Human Capital: Selected Agencies' Statutory Authorities Could	 
Offer Options in Developing a Framework for Governmentwide Reform
(21-APR-05, GAO-05-398R).					 
                                                                 
As the federal government continues its overall transformation,  
the centerpiece of this effort is the strategic management of	 
human capital. Federal agencies will need the most effective	 
human capital systems to succeed in their transformations.	 
Congress has recently given agencies such as the National	 
Aeronautics and Space Administration and the Departments of	 
Homeland Security (DHS) and Defense (DOD) statutory authorities  
intended to help them manage their human capital strategically to
achieve results. Consequently, in this environment, the federal  
government is quickly approaching the point where "standard	 
governmentwide" human capital policies and processes are neither 
standard nor governmentwide. To help advance the discussion	 
concerning how governmentwide human capital reform should	 
proceed, GAO and the National Commission on the Public Service	 
Implementation Initiative hosted a forum on whether there should 
be a governmentwide framework for human capital reform and, if	 
so, what this framework should include. While there were	 
divergent views among the forum participants, there was general  
agreement on a set of principles, criteria, and processes that	 
would serve as a starting point for further discussion in	 
developing a governmentwide framework to advance needed human	 
capital reform. Specifically, they include principles that the	 
government should retain in a framework for reform because of	 
their inherent, enduring qualities, such as certain prohibited	 
personnel practices; criteria that agencies should have in place 
as they plan for and manage their new human capital authorities, 
such as adequate resources for planning, implementation,	 
training, and evaluation; and processes that agencies should	 
follow as they implement new human capital authorities, such as  
involving employees and stakeholders in the design and		 
implementation of new human capital systems. Building on this	 
framework, we were asked to provide information on the statutory 
human capital authorities that Congress has already provided to  
various federal agencies.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-398R					        
    ACCNO:   A22338						        
  TITLE:     Human Capital: Selected Agencies' Statutory Authorities  
Could Offer Options in Developing a Framework for Governmentwide 
Reform								 
     DATE:   04/21/2005 
  SUBJECT:   Human capital					 
	     Human capital management				 
	     Human capital planning				 
	     Human capital policies				 
	     Statutory law					 
	     Strategic planning 				 
	     Standards and standardization			 
	     Federal employees					 
	     Employee training					 
	     Policies and procedures				 

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GAO-05-398R

United States Government Accountability Office Washington, DC 20548

April 21, 2005

The Honorable Susan M. Collins
Chairman
Committee on Homeland Security and Governmental Affairs
United States Senate

Subject: Human Capital: Selected Agencies' Statutory Authorities Could
Offer Options in Developing a Framework for Governmentwide Reform

Dear Chairman Collins:

As the federal government continues its overall transformation, the
centerpiece of this effort is the strategic management of human capital.1
Federal agencies will need the most effective human capital systems to
succeed in their transformations. Congress has recently given agencies
such as the National Aeronautics and Space Administration (NASA) and the
Departments of Homeland Security (DHS) and Defense (DOD) statutory
authorities intended to help them manage their human capital strategically
to achieve results. Consequently, in this environment, the federal
government is quickly approaching the point where "standard
governmentwide" human capital policies and processes are neither standard
nor governmentwide. To be effective, human capital reform needs to avoid
further fragmentation within the civil service, ensure reasonable
consistency within the overall civilian workforce, and help maintain a
reasonably level playing field among federal agencies in competing for
talent.

To help advance the discussion concerning how governmentwide human capital
reform should proceed, GAO and the National Commission on the Public
Service Implementation Initiative hosted a forum on whether there should
be a governmentwide framework for human capital reform and, if so, what
this framework should include.2 While there were divergent views among the
forum participants, there was general agreement on a set of principles,
criteria, and processes that would serve as a starting point for further
discussion in developing a governmentwide framework to advance needed
human capital reform. Specifically, they include

1 For a discussion of some of the main policy and governance challenges
facing the nation in the 21st
century, see GAO, 21st Century Challenges: Reexamining the Base of the
Federal Government,
GAO-05-325SP (Washington, D.C.: February 2005).
2 GAO and the National Commission on the Public Service Implementation
Initiative, Highlights of a
Forum: Human Capital: Principles, Criteria, and Processes for
Governmentwide Federal Human
Capital Reform, GAO-05-69SP (Washington, D.C.: Dec. 1, 2004).

                     GAO-05-398R Human Capital Authorities

o  	principles that the government should retain in a framework for reform
because of their inherent, enduring qualities, such as certain prohibited
personnel practices;

o  	criteria that agencies should have in place as they plan for and
manage their new human capital authorities, such as adequate resources for
planning, implementation, training, and evaluation; and

o  	processes that agencies should follow as they implement new human
capital authorities, such as involving employees and stakeholders in the
design and implementation of new human capital systems.

Building on this framework, you asked us to provide information on the
statutory human capital authorities that Congress has already provided to
various federal agencies. As the first part of our response to your
request, enclosure I organizes six selected agencies' existing human
capital authorities by the principles, criteria, and processes included in
the framework for governmentwide reform. These six agencies have undergone
statutory reform of their human capital systems within the past 10 years.
Cataloging these recent authorities could help Congress craft an approach
to address human capital reform efforts. For example, assuring adequate
training-one process identified in the framework-is critical to the
success of any human capital reform. As shown in enclosure I, Congress
took a very broad approach in DOD's human capital legislation, requiring
the department to provide adequate training and retraining for
supervisors, managers, and employees in the implementation and operation
of its performance management system. Congress took a more prescriptive
approach with the Internal Revenue Service (IRS), requiring that it
implement an employee training program no later than 180 days after
enactment of its new personnel authority. In addition, IRS was to submit a
plan that provided information such as scheduling and funding of the
training and covered specific training areas such as customer service and
conflict resolution.

To illustrate more broadly what specific authorities Congress has provided
to agencies in the past, enclosure II identifies and summarizes 10
selected agencies' exemptions from various chapters of title 5 of the U.S.
Code dealing with civil service employees. The enclosure provides details
on these agencies' exemptions in six key areas: (1) merit system
principles and prohibited personnel practices; (2) hiring, staffing, and
employment authority; (3) performance management; (4) classification and
pay administration; (5) labor-management relations; and (6) adverse
actions and appeals. Except for merit system principles, generally these
are the provisions of title 5 that Congress has often addressed in past
agency-specific human capital reforms and might want to address in any
comprehensive human capital reform legislation. For example, in the area
of adverse actions and appeals, IRS is partially exempt from the general
procedures that agencies are to follow in initiating adverse actions
against employees for certain performance or conduct reasons. In contrast,
DHS and DOD are exempt and can design their own procedures for such
actions.

                  Page 2 GAO-05-398R Human Capital Authorities

There is general recognition of a need to continue to develop a
governmentwide framework for human capital reform that Congress and the
administration can implement to enhance performance, ensure
accountability, and position the nation for the future. Taken together,
these enclosures offer options that Congress can consider to ensure the
critical components of the framework are consistently addressed when
granting both (1) agency-specific human capital authorities so agencies
can design and implement effective human capital systems to help them
address 21st century challenges and succeed in their transformations, and
(2) governmentwide reform to provide broad consistency where desirable and
appropriate.

To provide the information you requested, we selected 10 federal agencies
for review: Central Intelligence Agency (CIA), DHS, DOD, Federal Aviation
Administration (FAA), Federal Deposit Insurance Corporation (FDIC), IRS,
NASA, National Security Agency (NSA), Securities and Exchange Commission
(SEC), and Veterans Health Administration (VHA). We selected DHS, DOD,
FAA, IRS, NASA, and SEC because these agencies have undergone statutory
reform of their human capital systems within the past 10 years and are
frequently mentioned in the context of reform efforts. We selected CIA,
FDIC, NSA, and VHA because they have long been exempted from various
provisions of title 5 and are likewise often cited in the context of
reform. These 10 agencies have a combined workforce of over 1.2 million
civilian employees.

For our analysis, we reviewed the 10 agencies' human capital authorities
in 34 chapters of title 5 dealing with the civil service to identify
exemptions and relevant references to principles, criteria, and processes
of the human capital reform framework. As agreed, we do not provide
information on whether or how the agencies have implemented these
authorities. To verify the accuracy of our analysis, we provided draft
copies of relevant excerpts of this report to the 10 agencies for review.
A DHS official told us that DHS had no comments. Eight of the 10 agencies
provided technical comments, which we incorporated where appropriate. CIA
also provided comments which we were unable to fully incorporate because
of the timing of their submission and the lack of readily available
information to perform the work needed to resolve the interpretive issues
they present. Accordingly, we do not express an opinion regarding CIA's
exemption from or coverage under the particular chapter of title 5 unless
Congress has enacted a specific exemption. A few agency officials
commented that although an agency may not be required to follow specific
provisions or chapters of title 5, the agency may have voluntarily
incorporated some or all of them in its human capital system. For example,
although FAA is exempt from specific title 5 requirements related to merit
system principles and performance management systems, an FAA official told
us that its personnel system is consistent with these title 5
requirements. Similarly, a VHA official told us that while VHA is not
required to apply veterans' preference procedures when hiring for
healthcare positions, VHA gives preference to veterans when the
qualifications of candidates are approximately equal.

                  Page 3 GAO-05-398R Human Capital Authorities

We conducted our work from September 2004 through March 2005 in accordance
with generally accepted government auditing standards. The information in
this report does not represent all the agencies' statutory authorities and
exemptions related to human capital. For comparative purposes, enclosure
III includes a summary of GAO's human capital statutory authorities, and
enclosure IV lists selected GAO products related to governmentwide human
capital issues and specific human capital management at the agencies
included in this report.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the report date. At that time, we will send copies to the Ranking
Minority Member of the Committee on Homeland Security and Governmental
Affairs and to other appropriate congressional committees. We will also
send copies of this report to the heads of the 10 agencies included in our
review, the Director of the Office of Personnel Management, and other
interested parties. Copies will be made available to others upon request.
In addition, the report will be available at no charge on the GAO Web site
at http://www.gao.gov.

If you or your staff have any questions about this report or need
additional information, please contact me or Lisa Shames, Assistant
Director, at (202) 512-6806. We can also be reached by e-mail at
[email protected] or [email protected]. Other GAO staff that made key
contributions to this report are Michelle Bracy, K. Scott Derrick, Karin
Fangman, Michael Volpe, and Katherine H. Walker.

