Employment of OMHAR Staff at HUD Following Their Employment at	 
OMHAR (30-JUN-03, GAO-03-703R). 				 
                                                                 
To reduce the estimated multibillion-dollar costs to the federal 
government of renewing rental subsidy contracts while helping	 
preserve available and affordable low-income rental housing,	 
Congress passed the Multifamily Assisted Housing Reform and	 
Affordability Act of 1997 (Act), which established the "mark-to  
market" program to restructure the contracts. The Act also	 
created the Office of Multifamily Housing Assistance		 
Restructuring (OMHAR) as a temporary organization within the	 
Department of Housing and Urban Development (HUD) to administer  
the contract-restructuring program. With OMHAR scheduled to	 
"sunset" (cease operations) on September 30, 2001, the		 
Subcommittee on Housing and Transportation, Committee on Banking,
Housing, and Urban Affairs, held a hearing in June 2001 to	 
determine whether it would be more advantageous to the federal	 
government to extend rather than end the program. Subsequently,  
Congress extended the sunset date to September 30, 2004, with	 
restructuring work at HUD continuing until 2006. To ensure that  
OMHAR could attract and retain staff with requisite expertise in 
multifamily housing finance issues, the Act provided the Director
of OMHAR authority to pay salaries comparable with the Federal	 
Deposit Insurance Corporation. As a result, OMHAR salaries are	 
generally higher than those paid for most federal positions.	 
OMHAR is staffed in part by former HUD employees, and also by	 
former employees of other federal agencies and the private	 
sector. GAO agreed to (1) describe what information HUD and OMHAR
officials provided regarding OMHAR staff employment at HUD	 
following their employment at OMHAR; (2) describe how HUD	 
determined to which OMHAR employees it would offer employment and
what their pay levels would be; and (3) determine, for eligible  
OMHAR employees, how accepting HUD's offer would affect their	 
pay.								 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-703R					        
    ACCNO:   A07435						        
  TITLE:     Employment of OMHAR Staff at HUD Following Their	      
Employment at OMHAR						 
     DATE:   06/30/2003 
  SUBJECT:   Compensation					 
	     Employment 					 
	     Federal agency reorganization			 
	     Strategic planning 				 
	     Data collection					 

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GAO-03-703R

GAO- 03- 703R OMHAR Staff Employment United States General Accounting
Office Washington, DC 20548

June 30, 2003 The Honorable Paul S. Sarbanes Ranking Minority Member
Committee on Banking, Housing, and Urban Affairs United States Senate

Subject: Employment of OMHAR Staff at HUD Following Their Employment at
OMHAR

Dear Senator Sarbanes: To reduce the estimated multibillion- dollar costs
to the federal government of renewing rental subsidy contracts while
helping preserve available and affordable low- income rental housing,
Congress passed the Multifamily Assisted Housing Reform and Affordability
Act of 1997 (Act), which established the *mark- to- market* program to
restructure the contracts. The Act also created the Office of Multifamily
Housing Assistance Restructuring (OMHAR) as a temporary organization
within the Department of Housing and Urban Development (HUD) to administer
the contractrestructuring program. With OMHAR scheduled to *sunset* (cease
operations) on September 30, 2001, the Subcommittee on Housing and
Transportation, Committee on Banking, Housing, and Urban Affairs, held a
hearing in June 2001 to determine whether it would be more advantageous to
the federal government to extend rather than end the program.
Subsequently, Congress extended the sunset date to September 30, 2004,
with restructuring work at HUD continuing until 2006. To ensure that OMHAR
could attract and retain staff with requisite expertise in multifamily
housing finance issues, the Act provided the Director of OMHAR authority
to pay salaries comparable with the Federal Deposit Insurance Corporation.
1 As a result, OMHAR salaries are generally higher than those paid for
most federal positions. OMHAR is staffed in part by former HUD employees,
and also by former employees of other federal agencies and the private
sector.

