Results Act: Observations on the Office of Personnel Management's Annual
Performance Plan (Letter Report, 07/28/98, GAO/GGD-98-130).

Pursuant to a congressional request, GAO reviewed the Office of
Personnel Management's (OPM) annual performance plan for fiscal year
(FY) 1999, focusing on whether OPM's plan complies with the statutory
requirements and congressional intent as contained in the Government
Performance and Results Act and related guidance.

GAO noted that: (1) OPM's annual performance plan addresses the six
program components required by the Results Act; (2) the plan has several
performance goals and measures listed under each of its five strategic
goals as identified in OPM's September 1997 strategic plan; (3) some of
these goals and measures are objective and quantifiable, providing a way
to judge whether the goal has been achieved; (4) the plan also lays out,
very well, a clear linkage between the FY 1999 performance goals and
OPM's mission and strategic goals and also between its goals and its
specific program activities and related funding as presented in its 1999
budget; (5) the principal area in which the performance plan could be
improved to better meet the purposes of the Results Act is in the
statement of its goals; (6) OPM's annual performance plan goals, like
those in its strategic plan, tend to be process or activity goals; (7)
the Results Act, in contrast, envisions a much greater emphasis on
outcome goals that state what overall end result the agency will
achieve, such as increasing the effectiveness of the federal civilian
workforce; (8) Congress sought this emphasis to help ensure that
processes and activities that agencies undertake actually add up to a
meaningful result that is commensurate with the resources expended; and
(9) OPM's annual performance plan could also be improved by including
more discussion on how its resources will be used to achieve its goals
and adding a discussion of known data limitations that may affect the
validity of various performance measures that OPM plans to use.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-98-130
     TITLE:  Results Act: Observations on the Office of Personnel 
             Management's Annual Performance Plan
      DATE:  07/28/98
   SUBJECT:  Strategic planning
             Accountability
             Congressional/executive relations
             Data integrity
             Program evaluation
             Reporting requirements
             Personnel management
             Agency missions
             Information resources management
IDENTIFIER:  Government Performance and Results Act
             GPRA
             
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Cover
================================================================ COVER


Report to the Chairman and Ranking Minority Member, Subcommittee on
Civil Service, Committee on Government Reform and Oversight, House of
Representatives

July 1998

RESULTS ACT - OBSERVATIONS ON THE
OFFICE OF PERSONNEL MANAGEMENT'S
ANNUAL PERFORMANCE PLAN

GAO/GGD-98-130

Observations on OPM's Annual Performance Plan

(410326)


Abbreviations
=============================================================== ABBREV

  CPDF - Central Personnel Data File
  FEHBP - Federal Employees Health Benefits Program
  HRM - Human resource management
  IG - Inspector General
  IT - Information technology
  OMB - Office of Management and Budget
  OMSOE - Office of Merit Systems Oversight and Effectiveness
  OPM - Office of Personnel Management

Letter
=============================================================== LETTER


B-280255

July 28, 1998

The Honorable John L.  Mica, Chairman
The Honorable Elijah E.  Cummings
Ranking Minority Member
Subcommittee on Civil Service
Committee on Government Reform and Oversight
House of Representatives

As requested, this report presents our observations on the Office of
Personnel Management's (OPM) annual performance plan for fiscal year
1999, which was submitted to Congress in February 1998.  The
Government Performance and Results Act of 1993 (the Results Act)
requires executive agencies, beginning with fiscal year 1999, to
develop annual performance plans covering each program activity set
forth in the agencies' budgets.  We assessed whether OPM's plan
complies with the statutory requirements and congressional intent as
contained in the Results Act and related guidance. 

Our overall assessment of OPM's annual performance plan was generally
based on our knowledge of OPM's operations and programs, our numerous
reviews of OPM and federal workforce issues, and other existing
information available at the time of our assessment.  Specifically,
we used the criteria in the Results Act; the Office of Management and
Budget's (OMB) guidance on developing the plan (Circular A-11, part
2); our February 1998 guidance for congressional review of the plans
(GAO/GGD/AIMD 10.1.18); our evaluator's guidance for assessing annual
performance plans (GAO/GGD-10.1.20); and the December 17, 1997,
letter to the OMB Director from several congressional leaders.  We
did our work between March and June 1998 in accordance with generally
accepted government auditing standards.  We obtained written comments
on a draft of this report from the Director of the Office of
Personnel Management.  These comments are discussed at the end of
this letter and are reprinted in appendix I. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

OPM's annual performance plan addresses the six program components
required by the Results Act.\1 The plan has several performance goals
and measures listed under each of its five strategic goals as
identified in OPM's September 1997 strategic plan.  Some of these
goals and measures are objective and quantifiable, providing a way to
judge whether the goal has been achieved.  The plan also lays out,
very well, a clear linkage between the fiscal year 1999 performance
goals and OPM's mission and strategic goals and also between its
goals and its specific program activities and related funding as
presented in its 1999 budget. 

