Major Management Challenges and Program Risks
Office of Personnel Management
Gao ID: GAO-03-115 January 1, 2003
This is GAO's first performance and accountability series report on the Office of Personnel Management (OPM), the federal government's human capital agency. OPM faces challenges in four key areas: leadership, oversight, internal management, and administration of the federal retirement and health insurance programs. The data presented in this report are intended to help sustain congressional attention and an agency focus in addressing these challenges and ultimately overcoming them. This report is part of a special series of reports on governmentwide and agency-specific issues.
OPM has implemented important initiatives and has others under way to improve its mission and management performance. Building on these efforts, OPM has additional opportunities to overcome the following management challenges. Leading strategic human capital management governmentwide: Many agencies continue to experience human capital shortfalls. They want and need greater OPM leadership and assistance to help them strategically manage their human capital and address challenges in recruiting, retaining, and rewarding talented staff--caused, in part, by long-standing problems with the federal pay, classification, and hiring systems. Overseeing agency human capital management systems: Merit system surveys and studies continue to show a need for strong oversight of agency human capital systems. Surveys show employees continue to believe agencies are not adhering to several of the merit principles. Transforming OPM and managing its internal operations: As in other areas, OPM has major efforts under way to address this challenge. It is realigning its organizational structure, has prepared a draft succession plan, is implementing a new financial management system, and is addressing several information security weaknesses. But more remains to be done as OPM transitions to its new structure. For example, OPM should implement workforce and succession planning strategies to address the expected staff losses from retirements and to close skill and knowledge gaps, fully implement an agencywide security program and conduct security risk assessments of its information systems, and continue to take steps to address historical weaknesses in activities of its discretionary appropriation funds. Administering the retirement and health insurance programs: OPM has made major strides in managing these programs, which have received high ratings from customers over the past few years--for example, over 90 percent of federal annuitants are satisfied with OPM's retirement services. But customer satisfaction could fall if OPM is not able to handle the impending retirement wave or implement measures to limit health care premiums.
GAO-03-115, Major Management Challenges and Program Risks: Office of Personnel Management
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Performance and Accountability Series:
January 2003:
Major Management Challenges and Program Risks:
Office of Personnel Management:
GAO-03-115:
A Glance at the Agency Covered in This Report:
The Office of Personnel Management provides human capital leadership,
guidance, and expertise to the President, and to federal agencies and
their employees. It also ensures compliance with personnel laws and
regulations and provides retirement, health benefits, and other
insurance services to employees, annuitants, and beneficiaries. OPM
is in the midst of a major transformation effort and has revised its
strategic plan to both drive and reflect that effort. The strategic
plan outlines the following three goals for the agency:
* ensuring that federal agencies adopt human capital management
systems that improve their ability to build successful, high-performing
organizations;
* ensuring that federal agencies use effective merit-based human
capital strategies to create a rewarding work environment that
accomplishes the mission; and
* meeting the needs of federal agencies, employees, and annuitants
through the delivery of efficient and effective products and services.
The Office of Personnel Management‘s Budgetary and Staff Resources
[See PDF for image]
a Budgetary resources include new budget authority (BA) and
unobligated balances of previous BA.
b Budget and staff resources are actuals for FY 1998-2001. FY 2002
are estimates from the FY 2003 budget, which are the latest publicly
available figures on a consistent basis as of January 2003. Actuals
for FY 2002 will be contained in the President‘s FY 2004 budget to be
released in February 2003.
Source: Budget of the United States Government.
[End of figure]
This Series:
This report is part of a special GAO series, first issued in 1999 and
updated in 2001, entitled the Performance and Accountability Series:
Major Management Challenges and Program Risks. The 2003 Performance
and Accountability Series contains separate reports covering each
cabinet department, most major independent agencies, and the U.S.
Postal Service. The series also includes a governmentwide perspective
on transforming the way the government does business in order to meet
21st century challenges and address long-term fiscal needs. The
companion 2003 High-Risk Series: An Update identifies areas at
high risk due to either their greater vulnerabilities to waste, fraud,
abuse, and mismanagement or major challenges associated with their
economy,
efficiency, or effectiveness. A list of all of the reports in this
series is included at the end of this report.
GAO Highlights:
Highlights of GAO-03-115, a report to Congress included as part of
GAO‘s Performance and Accountability Series
Why GAO Did This Report:
This is GAO‘s first performance and accountability series report on the
Office of Personnel Management (OPM), the federal government‘s human
capital agency. OPM faces challenges in four key areas: leadership,
oversight, internal management, and administration of the federal
retirement and health insurance programs. The data presented in this
report are intended to help sustain congressional attention and an
agency focus in addressing these challenges and ultimately overcoming
them. This report is part of a special series of reports on
governmentwide and agency-specific issues.
What GAO Found:
OPM has implemented important initiatives and has others under way to
improve its mission and management performance. Building on these
efforts, OPM has additional opportunities to overcome the following
management challenges.
Leading strategic human capital management governmentwide. Many
agencies continue to experience human capital shortfalls. They
want and need greater OPM leadership and assistance to help them
strategically manage their human capital and address challenges
in recruiting, retaining, and rewarding talented staff”caused, in
part, by long-standing problems with the federal pay, classification,
and hiring systems.
Overseeing agency human capital management systems. Merit system
surveys and studies continue to show a need for strong oversight of
agency human capital systems. Surveys show employees continue to
believe agencies are not adhering to several of the merit principles.
Transforming OPM and managing its internal operations. As in other
areas, OPM has major efforts under way to address this challenge.
It is realigning its organizational structure, has prepared a
draft succession plan, is implementing a new financial management
system, and is addressing several information security weaknesses.
But more remains to be done as OPM transitions to its new structure.
For example, OPM should implement workforce and succession planning
strategies to address the expected staff losses from retirements
and to close skill and knowledge gaps, fully implement an
agencywide security program and conduct security risk assessments
of its information systems, and continue to take steps to address
historical weaknesses in activities of its discretionary
appropriation funds.
Administering the retirement and health insurance programs. OPM
has made major strides in managing these programs, which have
received high ratings from customers over the past few years”for
example, over 90 percent of federal annuitants are satisfied
with OPM‘s retirement services. But customer satisfaction could
fall if OPM is not able to handle the impending retirement wave
or implement measures to limit health care premiums.
What Remains to Be Done:
Consistent with OPM‘s ongoing internal transformation efforts,
GAO believes that OPM should:
* accelerate efforts to seek and implement solutions to problems
with the federal pay and hiring systems,
* ensure that agencies establish and maintain merit-based human
capital management systems and promote agency self-monitoring
programs, and
* ensure that it effectively transitions to its new
organizational structure while continuing to address its human
capital, financial management, and information security
challenges.
www.gao.gov/cgi-bin/getrpt?GAO-03-115.
To view the full report, click on the link above.
For more information, contact Chris Mihm at mihmj@gao.gov or
(202) 512-6806.
Transmittal Letter:
Major Performance and Accountability Challenges:
GAO Contacts:
Related GAO Products:
Performance and Accountability and High-Risk Series:
This is a work of the U.S. Government and is not subject to
copyright protection in the United States. It may be
reproduced and distributed in its entirety without further
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Transmittal Letter January 2003:
The President of the Senate
The Speaker of the House of Representatives:
This report addresses, for the first time, the major performance and
accountability challenges facing the Office of Personnel Management
(OPM) as it seeks to ensure that the federal government‘s human capital
management systems are merit-based and support agencies in recruiting,
hiring, and retaining the high-quality, diverse workforce necessary to
meet the current and emerging needs of the American people. It includes
a summary of actions that OPM has taken and that are under way to
address these challenges. It also outlines further actions that GAO
believes are necessary.
This analysis should help the new Congress and the administration carry
out their responsibilities and improve government for the benefit of
all Americans. For additional information about this report, please
contact J. Christopher Mihm, Director, Strategic Issues, at (202) 512-
6806 or at mihmj@gao.gov.
David M. Walker
Comptroller General
of the United States:
Signed by David M. Walker
Major Performance and Accountability Challenges:
The Office of Personnel Management (OPM), the President‘s agent and
advisor for human capital matters, is charged with overseeing the
management of the federal government‘s most important asset--its
people. In January 2001, we added strategic human capital management to
our list of federal programs and operations that we have identified as
high risk.[Footnote 1] OPM‘s charge entails leading agencies and
holding them accountable for shaping their human capital management
systems in a manner that ensures that (1) the federal government
acquires, develops, manages, and retains employees with the knowledge,
skills, and abilities needed to deliver services the American people
want and deserve and (2) governmentwide values, such as the merit
system principles, veterans‘ preference, and workforce diversity, are
consistently upheld. OPM is also charged with providing retirement,
health benefits, and other insurance services to employees, annuitants,
and beneficiaries.
OPM‘s leadership in helping agencies shape their human capital
management systems has become more crucial as a result of the tragic
events of September 11, 2001. These events led to a change in our world
and the priorities of our policymakers and produced new challenges to
create and staff new governmental structures and restructure some
existing ones to fight terrorism and secure our homeland. At the same
time, agencies across the federal government need to transform what
they do, how they do it, and with whom they partner. These
transformations will have enormous implications for the federal
government‘s ’people“ policies and procedures as well as cultures of
government organizations. OPM plays a key role in helping individual
agencies and the government as a whole overcome the broad range of
human capital challenges, which are at the root of transformation. The
four pervasive governmentwide human capital challenges, identified in
our 2001 High-Risk Update, are (1) strategic human capital planning and
organizational alignment, (2) leadership continuity and succession
planning, (3) acquiring and developing staffs whose size, skills, and
deployment meet agency needs, and (4) creating results-oriented
organizational cultures. OPM carries out its leadership role in a
decentralized environment where both it and the agencies have shared
responsibilities for addressing the human capital and related
challenges facing the government.
