GAO: A Unique Agency with a Hybrid System

As an arm of the legislative branch, GAO exists to support the Congress in  meeting its constitutional responsibilities and to help improve the  performance and ensure the accountability of the federal government for  the benefit of the American people.  Today, GAO is a multidisciplinary  professional services organization, comprised of about 3,250 employees,  that conducts a wide range of financial and performance audits, program  evaluations, management reviews, investigations, and legal services  spanning a broad range of government programs and functions.  GAO’s  work covers everything from the challenges of securing our homeland, to  the demands of an information age, to emerging national security threats,  and the complexities of globalization.  We are committed to transforming  how the federal government does business and to helping government  agencies become organizations that are more results oriented and  accountable to the public.  We are also committed to leading by example in  all major management areas.
Given GAO’s role as a key provider of information and analyses to the  Congress, maintaining the right mix of technical knowledge and subject  matter expertise as well as general analytical skills is vital to achieving the  agency’s mission.  Carrying out GAO’s mission today is a multidisciplinary  staff reflecting the diversity of knowledge and competencies needed to  deliver a wide array of products and services to support the Congress.  Our  mission staff—at least 67 percent of whom have graduate degrees—hold  degrees in a variety of academic disciplines, such as accounting, law,  engineering, public administration, economics, and social and physical  sciences.  I am extremely proud of our GAO employees and the difference  that they make for the Congress and the nation.  They make GAO the  world-class organization that it is, and I think it is fair to say that while they  account for about 80 percent of our costs, they constitute 100 percent of  our real assets.
Because of our unique role as an independent overseer of federal  expenditures, fact finder, and honest broker, GAO has evolved into an  agency with hybrid systems.  This is particularly evident in GAO’s  personnel and performance management systems.  Unlike many executive  branch agencies, which have either recently received or are just requesting  new broad-based human capital tools and flexibilities, GAO has had certain  human capital tools and flexibilities for over two decades.  As a result, we  have been able to some extent to operate our personnel system with a  degree of independence that most agencies in the executive branch do not  have.  For example, we are excepted from certain provisions of Title 5,  which governs the competitive service, and we are not subject to Office of  Personnel Management (OPM) oversight.
Until 1980, our personnel system was indistinguishable from those of  executive branch agencies—that is, GAO was subject to the same laws,  regulations, and policies as they were.  However, with the expansion of  GAO’s role in congressional oversight of federal agencies and programs,  concerns grew about the potential for conflicts of interest.  Could GAO  conduct independent and objective reviews of executive branch agencies,  such as OPM, when these agencies had the authority to review GAO’s  internal personnel activities?  As a result, GAO worked with the Congress  to pass the GAO Personnel Act of 1980, the principal goal of which was to  avoid potential conflicts by making GAO’s personnel system more  independent of the executive branch.
Along with this independence, the act gave GAO greater flexibility in hiring  and managing its workforce.  Among other things, it granted the  Comptroller General authority to  appoint, promote, and assign employees without regard to Title 5  requirements in these areas;  set employees’ pay without regard to the federal government’s General  Schedule (GS) pay system’s classification standards and requirements;  and   establish a merit pay system for appropriate officers and employees.
By excepting our agency from the above requirements, the GAO Personnel  Act of 1980 allowed us to pursue some significant innovations in managing  our people.  One key innovation was the establishment of a “broad  banding,” or “pay banding,” approach for classifying and paying our Analyst  and Attorney workforce in 1989.  This was coupled with the adoption of a  pay for performance system for this portion of our workforce.  Therefore,  while other agencies are only now requesting the authority to establish  broad banding and pay for performance systems, GAO has had almost 15  years of experience with such systems.
Although GAO’s personnel and pay systems are not similar to those of  many executive branch agencies, I must emphasize that in important ways,  our human capital policies and programs are very much and will continue  to remain similar to those of the larger federal community.  GAO’s current  human capital proposal will not change our continued support for certain  national goals (e.g., commitment to federal merit principles, protection  from prohibited personnel practices, employee due process through a  specially created entity—the Personnel Appeals Board (PAB), and  application of veterans’ preference consistent with its application in the  executive branch for appointments and all appropriate reductions-in- force).  Furthermore, our pay system is and will continue to be consistent  with the statutory principle of equal pay for equal work while making pay  distinctions on the basis of an individual’s responsibilities and  performance.  In addition, we are covered and will remain covered by Title  VII of the Civil Rights Act, which forbids employment discrimination.  At  GAO, we also emphasize opportunity and inclusiveness for a diverse  workforce and have zero tolerance for discrimination of any kind.  We have  taken and will continue to take disciplinary action when it “will promote  the efficiency of the service”—which for us includes such things as GAO’s  ability to do its work and accomplish its mission.
Although we are not subject to OPM oversight, we are nevertheless subject  to the oversight of the Congress including our appropriations  committees—the Senate Committee on Appropriations’ Subcommittee on  the Legislative Branch and the House Committee on Appropriations’  Subcommittee on Legislative—and our oversight committees—the Senate  Committee on Governmental Affairs and the House Committee on  Government Reform.  In addition, GAO’s management actions are subject  to the review of an independent five member board, the Personnel Appeals  Board, which performs functions similar to those provided by the Merit  Systems Protection Board for federal executive branch employees’  personnel grievances.  The Congress authorized the establishment of the  PAB specifically for GAO in order to protect GAO’s independence as an  agency.  As with other federal executive branch employees, our employees  have the right to appeal certain kinds of management actions including  removal, suspension for more than 14 days, reductions in pay or grade,  furloughs of not more than 30 days, a prohibited personnel practice, an  action involving prohibited discrimination, a prohibited political activity, a  within-grade denial, unfair labor practices or other labor relations issue.   However, they do so to the PAB rather than the MSPB.
While we currently do not have any bargaining units at GAO, our  employees are free to join employee organizations, including unions.  In  addition, we engage in a range of ongoing communication and coordination  efforts to empower our employees while tapping their ideas.  For example,  we regularly discuss a range of issues of mutual interest and concern with  our democratically elected Employee Advisory Council (EAC).  Chris  Keisling, who is a Band III field office representative of the EAC, is  testifying with me today.  In addition, I consult regularly with our managing  directors on issues of mutual interest and concern.  In that spirit, I will  consult with the managing directors and the EAC before implementing the  provisions related to our human capital proposal.  As we did with the  flexibilities granted it under Public Law 106-303, the GAO Personnel  Flexibilities Act, we will implement the authorities granted under this  provision of our proposal only after issuing draft regulations and providing  all employees notice and an opportunity for comment.  Specifically, for the  authorities granted to us under Public Law 106-303, we posted the draft  regulations on our internal Web site and sent a notice to all GAO staff  advising them of the draft regulations and seeking their comments.

