United States General Accounting Office

GAO Report to the Chairman and Ranking

Minority Member, Subcommittee on Civil

Service, Committee on Government

Reform and Oversight, House of

Representatives

July 1998 RESULTS ACT

Observations on the

Office of Personnel

Management’s Annual

Performance Plan

GAO/GGD-98-130

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-280255 

July 28, 1998

The Honorable John L. Mica, Chairman

The Honorable Elijah E. Cummings

Ranking Minority Member

Subcommittee on Civil Service

Committee on Government Reform and Oversight

House of Representatives

As requested, this report presents our observations on the Office of

Personnel Management’s (OPM) annual performance plan for fiscal year

1999, which was submitted to Congress in February 1998. The Government

Performance and Results Act of 1993 (the Results Act) requires executive

agencies, beginning with fiscal year 1999, to develop annual performance

plans covering each program activity set forth in the agencies’ budgets. We

assessed whether OPM’s plan complies with the statutory requirements and

congressional intent as contained in the Results Act and related guidance.

Our overall assessment of OPM’s annual performance plan was generally

based on our knowledge of OPM’s operations and programs, our numerous

reviews of OPM and federal workforce issues, and other existing

information available at the time of our assessment. Specifically, we used

the criteria in the Results Act; the Office of Management and Budget’s

(OMB) guidance on developing the plan (Circular A-11, part 2); our

February 1998 guidance for congressional review of the plans

(GAO/GGD/AIMD 10.1.18); our evaluator’s guidance for assessing annual

performance plans (GAO/GGD-10.1.20); and the December 17, 1997, letter to

the OMB Director from several congressional leaders. We did our work

between March and June 1998 in accordance with generally accepted

government auditing standards. We obtained written comments on a draft

of this report from the Director of the Office of Personnel Management.

These comments are discussed at the end of this letter and are reprinted in

appendix I.

Results in Brief OPM’s annual performance plan addresses the six program components

required by the Results Act.1

 The plan has several performance goals and

measures listed under each of its five strategic goals as identified in OPM’s

September 1997 strategic plan. Some of these goals and measures are

1

The Results Act specifies that agencies’ performance plans should have these components:

(1) performance goals; (2) an expression of the goals in an objective, quantifiable, and measurable

form; (3) a description of the operational processes, skills, and technology and the human, capital,

information, or other resources required; (4) performance indicators; (5) a basis for comparing actual

program results with the performance goals; and (6) a description of the means used to verify and

validate measured values.

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objective and quantifiable, providing a way to judge whether the goal has

been achieved. The plan also lays out, very well, a clear linkage between

the fiscal year 1999 performance goals and OPM’s mission and strategic

goals and also between its goals and its specific program activities and

related funding as presented in its 1999 budget.

The principal area in which the performance plan could be improved to

better meet the purposes of the Results Act is in the statement of its goals.

OPM’s annual performance plan goals, like those in its strategic plan, tend

to be process or activity goals (e.g., to complete a specified number of

studies during 1999). The Results Act, in contrast, envisions a much

greater emphasis on outcome goals that state what overall end result the

agency will achieve, such as increasing the effectiveness of the federal

civilian workforce. Congress sought this emphasis to help ensure that

processes and activities that agencies undertake actually add up to a

meaningful result that is commensurate with the resources expended.

OPM’s annual performance plan could also be improved by including more

discussion on how its resources will be used to achieve its goals and

adding a discussion of known data limitations that may affect the validity

of various performance measures that OPM plans to use.

Background OPM is the central management agency of the federal government charged

with administering and enforcing federal civil service laws, regulations,

and rules and aiding the President in carrying out his responsibilities for

managing the federal workforce. OPM has policy responsibilities related to

hiring, managing, compensating, and separating federal employees.

Moreover, OPM endeavors to ensure compliance with civil service policies

through a program of overseeing the personnel activities of covered

federal agencies.

OPM helps federal program managers in their personnel responsibilities

through a range of programs, such as training and performance

management, designed to increase the effectiveness of federal employees.

In addition to these responsibilities, OPM also promulgates regulations

related to federal employee benefits, including retirement, health, and life

insurance benefits. OPM directly administers all or major portions of these

benefit programs, which serve millions of current and former federal

employees.

Top OPM officials said they envision OPM as providing human resource

management (HRM) leadership for the federal government. Through that

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leadership, OPM officials say they intend to ensure that the merit principles

that are the basis for the federal civil service system are followed

throughout the government and that human resource management is

effective.

