resources, and three other SBA
officials had interviewed the appointee and two other candidates.



5
 A certificate of eligibles is used when the applicants do not have competitive service status and their
qualifications must therefore be examined and rated numerically against other nonstatus applicants.
The selecting official is required to select from the top three rated applicants on the certificate and may
not pass over a preference-eligible for a nonpreference-eligible without sufficient justification. A roster
of eligibles is prepared for applicants who do have competitive service status and whose qualifications
meet the minimum requirements for the position. These applicants are listed in alphabetical order, and
the selecting official may select anyone on the alphabetical list.




Page 37                                                    GAO/GGD-99-68 SBA Personnel Practices
Appendix III
Appointments of SBA District Directors




According to the memo, they determined that the appointee was clearly
the top choice of each of the interviewers. They said that the appointee
had demonstrated the requisite ability, energy, and enthusiasm needed for
the position.

Employment histories and education information contained in the
application materials of the other two candidates who were interviewed
showed that one was a GS-14 Supervisory Contract Specialist at another
federal government agency. This applicant received a Bachelor of Science
degree in Human Resource Management from the University of Wyoming
and a Master of Business Administration degree from California State
University. The other applicant who was interviewed was the Acting
District Director of the Denver District Office. He had obtained a
temporary promotion to the GS-15 level as the Acting District Director. His
application materials indicated he had taken college courses in accounting,
but there was no indication that he had earned a college degree.

Information contained in the application materials of the two highest-
ranking applicants on the GS-15 certificate showed that the highest-ranked
applicant had been the Deputy Director for Economic Development for the
State of Ohio. He received a Bachelor of Science degree from Tennessee
State University in 1969 and a Master of Administration degree from
Central Michigan University in 1979. The second highest-ranked applicant
on this certificate had been a Credit Specialist with the Federal Deposit
Insurance Corporation. Before that he was an executive level Subsidiary
Program Manager at the Resolution Trust Corporation and had served as a
Vice President of two different banks. He received a Bachelor of Science
degree from California State Polytechnic University in 1968 and a Master
of Business Administration degree from that same university in 1972.

Information contained in the application materials of the two highest-
ranking applicants on the GS-14 certificate showed that the highest-ranked
applicant had been a GS-13 (equivalent) Supervisory Management Analyst
with the Department of the Army. He received a Bachelor of Arts degree in
sociology from the University of the State of New York in 1976. He also
received a Master of Business Administration degree from Pepperdine
University in 1987. The second highest-ranked applicant on this certificate
had been an executive level Director of Asset Management at the
Resolution Trust Corporation. Prior to that he had served as General
Counsel and Senior Vice President of a savings and loan association. He
received a Bachelor of Science degree in public administration from
Florida State University in 1957, and a Juris Doctorate degree from Florida
State University in 1973.



Page 38                                  GAO/GGD-99-68 SBA Personnel Practices
Appendix III
Appointments of SBA District Directors




Case 5: On August 11, 1998, an individual who had previously been an
entrepreneur in the home health services field was appointed to the
position of District Director of the New Orleans, LA, District Office.
According to information contained in his application materials, as an
entrepreneur the individual had participated in many of the SBA’s
programs. The individual’s application materials cited the names of U.S.
and local politicians who could be contacted as references for the
individual and contained letters of recommendation from local politicians.
According to information contained in his application materials, the
individual obtained a Master of Business Administration degree from the
University of New Orleans and a Bachelor of Science degree from Xavier
University of New Orleans. The application materials also showed that his
salary had progressed from about $14,000 per year in 1974 when employed
as a Vice President of an oil fields drilling fluids and service company; to
$65,000 per year in 1992 as the Chief Executive Officer (CEO) of a
precision machine shop; to $75,000 in 1997 as President and CEO of his
own home health care company; and finally to about $76,000 when
appointed by SBA to the GS-15, step 1, District Director of New Orleans,
LA, position.

This individual was selected for the District Director position through a
competitive examination process that began with a vacancy
announcement advertising the job as a GS-14/15 position open to all
recruiting sources. According to a SBA HR official who initially reviewed
all application packages for this position, between 60 and 70 people
applied for the position. Information obtained from SBA’s Office of Human
Resources showed that 5 selection certificates and rosters were prepared
that contained the names of 21 applicants found to be best qualified for the
position. Two certificates contained the names of best-qualified applicants
in numerically ranked order, and three rosters contained the names of
best-qualified applicants in alphabetical order. Of the two numerically
ranked certificates, one contained the names of three individuals,
including the appointee, who were eligible for appointment at the GS-14
level. The appointee ranked third on this certificate. The other numerically
ranked certificate contained the names of three individuals, including the
appointee, who were eligible for appointment at the GS-15 level; the
appointee was ranked second on this certificate and was appointed from
it. However, the original certificate did not contain the appointee’s name,
and the certificate was amended to include it. According to the SBA HR
official who handled the case, he was initially unaware that the appointee’s
application package contained both an abbreviated resume and a more
substantive resume. The HR official told us that he examined the
abbreviated resume and determined the appointee was eligible for



