GAO'S Proposed Human Capital Legislation: Views of the Employee  
Advisory Council (16-SEP-03, GAO-03-1162T).			 
                                                                 
This testimony discusses how the Comptroller General formed the  
Employee Advisory Council (EAC) about 4 years ago to be fully	 
representative of the GAO population and to advise him on issues 
pertaining to both management and employees. The members of the  
EAC represent a variety of employee groups and almost all	 
employees outside of the senior executive service (more than	 
3,000 of GAO's 3,200 employees or 94 percent). The EAC operates  
as an umbrella organization that incorporates representatives of 
GAO's long-standing employee organizations including groups	 
representing the disabled, Hispanics, Asian-Americans,		 
African-Americans, gays and lesbians, veterans, and women, as	 
well as employees in various pay bands, attorneys, and		 
administrative and professional staff.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-1162T					        
    ACCNO:   A08468						        
  TITLE:     GAO'S Proposed Human Capital Legislation: Views of the   
Employee Advisory Council					 
     DATE:   09/16/2003 
  SUBJECT:   Employee benefit plans				 
	     Employee retirement plans				 
	     Government employees				 
	     Performance measures				 
	     Personnel management				 
	     Salary increases					 

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GAO-03-1162T

                                       A

Test i mony Before the Senate Committee on Governmental Affairs

For Release on Delivery Expected at 9: 30 a. m. EDT GAO*S PROPOSED
Tuesday, September 16, 2003 HUMAN CAPITAL

LEGISLATION Views of the Employee Advisory Council

Statement for the Record by GAO*s Employee Advisory Council

GAO- 03- 1162T

Mr. Chairman and Members of the Committee: We are pleased to have the
opportunity to comment on the Comptroller General*s Human Capital II
proposal. The Comptroller General formed the EAC about 4 years ago to be
fully representative of the GAO population and advise him on issues
pertaining to both management and employees. The members of the EAC
represent a variety of employee groups and almost all employees outside of
the senior executive service (more than 3, 000 of GAO*s 3,200 employees or
94 percent). The EAC operates as an umbrella

organization that incorporates representatives of GAO*s long- standing
employee organizations including groups representing the disabled,
Hispanics, Asian- Americans, African- Americans, gays and lesbians,
veterans, and women, 1 as well as employees in various pay bands,
attorneys, and administrative and professional staff. 2 As established in
our charter, the Employee Advisory Council serves as an

advisory body to the Comptroller General and other senior executives by: 
seeking and conveying the views and concerns of the individual

employee groups it represents while being sensitive to the mutual
interests of all employees, regardless of their grade, band, or
classification group;

 proposing solutions to concerns raised by employees, as appropriate; 
providing input by assessing and commenting on GAO policies,

procedures, plans, and practices; and,  communicating issues and concerns
of the Comptroller General and other senior managers to employees.

In preparing this statement, the EAC considered the results of discussions
with constituents, and input from Council representatives, including
information gathered from employees during the initial introduction of the
proposal and comments provided on the Comptroller General*s revised

1 While these organizations historically operated under separate charters
by the Comptroller General, they now are included in the charter of the
EAC and appoint representatives to serve on the Council. 2 These members
are elected by their constituency to two- year terms and may seek

reelection once.

proposal. Although we have limited quantitative data in this regard and
recognize that not all employees have the same opinions regarding all
provisions of the proposed legislation, we believe our testimony is
representative of a substantial cross- section of GAO employees.

In summary, GAO employees generally support many of the provisions in the
proposed legislation. For example, most employees expressed support for 
the provision to make GAO*s authority to offer voluntary early

retirement permanent,  provisions to enhance vacation time for upper-
level hires and relocation expenses deemed necessary by the Comptroller
General to recruit and

retain top employees, and  the provision to establish an exchange program
with the private sector. However, many employees have expressed concerns
about the proposals that affect pay. Specifically, many staff are
concerned about the potential negative impact of the change in the basis
for annual salary increases, although some staff recognize the potential
benefits for additional reward

and management flexibility. To a lesser extent, staff are concerned about
changes to pay protections provided under traditional federal employment
rules. Staff have differing opinions on the provision to change GAO*s name
to the Government Accountability Office. The EAC recognizes and
appreciates the efforts the Comptroller General

has made to address employees* concerns regarding provisions affecting pay
by (1) providing assurances that the new system will sustain employees*
purchasing power and provide parity with prevailing locality pay, (2)
proposing short- and longer- term modifications to GAO*s performance
management system, and (3) incorporating a 2- year transition period for
implementation of the new system. We hope that if the

legislation is enacted, the Comptroller General will continue to be
responsive to the concerns of employees as the agency moves forward in
implementing these changes.