The Results Act is intended to improve the efficiency and effectiveness of

federal programs by establishing a system to set goals for program

performance and to measure results. Specifically, the Act requires

executive agencies to prepare multiyear strategic plans, annual

performance plans, and annual performance reports. OPM and other

agencies submitted their first cycle of agency multiyear strategic plans to

OMB and Congress in September 1997. Like other agencies, OPM also

submitted its first draft annual performance plan to OMB in the fall of 1997.

The Results Act requires each performance plan to identify annual

performance goals that cover all of the program activities in the agency’s

budget. OMB Circular A-11 specifies that the annual performance goals

reflect the agency’s strategic goals and mission. OMB used these draft

performance plans to develop and submit the first federal governmentwide

performance plan to Congress in February 1998 with the President’s fiscal

year 1999 budget. OPM and other agencies submitted their final

performance plans to Congress after the submission of the President’ s

budget.

OPM’S Plan Describes

an Extensive Set of

Activities Related to

Its Strategic Goals,

but the Result to Be

Achieved Is Only

Partially Clear

OPM’s annual performance plan specifies quite clearly its goals—generally

expressed as planned activities—for fiscal year 1998 and how those

planned activities relate to the goals in its published strategic plan and to

program activity accounts in its proposed fiscal year 1999 budget. OPM’s

plan specifies over 100 performance goals, with each OPM unit linking its

planned activities and processes to OPM’s five strategic goals and to

program activities in its budget request. Consistent with congressional

suggestions and OMB guidance, the plan also describes the means OPM

intends to use to validate performance and discusses its coordination with

other agencies on crosscutting activities. In this sense, the annual

performance plan provides a picture of OPM’s intended performance.

However, this picture is incomplete because the annual performance plan

often does not give a sense of how those activities will help OPM achieve a

desired end result. Rather, OPM’s performance plan often would enable

policymakers to determine whether OPM has completed a set of actions,

but not whether those actions made any difference in such things as the

management of the federal workforce or whether the actions would cause

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that workforce to be more or less able to effectively and efficiently carry

out its responsibilities.

Defining Expected

Performance

The performance goals in OPM’s plan are generally measurable and linked

to the agency’s strategic goals and objectives; however, they are typically

more activity- or output-oriented rather than results-oriented as

envisioned by the Results Act. The lack of a results focus likely would

impede policymakers in determining whether OPM’s efforts have “made a

difference” in how well the federal government’s human resources are

actually managed.

Generally, OPM’s performance goals are expressed as activities to be

completed or results to be achieved by the end of fiscal year 1999. For

example, OPM’s Employment Service says that in fiscal year 1999, it will

complete a review of all governmentwide policies and programs that are

its responsibility, and OPM’s Workforce Compensation and Performance

Service says it will lead a study of allowances, differentials, premium pay,

and hours of duty as part of a 3-year comprehensive review of

governmentwide compensation policies and programs. Both of these

performance goals, like many others, commit OPM to undertake or

complete a specific piece of work in fiscal year 1999 and thus, in a literal

sense, define a minimal level of expected performance.

OPM officials acknowledged that many of the annual performance goals are

activity- or process-oriented, but said that, particularly with respect to

policy development and implementation, successful accomplishment of

several of its performance goals will require a sequence of steps from

policy analysis and development through policy implementation to policy

evaluation. In many cases, this sequence of steps will extend over several

years. Consequently, OPM officials said it is impractical to specify a

results-oriented goal in any year until the sequence of steps is complete

and changes in policy have been made and implemented so that the new

policies can actually effect a change in agencies’ practices. OPM officials

also noted that this circumstance is recognized in OMB’s guidance on

annual performance plans, which notes that outcome goals may only be

achieved at certain points during the lifespan of a strategic plan and

requires that an annual plan include outcome goals when their

achievement is scheduled for the fiscal year covered by the annual

performance plan.

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The OPM officials’ observations highlight that results-oriented annual

performance goals can be difficult to set on an annual basis in certain

circumstances. However, a key intent of the Results Act was that agencies

should focus their planning on what they are intending to achieve, the

result that they are provided resources to accomplish, rather than on

traditional measures of output like activities undertaken. We have

previously reported that OPM’s strategic plan goals do not provide a sense

of the results OPM expects to achieve or how they might be measured.2

 If

neither the strategic goals nor the annual performance goals are

results-oriented, policymakers likely will have an inadequate basis on

which to judge whether agencies are making meaningful progress toward

an overall desired outcome.

OPM officials also told us that they were obligated to develop an annual

performance plan that presented annual performance goals that would

carry out their existing strategic plan’s goals. Although the officials did not

necessarily agree that the OPM strategic goals were inadequately

results-oriented, they said that their annual performance goals could not

be inconsistent with the strategic plan.