	Key Elements of GAO’s Proposal

GAO’s proposal combines diverse initiatives that, collectively, should  further GAO’s ability to enhance our performance, assure our  accountability, and help ensure that we can attract, retain, motivate, and  reward a top quality and high-performing workforce currently and in future  years.  These initiatives should also have the benefit of helping guide other  agencies in their human capital transformation efforts.  Specifically, we are  requesting that the Congress provide us the following additional human  capital tools and flexibilities:   make permanent GAO’s 3-year authority to offer voluntary early  retirement and voluntary separation payments;   allow the Comptroller General to adjust the rates of basic pay of GAO on  a separate basis than the annual adjustments authorized for employees  of the executive branch;   permit GAO to set the pay of an employee demoted as a result of  workforce restructuring or reclassification at his or her current rate  with no automatic annual increase to basic pay until his or her salary is  less than the maximum rate of  their new position;   provide authority in appropriate circumstances to reimburse employees  for some relocation expenses when that transfer does not meet current  legal requirements for entitlement to reimbursement but still benefits  GAO;   provide authority to put upper-level hires with less than 3 years of  federal experience in the 6-hour leave category;   authorize an executive exchange program with private sector  organizations working in areas of mutual concern and involving areas in  which GAO has a supply-demand imbalance; and  change GAO’s legal name from the “General Accounting Office” to the  “Government Accountability Office.”
I will go into more detail later in my testimony on the details and rationale  for each of these proposals.

	Process for Developing the Proposal

In developing our proposal, we used a phased approach that involved   (1) developing a straw proposal, (2) vetting the straw proposal broadly  both externally and internally, and (3) making appropriate adjustments  based on comments and concerns raised during the vetting process.   As we  have previously testified, many of the management tools and flexibilities  we needed to pursue modern human capital management approaches are  already available to us and we have used them.  We have chosen to come to  the Congress for legislation only where the tools and flexibilities we have  were inadequate for addressing the challenges we faced.  For example, the  Congress enacted Public Law 106-303 to provide us with certain narrowly  tailored flexibilities we needed to reshape our workforce and establish  senior-level technical positions in critical areas.  These flexibilities were  needed to help GAO address the past decade’s dramatic downsizing  (approximately 40 percent from 1992 through 1997) combined with a  significant increase in the retirement-eligible workforce that jeopardized  our ability to perform our mission in the years ahead.
In developing our preliminary proposal, we gathered suggestions for  addressing GAO’s human capital challenges as well as challenges faced by  the rest of the federal government, discussed and debated them internally,  and compiled a preliminary list of proposals.  We received a number of  viable proposals that we separated into two groups: (1) proposals that  would be more applicable government-wide and (2) proposals GAO should  undertake.  I had our Office of General Counsel review the proposals GAO  should undertake to determine whether we needed to seek legislative  authority to implement them or whether I could implement them under the  Comptroller General’s existing authority.
Mindful of the need to keep the Congress appropriately informed, my staff  and I began our outreach to GAO’s appropriations and oversight  committees on the need for additional human capital flexibilities beginning  late last year.   In early spring of this year, we shared with these committees  a confidential draft of a preliminary draft proposal.  We also advised them  that we planned to conduct a broad range of outreach and consultation on  the proposal with our employees and other interested parties and that we  would send them our revised legislative proposal at a later date.  We  conducted an extensive outreach and consultation effort with members of  the Congress, including chairmen and ranking minority members of our  appropriations and oversight committees and a number of local delegation  members; congressional staff; the Director of OPM; the Deputy Director for  Management of the Office of Management and Budget; public sector  employee associations and unions; and various “good government”  organizations.
Within GAO, members of the Executive Committee (EC), which includes  our Chief Operating Officer, our General Counsel, our Chief Mission  Support Officer and me, engaged in an extensive and unprecedented range  of outreach and consultation with GAO employees.  This outreach included  numerous discussions with our managing directors, who manage most of  GAO’s workforce, and members of the EAC.
The EAC is an important source of input and a key communications link  between executive management and the constituent groups its members  represent.  Comprising employees who represent a cross-section of the  agency, the EAC meets at least quarterly with me and members of our  senior executive team.  The EAC’s participation is an important source of  front-end input and feedback on our human capital and other major  management initiatives.  Specifically, EAC members convey the views and  concerns of the groups they represent, while remaining sensitive to the  collective best interest of all GAO employees; propose solutions to  concerns raised by employees; provide input to and comment on GAO  policies, procedures, plans, and practices; and help to communicate  management’s issues and concerns to employees.
I have also used my periodic “CG chats,” closed circuit televised broadcasts  to all GAO employees, as a means of explaining our proposal and  responding to staff concerns and questions.  Specifically, I have held two  televised chats to inform GAO staff about the proposal.  One of these chats  was conducted in the form of a general listening session, open to all  headquarters and field office staff,  featuring questions from members of  the EAC and field office employees.  I have also discussed the proposal  with the Band IIs (GS-13-14 equivalents) in sessions held in April 2003, and  with our Senior Executive Service (SES) and Senior Level members at our  May off-site meeting. In addition to my CG chats, I have personally held a  number of listening sessions, including a session with members of our  Office of General Counsel, two sessions with our administrative support  staff, and sessions with staff in several field offices.  Furthermore, the Chief  Operating Officer represented me in a listening session with Band I field  office personnel.  Finally, I have also personally received and considered a  number of E-mails, notes, and verbal comments on the human capital  proposal.
I would like to point out to others seeking human capital flexibilities that  the outreach process, while necessary, is indeed time-consuming and  requires real and persistent commitment on the part of an agency’s top  management team.  In order for the process to work effectively, it also  requires an ongoing education and dialogue process that will, at times,  involve candid, yet constructive, discussion between management and  employees.   This is, however, both necessary and appropriate as part of the  overall change management process.  To facilitate the education process on  the proposal, we posted materials on GAO’s internal website, including  Questions and Answers developed in response to employees’ questions and  concerns, for all employees to review.  Unfortunately, others who have  sought and are seeking additional human capital flexibilities have not  employed such an extensive outreach process.