The principal area in which the performance plan could be improved to
better meet the purposes of the Results Act is in the statement of
its goals.  OPM's annual performance plan goals, like those in its
strategic plan, tend to be process or activity goals (e.g., to
complete a specified number of studies during 1999).  The Results
Act, in contrast, envisions a much greater emphasis on outcome goals
that state what overall end result the agency will achieve, such as
increasing the effectiveness of the federal civilian workforce. 
Congress sought this emphasis to help ensure that processes and
activities that agencies undertake actually add up to a meaningful
result that is commensurate with the resources expended.  OPM's
annual performance plan could also be improved by including more
discussion on how its resources will be used to achieve its goals and
adding a discussion of known data limitations that may affect the
validity of various performance measures that OPM plans to use. 


--------------------
\1 The Results Act specifies that agencies' performance plans should
have these components:  (1) performance goals; (2) an expression of
the goals in an objective, quantifiable, and measurable form; (3) a
description of the operational processes, skills, and technology and
the human, capital, information, or other resources required; (4)
performance indicators; (5) a basis for comparing actual program
results with the performance goals; and (6) a description of the
means used to verify and validate measured values. 


   BACKGROUND
------------------------------------------------------------ Letter :2

OPM is the central management agency of the federal government
charged with administering and enforcing federal civil service laws,
regulations, and rules and aiding the President in carrying out his
responsibilities for managing the federal workforce.  OPM has policy
responsibilities related to hiring, managing, compensating, and
separating federal employees.  Moreover, OPM endeavors to ensure
compliance with civil service policies through a program of
overseeing the personnel activities of covered federal agencies. 

OPM helps federal program managers in their personnel
responsibilities through a range of programs, such as training and
performance management, designed to increase the effectiveness of
federal employees.  In addition to these responsibilities, OPM also
promulgates regulations related to federal employee benefits,
including retirement, health, and life insurance benefits.  OPM
directly administers all or major portions of these benefit programs,
which serve millions of current and former federal employees. 

Top OPM officials said they envision OPM as providing human resource
management (HRM) leadership for the federal government.  Through that
leadership, OPM officials say they intend to ensure that the merit
principles that are the basis for the federal civil service system
are followed throughout the government and that human resource
management is effective. 

The Results Act is intended to improve the efficiency and
effectiveness of federal programs by establishing a system to set
goals for program performance and to measure results.  Specifically,
the Act requires executive agencies to prepare multiyear strategic
plans, annual performance plans, and annual performance reports.  OPM
and other agencies submitted their first cycle of agency multiyear
strategic plans to OMB and Congress in September 1997.  Like other
agencies, OPM also submitted its first draft annual performance plan
to OMB in the fall of 1997.  The Results Act requires each
performance plan to identify annual performance goals that cover all
of the program activities in the agency's budget.  OMB Circular A-11
specifies that the annual performance goals reflect the agency's
strategic goals and mission.  OMB used these draft performance plans
to develop and submit the first federal governmentwide performance
plan to Congress in February 1998 with the President's fiscal year
1999 budget.  OPM and other agencies submitted their final
performance plans to Congress after the submission of the President'
s budget. 


   OPM'S PLAN DESCRIBES AN
   EXTENSIVE SET OF ACTIVITIES
   RELATED TO ITS STRATEGIC GOALS,
   BUT THE RESULT TO BE ACHIEVED
   IS ONLY PARTIALLY CLEAR
------------------------------------------------------------ Letter :3

OPM's annual performance plan specifies quite clearly its
goals--generally expressed as planned activities--for fiscal year
1998 and how those planned activities relate to the goals in its
published strategic plan and to program activity accounts in its
proposed fiscal year 1999 budget.  OPM's plan specifies over 100
performance goals, with each OPM unit linking its planned activities
and processes to OPM's five strategic goals and to program activities
in its budget request.  Consistent with congressional suggestions and
OMB guidance, the plan also describes the means OPM intends to use to
validate performance and discusses its coordination with other
agencies on crosscutting activities.  In this sense, the annual
performance plan provides a picture of OPM's intended performance. 

However, this picture is incomplete because the annual performance
plan often does not give a sense of how those activities will help
OPM achieve a desired end result.  Rather, OPM's performance plan
often would enable policymakers to determine whether OPM has
completed a set of actions, but not whether those actions made any
difference in such things as the management of the federal workforce
or whether the actions would cause that workforce to be more or less
able to effectively and efficiently carry out its responsibilities. 


      DEFINING EXPECTED
      PERFORMANCE
---------------------------------------------------------- Letter :3.1

The performance goals in OPM's plan are generally measurable and
linked to the agency's strategic goals and objectives; however, they
are typically more activity- or output-oriented rather than
results-oriented as envisioned by the Results Act.  The lack of a
results focus likely would impede policymakers in determining whether
OPM's efforts have "made a difference" in how well the federal
government's human resources are actually managed. 