GAO Employees Outreach efforts by EAC representatives indicate that most
employees

Support Most Aspects support many portions of the legislative proposal
under consideration by

the Subcommittee but have concerns about provisions in the proposal of the
Proposed

related to pay. Specifically, employees generally support provisions that
Legislation but Have

make the authorities provided to GAO for voluntary early retirement pay
Concerns about Pay

incentives permanent, to provide enhancements in vacation time and
relocation expenses deemed necessary by the Comptroller General to
Provisions and recruit and retain top employees, and to establish a
private sector

Differing Opinions exchange program. However, many employees are concerned
about the

provisions that change the way that annual pay decisions are made and, to
about the Proposed

a lesser extent, the proposed change to traditional protections for pay
Name Change

retention. Employees had differing opinions about the proposed change to
GAO*s name. Most Employees Support

Most employees support the Comptroller General*s proposed provisions to
Proposals to Improve GAO*s

make permanent GAO*s 3- year authority to offer voluntary early retirement
Ability to Realign the

and voluntary separation payments to provide flexibility to realign GAO*s
Workforce and Attract and

workforce. In addition, GAO employees recognize that attracting and Retain
High Quality

retaining high- quality employees and managers throughout the organization
is vitally important for the future of GAO. Employees thus Employees
generally support the provisions to offer flexible relocation
reimbursements, provide upper- level hires with 6- hour leave accrual, and

establish an executive exchange program with private sector organizations.
Most employees commented positively on these authorities so long as there
are internal controls to monitor and report on their use, as are present
to provide accountability for other authorities throughout GAO. 3 Many
Employees Are

Many employees expressed concern about the provisions that affect the
Concerned about the

determination of annual pay increases and pay retention. The opinions
Provisions That Affect Pay

expressed by employees generally fall into three categories: (1) general
concerns and some supporting views regarding changes in traditional civil
service employment rules that could reduce the amount of annual pay
increases provided for economic adjustments but provide greater

3 For example, the Comptroller General detailed GAO*s use of the
flexibilities provided in the first round of authorities granted in the
GAO Personnel Flexibilities Act of October 2000 in U. S. General
Accounting Office, Assessment of Public Law 106- 303, GAO- 03- 954SP
(Washington, D. C., June 27, 2003).

opportunity for rewarding performance, (2) concerns about making a portion
of annual economic adjustments variable based on performance assessment,
and to a lesser extent (3) concerns about the loss of traditional pay
retention protections. Concerns and Supporting Views

The first area of employee concern is proposed changes to traditional on
Proposed Changes That

federal civil service employment rules that have historically provided a
Could Reduce Annual Pay

fixed annual increase for all federal employees determined by the
President Provided for Economic and the Congress. Government employees in
general, and GAO employees Adjustments but Provide Greater

in particular, often conduct work that can have far reaching implications
Rewards

and impacts. Such work can positively or negatively affect segments of the
population and thereby the general public*s perceptions of, and reactions
to, the federal government, including Members of Congress. Over the years,
the Congress has developed a bulwark of protections to shield federal
workers from reprisals that might result from their service as employees.
Included among these has been the process by which federal employees*
salaries are annually adjusted as a result of the passage of, and signing
into law, of the annual budget.

