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entitled 'GAO'S Proposed Human Capital Legislation: Views of the 
Employee Advisory Council' which was released on July 16, 2003.

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Testimony:

Before the Subcommittee on Civil Service and Agency Organization, House 
Committee on Government Reform:

United States General Accounting Office:

GAO:

For Release on Delivery Expected at 1:00 p.m. EDT:

Wednesday, July 16, 2003:

GAO's proposed human capital legislation:

Views of the Employee Advisory Council:

Statement of Christopher A. Keisling, Employee Advisory Council Member:

GAO-03-1020T:

Good afternoon, Madam Chairwoman and members of the Subcommittee. My 
name is Chris Keisling. I am one of three liaisons to the Comptroller 
General and the Congress selected by GAO's 23-member Employee Advisory 
Council (also known as the EAC). I am an Assistant Director in GAO's 
Atlanta Field Office and while my role on the Council is to represent 
Band III employees in all field offices, I am here today, at the 
Subcommittee's invitation, to provide the views of the Council and a 
wide cross-section of GAO on the Comptroller General's Human Capital II 
proposal.

The Comptroller General formed the EAC about 4 years ago to be fully 
representative of the GAO population and advise him on issues 
pertaining to both management and employees. The members of the EAC 
represent a variety of employee groups and almost all employees outside 
of the senior executive service (more than 3,000 of GAO's 3,200 
employees or 94 percent). The EAC operates as an umbrella organization 
that incorporates representatives of GAO's long-standing employee 
organizations including groups representing the disabled, Hispanics, 
Asian-Americans, African-Americans, gays and lesbians, veterans, and 
women,[Footnote 1] as well as employees in various pay bands, 
attorneys, and administrative and professional staff.[Footnote 2]

As established in our charter, the Employee Advisory Council serves as 
an advisory body to the Comptroller General and other senior executives 
by:

* seeking and conveying the views and concerns of the individual 
employee groups it represents while being sensitive to the mutual 
interests of all employees, regardless of their grade, band, or 
classification group;

* proposing solutions to concerns raised by employees, as appropriate;

* providing input by assessing and commenting on GAO policies, 
procedures, plans, and practices; and,

* communicating issues and concerns of the Comptroller General and 
other senior managers to employees.

In preparing for our testimony today, the EAC considered the results of 
discussions with constituents, and input from Council representatives, 
including information gathered from employees during the initial 
introduction of the proposal and comments provided on the Comptroller 
General's revised proposal. Although we have limited quantitative data 
in this regard and recognize that not all employees have the same 
opinions regarding all provisions of the proposed legislation, we 
believe our testimony is representative of a substantial cross-section 
of GAO employees.

In summary, GAO employees generally support many of the provisions in 
the proposed legislation. For example, most employees expressed support 
for:

* the provision to make GAO's authority to offer voluntary early 
retirement permanent,

* provisions to enhance vacation time for upper-level hires and 
relocation expenses deemed necessary by the Comptroller General to 
recruit and retain top employees, and:

* the provision to establish an exchange program with the private 
sector.

However, many employees have expressed concerns about the proposals 
that affect pay. Specifically, many staff are concerned about the 
potential negative impact of the change in the basis for annual salary 
increases, although some staff recognize the potential benefits for 
additional reward and management flexibility. To a lesser extent, staff 
are concerned about changes to pay protections provided under 
traditional federal employment rules. Staff have differing opinions on 
the provision to change GAO's name to the Government Accountability 
Office.

The EAC recognizes and appreciates the efforts the Comptroller General 
has made to address employees' concerns regarding provisions affecting 
pay by (1) providing assurances that the new system will sustain 
employees' purchasing power and provide parity with prevailing locality 
pay, (2) proposing short-and longer-term modifications to GAO's 
performance management system, and (3) incorporating a 2-year 
transition period for implementation of the new system. We hope that if 
the legislation is enacted, the Comptroller General will continue to be 
responsive to the concerns of employees as the agency moves forward in 
implementing these changes.

GAO Employees Support Most Aspects of the Proposed Legislation But Have 
Concerns About Pay Provisions and Differing Opinions About the Proposed 
Name Change:

Outreach efforts by EAC representatives indicate that most employees 
support many portions of the legislative proposal under consideration 
by the Subcommittee but have concerns about provisions in the proposal 
related to pay. Specifically, employees generally support provisions 
that make the authorities provided to GAO for voluntary early 
retirement pay incentives permanent, to provide enhancements in 
vacation time and relocation expenses deemed necessary by the 
Comptroller General to recruit and retain top employees, and to 
establish a private sector exchange program. However, many employees 
are concerned about the provisions that change the way that annual pay 
decisions are made and, to a lesser extent, the proposed change to 
traditional protections for pay retention. Employees had differing 
opinions about the proposed change to GAO's name.

