Human Capital: Observations on EPA's Efforts to Implement a Workforce
Planning Strategy (Statement/Record, 03/23/2000, GAO/T-RCED-00-129).

Pursuant to a congressional request, GAO discussed its observations on
the Environmental Protection Agency's (EPA) efforts to determine the
workforce it needs to meet its strategic goals and objectives, focusing
on: (1) how EPA determines the number of employees and competencies
needed to carry out its strategic goals and objectives; and (2) what
actions, if any, EPA is taking to improve its workforce planning
activities.

GAO noted that: (1) EPA does not have a workforce planning strategy to
determine the number of employees and competencies needed to carry out
its strategic goals and objectives; (2) in preparing the agency's annual
budget request, EPA assistant administrators, regional administrators,
and other senior officials determine the increases or decreases in the
full-time equivalents (FTE) requested by the agency; (3) the senior
officials make their decisions on the basis of information provided by
program managers, who identify incremental changes in their needs from
the prior year; (4) however, EPA does not have the detailed workforce
planning information it needs to inform such decisions, including: (a)
information on the linkage between the FTEs requested and the agency's
ability to meet its strategic goals and objectives; and (b) any excesses
or gaps in needed competencies within the agency's various headquarters
and field components; (5) furthermore, EPA has not assessed the accuracy
of its existing data to ensure that its employees are being used in ways
that are consistent with the intent of its congressional appropriators;
(6) although EPA does not have a workforce planning strategy, it has
taken steps to identify its current and future human capital needs,
including the size and competencies of its workforce; (7) in May 1999,
EPA completed a study that identified: (a) the competencies needed to
meet the agency's current missions; (b) possible alternative missions
that EPA may face in the future; and (c) new competencies that may be
needed under each of the future mission scenarios; (8) however, the
study was not detailed enough to identify in total or in individual
organizational components the number of employees who need to possess
the competencies identified; (9) citing budget constraints, EPA
discontinued its efforts to implement a workforce planning strategy,
which was to include a continuous process to monitor and assess the
agency's workforce in light of internal and external changes in its
environment; (10) although EPA has no resources designated for
implementing a workforce planning strategy, the agency recently prepared
a draft human resources strategic plan; (11) according to EPA officials,
a workforce planning strategy would be developed and implemented as part
of this plan; and (12) EPA officials plan to meet in April 2000 to
consider whether to approve the draft plan.

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

 REPORTNUM:  T-RCED-00-129
     TITLE:  Human Capital: Observations on EPA's Efforts to Implement
	     a Workforce Planning Strategy
      DATE:  03/23/2000
   SUBJECT:  Strategic planning
	     Personnel recruiting
	     Performance measures
	     Human resources utilization
	     Federal employees
	     Personnel management

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Testimony

Before the Subcommittee on VA, HUD, and Independent Agencies, Committee on
Appropriations, U.S. Senate

To Be Released
at 9:30 a.m., EST,
Thursday,
March 23, 2000

HUMAN CAPITAL

Observations on EPA's Efforts to Implement a Workforce Planning Strategy

Statement for the Record by
Peter F. Guerrero
Director, Environmental Protection Issues,
Resources, Community, and Economic Development Division

GAO/T-RCED-00-129

Mr. Chairman and Members of the Subcommittee:

We appreciate the opportunity to present our observations on the
Environmental Protection Agency's (EPA) efforts to determine the workforce
it needs to meet its strategic goals and objectives. During the past decade,
when most federal agencies reduced their staffing, EPA's workforce grew by
about 18 percent, even though the states were assuming more responsibility
for carrying out federal environmental programs and enforcement activities.
EPA officials attribute much of the growth during this period to additional
statutory responsibilities given the agency, such as the Clean Air Act
Amendments of 1990. Concerned about such growth, the Congress, in its
deliberations on EPA's fiscal year 2000 budget request, expressed its
expectation that the agency, while remaining flexible to meet its program
requirements, would not exceed a personnel level of 18,000 full-time
equivalents (FTE) by the end of fiscal year 2001, a reduction of about 100
FTEs from EPA's estimated level for fiscal year 2000.