	Nature of GAO Employee Concerns

Based on feedback from GAO employees, there is little or no concern  relating to most of the provisions in our proposal.  There has been  significant concern expressed over GAO’s proposal to decouple GAO’s pay  system from that of the executive branch.  Some concerns have also been  expressed regarding the pay retention provision and the proposed name  change.  As addressed below, we do believe, however, that these employee  concerns, have been reduced considerably due to the clarifications,  changes, and commitments resulting from our extensive outreach and  consultation effort.
On the basis of various forms of GAO employee feedback, it is not  surprising, since pay is important to all employees, that the provision that  has caused the most stir within GAO has been the pay adjustment  provision.  Fundamentally, some of our employees would prefer to remain  with the executive branch’s GS system for various types of pay increases.   There are others close to retirement who are concerned with their “high  three” and how the modified pay system, when fully implemented, might  affect permanent base pay, which is the key component of their retirement  annuity computation.  Overall, there is a great desire on the part of GAO  employees to know specifically how this authority would be implemented.
It is important to note that, even in the best of circumstances, it is difficult  to garner a broad-based consensus of employee support for any major pay  system changes.  While it is my impression, based on employee feedback,  that we have made significant strides in allaying the significant initial  concerns expressed by employees regarding the pay adjustment provision,  I believe that some of these concerns will remain throughout  implementation.  In addition, some can never be resolved because they  involve philosophical differences or personal interest considerations on  behalf of individual GAO employees.
GAO’s history with pay banding certainly is illustrative of how difficult it is  for an organization to allay employee fears even in the face of obvious  benefits.  While history has proven that an overwhelming majority of GAO  employees have benefited from GAO’s decision to migrate our Analysts and  Attorneys into pay banding and pay for performance systems, there was  significant opposition by GAO employees regarding the decision to move  into these systems.  The experience of the executive branch’s pay  demonstration projects involving federal science and technology  laboratories shows that employee support at the beginning of the pay  demonstration projects ranged from 34 percent to 63 percent.  In fact, OPM  reports that it takes about 5 years to get support from two-thirds of  employees with managers generally supporting demonstrations at a higher  rate than employees.
Following the pay adjustment provision but a distant second in terms of  employee concern, has been the pay reclassification provision, which  would allow GAO employees demoted as a result of workforce  restructuring or reclassification to keep their basic pay rates; however,  future pay increases would be set consistent with the new positions’ pay  parameters.  Currently, employees subject to a reduction-in-force or  reclassification can be paid at a rate that exceeds the value of their duties  for an extended period.
A distant third in terms of employee concern is the proposed name change  from the “General Accounting Office’ to the “Government Accountability  Office,” which would allow the agency’s title to more accurately reflect its  mission, core values, and work.  My sense is that some GAO employees  who have been with GAO for many years have grown comfortable with the  name and may prefer to keep it.   At the same time, I believe that a  significant majority of our employees support the proposed name change.   Importantly, all of our external advisory groups, including the Comptroller  General’s Advisory Council, consisting of distinguished individuals from  the public and private sectors, and the Comptroller General’s Educators  Advisory Council, consisting of distinguished individuals from the  academic community, and a variety of “good government” groups strongly  support the proposed name change.

	Changes Made in Response to Employee Feedback

The members of the EC and I took our employees’ feedback seriously and  have seriously considered their concerns.  Key considerations in our  decision making were our institutional responsibility as leaders and  stewards of GAO and the overwhelming support expressed through  anonymous balloting by our senior executives, who also serve as leaders  and stewards for GAO, for proceeding with all of the provisions of our  human capital proposal, including the pay adjustment provision.   Specifically, in a recent confidential electronic balloting of our senior  executives, support for each element of our proposal ranged from over 2 to  1 to unanimous, depending on the provision.  Support for the proposed pay  adjustment provision was over 3 to 1, and support for the proposed pay  protection provision was over 4 to 1.  Given this and other considerations,  ultimately, we decided to proceed with the proposal but adopted a number  of the suggestions made by employees in these sessions, including several  relating to the proposal to decouple GAO annual pay adjustments from  those applicable to many executive branch agencies.
A key suggestion adopted include a minimum 2-year transition period for  ensuring the smooth implementation of the pay provisions which would  also allow time for  developing appropriate methodologies and issuing  regulations for notice and comment by all employees.  Another key  suggestion adopted was the commitment to guarantee annual across the  board purchase power protection and to address locality pay  considerations to all employees rated as performing at a satisfactory level  or above (i.e., meeting expectations or above) absent extraordinary  economic circumstances or severe budgetary constraints.  We have chosen  to implement this guarantee through a future GAO Order rather than  through legislative language because prior “pay protection” guarantees  relating to pay banding made by my predecessor, Comptroller General  Charles A. Bowsher, used this means effectively to document and  operationalize that guarantee.  I have committed to our employees that I  would include this guarantee in my statement here today so that it could be  included as part of the legislative record.  Additional safeguards relating to  our pay proposal are set forth below.
The following represents additional information regarding our specific  proposal.