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Appendix III
Appointments of SBA District Directors




appointment only at the GS-14 level. According to the HR official, when the
appointee learned that he was selected for appointment at the GS-14 level,
the appointee appealed for reconsideration for appointment at the GS-15
level. The official told us that during a discussion of the matter with the
appointee, the appointee referred to the substantive resume that he had
submitted as part of his application materials. The HR official told us that
he reexamined the appointee’s application materials and found that the
more substantive resume had been overlooked. On the basis of the HR
official’s reexamination of the application materials—including the more
substantive resume—and on the basis of an independent examination of
the same application materials by a second HR official, a determination
was made that the appointee did qualify for appointment at the GS-15 level.
As a result, an amended certificate was prepared to include the appointee’s
name.

The SBA HR official who conducted the initial examination and the
reexamination told us that such mistakes sometimes occur because of the
overwhelming number of applicants and the volume of materials each
applicant submits for District Director positions. He also said that new
procedures have recently been put into place that require a second HR
official to also examine all application packages for the District Director
positions. He believes the use of two independent examiners should help
prevent the reoccurrence of such mistakes.

Of the three rosters from which a selection could have been made, one
contained the names of two individuals—in alphabetical order—who had
indicated interest in being transferred to the position at the GS-15 level. A
second roster contained the names of two individuals—in alphabetical
order—who were found eligible for promotion to the position at the GS-15
level. And the third roster contained the names of 11 individuals—in
alphabetical order—who were found eligible for promotion to the position
at the GS-14 level.

We noted that the appointee’s application materials contained the names
of two U.S. Senators and two U.S. Representatives, all from Louisiana, who
could be contacted as references for the applicant. Also cited as references
were the names of the mayors of the cities of New Orleans and Alexandria,
LA. The application materials also included letters of recommendation
from the mayors of the cities of Slidell and Opelousas, LA, as well as from
several councilmen of the city of New Orleans. On the basis of these cited
references and letters of recommendation, we questioned SBA’s HR
officials about any political connections that may have been used in the
competitive examination process. SBA HR officials from both



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Appendix III
Appointments of SBA District Directors




headquarters and from the SBA Denver, CO, personnel processing center
told us that other than the information that was contained in the
application package, they were not aware of any political connections the
appointee may have had within SBA or elsewhere within the
administration. They also claimed that they did not contact the cited
references and that there was absolutely no pressure of any kind placed
upon them as they conducted the competitive examination process in this
case. Other than the information contained in the application materials, we
did not identify any other information that would indicate the use of
political connections in this case. We did inquire about whether or not the
appointee remained involved with any prior business that may be
participating in SBA programs. SBA’s HR officials told us that the
appointee was completely out of all prior businesses at the time that he
was appointed to the District Director position.

Our review of the application packages of the other best-qualified
applicants is summarized below.

Of the two other individuals who were listed on the numerically ranked
GS-15 certificate from which the appointee was selected, both were SBA
employees. One had been serving as the Acting District Director of the
New Orleans District Office since December 17, 1997; and the other was
serving as the District Director of SBA’s Detroit, MI, District Office. The
Acting District Director was formerly the Assistant District Director for
Economic Development, Finance, and Investment. According to his
application materials, he obtained a Bachelor of Science degree in
Personnel Management in 1961 from Louisianna State University.
According to the other individual’s application materials, he had been
serving as the District Director of the Detroit, MI, District Office since June
1995 and obtained a Bachelor of Science degree in Mathematics from
Howard University in 1968.

Of the other two individuals who were listed on the numerically ranked
GS-14 certificate, one was a GS-13 Supervisory Business Marketing
Executive with the Defense Reutilization and Marketing Service.
According to his application materials, he obtained a Bachelor of Arts
degree in Business Administration from the University of Maryland in 1975
and a Master of Arts degree in Management Supervision and Personnel
Management from Central Michigan University in 1981. According to
application materials from the other individual, he was president and
owner of a steel cleaning, coating, and fabrication company. His
application materials showed he obtained a Bachelor of Arts degree in
engineering sciences from Dartmouth College in 1975 and had taken



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Appendix III
Appointments of SBA District Directors




master-level courses in finance and engineering at the University of
Pittsburgh and at the Illinois Institute of Technology.