Sincerely yours,

Enclosures - 4

                  Page 4 GAO-05-398R Human Capital Authorities

    Selected Agencies' Statutory References to the Principles, Criteria, and
               Processes for Governmentwide Human Capital Reform

We reported that the following principles, criteria, and processes can
serve as a starting point for further discussion in developing a
governmentwide framework to advance needed human capital reform, as shown
in figure I.1.1

Figure I.1: Principles, Criteria, and Processes for a Human Capital Reform
Framework

Principles that the government should retain in a framework for reform
because of their inherent, enduring qualities:

1.	Merit principles that balance organizational mission, goals, and
performance objectives with individual rights and responsibilities

2.	Ability to organize, bargain collectively, and participate through
labor organizations

3. Certain prohibited personnel practices

4. Guaranteed due process that is fair, fast, and final

Criteria that agencies should have in place as they plan for and manage
their new human capital authorities:

1. Demonstrated business case or readiness for use of targeted authorities

2.	An integrated approach to results-oriented strategic planning and human
capital planning and management

3.	Adequate resources for planning, implementation, training, and
evaluation

4.	A modern, effective, credible, and integrated performance management
system that includes adequate safeguards to help ensure equity and prevent
discrimination

Processes that agencies should follow as they implement new human capital
authorities:

1.	Prescribing regulations in consultation or jointly with the Office of
Personnel Management (OPM)

2.	Establishing appeals processes in consultation with the Merit Systems
Protection Board (MSPB)

3.	Involving employees and stakeholders in the design and implementation
of new human capital systems

4. Phasing in implementation of new human capital systems

5. Committing to transparency, reporting, and evaluation

6. Establishing a communications strategy

7. Assuring adequate training

Source: GAO.

Four of the 10 federal agencies in our review-Central Intelligence Agency,
Federal Deposit Insurance Corporation, National Security Agency, and
Veterans Health Administration-have long been exempted from various
provisions in title 5 of the U. S. Code. The remaining 6 agencies have
undertaken a range of human capital reforms over

1 GAO-05-69SP.

the past 10 years. These six agencies and the dates of enactment for their
statutory authorities are as follows:

o  Federal Aviation Administration (FAA), November 15, 1995;

o  Internal Revenue Service (IRS), July 22, 1998;

o  Securities and Exchange Commission (SEC), January 16, 2002, and July 3,
2003;

o  Department of Homeland Security (DHS), November 25, 2002;

o  Department of Defense (DOD), November 24, 2003; and

o  National Aeronautics and Space Administration (NASA), February 24,
2004.

Tables I.1 through I.15 describe these six agencies' statutory references
to the principles, criteria, and processes in the framework. In these
tables, all references to chapters are for title 5 of the U.S. Code,
unless otherwise noted.

Table I.1: Selected Agencies' Statutory References to Principle #1

     Principle #1 Meritprinciplesthatbalanceorganizationalmission,goals,and
        performance objectives withindividualrightsand responsibilities

Merit system principles are the fundamental foundation of the federal
human capital system and provide guidance for how federal managers and
supervisors should manage their human capital. Adherence to principles of
fairness, efficiency, and objectivity help to make certain that federal
employees are hired, promoted, paid, and discharged on the basis of merit.

Chapter 23 requires that all federal personnel management be conducted in
accordance with nine fundamental concepts known as merit system
principles. Examples of these merit principles include appointing or
promoting employees based on merit, retaining or separating employees
based on performance, and protecting employees from arbitrary action or
personal favoritism.

                          Agency Statutory references

DOD 	DOD must use its new human capital authorities in accordance with the
merit system principles as delineated in chapter 23.

DHS	DHS must use its new human capital authorities in accordance with the
merit system principles as delineated in chapter 23.

 FAA FAA is not required to adhere to the merit system principles as delineated
                                 in chapter 23.

IRS	IRS must use its new human capital authorities in accordance with the
merit system principles as delineated in chapter 23.

NASA	NASA must use its new human capital authorities in accordance with
the merit system principles as delineated in chapter 23.

SEC	SEC must use its new human capital authorities in accordance with the
merit system principles as delineated in chapter 23.

Source: GAO.

Table I.2: Selected Agencies' Statutory References to Principle #2

Principle #2

      Abilitytoorganize,bargain collectively,and participatethrough labor
                                 organizations

The ability to organize, bargain collectively, and participate in labor
organizations helps to ensure that the perspectives of agency employees,
presented through their representatives, can be heard. Engaging employee
unions in major changes, such as changing work rules, can help achieve
consensus on the planned changes, avoid misunderstandings, speed
implementation, and more expeditiously resolve problems that occur.

Chapter 71 prescribes how federal agencies should interact with labor
organizations. The chapter describes the rights and duties of agency
management and labor organizations, standards of conduct for labor
organizations, the grievance and appeals processes, and other
administrative provisions. The chapter establishes that labor
organizations and collective bargaining in the civil service are in the
public interest. The chapter also requires agencies to recognize employee
rights to engage in collective bargaining through representatives chosen
by employees. However, the President may, by Executive Order, exclude from
coverage under chapter 71 any agency or subdivision that has as a primary
function intelligence, counterintelligence, investigation, or national
security work.

                          Agency Statutory references

DOD 	DOD is authorized to establish a tailored labor relations system that
would "address the unique role that the department's civilian workforce
plays in supporting the department's national security mission." Labor
unions have 30 days to review and comment on the proposal for the
department's new personnel system; DOD must meet and confer for at least
30 days to resolve disputes; and Congress is to be notified of remaining
disputes 30 days before implementation. In addition, DOD may bargain at
the national level instead of at the local level.

DHS	DHS is required to construct a human resources system that ensures its
employees may organize, bargain collectively, and participate through
labor organizations of their choosing in decisions that affect them,
subject to exclusions established by law. Labor unions have 30 days to
review and comment on the proposal for the department's new personnel
system; DHS must meet and confer for at least 30 days to resolve disputes;
and Congress is to be notified of the implementation of any part of the
proposal to include an explanation of why this implementation is proper.

FAA FAA is required to recognize and engage in collective bargaining as
delineated in chapter 71.

IRS	IRS is required to recognize and engage in collective bargaining as
delineated in chapter 71. Under the agency's new personnel authority,
employees within a unit with a recognized employee union will be affected
by the exercise of new personnel flexibilities only if a written agreement
between the union and IRS is required and so specifies. These
flexibilities are streamlined demonstration project authority, the general
workforce performance management system, classification and pay, and
staffing.

NASA NASA must recognize and engage in collective bargaining as delineated
in chapter 71.

SEC	SEC is authorized to set and adjust rates of basic pay for all SEC
employees without regard to the restrictions of the General Schedule in
order to maintain comparability with other financial regulatory agencies.
Also, the base pay of an employee represented by a labor organization with
exclusive recognition in accordance with Chapter 71 may not be reduced by
reason of enactment of the 2002 legislation.

Source: GAO.

Table I.3: Selected Agencies' Statutory References to Principle #3

              Principle #3 Certain prohibited personnel practices

Certain personnel practices, such as reprisal against whistleblowers,
should be prohibited. In the public sector, such safeguards are
particularly important because the workforce takes an oath rather than
signs a contract and expectations for transparency and accountability are
often greater than in the private sector.

Chapter 23 specifies 12 prohibited personnel practices that may not be
taken by any employee who can take, direct others to take, recommend, or
approve any personnel actions. Examples of prohibited personnel actions
include discrimination, coercion of political activity, reprisal against
whistleblowers, and nepotism.

                          Agency Statutory references

DOD 	DOD must implement its new human capital authorities without
violating the prohibited personnel practices as specified in chapter 23.

DHS 	DHS must implement its new human capital authorities without
violating the prohibited personnel practices as specified in chapter 23.

FAA 	FAA is bound by one of the 12 prohibited personnel practices
delineated in chapter 23, which specifically proscribes retaliation
against whistleblowers, whether an employee or a job applicant.

IRS	IRS's new human capital authorities must be exercised in a manner to
ensure the prevention of the prohibited personnel practices specified in
chapter 23.

NASA	Congress did not exempt NASA from ensuring against the prohibited
personnel practices in exercising its new human capital flexibilities.

SEC	SEC's new human capital flexibilities must be exercised in a manner to
ensure against the prohibited personnel practices specified in chapter 23.

Source: GAO.

Table I.4: Selected Agencies' Statutory References to Principle #4

          Principle #4 Guaranteeddue processthatisfair, fast,andfinal

Agencies need to ensure that their employees are afforded the protections
of due process in the agencies' human capital systems. A guaranteed due
process that is fair, fast, and final will aid both employees and agencies
in protecting employees' rights while avoiding systems that are
inefficient, expensive, and timeconsuming.

Chapters 43 and 75 provide procedures for agencies to follow in taking
actions to address performance-or conduct-based problems. These chapters
also provide MSPB with jurisdiction over employee appeals from such agency
actions. The types of adverse actions that employees can appeal to MSPB
include removals, suspensions of more than 14 days, reductions in grade or
pay, and furloughs of 30 days or fewer. Chapter 77 outlines the MSPB
procedures and standards of proof for these and other appeals.

                          Agency Statutory references

DOD 	DOD must ensure its employees the right to appeal an adverse decision
to the full MSPB. DOD also must consult with MSPB in developing its
appeals process procedures and must provide fair treatment to its
employees in all appeals related to employment decisions. DOD's
performance management system must have effective safeguards to ensure
that the management of the system is fair and equitable and based on
employee performance.

DHS	DHS must consult with MSPB in developing its appeals process
procedures and must provide fair treatment to its employees in all appeals
related to employment decisions. Specifically, DHS must ensure the
availability of procedures that (1) are consistent with requirements of
due process; (2) provide, to the maximum extent practicable, for the
expeditious handling of any matters involving the department; and (3)
modify procedures under chapter 77 only insofar as such modifications are
designed to further the fair, efficient, and expeditious resolution of
matters involving department employees.

FAA 	FAA has the authority to establish its own procedures for initiating
adverse actions. Although the 1995 legislation did not provide statutory
appeal rights for adverse action cases, Congress reinstated by statute in
2000 the right of FAA employees to appeal adverse actions to MSPB and the
federal courts.

IRS 	The period to notify employees regarding personnel actions based on
unacceptable performance or adverse actions is 15 days instead of 30 days.
Also, an IRS employee's right to appeal the denial of a periodic step
increase to MSPB is eliminated. The agency shall terminate an employee if
there is an administrative or judicial determination that the employee
committed any act or omission described in Section 1203(b) of the 1998
legislation in the performance of the employee's official duties. These
actions are often referred to as the "ten deadly sins." The IRS
Commissioner has the sole discretionary authority to mitigate the penalty
to anything other than termination for a violation of Section 1203. The
Commissioner's penalty determination may not be appealed in any
administrative or judicial proceeding.

                      NASA No direct statutory reference.

                       SEC No direct statutory reference.

Source: GAO.

Table I.5: Selected Agencies' Statutory References to Criteria #1

  Criteria #1 Demonstratedbusinesscaseorreadinessforuse oftargetedauthorities

High-performing organizations identify their current and future human
capital needs using fact-based analysis. Presenting a business case or
passing a readiness assessment are positive first steps for an agency to
ensure that it has crucial elements in place to move forward with
implementation of new human capital authorities.

Chapter 47 gives OPM the authority to establish, maintain, and evaluate
personnel research programs and demonstration projects in order to study
improved methods and technologies in federal personnel management. To be
authorized to conduct an OPM-sponsored demonstration project, an agency is
required to establish a business case in the form of a published project
plan in the FederalRegisteras well as consult with unions and employees in
developing the implementation plan for the demonstration project, notify
Congress and employees of the demonstration project, and ensure an
evaluation of the results of each demonstration project and its impact on
improving public management, among other things.