Generally, OPM's performance goals are expressed as activities to be
completed or results to be achieved by the end of fiscal year 1999. 
For example, OPM's Employment Service says that in fiscal year 1999,
it will complete a review of all governmentwide policies and programs
that are its responsibility, and OPM's Workforce Compensation and
Performance Service says it will lead a study of allowances,
differentials, premium pay, and hours of duty as part of a 3-year
comprehensive review of governmentwide compensation policies and
programs.  Both of these performance goals, like many others, commit
OPM to undertake or complete a specific piece of work in fiscal year
1999 and thus, in a literal sense, define a minimal level of expected
performance. 

OPM officials acknowledged that many of the annual performance goals
are activity- or process-oriented, but said that, particularly with
respect to policy development and implementation, successful
accomplishment of several of its performance goals will require a
sequence of steps from policy analysis and development through policy
implementation to policy evaluation.  In many cases, this sequence of
steps will extend over several years.  Consequently, OPM officials
said it is impractical to specify a results-oriented goal in any year
until the sequence of steps is complete and changes in policy have
been made and implemented so that the new policies can actually
effect a change in agencies' practices.  OPM officials also noted
that this circumstance is recognized in OMB's guidance on annual
performance plans, which notes that outcome goals may only be
achieved at certain points during the lifespan of a strategic plan
and requires that an annual plan include outcome goals when their
achievement is scheduled for the fiscal year covered by the annual
performance plan. 

The OPM officials' observations highlight that results-oriented
annual performance goals can be difficult to set on an annual basis
in certain circumstances.  However, a key intent of the Results Act
was that agencies should focus their planning on what they are
intending to achieve, the result that they are provided resources to
accomplish, rather than on traditional measures of output like
activities undertaken.  We have previously reported that OPM's
strategic plan goals do not provide a sense of the results OPM
expects to achieve or how they might be measured.\2 If neither the
strategic goals nor the annual performance goals are
results-oriented, policymakers likely will have an inadequate basis
on which to judge whether agencies are making meaningful progress
toward an overall desired outcome. 

OPM officials also told us that they were obligated to develop an
annual performance plan that presented annual performance goals that
would carry out their existing strategic plan's goals.  Although the
officials did not necessarily agree that the OPM strategic goals were
inadequately results-oriented, they said that their annual
performance goals could not be inconsistent with the strategic plan. 

OMB guidance does advise agencies that their annual performance plans
should be specifically linked to their strategic plans and that, for
example, performance goals and indicators in the annual plan should
be based on the general goals and objectives in the agency's
strategic plan.  Accordingly, OPM may have been somewhat constrained
in developing annual goals that were results-oriented given that, in
our judgment, the strategic goals did not give a clear sense of the
results OPM was intending to achieve.  Other agencies have recognized
that their strategic plans did not communicate their desired results
adequately and have initiated efforts to revise those plans.  For
example, the Department of Labor has consolidated the six strategic
goals outlined in its September 1997 strategic plan into the three
strategic goals contained in its annual performance plan.  According
to Labor, this revision fosters greater cohesion within the
Department and also responds to concerns raised by external reviewers
that the agency's strategic plan did not adequately reflect the
integration and crosscutting nature of Labor's programs. 

A results-oriented goal in OPM's annual performance plan illustrates
how such goals can provide a better basis for OPM, Congress, and the
public to determine if the agency is achieving the intended impact or
results with the resources that it is provided.  OPM's Employment
Service has a goal that states, in part, that agency-delegated
examining units (offices within agencies that assess whether job
applicants meet the requirements of jobs being advertised) "will [be]
operated according to merit principles." This is directly related to
OPM's mission of ensuring that merit system requirements are followed
in federal human resources management.  This results-oriented goal is
included even though the rest of the goal stresses activities to be
undertaken, that is, to complete the first 3-year cycle of
recertification for all delegated examining units by the end of
fiscal year 1999.  However, the results-oriented goal provides a
framework for OPM and Congress to use to determine whether the
activities lead to an improved result.  That is, OPM and Congress can
track the number of instances in which delegated examining units do
or do not operate in accordance with the merit principles specified
in statute. 

This example also shows that even if a results-oriented annual
performance goal cannot be set in any given year, tracking data
related to a desired result or outcome can nevertheless occur and be
useful.  Measures that track yearly results can be useful in
establishing a baseline performance level to use in establishing
future results-oriented performance goals and in determining whether
specific activities are moving the agency closer to the desired end
result.  OPM's plan has some measures that are related to achieving
results.  For example, the Office of Merit Systems Oversight and
Effectiveness (OMSOE) has a fiscal year 1999 goal to promote the
growth of merit principle awareness and understanding governmentwide. 
OPM has statutory responsibility for overseeing compliance with the
merit principles specified in title 5 of the U.S.  Code.  One
measure, or target, for OMSOE's performance goal is an increase from
39 to 41 percent in the proportion of employees who say they know
what the merit system principles and prohibited personnel practices
are as measured by an employee survey. 