OPM is in the process of transformation--from less of a rulemaker,
enforcer, and independent agent to more of a consultant, toolmaker, and
strategic partner in leading and supporting executive agencies‘ human
capital management systems. As OPM‘s transformation evolves and it
seeks to constructively partner and consult with other executive
agencies in shaping their human capital management systems, it must
also strive to maintain the degree of institutional independence needed
to oversee agencies‘ human capital efforts objectively.
OPM‘s transformation has been occurring against the backdrop of at
least 15 reorganizations since its inception in 1979 and a nearly 50
percent drop in staff over the last decade, largely due to
governmentwide downsizing in the mid-1990s. OPM‘s total workforce
dropped from nearly 6,800 in 1990 to about 3,700 in 2002. OPM‘s
operating budget was also affected during this time frame but not to
the same degree. From fiscal years 1990 through 2002, OPM‘s operating
budget fluctuated--ranging from a high of
$227 million in fiscal year 2002 to a low of $186 million in
1998.[Footnote 2] Overall, after adjusting for inflation, OPM‘s funding
declined 10 percent over the 1990 through 2002 period.
The changes that have been occurring in OPM‘s culture and organization
since its creation, as well as the different operating philosophies of
each of its directors, have influenced how the agency has carried out
its leadership role and mission. OPM‘s overarching challenge today is
to lead agencies in shaping their human capital management systems
while also undergoing its own internal transformation. As it addresses
this overall challenge, OPM faces several performance and
accountability challenges that affect its ability to effectively
execute its mission and become a high-performing organization focused
more on results and less on process. These include the following:
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[End of figure]
OPM has taken a number of important steps and has several initiatives
under way or planned to address each of its challenges. For example,
OPM has exerted greater human capital leadership by issuing agencies
its Human Capital Scorecard[Footnote 3] to assist them in improving
strategic management of their human capital and administering an annual
governmentwide survey on human capital to help assess agencies‘
progress in achieving performance goals for each of the five dimensions
of human capital management contained in its Human Capital Scorecard.
For example, OPM will be able identify the extent to which workforces
in individual agencies as well as the federal government as a whole
lack the necessary job-relevant knowledge and skills to accomplish
organizational goals. In addition to using the results of the survey to
assess and report on federal agency progress overall in achieving the
human capital management performance goals contained in its scorecard,
OPM intends to compare and benchmark the human capital survey results
with private sector organizations. OPM has also exerted greater human
capital leadership by developing a set of legislative proposals for
providing agency managers the additional flexibilities and tools they
need to manage their human capital effectively.[Footnote 4] OPM is
addressing its oversight challenge, in part, by encouraging agencies to
develop and maintain internal accountability systems in line with its
HRM Accountability System Standards.
Internally, OPM has launched an effort to transform its organizational
structure and workforce to be more customer-focused and results-
oriented. OPM outlined its new organizational structure in September
2002 and is currently implementing it. OPM has also taken several steps
to manage its human capital more strategically (such as aligning its
human capital goals with program-specific goals), correct financial
management weaknesses (such as implementing a new financial management
system), and secure its information resources (such as issuing an
agencywide security policy). Given its governmentwide leadership
responsibilities, it is particularly important that OPM seeks to ’lead
by example“ in its internal management, particularly with its own human
capital approaches and initiatives.
In addition to launching the new federal long-term care insurance
program, OPM has made significant strides in administering the federal
employees retirement and health benefits programs, which customers have
rated highly. For example, OPM has taken steps to modernize its
retirement systems and limit the extent of the health care premium
increases. Although customers have rated the retirement and health
benefits programs highly, these high satisfaction rates could fall if
OPM is not prepared to handle the expected retirement wave and
implement cost-containment measures that limit health care premium
increases.
Building on these efforts, OPM should also exert greater leadership in
seeking and implementing solutions to long-standing problems with the
federal pay and hiring systems and in working with other interested
parties to prepare the way for more comprehensive civil service reform;
ensure that agencies establish and maintain merit-based human capital
management systems and promote agency self-monitoring programs; and
ensure that it effectively transitions to its new organizational
structure while continuing to address its internal human capital,
financial management, and information security challenges.
Leadership of Human Capital:
Strategic human capital management is a pervasive challenge facing
agencies across the federal government, and overcoming this challenge
will require vigorous and sustained leadership from multiple parties--
OPM as well as other key human capital players, such as the President;
the Office of Management and Budget (OMB); Congress; and department and
agency leaders. Since designating strategic human capital management as
a high-risk area in January 2001,[Footnote 5] our work and the work of
others continues to show that agencies need and want greater leadership
from OPM in helping them to address their human capital challenges. OPM
recognizes the importance of exerting a stronger and more visible
leadership role. It, along with several other key human capital
players, including GAO, has taken or proposed actions within the last 2
years that are aimed at improving human capital management across
government and a real momentum for reform is now evident. Nevertheless,
while addressing the challenge of strategic human capital management is
a shared responsibility among multiple parties, continuing and
augmented leadership from OPM, as the President‘s primary advisor on
human capital issues, is critically needed in addressing this
challenge.
Our work and that of others has shown that many agencies are continuing
to experience human capital shortfalls that erode their ability, as
well as threaten the ability of others, to perform their missions
economically, efficiently, and effectively. The following examples
illustrate the seriousness of the human capital challenges facing
agencies.
* The federal government is facing several human capital challenges in
its civilian acquisition workforce. This workforce declined by 22
percent over the last decade. As the number of acquisition workers
declines, the demand increases for an acquisition workforce with more
sophisticated technical, financial, and management skills to handle the
procurement of $200 billion in goods and services annually.[Footnote 6]
* The Federal Aviation Administration (FAA) will likely need to hire
thousands of air traffic controllers in the next decade to meet
increasing traffic demands and to address the anticipated attrition of
experienced controllers, predominately because of retirement. Yet, we
reported in June 2002 that FAA had not developed a comprehensive human
capital workforce strategy to address its impending controller
needs.[Footnote 7]
* The Securities and Exchange Commission‘s (SEC) workload has increased
in volume and complexity over the past decade due to the tremendous
growth in the U.S. securities markets. SEC‘s growing workload has
caused staffing imbalances and put the agency under increasing
pressure. In addition, staffing shortages have delayed critical
regulatory activities, such as reviewing rule findings and issuing
guidance, and affected its oversight and supervisory
functions.[Footnote 8]
* The Department of Homeland Security is bringing together 170,000
federal employees from 22 agencies with their own cultures and often
differing performance management, personnel, and payroll systems.
Merging these disparate entities into a coherent, unified, and high-
performing department represents a great challenge for the new
leadership as well as for OPM in advising and supporting the
leadership.[Footnote 9]
Although federal departments and agencies have primary responsibility
for strategically managing their people and addressing their human
capital challenges, OPM has an important role and responsibility in
leading agency and governmentwide human capital efforts. OPM defines
its human capital leadership role as supporting agencies in achieving
their strategic goals and managing their human capital more effectively
and strategically by:
* creating a personnel system (policies, procedures, and tools) that
gives agencies the flexibility they need to recruit, retain, train, and
manage employees and to align their workforces in a manner appropriate
to their unique needs;
* providing guidance and assistance through its Web site as well as
through other means to alert agency managers to their human capital
responsibilities and authorities;
* making the hiring process more effective and efficient, including
improving the attractiveness of the federal government as an employer
to people of diverse backgrounds;
* providing expert advice on performance management, classification,
and compensation, including proposing options for market-based,
performance-oriented compensation reform to enable agencies to recruit
and retain high-quality employees;
* promoting demonstration projects that help agencies develop more
effective human capital programs and practices as well as providing
them a wide range of human capital products and services, such as
examining and testing job applicants;
* encouraging agencies to use workforce and succession planning to
strategically manage the impact of demographic and other workforce
changes;
* disseminating information about the federal labor-management
relations program to agencies, labor organizations, and the general
public and consulting with labor organizations on the national level
about governmentwide human capital issues; and:
* ensuring that essential governmentwide values--such as merit system
principles and accountability, veterans‘ preference, workforce
diversity, and family-friendly policies--are sustained.
While important efforts have recently been taken and more are planned
or under way, there are additional opportunities for OPM leadership.
For example, as a part of our work on human capital flexibilities for a
forthcoming report, half or more of the human resource (HR) directors
we surveyed in 2001 and 2002 at 24 agencies and departments told us
that OPM had not sufficiently assisted them in identifying new
flexibilities. Our ongoing review of the federal hiring process is
identifying additional areas where OPM can target its efforts. We
reported in July 2001 and in an earlier report that OPM should take a
more active role in agency workforce planning efforts in light of the
expected retirement wave.[Footnote 10] Our July 2001 report also
pointed out that OPM should focus its performance goals more squarely
on the degree to which the federal workforce has the right skill mix.
Twenty-six percent of the HR directors responding to OPM‘s fiscal year
2001 customer satisfaction survey said employees in their agencies
lacked the skills needed to meet their agencies‘ missions.
The Merit Systems Protection Board (MSPB) has also called for greater
leadership on the part of OPM. MSPB, which is required by statute to
periodically review OPM‘s activities, reported in December
2001[Footnote 11] that OPM has made commendable progress in a number of
areas, such as decentralizing the civil service and improving HR
oversight. However, its leadership needs to be more vigorous in
responding to a number of critical program areas, such as applicant
examining, staffing, and employee compensation policies and practices.
MSPB said that OPM is in an ideal position to demonstrate leadership by
championing the development and use of the best assessment tools for
evaluating candidates. Regarding staffing, MSPB said that many managers
and HR specialists continue to be convinced that they are not getting
high-quality candidates because policies, laws, and regulations impose
restrictions on how agencies are to select, appoint, and promote
employees. As the government‘s human capital leader and expert, MSPB
said that OPM should forcefully use its influence to help bring about
changes in civil service laws, policies, and practices that either
conflict with or detract from a merit-based employment system.
MSPB‘s 2001 report also noted opportunities for greater OPM leadership
in improving the federal government‘s classification and compensation
systems and in addressing key obstacles within the hiring process. For
example, MSPB reported that critics of the classification system, which
remains the primary determinant of employees‘ pay after over 50 years,
view it as antiquated and irrelevant to the work and workers of today.