Agency Statutory references

DOD No direct statutory reference.

                       DHS No direct statutory reference.

FAA	In May 1994, Congress directed the Secretary of Transportation to
undertake a study of management, regulatory, and legislative reforms that
would enable FAA to provide better air traffic control services without
changing FAA's basic organizational structure. The resulting FAA report to
Congress, issued in August 1995, concluded that the most effective
internal reform would be to exempt FAA from most federal personnel rules
and procedures. On November 15, 1995, Congress, in making appropriations
for the Department of Transportation, directed the FAA Administrator to
develop and implement a new personnel management system for the agency.

IRS 	IRS has streamlined authority to implement OPM-sponsored
demonstration projects related to human capital management of its
employees. IRS's exemptions allow the agency to waive the required public
hearing and the 90-day advance notification requirement to Congress, as
well as shorten the 180-day notification period to Congress to 30 days. In
addition, IRS is not subject to the 10-year limitation on the duration of
its demonstration projects. IRS must obtain approval from OPM to deviate
from the classification system as it appears in Chapter 53. With OPM
approval, IRS also may establish a broadbanded system for senior level
positions. In addition, IRS may develop its own rules governing payment of
recruitment, relocation, and retention incentives and provide allowable
travel and transportation expenses for certain new employees and current
employee transfers. However, IRS's authority in this area is subject to
OPM approval and is set to expire in 2008.

NASA	In advance of exercising any of its new hiring and staffing
flexibilities, NASA is to submit a workforce plan, approved by OPM, to
Congress 90 days before NASA is to implement its human capital
authorities.

SEC	Prior to implementing its new classification and compensation system,
SEC must prepare an implementation plan within its annual performance plan
as required under the Government Performance and Results Act (GPRA). The
agency must consult with and seek approval from OPM to implement its pay
and classification system.

Source: GAO.

Table I.6: Selected Agencies' Statutory References to Criteria #2

Criteria #2 An integratedapproach toresults-orientedstrategic planningand human
                         capital planningand management

To implement additional human capital authorities, an agency should have
an institutional infrastructure in place that includes, among other
things, a planning process that integrates the agency's human capital
policies, strategies, and programs with its program goals, mission, and
desired outcomes. Linking strategic and human capital planning and
management will more firmly assist each agency in accomplishing its
mission and programmatic goals.

The Chief Human Capital Officers (CHCO) Act of 2002

o  calls for the alignment of human capital strategies with agencies'
missions, goals, and objectives;

o 	requires agencies to include human capital strategic planning in their
annual performance plans and performance reports; and

o  requires selected agencies to establish positions and functions of a
CHCO.

In addition, the act establishes the CHCO Council to aid in sharing
information about effective human capital practices and in coordinating
agency human capital improvement efforts.

Agency Statutory references

DOD 	DOD is required to link its new performance management system with
the agency's strategic plan.

                       DHS No direct statutory reference.

                       FAA No direct statutory reference.

IRS No direct statutory reference.

NASA	NASA is required by statute to engage in strategic human capital
planning. NASA must submit a workforce plan to Congress that provides
specific information on workforce issues relevant to using the new
personnel flexibilities, including each critical need of the agency and
the criteria used to identify that need.

SEC	Prior to implementing its new classification and compensation system,
SEC must prepare an implementation plan within its annual performance
plan.

Source: GAO.

Table I.7: Selected Agencies' Statutory References to Criteria #3

      Criteria #3 Adequate resourcesfor planning, implementation,training,
                                 andevaluation

Successful human capital reform requires that agencies have adequate
resources to ensure sufficient planning, implementation, training, and
evaluation. Experience has shown that additional resources are often
necessary for agencies to achieve this success. The CHCO Act, along with
establishing the CHCO Council, requires the inclusion of agency human
capital strategic planning in performance plans and program performance
reports.

                          Agency Statutory references

DOD 	Congress required DOD to ensure adequate resources were allocated for
the design, implementation, and administration of its new performance
management system.

                       DHS No direct statutory reference.

FAA No direct statutory reference.

IRS 	IRS was required, no later than 180 days after enactment of its new
personnel authority in 1998, to implement an employee training program.
The act also required IRS to submit to congressional tax writing
committees within 180 days of the date of enactment an employee training
plan that would: (1) detail a comprehensive employee training program to
ensure adequate customer service training; (2) detail a schedule for
training and the fiscal years during which the training will occur; (3)
detail the funding of the program and the relevant information to
demonstrate the priority and commitment of resources to the plan; (4)
review the organizational design of customer service; (5) provide for the
implementation of a performance development system; and (6) provide for at
least 16 hours of conflict management training during fiscal year 1999 for
employees conducting collection activities.

NASA	NASA must submit a workforce plan to Congress that provides specific
information on workforce issues relevant to using the authorities.

SEC 	SEC must prepare an implementation plan within the annual performance
plan prior to implementing its new classification and compensation system.

Source: GAO.

Table I.8: Selected Agencies' Statutory References to Criteria #4

       Criteria #4 A modern, effective,credible, andintegratedperformance
 managementsystem that includesadequate safeguardstohelpensurequalityandprevent
                                 discrimination

Effective performance management systems strive to: (1) provide candid and
constructive feedback to help individuals maximize their contribution and
potential in understanding and realizing the goals and objectives of the
organization; (2) seek to provide management with the objective and
fact-based information it needs to reward top performers; and (3) provide
the necessary information and documentation to deal with poor performers.
Before additional human capital authorities are implemented, agencies
should have to demonstrate that they have modern, effective, and credible
performance management systems in place with adequate safeguards to ensure
fairness and prevent politicization and abuse of employees.

Chapter 43 establishes requirements for and defines OPM's advisory role in
agencies' development of employee performance appraisal systems.
Specifically, agencies are required to

o 	establish appraisal systems with performance standards, which will, to
the maximum extent feasible, permit the accurate evaluation of job
performance on the basis of objective criteria related to the job in
question for each employee or position under the system; and

o 	develop performance appraisal systems that: (1) provide for periodic
appraisals of job performance of employees; (2) encourage employee
participation in establishing performance standards; and (3) use the
results of performance appraisals as a basis for training, rewarding,
reassigning, promoting, reducing in grade, retaining, and removing
employees.

The chapter also details the actions that agencies can take in cases of
unacceptable employee performance and specifies that employees can appeal
certain agency actions to MSPB as delineated in chapter 77.

                          Agency Statutory references

DOD 	DOD can develop its own performance management system. The new system
is to be resultsoriented and link individual employee performance to
organizational mission and goals. The department cannot expand its new
personnel system until a performance management approach is in place that
meets these criteria.

DHS DHS can develop its own performance management system(s).

FAA FAA can develop its own performance management system.

IRS 	Within 1 year of enactment of its new personnel authority, IRS was to
establish its own resultsoriented performance management system that
maintains individual employee accountability through the use of
performance assessments linked to organizational and individual goals and
objectives.

                      NASA No direct statutory reference.

                       SEC No direct statutory reference.

Source: GAO.

Table I.9: Selected Agencies' Statutory References to Process #1

       Process #1 Prescribingregulations in consultation orjointlywithOPM

Involving OPM offers opportunities to make certain that human capital
authorities are implemented efficiently and effectively and in a manner
that places the public's interest paramount. OPM serves as the federal
government's central personnel management agency and is responsible for
executing, administering, and enforcing civil service laws, rules, and
regulations. Its mission is to support the federal government's ability to
have the best workforce possible to do the best job possible. OPM is to
accomplish this mission chiefly by leading federal agencies in shaping
federal resources management systems and serving federal agencies,
employees, retirees, their families, and the public through technical
assistance, employment information, pay administration, and benefits
delivery. In carrying out this mission, OPM is to advise the President on
actions that may be taken to promote an efficient civil service and a
systematic application of the merit system principles.

                          Agency Statutory references

DOD 	DOD is required to jointly prescribe regulations with OPM to
establish the new human capital system.

DHS	DHS is required to jointly prescribe regulations with OPM to establish
the new human capital system.

                       FAA No direct statutory reference.

IRS	For a period of 10 years subject to OPM approval after the date of
enactment of IRS's new personnel authority, the Secretary of the Treasury
may provide for variations in the payment of recruitment, relocation, and
retention incentives. The Treasury Secretary also may, subject to criteria
to be prescribed by the OPM, establish one or more broadbanded systems
covering all or any portion of the IRS workforce.

NASA	NASA is required to prepare a workforce plan that provides specific
information on workforce issues relevant to using its new hiring and
staffing authorities. NASA must provide its workforce plan to relevant
employee representatives and fully consider any recommended changes and
then submit its plan to OPM for approval. NASA is also required to
establish a plan (approved by OPM) for paying recruitment, redesignation,
relocation, and retention bonuses under the NASA Flexibility Act of 2004
and for setting pay under the qualifications pay authority in the act.

SEC 	SEC must prepare an implementation plan and submit a report to
Congress and OPM before implementing its new classification and
compensation system. SEC must also include this implementation plan in the
SEC annual performance plan and report as required under GPRA.

Source: GAO.

Table I.10: Selected Agencies' Statutory References to Process #2

Process #2 Estabishing appeals processes inconsultationwiththeMeritSystems
                            Protection Board (MSPB)

Involving MSPB offers opportunities to make certain that human capital
authorities are implemented efficiently and effectively and in a manner
that places the public's interest paramount. MSPB is an independent,
quasi-judicial executive agency created by the Civil Service Reform Act of
1978. Its mission is to ensure that: (1) federal employees are protected
against abuses by their agencies' management; (2) executive branch
agencies make employment decisions in accordance with merit system
principles; and (3) federal merit systems are kept free of prohibited
personnel practices. In large part, MSPB is to accomplish its mission by
hearing and deciding appeals by federal employees alleging actions taken
against them by their agencies. In addition to its adjudicatory functions,
MSPB is responsible for conducting studies relating to the civil service
and to other merit systems in the executive branch and reporting to the
President and to Congress whether or not the public interest is paramount
and the civil service is free of prohibited personnel practices and
adequately protected.

                          Agency Statutory references

DOD 	DOD is required to consult with MSPB when developing processes and
procedures for employee appeals.

DHS	DHS is required to consult with MSPB when developing processes and
procedures for employee appeals.

FAA	In 2000, Congress reinstated the right of FAA employees to appeal
adverse actions to MSPB and the federal courts.

IRS IRS is not required to consult with MSPB regarding any changes to the
appeals process.

NASA	NASA is not required to consult with MSPB when developing processes
and procedures for employee appeals.

SEC	SEC is not required to consult with MSPB when developing processes and
procedures for employee appeals.

Source: GAO.

Table I.11: Selected Agencies' Statutory References to Process #3

Process #3 Involvingemployeesand stakeholders in thedesignand
implementation of new

                             human capital systems

Successful organizational transformation should involve employees and
their representatives from the beginning to gain their ownership for the
changes that are occurring in the organization. Employee involvement
strengthens the transformation process by including frontline perspectives
and experiences. Agencies can involve employees in a variety of ways, such
as using employee teams to assist in implementing changes and
incorporating employee feedback into new policies and procedures. Except
for general requirements related to collective bargaining issues, title 5
provisions related to civil service employees do not directly call for
involving employees and stakeholders when designing and implementing any
new human capital system.