OPM's annual performance plan could be more useful if additional
results-oriented performance measures were identified.  For example,
the Employment Service's performance goal of reviewing all
governmentwide human resource management policies and programs during
fiscal year 1999 is in support of OPM's strategic goal of providing
leadership to recruit and retain the federal workforce required for
the 21st century.  Policymakers could reasonably expect OPM to define
the characteristics of the workforce that is needed--in essence, the
result being sought in part through the improved human resource
management policies OPM hopes to develop--and to track the extent to
which the federal government is being more or less successful in
recruiting and retaining that workforce.  OPM has no such measure in
its fiscal year 1999 annual performance plan and had not proposed
such a measure in its strategic plan. 

OPM's annual performance plan also does not appear to have cost-based
performance measures, as intended by Congress and encouraged in OMB
guidance, that would show how efficiently it performed certain
business-like operations (e.g., the administration of health and
retirement programs).  Relevant measures might include the cost of
doing business per unit of output, such as the cost to process civil
service retirement payments made either by electronic funds transfer
or check.  Cost-based efficiency measures could be useful to managers
as they attempt to improve their operations.  Such measures could
serve as benchmarks for determining whether private firms might be
able to perform certain services more cost-effectively than OPM can
with federal civilian employees.  If such cost-based measures were
developed, however, it would be important for OPM's salaries and
expenses and revolving funds to have accurate financial and cost
data.  The reliability of these data is not currently determinable
since OPM's Inspector General (IG) has been unable to express an
unqualified opinion on these funds' financial statements because of
inadequate or nonexistent internal controls and standard accounting
policies, procedures, and records. 


--------------------
\2 The Results Act:  Observations on OPM's May 1997 Draft Strategic
Plan (GAO/GGD-97-150R, July 11, 1997). 


      CONNECTING MISSION, GOALS,
      AND ACTIVITIES
---------------------------------------------------------- Letter :3.2

OPM's annual performance plan clearly connects its performance goals
to the agency's mission, strategic goals, and program activities in
its fiscal year 1999 budget request.  For nearly all of its program
activities, OPM's plan lists strategic and annual goals.  The plan
also provides the total budgetary resources proposed for the program
activity and a breakdown of how much of the program activity will be
used for each of OPM's five strategic goals.  For example, OPM's
fiscal year 1999 annual goal to assist agencies to raise the levels
of underrepresented groups in key federal occupations and at key
grade levels by 2 percent over fiscal year 1998 levels supports OPM's
strategic goal to provide policy direction and leadership to recruit
and retain the federal workforce required for the 21st century and is
1 of 11 major performance goals expected to use almost $12 million
from the Employment Service program activity. 

The portions of OPM's plan that provide fiscal year 1999 budgetary
information for its mandatory spending program activities related to
federal health, life, and retirement programs do not include annual
performance goals and do not show linkage to OPM's strategic goals. 
Although goals and linkages are not included in these specific
portions of the plan, OPM does have annual performance goals related
to these activities listed under the Transfers from Trust Funds
section of the Salaries and Expenses Account portion of its plan. 
OPM officials believe that it is more appropriate to discuss the
goals and linkages in the Transfers section because this is the
budgetary account that funds the activities that are expected to
achieve OPM's goals.  For example, OPM set a goal to maintain, at
fiscal year 1998 levels, customer satisfaction, processing times, and
accuracy rates pertinent to processing new claims for annuity and
survivor benefits and shows baseline data on processing these claims. 
OPM also set a goal to develop a proposal, expected to be completed
in fiscal year 1998, to implement the design, financing, and service
delivery of federal earned benefits recommended by its benefits
vision study.  Providing a reference to these goals in the relevant
presentation of the mandatory spending program activities would be a
useful guide to quickly steer users of the plan to goals and measures
associated with these program activities. 

OPM's specific goals related to its information technology (IT)
program are also linked to its strategic goals.  This is a useful
linkage that is consistent with recent legislation that emphasizes
that IT investments should be made in direct support of the
mission-related activities of agencies.\3 In addition, OPM's
performance plan includes goals for dealing with Clinger-Cohen Act
requirements, Year 2000 computer conversion efforts, and information
security; specifies the means for achieving the goals; and includes
performance indicators for measuring results.  Given the importance
of these issues, their focused presentation in the annual performance
plan appears to be appropriate.  OPM could further strengthen its
performance indicators by including information on (1) how it plans
to deal with its other systems that may not be mission-critical but
may have some impact on its operations in 2000, and (2) contingency
plans in place in the event that Year 2000 corrections are not
successful or systems fail to operate. 