Most Employees Support Proposals to Improve GAO's Ability to Realign 
the Workforce and Attract and Retain High-Quality Employees:

Most employees support the Comptroller General's proposed provisions to 
make permanent GAO's 3-year authority to offer voluntary early 
retirement and voluntary separation payments to provide flexibility to 
realign GAO's workforce. In addition, GAO employees recognize that 
attracting and retaining high-quality employees and managers throughout 
the organization is vitally important for the future of GAO. Employees 
thus generally support the provisions to offer flexible relocation 
reimbursements, provide upper-level hires with 6-hour leave accrual, 
and establish an executive exchange program with private sector 
organizations. Most employees commented positively on these authorities 
so long as there are internal controls to monitor and report on their 
use, as are present to provide accountability for other authorities 
throughout GAO.[Footnote 3]

Many Employees Are Concerned About The Provisions That Affect Pay:

Many employees expressed concern about the provisions that affect the 
determination of annual pay increases and pay retention. The opinions 
expressed by employees generally fall into three categories: (1) 
general concerns and some supporting views regarding changes in 
traditional civil service employment rules that could reduce the amount 
of annual pay increases provided for economic adjustments but provide 
greater opportunity for rewarding performance, (2) concerns about 
making a portion of annual economic adjustments variable based on 
performance assessment, and to a lesser extent (3) concerns about the 
loss of traditional pay retention protections.

Concerns and supporting views on proposed changes that could reduce 
annual pay provided for economic adjustments but provide greater 
rewards:

The first area of employee concern is proposed changes to traditional 
federal civil service employment rules that have historically provided 
a fixed annual increase for all federal employees determined by the 
President and the Congress. Government employees in general, and GAO 
employees in particular, often conduct work that can have far reaching 
implications and impacts. Such work can positively or negatively affect 
segments of the population and thereby the general public's perceptions 
of, and reactions to, the federal government, including Members of 
Congress. Over the years, the Congress has developed a bulwark of 
protections to shield federal workers from reprisals that might result 
from their service as employees. Included among these has been the 
process by which federal employees' salaries are annually adjusted as a 
result of the passage of, and signing into law, of the annual budget.

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

The Comptroller General has expressed his concern about trends in the 
executive branch that make it highly likely that the current civil 
service pay system will be the subject of comprehensive reform within 
the next few years. Citing federal agencies that already have many of 
these flexibilities, such as the Federal Aviation 
Administration[Footnote 5] and the new Department of Homeland Security, 
as well as agencies currently seeking reform, such as the Department of 
Defense, he has stated his belief that GAO needs to be "ahead of the 
curve.":

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

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

* A portion of appropriations historically intended to provide all 
federal employees with increases to keep pace with inflation and the 
cost of living in particular localities should not be tied to 
individual performance.

* GAO-based annual economic adjustments are more likely to be less 
than, rather than more than, amounts annually provided by the Congress; 
thus employees performing at lower (but satisfactory) levels who may 
not receive an equal or greater amount in the form of a bonus or 
dividend may experience an effective pay cut from amounts traditionally 
provided.

* The flexibility for the Comptroller General to use funds appropriated 
for cost-of-living adjustments for pay-for-performance purposes could 
imperil future GAO budgets by making that portion of the annual budget 
discretionary where it was once mandatory.

* The wide latitude provided in the proposal gives the Comptroller 
General broad discretion and limited accountability for determining 
whether employees receive annual across-the-board economic 
adjustments, the amount of such adjustments, and the timing of 
adjustments. This could result in unfair financial harm for some 
employees if the broad authorities were improperly exercised.[Footnote 
6]

* The Comptroller General has not made a compelling case regarding the 
need for these pay-related and other legislative changes, for example 
by showing that existing cost-of-living adjustment mechanisms are 
inaccurate or that the agency has had difficulty in attracting and 
retaining high-quality employees.