OMB guidance does advise agencies that their annual performance plans

should be specifically linked to their strategic plans and that, for example,

performance goals and indicators in the annual plan should be based on

the general goals and objectives in the agency’s strategic plan.

Accordingly, OPM may have been somewhat constrained in developing

annual goals that were results-oriented given that, in our judgment, the

strategic goals did not give a clear sense of the results OPM was intending

to achieve. Other agencies have recognized that their strategic plans did

not communicate their desired results adequately and have initiated

efforts to revise those plans. For example, the Department of Labor has

consolidated the six strategic goals outlined in its September 1997

strategic plan into the three strategic goals contained in its annual

performance plan. According to Labor, this revision fosters greater

cohesion within the Department and also responds to concerns raised by

external reviewers that the agency’s strategic plan did not adequately

reflect the integration and crosscutting nature of Labor’s programs.

A results-oriented goal in OPM’s annual performance plan illustrates how

such goals can provide a better basis for OPM, Congress, and the public to

determine if the agency is achieving the intended impact or results with

2

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

1997).

Page 5 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
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the resources that it is provided. OPM’s Employment Service has a goal that

states, in part, that agency-delegated examining units (offices within

agencies that assess whether job applicants meet the requirements of jobs

being advertised) “will [be] operated according to merit principles.” This is

directly related to OPM’s mission of ensuring that merit system

requirements are followed in federal human resources management. This

results-oriented goal is included even though the rest of the goal stresses

activities to be undertaken, that is, to complete the first 3-year cycle of

recertification for all delegated examining units by the end of fiscal year

1999. However, the results-oriented goal provides a framework for OPM and

Congress to use to determine whether the activities lead to an improved

result. That is, OPM and Congress can track the number of instances in

which delegated examining units do or do not operate in accordance with

the merit principles specified in statute.

This example also shows that even if a results-oriented annual

performance goal cannot be set in any given year, tracking data related to

a desired result or outcome can nevertheless occur and be useful.

Measures that track yearly results can be useful in establishing a baseline

performance level to use in establishing future results-oriented

performance goals and in determining whether specific activities are

moving the agency closer to the desired end result. OPM’s plan has some

measures that are related to achieving results. For example, the Office of

Merit Systems Oversight and Effectiveness (OMSOE) has a fiscal year 1999

goal to promote the growth of merit principle awareness and

understanding governmentwide. OPM has statutory responsibility for

overseeing compliance with the merit principles specified in title 5 of the

U.S. Code. One measure, or target, for OMSOE’s performance goal is an

increase from 39 to 41 percent in the proportion of employees who say

they know what the merit system principles and prohibited personnel

practices are as measured by an employee survey.

OPM’s annual performance plan could be more useful if additional

results-oriented performance measures were identified. For example, the

Employment Service’s performance goal of reviewing all governmentwide

human resource management policies and programs during fiscal year

1999 is in support of OPM’s strategic goal of providing leadership to recruit

and retain the federal workforce required for the 21st century.

Policymakers could reasonably expect OPM to define the characteristics of

the workforce that is needed—in essence, the result being sought in part

through the improved human resource management policies OPM hopes to

develop—and to track the extent to which the federal government is being

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more or less successful in recruiting and retaining that workforce. OPM has

no such measure in its fiscal year 1999 annual performance plan and had

not proposed such a measure in its strategic plan.

OPM’s annual performance plan also does not appear to have cost-based

performance measures, as intended by Congress and encouraged in OMB

guidance, that would show how efficiently it performed certain

business-like operations (e.g., the administration of health and retirement

programs). Relevant measures might include the cost of doing business

per unit of output, such as the cost to process civil service retirement

payments made either by electronic funds transfer or check. Cost-based

efficiency measures could be useful to managers as they attempt to

improve their operations. Such measures could serve as benchmarks for

determining whether private firms might be able to perform certain

services more cost-effectively than OPM can with federal civilian

employees. If such cost-based measures were developed, however, it

would be important for OPM’s salaries and expenses and revolving funds to

have accurate financial and cost data. The reliability of these data is not

currently determinable since OPM’s Inspector General (IG) has been unable

to express an unqualified opinion on these funds’ financial statements

because of inadequate or nonexistent internal controls and standard

accounting policies, procedures, and records.

Connecting Mission, Goals,

and Activities

OPM’s annual performance plan clearly connects its performance goals to

the agency’s mission, strategic goals, and program activities in its fiscal

year 1999 budget request. For nearly all of its program activities, OPM’s

plan lists strategic and annual goals. The plan also provides the total

budgetary resources proposed for the program activity and a breakdown

of how much of the program activity will be used for each of OPM’s five

strategic goals. For example, OPM’s fiscal year 1999 annual goal to assist

agencies to raise the levels of underrepresented groups in key federal

occupations and at key grade levels by 2 percent over fiscal year 1998

levels supports OPM’s strategic goal to provide policy direction and

leadership to recruit and retain the federal workforce required for the 21st

century and is 1 of 11 major performance goals expected to use almost

$12 million from the Employment Service program activity.