As you know, the Subcommittee on Housing and Transportation, Committee on
Banking, Housing, and Urban Affairs has previously highlighted the
importance of attracting and retaining the skilled staff necessary to
carry out OMHAR functions. In addition, you have stated that a chief goal
of the legislation extending the sunset date until 2004 ought to be the
retention of OMHAR staff so that program implementation would move forward
effectively. In light of these issues, in your December 4, 2002, request,
you expressed concern that HUD might not be honoring pay commitments
relating to the return of OMHAR staff to HUD after their employment at
OMHAR

1 Public Law 105- 65, Section 574 (b), 111 Stat. 1422, October 27, 1997.

GAO- 03- 703R OMHAR Staff Employment Page 2 ends. We agreed with your
office to (1) describe what information HUD and OMHAR

officials provided regarding OMHAR staff employment at HUD following their
employment at OMHAR; (2) describe how HUD determined to which OMHAR
employees it would offer employment and what their pay levels would be;
and (3) determine, for eligible OMHAR employees, how accepting HUD*s offer
would affect their pay.

Background

OMHAR is responsible for administering the mark- to- market program, which
was established to reduce rent levels for Federal Housing Administration
(FHA)- insured multifamily properties that receive Section 8 assistance
and have rents determined to be above prevailing market levels. 2 The
goals of the mark- to- market program include preserving the affordability
and the availability of low- income rental housing while reducing the
long- term costs of Section 8 project- based assistance. Restructuring
generally involves resetting rents to market levels and reducing mortgage
debt, if necessary, to permit a positive cash flow for the project. To
facilitate the restructurings, Congress provided OMHAR with certain tools,
such as the ability to reduce an owner*s mortgage payments by creating a
new first mortgage and, where necessary, deferring some of the debt to a
second mortgage that must be repaid only if sufficient cash flow is
available.

As of June 1, 2003, OMHAR had a staff of 78, split among four field
offices and its Washington, D. C., headquarters. Approximately two- thirds
of the staff are devoted to *production* functions such as reviewing,
underwriting, or restructuring mortgages and conducting closing and post-
closing activities; the remaining staff perform administrative functions.
HUD and OMHAR managers agreed during the start- up of OMHAR that HUD*s
human resource office would handle personnel processing functions, because
establishing a separate personnel office at OMHAR or using other agencies
would be difficult and might delay hiring.

In December 1998 and January 1999, HUD requested, and received from the
Office of Personnel Management (OPM), the authority to appoint (hire)
staff under Schedule A of the excepted schedules. 3 Schedule A authority
must be used by temporary organizations (such as OMHAR) that are
established within continuing agencies to hire staff for positions for
which it is not practical to hold competitive examinations. 4 An
appointment into a position under Schedule A is an appointment into the
excepted

service, or those positions in the executive branch specifically exempted
from 2 Under Section 8 of the Housing Assistance Act of 1937, tenants pay
up to 30 percent of their family or individual income for rent. The
federal government pays property owners the difference between the actual
monthly rent and the family or individual*s payment. This assistance can
be project- based (attached to the unit) or tenant- based (in the form of
a voucher held by the tenant). The mark- tomarket program applies only to
project- based Section 8 program contracts. Over 800,000 units in
approximately 8,500 multifamily projects have been financed with mortgages
insured by FHA and supported by project- based Section 8 housing
assistance payment contracts. 3 5 C. F. R. 213. 3101. OPM is responsible
for administering the Civil Service System, including personnelrelated

laws and executive orders, and for developing regulations to ensure that
all agency personnel actions are in accordance with merit system
principles. 5 U. S. C. S:S: 1103 & 1104. 4 5 C. F. R. 213.3199.

GAO- 03- 703R OMHAR Staff Employment Page 3 competitive service
procedures. In contrast, competitive service positions are those

to which competitive civil service laws and procedures do apply. An
appointment to a competitive service position allows federal employees to
earn competitive status, which in turn allows them to be promoted,
transferred, reassigned, or reinstated without taking additional
competitive examinations or undergoing competitive procedures, subject to
the conditions prescribed by the civil service rules and regulations. 5
The movement of federal employees among agencies or between positions is
subject

to certain limitations. In this letter, we discuss two such limitations;
specifically, how reemployment rights and reinstatement eligibility apply
to federal employees. Reemployment rights allow an employee to return to
nontemporary employment following an assignment to other civilian
employment. 6 An employee with reemployment rights is entitled to, among
other things, a position at the same grade or level and in the same
geographic area as the position that the employee previously held. 7 But,
under OPM regulations, agencies may only offer reemployment in limited
circumstances, such as movement of staff between executive agencies during
emergencies. To grant reemployment rights in the case of an emergency, an
agency must request that OPM provide it with a letter of authority. 8
Reinstatement eligibility, on the other hand, is a broader concept;
federal employees

with competitive status are by definition eligible for reinstatement.
Reinstatement eligibility allows an individual formerly employed in the
competitive service, who had competitive status or was probationary when
separated, to be considered for a federal position without undergoing
competitive procedures. 9 Agencies may still choose whom to hire;
reinstatement eligibility does not guarantee a position, but rather offers
the possibility for appointing an individual to a position.