This Subcommittee has also expressed concern that increases in EPA's
personnel levels may reflect incremental responses to meet the demands of
new environmental initiatives, rather than the results of a workforce
planning strategy linked to the agency's strategic planning efforts. Such a
strategy would identify EPA's current and future human capital needs,
including the size of the workforce, its deployment across the organization,
and the competencies (knowledge, skills, and abilities) needed to meet the
agency's strategic goals and objectives. In response to the Subcommittee's
interest in EPA's workforce planning, we reviewed (1) how EPA determines the
number of employees and the competencies needed to carry out its strategic
goals and objectives and (2) what actions, if any, EPA is taking to improve
its workforce planning activities.

In summary, our findings are as follows:

   * EPA does not now have a workforce planning strategy to determine the
     number of employees and competencies needed to carry out its strategic
     goals and objectives. In preparing the agency's annual budget request,
     EPA assistant administrators, regional administrators, and other senior
     officials determine the increases or decreases in the FTEs requested by
     the agency. The senior officials make their decisions on the basis of
     information provided by program managers, who identify incremental
     changes in their needs from the prior year. However, EPA does not have
     the detailed workforce planning information it needs to inform such
     decisions, including (1) information on the linkage between the FTEs
     requested and the agency's ability to meet its strategic goals and
     objectives and (2) any excesses or gaps in needed competencies within
     the agency's various headquarters and field components. Furthermore,
     EPA has not assessed the accuracy of its existing data to ensure that
     its employees are being used in ways that are consistent with the
     intent of its congressional appropriators.

   * Although EPA does not currently have a workforce planning strategy, it
     has taken steps to identify its current and future human capital needs,
     including the size and competencies of its workforce. In May 1999, EPA
     completed a study that identified (1) the competencies needed to meet
     the agency's current missions, (2) possible alternative missions that
     EPA may face in the future, and (3) new competencies that may be needed
     under each of the future mission scenarios. While a step in the right
     direction, the study was not detailed enough to identify in total or in
     individual organizational components the number of employees who need
     to possess the competencies identified. Furthermore, citing budget
     constraints, EPA discontinued its efforts to implement a workforce
     planning strategy, which was to include a continuous process to monitor
     and assess the agency's workforce in light of internal and external
     changes in its environment. Although EPA currently has no resources
     designated for implementing a workforce planning strategy, the agency
     recently prepared a draft human resources strategic plan. According to
     EPA officials, a workforce planning strategy would be developed and
     implemented as part of this plan. EPA officials plan to meet in April
     2000 to consider whether to approve the draft plan.

We met with EPA officials, including the Associate Director of EPA's Annual
Planning and Budgeting Division, Office of the Comptroller, to discuss this
statement for the record. They told us that the information reported is a
fair assessment of EPA's workforce planning activities. They provided
several technical comments and clarifications, which we incorporated as
appropriate.

Background

EPA is organized into 13 major headquarters offices, located in Washington,
D.C., that receive administrative, investigative, and laboratory support
from various headquarters' field entities located throughout the country.
EPA also maintains 10 regional offices to implement federal environmental
statutes and to provide oversight of related state activities. While total
federal employment was reduced by about 17 percent from fiscal year 1990
through fiscal year 1999, the FTEs available to EPA to carry out its
programs grew from 15,277 to 18,078, an increase of about 18 percent. (See
fig.1.) Most of the growth occurred from fiscal year 1990 through fiscal
year 1993, when the FTEs increased from 15,277 to 17,280, an increase of
about 13 percent. Since then, EPA has grown at a more moderate rate,
averaging less than 1 percent a year.

Figure 1: EPA's Total FTEs, Showing Headquarters and Regional FTEs, Fiscal
Years 1990-99

EMBED Word.Document.8 \s Source: EPA.

EPA's employees possess a wide range of educational backgrounds and skills.
Figure 2 shows the occupations that represent the largest part of the
agency's workforce. EPA also makes extensive use of contractors to perform
its work. The agency estimates that it would need an additional 11,000 to
15,000 employees if it did not receive appropriations to fund contractors.
Thus, EPA's workforce must be adept both at delivering services directly and
at effectively managing the cost and quality of mission-support services
delivered by third parties on the government's behalf.