Agency Statutory references

DOD 	DOD is required to include a means for ensuring employee
representatives' involvement in the design and implementation of its new
human capital system. Labor unions have at least 30 days to review and
make recommendations regarding the proposal for new personnel authorities.
DOD must give "full and fair consideration" of any recommendations and
must notify Congress if the department disagrees with the recommendations.
DOD must then meet and confer with the employee representatives who made
the recommendations in an attempt to reach agreement. For future and
continuing collaboration, the Secretary of DOD and the Director of OPM
must (1) develop a method for each employee representative to participate
in any further planning or development that might become necessary and (2)
give each employee representative adequate access to information to make
that participation productive.

DHS 	The legislation authorizing DHS to create a new personnel system
noted that it is the sense of Congress that employees be involved in the
creation of the new human capital system. DHS and OPM must share any
proposal for a new personnel system with employee representatives and give
these representatives 30 days to review the proposal and make
recommendations with respect to the proposal. DHS must give "full and fair
consideration" of any recommendations and must notify Congress if the
department disagrees with the recommendations. DHS must then meet and
confer with employee representatives who made such recommendations in an
attempt to reach agreement. For future and continuing collaboration, the
Secretary of DHS and the Director of OPM must (1) develop a method for
each employee representative to participate in any further planning or
development that might become necessary and (2) give each employee
representative adequate access to information to make that participation
productive.

FAA	In developing and implementing its new personnel management system,
FAA was required to consult with its employees and such nongovernmental
personnel experts it deemed appropriate. The agency must negotiate with
its unions regarding changes made to its personnel management system.

IRS	IRS must have a written agreement with the recognized employee union
to implement the new personnel flexibilities within a unit covered by that
union to the extent the matter is bargainable under Chapter 71.

NASA	NASA must provide a copy of its workforce plan for implementing any
new human capital authorities to each employee representative representing
any employees who might be affected by the new authorities. Each
representative would have 30 days to review and make recommendations with
respect to the proposed plan, or subsequent modifications to the plan.
NASA must give "full and fair consideration" of any recommendations
received from these employee representatives. Moreover, NASA has to
provide a copy of the workforce plan to all employees no later than 60
days prior to exercising any of the new workforce authorities.

Table I.11: Selected Agencies' Statutory References to Process #3
(Continued)

                          Agency Statutory references

SEC	SEC is authorized to set and adjust rates of basic pay for all SEC
employees without regard to the restrictions of the General Schedule to
maintain comparability with other financial regulatory agencies. Also, the
base pay of an employee represented by a labor organization with exclusive
recognition in accordance with Chapter 71 may not be reduced by reason of
enactment of the 2002 legislation.

Source: GAO.

Table I.12: Selected Agencies' Statutory References to Process #4

        Process #4 Phasingin implementation of new human capital systems

A phased implementation approach recognizes that different components of
agencies will often have varied levels of readiness and diverse
capabilities to implement new authorities. Furthermore, a phased approach
allows for learning so that appropriate adjustments and midcourse
corrections can be made before new policies and procedures are fully
implemented organizationwide. In general, title 5 provisions related to
civil service employees do not directly call for the phasing in of any new
human capital authorities that agencies might acquire.

                          Agency Statutory references

DOD 	DOD's new personnel system can be put into place for up to 300,000
employees and cannot be expanded until a performance management system is
in place that meets the criteria in the law.

DHS	DHS is required to phase in implementation of its new human capital
system through consultation with employee representatives and notification
of Congress.

FAA 	In implementing its new personnel system, FAA cannot adversely affect
the pay of any employee for 3 years, which ended in 1999.

                       IRS No direct statutory reference.

                      NASA No direct statutory reference.

                       SEC No direct statutory reference.

Source: GAO.

Table I.13: Selected Agencies' Statutory References to Process #5

         Process #5 Committing totransparency, reporting, andevaluation

High-performing organizations continually review and revise their human
capital management systems based on data-driven lessons learned and
changing needs in the environment. Transparency, reporting, and evaluation
are critical processes in ongoing human capital reform efforts because
they help to demonstrate how well the government is doing to improve the
quality of its civil service as measured against objective standards
linked to promised results.

As mentioned earlier, chapter 47 gives OPM the authority to establish,
maintain, and evaluate personnel demonstration projects in order to study
improved methods and technologies in federal personnel management. OPM
must provide for an evaluation of the results of each demonstration
project and its impact on improving public management. Before conducting
or entering into any agreement or contract to conduct such a demonstration
project, OPM must have developed a plan that identifies the methodology
and criteria for the evaluation.

Agency Statutory references

                       DOD No direct statutory reference.

DHS No direct statutory reference.

FAA	Three years after implementation of its new personnel system, FAA is
to subject its new system to outside expert evaluation.

IRS 	Under its streamlined demonstration project authority, IRS is
required to work with OPM to provide for an evaluation of the results of
each demonstration project and its impact on improving public management.

NASA	NASA must submit to appropriate congressional committees, not later
than February 28 of each of the 6 years following enactment of its new
authority, a report that summarizes the extent to which the agency used
each of the authorized personnel flexibilities. Within 6 years of
enactment of its new authority, NASA must conduct an evaluation of the
effectiveness of the implemented flexibilities.

SEC 	In its annual program performance report, SEC must report on the
effects of implementing its compensation and classification system.

Source: GAO.

Table I.14: Selected Agencies' Statutory References to Process #6

                Process #6 Estabishing a communications strategy

An organization implementing any major change management initiative, such
as human capital authorities, needs to develop a comprehensive
communications strategy that reaches out to employees, customers, and
stakeholders and seeks to genuinely engage them in the transformation
process. Creating an effective, ongoing communications strategy is
essential to help build trust, ensure consistency of message, encourage
two-way communication, and provide information to meet specific needs of
employees. Title 5 provisions related to civil service employees do not
directly call for establishing a communications strategy.

                          Agency Statutory references

DOD 	DOD is required to consult with employee representatives in the
development of the new human capital system and when further planning or
development might become necessary.

DHS	DHS must consult with employee organizations in the development of the
human capital system and when further planning or development might become
necessary.

FAA	In developing and implementing a new personnel management system, FAA
is required to consult with its employees and negotiate with its unions.

IRS	IRS is required to have a written agreement with the recognized
employee union of an affected IRS unit to the extent the matter is
bargainable under Chapter 71.

NASA	NASA is required to provide employee representatives with a copy of
the agency's workforce plan during consultation and to provide all
employees with a copy of the plan prior to implementation of any new
authorities.

                       SEC No direct statutory reference.

Source: GAO.

Table I.15: Selected Agencies' Statutory References to Process #7

                     Process #7 Assuring adequate training

High-performing organizations understand the value of training employees,
particularly when undergoing significant change, such as human capital
reform. Training and developing new and current staff to fill new roles
and work in different ways will play an important role in the federal
government's endeavors to meet its transformation challenges.

Under chapter 41, which codifies provisions of the Government Employees
Training Act, the head of each agency is responsible for ensuring that the
training needs of the organization are identified and programs are
established to meet those needs. In general, authority granted under this
chapter is broad and flexible to enable an agency to provide whatever
training is necessary to accomplish its mission and achieve its goals.

                          Agency Statutory references

DOD 	For any new performance management system developed, DOD must
incorporate adequate training and retraining of supervisors, managers, and
employees in the implementation and operation of the system.

DHS No direct statutory reference.

                 FAA FAA can develop its own training policies.

IRS 	IRS was required, not later than 180 days after enactment of its new
personnel authority, to implement an employee training program. IRS was
required to submit to congressional tax writing committees within 180 days
of the date of enactment, an employee training plan that would: (1) detail
a comprehensive employee training program to ensure adequate customer
service training; (2) detail a schedule for training and the fiscal years
during which the training will occur; (3) detail the funding of the
program and the relevant information to demonstrate the priority and
commitment of resources to the plan; (4) review the organizational design
of customer service; (5) provide for the implementation of a performance
development system; and (6) provide for at least 16 hours of conflict
management training during fiscal year 1999 for employees conducting
collection activities.

                      NASA No direct statutory reference.

                       SEC No direct statutory reference.

Source: GAO.

         Full and Partial Exemptions from Title 5 for Selected Agencies

Federal agencies have received various exemptions from the requirements in
part III of title 5 of the U.S. Code, which deals with civil service
employees. These exemptions have led to considerable variation in the
personnel authorities granted to individual agencies. Figure II.1 shows
the full and partial exemptions for 10 selected agencies by relevant
chapters of title 5. These 10 agencies are the Central Intelligence Agency
(CIA), the Department of Defense (DOD), the Federal Aviation
Administration (FAA), the Federal Deposit Insurance Corporation (FDIC),
the Department of Homeland Security (DHS), the Internal Revenue Service
(IRS), the National Aeronautics and Space Administration (NASA), National
Security Agency (NSA), Securities and Exchange Commission (SEC), and the
Veterans Health Administration (VHA).1 The narrative summary that follows
in tables II.1 through II.6 provides further details on the exemptions for
these agencies in six categories:

o  merit system principles and prohibited personnel practices;

o  hiring, staffing, and employment authority;

o  performance management;

o  classification and pay administration;

o  labor management relations; and

o  adverse actions and appeals.

1 For VHA, this analysis focuses on physicians, dentists, and other
health-care professionals covered under 38 USC 7401(1). In the absence of
overriding provisions in title 38, these health-care professionals are
covered by various provisions in title 5.

Figure II.1: Summary of Selected Agencies' Exemptions from Title 5
Chapters Related To Civil Service Employees

Notes: For an agency fully exempt from the requirements of a particular
chapter of title 5, this figure does not indicate whether or not reform
provisions impose other restrictions or requirements on agency action.
Chapters 48, 95, 97, 98, and 99 of title 5 have been omitted from this
figure because these chapters reference agency-specific exemptions that
are captured elsewhere in this figure.

For CIA, a blank circle for a chapter does not indicate that the agency is
fully covered. A blank circle indicates that we are not expressing an
opinion regarding CIA's exemption from or extent of coverage under such
chapter. See the discussion of scope and methodology.

Table II.1: Selected Agencies' Exemptions from Chapter 23 of Title 5

Merit System Principles and Prohibited Personnel Practices

Chapter 23 requires that all federal personnel management be conducted in
accordance with nine fundamental concepts known as merit system
principles. Examples of these merit principles include appointing or
promoting employees based on merit, retaining or separating employees
based on performance, and protecting employees against arbitrary action or
personal favoritism. This chapter also outlines 12 prohibited personnel
practices that may not be taken by any employee who can take, direct
others to take, recommend, or approve any personnel actions. Examples of
prohibited personnel actions include discrimination, coercion of political
activity, reprisal against whistleblowers, and nepotism. The Office of
Personnel Management (OPM) is responsible for overseeing agency personnel
management functions to ensure compliance with merit system principles.