Application materials from applicants listed alphabetically on the rosters
showed they had acquired levels of experience and education that ranged
from being a GS-15 director of another agency federal program and having
a doctorate degree in engineering, to current SBA employees serving in
positions of a lesser grade and responsibility than that of District Director
and having various levels of formal education.

Case 6: On August 30, 1998, an individual who had previously been a GS-15
Industrial Production Officer in the Department of the Air Force was
appointed to the position of District Director of the Sacramento, CA,
District Office. Information contained in the appointee’s application
materials showed that this individual obtained a Bachelor of Science
degree from Wayland College in 1979. The information also showed that
the individual’s salary progressed from about $46,000 per year in 1990
when he retired from the Air Force at the rank of Captain; to about $51,500
per year in 1995 as a GS-13 civilian employee of the Air Force; to $75,000
per year in 1997 as a GS-15 Division Chief in the Air Force; and finally to
about $82,000 when appointed by SBA to the GS-14, step 8, District
Director of the Sacramento, CA, position.

SBA conducted a competitive examination in filling this position that
began with a vacancy announcement advertising the job as a GS-14/15
position open to all sources. Information regarding the total number of
applicants for this position was not included in the materials we reviewed.
However, available information showed that SBA established 6 certificates
and rosters containing the names of 17 applicants whom SBA had
determined to be the best-qualified applicants for the position. The
appointee already had competitive service status from his previous
employment with the Air Force, and SBA found him qualified for
appointment to the District Director position at the GS-14 level. His name
was listed on the GS-14 roster in alphabetical order with the names of
other status applicants found to be qualified for appointment at that level.
The appointee’s application materials included (1) a letter from him to SBA
advising that he was to be adversely affected by a reduction in force (RIF)
action due to the upcoming closure of his Air Force base and (2) a copy of
a memorandum to him from the Air Force advising him of the impending
RIF.

Of the six certificates and rosters from which a selection could have been
made, one was a certificate that contained the names of seven individuals



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                        Appendix III
                        Appointments of SBA District Directors




                        in numerically ranked order who were eligible for appointment to the
                        position at the GS-14 level. The top three candidates on that list included a
                        GS-13 Project Manager employed by the Department of Defense (DOD); a
                        Chief Administrative Officer of a California university school of medicine;
                        and the owner of the steel cleaning, coating, and fabrication company who
                        was also identified as a top candidate for the position discussed in case 5
                        above. Application materials from the GS-13 DOD Project Manager showed
                        that he obtained a Bachelor of Science degree in journalism from
                        Northwestern University and a Master of Arts degree in economic
                        development from the University of Wisconsin. The dates these degrees
                        were awarded were not shown. The application materials from the
                        Administrative Officer of a California university school of medicine
                        showed that he obtained a Bachelor of Science degree from the University
                        of California in 1972, a Master of Business Administration degree from
                        UCLA in 1976, and a Master in Public Health degree from UCLA in 1976.
                        The materials also showed that he was working on a doctoral degree in
                        public policy when he applied for the District Director position.

                        Five rosters contained the names of 13 individuals, in alphabetical order,
                        including the appointee, who were eligible for promotion to either the GS-
                        14 or GS-15 level, were eligible for transfer at either the GS-14 or GS-15
                        level, or were eligible for noncompetitive appointment at the GS-14 level
                        due to Peace Corps service. Application materials from the nonselected
                        applicants on these rosters showed they had acquired levels of experience
                        and education that ranged from being a former GS-15 Deputy Regional
                        Manager at SBA and having a Master of Public Administration degree; to
                        the former Peace Corps Volunteer who also had been a partner in a law
                        firm and, in addition to her Juris Doctorate degree in law, had obtained a
                        Master of Business Administration degree from the University of California
                        at Berkeley in 1983, a Master of Arts degree in Special Education from the
                        University of Northern Colorado in 1975, and a Bachelor of Arts degree in
                        Sociology from Colorado College in 1972.

                        As noted earlier in this appendix, 40 appointments of SBA employees were
Two Cases in Which      made to District Director positions between January 1, 1993, and
SBA Employees Were      December 4, 1998. In 14 of these appointments, the individuals had
Appointed to District   recently graduated from SBA’s District Director Candidate Development
                        Program and were noncompetitively appointed to their District Director
Director Positions      positions. In nine of these appointments, the individuals had been
                        reassigned from District Director positions in other district offices. In the
                        remaining 17 cases, the individuals had held various other positions at SBA
                        and had either competed for, or were reassigned to, their District Director
                        positions.



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Appendix III
Appointments of SBA District Directors




In order to understand how some of these latter appointments to District
Director were made, we examined the circumstances in 2 of the 17 cases.
In both cases, on the basis of the information available for our review, it
appeared that SBA followed procedures consistent with federal laws and
regulations in filling the District Director positions.