Figure 2: EPA Employees by Major Occupational Category, as of September 30,
1999

EMBED Word.Document.8 \s Source: EPA.

The Government Performance and Results Act of 1993 (the Results Act)
requires EPA and other federal agencies to set goals, measure performance,
and report on their accomplishments as a means of achieving results.
Effective implementation of performance-based management, as envisioned in
the Results Act, hinges on senior managers' willingness and ability to
strategically manage all of the agency's resources-including human
capital-to achieve missions and goals. Specifically, this requires aligning
strategic and program planning systems with an explicit workforce planning
strategy that includes (1) identifying the current and future competencies
needed and any gaps, (2) developing a workforce action plan designed to
address the gaps, and (3) monitoring and evaluating the workforce planning
actions taken. Workforce planning is a key component of a human capital
self-assessment checklist we published as a discussion draft last September.
(See attachment I.)

EPA Does Not Now Have a Workforce Planning

Strategy to Assess Its Human Capital Requirements

Although EPA's senior managers are closely involved in decisions concerning
the

agency's annual budget requests for staffing, the agency has not developed
and implemented a workforce planning strategy to systematically and
comprehensively

assess its human capital requirements. Consequently, EPA cannot determine
whether it has the appropriate number of people and competencies needed to
effectively carry out its strategic goals and objectives. Furthermore,
although EPA collects cost-accounting data on the amount of time its
employees spend in carrying out the agency's strategic goals and objectives,
it has not assessed the accuracy of the data. Thus, EPA lacks assurance that
its employees are being used in ways that are consistent with the intent of
its congressional appropriations legislation, which identifies the number of
FTEs approved for each strategic goal and objective.

During most of the 1980s, EPA used a workload model for calculating the
total

number of FTEs needed and for allocating them among its various headquarters
and regional offices. The model was based on studies of the amount of time
required to perform key functions of the agency. The agency used the model
to allocate its staff among its various organizational units but did not use
it for determining the number of employees. An EPA official explained that
the number of employees needed, according to the model, consistently
exceeded the personnel ceilings established for the agency by the Office of
Management and Budget. In 1987, EPA froze the workload model because it
believed it was spending an inordinate amount of time each year negotiating
the distribution of marginal staffing increases. Although the model
continued to be used for allocating staff resource levels into the early
1990s, it was not updated to reflect new circumstances, became outdated, and
was discontinued.

EPA's current process for preparing its budget request involves identifying
funding and staffing increases, ("investments") in areas it considers to be
priorities, which are usually offset by decreases, ("disinvestments") in
areas of lower priority. For example, for fiscal year 2000, EPA identified
investments totaling 311 FTEs and the same number of disinvestments.
Increases were identified for program priorities such as clean air, climate
change, information management, and children's health. To accommodate the
increases, decreases were identified in other agency activities, such as
those for assessing chemical risks, enforcing clean water regulations, and
cleaning up contaminated waste sites. Through such reallocations, EPA
focuses on the number of staff available and does not consider the types of
skills needed for program activities. We did not review the basis for EPA's
decisions on the reallocations.

After the Congress reviews EPA's budget request and appropriates resources
to the agency, senior officials allocate the available FTEs to EPA's
organizational units. Because EPA does not have a system in place to assess
its human capital requirements and to allocate resources accordingly, the
allocations are based primarily on the number of FTEs that were allocated in
previous years, with increases or decreases made incrementally to reflect
the agency's "investments" and "disinvestments." However, an approach based
on historical data may not accurately reflect the conditions facing EPA
today and those likely to face it tomorrow. For example, over the past
decade, technological changes have had a major impact on the skills and
technical expertise needed to carry out federal programs. In addition,
changes have occurred in EPA's regional environmental responsibilities as
states have accepted more responsibility for the day-to-day implementation
of federal environmental statutes. For example, in 1993, only eight states
had accepted responsibility under EPA's delegation process for implementing
provisions of the Safe Drinking Water Act. By 1998, 36 states had done so.
The Environmental Council of the States, an association representing state
environmental administrators, has pointed out that the states now assume
responsibility for more than 75 percent of federal environmental programs.
Such changes may reduce EPA's activities in some areas, such as carrying out
inspections, but may in turn create the need for additional people and
competencies in other areas, such as providing technical assistance and
reviewing and measuring the effectiveness of state programs.