                           Agency Degree of exemption

CIA 	CIA is not covered by the prohibitions on specific personnel
practices under chapter 23; however, its employees have special
whistleblower protection through the Intelligence Community Whistleblower
Protection Act of 1998, as amended. We express no opinion with regard to
CIA's coverage under the remainder of the chapter. See the discussion of
scope and methodology.

DHS 	DHS is not exempt from the requirements of chapter 23. Therefore, DHS
is required to implement its personnel system in a manner consistent with
the principles and prohibitions specified in the chapter.

DOD 	DOD is not exempt from the requirements of chapter 23. Therefore, DOD
is required to implement its personnel management system consistent with
the principles and prohibitions specified in the chapter.

FAA 	FAA is partially exempt from the requirements of chapter 23. FAA is
not required to adhere to the merit system principles as delineated in the
chapter. However, FAA is bound by the portion of the chapter under
prohibited personnel practices that specifically proscribes retaliation
against whistleblowers, whether an employee or a job applicant.

FDIC	FDIC is partially exempt from the requirements in chapter 23. FDIC is
bound by all provisions in the chapter dealing with merit system
principles. FDIC is not subject to the prohibited personnel practices,
with the exception of the prohibition relating to whistleblower
retaliation.

IRS 	IRS is not exempt from the requirements of chapter 23. IRS is to
carry out its personnel management system consistent with merit system
principles and ensure the prevention of the prohibited personnel
practices.

NASA	NASA is not exempt from the requirements of chapter 23. NASA must
adhere to all provisions dealing with merit system principles and
prohibited personnel practices.

NSA	NSA is partially exempt from the requirements of chapter 23. While the
merit principles apply to NSA, it is not under OPM oversight in this
regard, and the application of the merit principles may not impair the
agency's authorities and responsibilities. Although NSA is not covered by
the prohibitions on specific personnel practices, its employees have
special whistleblower protection through the Intelligence Community
Whistleblower Protection Act of 1998, as amended.

SEC	SEC is not exempt from the requirements of chapter 23. Therefore, SEC
is required to implement its personnel management system consistent with
the principles and prohibitions specified in the chapter.

Table II.1: Selected Agencies' Exemptions from Chapter 23 of Title 5
(Continued)

                           Agency Degree of exemption

VHA	VHA is not exempt from the requirements of chapter 23. Therefore, VHA
is required to implement its personnel management system consistent with
the principles and prohibitions specified in the chapter.

Source: GAO.

Table II.2: Selected Agencies' Exemptions from Chapters 31 and 33 of Title
5

Hiring, Staffing, and Employment Authority

Chapter 31 provides specific authorities and restrictions with regard to
the employment of personnel under the General Schedule (GS) system, which
is the basic classification and compensation system for white-collar
occupations in the federal government. The chapter also provides
authorities and restrictions regarding Senior Executive Service (SES)
positions. In addition, the chapter gives agencies the authority to employ
disabled veterans noncompetitively and accept the voluntary services of
students. Requirements in the chapter preclude student volunteers from
being considered as traditional employees and restrict them from receiving
government benefits with certain exceptions.

Chapter 33 provides the rules for the selection and placement of federal
employees, including rules related to examination, certification, and
appointment of individuals entering the competitive service. This chapter
also includes procedures for using category rating and veterans'
preference in the hiring process and provides rules that dictate the
conditions of appointment to the competitive service, such as requiring
probationary periods.

                           Agency Degree of exemption

CIA 	CIA is exempt from the provisions of chapter 31 related to
establishing positions under the SES. We express no opinion with regard to
CIA's coverage under the remainder of the chapter. See the discussion of
scope and methodology.

CIA is fully exempt from the requirements of chapter 33. Thus, CIA has the
authority to examine, certify, and appoint individuals in a manner outside
the rules in the chapter.

DHS 	DHS is not exempt from the requirements of chapter 31. Thus, DHS is
obligated to appoint personnel in accordance with the provisions in the
chapter.

DHS is not exempt from the requirements of chapter 33. DHS is therefore
required to examine, select, and place its employees consistent with all
requirements in the chapter.

DOD 	DOD is partially exempt from the requirements of chapter 31. For
example, DOD can create new hiring authorities and has the expanded
authority to hire highly qualified experts.

DOD is partially exempt from the requirements of chapter 33. DOD may
modify these provisions without regard to limitations on methods of: (1)
establishing qualification requirements for, recruitment for, and
appointment to positions; and (2) assigning, reassigning, detailing,
transferring, or promoting employees.

FAA 	FAA is fully exempt from the requirements of chapter 31. Each head of
a line or business staff organization at FAA is allowed to determine the
number of employees for his/her organization based on the amount of funds
allocated to the line of business or staff organization by the
administrator. Also, FAA is not limited in providing certain employee
benefits to student volunteers at the agency.

FAA is partially exempt from the requirements of chapter 33. FAA must
still comply with the provisions of veterans' preference.

FDIC	FDIC is partially exempt from the requirements of chapter 31. As a
government corporation, FDIC is exempt from the chapter 31 rules governing
the SES and the rules on the temporary or intermittent employment of
experts and consultants. FDIC is authorized by the Federal Deposit
Insurance Act of 1933 to appoint and to fix the compensation of its
employees.

FDIC is partially exempt from the requirements of chapter 33. For example,
the chapter 33 provision on appointments to positions classified above
GS-15 does not apply to FDIC, as FDIC is authorized to appoint and fix the
compensation of its employees.

Table II.2: Selected Agencies' Exemptions from Chapters 31 and 33 of Title
5 (Continued)

                           Agency Degree of exemption

IRS 	IRS is partially exempt from the requirements of chapter 31. For IRS,
the definition of "career reserved position" was broadened to include
certain positions filled by "limited emergency appointees" and
"limited-term appointees." Under this exemption, the number of such
appointees is limited to up to 10 percent of the number of SES positions
available to IRS.

IRS is partially exempt from the requirements of chapter 33. IRS has the
authority to convert term appointment employees to competitive appointees
under certain specified conditions. IRS may establish its own
category-ranking systems for evaluating competitive service candidates and
may also waive restrictions on the length of time for new employee
probationary periods and employee details.

NASA	NASA is partially exempt from the requirements of chapter 31. NASA
can fill up to 10 percent of "career reserved" SES positions for a
limited-term (which could extend up to 7 years) without prior OPM approval
and is exempt from the limitations that OPM places on the number of SES
positions available to each agency. These NASA limited-term appointments
can be used for situations other than project-based needs or emergencies,
and individuals in these limited-term appointments are eligible for cash
bonuses.

NASA is partially exempt from the requirements of chapter 33. NASA's
legislation allows the agency to convert term appointees to career
conditional employees after a period of at least 1 year, exempting the
agency from part of the chapter that requires at least a 3-year
appointment for term employees. NASA may also accept assignments of
personnel from other government agencies and organizations for a total of
6 years instead of 4 years. In addition, NASA may waive requirements
relating to competitive service examination and rules governing the
ranking and selection of preference eligibles if candidates have completed
a degree program within 2 years of appointment.

NSA	NSA is partially exempt from the requirements of chapter 31. NSA is
exempt, for example, from provisions establishing SES positions within the
agency.

NSA is partially exempt from the requirements of chapter 33. NSA is
exempt, for example, from the chapter rules related to selecting and
placing individuals in job positions at the agency.

SEC	SEC is partially exempt from the requirements of chapter 31. SEC may
appoint accountants, economists, and securities compliance examiners under
excepted service procedures.

SEC is not exempt from the requirements of chapter 33. The agency is
obligated to follow all chapter provisions when examining, certifying, and
appointing individuals to positions.

VHA	VHA is fully exempt from the requirements of chapter 31 for its
health-care positions. Appointment of health-care professionals authorized
under title 38 of the U.S. Code may be made without regard to civil
service requirements. Therefore, chapter 31 provisions do not apply unless
their application would be consistent with chapters 73 and 74 of title 38,
which outline VHA personnel authorities.

VHA is fully exempt from the requirements of chapter 33 for its
health-care positions. These health-care positions are exempt from the
competitive examination provisions of title 5. Thus, VHA is not required
to rate and rank candidates for these positions nor must VHA apply
veterans' preference procedures. In addition, these health-care positions
do not require any competition for internal placements with promotion
potential. Therefore, chapter 33 provisions do not apply unless their
application would be consistent with chapters 73 and 74 of title 38.

Source: GAO.

Table II.3: Selected Agencies' Exemptions from Chapters of 43 and 45 of
Title 5

Performance Management

Chapter 43 establishes requirements for and defines OPM's advisory role in
the development of employee and SES performance appraisal systems. The
chapter also outlines specific criteria and performance ratings required
for the SES performance appraisal system. For example, agencies are
required to establish appraisal systems with performance standards, which
will, to the maximum extent feasible, permit the accurate evaluation of
job performance on the basis of objective criteria related to the job in
question for each employee or position under the system. Chapter 43 also
specifies the procedures that agencies are to follow in removing or
reducing in grade an employee for unacceptable performance and provides
employees the right to appeal to the Merit Systems Protection Board
(MSPB).

Chapter 45 provides guidance for the administration of incentive awards to
federal employees, including specific guidelines for the frequency and
amount of the award distribution. Under this chapter, agencies can grant
an employee, whose performance appraisal is "fully successful" or better,
a lump sum cash award. These performance-based cash awards can be up to 10
percent of the employee's annual rate of basic pay, or up to 20 percent
for "exceptional performance." Agencies also may grant a cash award to an
employee in recognition of a highly exceptional and unusually outstanding
suggestion, invention, superior accomplishment, or other meritorious
effort. For these accomplishment-based cash awards, agencies may grant up
to $10,000 without OPM approval.

                           Agency Degree of exemption

CIA 	CIA is fully exempt from the requirements in chapter 43. This
exemption allows CIA to establish its own performance management system.

CIA's senior executive personnel are excluded from coverage under chapter
45 regarding presidential rank awards given for superior accomplishments.
We express no opinion with regard to CIA's coverage under the remainder of
the chapter. See the discussion of scope and methodology.

DHS 	DHS is fully exempt from the requirements in chapter 43. This
exemption allows DHS to establish its own performance management system.

DHS is not exempt from the requirements in chapter 45. As a result, DHS is
to use the guidelines and procedures spelled out in the chapter when
granting incentive awards to its employees.

DOD 	DOD is fully exempt from requirements in chapter 43. This exemption
allows DOD to establish its own performance management system.
Nonetheless, the legislation creating DOD's new personnel system provides
employees the right to petition the full MSPB for review of adverse action
decisions.

DOD is partially exempt from the requirements in chapter 45. For example,
DOD is not required to obtain OPM approval to provide its employees with
accomplishment-based cash awards in excess of $10,000.

FAA 	FAA is fully exempt from the requirements of chapter 43. This
exemption allows FAA to establish its own performance management system.

FAA is fully exempt from the requirements of chapter 45 and thus can
establish its own incentive awards program.

FDIC	FDIC is fully exempt from the requirements of chapter 43 and is thus
permitted to establish its own performance appraisal system.