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

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

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

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

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

In addition, the provision may, to a limited extent, address a concern 
of some field employees by providing alternatives to reductions in 
force in times when mandated pay increases are not fully funded or in 
other extraordinary circumstances. For example, from 1992 to 1997, GAO 
underwent budgetary cuts totaling 33 percent (in constant fiscal year 
1992 dollars.) To achieve these budgetary reductions, GAO staff was 
reduced by 39 percent, primarily through field office closures and the 
associated elimination of field-based employees. While we hope the 
agency will never again have to manage budget reductions of this 
magnitude, this provides a painful example of the vulnerability of 
staffing levels, particularly in the field, to budgetary fluctuations. 
The proposed pay provisions would provide the Comptroller General with 
greater flexibility to manage any future budget crises by adjusting the 
annual pay increases of all employees without adversely and 
disproportionately impacting the careers and lives of field-based 
employees.

Concerns about making a portion of annual pay increases variable based 
on performance assessment:

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

These concerns are compounded by long-standing widespread employee 
concerns regarding the accuracy and validity of GAO's performance 
appraisal system, which is used for the current system of performance-
based pay adjustments. Any effort to increase the link between pay and 
performance implicitly relies upon the existence of a reliable method 
for gauging individual performance. We received comments that the 
varying levels of complexity, time frames, resource availability, and 
sensitivity of GAO work make it difficult to objectively assess 
individual performance and to fairly and accurately compare employees' 
performance with sufficient precision. In other words, some employees 
believe that the subjectivity inherent in the system does not provide a 
valid basis for distinguishing between subtle differences in 
performance that may be measured in tenths of a percentage point 
between performance categories. Employee concerns about performance 
assessment have not significantly changed as a result of the new 
competency-based system GAO implemented last year. The comments we have 
heard are consistent with the concerns expressed to the Congress by GAO 
employees in 1993:

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

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

Concerns about the loss of traditional pay retention protections:

To a lesser extent, some employees expressed concerns about the 
elimination of traditional federal employment rules related to grade 
and pay retention for employees who are demoted due to such conditions 
as a workforce restructuring or reclassification. The proposed 
legislation will allow the Comptroller General to set the pay of 
employees downgraded as a result of workforce restructuring or 
reclassification at their current rates (i.e., no drop in current pay), 
but with no automatic annual increase to basic pay until their salaries 
are less than the maximum rates of their new grades or bands.

Employee concern, particularly among some Band II analysts and mission 
support staff, focuses on the extent to which this provision may result 
in a substantial erosion in future pay, since there is a strong 
possibility that these two groups may be restructured in the near 
future. For example, one observation is that the salary range within 
pay bands is such that senior analysts who are demoted would likely 
wait several years for their next increase in pay or bonus. In this 
circumstance, employees would need to reconcile themselves to no 
permanent pay increases regardless of their performance. Some employees 
cited this potential negative impact on staff motivation and 
productivity and emphasized that to continue providing service at the 
level of excellence that the Congress and the American people expect 
from GAO, this agency needs the best contributions of all its midlevel 
and journeymen employees. However, the EAC recognizes that, absent this 
kind of authority and given some of the authorities already provided to 
the Comptroller General, some employees who may be demoted could 
otherwise face termination rather than diminished salary increases.

Employees Had Differing Opinions Regarding a Change in GAO's name:

Finally, employees had differing opinions regarding the provision to 
change GAO's name to the Government Accountability Office. Some 
employees are concerned that the proposed change in GAO's name to more 
accurately reflect the work that we do will damage GAO's "brand 
recognition." Most employees who oppose the name change do not see the 
current name as an impediment to doing our work or to attracting 
quality employees. Some employees expressed concern that the legacy of 
high-quality service to the Congress that is embedded in the name 
"United States General Accounting Office" might be lost by changing the 
name. Other employees support the name change and cited their own 
experiences in being recruited or recruiting others and in their 
interaction with other federal agencies. In their opinion, the title 
"General Accounting Office" reflects misunderstandings and incorrect 
assumptions about GAO's role and function by those who are not familiar 
with our operations and may serve as a deterrent to attracting 
employees who are otherwise not interested in accounting.

The EAC Appreciates the Comptroller General's Efforts to Address 
Concerns of GAO Employees About Pay-Related Human Capital II 
Provisions:

We appreciate the Comptroller General's efforts to involve the Employee 
Advisory Council and to solicit employee input through discussions of 
the proposal. As a result of employee feedback and feedback from GAO 
managers and the EAC, the Comptroller General has made a number of 
revisions and clarifications to the legislative proposal along with 
commitments to address concerns relating to the annual pay adjustment 
by issuing formal GAO policy to formally establish his intent to retain 
employees' earning power in implementing the authorities; by revising 
the performance management system; and by deferring implementation of 
pay changes until 2005.