MSPB also reported that several HR directors said that OPM has relied
on a piecemeal approach to solving problems with the compensation
system, while others expressed frustration with OPM‘s lack of progress
in creating a system that helps them recruit and retain high-quality
workforces. In particular, MSPB has called on OPM to address key
problems with the hiring process, including revamping the system for
compensating workers, reducing the number of hiring authorities, and
developing new candidate assessment tools.
OPM also has a key role to play in improving the governmentwide systems
in place for managing employee performance at all levels and holding
employees accountable for results, adequately compensating employees at
all levels, and maintaining effective employee and labor relations. As
we discuss in our 2003 High-Risk Series: Strategic Human Capital
Management,[Footnote 12] modernizing agency performance management
systems and linking them to agency strategic plans and desired outcomes
should be a top priority. We also noted that (1) long-standing issues
and concerns over executive compensation and pay compression need to be
carefully examined in the context of how to make any pay increases
variable and performance-based rather than across-the-board and fixed
and (2) effective employee-management relations can aid in achieving
organizational outcomes by fostering an environment in which managers
and employees work collaboratively. OPM can also assist agencies as
they seek to form high-performing organizations. Agencies need to form
high-performing organizations to better determine competitive sourcing
strategies.
OPM is taking several steps to exercise broad overall leadership over
federal human capital management. OPM has the key role leading the
administration‘s efforts to address strategic human capital management,
a critical part of the President‘s Management Agenda for improving
federal management and performance, and has dedicated staff to work
directly with agency leaders to ensure that they are effectively
transforming their strategic human capital management. In December
2001, OPM issued its Human Capital Scorecard, which is designed to help
agencies achieve the human capital standards for success that are part
of the Executive Branch Management Scorecard. In November 2002, OPM
posted on its Web site the administration‘s revised Human Capital
Standards for Success that were based on a collaborative effort by OPM,
OMB, and us. The revised standards replaced OPM‘s Human Capital
Scorecard and more fully reflect the key themes in our strategic human
capital model.[Footnote 13] OPM says it is using these standards to
assess agencies‘ human capital practices.
To increase agencies‘ awareness and use of effective human capital
flexibilities, OPM published two reports in 2001. One report,
Demonstration Projects and Alternative Personnel Systems: HR
Flexibilities and Lessons Learned, describes best practices and lessons
learned from testing a variety of flexibilities, such as pay banding,
categorical ranking, and market-based pay, under demonstration projects
and alternative personnel systems. The other report, Human Resources
Flexibilities and Authorities in the Federal Government, is a handbook
that is designed to provide agencies information on how they can use
the HR flexibilities to address their human capital challenges. Also in
2001, OPM began sending ’strike force“ teams of HR experts to agencies
that requested specific assistance in using existing HR flexibilities.
OPM has also begun to exercise more leadership to address the long-
standing problems with the federal government‘s cumbersome hiring
process and inadequate pay and classification systems. OPM began an
initiative in the spring of 2002 to improve the hiring process. The
hiring initiative will, in part, entail revising the vacancy
announcements to make them more reader friendly; providing federal job
seekers a single application point through Recruitment One-Stop, an
electronic government (e-Gov) initiative;[Footnote 14] and taking steps
to build the image of public service. OPM is developing a resource
guide for managers and HR professionals that will highlight efficient
and effective hiring practices that can be implemented under existing
authorities available to agencies. The resource guide is scheduled to
be released in 2003, according to OPM. In addition, OPM‘s 2003
performance plan indicates increased attention to improving applicant
assessment tools, a key obstacle to effective hiring. One of the
strategic objectives in OPM‘s 2003 plan states that by 2005,
governmentwide hiring selections are to be based on assessment tools
that are more comprehensive in assessing the full range of competencies
needed to perform the jobs of the future.
Regarding pay and classification, OPM issued a white paper in April
2002[Footnote 15] describing the need for reform of the white-collar
federal pay system to make it more flexible, market-sensitive, and
performance-oriented as well as a better tool for improving strategic
human capital management. The paper characterized the federal
government‘s pay and classification (also called job evaluation)
systems as rigid and antiquated with work level descriptions dating
back over half a century that are not meaningful for today‘s knowledge-
driven organizations. In July 2002, we testified before the National
Commission on the Public Service that OPM‘s white paper provides a good
foundation for the results-oriented pay reform discussion that now
needs to take place and noted that the greater use of broadbanding is
an option that deserves to be discussed. In that testimony, we also
noted that Congress may wish to explore the benefits of (1) giving OPM
additional flexibility that would enable it to grant governmentwide
authority for all agencies (i.e., class exemptions) to use broadbanding
for certain critical occupations and/or (2) allowing agencies to apply
to OPM (i.e., case exemptions) for broadbanding authority for their
specific critical occupations. However, agencies should be required to
demonstrate to OPM‘s satisfaction that they have modern, effective, and
validated performance management systems before they are allowed to use
broadbanding.[Footnote 16]
OPM also had a central role in the development of key personnel reforms
that were part of the administration‘s reform legislation. Some of
these reforms were included in the recently enacted Homeland Security
Act of 2002,[Footnote 17] which created the new Department of Homeland
Security. According to OPM, it has been the principal advisor on HR
flexibilities for the new department and is working with the
department‘s leadership to develop specific HR recommendations in the
six areas of management flexibility provided in the legislation--
performance management, pay systems, position classification, hiring,
labor-management relations, and disciplinary actions and appeals. In
addition to providing the President with additional authority to create
new policies for managing the workforce within the new department, the
legislation includes provisions that authorize agencies across the
federal government to use additional personnel flexibilities. For
example, agencies will now be permitted (1) to offer early outs and
buyouts to their employees without the requirement to reduce their
overall number of employees and (2) to use a more flexible approach in
the rating and ranking of job candidates during the hiring and staffing
process. In addition, under the legislation agencies will be required
to incorporate strategic workforce planning into their performance
plans and reports and appoint ’chief human capital officers“ to oversee
workforce management.
Although OPM has initiated several actions to help address
governmentwide strategic human capital management challenges, there are
opportunities for OPM to augment its leadership. As we have noted
earlier in this report and MSPB has outlined in several studies, OPM
can build on the steps it has taken and exert aggressive leadership in
seeking and implementing solutions to key human capital challenges.
Continuing efforts are particularly needed to address hiring and
compensations issues, which have plagued federal human capital
management for years.
Oversight of Agency Human Capital Management Systems:
Agencies and OPM share responsibility for ensuring that human capital
practices are effective and carried out in accordance with the merit
system principles[Footnote 18] and other national goals. Effective
implementation of human capital practices in accordance with the merit
system principles and other national goals is important to ensuring a
skilled and qualified federal workforce as well as maintaining the
integrity of and public confidence in the federal civil service. In
recognition of the importance of this issue, one of the dimensions of
effective human capital management in the administration‘s Human
Capital Standards for Success is ’Agency human capital decisions are
guided by a data-driven, results-oriented planning and accountability
system.“ While agencies are primarily responsible for managing their
human capital, OPM has governmentwide oversight responsibilities. OPM
recognizes that oversight is important to improving governmentwide
strategic human capital management, especially in the changing human
capital environment of increased flexibility in managing human capital
both inside and outside the requirements of title 5 of the U.S. Code,
which defines much of the federal government‘s personnel system
requirements. In recognition of this growing decentralization of the
federal personnel system, OPM has taken actions to strengthen its
oversight program. Building on these efforts, OPM needs to do more to
ensure that agencies are effectively operating their human capital
management systems and adhering to the merit system principles.
Promoting agency self-monitoring programs is one area needing continued
OPM attention.
Effective and strategic oversight of agencies‘ systems is even more
critical today because an increasing number of agencies are using human
capital flexibilities, delegating authorities to line managers, and
seeking and obtaining exemptions from the requirements of title 5 of
the U.S. Code. This is taking place at a time when OPM‘s and agencies‘
human capital staffs for overseeing these activities have dwindled
substantially. In response to this development, OPM is carrying out its
oversight by encouraging and monitoring agency self-assessment efforts,
analyzing agency-specific and governmentwide data, conducting
governmentwide annual surveys on the merit system principles and human
capital to gather employees‘ perceptions of the systems‘ fairness and
effectiveness, and conducting on-site reviews of agencies‘ human
capital management systems.
The results of several merit principle surveys conducted by OPM and
MSPB continue to raise questions about how effectively the agencies and
OPM are carrying out their responsibilities for ensuring that human
capital practices are carried out in accordance with the merit system
principles. Over the years, these surveys have revealed that a varying
and sometimes substantial percentage of employees have expressed a
belief that their agencies are not adhering to these principles. OPM‘s
Merit System Principles Questionnaire results for 1999 through 2001
showed less than half of the responding employees believed that their
agencies protect them against reprisal and provide equal pay for equal
work as well as reward excellence. OPM‘s survey results are broadly
consistent with a 1998 MSPB survey where 40 percent of those surveyed
said they believed they had inadequate protection against the
possibility of a prohibited personnel action being taken against them.
MSPB said of these results, ’the fact that such a high percentage felt
[this way] is a cause for concern and continued vigilance.“ To its
credit, OPM acknowledged in its 2001 performance report that employees‘
low perceptions of their agencies‘ adherence to the aforementioned
merit principles were unacceptable and that it planned to address the
perception issue in future plans and strategies. Its 2003 performance
plan says it expects improvement to occur over a period of years, but
it does not address what specific steps OPM and others need to take to
improve the percentage of positive responses.
MSPB survey data collected from 1986 through 2001 showed that employees
are not convinced that favoritism and unfair advantage have been
removed from the government‘s hiring and promotion processes. For
example, 28 percent of employees surveyed in 1986 said they believed
they had been denied a job or job reward because of the operation of a
’buddy system“ without regard to merit. In a study published in
December 2001, MSPB reported that 69 percent of surveyed employees
believed that ’connections to other important people in government“ was
the single factor most likely to play a role in promotions or
selections for vacant positions in their organizations.[Footnote 19]
To address these ongoing issues in its oversight program, OPM has taken
a number of actions. For example, in January 2002, OPM issued HRM
Accountability System Standards in response to Executive Order 13197.