Table II.3: Selected Agencies' Exemptions from Chapters 43 and 45 of Title
5 (Continued)

                           Agency Degree of exemption

FDIC	FDIC is not exempt from the requirements in chapter 45. Nonetheless,
according to FDIC, Executive Order 12976, which provides that government
corporations should not pay bonuses in excess of those authorized in the
chapter, does not apply to FDIC because it conflicts with FDIC's authority
to determine the compensation of its employees.

IRS 	IRS is partially exempt from requirements in chapter 43. IRS is
allowed to design and implement its own performance management system.
Nonetheless, IRS's performance management system must still maintain
individual accountability with one or more retention standards and
periodic determinations if an employee meets this standard(s).

IRS is partially exempt from the requirements in chapter 45. For example,
IRS is not required to obtain OPM approval to provide its employees with
accomplishment-based cash awards in excess of $10,000.

NASA	NASA is not exempt from the requirements in chapter 43. As a result,
NASA is bound by the chapter's provisions when developing and implementing
a performance management system for its employees.

NASA is not exempt from the requirements in chapter 45. Thus, NASA is
required to follow the provisions in the chapter when granting incentive
awards to its employees.

NSA	NSA is partially exempt from the requirements of chapter 43. NSA is
allowed to establish its own performance management system. However, title
10 of the U.S. Code requires NSA to follow the chapter 43 performance
management requirements relating to senior executives.

NSA is partially exempt from the requirements in chapter 45. For example,
NSA is not required to obtain OPM approval to provide its employees with
accomplishment-based awards in excess of $10,000.

SEC	SEC is not exempt from the requirements in chapter 43. Thus, SEC must
develop and implement a performance management system in compliance with
the provisions in the chapter.

SEC is not exempt from the requirements in chapter 45. SEC must adhere to
all chapter provisions in the administration of incentive awards to
employees.

VHA	VHA is fully exempt from the requirements in chapter 43 for its
health-care positions. Therefore, VHA has the authority to create a unique
performance management system for these health-care professionals.

VHA is partially exempt from the requirements in chapter 45 for its
health-care positions. For example, the VHA health-care professionals are
excluded from coverage under the presidential rank awards given for
superior accomplishments. However, VHA can grant these health-care
professionals cash awards for cost-savings disclosures. As described in
chapter 45, VHA may pay a cash award to any employee of the agency whose
disclosure of fraud, waste, or mismanagement has resulted in costs savings
for the agency.

Source: GAO.

Table II.4: Selected Agencies' Exemptions from Chapters 51, 53, and 55 of
Title 5

Classification and Pay Administration

Chapter 51 defines and provides standards for classification of positions
under the GS system. The chapter provides descriptions for each of the 15
GS grades. Grades represent levels of difficulty, responsibility, and
qualifications that are sufficiently similar to warrant their inclusion
within one range of rates of basic pay. This chapter also establishes
OPM's authority to establish, modify, and review classification standards
and revoke agency authority to classify positions.

Chapter 53 establishes the guidelines that determine federal employee pay.
The chapter explains requirements for the administration of pay
comparability, which sets the standard that federal employees should
receive equal pay for work of equal value. The chapter also provides rules
and guidance that govern the determination of annual pay adjustments and
locality pay as well as the granting of special pay authority for
hard-to-fill positions. In addition, the chapter establishes guidelines
that govern those federal employees paid under the Executive Schedule and
GS systems, including how and when step pay increases are to be
administered. In addition, the chapter establishes guidance for the pay of
student-employees, prevailing rate employees, and SES employees, as well
as rules establishing pay retention.

Chapter 55 describes how to compute employee salary and pay; explains what
taxes and other withholdings are permitted to be deducted from pay; sets
guidelines for dual employment and dual pay (e.g., working for a federal
agency while being enlisted in National Guard or Reserves); establishes
rules governing premium pay (e.g., overtime pay, night differential, and
availability pay); and defines the rules governing payment for accrued
leave and severance and back pay.

                           Agency Degree of exemption

CIA 	CIA is fully exempt from the requirements in chapter 51. Therefore,
CIA has the authority to establish its own agency-specific classification
system.

CIA is fully exempt from the requirements in chapter 53 and thus may
develop its own agencyspecific pay system.

We express no opinion with regard to CIA's coverage under chapter 55. See
the discussion of scope and methodology.

DHS 	DHS is fully exempt from the requirements in chapter 51 and thus has
the authority to establish its own agency-specific classification system.

DHS is partially exempt from the requirements in chapter 53. Although DHS
is exempt from most rules governing pay rate and pay system requirements,
it may not modify the pay of any employee who serves in an Executive
Schedule position (or a position for which the rate of basic pay is fixed
in statute by reference to the Executive Schedule) or set employee pay in
excess of the limitation on aggregate annual compensation payable under
chapter 53.

DHS is not exempt from the requirements in chapter 55 and is thus
obligated, for example, to follow chapter rules in determining premium pay
and payment of accrued leave for its employees.

DOD 	DOD is fully exempt from the requirements in chapter 51 and therefore
has the authority to establish its own agency-specific classification
system.

Table II.4: Selected Agencies' Exemptions from Chapters 51, 53, and 55 of
Title 5 (Continued)

                           Agency Degree of exemption

DOD 	DOD is partially exempt from the requirements in chapter 53. DOD can
develop its own agencyspecific pay system. Nonetheless, DOD is required,
to the maximum extent practicable, to ensure that the rates of
compensation for civilian employees are adjusted at the same rate and same
proportion as are rates for members of the uniformed services. DOD is also
required to ensure that the aggregate of allowances, differentials,
bonuses, awards, or other similar cash payments to senior level or SES
employees does not exceed the total annual compensation payable to the
vice president of the United States.

DOD is partially exempt from requirements in chapter 55 and thus has
greater flexibility to establish its own rules in determining premium pay
for its employees.

FAA 	FAA is fully exempt from the requirements in chapter 51. As a result,
FAA has the authority to establish its own agency-specific classification
system.

FAA is fully exempt from the requirements in chapter 53 and thus may
develop its own agencyspecific pay system.

FAA is partially exempt from the requirements in chapter 55 and hence has
greater flexibility to establish its own rules in determining premium pay
and payment of accrued leave for its employees.

FDIC	FDIC is fully exempt from the requirements in chapter 51. This
exemption allows FDIC to define its own standards for classification of
positions within the agency.

FDIC is partially exempt from the requirements in chapter 53. FDIC is not
subject to GS pay rates but is subject to Executive Schedule pay rates and
provisions on student employees.

FDIC is not exempt from the requirements in chapter 55. As a result, FDIC
must, for example, follow chapter rules in determining premium pay and
payment of accrued leave for its employees.

IRS 	IRS is fully exempt from the requirements in chapter 51. Hence, IRS
has the authority to establish its own broadbanded classification system.

IRS is partially exempt from the requirements in chapter 53. IRS is
permitted to establish ranges of rates of pay in one or more occupation
series under its classification system. IRS also has the authority to fix
the rate of basic pay for critical or hard-to-fill positions and has
increased flexibility to set limitations for the amount of performance
awards available to its SES employees. In addition, IRS may also vary from
requirements that govern reduction in force and reduction in pay for its
employees. Nonetheless, IRS must ensure that each employee's total
compensation (including base pay, incentive pay, and other allowances)
does not exceed the total of the annual rate of basic pay payable for
level I of the Executive Schedule.

IRS is not exempt from the requirements in chapter 55 and hence is
obligated to follow chapter rules related to determining premium pay and
payment of accrued leave for its employees.

NASA	NASA is not exempt from the requirements of chapter 51 and thus is
still obligated to use the GS classification system.

Table II.4: Selected Agencies' Exemptions from Chapters 51, 53, and 55 of
Title 5 (Continued)

                           Agency Degree of exemption

NASA	NASA is partially exempt from chapter 53. The agency is allowed added
flexibility in administering recruitment, retention, and relocation
bonuses. NASA also may set the rate of basic pay for critical or
hard-to-fill positions. NASA must adhere to the requirement that each
employee's total compensation (including base pay, incentive pay, and
other allowances) does not exceed the total of the annual rate of basic
pay payable for the Vice President. NASA has the flexibility, for example,
to provide performance awards to limited term appointees in the same
manner and amounts as career appointees and to set pay under the
qualifications pay authority in title 5, section 9814.

NASA is not exempt from chapter 55 and is thus bound to chapter rules in
determining premium pay and payment of accrued leave for its employees.

NSA NSA is fully exempt from the requirements in chapter 51.

NSA is partially exempt from the requirements in chapter 53. The Secretary
of Defense has the authority by regulation to fix rates of basic pay for
NSA employees, although their pay must be related to pay for comparable
DOD positions and is subject to the same limitations on maximum rates of
pay.

NSA is partially exempt from the requirements in chapter 55. NSA has
flexibility as to whether to extend premium pay benefits; however, if NSA
opts to do so, it must follow the premium pay rules under chapter 55.

SEC	SEC is fully exempt from the requirements of chapter 51 and therefore
is free to establish its own agency-specific classification system.

SEC is partially exempt from the requirements of chapter 53. SEC can fix
the compensation of attorneys, economists, securities compliance
examiners, and other employees as may be necessary for carrying out its
functions under the securities laws. SEC may provide additional
compensation and benefits to its employees if the same types of
compensation or benefits are then being provided by other federal banking
agencies. Nonetheless, SEC is still required to follow chapter 53 rules
for paying employees in other occupations within the agency.

SEC is not exempt from the requirements of chapter 55 and thus is required
to follow chapter rules related to determining premium pay and payment of
accrued leave for its employees.

VHA	VHA is fully exempt from the requirements of chapter 51 for its
health-care positions. The classification system for these positions is
provided for under title 38 of the U.S. Code.

VHA is fully exempt from the requirements of chapter 53 for its
health-care positions. The pay system established for these health-care
professionals is a statutory pay system provided for under title 38, which
allows VHA to use a rank-in-person approach rather than a rank-in-position
approach for setting grade and pay. In addition, the health-care
professionals have pay schedules specific to the occupation, rather than
being paid under the GS system. The pay for certain of these health-care
professionals-physicians and dentists-is to consist of three elements: (1)
base; (2) market; and (3) performance. VHA can set special pay rates for
nurses and other designated health-care personnel in any of the title 38
occupations at its medical centers based on the need to have pay
competitive with other health care providers in the community.

Table II.4: Selected Agencies' Exemptions from Chapters 51, 53, and 55 of
Title 5 (Continued)

                           Agency Degree of exemption

VHA	VHA is partially exempt from the requirements of chapter 55 related to
these health-care positions. For example, VHA is not required to follow
chapter rules on premium pay for these health-care positions.

Source: GAO.

Table II.5: Selected Agencies' Exemptions from Chapter 71 of Title 5

Labor Management Relations

Chapter 71 provides guidance for how the federal agencies should interact
with labor organizations. The chapter describes the rights and duties of
agency management and labor organizations, standards of conduct for labor
organizations, the grievance and appeals processes, and other
administrative provisions. The chapter establishes that labor
organizations and collective bargaining in the civil service are in the
public interest. The chapter also requires agencies to recognize employee
rights to engage in collective bargaining through representatives chosen
by employees.