The historical process relies on passage of legislation which includes an
annual increase in pay to reflect increases in inflation and overall
employment costs, followed by determinations by the President (and the
Office of Personnel Management) to calculate the distribution of the
legislative economic adjustments between an overall cost- of- living
adjustment and locality- based increases to reflect differences in cities
across the nation. The current mechanism for annual federal pay
adjustments is found in Public Law 101- 509, the Federal Employees Pay
Comparability Act. 4 4 While the goal of the act is to achieve full
comparability, namely pay parity, between federal

employees and their nonfederal counterparts on a locality- by- locality
basis, the law has never been implemented as originally enacted as a
result of a provision in the law that authorizes the President to offer an
alternative pay plan in times of war or *serious economic conditions
affecting the general welfare.*

The Comptroller General has expressed his concern about trends in the
executive branch that make it highly likely that the current civil service
pay system will be the subject of comprehensive reform within the next few

years. Citing federal agencies that already have many of these
flexibilities, such as the Federal Aviation Administration 5 and the new
Department of Homeland Security, as well as agencies currently seeking
reform, such as the Department of Defense, he has stated his belief that
GAO needs to be

*ahead of the curve.* Under the proposal, rather than relying on the
administration*s determination and the Congress* mandate for an annual
salary adjustment, GAO can develop and apply its own methodology for the
annual cost- ofliving adjustments and compensation differences by locality
that the Comptroller General believes would be more representative of the
nature, skills, and composition of GAO*s workforce. Some employees have
expressed following concerns.

 Removing GAO from the traditional process significantly alters a key
element of federal pay protection that led some employees to seek
employment in the federal sector. Changing this protection could diminish
the attractiveness of federal service and result in the need for higher
salaries to attract top candidates.

 A portion of appropriations historically intended to provide all federal
employees with increases to keep pace with inflation and the cost of
living in particular localities should not be tied to individual
performance.  GAO- based annual economic adjustments are more likely to
be less

than, rather than more than, amounts annually provided by the Congress;
thus employees performing at lower (but satisfactory) levels who may not
receive an equal or greater amount in the form of a bonus or dividend may
experience an effective pay cut from amounts traditionally provided.

 The flexibility for the Comptroller General to use funds appropriated
for cost- of- living adjustments for pay- for- performance purposes could

5 While the Federal Aviation Administration is not required to grant cost
of living allowances or locality pay increases, agency management has
elected to continue providing these pay adjustments as they are generally
applied to the federal pay system.

imperil future GAO budgets by making that portion of the annual budget
discretionary where it was once mandatory.  The wide latitude provided in
the proposal gives the Comptroller

General broad discretion and limited accountability for determining
whether employees receive annual across- the- board economic adjustments,
the amount of such adjustments, and the timing of adjustments could result
in unfair financial harm for some employees if the broad authorities were
improperly exercised. 6  The Comptroller General has not made a
compelling case regarding the

need for these pay- related and other legislative changes, for example by
showing that existing cost- of- living adjustment mechanisms are
inaccurate or that the agency has had difficulty in attracting and
retaining high- quality employees.

On the other hand, some employees also recognize that the proposed pay
provisions may offer some distinct advantages for some employees. Some
employees commented in support of the provision indicating that

 the existing system for calculating inflation and local cost adjustments
may not accurately reflect reality;

 most employees would not likely be harmed by a system that allocates a
greater share of pay to performance- based compensation;

 the authorities would allow GAO managers to provide greater financial
rewards to the agency*s top performers, as compared to the present payfor-
performance system;

 making a stronger link between pay and performance could facilitate
GAO*s recruitment of top talent.

In addition, the provision may, to a limited extent, address a concern of
some field employees by providing alternatives to reductions in force in
times when mandated pay increases are not fully funded or in other 6 While
management*s salary increase decisions for employees are not subject to
appeal under the current system, some employees feel that the application
of any methodology that GAO establishes to determine the amount of annual
economic increases under the proposed approach should be subject to
appeal.

extraordinary circumstances. For example, from 1992 to 1997, GAO underwent
budgetary cuts totaling 33 percent (in constant fiscal year 1992 dollars.)
To achieve these budgetary reductions, GAO staff was reduced by

39 percent, primarily through field office closures and the associated
elimination of field- based employees. While we hope the agency will never
again have to manage budget reductions of this magnitude, this provides a
painful example of the vulnerability of staffing levels, particularly in
the field, to budgetary fluctuations. The proposed pay provisions would
provide the Comptroller General with greater flexibility to manage any
future budget crises by adjusting the annual pay increases of all
employees without adversely and disproportionately impacting the careers
and lives of field- based employees.