According to OPM regulations, individuals who have reinstatement
eligibility would, upon accepting reinstatement without competition, have
their pay set at no higher than their last competitive grade held in the
General Schedule (GS). 10 For example, if an individual left the
competitive service and the last competitive grade held was a GS- 9, he or
she would have to be reinstated to a GS- 9 position. The hiring agency
could then apply the maximum payable rate rule, which uses highest
previous rate of

5 Competitive status is acquired by completion of a probationary period. 6
Other civilian employment may be with the Foreign Service, public
international organizations, or other agencies in the executive branch. 7
An agency may refuse to reemploy an employee with reemployment rights only
when the employee was separated from the agency for serious cause (5 C. F.
R. 352.208). 8 5 C. F. R. 352. 201- 203.

9 5 C. F. R. Part 315, Subpart D. 10 The General Schedule (GS) is the
graded pay system established under the Classification Act of 1949, as
amended (5 U. S. C. Chapter 53, Subchapter III, and 5 C. F. R Part 531).
GS grades range from GS- 1 to GS- 15, and there are 10 steps in each grade
level.

GAO- 03- 703R OMHAR Staff Employment Page 4 pay to determine the
appropriate step within this grade level. 11 Highest previous rate

is the highest actual rate of basic pay previously received by an
individual while employed in a federal government position, or the actual
rate of basic pay for the highest grade and step previously held by an
individual while employed in a position subject to the general schedule.
To set pay, the hiring agency typically would review the individual*s
official personnel folder to determine the last nontemporary GS grade held
in the competitive service. The agency then would have the discretion to
set pay at any step within the grade without exceeding the last GS pay
grade held. 12 Results in Brief

Over a period of several years, HUD provided inaccurate information to
OMHAR officials and staff regarding OMHAR staff members* potential
employment and pay at HUD. To encourage HUD employees to apply for
positions at OMHAR during start- up in 1999, HUD provided a memorandum to
OMHAR managers stating that certain HUD employees who joined OMHAR would
have *reemployment rights.* However, HUD had neither requested nor
received authority from OPM to grant reemployment rights. (HUD did have
the authority to reinstate employees.) Also during 1999, HUDprepared job
announcements erroneously advertised some OMHAR positions as competitive
service positions, when they were actually excepted service positions. In
November 2000, HUD sent a memorandum to OMHAR managers, notifying them
that it would correct erroneous OMHAR employee appointments made under
incorrect announcements. However, in the same memorandum, HUD provided
inaccurate information on pay levels that would apply to OMHAR employees
eligible to return to HUD. Specifically, the memorandum stated that *upon
the sunset of OMHAR,* eligible employees would be moved into positions at
HUD at their current OMHAR pay grades rather than, as is correct, their
highest previously held grade in the competitive service.

HUD determined to which OMHAR employees it would offer employment and what
their pay would be using OPM regulations regarding reinstatement
eligibility. HUD laid the groundwork for these decisions in a July 2002
memorandum to OMHAR managers noting that previous information on
employment and pay that it had provided was not consistent with OPM
regulations. The memorandum clarified previous inaccuracies and explained
which regulations applied to staff and how these would affect employment
eligibility and pay for positions at HUD. HUD also stated that its earlier
*reemployment commitment* to eligible staff would be honored. Shortly
after the July 2002 memorandum, OMHAR and HUD officials worked together to
identify OMHAR staff to whom HUD would offer positions, based on their
prior competitive status, and what their pay would be, based on their
highest grade level held in the competitive service. Because OMHAR is a
temporary organization and its positions are excepted rather than
competitive, only staff with prior competitive status have reinstatement
eligibility. HUD is using its discretionary authority to offer positions
to OMHAR employees with reinstatement eligibility in an attempt to honor
its *reemployment commitment.* HUD is also using its authority to offer
staff pay at the highest appropriate step within the last competitive
grade held. Based on HUD

11 5 C. F. R 531.201- 531.203. 12 5 C. F. R. 531.203 (c) (1).