Fact-based human capital management requires data on how EPA's current
workforce spends its time. However, the agency's efforts to account for the
time spent to carry out its various tasks have been hampered by inaccuracies
in existing data. For example, although each of EPA's regional employees is
assigned to a specific work area, such as pollution prevention or
groundwater protection, the employees may be directed to perform tasks in
other areas. In a September 1996 report, EPA's Inspector General stated that
in two regions reviewed, employees spent a significant amount of time
working in areas unrelated to the program areas to which their time was
charged. In October 1998, EPA modified its cost-accounting system to account
for tasks related to its strategic goals and objectives. EPA officials told
us that the accuracy of the data collected under the new system has not been
assessed, although they said the agency recognizes the need to do so.
Assessing the data is crucial for their use under the agency's plans to
develop and implement a workforce planning strategy. For example, an
official representing EPA's Office of Enforcement and Compliance Assurance,
which relies extensively on regional employees to carry out its functions,
told us that it is important that the office have an accurate system of
accounting for time spent in order to determine appropriate personnel
levels.

EPA Has Begun to Develop and Implement a Workforce Planning Strategy

EPA's decentralized organizational structure and the size and deployment of
its workforce have long been issues of concern among outside reviewers of
the agency. For example, in an April 1995 report to the Congress, the
National Academy of Public Administration (NAPA) commented that EPA has
little data to determine the day-to-day activities of its regional
employees. NAPA recommended that EPA complete an analysis of the activities
of the regional offices, determine their appropriate size, and add or reduce
staff accordingly.

During the past decade, EPA has attempted to improve its workforce planning
but has fallen short of implementing an effective strategy for doing so. As
previously mentioned, EPA stopped using its workforce analysis model in the
early 1990s, partly because the model required more resources than EPA
considered appropriate to spend. For fiscal years 1995 through 1997, the
agency conducted annual surveys to analyze the human capital needed to
achieve its mission. Once each year, employees estimated the time they spent
on various tasks for the first several months of the year and projected how
they would spend their time during the remainder of the year. The purpose of
the survey was to gain an understanding of where the workforce was deployed,
ensure that the budget reflected this deployment, and make certain that
resources were directed toward high-priority objectives and performance
goals.

EPA officials told us that the survey was discontinued after fiscal year
1997 because of data collection flaws that caused EPA to lose confidence in
the validity of the survey data. They said that the survey did not clearly
define terms and reporting requirements, causing inconsistencies in the data
reported by various employees and organizational components. In analyzing
the results of the 1997 survey, EPA found that the workforce data differed
substantially from the data reported to the Congress in EPA's fiscal year
1997 operating plan. For example, the survey data showed that the amount of
time spent on activities of the Office of Enforcement and Compliance
Assurance was 23 percent less than the amount reported by EPA in its
operating plan, whereas the time spent on activities of the Office of
Policy, Planning, and Evaluation was nearly three times the amount reported
in the plan.

EPA has recently attempted to address the need for a more credible strategy
to determine its workforce requirements. In June 1998, EPA initiated a
project to assess and act upon the implications of strategic change for the
agency's workforce. Through this project, which was completed in May 1999,
EPA (1) developed a workforce profile identifying the competencies of the
people employed by the agency and (2) estimated what competencies it would
need in the future under various scenarios. By comparing the current
workforce with estimated future needs, EPA identified potential gaps.

While the workforce assessment was a step in the right direction, it was a
limited measure toward needed actions to implement a workforce planning
strategy capable of meeting the agency's diverse goals and objectives. For
example, the assessment focused on the competencies, such as communication
and computer skills, needed to carry out EPA's missions. However, the study
was not designed to determine how many employees needed such competencies or
how employees should be deployed among strategic goals and objectives,
across program areas, and in various areas of the country. Furthermore,
although EPA has identified the competencies that it believes are vital and
difficult to obtain and maintain, it has not used this information to
develop an integrated workforce strategy for recruiting, developing, and
maintaining needed competencies in its current and future workforce.