Case 1: On July 23, 1995, the SBA Deputy Regional Administrator for
region I in Boston, MA, was reassigned to the position of District Director
of the Boston District Office. The previous District Director retired.
According to an SBA HR official familiar with this case, there were two
principal reasons for reassigning the Deputy Regional Administrator to the
position of District Director of the Boston office. First, as part of SBA’s
reorganization and downsizing effort, the number of employees at each of
the 10 SBA Regional Offices was being significantly reduced. As a result,
there was a need to reassign the Deputy Regional Administrator to another
position within SBA. Second, the HR official told us that the Boston
District Director vacancy had been advertised to the public, but SBA
management was not happy with the quality of the applicants and
determined that reassigning the Deputy Regional Administrator to that
position was the best option.

According to information contained in her application materials for the
Deputy Regional Administrator position, this individual had worked for
Senator George Mitchell’s Office since 1989 and was losing her job due to
the Senator’s retirement. Using her Ramspeck Act eligibility, she obtained
a career appointment at SBA as a GS-15, step 6, ($84,791) Deputy Regional
Administrator. Her appointment was made on January 22, 1995, just 6
months before she was reassigned to the position of District Director of
the Boston District Office. Her grade level and salary remained unchanged
when she was reassigned to the District Director position. Since then, this
individual has been reassigned again, this time to the position of District
Director of the Augusta, ME, District Office. Her application materials
showed that she obtained a Bachelor of Arts degree from Merrimack
College in 1963. Her replacement as District Director in Boston was an
individual who was holding the position of Boston Regional Advocate. This
individual was selected for the position of District Director of the Boston
office through a competitive examination process after having applied for
the position which was advertised as being open to all sources.

Case 2: On August 26, 1996, the Regional Advocate for King of Prussia
(Philadelphia) was selected for, and appointed to, the position of District
Director of the Clarksburg, WV, District Office. In this case, the position
was filled through a competitive examination process that began with a



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Appendix III
Appointments of SBA District Directors




vacancy announcement advertising the job as a GS-14/15 position open to
all recruiting sources. According to information that was available for our
review, a certificate of numerically ranked eligibles was prepared that
contained the name of two applicants. The appointee had the highest
ranking of the two and was selected and appointed to the position at the
GS-15, step 1 level ($72,162). This was about a $2,000 decrease from her
salary as Regional Advocate. Limited information on two other applicants
was available for our review, but the case file was incomplete and
information on any other applicants was not included.

According to the appointee’s application materials, she had served as an
Account Coordinator and as a Research Assistant in the private sector
before becoming Development Administrator for a West Virginia software
foundation in 1989. In the latter position she described the foundation as
having been started by Senator Byrd of West Virginia, and she listed the
Governor of West Virginia as her supervisor. She also claimed to have
worked with Senator Byrd’s staff in this position, facilitating
subcontracting agreements. Also, according to her application materials,
she received a Bachelor of Science degree in journalism in 1987 from West
Virginia University and a Master’s degree in administration in 1991, also
from West Virginia University. In April 1994 she received a noncompetitive
appointment to the position of Regional Advocate in the King of Prussia
office. Her appointment to that position was not to exceed May 3, 1995 (13
months), and her salary was set at about $50,300 (equivalent to the GS-13,
step 1 level.) In October 1994 her salary was increased to about $61,400
(equivalent to the GS-14, step 2 level); and on May 4, 1995, she was
reappointed as Regional Advocate not to exceed May 3, 1996 (13 months).
According to her application materials for the District Director position,
beginning in July 1995 she served as Acting Regional Administrator for
region III, which included King of Prussia as well as Clarksburg, WV, and
her salary was temporarily increased to about $72,200 (equivalent to the
GS-15, step 1 level.) In December 1995, she was again reappointed as
Regional Advocate, not to exceed November 19, 1996. On August 26, 1996,
she obtained a career-conditional appointment as GS-15, step 1, District
Director of the Clarksburg, WV, District Office. At that time, her salary as
Regional Advocate had been about $74,000. Her salary was reduced to the
GS-15, step 1 level of about $72,100 at the time of her District Director
appointment.

The other individual on the certificate of eligibles, who also could have
been selected, had appeared on certificates of eligibles for other SBA
District Director positions. He was a Director of Logistics at the GS-14
level in the Department of Defense. In addition to this applicant, according



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Appendix III
Appointments of SBA District Directors




to the SBA ERB, a recent graduate of SBA’s District Director Candidate
Development Program also expressed interest in the Clarksburg District
Director position. ERB, in a memorandum to the SBA Administrator,
identified this individual as a very strong candidate but said it believed that
the individual would have excellent placement potential in other District
Director positions and recommended that the appointee be selected.