GAO- 03- 703R OMHAR Staff Employment Page 5 and OMHAR*s analysis, as of
March 7, 2003, there were 24 staff who had been

identified as eligible for reinstatement at HUD. By accepting HUD*s offer
of reinstatement without competition, all 24 eligible OMHAR staff would
experience a reduction in pay. Based on HUD and OMHAR*s analysis, as of
March 7, 2003, the average decrease in pay for OMHAR staff would be 16.5
percent, or about $17,000. Specifically, 10 staff would experience a
decrease of more than 20 percent, 6 would experience a decrease of 10 to
20 percent, and 8 would experience a decrease of less than 10 percent.
However, to more closely match their OMHAR salary, eligible OMHAR staff
may apply for higher- grade positions at any federal agency through normal
competitive procedures.

In commenting on a draft of this letter, HUD officials agreed with the
letter*s findings. Our evaluation of HUD*s comments appears later in this
letter; HUD*s comments appear in the enclosure. We also requested, but did
not receive, comments from OPM.

HUD Provided Inaccurate Information Regarding Future Employment and Pay of
OMHAR Staff

From 1999 until 2002, HUD provided OMHAR staff with inaccurate information
regarding employment and pay. The inaccurate information was contained in
a variety of documents, including a series of memorandums and job
announcements to OMHAR managers and staff. Prior to hiring staff, HUD
mistakenly informed OMHAR managers that certain HUD employees who joined
OMHAR had *reemployment rights,* when in fact what they had was
reinstatement eligibility, which is granted to all employees with prior
competitive status in the federal service. HUD then incorrectly advertised
some positions as competitive and therefore appointed some OMHAR staff to
positions incorrectly designated as competitive when they were actually
excepted positions. Later, HUD corrected OMHAR employee appointments to
address initial mistakes, but presented inaccurate information regarding
pay grades for OMHAR employees eligible to return to HUD; OMHAR*s Director
then communicated this inaccurate information on pay to OMHAR staff.

HUD Mistakenly Informed OMHAR Managers That Eligible Staff Would Have
Reemployment Rights and Erroneously Appointed Many OMHAR Staff On February
17, 1999, the Deputy Secretary of HUD sent a memorandum to the

Director of OMHAR regarding the employment of HUD employees appointed to
positions at OMHAR. The memorandum incorrectly stated that, under
delegated agency authority granted by OPM, the Deputy Secretary was
*granting reemployment rights to those eligible career and career-
conditional HUD employees serving under a Schedule A excepted service or a
career appointment with OMHAR.* 13 13 A career employee has completed 3
substantially continuous, creditable years of federal service

under a competitive service permanent appointment (5 C. F. R. 315.201). A
career- conditional employee is serving in a competitive service
appointment, but has not yet completed the 3- year service period.

GAO- 03- 703R OMHAR Staff Employment Page 6 The February 1999 memorandum*s
use of the term *reemployment rights* was

inaccurate, because reemployment rights only apply in very specific
circumstances. Although these OMHAR staff did not have reemployment
rights, they did have reinstatement eligibility, which is offered to all
federal employees with prior competitive status, allowing them to be
considered for a federal position without undergoing competitive
procedures. Based on our discussions with OPM officials and review of the
regulations, HUD would have had to request a letter of authority from OPM
to be able to offer reemployment rights. 14 After interviews with HUD and
OPM officials, and after review of internal files by these officials, they
were unable to find any documentation that showed that HUD requested or
received this authority from OPM. However, according to HUD and OMHAR
officials, HUD believed at the time that it could offer reemployment
rights and used this offer to increase the interest of prospective HUD
employees in applying for positions at OMHAR. HUD and OMHAR officials also
told us that shortly after the memorandum was released, the Director of
OMHAR erroneously decided to extend reemployment rights to all federal
employees to be hired by OMHAR, not just HUD employees, to further
increase interest in the positions.