                           Agency Degree of exemption

          CIA CIA is fully exempt from the requirements of chapter 71.

DHS 	DHS is fully exempt from the requirements of chapter 71. Nonetheless,
the legislation establishing DHS's new personnel system states that the
department must construct a human resources system that ensures employees
may organize, bargain collectively, and participate through labor
organizations of their choosing in decisions that affect them.

DOD 	DOD is partially exempt from the requirements of chapter 71 and thus
is authorized to establish a labor relations system that deviates in
certain respects from this chapter. DOD is required to recognize and
engage in collective bargaining but may, for example, bargain at the
national level instead of the local level. Any provisions in existing
collective bargaining agreements that conflict with DOD regulations
establishing the new personnel system are void. In addition, the new labor
relations system must provide for an independent third party review of
labormanagement decisions, including what decisions are reviewable, what
standards would be used for the review, and what third party would conduct
the review. The labor relations system established is limited to a 6-year
period, unless renewed by law. Once expired, the provisions of chapter 71
would apply.

FAA 	FAA is not exempt from the requirements in chapter 71. FAA's 1995
reform legislation gave it partial exemption from the requirements of
chapter 71. In March 1996, a change in law reinstated the requirement for
FAA to comply fully with this chapter.

FDIC	FDIC is not exempt from the requirements in chapter 71. FDIC must
therefore comply with all provisions in the chapter when interacting with
recognized labor organizations and in implementing its labor relations
program.

IRS 	IRS is not exempt from the requirements in chapter 71. IRS is
obligated to follow chapter rules when interacting with recognized labor
organizations to carry out its labor relations program.

NASA	NASA is not exempt from the requirements in chapter 71. NASA must
adhere to the chapter rules when carrying out its labor-management
relations activities.

NSA NSA is fully exempt from the requirements of chapter 71.

SEC	SEC is not exempt from the requirements in chapter 71. SEC is required
to follow all chapter rules when interacting with recognized labor
organizations.

VHA	VHA is partially exempt from the requirements of chapter 71. VHA's
health-care positions are covered under chapter 71 collective bargaining
provisions as modified by title 38. For example, title 38 excludes from
collective bargaining any matter relating to (1) professional conduct or
competence; (2) peer review; and (3) the establishment, determination, or
adjustment of employee compensation under title 38.

Source: GAO.

Table II.6: Selected Agencies' Exemptions from Chapters 75 and 77 of Title
5

Adverse Actions and Appeals

Chapter 75 specifies the general procedures that agencies are to follow in
initiating adverse actions against employees for performance or conduct
reasons to promote the efficiency of the civil service. These adverse
actions include suspensions, removals, reductions in grade or pay, or
furloughs of 30 days or fewer. This chapter includes the right of
employees to appeal certain of these adverse actions to MSPB.

Chapter 77 outlines the MSPB procedures and standards of proof for
handling adverse actions and other appeals. The types of actions that
employees can appeal to MSPB include removals, suspensions of more than 14
days, reductions in grade or pay, and furloughs of 30 days or fewer; OPM
determinations in retirement matters; OPM suitability determinations;
denials of restoration or reemployment rights; and certain terminations of
probationary employees.

                           Agency Degree of exemption

CIA 	CIA is fully exempt from the requirements of chapter 75. CIA is
therefore free to establish its own rules governing the initiation of
adverse actions against employees. The head of CIA may terminate an
employee whenever in the interests of the United States.

CIA is fully exempt from the requirements of chapter 77 for adverse action
appeals. Thus, the procedures for employee appeals do not apply to CIA and
its employees.

DHS 	DHS is fully exempt from the requirements of chapter 75. DHS can
therefore establish specific procedures and rules governing the initiation
of adverse actions against employees.

DHS is fully exempt from the requirements of chapter 77 for adverse action
appeals. Thus, the procedures for the employee appeals process do not
apply to DHS and its employees.

DOD 	DOD is fully exempt from the requirements of chapter 75 and hence can
establish its own procedures and rules governing adverse actions beyond
those delineated in the chapter. Nonetheless, the legislation creating
DOD's new personnel system provides employees the right to petition the
full MSPB for review of adverse action decisions.

DOD is fully exempt from the requirements of chapter 77 for adverse action
appeals. Thus, the procedures for employee appeals do not apply to DOD and
its employees.

FAA 	FAA is partially exempt from the requirements in chapter 75. Although
FAA can establish its own procedures and rules governing adverse actions,
FAA employees can appeal all adverse actions to MSPB.

FAA is not exempt from the requirements in chapter 77. The appeals process
procedures specified in the chapter apply fully to FAA and its employees.
FAA's 1995 reform legislation exempted it from the appeals process, but in
2000 Congress reinstated appeals of adverse actions to MSPB.

FDIC	FDIC is not exempt from the requirements in chapter 75. FDIC is
obligated to follow the procedures and rules specified in the chapter when
initiating an adverse action against an employee for misconduct or poor
performance.

FDIC is not exempt from the requirements in chapter 77. Therefore, the
procedures for processing employee appeals are fully applicable to FDIC
and its employees.

Table II.6: Selected Agencies' Exemptions from Chapters 75 and 77 of Title
5 (Continued)

                           Agency Degree of exemption

IRS 	IRS is partially exempt from the requirements of chapter 75. With
this partial exemption, IRS is allowed to establish critical pay positions
at higher levels of pay than is usually permitted. Employees in these
critical pay positions have no appeal rights (except those related to
alleged discrimination under federal civil rights provisions). In
addition, IRS may terminate any employee if there is an administrative or
judicial determination that the employee committed certain acts or
omissions in performance of official duties. The IRS Commissioner has sole
authority to take personnel action other than termination and to establish
a procedure that would be used to determine whether an individual should
be referred to him or her for such determination. Also, the notice period
for adverse actions is shortened from 30 days to 15 days.

IRS is not exempt from the requirements in chapter 77. Thus, the appeals
process procedures apply fully to IRS and its employees.

NASA	NASA is not exempt from the requirements in chapter 75. As a result,
NASA must adhere to the rules and procedures delineated in the chapter
when initiating adverse actions against employees for misconduct.

NASA is not exempt from the requirements in chapter 77. Therefore, the
procedures for processing employee appeals are fully applicable to NASA
and its employees.

NSA	NSA is partially exempt from the requirements in chapter 75.
Preference eligible employees at NSA may appeal adverse actions to MSPB.

NSA is partially exempt from the requirements in chapter 77. Preference
eligible employees at NSA may appeal adverse actions to MSPB. The
suspension or termination of an employee for national security reasons or
in the interest of the United States may not be appealed to MSPB.

SEC	SEC is not exempt from the requirements in chapter 75. Hence, SEC must
adhere to the rules and procedures specified in the chapter when
initiating adverse actions against employees for misconduct.

SEC is not exempt from the requirements in chapter 77. The procedures
specified in the chapter for processing employee appeals are fully
applicable to SEC and its employees.

  VHA VHA is fully exempt from the requirements in chapter 75 for the agency's
                             health-care positions.

VHA is partially exempt from the requirements of chapter 77 for its
health-care positions. These health-care professionals are considered
employees for purposes of chapter 77 and may file whistleblower
retaliation charges with MSPB.

Source: GAO.

                 Background on GAO's Human Capital Authorities

Over the past 25 years, the U.S. Government Accountability Office (GAO)
has taken a number of steps to improve and tailor its human capital system
by seeking various statutory flexibilities. Congress provided these
flexibilities through the GAO Personnel Act of 1980, the 2000 Amendments,
and the Human Capital Reform Act of 2004.

GAO Personnel Act of 1980

Prior to 1980, GAO's personnel system was subject to the same laws,
regulations, and policies as those of executive branch agencies. Out of
concern that GAO could not objectively audit executive branch agencies
that had authority to review GAO's internal personnel activities, such as
the Office of Personnel Management (OPM), Congress passed the GAO
Personnel Act of 1980. The principal goal of the act was to make GAO's
personnel system more independent of the executive branch. In addition,
the act also gave GAO greater flexibility in hiring and managing its
workforce.

Key provisions of the GAO Personnel Act of 1980 included the following:

o 	Recruiting and hiring: Allowed GAO to establish a more flexible
recruiting and hiring process by providing the Comptroller General (CG)
the authority to appoint, promote, and assign employees without regard to
related requirements in Title 5 of the U.S. Code.

o 	Classification and compensation: Provided authority to GAO to deviate
from the General Schedule and create a broadbanded pay-for-performance
(PFP) system with the goal of rewarding staff on the basis of their
knowledge, skills, and performance and provided managers with additional
flexibility to assign and use staff in a manner more suitable to
multi-tasking and the full utilization of available staff.1

o 	Competitive service status: Employees of GAO who complete at least 1
year of continuous service under a non-temporary appointment acquire
competitive status for appointment to a position in the executive branch.

o 	Appeals process: Established the Personnel Appeals Board (PAB) to
provide GAO employees with an independent appeal authority and protection
against prohibited and/or discriminatory actions.

Public Law 106-303 -2000 Amendments

During the mid-1990's, GAO underwent budgetary cuts, necessitating a
workforce reduction and a virtual hiring freeze at the entry level.
Because of this reduction in hiring, GAO's workforce was smaller, closer
to retirement, and at increasingly higher

1 GAO created a broadbanded system for analysts and specialists which
places staff in three bands rather than in Grades 7 through 15.

grade levels. In addition to the succession-related concerns raised by
such a human capital profile, GAO also faced a range of skills gaps.
Policy issues had become more complex and technology had rapidly developed
over the years, increasing the need for sophisticated skills. GAO used its
internal administrative authority to implement measures to improve the
alignment of its human capital skills with its organizational goals and
needs. In addition to these initiatives, GAO's leadership recognized that
additional steps were necessary to reshape the agency's workforce and
preexisting personnel authorities did not allow the agency to address
these challenges effectively. The 2000 Amendments addressed these concerns
and increased GAO's flexibilities to help reshape the agency's workforce
and recruit and retain staff with needed technical skills.

Key provisions of the 2000 Amendments included the following:

o 	Early retirement: Provided GAO with a 3 year authority to grant
voluntary early retirement to certain employee groups to address budgetary
or mission constraints; correct skill imbalances; or reduce high-grade,
supervisory, or managerial positions, not to exceed 10 percent of the
workforce in any fiscal year.

o 	Voluntary separation: Permitted the CG to offer voluntary separation
incentive payments to up to 5 percent of employees in any fiscal year to
realign the workforce based on criteria he determined as appropriate for a
three year period.

o 	Reduction-in-force regulations: (1) Authorized the CG to prescribe
regulations for the separation of GAO employees during a
reduction-in-force or other adjustment in force consistent with those
issued by OPM under section 3502(a) of Title 5, U. S. Code; (2) allowed
GAO employees in the event of involuntary job reductions to compete for
retention on the basis of the following factors in descending order of
priority: tenure, veteran's preference, performance ratings, and length of
federal service; (3) allowed the CG to base retention on other objective
factors, including skills and knowledge, in addition to the above factors,
at his own discretion.

o 	Recruit for specialized senior positions: Allowed GAO to create senior
level (SL) positions at compensation levels and benefits consistent with
Senior Executive Service (SES) positions to address GAO's need for
scientific, technical, and professional career expertise.