Page 46                                    GAO/GGD-99-68 SBA Personnel Practices
Appendix IV

Additional Information on Interagency Details


                                         Using SBA documents we prepared the following tables to provide
                                         additional information on interagency details of SBA employees during
                                         fiscal years 1992 through 1998.


Table IV.1: Reimbursable Details From SBA to Other Agencies During the Period FY 1992 Through FY 1998
                                                                       Duration        Reimburs-
                                                                       (in days)       able basis        Actual    Date of
             Agency to       Agency from     Planned period of                            (annual       amount Reimburse-
No. Grade which detailed which detailed      detail                Planned     Actual      salary) reimbursed        ment
                                                                                     a           b              c
1.    GS-13 Library of       SBA             12/01/91-11/30/95        1,460        ?     $50,692       110,872     7/26/94
             Congress
                                                                                     a
2.    ES-5 Department of SBA                 01/27/92-01/26/93          366        ?    $121,296        121,296    8/25/94
             Energy
                                                                                     a                          d
3.    GM-14 Department of Office of          04/13/92-09/30/92          171        ?      $68,610             ?
             Agriculture     Advocacy
                                                                                     a
4.    ES-6 Agency for        SBA             11/01/92-08/31/93          317        ?    $112,100        112,045    8/27/98
             International
             Development
                                                                                     a
5.    GS-14 National         SBA             05/29/94-05/28/95          365        ?      $64,926        29,286    9/26/94
             Aeronautics &
             Space
             Administration
                                                                                                                e
6.    GS-12 General          SBA             12/12/94-06/30/95          201      949      $51,001      $46,899     multiple
             Services
             Administration
                                                                                     a                          f
7.    GS-12 Peace Corps      SBA             07/05/95-07/04/96          365        ?      $48,365        62,874    8/27/98
8.    GS-15 Environmental SBA                07/09/95-07/08/97          730      240      $93,855       $73,331    6/10/98
             Protection
             Agency
                                                                                     a
9.    GM-13 Portland Federal SBA             10/01/95-09/30/96          365        ?      $79,000        70,367    8/27/98
             Executive
             Board/DOE
                                                                                     a                          g
10. EL-III Office of         SBA             07/20/98-07/19/99          365        ?    $125,900         31,190    11/4/98
             Management
             and Budget
Total                                                                                                 $658,160
                                         a
                                             SBA could not provide sufficient, documented evidence to show the actual length of the detail.
                                         b
                                             Average annual salary over 4-year period; benefits amount not shown in SBA documents.
                                         c
                                         Reflects reimbursement made for a portion of the detail period, including all of fiscal year 1993 and
                                         part of fiscal year 1994.
                                         d
                                             SBA could not provide sufficient, documented evidence of reimbursement.
                                         e
                                             Represents amount of payment made by GSA to SBA for overtime worked.
                                         f
                                          Reflects salary plus benefits totaling 30 percent of salary.
                                         g
                                             Reflects reimbursement for portion of detail—but portion not identified in SBA documents.
                                         Source: Documents obtained from SBA.




                                         Page 47                                                    GAO/GGD-99-68 SBA Personnel Practices
                                            Appendix IV
                                            Additional Information on Interagency Details




                                            SBA officials told us that SBA’s internal control processes regarding
                                            interagency details needed improvement. SBA was unable to provide
                                            sufficient, documented evidence in most cases that it had received the
                                            correct amounts of reimbursements for its employees detailed to other
                                            agencies on a reimbursable basis. At the time of our review, SBA officials
                                            indicated that the internal control problems were being corrected and that
                                            billings to the other agencies were going to be prepared.