The standards describe the essential elements of internal human
resources management (HRM) accountability systems, set criteria for
agencies in establishing and maintaining these systems, and provide OPM
a framework for reviewing and assessing agencies‘ systems. OPM reported
in its 2001 performance report that the executive order gave the agency
clear authority to require agencies to establish and maintain HRM
accountability systems. OPM officials told us it is encouraging
agencies to develop an internal accountability system in line with
these standards and has issued a ’toolkit“ to assist them in doing so.
Recognizing that it is increasingly important for agencies to have a
strong internal capability for ensuring accountability and compliance
with the merit principles in the currently decentralized HRM
environment, OPM established a strategic objective in its fiscal year
2003 performance plan that all agencies implement accountability
systems by fiscal year 2005 that ’effectively hold responsible
officials accountable for their human resources operations and
results.“ To achieve this objective, OPM set a goal to ’develop and
improve agency accountability for conducting HRM in accordance with the
merit system principles and in alignment with mission.“ OPM expects to
meet this goal by assessing agency accountability systems; improving
ways to evaluate the effectiveness of HRM accountability systems; and
promoting and assisting agencies in developing and improving their
accountability systems through sharing of best practices, developing
and distributing educational materials, and providing guidance and
individual consultation. Meeting this important goal will entail an
enormous effort on the part of OPM and the agencies.
OPM also issued a Human Capital Assessment and Accountability Framework
(Framework) in October 2002 that is based on the revised standards for
success contained in the administration‘s Executive Branch Management
Scorecard. The Framework provides agencies consolidated guidance on
critical success factors and performance indicators that they can refer
to as they transform their strategic human capital management programs.
It is also intended to support agencies‘ internal assessment and
accountability systems and OPM‘s evaluation of agency accountability
systems and human capital efforts. According to OPM, under its recent
restructuring, agency human capital efforts, including accountability
systems, are to be evaluated by its Agency Merit System Accountability
and Human Resources Programs Office.
Although the actions OPM has taken and planned to improve
governmentwide oversight of agencies‘ human capital systems are
promising, the results of the merit principles surveys and MSPB‘s 2001
report show that there continues to be a need for strong oversight of
the merit system from both OPM and the agencies, especially in this era
of delegation and decentralization. MSPB reported in December 2001 that
OPM needs to show strong leadership in fostering agency self-monitoring
programs and find a way for its oversight reviews to address HRM
accountability at the line manager and supervisor levels. While OPM‘s
actions to improve governmentwide oversight are promising, the agency
needs to do more to accomplish its oversight mission in a decentralized
human capital environment in which responsibility for human capital
management accountability continues to shift to agencies. Given that
OPM‘s oversight approach includes encouraging and monitoring agency
self-assessment programs, it could strengthen this approach by
requiring, rather than encouraging, agencies to establish and maintain
internal oversight programs and to meet its HRM Accountability System
Standards. OPM could also develop standards that agencies‘ oversight
staffs would need to meet to be fully qualified to conduct agency
oversight reviews. In short, there are opportunities for OPM to build
upon the positive efforts it has under way to promote agency self-
monitoring programs and ensure that agencies have mechanisms in place
for holding their managers and supervisors accountable.
OPM‘s Organizational Transformation Initiatives:
As OPM implements its organizational transformation initiatives, which
are shifting its role from less of a rule maker and enforcer to more of
a strategic partner in leading and supporting executive agencies‘ human
capital management systems, it is addressing the need to strategically
manage its human capital, including effectively aligning its
organizational structure and people resources to achieve its mission
and goals, protect its information technology systems against security
threats, and manage its financial resources. OPM has undertaken a
number of initiatives to address these challenges. However, the
experiences of successful major change management initiatives in large
private and public sector organizations suggest that it can often take
at least 5 to 7 years until such initiatives are fully implemented and
the related cultures are transformed in a sustainable manner. Thus, it
is entirely to be expected that as OPM moves forward, there are
opportunities to strengthen and deepen its current efforts.
Strategic Human Capital Management:
As the federal government‘s human capital agency, OPM must lead by
example in managing its people. While OPM faces many of the same human
capital challenges as other agencies, it must serve as a role model to
other agencies in how to address these challenges. OPM has taken and
planned actions to address its human capital challenges, and its
actions are in line with the administration‘s Human Capital Standards
for Success. OPM‘s actions also align with the four cornerstones of
effective strategic human capital management outlined in our March 2002
model of strategic human capital management:[Footnote 20] (1)
leadership, (2) strategic human capital planning, (3) acquiring,
developing, and retaining talent, and (4) creating results-oriented
organizational cultures.
Leadership:
In addition to demonstrating commitment to strategic human capital
management governmentwide, OPM‘s top leadership has demonstrated this
commitment internally by viewing people as important enablers of agency
performance. In November 2002, OPM‘s Director changed the makeup of her
senior leadership team by appointing four executives to new associate
director positions to help implement the agency‘s restructuring effort
approved in September 2002. The Director noted that the four executives
collectively possess special skills in innovative HR reforms, e-Gov,
and labor-management relations as well as knowledge of civil service
protections. OPM also (1) sought input on its restructuring from its
employees, local union representatives, and key external stakeholders
such as departments and agencies, Congress, and academic and other
public administration advocates, (2) involved employees in cross-
organizational taskforces on other major agencywide projects, and (3)
implemented employee-friendly workplace policies, such as
telecommuting.
The rate of turnover among OPM‘s career Senior Executive Service (SES),
due largely to retirements, varied widely from 0 percent in fiscal year
1997 to 21 percent in fiscal year 2001, according to OPM‘s
calculations. The size of OPM‘s career SES workforce during this 5-year
period ranged from 36 in fiscal year 1997 to 40 in fiscal year 1999.
OPM‘s projected retirement rate for its SES over the next 10 years will
be the largest--8 percent each year--of any group in its workforce,
according to its June 2001 workforce analysis. The recent and projected
losses in OPM‘s SES workforce will provide it with a challenge to
maintain an effective leadership team.
In light of the impending retirements among its SES workforce, OPM has
engaged in succession planning to ensure that it has the leadership
talent in place to manage a transformed OPM effectively. OPM‘s
succession planning initiative, begun in 2000, was not fully
implemented due to other priorities and the need to consider succession
planning in the context of OPM‘s transformation and restructuring
efforts. These efforts naturally have implications for the competencies
and career paths OPM will need to be successful. Nonetheless, now that
the restructuring effort is being implemented, OPM can revisit and, if
necessary, augment its succession planning strategies.
Strategic Human Capital Planning:
OPM, like other agencies, was required by OMB to analyze its workforce
and develop a plan for restructuring the agency that would meet the
President‘s goals of creating agency organizational structures that are
citizen-centered, results-oriented, and market-driven.[Footnote 21]
OPM prepared and submitted its workforce analysis and restructuring
plan to OMB and has taken and planned actions to address human capital
challenges identified as a result of its workforce analysis.
In analyzing its workforce, OPM found that 4.2 percent of its employees
(about 123 per year), on average, are projected to retire each year
over the next 10 years, and as we discussed earlier, the largest
percentage of projected retirements,[Footnote 22] about 8 percent per
year, will come from members of its career SES. OPM‘s expected
retirement rate for its workforce overall is more than the annual
retirement rate of 2 percent governmentwide identified in our April
2001 report.[Footnote 23] OPM‘s projected career SES retirement rate
also exceeds the career SES governmentwide rate of 6 percent, on
average, each year identified in our May 2000 report.[Footnote 24] In
addition, OPM‘s workforce analysis found that of the 123 employees
expected to retire each year over the next 10 years, about 25 percent
of those retirements will come from employees in OPM‘s human resources
specialist and retirement benefits specialist positions--two positions
OPM has identified as being critical to its mission.
Significantly, the workforce analysis also found that skill gaps exist
at varying levels in the majority of the jobs occupied by OPM employees
as of September 30, 2000. These gaps exist in competencies needed by
employees to perform OPM‘s work both now and in the future. The skill
gap analysis revealed that, overall, OPM‘s long-term skill needs were
greater than its short-term needs, which according to OPM, reflects the
impact of the agency‘s changing work and the high predicted turnover in
mission-critical occupations. OPM employees‘ competency needs were
determined through a survey of OPM executives, managers, and
supervisors. Gaps were identified in competencies such as attention to
detail, customer service, interpersonal skills, writing, oral
communication, planning and evaluation, and technical competence.
OPM has developed plans to prepare for the expected retirements in its
workforce and address skill imbalances. Its plans and strategies for
addressing these and other human capital challenges are described in
its Restructuring Plan and Human Capital Scorecard Action Plan
submitted to OMB in September 2001 and January 2002, respectively. For
example, in its Restructuring Plan, OPM identified strategies such as
training to address skill gaps and recruiting and hiring from all
sources to replace expected staff losses due to the impending
retirements. And in its Human Capital Scorecard Action Plan, OPM
identified goals and plans that related to (1) recruiting, hiring,
developing, and retaining employees with the strategic competencies for
its mission-critical occupations and (2) aligning its human capital
policies and organizational structure with its mission, vision, and
strategies. OPM‘s plans and strategies for addressing its human capital
challenges represent important steps toward strategic human capital
planning.
OPM‘s Restructuring Plan identified goals and strategies for addressing
human capital challenges in each of its program offices. This action is
in line with a recommendation we made in our July 2001 report as a
result of reviewing OPM‘s fiscal year 2002 performance plan and fiscal
year 2000 performance report as part of our Government Performance and
Results Act work.[Footnote 25] In that report, we recommended that OPM
better link its internal strategic human capital management goals to
specific OPM programs and outcomes. Its Human Capital Scorecard Action
Plan lays out specific action items and target dates for completing
each item that align with dimensions of its Human Capital Scorecard,
released to agencies governmentwide in December 2001.