	Voluntary Early Retirement and Separation Incentive Payment Authorities

Section 2 of our proposal would make permanent the authority of GAO  under section 1 and 2 of Public Law 106-303, the GAO Personnel  Flexibilities Act of 2000, to offer voluntary early retirements (commonly  termed “early outs”) and voluntary separation payments (commonly  termed “buyouts”) to certain GAO employees when necessary to realign  GAO’s workforce in order to meet budgetary or mission needs, correct skill  imbalances, or reduce high-grade positions.  We believe that we have  behaved responsibly in exercising the flexibilities that the Congress  granted us and deserve a permanent continuation of these authorities.  In  addition, the two flexibilities which we would like to be made permanent  are narrowly drawn and voluntary in nature, since the employees have the  right to decide if they are interested in being considered for the benefits.   Further, the provisions also have built in limits: no more than 10 percent of  the workforce in any one year can be given early outs and no more than 5  percent can be given buyouts.
GAO’s transformation effort is a work in progress, and for that reason, the  agency is seeking legislation to make the voluntary early retirement  provision in section 1 of the law permanent. While the overall number of  employees electing early retirement has been relatively small, GAO  believes that careful use of voluntary early retirement has been an  important tool in incrementally improving the agency’s overall human  capital profile. Each separation has freed resources for other uses, enabling  GAO to fill an entry-level position or to fill a position that will reduce a skill  gap or address other succession concerns.   Similarly, we are seeking  legislation to make section 2—authorizing the payment of voluntary  separation incentives—permanent.    Although GAO has not yet used its  buyout authority and has no plans to do so in the foreseeable future, we are  seeking to retain this flexibility.  The continuation of this provision  maximizes the options available to the agency to deal with future  circumstances, which cannot be reasonably anticipated at this time.   Importantly, this provision seems fully appropriate since the Homeland  Security Act of 2002 provides most federal agencies with permanent early  out and buyout authority.
Public Law 106-303 required that GAO perform an assessment of the  exercise of the authorities provided under that law, which included the  authority for the Comptroller General to provide voluntary early retirement  and voluntary separation incentive payments.  With your permission, I  would like to submit the assessment entitled Assessment of Public Law  106-303: The Role of Personnel Flexibilities in Strengthening GAO’s  Human Capital, issued on June 27, 2003, for the record.   I will now  highlight for you our observations from that assessment on voluntary early  retirement and buyouts.
Voluntary Early Retirement   Public Law 106-303 also allows the Comptroller General to offer voluntary  early retirement to up to 10 percent of the workforce when necessary or  appropriate to realign the workforce to address budgetary or mission  constraints; correct skill imbalances; or reduce high-grade, supervisory, or  managerial positions.  This flexibility represents a proactive use of early  retirement to shape the workforce to prevent or ameliorate future  problems.  GAO Order 2931.1, Voluntary Early Retirement, containing the  agency’s final regulations, was issued in April 2001.  Under the regulations,  each time the Comptroller General approves a voluntary early retirement  opportunity, he establishes the categories of employees who are eligible to  apply.  These categories are based on the need to ensure that those  employees who are eligible to request voluntary early retirement are those  whose separations are consistent with one or more of the three reasons for  which the Comptroller General may authorize early retirements.  Pursuant  to GAO’s regulations, these categories are defined in terms of one or more  of the following criteria:  organizational unit or subunits,  grade or band level,   skill or knowledge requirements,  other similar factors that the Comptroller General deems necessary and  appropriate.
Since it is essential that GAO retain employees with critical skills as well as  its highest performers, certain categories of employees have been ineligible  under the criteria.  Some examples of ineligible categories are employees  receiving retention allowances because of their unusually high or unique  qualifications; economists, because of the difficulty that the agency has  experienced in recruiting them; and staff in the information technology  area.  In addition, employees with performance appraisal averages above a  specified level have not been eligible under the criteria.
To give the fullest consideration to all interested employees, however, any  employee may apply for consideration when an early retirement  opportunity is announced, even if he or she does not meet the stated  criteria.  Furthermore, under our order, the Comptroller General may  authorize early retirements for these applicants on the basis of the facts  and circumstances of each case.  The Comptroller General or his EC  designee considers each applicant and makes final decisions based on  GAO’s institutional needs.  Only employees whose release is consistent  with the law and GAO’s objective in allowing early retirement are  authorized to retire early.  In some cases, this has meant that an employee’s  request must be denied.
GAO held its first voluntary early retirement opportunity in July 2001.   Employees who were approved for early retirement were required to  separate in the first quarter of fiscal 2002.  As required by the act,  information on the fiscal 2002 early retirements was reported in an  appendix to our 2002 Performance and Accountability Report.  Another  voluntary early retirement opportunity was authorized in fiscal 2003, and  employees were required to separate by March 14, 2003.  In anticipation of  the 3-year sunset on our authority to provide voluntary early retirements, I  have recently announced a final voluntary early retirement opportunity  under our current authority.  Table 1 provides the data on the number of  employees separated by voluntary early retirement as of May 30, 2003.
As you can see from the table, of the 79 employees who separated from  GAO through voluntary early retirement, 66, or 83.5 percent, were high- grade, supervisory, or managerial employees.  High-grade, supervisory, or  managerial employees are those who are GS-13s or above, if covered by  GAO’s GS system; Band IIs or above, if covered by GAO’s banded systems  for Analysts and Attorneys; or in any position in GAO’s SES or Senior-Level  system.
In recommending that GAO’s voluntary early out authority be made  permanent, I would like to point to our progress in changing the overall  shape of the organization. The 1990s were a difficult period for ensuring  that GAO’s workforce would remain appropriately sized, shaped, and  skilled to meet client demands and agency needs.  Severe downsizing of the  workforce, including a suspension of most hiring from 1992 through 1997,  and constrained investments in such areas as training, performance  incentives, rewards, and enabling technology left GAO with a range of  human capital and operational challenges to address.  Over 3 years ago,  when GAO sought additional human capital flexibilities, our workforce was  sparse at the entry level and plentiful at the midlevel.  We were concerned  about our ability to support the Congress with experienced and  knowledgeable staff over time, given the significant percentage of the  agency’s senior managers and analysts reaching retirement eligibility and  the small number of entry-level employees who were training to replace  more senior staff.
As illustrated in figure 1, by the end of fiscal year 2002, GAO had almost a  74 percent increase in the proportion of staff at the entry level (Band I)  compared with fiscal year 1998.  Also, the proportion of the agency’s  workforce at the midlevel (Band II) decreased by 16 percent.

		Voluntary Separation Payments

In addition to authorizing voluntary early retirement for GAO employees,  Public Law 106-303 permits the Comptroller General to offer voluntary  separation incentive payments—buyouts—when necessary or appropriate  to realign the workforce to meet budgetary constraints or mission needs;  correct skill imbalances; or reduce high-grade, supervisory, or managerial  positions.  Under the act, up to 5 percent of employees could be offered  such an incentive, subject to criteria established by the Comptroller  General.
The act requires GAO to deposit into the U.S. Treasury an amount  equivalent to 45 percent of the final annual basic salary of each employee to  whom a buyout is paid.  The deposit is in addition to the actual buyout  amount, which can be up to $25,000 for an approved individual.  Given the  many demands on agency resources, these costs present a strong financial  disincentive to use the provision if at all.  GAO anticipates little, if any, use  of this authority because of the associated costs.  For this reason, as well as  to avoid creating unrealistic employee expectations, GAO has not  developed and issued agency regulations to implement this section of the  act.  Nevertheless, as stated earlier, it is prudent for us to seek the  continuation of this provision because it maximizes the options available to  the agency to deal with future circumstances.  Since GAO is also eligible to  request buyouts under the provisions of the Homeland Security Act, the  agency will consider its options under this provision as well.  However,  under the Homeland Security Act, GAO would have to seek OPM approval  of any buyouts, which raises serious independence concerns.