Table IV.2: Nonreimbursable Details From SBA to Other Agencies During the Period FY 1992 Through FY 1998
                                                                                                                                Duration
                                                                     Agency from                                                (in days)
No. Grade    Agency to which detailed                                which detailed Planned period of detail                Planned       Actual
                                                                                                      a                                         b
1. GS-15     U.S. Int’l Cultural and Trade Center Commission         SBA            10/01/91-01/30/93                            488          ?
         c
2. GS-15     Nat’l Advisory Council on Public Service                SBA            05/01/92-04/30/93                            365        354
                                                                                                                                                b
             Office of the Vice President, Nat’l Performance         SBA            04/20/93-10/18/93                            182          ?
             Review
      g                                                                                                          d                                  b
3.   ?       Export-Import Bank                                      SBA                  06/02/92-11/30/92                      182           ?
                                                                                                                                                 b
4.   GS-15   Office of the Vice President, Nat’l Performance         SBA                  04/15/93-10/11/93                      180           ?
             Review
                                                                                                                                                    b
5.   GM-14   Office of the Vice President, Nat’l Performance         SBA                  04/15/93-10/11/93                      180           ?
             Review
                                                                                                                                                    b
6.   GM-15   Office of the Vice President, Nat’l Performance         SBA                  05/17/93-11/12/93                      180           ?
             Review
                                                                                                                                                    b
7.   GS-13   Office of the Vice President, Nat’l Performance         SBA                  05/19/93-11/14/93                      180           ?
             Review
                                                                                                                                   e                b
8.   ES-6    Office of Congressman Michael P. Forbes                 SBA                  02/21/95-10/20/95                     242            ?
                                                                                                       f                              f             b
9. GS-12     Executive Office of the President                       SBA                  04/16/95-?                               ?           ?
      g                                                                                                                                          b
10. ?        Dept. of the Navy                                       SBA                  03/17/97-07/14/97                      120           ?
                                            a
                                                These dates show the extensions of a detail that began on 02/01/90.
                                            b
                                            SBA could not provide sufficient, documented evidence to show the actual number of days of the
                                            detail.
                                            c
                                            This individual’s detail to the National Advisory Council on Public Service was terminated on
                                            04/19/93; and he was detailed the next day to the Office of the Vice President.
                                            d
                                                These dates show the extension of a detail that began on 05/15/91.
                                            e
                                            This total represents an initial planned detail of 120 days and an extension that was not supposed to
                                            exceed 120 days but in which the planned extension detail days totaled 122.
                                            f
                                            No interagency agreement was available for examination in this case, so the planned ending date
                                            and the planned number of days of the detail are unknown.
                                            g
                                                Information on this individual’s grade was not available.
                                            Source: Documents obtained from SBA.




                                            Page 48                                                         GAO/GGD-99-68 SBA Personnel Practices
Appendix V

Additional Information on Position Changes
in Key SBA Offices

                Executive Assistant: In 1996, the Executive Assistant position existed as
Office of the   an excepted service, Schedule C position and was filled by a GS-13
Administrator                       1
                political appointee. In February 1997, the position was newly established
                as a competitive service position, which meant that it had to be filled by a
                career federal employee rather than a political appointee. The political
                appointee who formerly held the excepted service position resigned. The
                current incumbent of the new position, a GS-13 career-conditional
                employee, transferred to SBA from the Office of Federal Housing
                Enforcement and Oversight (OFHEO), an independent agency within the
                Department of Housing and Urban Development. At OFHEO, she had been
                converted from an excepted service appointment to a career-conditional
                competitive service appointment about 1 month before transferring to
                SBA.

                White House Liaison: This position was filled on September 3, 1996, by a
                                                           2
                Schedule A, GS-14 White House Fellow. The appointment was not to
                exceed September 4, 1997, and was authorized by 5 C.F.R. 213.3102(z),
                which permits the appointments of not more than 30 individuals
                designated by the President to be White House Fellows to positions as
                assistants to top-level federal officials. On February 15, 1997, the
                incumbent resigned her position at SBA to accept a position in the
                Director’s Office at the U.S. Peace Corps.

                Project Director for Lender Oversight: This position was newly
                established in September 1997 as an SES position and was filled by a
                political appointee under a limited-term SES appointment not to exceed 36
                months. According to the job description, the incumbent would be
                responsible, in part, for modifying the existing interface between SBA,
                financial institutions, and trade groups in order to ensure that financial
                transactions were improved, operating efficiently, and in place prior to the
                21st century. Prior to this appointment, the incumbent had held an
                excepted service appointment at OFHEO. According to SBA’s HR officials,
                in June 1998 the incumbent returned to that agency to accept a permanent,
                part-time position. The Project Director for Lender Oversight position
                remained vacant as of December 1998.



                1
                 Excepted service positions are filled by individuals hired under Schedules A, B, or C authority.
                Schedule C authority is used to provide political appointments to individuals who work closely with,
                and have the confidence of, the head of the agency or other high level agency officials, who usually are
                also political appointees.
                2
                 Schedule A authority is generally used for appointing individuals to attorney positions. However,
                Schedule A authority can also be used in the appointment of White House Fellows.




                Page 49                                                  GAO/GGD-99-68 SBA Personnel Practices
                         Appendix V
                         Additional Information on Position Changes in Key SBA Offices




                         Special Assistant: This position was newly established in November 1997
                         as an excepted service position and was filled by a political appointee
                         under a Schedule C, GS-13 appointment. Prior to this SBA appointment,
                         the individual had been a Staff Assistant at the White House Office.