Realigning its organizational structure and workforce in a way that
will best achieve its mission, goals, and results has been challenging
for OPM for several years. Since its creation in 1979, OPM has
undergone a number of reorganizations[Footnote 26]--three of which,
including its most recent one that was approved in September 2002, have
involved major restructurings of the agency. Some of the
reorganizations resulted, in part, from different operating
philosophies of its directors. OPM‘s latest restructuring, which it
intends to complete by March 2003, is designed to create a new,
flexible structure that will ’de-stovepipe“ the agency; enable it to be
more responsive to its primary customers, federal departments and
agencies; and focus on the agency‘s core mission. For example, OPM has
decided to put its various program development offices under the
control of one associate director and its product and services
functions under another associate director to ensure that it
appropriately and efficiently responds to its customers. Effective
implementation of OPM‘s latest organizational and workforce realignment
will be crucial to maximizing its performance as the federal
government‘s human capital leader, assuring its own and other agencies‘
accountability, and ultimately achieving its goals.
OPM has also decided that its Equal Employment Opportunity (EEO)
Officer will have direct access to the agency head on EEO case and
policy issues but will directly report to, be rated by with input from
the agency head, and be supervised by the Associate Director for
Management on a day-to-day basis. Although OPM recognizes that
regulatory and implementing guidance issued by the Equal Employment
Opportunity Commission (EEOC) requires an agency‘s EEO Director to
report to and be directly supervised by the agency head,[Footnote 27]
OPM officials indicated the reporting arrangement between its EEO
Officer and agency head is in line with the intent or spirit of EEOC‘s
requirement because it will allow the EEO Officer to report directly to
the agency head on EEO case and policy issues when the EEO Officer
deems it is necessary, which is critical. The OPM officials also
indicated that an advantage of the reporting arrangement between OPM‘s
EEO Officer and agency head is that it does not separate the EEO
function from other HR functions that are the responsibility of the
Associate Director for Management.
In implementing this arrangement, we believe that it is important for
OPM to ensure that its EEO Officer‘s independence is not undermined as
a result of placing him/her under the direct supervision of the
Associate Director for Management who is responsible for the overall
management of the agency, including overseeing EEO functions, which
could affect HR functions. We also believe that it is important for the
EEO Officer to have regular one-on-one meetings with the agency head in
order for this reporting arrangement to work.
Talent:
Similar to other agencies, OPM faces challenges in recruiting and
retaining a high-quality, diverse workforce. In its workforce analysis,
OPM said that its challenges in attracting and retaining employees are
the result of lack of competitive pay with the private sector,
cumbersome recruitment and hiring procedures for certain occupations,
and a declining attraction of the public service--reasons that are not
unique to OPM.
OPM will need to hire and develop employees to replace the loss of
knowledge and expertise caused by departing employees and to address
gaps in employees‘ skills identified through its workforce analysis. In
addition, OPM will need to address shortfalls in employees‘ knowledge
in two areas--non-title 5 personnel systems and a modernized retirement
system environment. OPM recognizes that because an increasing number of
agencies are being exempted from title 5 requirements, it will need to
ensure that its employees are trained in the various laws, rules, and
regulations that govern non-title 5 systems as well as the multiple
environments in which they operate to oversee and evaluate them
effectively. OPM also recognizes that as the focus of the retirement
program shifts from transactions to customer service under its
retirement systems modernization initiative[Footnote 28] currently
under way, it will need to ensure that its employees have the knowledge
and skills to operate in this new environment. Our interviews with OPM
officials and a review of OPM‘s workforce analysis, Restructuring Plan,
and related documents indicate that OPM has strategies in place to meet
these challenges. These strategies include expanding its hiring and
recruitment sources and providing a variety of training and
developmental opportunities to broaden employees‘ skills. While OPM
does not have any numerical hiring goals over the next 5 years, it
plans to hire and recruit from the widest sources possible to ensure
that the agency has an available group of diverse and skilled
candidates in line to assume future leadership responsibilities. OPM
also plans to continue to use the Presidential Management Intern
program.
To broaden the skills of employees, OPM notes that a particularly
effective strategy has been its use of rotational assignments, special
projects, and details to ’cross-train“ employees at various levels of
the organization. These opportunities are intended to augment existing
staff skills, teach new competencies, and better prepare employees and
their work units for vacancies in key positions. OPM has made use of
cross-organizational task forces to manage agencywide projects such as
the restructuring plan, succession plan, and revision of its strategic
plan. OPM says that participants serving on these task forces gain
exposure to the full range of OPM‘s responsibilities and a deeper
understanding of the work performed by other offices. In order to pass
on the knowledge of departing staff members and expose less experienced
staff members to OPM‘s institutional culture and history, OPM is
developing a mentoring program called FOCUS (Facilitating Opportunities
& Change that Unleash Success). This program, also a part of the
agency‘s succession plan, is intended to broaden employees‘ knowledge
and mitigate skill gaps within the agency.
While OPM‘s strategies to address its internal recruitment and
retention needs are moving in the right direction, past studies have
raised concerns about OPM‘s training program for new supervisors and
its Core Competency Training and Development Model for all employees.
In particular, a 1999 oversight review conducted by OPM‘s Office of
Merit System Oversight and Effectiveness (OMSOE),[Footnote 29]
undertaken to assess the state of human capital management at OPM,
reported that ’newer supervisors“ expressed concern about their
preparation for supervisory responsibilities and stated that initial
training for new supervisors was ’uneven and sometimes nonexistent.“
The findings from OMSOE‘s report[Footnote 30] are consistent with the
findings from a March 2001 ’environmental scan“ of OPM‘s internal human
capital management performed by the National Academy of Public
Administration (NAPA) at OPM‘s request.[Footnote 31] NAPA reported that
OPM employees stated in focus groups that there was not a central focus
within OPM on training needs assessment and that supervisory training
within OPM was an area ’needing attention.“:
In light of the fact that OPM has fewer supervisors now than in the
past due to downsizing; is losing some of its more experienced
executives, managers, and supervisors to retirement over the next few
years; and is increasing its efforts to hire at the entry level, it is
important that OPM have a strong training program for new supervisors
in place. Supervisory training is also important to help OPM transform
from a rules-monitoring organization to a customer-oriented
organization that partners with agencies in managing their human
capital. OMSOE recommended in its 1999 report that OPM‘s Office of
Human Resources and Equal Employment Opportunity develop a training
course for new supervisors. According to OPM officials, a core training
and development curriculum for new supervisors was introduced in the
first quarter of fiscal year 2003 that is designed to provide new
supervisors with the tools and competencies they need to perform
effectively in their current positions and in future leadership
positions.
OMSOE‘s 1999 oversight review also raised concerns with OPM‘s Core
Competency Training and Development Model for all of its employees.
While the review said that the model was a useful tool for new
employees, it also reported that (1) experienced employees expressed
disinterest in the Core Competency Training and Development Model
because they did not believe it would help them advance, (2) managers
felt that experienced employees did not want to use the model because
they did not want to be viewed as needing training, (3) nonsupervisory
employees felt that the training model was not job related, (4)
supervisors felt that they could not track the results of the training
model back to job performance, and
(5) managers and supervisors felt that the model emphasized skills at
the basic but not the advanced level. To address these concerns, OMSOE
recommended that OPM explore establishing a structured program to
provide rotational assignments throughout the agency and suggested that
the Core Competency Training and Development Model might be the
appropriate avenue for launching the rotational program. To increase
employees‘ perceived usefulness of the core competency model and
encourage greater use of it, OMSOE also suggested that OPM consider
linking the model to other HR programs, such as career development and
workforce planning. An OPM official told us that the agency is updating
the Core Competency Training and Development Model.
Creating Results-Oriented Cultures:
OPM has taken measures to ensure that the focus of individual
expectations and accountability are centered on contributions to
achieve organizational results. For example, OPM set a goal in fiscal
year 1999 of aligning all of its employees‘ individual performance
plans with the agency‘s strategic plan. OPM reported in its fiscal year
2000 performance and accountability report that it had achieved
alignment for about 90 percent of its employees. OPM told us in July
2002 that all of its employees‘ performance plans have now been aligned
with the agency‘s former strategic plan, fully accomplishing the goal
it set in 1999. However, with the publication of OPM‘s new strategic
plan in November 2002, OPM officials told us that employees‘
performance plans will be revised where needed to provide the critical
link between organizational and individual performance and that
realignment of the plans will be completed in early 2003.
In addition to aligning all of its employees‘ performance plans with
the agency‘s strategic plan, OPM told us that the selection criteria
for its highest award, the Director‘s Award for Excellence, have been
revamped and revised to ensure that the award recognizes those who have
made clear contributions to the agency‘s strategic objectives and
furthered the President‘s goal of creating a government that is
citizen-centered, results-oriented, and market-based. Finally, OPM has
taken steps to revise all of its executives‘ performance standards to
include clear benchmarks for managing human and financial resources,
furthering the President‘s management objectives, leading positive
change, and building effective coalitions.
Information Security:
Over the last 2 years, significant weaknesses have been identified in
OPM‘s information systems‘ security program. OPM‘s information systems,
which support its human capital and financial management operations,
are used to manage billions of dollars in the retirement benefits,
health benefits, and life insurance trust funds. These systems are also
used to process retirement benefits for millions of annuitants and
survivors and HR data for millions of active federal employees. And as
OPM continues to develop and roll out the five e-Gov projects that the
administration assigned it to lead--Recruitment One-Stop, e-Training,
e-Clearance, Enterprise Human Resource Integration, and e-Payroll--
these systems will also be used to maintain and process HR data.
Because OPM‘s information systems are used to process significant
amounts of sensitive but unclassified data supporting both human
capital and financial management operations, protecting these systems
from computer-based attacks is crucial. Since 1997, we have designated
information security as a governmentwide high-risk area because
evidence indicated that controls over computerized federal operations
were not effective and the related risks were escalating, in part, due
to increasing reliance on the Internet. Furthermore, governmentwide
audits conducted in 2001 and 2002 continued to show that operations and
assets across the federal government were highly vulnerable to
computer-based attack.