	Annual Pay Setting Policy and Adjustments

Section 3 and 4 of our proposal would provide GAO greater discretion in  determining the annual across the board and locality pay increases for our  employees.  Under our proposal, GAO would have the discretion to set  annual pay increases by taking into account alternative methodologies  from those used by the executive branch and various other factors, such as  extraordinary economic conditions or serious budgetary constraints.   While the authority requested may initially appear to be broad based, there  are compelling reasons why GAO ought to be given such authority.  First, as  I discussed at the beginning of my testimony, GAO is an agency within the  legislative branch and already has a hybrid pay system established under  the authority the Congress granted  over two decades ago.  Therefore, our  proposal represents a natural evolution in GAO’s pay for performance  system.  Second, GAO’s proposal is not radical if viewed from the vantage  point of the broad-based authority that has been granted the Department of  Homeland Security (DHS) under the Homeland Security Act of 2002;  agencies that the Congress has already granted the authority to develop  their own pay systems; the authorities granted to various demonstration  projects over the past two decades; and the authority Congress is currently  contemplating providing the Department of Defense (DOD).  Third, GAO  already has a number of key safeguards and has plans to build additional  safeguards into our modified pay system if granted this authority.
Our proposal seeks to take a constructive step in addressing what has been  widely recognized as fundamental flaws in the federal government’s  approach to white-collar pay.  These flaws and the need for reform have  been addressed in more detail in OPM’s April 2002 White Paper, A Fresh  Start For Federal Pay: A Case for Modernization, and more recently the  National Commission on the Public Service’s January 2003 report on  revitalizing the public service.  The current federal pay and classification  system was established over 60 years ago for a federal workforce that was  made up largely of clerks performing routine tasks which were relatively  simple to assess and measure.  Today’s federal workforce is composed of  much higher graded and knowledge-based workers.
Although there have been attempts over the years to refine the system by  enacting such legislation as the Federal Employees Pay Comparability Act  (FEPCA) which sought to address, among other things, the issue of pay  comparability with the nonfederal sector, the system still contains certain  fundamental flaws.  The current system emphasizes placing employees in a  relative hierarchy of positions based on grade; is a “one size fits all  approach” since it does not recognize changes in local market rates for  different occupations; and is performance insensitive in that all employees  are eligible for the automatic across the board pay increases regardless of  their performance.  Specifically, the annual across the board base pay  increase, also commonly referred to as the cost of living adjustment  (COLA) or the January Pay Increase which the President recommends and  the Congress approves, provides a time driven annual raise keyed to the  Employment Cost Index (ECI) to all employees regardless of performance.   In certain geographic areas, employees receive a locality adjustment tied to  the local labor markets.  However, in calculating the locality adjustment,  for example, it is my understanding that FEPCA requires the calculation of  a single average, based on the dominant federal employer in an area, which  does not sufficiently recognize the differences in pay rates for different  occupations and skills. In view of the fact that today we are in a knowledge- based economy competing for the best knowledge workers in the job  market, I believe that new approaches and methodologies are warranted.   This is especially appropriate for GAO’s highly educated and skilled  workforce.
Our proposed pay adjustment provision along with the other provisions of  GAO’s human capital proposal are collectively designed to help GAO  maintain a competitive advantage in attracting, motivating, retaining, and  rewarding a high performing and top-quality workforce both currently and  in future years.  First, under our proposal, GAO would no longer be  required to provide automatic pay increases to employees who are rated as  performing at a below satisfactory level.  Second, when the proposal is fully  implemented, GAO would be able to allocate more of the funding— currently allocated for automatic across-the-board pay adjustments to all  employees—to permanent base pay adjustments that would vary based on  performance.   In addition, our proposal would affect all GAO, non-wage  grade employees, including the SES and Senior Level staff.
Ultimately, if GAO is granted this authority, all GAO employees who  perform at a satisfactory level will receive an annual base pay adjustment  composed of purchase power protection and locality based pay increases  absent extraordinary economic circumstances or severe budgetary  constraints.  GAO will be able to develop and apply its own methodology  for annual cost-of-living and locality pay adjustments.  The locality pay  increase would be based on compensation surveys conducted by GAO and  which would be tailored to the nature, skills, and composition of GAO’s  workforce.   The performance part of an employee’s annual raise would  depend on the level of the employee’s performance and that employee’s pay  band.  We estimate that at least 95 percent of the workforce will qualify for  an additional performance-based increase.   However, under this provision,  employees who perform below a satisfactory level will not receive an  annual increase of either type.

		How GAO Plans to Use This Authority

GAO’s major non-SES pay groups include (1) Analysts and Attorneys which  comprises the majority of our workforce and is our mission group, (2) the  Professional Development Program staff (PDP) which is our entry level  mission group, (3) the Administrative Professional Support Staff (APSS),  which is our mission support group for the most part, and (4) Wage Grade  employees who primarily operate our print plant.  Each of these groups  currently operate in a different pay system.  Generally, our mission staff are  all in pay bands whereby they currently receive the annual across-the- board base pay increase and locality pay increase similar to the GS pay  system, along with performance-based annual increases that are based on  merit.  Generally, our mission support staff, with some exceptions, remain  in a system similar to the GS pay system with its annual across- the-board  pay increases, locality pay, quality step increases, and within grade  increases.  We are currently in the process of migrating the mission support  staff into pay bands and a pay for performance system.  Our Wage Grade  staff will continue to be covered by the federal compensation system for  trade, craft, and laboring employees.  Because of the small number of  employees and the nature of their work, we have no plans to apply the pay  adjustment provision authority to this group.
I would like to point out the tables in appendices I through IV, which  succinctly describe how GAO plans to operationalize our authority under  our proposed annual pay adjustment provision over time.