Concerns about Making a In addition to the revised basis for calculating
annual economic

Portion of Annual Pay Increases adjustments, employees are concerned about
the provision that transforms

Variable Based on Performance a portion of the annual pay increases that
have historically been granted to

Assessment federal employees for cost- of- living and locality- pay
adjustments into

variable, performance- based pay increases and bonuses. Because the GAO
workforce is comprised of a wide range of highly qualified and talented
people performing a similarly wide range of tasks, employees recognize
that it is likely that some employees at times have more productive years
with greater contributions than others. Therefore, most agree with the
underlying principle of the provision to provide larger financial rewards
for employees determined to be performing at the highest level. However,
in commenting on the proposal, some employees said that GAO management
already has multiple options to reward high performers through bonuses,
placement in top pay- for- performance categories, and promotions. Others
expressed concern that increased emphasis on individual performance could
result in diminished teamwork, collaboration, and morale because GAO work
typically is conducted in teams, often comprised of employees who are
peers.

These concerns are compounded by long- standing widespread employee
concerns regarding the accuracy and validity of GAO*s performance
appraisal system, which is used for the current system of performancebased
pay adjustments. Any effort to increase the link between pay and
performance implicitly relies upon the existence of a reliable method for

gauging individual performance. We received comments that the varying
levels of complexity, time frames, resource availability, and sensitivity
of GAO work make it difficult to objectively assess individual performance
and to fairly and accurately compare employees* performance with
sufficient precision. In other words, some employees believe that the

subjectivity inherent in the system does not provide a valid basis for
distinguishing between subtle differences in performance that may be
measured in tenths of a percentage point between performance categories.
Employee concerns about performance assessment have not significantly
changed as a result of the new competency- based system GAO implemented
last year. The comments we have heard are consistent with the concerns
expressed to the Congress by GAO employees in 1993:

*The PFP (pay- for- performance) process involves managers making very
fine distinctions in staff*s performance in order to place them in
discrete performance management categories. These categories set
artificial limits on the number of staff being recognized for their
contributions with merit pay and bonuses.*

Related to concerns about subjectivity in the performance assessment
system, Council representatives and employees expressed concern about data
indicating that as a group, minorities, veterans, and field- based
employees have historically received lower ratings than the employee
population as a whole. While the data indicate that the disparity is
considerably improved or eliminated for employees who have been with the
agency fewer than 5 years, some employees have serious reservations about
providing even greater discretion in allocating pay based on the current
performance management system.

Concerns about the Loss of To a lesser extent, some employees expressed
concerns about the

Traditional Pay Retention elimination of traditional federal employment
rules related to grade and Protections

pay retention for employees who are demoted due to such conditions as a
workforce restructuring or reclassification. The proposed legislation will
allow the Comptroller General to set the pay of employees downgraded as a
result of workforce restructuring or reclassification at their current
rates (i. e., no drop in current pay), but with no automatic annual
increase to basic pay until their salaries are less than the maximum rates
of their new grades or bands. Employee concern, particularly among some
Band II analysts and mission support staff, focuses on the extent to which
this provision may result in a

substantial erosion in future pay, since there is a strong possibility
that these two groups may be restructured in the near future. For example,
one observation is that the salary range within pay bands is such that
senior analysts who are demoted would likely wait several years for their
next increase in pay or bonus. In this circumstance, employees would need
to reconcile themselves to no permanent pay increases regardless of their
performance. Some employees cited this potential negative impact on staff
motivation and productivity and emphasized that to continue providing

service at the level of excellence that the Congress and the American
people expect from GAO, this agency needs the best contributions of all
its midlevel and journeymen employees. However, the EAC recognizes that,
absent this kind of authority and given some of the authorities already
provided to the Comptroller General, some employees who may be demoted
could otherwise face termination rather than diminished salary

increases. Employee Had Differing

Finally, employees had differing opinions regarding the provision to
change Opinions regarding a GAO*s name to the Government Accountability
Office. Some employees

Change in GAO*s Name are concerned that the proposed change in GAO*s name
to more accurately reflect the work that we do will damage GAO*s *brand
recognition.* Most

employees who oppose the name change do not see the current name as an
impediment to doing our work or to attracting quality employees. Some
employees expressed concern that the legacy of high- quality service to
the Congress that is embedded in the name *United States General
Accounting Office* might be lost by changing the name. Other employees
support the name change and cited their own experiences in being recruited
or recruiting others and in their interaction with other federal agencies.
In their opinion, the title *General Accounting Office* reflects
misunderstandings and incorrect assumptions about GAO*s role and function
by those who are not familiar with our operations and may serve

as a deterrent to attracting employees who are otherwise not interested in
accounting.