OPM is working to resolve the weaknesses in its information security
program that were identified during audits by an independent accounting
firm, OPM‘s Office of the Inspector General (OIG), and us[Footnote 32]
during fiscal years 2001 and 2002. OPM has implemented new security
guidance and has developed a plan to resolve these weaknesses. Also,
OPM told us that it has consistently completed actions contained in the
plan and is on schedule to meet its remaining milestones. OPM‘s efforts
to address weaknesses in its information security program are part of
its ongoing actions to achieve compliance with federal financial
management statutes as they relate to information security and with
information security requirements contained in the Government
Information Security Reform provisions (commonly referred to as
’GISRA“).[Footnote 33] As part of its fiscal year 2001 financial
statement audit, the independent accounting firm assessed OPM‘s
compliance with the Federal Financial Management Improvement Act of
1996[Footnote 34] (FFMIA) requirements as they relate to information
systems security. The independent accounting firm found that OPM had
not provided adequate systems security. It also found that OPM‘s
electronic data processing (EDP) general control environment continues
to be a reportable condition from the prior year[Footnote 35] and five
areas of EDP general control need to be strengthened: (1) agencywide
security program management, (2) access controls, (3) system software
controls,
(4) software development and change controls, and (5) service
continuity. According to the independent accounting firm, these
conditions could affect OPM‘s ability to prevent and detect
unauthorized changes to financial information, control electronic
access to sensitive information, and protect OPM‘s information
resources.
As required by GISRA, OPM‘s OIG independently evaluated OPM‘s
information security program and reported in September 2002[Footnote
36] that OPM had made significant progress in improving its information
security program since 2001 but could make more improvements. For
example, the OIG noted that OPM had integrated its information security
requirements and costs estimates into its capital planning and
investment control process and took significant steps to meet its
governmentwide security training responsibilities. The OIG also noted
that OPM‘s agencywide security policy, originally released in June 2001
and revised in March 2002, and its efforts to certify and accredit its
two general support systems--the Enterprise server and local area
network/wide area network--are two positive steps that will help OPM to
achieve greater compliance with GISRA‘s requirements. However, the OIG
said that although no material weaknesses were found in OPM‘s
information security controls, a number of reportable conditions were
identified that OPM needs to address. For example, the OIG said OPM
still had not (1) fully implemented its agencywide security program,
although it issued implementation guides during the year, (2)
integrated its information security program with its critical
infrastructure responsibilities, (3) conducted risk assessments for all
of its systems, (4) completed security plans for all of its systems, or
(5) developed a process to track and monitor specialized training
requirements for personnel with significant security responsibilities.
These reportable conditions are addressed in OPM‘s action plan, and
according to OPM officials, progress has been made in overcoming them.
The independent accounting firm‘s and OPM‘s OIG findings are consistent
with ours. In March 2002, we testified on the federal government‘s
efforts in implementing GISRA requirements during fiscal year
2001.[Footnote 37] We testified that OPM and 23 other large agencies
had not conducted risk assessments for all of their systems, and almost
half of the agencies had not established effective performance measures
to show how well program officials had assessed the risk to operations
and assets under their control. Our review disclosed significant
weaknesses in four out of six major areas of OPM‘s general controls--
the policies, procedures, and technical controls that apply to all or a
large segment of OPM‘s information systems and help to ensure their
proper operation. In particular, we found weaknesses in OPM‘s (1)
security program management, (2) access controls, (3) change controls,
and (4) service continuity.
In its plan of action and milestones (POA&M) report submitted to OMB in
November 2001,[Footnote 38] OPM proposed corrective actions to address
a total of 15 weaknesses in its information security program. As of
April 30, 2002, OPM reported that it had completed actions for 2 of the
15 identified weaknesses and that corrective actions for the remaining
13 were ongoing. OPM has also taken steps to implement its agencywide
security program. For example, it issued an updated information
technology security policy in March 2002 that, in part, requires and
ensures that security planning is integrated into each of its systems‘
development life cycle processes and established a formal working group
to oversee implementation of the security policy and security program
at OPM. OPM also told us that it is applying its information security
policy to the five e-Gov projects it is leading and developing a
specific e-government Security Management Plan for each e-Gov project.
According to OPM, each e-government project‘s Security Management Plan
covers, as appropriate, risk assessment, data encryption, intrusion
detection and repudiation, information availability and assurance,
audit tracking, user authentication, physical site security,
catastrophic disaster recovery, data and power supply redundancy and
backup, and computer virus detection and prevention. OPM expects to
fully implement its agencywide security program in September 2003
according to its POA&M report submitted to OMB in November 2001.
Although OPM has taken positive steps to improve its information
security program, it must continue its efforts to achieve compliance
with GISRA and federal financial management statutes as they relate to
information security. In addition, it is important that OPM continues
its plans to incorporate appropriate information security controls into
the design and development of the five e-Gov projects it has been
assigned to lead. These controls will help to ensure the integrity,
reliability, and availability of data and systems used for the e-Gov
projects.
Financial Management:
OPM received an unqualified or ’clean“ opinion on its fiscal year 2000
and 2001 consolidated financial statements, and the independent public
accounting firm hired by OPM‘s OIG to perform these audits reported no
material weaknesses[Footnote 39] in internal controls over financial
reporting. However, the independent accounting firm identified several
reportable conditions[Footnote 40] over financial reporting, many of
which relate to long-standing problems with OPM‘s accounting for the
activities of its two discretionary accounts--the Salaries and Expenses
account and the Revolving Fund. In its audit report, the independent
accounting firm also stated that the financial management systems
supporting OPM‘s discretionary accounts as well as its retirement,
health benefits, and life insurance programs did not substantially
comply with certain requirements of FFMIA[Footnote 41] that relate to
federal financial management system requirements and the U.S.
Government Standard General Ledger at the transaction level.
Historical weaknesses in accounting for and reporting on the activities
of the Revolving Fund and the Salaries and Expenses account have
included (1) the inability to substantiate and reconcile reported
account balances with OPM‘s own subsidiary records as well as
information maintained by other federal agencies, (2) lack of or
failure to adequately implement policies and procedures, and (3)
insufficient analyses and review of the financial statements,
footnotes, and related adjusting entries. Contributing to some of these
weaknesses have been staffing limitations and skill deficiencies as
well as weaknesses in computer controls. Evidence of these continuing
weaknesses led the independent accounting firm to conclude that as of
the end of fiscal year 2001, OPM‘s financial management systems were
not in substantial compliance with FFMIA. These weaknesses call into
question OPM‘s ability to produce timely and accurate financial
information for management decision making and financial reporting
purposes relative to these two accounts.
The independent accounting firm and OPM‘s OIG both agree that OPM made
progress during fiscal year 2001 in addressing these various
weaknesses. A key step to resolving many of its reportable conditions
and material system nonconformances is OPM‘s phased implementation of a
new financial management system that supports the Revolving Fund and
Salaries and Expenses account and that will eventually interface with
the benefit plans‘ financial systems to enable timely and accurate
preparation of consolidated agency financial statements. OPM expects to
have completed the last phase of the system implementation by the end
of fiscal year 2003, at which time OPM plans to have audits performed
on the stand-alone Revolving Fund and Salaries and Expenses account
financial statements, in addition to the consolidated agency financial
statements, to demonstrate that the discretionary funds‘ financial
statements can successfully pass an audit. OPM has stated that the new
system, once fully operational, will improve its overall financial
performance by allowing it to routinely report the full cost of
programs and projects; integrate program, budget, and financial
information; and use this information to measure, monitor, and report
on program performance.
Federal Retirement and Health Benefits Program Administration:
Through its retirement and health insurance programs, OPM delivers
retirement and health insurance benefits to millions of federal
employees, annuitants, and their dependents totaling billions of
dollars annually. In fiscal year 2001, OPM paid $47 billion in
annuities to more than 2 million retired federal employees, annuitants,
and their dependents. OPM--which is the largest purchaser of employee
health benefits--also paid almost
$21 billion in health insurance premiums for more than 8 million
enrollees and their dependents in fiscal year 2001. Thus, OPM‘s
accurate, cost-effective, and efficient administration of the
retirement and health insurance programs is critical given the
substantial dollar outlays. Results of recent independent
surveys[Footnote 42] indicated that OPM‘s customers have been satisfied
with the quality of retirement services and health insurance products
and services. The results of OPM‘s own client satisfaction survey have
also indicated that retirees have been highly satisfied with services
provided by the agency. However, customer satisfaction could fall in
the coming years if OPM is not prepared to handle the expected federal
employee retirement wave and implement cost-containment strategies for
limiting health care premium increases while continuing to ensure that
employees are provided access to quality health care.
In 2001, as in prior years, OPM‘s retiree customers responding to the
American Customer Satisfaction Index survey reported that they were
highly satisfied with services they received from OPM. For example, in
2001 OPM received an overall satisfaction rating of 78 (out of a
possible 100) for delivery of retirement services, such as timeliness
of benefit payments and timeliness of OPM‘s response to inquiries.
OPM‘s 2001 satisfaction rating represented an increase over its 1999
and 2000 ratings of 75 and 73, respectively, and surpassed the private
sector rating of 70.5. In addition, over 90 percent of annuitants
responding to OPM‘s client satisfaction survey said they were satisfied
with overall retirement services during 1999 through 2001. Moreover,
for fiscal years 1999 through 2001, erroneous retirement payments
constituted less than 1 percent of total retirement payments. OPM also
reduced its processing times for retirement claims in 2001 and
surpassed its target.[Footnote 43] However, the level of customer
satisfaction OPM has achieved and its timeliness in processing claims
could dwindle over the next few years if the agency is not able to
handle the dramatic increase expected in the number of employees
seeking retirement services. By 2006, about one-third (493,000
employees) of the federal workforce will be eligible to retire and
about one-half (236,000 employees) of those eligible are expected to
retire. OPM‘s modernized retirement systems--the agency‘s long-term
strategy for delivering more cost-efficient, timely, and accurate
retirement services--is planned to be fully operational in 2010.