In 1999, as OMHAR started hiring staff, some HUD- prepared job
announcements incorrectly labeled OMHAR positions as being in the
competitive service. Because OMHAR is a temporary agency, all its
appointments must be to excepted service positions. Consequently, some
OMHAR employees were appointed to positions incorrectly characterized as
competitive service positions, and these incorrect appointments were
documented in personnel records such as the Standard Form 50 (SF 50). 15
After OMHAR appointed staff, it also provided each employee with a
memorandum

explaining that the employee had either an excepted service appointment or
(erroneously) an appointment with reemployment rights. For staff
erroneously offered reemployment rights, these individual memorandums, in
most cases, discussed the position and grade level staff would be placed
in at HUD following OMHAR sunset or termination of their appointment.

HUD Presented Inaccurate Information on Pay Grades to OMHAR Managers, Who
Disseminated the Information to OMHAR Staff On November 7, 2000, the
Director of the Office of Human Resources at HUD sent a

memorandum to OMHAR*s Administrative Officer regarding the appointment
status and pay of OMHAR employees. This memorandum was a follow- up to a
series of discussions between HUD*s Office of Human Resources and OMHAR
managers concerning appointment status and pay in light of the impending
OMHAR sunset. OMHAR officials were concerned that there would be a problem
retaining qualified staff and recruiting new staff in the year prior to
sunset. As an incentive to reduce the potential loss of staff, HUD agreed
to offer OMHAR employees retention of their

14 5 C. F. R. 352. 201- 203. 15 A Standard Form 50 (SF 50), Notification
of Personnel Action, is a document used by federal agencies to inform
employees of changes, such as reassignment, pay adjustments, promotions,
or achievement of status. A copy of every SF 50 issued for an employee is
included in the employee*s official personnel folder.

GAO- 03- 703R OMHAR Staff Employment Page 7 OMHAR pay grades rather than
use their last competitive grade held. The

memorandum also noted that some appointments had been improperly
documented as competitive, rather than excepted, and outlined the steps
that would be taken to correct employee records. (HUD and OMHAR
subsequently provided staff with corrected SF 50s.) However, the November
memorandum continued to erroneously refer to staff as having reemployment
rights.

While the memorandum notified OMHAR managers of the correction of one
misunderstanding, it created another by incorrectly stating that employees
with competitive status, following OMHAR sunset or termination of their
appointment, would be moved into positions at HUD at their *current
grades* rather than the grade last held in a competitive position. The
memorandum stated that when this occurred, *salaries would be based on the
GS pay schedule using highest previous rate rules.* The memorandum also
stated that the maximum rate payable under this authority was step 10 of
the GS equivalent to the current grade held. Based on our discussions with
OPM and HUD officials, because OMHAR is a temporary organization with
excepted positions, pay grades under this organization are also temporary,
and cannot be used to set pay if an agency chooses to reinstate an
employee without competition to a competitive position. (Reinstatement
without competition would be to the grade last held in a competitive
position.) 16 Using the information provided in the November 2000
memorandum, the Director of

OMHAR sent a memorandum to OMHAR staff on December 5, 2000, notifying them
of the two issues. The discussion of pay retention in the December
memorandum was almost identical to that of the November memorandum, but
added that shortly before OMHAR sunset, employees would be notified of the
positions to which they would be assigned and the grades and steps of
these positions.

HUD Determined to Whom It Would Offer Employment and What Their Pay Would
Be by Applying Federal Personnel Regulations

HUD determined to which employees it would offer positions and what their
pay would be by applying relevant OPM regulations on reinstatement
eligibility. Prior to the originally scheduled (2001) sunset of OMHAR, and
after questions were raised by OMHAR staff, HUD officials began to
research employment and pay issues. In so doing, HUD officials discovered
that inaccurate information had been provided to OMHAR officials and staff
from OMHAR*s inception. HUD then contacted OPM to discuss how HUD*s
existing information compared with OPM regulations. OPM officials
described OMHAR employee entitlements based on relevant regulations and
explained specific provisions applying to employees of temporary agencies.