Human Capital Reform Act of 2004 - Public Law 108-271

To help continue in reshaping the agency, GAO sought and received
additional human capital flexibilities in the Human Capital Reform Act of
2004. In addition to making permanent the 2000 flexibilities to offer
early outs and buyouts, the 2004 act authorized additional flexibilities
in the areas of annual pay adjustments, pay retention, and relocation
benefits.

Key provisions of the Human Capital Reform Act of 2004 include the
following:

o 	Early outs and buyouts: Makes permanent GAO's 3-year authority to offer
early outs and buyouts.

o 	Compensation: Allows (1) the CG to adjust the rates of basic pay of GAO
employees on a separate basis from the annual adjustments authorized for
employees of the executive branch; (2) GAO to set the pay of an employee
who is demoted as a result of workforce restructuring or reclassification
at his or her current rate with no automatic annual increase to basic pay
until his or her salary is less than the maximum rate for the new
position; and (3) GAO to withhold the annual across the board increase
from employees who are not performing at a satisfactory level.

o 	Relocation expenses: Provides the authority in appropriate
circumstances to reimburse employees for some relocation expenses when the
transfer does not meet current legal requirements for entitlement to
reimbursement but still provides some benefits to GAO.

o 	Annual leave: Allows key officers and employees with less than 3 years
of federal service to receive 6 hours of annual leave per biweekly pay
period rather than 4 hours.

o 	Executive exchange program: Authorizes an executive exchange program
with private sector organizations to further the institutional interest of
GAO or Congress.

                              Related GAO Products

Governmentwide Human Capital

Highlightsofa Forum:Human Capital: Principles, Criteria, and Processesfor
Governmentwide Federal Human CapitalReform. GAO-05-69SP. Washington, D.C.:
December 1, 2004.

Human Capital: Buildingon the CurrentMomentumtoTransformthe Federal
Government. GAO-04-976T. Washington, D.C.: July 20, 2004.

Human Capital: SeniorExecutive Performance Management Can BeSignificantly
Strengthened toAchieve Results. GAO-04-614. Washington, D.C.: May 26,
2004.

Human Capital: A Guide for Assessing Strategic Training and Development
Efforts in the Federal Government. GAO-04-546G. Washington, D.C.: March 1,
2004.

Human Capital: Implementing Pay for Performance atSelected Personnel
Demonstration Projects. GAO-04-83. Washington, D.C.: January 23, 2004.

Human Capital: Key Principles for Effective Strategic Workforce Planning.
GAO-04-39. Washington, D.C.: December 11, 2003.

Human Capital: Succession Planning and Management Is Critical Driver of
Organizational Transformation. GAO-04-127T. Washington, D.C.: October 1,
2003.

Results-Oriented Cultures: Implementaion Steps toAssist Mergersand
Organizational Transformaions. GAO-03-669. Washington, D.C.: July 2, 2003.

Human Capital: OPMCan Better AssistAgenciesin Using
PersonnelFlexibilities. GAO03-428. Washington, D.C.: May 9, 2003.

Human Capital: Selected Agency Actions toIntegrate Human CapitalApproaches
to AttainMissionResults. GAO-03-446. Washington, D.C.: April 11, 2003.

Results-Oriented Cultures: Creating a ClearLinkage between Individual
Performance and Organizational Success. GAO-03-488. Washington, D.C.:
March 14, 2003.

Human Capital: Effective Use of FlexibilitiesCan AssistAgenciesinManaging
Their Workforces. GAO-03-2. Washington, D.C.: December 6, 2002.

Results-Oriented Cultures: Using BalancedExpectations to Manage Senior
Executive Performance. GAO-02-966. Washington, D.C.: September 27, 2002.

A Model ofStrategic Human Capital Management. GAO-02-373SP. Washington,
D.C.: March 15, 2002.

Human Capital: Practices ThatEmpowered and InvolvedEmployees. GAO-01-1070.
Washington, D.C.: September 14, 2001.

Human Capital: ASelf-AssessmentChecklist forAgency Leaders. GAO-99-179.
Washington, D.C.: September 1, 1999.

Central Intelligence Agency (CIA)

Intelligence Reform: HumanCapitalConsiderations Critical to
9/11Commission's Proposed Reforms. GAO-04-1084T. Washington, D.C.:
September 14, 2004.

Intelligence Agencies: Personnel PracticesatCIA, NSA, and DIA Compared
withThose of Other Agencies. GAO/NSIAD-96-6. Washington, D.C.: March 11,
1996.

Department of Defense (DOD)

Human Capital: Preliminary Observationson ProposedRegulationsfor
DOD'sNational SecurityPersonnel System. GAO-05-559T. Washington, D.C.:
April 14, 2005.

Human Capital: Preliminary Observationson Proposed DepartmentofDefense
National SecurityPersonnel SystemRegulations. GAO-05-517T. Washington,
D.C.: April 12, 2005.

Human Capital: Preliminary Observationson Proposed DOD NationalSecurity
Personnel System Regulations. GAO-05-432T. Washington, D.C.: March 15,
2005.

DepartmentofDefense:Further ActionsAre Needed to Effectively Address
Business Management Problems and Overcome Key Business Transformation
Challenges. GAO05-140T. Washington, D.C.: November 18, 2004.

DOD Civilian Personnel: Comprehensive Strategic Workforce Plans Needed.
GAO-04-753. Washington, D.C.: June 30, 2004.

DOD Civilian Personnel: ImprovedStrategic Planning Neededto HelpEnsure
Viability of DOD'sCivilian Industrial Workforce. GAO-03-472. Washington,
D.C.: April 30, 2003.

DOD Personnel: DOD ActionsNeeded toStrengthen Civilian HumanCapital
Strategic Planning and Integration with Military Personnel andSourcing
Decisions. GAO-03-475. Washington, D.C.: March 28, 2003.

Military Personnel: Oversight ProcessNeededto Help Maintain Momentum of
DOD's Strategic Human Capital Planning. GAO-03-237. Washington, D.C.:
December 5, 2002.

Department of Homeland Security (DHS)

Human Capital: Observationson Final DHSHuman
CapitalRegulations.GAO-05-391T. Washington, D.C.: March 2, 2005.

Human Capital: Preliminary Observationson Final DepartmentofHomeland
Security Human Capital Regulations. GAO-05-320T. Washington, D.C.:
February 10, 2005.

Human Capital: DHS FacesChallengesinImplementing ItsNew PersonnelSystem.
GAO04-790. Washington, D.C.: June 18, 2004.

Human Capital: DHSPersonnel SystemDesign EffortProvidesfor Collaboration
and Employee Participation. GAO-03-1099. Washington, D.C.: September 30,
2003.

Highlightsofa GAOForum:Mergersand Transformaton: LessonsLearned for a
DepartmentofHomeland Securityand OtherFederal Agencies. GAO-03-293SP.
Washington, D.C.: November 14, 2002.

Federal Aviation Administration (FAA)

Federal AviationAdministration: Challengesfor Transforming Into
aHigh-Performing Organization. GAO-04-770T. Washington, D.C.: May 18,
2004.

Air Traffc Control: FAA'sModernization Efforts - Past,Present, and Future.
GAO-04227T. Washington, D.C.: October 30, 2003.

Federal AviationAdministration: Reauthorization
ProvidesOpportunitiestoAddressKey Agency Challenges. GAO-03-653T.
Washington, D.C.: April 10, 2003.

Human Capital Management: FAA'sReformEffort Requires a More Strategic
Approach. GAO-03-156. Washington, D.C.: February 3, 2003.

Air Traffc Control: FAA NeedstoBetter Prepare for
ImpendingWaveofController Attrition. GAO-02-591. Washington, D.C.: June
14, 2002.

Internal Revenue Service (IRS)

Tax Administration: Workforce PlanningNeeds Further Development for IRS's
Taxpayer Education and Communication Unit. GAO-03-711. Washington, D.C.:
May 30, 2003.

IRS Modernization: Continued Progress Necessary for Improving Service to
Taxpayers and Ensuring Compliance. GAO-03-796T. Washington, D.C.: May 20,
2003.

Tax Administration: IRS and TIGTA ShouldEvaluate Their Processing of
Employee MisconductUnderSection 1203. GAO-03-394. Washington, D.C.:
February 14, 2003.

IRS Telephone Assistance: OpportunitiestoImprove Human CapitalManagement.
GAO01-144. Washington, D.C.: January 30, 2001.

Tax Administration: IRS'Implementation ofthe RestructuringAct'sPersonnel
Flexibility Provisions. GAO/GGD-00-81. Washington, D.C.: April 28, 2000.

IRS Personnel Flexibilities: An OpportunitytoTestNew Approaches.
GAO/T-GGD-98-78. Washington, D.C.: March 12, 1998.

National Aeronautics and Space Administration (NASA)

Space Shuttle: Actions Neededto Better Position NASAto Sustain Its
Workforce through Retirement. GAO-05-230. Washington, D.C.: March 9, 2005.

NASA Management Challenges: Human Capitaland Other Critical Areas Need to
Be Addressed. GAO-02-945T. Washington, D.C.: July 18, 2002.

NASA: Status of Achieving Key Outcomes andAddressing Major Management
Challenges. GAO-01-868. Washington, D.C.: July 31, 2001.

Space Shuttle: HumanCapital and SafetyUpgrade Challenges Require Continued
Attention. GAO/NSIAD/GGD-00-186. Washington, D.C.: August 15, 2000.

Space Shuttle: HumanCapital Challenges Require Management Attention.
GAO/T-NSIAD00-133. Washington, D.C.: March 22, 2000.

National Security Agency (NSA)

Intelligence Reform: HumanCapitalConsiderations Critical to
9/11Commission's Proposed Reforms. GAO-04-1084T. Washington, D.C.:
September 14, 2004.

Intelligence Agencies: Personnel PracticesatCIA, NSA, and DIA Compared
withThose of Other Agencies. GAO/NSIAD-96-6. Washington, D.C.: March 11,
1996.

Securities and Exchange Commission (SEC)

Securities andExchange CommissionHuman Capital Survey. GAO-05-118R.
Washington, D.C.: November 10, 2004.

Human Capital: MajorHuman Capital Challenges at SEC and Key Trade
Agencies. GAO02-662T. Washington, D.C.: April 23, 2002.

Securities andExchange Commission: Human Capital Challenges Require
Management Attention. GAO-01-947. Washington, D.C.: September 17, 2001.

Veterans Health Administration (VHA)

Whistleblower Protection: VADidLittle UntilRecently to Inform Employees
About Their Rights. GAO/GGD-00-70. Washington, D.C.: April 14, 2000.

Pay and Benefits: Comparative AnalysesofFederal Physicians'Compensation.
GAO/GGD-97-170. Washington, D.C.: September 15, 1997.

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