Because modernization of the retirement systems is a complex, long-term
undertaking and given the costs and implementation risks associated
with it, OPM is considering outsourcing the claims processing and
customer service functions.
OPM measures its success in administering the Federal Employees Health
Benefits Program (FEHBP), in part, by active and retired employees‘
perceptions of the quality of the health plans and their accreditation.
OPM reported that 82 percent of employees enrolled in FEHBP were in
highly rated health plans in 2001, which indicates that they were
receiving high-quality health insurance products and services. Other
measures of OPM‘s success in administering the health benefits program
are the agency‘s progress in achieving less fraud and abuse in the
program and improving performance and financial oversight of the
program--areas that have been identified as top management challenges
facing OPM at some point over the last 2 years.
In January 2002, OPM‘s OIG removed fraud and abuse in FEHBP from its
list of top challenges facing OPM because it found no material
weaknesses and fewer errors in the program. In fiscal year 2001,
erroneous health benefit payments constituted less than 1 percent of
total health benefit payments. However, the OIG still recognizes that
health care fraud is a nationwide problem and that FEHBP continues to
be subjected to this problem.
Regarding improving performance of the health benefits program,
controlling the costs of premiums is a great concern to the government
because it pays, on average, 72 percent of the total premium, according
OPM‘s OIG. The OIG noted that OPM is often limited in how it can
control cost increases without also cutting desired health care
benefits. We recently reported that during the period 1991 through
2002, FEHBP premium increases, overall, have been similar to those for
other large purchasers of employee health benefits, although the
increases in the FEHBP premiums rose slightly faster than other large
purchasers from 1997 through 2002.[Footnote 44] In 2003, health care
premiums under FEHBP increased, on average, 11 percent, continuing a 3-
year trend of double-digit premium increases, although the 2003 premium
increase is less than those for some other large purchasers of
employer-sponsored health insurance. For example, the California Public
Employees‘ Retirement System (CalPERS)--the second largest public
purchaser of employee health benefits--announced that its health
maintenance organizations premiums increased an average of 26 percent
in 2003. To help mitigate FEHBP premium increases for 2003, OPM told us
that it initiated a four-point strategy that contributed to these
premium increases being below national trends. OPM‘s strategy, in part,
included OPM asking FEHBP health plan carriers to develop and submit
innovative benefit proposals that would not only maintain the quality
of but also contain the cost of health care.
We also reported that OPM relies on enrollee choice, competition among
plans, and its annual negotiations with participating plans to help
control premium increases, whereas other large public and private
purchasers adopt different negotiating strategies. For example, we
noted that in the past, OPM has encouraged plans to consider cost-
containment strategies, such as increased use of generic drugs and
expansion of preferred provider organizations, to lower the cost of
premiums. For the 2003 federal health benefits open season, OPM
encouraged plans to consider cost-containment strategies such as
increasing enrollees‘ out-of-pocket costs and emphasizing care
management for enrollees with chronic conditions. Other major
purchasers use other approaches to lower the cost of health benefit
premiums. For example, CalPERS and General Motors negotiate based on
standard benefit packages, and at the end of negotiations can decide
not to include a plan that does not meet their cost or quality
standards.
Regarding financial oversight of FEHBP, OPM‘s OIG reported in January
2002 that OPM has taken steps to provide more effective financial
oversight of the program, such as issuing an Audit Guide that requires
experienced-rated carriers to obtain an annual audit of FEHBP
activities and to report on their internal control structures. However,
the OIG also reported that OPM still needs to improve its oversight and
monitoring of the reconciliation of monies paid as premiums to
participating community-rated carriers with the enrollees for whom they
were being paid. The OIG noted that because OPM‘s existing systems were
not designed to reconcile differences between enrollment and premium
payments, the potential exists for carriers to provide benefits to
employees who are not covered by their plans at the time services are
rendered. To address this problem, OPM implemented the Centralized
Enrollment Clearinghouse System in the summer of 2002. This system is
expected to facilitate the carrier and agency reconciliation process.
[End of section]
GAO Contacts:
Subject(s) covered in this report: Strategic human capital management
leadership and oversight; ; Agency transformation and workforce
realignment; Contact person: J. Christopher Mihm, Director; Strategic
Issues; (202) 512-6806; mihmj@gao.gov.
Subject(s) covered in this report: Information security; Contact
person: Robert F. Dacey, Director; Information Technology; (202) 512-
3317; daceyr@gao.gov.
Subject(s) covered in this report: Financial management; Contact
person: Linda M. Calbom, Director; Financial Management and Assurance;
(202) 512-9508; calboml@gao.gov.
Subject(s) covered in this report: Federal retirement program
administration; Contact person: Barbara D. Bovbjerg, Director;
Education, Workforce, and Income Security; (202) 512-7215;
bovbjergb@gao.gov.
Subject(s) covered in this report: Federal health benefits program
administration; Contact person: Kathryn G. Allen, Director; Health
Care; (202) 512-7118; allenk@gao.gov.
[End of table]
[End of section]
Related GAO Products:
Human Capital:
High-Risk Series: Strategic Human Capital Management. GAO-03-120.
Washington, D.C.: January 2003.
Acquisition Workforce: Status of Agency Efforts to Address Future
Needs. GAO-03-55. Washington, D.C.: December 18, 2002.
Highlights of a GAO Forum: Mergers and Transformation--Lessons Learned
for a Department of Homeland Security and Other Federal Agencies. GAO-
03-293SP. Washington, D.C: November 14, 2002.
Managing for Results: Using Strategic Human Capital Management to Drive
Transformational Change. GAO-02-940T. Washington, D.C.: July 15,
2002. :
Air Traffic Control: FAA Needs to Better Prepare for Impending Wave of
Controller Attrition. GAO-02-591. Washington, D.C.: June 14, 2002. :
A Model of Strategic Human Capital Management. GAO-02-373SP.
Washington, D.C.: March 15, 2002. :
SEC Operations: Increased Workload Creates Challenges. GAO-02-302.
Washington, D.C.: March 5, 2002. :
Federal Employee Retirements: Expected Increase Over the Next 5 Years
Illustrates Need for Workforce Planning. GAO-01-509. Washington, D.C.:
April 27, 2001. :
High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January
2001. :
Senior Executive Service: Retirement Trends Underscore the Importance
of Succession Planning. GAO/GGD-00-113BR. Washington, D.C.: May 12,
2000. :
Homeland Security:
Homeland Security: Critical Design and Implementation Issues. GAO-02-
957T. Washington, D.C.: July 17, 2002.
Information Security:
Information Security: Additional Actions Needed to Fully Implement
Reform Legislation. GAO-02-470T. Washington, D.C.: March 6, 2002. :
Office of Personnel Management:
Federal Employees‘ Health Plans: Premium Growth and OPM‘s Role in
Negotiating Benefits. GAO-03-236. Washington, D.C.: December 31,
2002. :
Office of Personnel Management: Status of Achieving Key Outcomes and
Addressing Major Management Challenges. GAO-01-884. Washington, D.C.:
July 9, 2001. :
[End of section]
Performance and Accountability and High-Risk Series:
[End of section]
Major Management Challenges and Program Risks: A Governmentwide
Perspective. GAO-03-95.
Major Management Challenges and Program Risks: Department of
Agriculture. GAO-03-96.
Major Management Challenges and Program Risks: Department of Commerce.
GAO-03-97.
Major Management Challenges and Program Risks: Department of Defense.
GAO-03-98.
Major Management Challenges and Program Risks: Department of Education.
GAO-03-99.
Major Management Challenges and Program Risks: Department of Energy.
GAO-03-100.
Major Management Challenges and Program Risks: Department of Health and
Human Services. GAO-03-101.
Major Management Challenges and Program Risks: Department of Homeland
Security. GAO-03-102.
Major Management Challenges and Program Risks: Department of Housing
and Urban Development. GAO-03-103.
Major Management Challenges and Program Risks: Department of the
Interior. GAO-03-104.
Major Management Challenges and Program Risks: Department of Justice.
GAO-03-105.
Major Management Challenges and Program Risks: Department of Labor.
GAO-03-106.
Major Management Challenges and Program Risks: Department of State.
GAO-03-107.
Major Management Challenges and Program Risks: Department of
Transportation. GAO-03-108.
Major Management Challenges and Program Risks: Department of the
Treasury. GAO-03-109.
Major Management Challenges and Program Risks: Department of Veterans
Affairs. GAO-03-110.
Major Management Challenges and Program Risks: U.S. Agency for
International Development. GAO-03-111.
Major Management Challenges and Program Risks: Environmental Protection
Agency. GAO-03-112.
Major Management Challenges and Program Risks: Federal Emergency
Management Agency. GAO-03-113.
Major Management Challenges and Program Risks: National Aeronautics and
Space Administration. GAO-03-114.
Major Management Challenges and Program Risks: Office of Personnel
Management. GAO-03-115.
Major Management Challenges and Program Risks: Small Business
Administration. GAO-03-116.
Major Management Challenges and Program Risks: Social Security
Administration. GAO-03-117.
Major Management Challenges and Program Risks: U.S. Postal Service.
GAO-03-118.
High-Risk Series: An Update. GAO-03-119.
High-Risk Series: Strategic Human Capital Management. GAO-03-120.
High-Risk Series: Protecting Information Systems Supporting the Federal
Government and the Nation‘s Critical Infrastructures. GAO-03-121.
High-Risk Series: Federal Real Property. GAO-03-122.
FOOTNOTES
[1] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
01-263 (Washington, D.C.: January 2001).
[2] These amounts do not reflect OPM‘s total budget. OPM‘s total
budget, which is shown in the inside cover of this report, primarily
consists of the trust funds for civil service retirement and federal
health benefits. For the last 5 years, OPM‘s total budget increased
each year from $112 billion in fiscal year 1998 to an estimated $134
billion in fiscal year 2002.