--------------------
\3 The Paperwork Reduction Act of 1995 is the overarching statute
dealing with the acquisition and management of information
resources--including information technology--by federal agencies.  It
emphasizes that agencies need to acquire and apply resources to
effectively support the accomplishment of agency missions and the
delivery of services to the public.  The Clinger-Cohen Act of 1996
repeats this theme and elaborates on requirements for agencies to
follow when acquiring information technology. 


      RECOGNIZING CROSSCUTTING
      EFFORTS
---------------------------------------------------------- Letter :3.3

OPM's performance plan partially addresses the need to coordinate
with other agencies and individuals having an interest in OPM's
mission and services.  As a central management agency, OPM must work
with or through other federal agencies to ensure that federal
personnel policies are appropriate and are followed properly.  Thus,
OPM's core responsibilities do, in some sense, cut across a large
portion of the federal government.  OPM's performance goals reflect
the crosscutting nature of its activities.  In many cases, the plan
discusses OPM's planned efforts to coordinate its crosscutting
functions with the federal community.  These discussions are
consistent with Results Act requirements. 

However, in some cases, a more explicit discussion of OPM's intended
coordination with other agencies would be helpful.  For example, OPM
has a performance goal to seek improvement in adjudicatory processes
that address conflicts in the workplace and to work to make them more
understandable, timely, and less costly.  The means, or strategy, OPM
proposes to achieve this goal implicitly recognizes that OPM has
limited authority to set or influence policy regarding adjudicatory
processes.  It states that OPM will "promote and provide active
participation in response to governmentwide efforts to improve the
adjudicatory process." Meaningful participation by OPM would require
ongoing coordination with the adjudicatory agencies, such as the
Equal Employment Opportunity Commission and the Merit Systems
Protection Board, but such coordination is not discussed in the plan. 
OPM's relationship with the adjudicatory agencies and its approach to
coordination could be described more fully to portray the status of
OPM's involvement in this issue and the extent to which it intends to
participate in interagency efforts to improve the adjudicatory
process. 


   OPM'S PERFORMANCE PLAN COULD
   MORE FULLY DISCUSS HOW THE
   AGENCY'S STRATEGIES AND
   RESOURCES WILL HELP ACHIEVE ITS
   GOALS
------------------------------------------------------------ Letter :4

OPM's performance plan could more fully discuss the strategies and
resources the agency will use to achieve its performance goals. 
Because many of OPM's annual performance goals are not
results-oriented, it would be difficult for policymakers to judge
from the plan, itself, how the strategies associated with these
performance goals would add up to achieving a significant result
related to OPM's mission. 

Nevertheless, the plan specifies strategies for achieving each of its
performance goals.  But in many cases, the plan does not provide a
rationale for how the strategy will contribute to accomplishing the
expected level of performance.  OPM's performance plan could also be
enhanced by discussing external factors that could significantly
affect performance. 


      CONNECTING STRATEGIES TO
      RESULTS
---------------------------------------------------------- Letter :4.1

We found that OPM's strategies are connected to its performance
goals, but because many of the performance goals are not
results-oriented, it is unclear how the strategies will contribute to
achieving an intended result related to OPM's mission.  For example,
OPM's performance goal to improve recognition of OPM as a leading
source for effective, efficient technical assistance in a broad range
of employment programs does not readily indicate what result this
would help OPM to achieve.  Consequently, it is also difficult to
determine whether its corresponding strategy to monitor current and
emerging issues, trends, and stakeholder interests will contribute to
achieving a results-oriented change, such as improving the
effectiveness of federal employees. 

In other cases, it was unclear how a strategy related to its
associated performance goal.  For example, OPM has a goal to complete
a plan for central personnel data file (CPDF) modernization in fiscal
year 1999 in coordination with the Human Resources Technology
Council.  That performance goal has an associated strategy to ï¿½use
electronic media to collect and disseminate information widely and
cost-effectively." While this strategy may be useful for improving
the collection and dissemination of CPDF information, it is not clear
how this strategy is related to getting the CPDF modernization plan,
itself, done. 

OPM's plan discusses the actions it plans to take to use information
technology and capital investments to improve performance and help
achieve performance goals in terms of (1) reducing costs, (2)
increasing productivity, (3) decreasing cycle or processing time, (4)
improving service quality, and (5) increasing customer satisfaction. 
For example, OPM has established a goal placing responsibility with
its Chief Information Officer for providing independent oversight of
major OPM information technology initiatives and investments to
ensure that OPM's core functions can meet their business goals and
objectives through the prudent application of technology and improved
use of IT through the implementation of the requirements of the
Clinger-Cohen Act.  OPM also plans to

  -- oversee major IT initiatives, including modernization of the
     retirement program's service delivery systems and the earned
     benefit financial systems, modernization of the CPDF system, and
     development and integration of OPM's employment information
     systems;

  -- implement a sound and integrated IT architecture;

  -- manage OPM's IT capital planning and investment control process
     and implement a performance-based IT management system; and

  -- implement an agencywide systems development life-cycle
     methodology and train staff in its use to support OPM's
     achievement of Software Engineering Institute Capability
     Maturity Model level 3 for systems development. 