		GAO’s Proposed Pay Authority Is Reasonable

GAO’s proposal for additional pay flexibility is reasonable in view of the  authority the Congress has already granted DHS through the Homeland  Security Act of 2002; the other agencies for whom the Congress has granted  the authority to develop their own pay systems; the demonstration projects  that OPM has authorized; and the authorities that other agencies in the  executive branch are currently seeking (e.g., DOD).
While we are aware that the passage of the Homeland Security Act of 2002  was not without its difficult moments,  particularly with respect to the  broad-based authorities granted the department, we are also aware that the  process employed by DOD and certain of its human capital proposals are  highly controversial.  It is important to point out that GAO’s proposal and  proposed pay flexibilities pale in respect to those granted to the DHS and to  those requested by the DOD in the Defense Transformation for the 21st  Century Act of 2003. Collectively, these two agencies represent almost 45  percent of the non-postal federal civilian workforce.  Specifically, in  November 2002, the Congress passed the Homeland Security Act of 2002,  which created DHS and provided the department with significant  flexibilities to design a modern human capital management system, which  could have the potential, if properly developed, for application  governmentwide.  DOD’s proposed National Security Personnel System  (NSPS) would provide wide-ranging changes to its civilian personnel pay  and performance management systems, collective bargaining, rightsizing,  and a variety of other human capital areas.  NSPS would enable DOD to  develop and implement a consistent, DOD-wide civilian personnel system.
In addition to DHS, there are a number of federal agencies with authority  for their own pay systems.  Some of these agencies are, for example, the  Congressional Budget Office, which is one of our sister agencies in the  legislative branch; the Federal Aviation Administration (FAA); the  Securities and Exchange Commission (SEC) ; and the Office of the  Comptroller of the Currency (OCC) within the Department of the Treasury.   When the Congress created the CBO in 1974, it granted that legislative  branch agency significant flexibilities in the human capital area.  For  example, CBO has “at will” employment.  In addition, CBO is not subject to  the annual executive branch pay adjustments.  Further, CBO has extensive  flexibility regarding its pay system subject only to certain statutory annual  compensation limits.
Furthermore, there are twelve executive branch demonstration projects  involving pay for performance.  These projects have taken different  approaches to the sources of funding for salary increases that are tied to  performance and not provided as entitlements.  Many of the demonstration  projects reduce or deny the annual across the board base pay increase for  employees with unacceptable ratings (e.g., the Department of Navy’s China  Lake demonstration, DOD’s Civil Acquisition Workforce demonstration, the  Department of Air Force’s Research Laboratory demonstration, and the  Department of Navy’s Research Laboratory demonstration, among others.)    Others, including the National Institute of Standards and Technology and  the Department of Commerce demonstration projects, deny both the  annual across the board base pay increase and the locality pay adjustment  for employees with unacceptable ratings.
Currently, this Congress is considering a NASA human capital proposal.   This proposal would provide NASA with further flexibilities and authorities  for attracting, retaining, developing, and reshaping a skilled workforce.  These include a scholarship-for-service program; a streamlined hiring  authority for certain scientific positions; larger and more flexible  recruitment, relocation, and retention bonuses; noncompetitive  conversions of term employees to permanent status; a more flexible critical  pay authority; a more flexible limited-term appointment authority for the  SES; and greater flexibility in determining annual leave accrual rate for  new hires.

		Safeguards Provided

As we have testified, agencies should have modern, effective, credible, and  as appropriate, validated performance management systems in place with  adequate safeguards, including reasonable transparency and appropriate  accountability mechanisms, to ensure fairness and prevent politicization  and abuse.  While GAO’s transformation is a work in progress, we believe  that we are in the lead compared to executive branch agencies in having  the human capital infrastructure in place to provide such safeguards and  implement a modified pay system that is more performance oriented.   Specifically, for our Analyst pay group, we have gone through the first cycle  of a validated performance management system that has adequate  safeguards, including reasonable transparency and appropriate  accountability mechanisms.  We have learned from what has worked and  what improvements can and should be made with respect to the first cycle.   In fact, we have adopted many of the recommendations and suggestions of  our managing directors and EAC and are now in the process of  implementing these suggestions.
The following is an initial list of possible safeguards, developed at the  request of Congressman Danny Davis, for Congress to consider to help  ensure that any pay for performance systems in the government are fair,  effective, and credible.  GAO’s current human capital infrastructure has  most of these safeguards built in, and the others are in the process of being  incorporated.
Assure that the agency’s performance management systems (1) link to  the agency’s strategic plan, related goals, and desired outcomes and   (2) result in meaningful distinctions in individual employee  performance.  This should include consideration of critical  competencies and achievement of concrete results.
Involve employees, their representatives, and other stakeholders in the  design of the system, including having employees directly involved in  validating any related competencies, as appropriate.
Ensure that certain predecisional internal safeguards exist to help  achieve the consistency, equity, nondiscrimination, and  nonpoliticization of the performance management process (e.g.,  independent reasonableness reviews by the human capital offices  and/or the offices of opportunity and inclusiveness or its equivalent in  establishing and implementing a performance appraisal system, as well  as reviews of performance rating decisions, pay determinations, and  promotion actions before they are finalized to ensure that they are  merit-based; internal grievance processes to address employee  complaints; and pay panels predominately made up of career officials  who would consider the results of the performance appraisal process  and other information in making final pay decisions).
Assure reasonable transparency and appropriate accountability  mechanisms in connection with the results of the performance  management process (e.g., publish overall results of performance  management and pay decisions while protecting individual  confidentiality, and report periodically on internal assessments and  employee survey results).

		Transition Period

We have provided a statutory period minimum to allow for a smooth  implementation of the law as it applies to both our mission and mission  support staff.  Specifically, for our Analyst and Attorney communities, we  plan to allow for at least a two-year period, during which they will continue  to receive their annual across the board pay raise and their locality pay, if  applicable, based on the amount set by the GS system.  Once the proposal  is fully implemented, the new across-the-board increase, which provides  for inflation protection and locality pay where applicable, would be  computed based on GAO compensation studies, and the performance- based merit pay would be provided based on an employee’s performance.
For our APSS employees, the transition period of at least 2 years would  allow for a smooth migration to the pay bands and the implementation of at  least one performance cycle of a newly validated competency based  performance appraisal system for that component of GAO’s workforce.   Our APSS employees are currently still in the GS system, but we are in the  process of moving them into pay bands.   We will allow time for the group  to migrate to broad bands and to have at least one performance cycle under  pay bands before moving it into the new pay system.  Therefore, as with the  analysts and attorneys, the administrative support staff will move into a  hybrid pay system once they migrate to pay bands. Also, as with the  analysts and attorneys, I have committed to providing them “pay  protection.” This guarantee would continue even after GAO’s authority to  adjust pay is fully implemented.
We have a small Wage Grade community of under 20 employees.  As  mentioned earlier, we do not contemplate having the pay adjustment  provision apply to them.   “Pay Protection” Guarantee  My predecessor, Comptroller General Charles A. Bowsher, provided the  analysts and attorneys a “pay protection” guarantee at the time of their  conversion to broad bands.  This guarantee, later spelled out in a GAO  order, provided that the analyst and attorneys rated as meeting  expectations in all categories would fare at least as well under pay bands as  under the GS system.  This guarantee would not apply to employees who  are promoted after conversion or demoted, and to new employees hired  after the conversion.  It is my understanding that this guarantee provided  by my predecessor is unique to GAO and has generally not been applied by  other agencies that have migrated their employees to pay bands.
Currently, 535 GAO employees are still covered by this “pay protection”  guarantee, while less than 10 employees annually have their pay readjusted  after the merit pay process.  I have committed to GAO employees that even  if we receive the new pay adjustment authority, I would still honor my  predecessor’s pay protection guarantee.  In addition, our mission support  staff will also receive this guarantee upon conversion to pay bands.  This  guarantee will continue through the implementation period for our new  human capital authority.