                         Staff Assistant: This position was newly established in February 1997 as a
                         competitive service position, and, as had been done with the Executive
                         Assistant position, the incumbent was converted from an excepted service
                         appointment at OFHEO to a career-conditional competitive service
                         appointment about 1 month before transferring to this SBA position.

                         Senior Advisor: This position was a Schedule C, GS-15 position filled by a
Office of the Deputy     political appointee. The political appointee resigned from SBA in
Administrator            November 1996, and the position was eliminated thereafter.

                         Program Support: This position was established as a competitive service
                         position in January 1997 and was filled by a GS-9 SBA employee who was
                         reassigned from a Program Support Specialist position in SBA’s Office of
                         Communications and Public Liaison.

                         Special Assistant: This position was newly established in October 1997 as
Office of the Chief of   an excepted service position and was filled by a Schedule C, GS-14
Staff                    political appointee who had been in a similar political appointee position
                         at the Department of Housing and Urban Development. In 1996 a different
                         Special Assistant position existed as a competitive service position and
                         was filled by a GS-7 career employee. The employee was reassigned
                         within the same Office to a secretary position (see Staff Assistant positions
                         below in this section).

                         Receptionist: This position was vacant in 1996 and was eliminated
                         thereafter.

                         Deputy Chief of Staff: This position was newly created in September 1997
                         as an SES position. In October 1997, an individual who had been serving
                         as an Office of Advocacy Regional Advocate in San Francisco was
                         converted to a limited-term SES appointment and placed into the Deputy
                         Chief of Staff position. The following year, in October 1998, this individual
                         became the Chief of Staff, and the Deputy Chief of Staff position became
                         vacant. It remained vacant as of December 1998.

                         Staff Assistant: Two competitive service staff assistant (secretary)
                         positions were filled by SBA career employees who were reassigned from
                         other SBA positions. One was reassigned in May 1996 from the Special



                         Page 50                                          GAO/GGD-99-68 SBA Personnel Practices
                          Appendix V
                          Additional Information on Position Changes in Key SBA Offices




                          Assistant position in this Office, and the other was reassigned in February
                          1997 from an Automation Assistant position within the Office of the
                          Administrator.

                          Chief Operating Officer: This position was newly established in August
Office of the Chief       1997 as an SES position and was filled by a career SES employee who
Operating Officer         transferred to this position from the Justice Department’s Immigration and
                          Naturalization Service in September 1997. About 1 year later, this
                          individual was detailed to the Office of Management and Budget.
                          According to an SBA HR official, a new Chief Operating Officer has been
                          selected and was to soon be appointed. She is a career senior executive
                          and will be transferring to SBA from the Immigration and Naturalization
                          Service.

                          Program Support Specialist: The incumbent of this GS-9 position resigned
Office of the Associate   from SBA in August 1997 to accept a position in a local public school
Administrator for Field   system. The position was eliminated thereafter.
Operations
                          Program Analyst: Two Program Analyst positions were eliminated during
                          the period 1996 through 1998. The career employee incumbents of those
                          positions were reassigned to other SBA positions. One was reassigned to a
                          Deputy District Director position in September 1996, and the other was
                          reassigned to a position in SBA’s Office of Congressional and Legislative
                          Affairs.

                          Associate Director: This position was newly established in October 1997
                          as an excepted service position and was filled by a Schedule C, GS-12
                          political appointee who, just prior to this appointment, had been a GS-11
                          Special Assistant political appointee in SBA’s Office of Communications
                          and Public Liaison.

                          Office Automation Assistant: This position was newly created as a GS-6
                          excepted service position in August 1997 and was filled on a temporary
                          basis by a newly hired SBA employee. In 1998 the employee was promoted
                          to a GS-7 Office Automation Assistant and converted to a career-
                          conditional appointment.




                          Page 51                                          GAO/GGD-99-68 SBA Personnel Practices
 Appendix VI

 Comments From the Small Business
 Administration




Now on p. 3.

Now on p. 49.

See GAO comment 1.




                     Page 52   GAO/GGD-99-68 SBA Personnel Practices
                            Appendix VI
                            Comments From the Small Business Administration




Clarified. See p. 4.


See GAO comment 2.




Now on p. 10.




See GAO comment 3.


Now on pp. 10 and 12. See
GAO comment 4.




Now on p. 13.




                            Page 53                                       GAO/GGD-99-68 SBA Personnel Practices
                             Appendix VI
                             Comments From the Small Business Administration




Now on p. 13.




Table modified. See p. 16.



Now on p. 19.


Text modified.



Now on p. 20. See GAO
comment 5.




Clarified. See p. 50.