One area that is unclear from OPM's discussion in its plan for the
Clinger-Cohen Act implementation is whether or not OPM has or plans
to establish a separate Investment Review Board to ensure that senior
executives are involved in information management decisions.  The
Clinger-Cohen Act calls for agencies to establish such boards to help
improve performance and meet strategic goals.  Although not stated in
the plan, OPM officials have told us they plan to establish an
Investment Review Board. 

In its September 1997 strategic plan, OPM identified several external
factors that could affect achievement of its goals and objectives,
which it organized by the following categories:  (1) governmentwide
issues, (2) relationships with other federal agencies, and (3) the
personnel community.  OPM's performance plan does not explicitly
discuss these factors or their impact on achieving the performance
goals.  While not required by the Results Act, we believe that a
discussion of these external factors would provide additional context
regarding anticipated performance.  For example, several large
agencies recently have been granted, or are seeking to be granted,
wide flexibility to deviate from standard provisions of title 5 of
the U.S.  Code.  These include the Internal Revenue Service, the
Federal Aviation Administration, and the Department of Defense
(civilian workforce).  Although these changes could significantly
affect OPM's role as the central personnel agency, the plan has
little discussion of how such changes were taken into account in
setting performance goals. 


      CONNECTING RESOURCES TO
      STRATEGIES
---------------------------------------------------------- Letter :4.2

OPM's performance plan partially discusses the resources it will use
to achieve the performance goals.  OPM's plan does not consistently
describe the capital, human, information, and other resources the
agency will use to achieve its performance goals.  For example, the
plan explains that OPM will spend approximately $2.6 million in
fiscal year 1999 on implementing an action plan to develop a
governmentwide electronic personnel recordkeeping system that will
support its goal of helping the Human Resources Technology Council
design an electronic official personnel folder to replace paper
records.  In contrast, the plan generally does not mention specific
training or workforce skills that will be needed to achieve OPM's
performance goals. 


   OPM'S PERFORMANCE PLAN COULD
   BETTER PROVIDE CONFIDENCE THAT
   THE AGENCY'S PERFORMANCE
   INFORMATION WILL BE CREDIBLE
------------------------------------------------------------ Letter :5

We found that OPM's performance plan could better provide confidence
that its performance information will be credible.  OPM's annual
performance plan material for each program activity includes a
verification and validation section.  The material in those sections
generally describes various assessments and measures that OPM intends
to use in gauging progress toward the performance goals and how they
will be audited, benchmarked, and validated.  These sections
sometimes do not provide a clear view of the current problems OPM
faces with data verification and validation.  We also found that the
plan does not discuss or identify any significant data limitations
and their implications for assessing the achievement of performance
goals. 


      VERIFYING AND VALIDATING
      PERFORMANCE
---------------------------------------------------------- Letter :5.1

OPM's performance plan partially discusses how the agency will ensure
that its performance information is sufficiently complete, accurate,
and consistent.  Specifically, the plan highlights the importance of
having credible data and generally meets the intent of the Results
Act by identifying actions that OPM believes will identify data
problems.  These actions include audits of its financial statements
by an independent accounting firm.  The plan also includes specific
actions or goals that could contribute to improved reliability of
data, such as installing a new financial management system.  However,
it does not include plans for audits of nonfinancial data, which were
one technique for ensuring data integrity as envisioned by Congress. 

Although the performance plan provides proposed indicators for each
performance goal, it is not clear that data exist for all of the
indicators or that the specific data OPM proposes to use would be a
valid measure for assessing progress toward achieving its associated
performance goal.  For instance, for its goal of supporting OPM
leadership of the Human Resources Technology Council, OMSOE proposes
to use as an indicator "improved HRM operations as measured by
10-year efficiency and quality indicators, e.g., improved ratios of
personnel operations staff to employees covered." However, the plan
does not indicate what data OPM would use to measure the quality of
HRM operations.  Further, the proposed efficiency measure, the ratio
of personnelists to other employees, while a potentially useful
measure, can be imprecise when agencies have staff performing
personnel-related duties who are not specifically in job
classifications normally considered to be "personnelist" occupations. 


      RECOGNIZING DATA LIMITATIONS
---------------------------------------------------------- Letter :5.2

OPM's performance plan does not discuss a number of known data
limitations that may affect the validity of many performance measures
OPM plans to use.  OPM lacks the timely, accurate, and reliable
program data needed to effectively manage and oversee some of its
various activities and programs.  For example, OPM's December 1997
report on the agency's management controls required by the Federal
Managers' Financial Integrity Act noted that there are a number of
key areas where controls and reconciliations are either weak or not
implemented.  This report noted that OPM does not have an effective
system in place to ensure the accuracy of claims paid by
experience-rated carriers participating in the Federal Employees
Health Benefits Program (FEHBP).  The report also noted that a
significant opportunity exists for fraudulent claims to persist
undetected owing to the lengthy audit cycle of FEHBP carriers, which
was 15 years in 1992--longer than the requirement for carriers to
retain auditable records (3 to 5 years). 