	Pay Retention

Section 5 of our proposal would allow GAO not to provide any automatic  increase in basic pay to an employee demoted as a result of workforce  restructuring or reclassification at his or her current rate until his or her  salary is less than the maximum rate of the new position.  Under current  law, the grade and pay retention provisions allow employees to continue to  be paid at a rate that exceeds the value of the duties they are performing for  an extended period.  Specifically, employees who are demoted (e.g., incur a  loss of grade or band) due to, among other things, reduction-in-force  procedures or reclassification receive full statutory pay increases for 2  years and then receive 50 percent of the statutory pay increases until the  pay of their new positions falls within the range of pay for those positions.   We believe that this antiquated system is inconsistent with the merit  principle that there should be equal pay for work of equal value.
In granting GAO this authority, we would be able to immediately place  employees in the band or grade commensurate with their roles and  responsibilities.  It is important to note that we have a key safeguard— employees whose basic pay exceeds the maximum rate of the grade or  band in which the employee is placed will not have their basic pay reduced.   These employees, who would still be eligible to increase their overall pay  through certain types of performance-based awards (e.g., incentive  awards), would retain this rate until their basic pay is less than the  maximum for their grade or band.  As with all the provisions in our  proposal, we will not implement this pay retention provision until we have  consulted with the EAC and managing directors and have provided all GAO  employees an opportunity for notice and comment on any regulations.

	Relocation Expenses

Section 6 would provide GAO the authority, in appropriate circumstances,  to reimburse employees for some relocation expenses when transfers do  not meet current legal requirements for entitlement to reimbursement but  still benefit GAO.  Under current law, employees who qualify for relocation  benefits are entitled to full benefits; however, employees whose transfer  may be of some benefit or value to the agency would not be eligible to  receive any reimbursement.  This provision would provide these employees  some relief from the high cost of relocating while at the same time allowing  GAO the flexibility to promulgate regulations in order to provide such  relief.  This authority has been previously granted to other agencies,  including the FAA.

	Leave for Upper Level Hires

Section 7 of the proposal provides GAO the authority to provide 160 hours  (20 days) of annual leave to appropriate employees in high-grade,  managerial or supervisory positions who have less than 3 years of federal  service.  This is narrowly tailored authority that would apply only to GAO  and not to executive branch agencies.  While it is been a long-standing tenet  that all federal employees earn annual leave based on years of federal  service, we believe that there is substantial merit in revisiting this in view  of today’s human capital environment and challenges.  We have found that,  in recruiting experienced mid- and upper-level hires, the loss of leave they  would incur upon moving from the private to the federal sector is a major  disincentive.  For example, an individual, regardless of the level at which  he enters first enters the federal workforce, is eligible to earn 4 hours of  annual leave for each pay period and, therefore, could accrue a total of 104  hours (13 days) annually so long as they do not use any of that leave during  the year.  This amount increases to 6 hours of annual leave after 3 years of  federal service.  By increasing the annual leave that certain newly hired  officers and employees may earn, this provision is designed to help attract  and retain highly skilled employees needed to best serve the Congress and  the country.

	Executive Exchange Program

Section 8 would authorize GAO to establish an executive exchange  program between GAO and private sector entities.  Currently, GAO has the  authority to conduct such an exchange with public entities and non profit  organizations under the Intergovernmental Personnel Act; there is no such  authority for private sector exchanges.   Under this program, high-grade,  managerial or supervisory employees from GAO may work in the private  sector, and private sector employees may work at GAO.  While GAO will  establish the details of this program in duly promulgated regulations, we  have generally fashioned, with exceptions where appropriate, the legal  framework for this program on the Information Technology Exchange  Program authorized by Public Law 107-347, the E-Government Act of 2002,  which the Congress enacted to address human capital challenges within  the executive branch in the information technology area.
While the Information Technology Exchange Program only involves  technology exchanges, GAO’s exchange program will cover not only those  who work in information technology fields, but also accountants,  economists, lawyers, actuaries, and other highly skilled professionals.  This  program will help us address certain skills imbalances in such areas as well  as a range of succession planning challenges.  Specifically, by fiscal year  2007, 52 percent of our senior executives, 37 percent of our management- level analysts, and 29 percent of our analysts and related staff will be  eligible for retirement.  Moreover, at a time when a significant percentage  of our workforce is nearing retirement age, marketplace, demographic,  economic, and technological changes indicate that competition for skilled  employees will be greater in the future, making the challenge of attracting  and retaining talent even more complex.
One of the key concerns raised in the past regarding private sector  exchange programs has been the issue of conflict of interest.  We believe  that in this regard GAO differs from executive branch agencies in that, as  reviewers, we are not as subject to potential conflicts of interest.   Nevertheless, it is important to note in requesting this authority that we  have made clear that the private sector participants would be subject to the  same laws and regulations regarding conflict of interest, financial  disclosure, and standards of conduct applicable to all employees of GAO.   Under the program, private sector participants would receive their salaries  and benefits from their employers and GAO need not contribute to these  costs.  We also believe that this will also encourage private sector  individuals to devote a portion of their careers to the public sector without  incurring substantial financial sacrifice.

	Changing GAO’s Name to the “Government Accountability Office”

Section 9 would change the name of our agency from the “General  Accounting Office” to the “Government Accountability Office.”  At the  same time, the well-known acronym “GAO,” which has over 80 years of  history behind it, will be maintained.  We believe that the new name will  better reflect the current mission of GAO as incorporated into its strategic  plan, which was developed in consultation with the Congress.  As stated in  GAO’s strategic plan, our activities are designed to ensure the executive  branch’s accountability to the American people.  Indeed, the word  accountability is one of GAO’s core values along with integrity and  reliability.  These core values are also incorporated in GAO’s strategic plan  for serving the Congress.
The GAO of today is a far cry from the GAO of 1921, the year that the  Congress established it through the enactment of the Budget and  Accounting Act.  In 1921, GAO pre-audited agency vouchers for the legality,  propriety, and accuracy of expenditures.  In the 1950s, GAO’s statutory  work shifted to the comprehensive auditing of government agencies.  Later,  beginning during the tenure of Comptroller General Elmer B. Staats, GAO’s  work expanded to include program evaluation and policy analysis.   Whereas GAO’s workforce consisted primarily of accounting clerks during  the first three decades of its existence, today it is a multidisciplinary  professional services organization with staff reflecting the diversity of  knowledge and skills needed to deliver a wide range of services to the  Congress.
Although currently less than 15 percent of agency resources are devoted to  traditional auditing and accounting activities, members of the public, the  press, as well as the Congress often incorrectly assume that GAO is still  solely a financial auditing organization.  In addition, our name clearly  confuses many potential applicants, who assume that GAO is only  interested in hiring accountants.  We believe that the new name will help  attract applicants and address certain “expectation gaps” that exist outside  of GAO.