Based on this research, HUD developed a memorandum to clarify previous
misinformation. On July 8, 2002, HUD*s Assistant Secretaries for
Administration and Housing sent this memorandum to the Deputy Secretary of
HUD requesting approval of a policy change on OMHAR employment. This
policy change was requested in order to clarify eligibility of current and
future competitive status employees at

16 See 5 C. F. R. 335.103 (c) (1) (vi) and 5 C. F. R. 335.103 (c) (3) (v).

GAO- 03- 703R OMHAR Staff Employment Page 8 OMHAR for positions at HUD and
to explain how pay would be set for those

employees offered positions at HUD. 17 More specifically, the memorandum
explained that the information on *reemployment rights* and pay that
employees had previously received was inconsistent with OPM regulations.
The memorandum also referred to the December 2000 memorandum that
inaccurately indicated that OMHAR employees could move to HUD at their
current pay grades in OMHAR (not to exceed step 10 of that grade).

Based on discussions with OPM officials and review of the regulations, HUD
determined that those OMHAR employees who had achieved competitive status*
whether at HUD or another federal agency* prior to their appointment with
OMHAR did not have reemployment rights, but rather reinstatement
eligibility. Yet the memorandum also recommended that HUD *honor the
commitment* made by the former Deputy Secretary in February 1999. The
memorandum further explained that current OMHAR employees with competitive
status would receive positions at HUD at a pay grade permissible under OPM
regulations, meaning the last competitive grade held (because they could
not be reinstated to a position at a higher grade than previously held
without undergoing competitive procedures). 18 Additionally, HUD stated
that all staff hired after July 8, 2002, who had competitive status in a
previous position, would be required to sign an acknowledgment indicating
that they were leaving the competitive service to join the excepted
service on a time- limited appointment and not entitled to permanent
reemployment with HUD upon expiration of their OMHAR appointment.

After the July memorandum was approved, HUD and OMHAR officials began a
process of identifying individuals to whom HUD would offer positions. In
August 2002, OMHAR provided HUD with a list of employees who had been told
they had reemployment rights when they were hired. 19 HUD then examined
official personnel folders to verify the accuracy of the list.
Specifically, HUD determined whether an individual had prior competitive
status and what his or her previous grade level was in the last
competitive position held. Based on HUD and OMHAR*s analysis, as of March
7, 2003, 24 staff were identified as eligible for reinstatement at HUD.

According to HUD officials, they are trying to find positions at HUD for
OMHAR staff with competitive status in an attempt to honor HUD*s
*reemployment commitment.*

17 The Deputy Secretary approved the memorandum on July 17, 2002. 18 These
employees are not entitled to their OMHAR salaries even though the
Director of HUD*s Office of Human Resources and OMHAR*s Director
explicitly promised that they would receive those salaries at HUD. Federal
government employees serve by appointment, rather than by contract. See
United States v. Hopkins, 427 U. S. 123 (1976). Appointing officials
cannot exceed their authority in making appointments and by such conduct
create a binding claim against the Government. See National

Treasury Employees Union v. Reagan, 509 F. Supp. 1337 (1981). Courts have
also determined that the appointment documents were not controlling on
their face where the Government was able to show that employees did not
have the employment status indicated on the form. See Grigsby v. United
States Department of Commerce, 729 F. 2d 772 (Fed. Cir. 1984). Payments of
money from the federal treasury are limited to those authorized by law;
the erroneous advice given by these officials does not supersede HUD*s
limited authority to make payments to employees. See Office of Personnel

Management v. Richmond, 496 U. S. 414 (1990), reh*g denied, 497 U. S. 1046
(1990). 19 We discuss updates and changes to this list in the following
section.

GAO- 03- 703R OMHAR Staff Employment Page 9 Based on our discussions with
OPM officials, HUD*s offer of employment to OMHAR

staff with competitive status is not a guarantee; that is, these
individuals do not have reemployment rights. HUD is using its
discretionary authority to choose to hire staff with reinstatement
eligibility. Additionally, HUD is using its discretion to offer pay up to
step 10 of the reinstated employees* previous competitive grades. A
federal agency has the authority to match, as closely as possible,
prospective employees* current salary as long as the agency does not
exceed the highest step within the last grade held in a competitive
position.