The EAC Appreciates We appreciate the Comptroller General*s efforts to
involve the Employee

the Comptroller Advisory Council and to solicit employee input through
discussions of the

proposal. As a result of employee feedback and feedback from GAO General*s
Efforts to

managers and the EAC, the Comptroller General has made a number of Address
Concerns of

revisions and clarifications to the legislative proposal along with GAO
Employees about commitments to address concerns relating to the annual pay
adjustment by issuing formal GAO policy to formally establish his intent
to retain

Pay- Related Human employees* earning power in implementing the
authorities; by revising the

Capital II Provisions performance management system; and by deferring
implementation of pay

changes until 2005. Retention of Earning Power

Key among the commitments made by the Comptroller General is his and
Locality Pay Parity

assurance to explicitly consider factors such as cost- of- living and
locality-

pay differentials among other factors, both items that were not in the
preliminary proposal. In addition, the Comptroller General has said that
employees who are performing adequately will be assured of some annual

increase that maintains spending power. He outlined his assurance in GAO*s
weekly newsletter for June 30th that successful employees will not witness
erosion in earning power and will receive an annual adjustment
commensurate with locality- specific costs and salaries. According to the
Comptroller General, pay protection commitments that are not included in
the statute will be incorporated in the GAO orders required to implement
the new authorities. This is consistent with the approach followed when
GAO made similar pay protection commitments during the conversion to broad
bands in the 1980s. To the extent that these steps are taken, overall
employee opinion of the changes should improve because much of the concern
has focused on making sure that staff who are performing adequately do not
witness economic erosion in their pay. Planned Revisions to

In response to concerns regarding the performance management system
Performance Management

and the related variable elements of annual pay increases raised by the
EAC, employees, and senior managers, the Comptroller General has told
employees that he will provide increased transparency in the area of
ratings distributions, for example by releasing summary- level performance
appraisal results. In addition, the Comptroller General has stated that he
plans to take steps to improve the performance management system that
could further reduce any disparities. Specifically, on June 26, the
Comptroller General released a "Performance Management System Improvement
Proposal for the FY 2003 Performance Cycle" that outlines

proposed short- term improvements to the analyst performance management
system that applies to the majority of GAO employees. These include
additional training for staff and performance managers and a reduction in
the number of pay categories from five to four. A number of longer- term
improvements to the performance appraisal system requiring validation are
also under consideration, including weighting competencies and modifying,
adding, or eliminating competencies. For all employees to embrace any
additional pay- for- performance efforts, it is vital that the Comptroller
General take steps that will provide an increased level of confidence that
the appraisal process is capable of accurately identifying high performers
and fairly distinguishing between levels of performance.

Deferred Implementation of Finally, the Comptroller General has agreed to
delay implementation of the

Pay Provisions pay- for- performance provisions of the proposal until
October 1, 2005. This

change should provide an opportunity to assess efforts to improve the
annual assessment process and lessen any impact of changes in the
permanent annual pay increase process for employees approaching
retirement. It should also provide an opportunity to implement a number of
measures designed to improve confidence in the annual assessment process.

Conclusion In summary, as GAO employees we are proud of our work assisting
the Congress and federal agencies to make government operations more

efficient and effective. Although all of us would agree that our agency is
not perfect, the EAC believes GAO is making a concerted effort to become a
more effective organization. We will continue to work closely with
management to improve GAO, particularly in efforts to implement and

monitor any additional authorities granted to the Comptroller General. We
believe that it is vital that we help to develop and implement innovative
approaches to human capital management that will enable GAO to continue to
meet the needs of the Congress; further improve the work environment to
maximize the potential of our highly skilled, diverse, and dedicated
workforce; and serve as a model for the rest of the federal government.

(997901)

GAO United States General Accounting Office

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