Retention of Earning Power and Locality Pay Parity:

Key among the commitments made by the Comptroller General is his 
assurance to explicitly consider factors such as cost-of-living and 
locality-pay differentials among other factors, both items that were 
not in the preliminary proposal. In addition, the Comptroller General 
has said that employees who are performing adequately will be assured 
of some annual increase that maintains spending power. He outlined his 
assurance in GAO's weekly newsletter for June 30th that successful 
employees will not witness erosion in earning power and will receive an 
annual adjustment commensurate with locality-specific costs and 
salaries. According to the Comptroller General, pay protection 
commitments that are not included in the statute will be incorporated 
in the GAO orders required to implement the new authorities. This is 
consistent with the approach followed when GAO made similar pay 
protection commitments during the conversion to broad bands in the 
1980s. To the extent that these steps are taken, overall employee 
opinion of the changes should improve because much of the concern has 
focused on making sure that staff who are performing adequately do not 
witness economic erosion in their pay.

Planned Revisions to Performance Management:

In response to concerns regarding the performance management system and 
the related variable elements of annual pay increases raised by the 
EAC, employees, and senior managers, the Comptroller General has told 
employees that he will provide increased transparency in the area of 
ratings distributions, for example by releasing summary-level 
performance appraisal results. In addition, the Comptroller General has 
stated that he plans to take steps to improve the performance 
management system that could further reduce any disparities. 
Specifically, on June 26, the Comptroller General released a 
"Performance Management System Improvement Proposal for the FY 2003 
Performance Cycle" that outlines proposed short-term improvements to 
the analyst performance management system that applies to the majority 
of GAO employees. These include additional training for staff and 
performance managers and a reduction in the number of pay categories 
from five to four. A number of longer-term improvements to the 
performance appraisal system requiring validation are also under 
consideration, including weighting competencies and modifying, adding, 
or eliminating competencies. For all employees to embrace any 
additional pay-for-performance efforts, it is vital that the 
Comptroller General take steps that will provide an increased level of 
confidence that the appraisal process is capable of accurately 
identifying high performers and fairly distinguishing between levels of 
performance.

Deferred Implementation of Pay Provisions:

Finally, the Comptroller General has agreed to delay implementation of 
the pay-for-performance provisions of the proposal until October 1, 
2005. This change should provide an opportunity to assess efforts to 
improve the annual assessment process and lessen any impact of changes 
in the permanent annual pay increase process for employees approaching 
retirement. It should also provide an opportunity to implement a number 
of measures designed to improve confidence in the annual assessment 
process.

Conclusion:

In summary, as GAO employees we are proud of our work assisting the 
Congress and federal agencies to make government operations more 
efficient and effective. Although all of us would agree that our agency 
is not perfect, the EAC believes GAO is making a concerted effort to 
become a more effective organization. We will continue to work closely 
with management to improve GAO, particularly in efforts to implement 
and monitor any additional authorities granted to the Comptroller 
General. We believe that it is vital that we help to develop and 
implement innovative approaches to human capital management that will 
enable GAO to continue to meet the needs of the Congress; further 
improve the work environment to maximize the potential of our highly 
skilled, diverse, and dedicated workforce; and serve as a model for the 
rest of the federal government.

Madam Chairwoman, this concludes my formal statement. I would be 
pleased to answer any questions you may have.

FOOTNOTES

[1] While these organizations historically operated under separate 
charters by the Comptroller General, they now are included in the 
charter of the EAC and appoint representatives to serve on the Council. 


[2] These members are elected by their constituency to 2-year terms and 
may seek reelection once.

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

[4] While the goal of the act is to achieve full comparability, namely 
pay parity, between federal employees and their nonfederal counterparts 
on a locality-by-locality basis, the law has never been implemented as 
originally enacted as a result of a provision in the law that 
authorizes the President to offer an alternative pay plan in times of 
war or "serious economic conditions affecting the general welfare."

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

[6] While management's salary increase decisions for employees are not 
subject to appeal under the current system, some employees feel that 
the application of any methodology that GAO establishes to determine 
the amount of annual economic increases under the proposed approach 
should be subject to appeal.