Similarly, in his October 31, 1997, semiannual report to Congress,
OPM's Inspector General expressed concern with the infrequency of IG
audits of FEHBP insurance carriers and with the consolidation of
unaudited data from experience-rated carriers with agency data, which
contributed to the disclaimer of opinion on OPM's health benefit
program financial statements.  The annual performance plan section on
the Inspector General's Office requests five additional staff to meet
the goal of a shorter audit cycle.  OPM's plan states that in
addition to providing increased FEHBP oversight, reducing the audit
cycle to 5 years would result in considerable financial recoveries. 

Finally, the independent audit of OPM's 1996 and 1997 financial
statements noted internal control weaknesses in a number of areas for
OPM's retirement, health benefits, and life insurance programs.  For
example, OPM has prescribed minimum records, documentation, and
reconciliation requirements to the employer agencies, but it does not
monitor the effectiveness of employer agencies' controls or their
degree of compliance with controls.  As a result, OPM does not have a
basis for relying on other agencies' internal controls as they relate
to contributions recorded in its accounting records and other data
received, which support amounts recorded in the financial statements. 

The independent accountant also noted in the 1997 report that OPM's
financial management system does not support all program
decisionmaking because the system does not produce cost reports or
other types of reports at meaningful levels.  Despite such evidence
that suggests that internal controls over data reliability are still
a major problem area, the performance plan deals with these problems
only on a very broad level in those portions of the plan that alert
readers to the limitations associated with data that OPM intends to
use to gauge its performance against planned goals.  Although OPM's
fiscal year 1997 retirement and life insurance program financial
statements received unqualified opinions, the independent auditor
disclaimed an opinion on the health benefits program financial
statements for reasons related to inadequate controls.  At a minimum,
it would have been helpful if the plan had an explicit discussion of
specific current program performance data problems and how OPM plans
to address them. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

We provided OPM with copies of a draft of our observations on its
annual performance plan.  On April 10, 1998, we met with OPM's Chief
of Staff and other officials to discuss the draft.  In an April 13,
1998, letter, the OPM Director raised a number of concerns about the
draft observations, which we addressed in a revised draft.  In an
April 30, 1998, letter, the OPM Director provided written comments on
the revised draft (see app.  I).  OPM said that it found the meeting
with us to be particularly helpful as OPM further develops and
refines its plan--which OPM views as an evolutionary process that
will enable it to continually improve and articulate its focus on
improving federal human resource management.  OPM also said that it
was especially pleased to see that the revised draft included changes
on some of the points discussed in the meeting. 

OPM also said that the revised draft contains an inappropriate
"imbalance in its overall negative tone," which may lead readers to
conclude that the OPM plan is substantially weaker than it is strong. 
OPM described our discussions of the plan's weaknesses as "lengthy"
and said that they overwhelm our "relatively short" statements
regarding the plan's strengths. 

We agree that the Results Act planning process is evolutionary and
assessed OPM's annual performance plan from the standpoint of how
well it can, as currently written, assist Congress and OPM as they
work to realize the potential of a results-focused planning process. 
We believe that our assessment recognizes strengths in OPM's annual
performance plan while also providing a sufficiently in-depth
discussion to adequately describe areas in which further improvement
is warranted.  Thus, it was not our intention to create an unduly
negative tone, and we have made changes to avoid such an impression. 

OPM made additional comments that, for example, provided an
explanation of its intentions in developing its annual performance
plan and suggested additional context concerning some of our
observations.  We made changes where appropriate to reflect these
comments.  Appendix I includes OPM's letter and our additional
comments. 


---------------------------------------------------------- Letter :6.1

We are sending copies of this report to the Chairmen and Ranking
Minority Members of interested congressional committees; the
Director, Office of Personnel Management; and other interested
parties.  Upon request, we will also make copies available to others. 
Major contributors to this report are listed in appendix II.  Please
contact me on (202) 512-8676 if you or your staff have any questions
concerning this report. 

Michael Brostek
Associate Director, Federal Management
  and Workforce Issues




(See figure in printed edition.)Appendix I
COMMENTS FROM THE OFFICE OF
PERSONNEL MANAGEMENT
============================================================== Letter 



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Office of Personnel
Management's letter dated April 30, 1998. 