[3] OPM‘s Human Capital Scorecard, issued in December 2001, contains
dimensions for strategic alignment, strategic competencies (talent),
leadership, performance culture (strategic awareness), and learning
(knowledge management).
[4] Some of the proposals were included in the governmentwide human
capital provisions in the Homeland Security Act of 2002.
[5] GAO-01-263.
[6] U.S. General Accounting Office, Acquisition Workforce: Status of
Agency Efforts to Address Future Needs, GAO-03-55 (Washington, D.C.:
Dec. 18, 2002).
[7] U.S. General Accounting Office, Air Traffic Control: FAA Needs to
Better Prepare for Impending Wave of Controller Attrition, GAO-02-591
(Washington, D.C.: June 14, 2002).
[8] U.S. General Accounting Office, SEC Operations: Increased Workload
Creates Challenges, GAO-02-302 (Washington, D.C.: Mar. 5, 2002).
[9] U.S. General Accounting Office, Homeland Security: Critical Design
and Implementation Issues, GAO-02-957T (Washington, D.C.: July 17,
2002), and Highlights of a GAO Forum: Mergers and Transformation:
Lessons Learned for a Department of Homeland Security and Other Federal
Agencies, GAO-03-293SP (Washington, D.C: Nov. 14, 2002).
[10] U.S. General Accounting Office, Office of Personnel Management:
Status of Achieving Key Outcomes and Addressing Major Management
Challenges, GAO-01-884 (Washington, D.C.: July 9, 2001), and Senior
Executive Service: Retirement Trends Underscore the Importance of
Succession Planning, GAO/GGD-00-113BR (Washington, D.C.: May 12, 2000).
[11] U.S. Merit Systems Protection Board, The U.S. Office of Personnel
Management in Retrospective: Achievements and Challenges After Two
Decades (Washington, D.C.: December 2001).
[12] U.S. General Accounting Office, High-Risk Series: Strategic Human
Capital Management, GAO-03-120 (Washington, D.C.: January 2003).
[13] U.S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002). The model,
which was issued as an exposure draft, is intended to be a tool to help
federal agency leaders better manage their people.
[14] Recruitment One-Stop is one of five crosscutting e-Gov projects
initiated under the President‘s Management Agenda that OPM is charged
with leading. The other four projects are e-Clearance, e-Payroll, e-
Training, and the Enterprise Human Resource Integration initiative.
These projects cover a spectrum of human capital activities.
[15] U.S. Office of Personnel Management, A Fresh Start for Federal
Pay: The Case for Modernization (Washington, D.C.: April 2002).
[16] U.S. General Accounting Office, Managing for Results: Using
Strategic Human Capital Management to Drive Transformational Change,
GAO-02-940T (Washington, D.C.: July 15, 2002).
[17] Pub. L. No. 107-296, Nov. 25, 2002.
[18] The nine merit principles, defined in law at 5 U.S.C. 2301(b), are
broad principles that define how federal personnel management should be
implemented. The principles cover topics such as recruitment, pay, and
employee performance.
[19] U.S. Merit Systems Protection Board, The Federal Merit Promotion
Program: Process vs. Outcome (Washington, D.C.: December 2001).
[20] GAO-02-373SP.
[21] OMB Bulletin No. 01-07, dated May 8, 2001, required agencies to
conduct workforce analyses and to develop restructuring plans based on
the workforce analyses. OMB directed agencies to submit their workforce
analyses by June 29, 2001. The restructuring plans were to be submitted
as a part of the agencies‘ 2003 budget submissions and annual
performance plans.
[22] OPM based its retirement projections on the yearly retirement
patterns of permanent employees on board as of October 1, 1995, and
then applied these patterns to determine retirement probabilities in
each of the next 5 years. OPM controlled for variables, such as gender,
occupational category, retirement system, and length of retirement
eligibility, in determining the retirement probabilities. It then
averaged the 1-year probabilities to obtain a composite 1-year
probability estimate.
[23] U.S. General Accounting Office, Federal Employee Retirements:
Expected Increase Over the Next 5 Years Illustrates Need for Workforce
Planning, GAO-01-509 (Washington, D.C.: Apr. 27, 2001). In that report,
we calculated a retirement rate of 2 percent per year until 2006 for
employees at 24 executive branch agencies, which comprise about 98
percent of the federal workforce, excluding Postal Service, Federal
Reserve, Tennessee Valley Authority, and intelligence agency employees.
Our retirement projections covered the period from 1999 through 2006.
For more information on our retirement projections, their assumptions,
and methodology, see that report.
[24] U.S. General Accounting Office, Senior Executive Service:
Retirement Trends Underscore the Importance of Succession Planning,
GAO/GGD-00-113BR (Washington, D.C.: May 12, 2000). In that report, we
calculated the average estimated annual SES retirement rate for fiscal
years 1999 through 2005 on the basis of OPM‘s estimate of the SES
retirement rate for that entire 7-year period. OPM‘s retirement
estimate was based on the actual number of career SES retirements
during fiscal years 1996 through 1998 to eliminate the effect of
downsizing during the mid-1990s and the increase in retirements during
fiscal year 1994 following the substantial 1991 SES pay raise.
[25] GAO-01-884.
[26] For purposes of this report, a reorganization is defined as a
change in the agency‘s organizational structure and/or reporting
relationships, including adding or abolishing an office or function.
[27] EEOC‘s regulation, 29 C.F.R. 1614.102(b)(4), and guidance (EEOC
Management Directive 110, Chapter 1) require an agency‘s EEO director
to report to and be supervised directly by the agency head for the
purposes of demonstrating the importance of EEO to employees and
ensuring that the EEO director‘s independence is not undermined,
particularly in situations where the person to whom he or she reports
is involved in or would be affected by the EEO director‘s actions in
implementing the agency‘s EEO program.
[28] The retirement systems modernization initiative, which is being
implemented in phases, is OPM‘s long-term strategy for reengineering
business processes in order to improve all aspects of the delivery of
retirement services. OPM expects the initiative to be fully operational
in 2010.
[29] OMSOE, which is now a part of OPM‘s Agency Merit System
Accountability and Human Resources Programs, assesses agencies‘
effectiveness in personnel management at the governmentwide, agency,
and installation levels to gather information for policy development
and program refinement, ensure compliance with personnel laws and
regulations, enhance agency capability for human resources management
accountability, and assist agencies in operating personnel programs
that effectively support accomplishment of their primary missions
consistent with merit system principles. OMSOE also works with federal
agencies to explore potential improvements in personnel systems and
better and simpler ways to manage federal personnel.
[30] U.S. Office of Personnel Management, Office of Merit Systems
Oversight and Effectiveness, Report of an Oversight Review: Office of
Personnel Management (Washington, D.C.: June 1999).
[31] National Academy of Public Administration, An Environmental Scan
for the Office of Human Resources and Equal Employment Opportunity,
U.S. Office of Personnel Management (Washington, D.C.: March 2001).
[32] This work was performed as part of our assessment of 24 agencies‘
compliance with the Government Information Security Reform provisions
in the National Defense Authorization Act for Fiscal Year 2001 (Pub. L.
No. 106-398, Oct. 30, 2000). Our findings were presented in testimony
before the Subcommittee on Government Efficiency, Financial Management
and Intergovernmental Relations, Committee on Government Reform, House
of Representatives entitled Information Security: Additional Actions
Needed to Fully Implement Reform Legislation, GAO-02-470T (Washington,
D.C.: Mar. 6, 2002). In presenting the results of our work, we reported
the results for 24 agencies in the aggregate but did not report the
results for each of the 24 agencies individually.
[33] Similar to other agencies, OPM is subject to the requirements of
GISRA, which require, in part, that (1) agencies establish agencywide,
risk-based information security programs,
(2) the inspector general of each agency conduct an independent
evaluation of the agency‘s information security program, and (3) OMB
submit an annual report to Congress summarizing the results of
agencies‘ evaluations of their information security programs.
[34] 31 U.S.C. section 3512 note.
[35] A reportable condition is a matter coming to an auditor‘s
attention relating to significant deficiencies in the design or
operation of the internal controls over financial reporting that, in
the auditor‘s judgment, could adversely affect an agency‘s ability to
record, process, summarize, and report financial data consistent with
the assertions by management in financial statements.
[36] U.S. Office of Personnel Management, Office of the Inspector
General, Government Information Security Reform Act Fiscal Year 2002
Independent Evaluation, Executive Summary (Washington, D.C.: Sept. 9,
2002).
[37] U.S. General Accounting Office, Information Security: Additional
Actions Needed to Fully Implement Reform Legislation, GAO-02-470T
(Washington, D.C.: Mar. 6, 2002).
[38] OPM‘s POA&M report is a list of corrective actions that OPM will
take in response to information security weaknesses identified by its
Chief Information Officer, independent auditor, OIG, or us.
[39] Material weaknesses in internal control are reportable conditions
in which the design or operation of the internal control does not
reduce to a relatively low level the risk that errors, fraud, or
noncompliance in amounts that would be material in relation to the
financial statements or other required information being audited may
occur and not be detected within a timely period by employees in the
normal course of performing their assigned duties.
[40] See footnote 35.
[41] Under FFMIA, an agency head must determine whether his or her
agency is in substantial compliance with three requirements: (1)
federal financial management system requirements, (2) federal
accounting standards, and (3) the U.S. Government Standard General
Ledger at the transaction level.
[42] The independent surveys include the American Customer Satisfaction
Index, which is used to measure customer satisfaction with OPM‘s
retirement services, and the Consumer Assessment of Health Plans Study,
which is used to get customer feedback on performance of health plans
in the Federal Employees Health Benefits Program.
[43] OPM‘s target time for processing Civil Service Retirement System
claims was 55 calendar days; actual time was 54 calendar days. For
Federal Employees Retirement System claims, the target time was 150
calendar days; actual time was 101 calendar days.
[44] U.S. General Accounting Office, Federal Employees‘ Health Plans:
Premium Growth and OPM‘s Role in Negotiating Benefits, GAO-03-236
(Washington, D.C.: Dec. 31, 2002).
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