	Concluding Observations

In conclusion, I believe that GAO’s human capital proposal merits prompt  passage by this committee and, ultimately, the Congress.  We have used the  narrowly tailored flexibilities the Congress provided us previously in Public  Law 106-303 responsibly, prudently, and strategically to help posture GAO  to ensure the accountability of the federal government for the benefit of the  Congress and the American people.  Although some elements of our initial  straw proposal were controversial, we have made a number of changes,  clarifications, and commitments to address various comments and  concerns raised by GAO employees.  We recognize that the pay adjustment  provision of this proposal remains of concern to some of our staff.   However, we believe that it is vitally important to GAO’s future that we  continue modernizing and updating our human capital policies and system  in light of the changing environment and anticipated challenges ahead.  We  believe that the proposal as presented and envisioned is well reasoned and  reasonable with adequate safeguards for GAO employees.  Given our  human capital infrastructure and our unique role in leading by example in  major management areas, including human capital management, the  federal government could benefit from GAO’s experience with pay for  performance systems.  Overall, we believe that this proposal represents a  logical incremental advancement in modernizing GAO’s human capital  policies, and with your support, we believe that it will make a big difference  for the GAO of the future.
Chairwoman Jo Ann Davis, Mr. Davis, and Members of the Committee, this  concludes my prepared statement.  I would be pleased to respond to any  questions you may have.

	Contacts

For further information regarding this testimony, please contact Sallyanne  Harper, Chief Mission Support Officer, on (202) 512-5800 or at  harpers@gao.gov or Jesse Hoskins, Chief Human Capital Officer, on (202)  512-5553 or at hoskinsj@gao.gov.

Analysts and Attorneys: Pay Increases under GAO’s Current System and Human Capital Proposal

(Broad band)
Pay Protection from Band Conversion)
Conversion) (Same percentage as  executive branch GS;  performers) performers) (Same percentage as  executive branch GS;  performers) performers)
EC annually) additional performance- based funds limited due  will vary over time) guarantee)
N/A  This element is not applicable circumstances or serious budgetary constraints, base pay and locality pay according to the same  adjustment provided to executive branch employees.   All such GAO staff will also be eligible for  additional performance-based merit pay increases, performance bonuses (if pay capped)/dividends,  and incentive awards.  During the transition period, GAO will continue to raise the pay cap for its pay  bands commensurate with executive branch pay cap increases absent extraordinary economic  circumstances or serious budgetary constraints.  The Executive Committee will determine on an  annual basis which categories, if any, are eligible for bonuses and dividends.

Professional Development Program (PDP) Staff: Pay Increases under GAO’s Current System and Human Capital Proposal

(Broad band/PDP) as executive  branch GS;  performers) performers) as executive  branch GS;  performers) performers)
EC annually)
EC annually)
EC annually)
N/A  This element is not applicable The percentage allocated to each type of pay increase varies annually.
Executive Committee will determine on an annual basis which pay categories, if any, are eligible for  PDP bonuses.

Administrative Professional Support Staff (APSS): Pay Increases under GAO’s Current System and Human Capital Proposal

(Broad band)
Pay Protection from Band Conversion (GS) branch GS) for all satisfactory performers) branch GS) for all satisfactory performers)
EC annually) amount will vary over time)
N/A  This element is not applicable The percentage allocated to each type of pay increase varies annually.   This chart applies only to  APSS employees who are under the General Schedule (GS) system.  APSS employees who are  already in broad bands should see the chart for Analysts and Attorneys.   guarantee will not apply to staff who are promoted after conversion or demoted and to new employees  hired after the conversion.  APSS staff will be eligible for performance-based merit increases,  performance bonuses (if pay capped) /dividends, and incentive awards.  During the transition period,  GAO will continue to raise the pay cap for its pay bands commensurate with executive branch pay cap  increases.  The Executive Committee will determine on an annual basis which pay categories, if any,  are eligible for bonuses and dividends.

Wage Grade (WG) Staff: Pay Increases under GAO’s Current System and Human Capital Proposal

(Wage Grade)
Quality step increase (QSI)
Within grade increase (WIG)
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Summary:
Why GAO Did This Study

The Subcommittee on Civil Service and Agency Organization, House Committee on Government Reform seeks GAO's views on its latest human capital proposal that is slated to be introduced as a bill entitled the GAO Human Capital Reform Act of 2003.

What GAO Found

As an arm of the legislative branch, GAO exists to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the American people. Unlike many executive branch agencies, which have either recently received or are just requesting new broad-based human capital tools and flexibilities, GAO has had certain human capital tools and flexibilities for over two decades. GAO's latest proposal combines diverse initiatives that, collectively, should further GAO's ability to enhance its performance, assure its accountability, and help ensure that it can attract, retain, motivate, and reward a top-quality and high-performing workforce currently and in future years. Specifically, GAO is requesting that the Congress (1) make permanent GAO's 3-year authority to offer early outs and buyouts, (2) allow GAO to set its own annual pay adjustment system separate from the executive branch, (3) permit GAO to set the pay of an employee demoted as a result of workforce restructuring or reclassification to keep his/her basic pay but to set future increases consistent with the new position's pay parameters, (4) provide authority to reimburse employees for some relocation expenses when that transfer has some benefit to GAO but does not meet the legal requirements for reimbursement, (5) provide authority to place upper-level hires with fewer than 3 years of federal experience in the 6-hour leave category, (6) authorize an executive exchange program with the private sector, and (7) change GAO's legal name from the "General Accounting Office" to the "Government Accountability Office." GAO has used the narrowly tailored flexibilities granted by the Congress previously in Public Law 106-303, the GAO Personnel Flexibilities Act, responsibly, prudently, and strategically. GAO believes that it is vitally important to its future to continue modernizing and updating its human capital policies and system in light of the changing environment and anticipated challenges ahead. GAO's proposal represents a logical incremental advancement in modernizing GAO's human capital policies. Based on employee feedback, there is little or no concern relating to most of the proposal's provisions. Although some elements of GAO's initial straw proposal were controversial (e.g., GAO's pay adjustment provision), the Comptroller General has made a number of changes, clarifications, and commitments to address employee concerns. While GAO believes that some employees remain concerned about the pay adjustment provision, GAO also believes that employee concerns have been reduced considerably due to the clarifications, changes, and commitments the Comptroller General has made. Given GAO's human capital infrastructure and unique role in leading by example in major management areas, the rest of the federal government can benefit from GAO's pay system experience.