                             Page 54                                       GAO/GGD-99-68 SBA Personnel Practices
Appendix VI
Comments From the Small Business Administration




Page 55                                       GAO/GGD-99-68 SBA Personnel Practices
               Appendix VI
               Comments From the Small Business Administration




               The following are GAO’s comments on SBA’s April 1, 1999, letter.
GAO Comments
               1. SBA said that we were incorrect in including Schedule A excepted
               service appointees, appointees whose pay rates were administratively
               determined, and limited term SES appointees in our definition of political
               appointees. We recognize that Schedule A appointees, appointees whose
               pay rates are administratively determined, and limited term SES
               appointees are not traditionally recognized as political appointees.
               However, such appointments share certain characteristics with
               traditionally recognized political appointees, such as Schedule C
               appointees and noncareer SES appointees. Among other things, such
               appointments can be made noncompetitively as are traditional political
               appointments, and the appointees serve at the pleasure of the agency head
               as do traditional political appointees. Because of this sharing of
               characteristics, we included Schedule A appointees, administratively
               determined pay rate appointees, and limited term SES appointees in our
               definition of political appointee. Although SBA is correct that Schedule A
               appointees can include students and the disabled as well as attorneys, the
               Schedule A appointees included in this report were all attorneys.

               2. SBA said that a statement we attribute to a SBA official that she was
               unaware of any agency that uses recruitment bonuses was incorrect. The
               official believes she told us that she did not have any information on the
               effectiveness of recruitment bonuses in any other agencies. We
               understood from an interview two of our staff held with the official that
               she was unaware of the use of recruitment bonuses by other agencies.
               Nevertheless, we have modified the language in the report. Elsewhere in
               its comments SBA pointed out that it has developed a policy for the use of
               recruitment bonuses, and we commend SBA for that effort.

               3. While commenting on a draft of this report, SBA found and provided
               missing documentation for the advanced salary setting for an employee
               hired as a district director. We reviewed the documentation now supplied
               by SBA and have changed that case in this report. Now, documented
               justification of the salary setting was provided for all six outside hired
               District Director appointments that we reviewed.

               4. We believe it would be inappropriate to delete the words “appeared to”
               because our work was based only on the evidence that was available.
               Further, we do not believe the wording detracts from giving SBA credit for
               the subject personnel actions.




               Page 56                                       GAO/GGD-99-68 SBA Personnel Practices
Appendix VI
Comments From the Small Business Administration




5. SBA’s comment pertains to our conclusions. It objected to our phrasing
of a sentence that says that SBA usually followed appropriate laws and
regulations in setting the salaries of political appointees. Elsewhere on the
same page we made the statement that with the exception of one case,
SBA followed applicable federal laws and regulations when setting the
starting salaries. SBA believes the qualifying use of the term “usually” is
inappropriate because only one case was cited as an exception. The two
statements that SBA referred to were in the conclusion section of our draft
report, and we believe “usually” is an appropriate characterization. The
statements refer to two different groups of employees. For one group, we
were referring to the pay setting of six district director appointees. For the
second group, we were referring to the advanced pay setting of 141
political appointees.

In our draft report, we said that SBA could not provide documentation
justifying the advanced pay setting for 1 of 6 district directors and for 31 of
the political appointees. While commenting of the draft, SBA found and
provided missing documentation for the 1 district director and for several
of the 31 political appointees. We have changed the report accordingly.
However, supporting documentation is still missing for the advanced pay
rates for 11 political appointees, and we believe our characterization that
SBA usually followed appropriate federal laws and regulations is accurate.




Page 57                                       GAO/GGD-99-68 SBA Personnel Practices
Appendix VII

Major Contributors to This Report


                     Richard W. Caradine, Assistant Director
General Government   N. Scott Einhorn, Evaluator-in-Charge
Division             Anthony Assia, Evaluator
                     Gerard S. Burke, Evaluator
                     Brenda J. Lindsey, Evaluator
                     Ernestine Burt-Sanders, Issue Area Assistant
                     Donna M. Leiss, Communications Analyst

                     Alan N. Belkin, Assistant General Counsel
Office of General    Jessica A. Botsford, Senior Attorney
Counsel




                     Page 58                                 GAO/GGD-99-68 SBA Personnel Practices
Page 59   GAO/GGD-99-68 SBA Personnel Practices
Related GAO Products


             Personnel Practices: Career Appointments of Former Political and
             Congressional Employees (GAO/GGD-97-165, Sept. 2, 1997).

             Personnel Practices: Improper Personnel Actions on Selected CPSC
             Appointments (GAO/GGD-97-131, June 27, 1997).

             Federal Recruiting and Hiring: Authority for Higher Starting Pay Useful but
             Guidance Needs Improvement (GAO/GGD-91-22, Sept. 10, 1991).




             Page 60                                  GAO/GGD-99-68 SBA Personnel Practices
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