EPA had intended to build on its workforce assessment by developing and
implementing a workforce planning strategy to (1) continually monitor and
assess its workforce in light of internal and external environments and (2)
monitor and evaluate workforce actions taken. Although EPA had contracted
for the development of the strategy, EPA officials terminated this work in
February 1999, citing budget constraints. Nevertheless, the director of
EPA's Office of Planning, Analysis, and Accountability told us that, while
the agency currently has no resources allocated for implementing a workforce
planning strategy, it recognizes the need to complete the job. He said that
EPA is considering linking a workforce planning initiative to its strategic
planning efforts. However, little time remains for implementing a workforce
planning strategy before EPA's current strategic plan is scheduled to be
revised and issued by September 2000.

EPA officials told us that in terminating the contractor's work for the
development of a workforce planning strategy, EPA decided to develop such a
strategy itself. Such an initiative is being considered under the auspices
of EPA's Human Resources Council, which consists of senior managers in EPA's
headquarters and regional offices. At the direction of the Council, a
multifunctional group of program office executives and representatives of
EPA's Office of Human Resources and Organizational Services has prepared a
draft strategic plan for human resources. The plan calls for securing
essential competencies through a workforce planning strategy aimed at
recruiting and developing staff and providing incentives to retain highly
competent employees. EPA officials told us that this strategy in essence
would continue the efforts that EPA had planned to do under the contract.
The Human Resources Council is scheduled to meet in April 2000 to discuss
the plan.

Observations

The growth in EPA's personnel levels during the past decade has been
accompanied by

substantial changes in the roles and responsibilities of the agency and its
state partners. In addition, technological advances during this period have
provided opportunities for efficiencies to carry out the agency's strategic
goals and objectives. While EPA has implemented several initiatives during
the past decade to gain a fuller understanding of the demands facing its
workforce, these initiatives have not received the resources and senior
management commitment needed to bring them to fruition, and they have fallen
short of their objectives. Without a workforce planning strategy, EPA is not
able to identify the size of its workforce and the competencies that need to
be deployed among its organizational components to effectively and
efficiently carry out its strategic goals and objectives.

EPA's current efforts to develop and implement a human resources strategic
plan, including a workforce planning strategy that is focused on continually
monitoring and assessing its workforce and evaluating the effectiveness of
actions taken, is a step in the right direction. If the plan is adopted, its
ultimate usefulness will depend largely on the extent to which EPA's senior
management remains committed to and provides the resources needed to ensure
its success. Furthermore, as part of its workforce planning strategy, EPA
will need to ensure that it collects and analyzes accurate data on the
amount of time being spent on various programs and activities. Without such
data, EPA cannot accurately determine the costs of carrying out its
strategic goals and objectives and ensure that its workforce is being used
in ways that are consistent with the intent of its congressional
appropriators. In addressing these concerns, it is important that EPA
identify the resources that would be necessary to implement a workforce
planning strategy and to assess the accuracy of its cost-accounting data on
the amount of time employees spend in performing tasks related to the
agency's strategic goals and objectives.

- - - - -

We performed our review from October 1999 through March 2000 in accordance
with generally accepted government auditing standards. If you have any
questions about this statement, please contact me on (202) 512-6111. Major
contributors to this statement were Ed Kratzer, Bill Roach, Ken McDowell,
and Rosemary Torres-Lerma.

ATTACHMENT I

THE HUMAN CAPITAL FRAMEWORK

We recognize that there is no single recipe for successful human capital
management. But we have identified a number of human capital elements and
underlying values that are common to high-performance organizations in the
public and private sectors. The five parts of the human capital framework
are as follows:

  1. Strategic Planning: Establish the agency's mission, vision for the
     future, core values, goals, and strategies.

  2. Organizational Alignment: Integrate human capital strategies with the
     agency's core business practices.

  3. Leadership: Foster a committed leadership team and provide continuity
     through succession planning.

  4. Talent: Recruit, hire, develop, and retain employees with the skills
     for mission accomplishment.

  5. Performance Culture: Enable and motivate performance while ensuring
     accountability and fairness for all employees.

(160506)
  
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