Accepting HUD*s Offer of Reinstatement Would Reduce the Pay of Eligible
OMHAR Staff

Because of the difference between OMHAR and HUD pay schedules, and pay
increases due to promotions that some employees received at OMHAR, all
eligible OMHAR staff would see a reduction in pay if they chose to accept
HUD*s offer of reinstatement without competition. Based on HUD and OMHAR*s
analysis, as of March 7, 2003, 24 eligible OMHAR employees would
experience an average pay decrease of 16.5 percent, or about $17,000. Five
staff would experience a decrease of 25 percent or more, 5 staff would
experience a decrease of 20 to 25 percent, 6 would experience a decrease
of 10 to 20 percent, and 8 would experience a decrease of less than 10
percent. In dollars, 4 staff would experience a reduction in pay of
$30,000 or more, 4 would experience a reduction of $17,000 to $30,000, 10
would experience a reduction of $8,500 to $17,000, and 6 staff would
experience a reduction of less than $8,500.

To verify the number of staff that would be affected and the pay
reductions they would experience, we used the August 2002 HUD- verified
list of 36 employees to whom HUD would offer positions. The list included
the grade and step employees would receive at HUD, their current OMHAR
grade and step, and the difference between the two in dollars.
Additionally, on March 7, 2003, OMHAR provided us with 2003 OMHAR pay
rates and updates regarding employee status, including retirements,
transfers, and resignations. Based on these updates, the list of 36 was
reduced to 28 employees because 4 staff were offered positions by HUD, 2
staff retired, 1 took a position with another federal agency, and 1 took a
position in the private sector. As of March 7, 2003, HUD planned to offer
positions to 24 employees with reinstatement eligibility. 20 If OMHAR
staff wish to obtain or more closely match their OMHAR salary and grade

levels, OPM regulations require that they apply for higher- grade
positions through normal competitive procedures. If an agency then
selected these staff into highergrade positions, it could use the highest
previous rate these staff earned at OMHAR to set pay up to the step 10
within this new grade. Through this process, OMHAR staff members could
more closely match their OMHAR pay, if such positions were available.

20 One individual retired since the March 2003 update, changing the number
to 23. In addition, four staff were also erroneously offered reemployment
rights by OMHAR, but did not have prior competitive status. HUD and OMHAR
officials are working to resolve these cases. HUD has hired one of these
individuals since the March 2003 update.

GAO- 03- 703R OMHAR Staff Employment Page 10

Agency Comments

We provided a draft of this report to the Department of Housing and Urban
Development (HUD) and the Office of Personnel Management (OPM) for their
review and comment. We received written comments and technical suggestions
on the draft report from HUD*s Assistant Secretary for Housing, but did
not receive a response from OPM. HUD agreed with the report*s findings
that the Department initially provided OMHAR management with incorrect
personnel guidance regarding ** reemployment rights** and ** return pay**
levels of OMHAR staff. Where appropriate, we also incorporated technical
suggestions made by HUD.

Scope and Methodology

To describe what information HUD and OMHAR officials provided regarding
OMHAR staff employment and pay following their employment at OMHAR, we
obtained memorandums and interviewed officials from HUD, OMHAR, and OPM.
To describe how HUD determined to which OMHAR employees it would offer
employment and what their pay levels would be, we interviewed HUD and
OMHAR officials and obtained relevant communications and data from HUD,
OMHAR, and OPM. We also obtained and reviewed relevant personnel
regulations. To address the impact of accepting HUD*s offer of employment
on eligible OMHAR employees* pay, we obtained data from OMHAR and HUD that
listed those who were eligible and compared the current pay of OMHAR staff
with the pay they would receive if they accepted employment with HUD. We
then verified this information by reviewing official personnel folders of
the listed staff. HUD was unable to locate one personnel folder;
therefore, we were only able to verify the competitive status and the
highest grade held for 23 of the 24 eligible staff. We conducted our work
in Washington, D. C., from December 2002 until June 2003 in accordance
with generally accepted government auditing standards.

We are sending copies of this report to the Secretary, Department of
Housing and Urban Development; the Director, Office of Personnel
Management; and the Director, Office of Management and Budget. The report
is also available at no cost on GAO's home page at http:// www. gao. gov.
Major contributors to this report were John McGrail, Barbara Roesmann,
Wendy Wierzbicki, and Chuck Wilson. If you or your

staff have any questions, please contact me on (202) 512- 8678 or at
woodd@ gao. gov. Sincerely yours,

David G. Wood Director, Financial Markets and Community Investment

GAO- 03- 703R OMHAR Staff Employment Page 11

Enclosure Comments from the Department of Housing and Urban Development

(250120)

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