GAO COMMENTS

1.  OPM stated that in several cases where we suggested its annual
performance plan could be improved, the underlying problem seemed to
be a continuing disagreement between us and OPM on the strategic
goals, objectives, and measures included in its Results Act strategic
plan.  OPM further said it was required by law to develop an annual
performance plan that presented annual performance goals for fiscal
year 1999 that it determined to be necessary to achieve that
strategic plan's goals and outcomes.  In a previous analysis of OPM's
strategic plan, we did find that the goals in OPM's strategic plan
tended to be process or activity goals as opposed to results-oriented
goals.  This may contribute to the annual plan goals' also focusing
on processes or activities, which is one of the key areas in which we
believe the annual performance plan could be improved.  Nevertheless,
even with a set of strategic goals that are process- or
activity-focused, annual performance goals can to some extent be
results- oriented.  This is demonstrated in part by OPM's performance
plan itself, which does include some results-oriented goals. 
Further, even when actual results-oriented goals are not established,
identifying and tracking results-oriented performance measures can be
useful to establish performance baselines and to lead to more
informed goal-setting in the future.  We have revised the report to
make these points more clearly. 

In addition, although the Results Act requires that strategic plans
be updated at least every 3 years, it does not prohibit more frequent
revisions.  More frequent revisions might be appropriate in these
early years of implementing the Act as all parties gain experience
with the challenges and benefits of results-oriented planning.  At
least two agencies began revising their strategic plans even as they
were developing their first annual performance plans.  Thus, if OPM
believes that its current strategic plan inhibits its ability to
achieve a results orientation in its annual performance plans, it
could reconsider its strategic plan. 

2.  OPM said that it continues to believe that the Transfers from the
Trust Funds section of the Salaries and Expenses Account portion of
its performance plan is the proper location for its annual
performance goals for its mandatory spending program activities
related to federal, health, life, and retirement programs. 
Nevertheless, OPM said that its annual performance plans for fiscal
year 2000 and beyond will include appropriate statements that direct
readers to the Transfers and Trust Funds section for goals that would
pertain to the mandatory spending program activities.  We agree that
providing a reference to the relevant goals in OPM's presentation of
its mandatory spending accounts would appropriately guide users of
the plan to the goals and measures associated with the accounts. 

OPM also stated that our report implies that, because of the method
OPM used to establish and communicate relevant annual performance
goals for its mandatory spending program activities, OPM's
performance plan is not consistent with its strategic plan and is,
consequently, deficient.  It was not our intention to imply that
OPM's plan was inconsistent with its strategic plan.  We have revised
the appropriate section of the report to more accurately reflect our
observations. 

3.  OPM also disagreed with our assessment that its performance plan
deals with certain internal and management control weaknesses in the
earned benefits programs only on a very broad level.  OPM said that
its plan contains five specific annual performance goals in the
Transfers from Trust Funds section and an additional two such goals
in the Office of Inspector General section that deal specifically
with these problems.  More importantly than how broad its description
of how it approaches a matter, according to OPM, is the fact that OPM
has made a commitment to overcome a problem, solve an issue, or
otherwise deal with an important matter affecting the government's
Human Resource Management Program. 

We think it is commendable that OPM is committed to overcoming its
internal control problems.  However, our comment about OPM's dealing
with these problems only on a very broad level was made in the
context of pointing out that these internal control problems affect
the reliability of the performance measures OPM proposes to use to
gauge progress toward achieving its goals.  Our report, Agencies'
Annual Performance Plans Under the Results Act:  An Assessment Guide
to Facilitate Congressional Decision Making (GAO/GGD/AIMD-10.1.18, p. 
23) states that explaining the limitations of performance information
can provide Congress with a context for understanding and assessing
agencies' performance and the costs and challenges agencies face in
gathering, processing, and analyzing needed data.  Thus, we believe a
more specific discussion of internal control problems and their
effect on data limitations would be desirable.  We made clarifying
changes to the report on this matter. 

4.  OPM expressed concern that we cited one of its performance goals
as one of "several" other performance goals using almost $12 million
from the Employment Service program activity rather than state that
the particular performance goal is 1 of "11" major performance goals
in the program activity.  We have revised the report to reflect this
fact. 

5.  In reference to our statement that OPM's plan does not mention
specific training or workforce skills that will be needed to achieve
its performance goals, OPM referenced the statement in its plan that
states that OPM has a major initiative underway to ensure that gaps
in core competencies are addressed.  Our position on this issue
remains unchanged since OPM's plan does not specify the training or
skills needed nor does it link these needs to specific performance
goals.  This information is needed for policymakers to make informed
judgments concerning whether OPM's staffing will in fact be adequate
to successfully execute its plan. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II

GENERAL GOVERNMENT DIVISION

Steven J.  Wozny, Assistant Director
Clifton G.  Douglas, Jr., Evaluator-in-Charge

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION

Ronald B.  Bageant, Assistant Director
Joan B.  Hawkins, Assistant Director
Brian C.  Spencer, Technical Assistant Director
Scott E.  McNulty, Senior Auditor
Laura E.  Castro, Senior Evaluator

OFFICE OF THE GENERAL COUNSEL

Alan N.  Belkin, Assistant General Counsel


*** End of document. ***