The portions of OPM’s plan that provide fiscal year 1999 budgetary

information for its mandatory spending program activities related to

federal health, life, and retirement programs do not include annual

performance goals and do not show linkage to OPM’s strategic goals.

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Although goals and linkages are not included in these specific portions of

the plan, OPM does have annual performance goals related to these

activities listed under the Transfers from Trust Funds section of the

Salaries and Expenses Account portion of its plan. OPM officials believe

that it is more appropriate to discuss the goals and linkages in the

Transfers section because this is the budgetary account that funds the

activities that are expected to achieve OPM’s goals. For example, OPM set a

goal to maintain, at fiscal year 1998 levels, customer satisfaction,

processing times, and accuracy rates pertinent to processing new claims

for annuity and survivor benefits and shows baseline data on processing

these claims. OPM also set a goal to develop a proposal, expected to be

completed in fiscal year 1998, to implement the design, financing, and

service delivery of federal earned benefits recommended by its benefits

vision study. Providing a reference to these goals in the relevant

presentation of the mandatory spending program activities would be a

useful guide to quickly steer users of the plan to goals and measures

associated with these program activities.

OPM’s specific goals related to its information technology (IT) program are

also linked to its strategic goals. This is a useful linkage that is consistent

with recent legislation that emphasizes that IT investments should be made

in direct support of the mission-related activities of agencies.3

 In addition,

OPM’s performance plan includes goals for dealing with Clinger-Cohen Act

requirements, Year 2000 computer conversion efforts, and information

security; specifies the means for achieving the goals; and includes

performance indicators for measuring results. Given the importance of

these issues, their focused presentation in the annual performance plan

appears to be appropriate. OPM could further strengthen its performance

indicators by including information on (1) how it plans to deal with its

other systems that may not be mission-critical but may have some impact

on its operations in 2000, and (2) contingency plans in place in the event

that Year 2000 corrections are not successful or systems fail to operate.

Recognizing Crosscutting

Efforts

OPM’s performance plan partially addresses the need to coordinate with

other agencies and individuals having an interest in OPM’s mission and

services. As a central management agency, OPM must work with or through

3

The Paperwork Reduction Act of 1995 is the overarching statute dealing with the acquisition and

management of information resources—including information technology—by federal agencies. It

emphasizes that agencies need to acquire and apply resources to effectively support the

accomplishment of agency missions and the delivery of services to the public. The Clinger-Cohen Act

of 1996 repeats this theme and elaborates on requirements for agencies to follow when acquiring

information technology.

Page 8 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
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other federal agencies to ensure that federal personnel policies are

appropriate and are followed properly. Thus, OPM’s core responsibilities

do, in some sense, cut across a large portion of the federal government.

OPM’s performance goals reflect the crosscutting nature of its activities. In

many cases, the plan discusses OPM’s planned efforts to coordinate its

crosscutting functions with the federal community. These discussions are

consistent with Results Act requirements.

However, in some cases, a more explicit discussion of OPM’s intended

coordination with other agencies would be helpful. For example, OPM has a

performance goal to seek improvement in adjudicatory processes that

address conflicts in the workplace and to work to make them more

understandable, timely, and less costly. The means, or strategy, OPM

proposes to achieve this goal implicitly recognizes that OPM has limited

authority to set or influence policy regarding adjudicatory processes. It

states that OPM will “promote and provide active participation in response

to governmentwide efforts to improve the adjudicatory process.”

Meaningful participation by OPM would require ongoing coordination with

the adjudicatory agencies, such as the Equal Employment Opportunity

Commission and the Merit Systems Protection Board, but such

coordination is not discussed in the plan. OPM’s relationship with the

adjudicatory agencies and its approach to coordination could be described

more fully to portray the status of OPM’s involvement in this issue and the

extent to which it intends to participate in interagency efforts to improve

the adjudicatory process.

OPM’S Performance

Plan Could More Fully

Discuss How the

Agency’s Strategies

and Resources Will

Help Achieve Its

Goals

OPM’s performance plan could more fully discuss the strategies and

resources the agency will use to achieve its performance goals. Because

many of OPM’s annual performance goals are not results-oriented, it would

be difficult for policymakers to judge from the plan, itself, how the

strategies associated with these performance goals would add up to

achieving a significant result related to OPM’s mission.

Nevertheless, the plan specifies strategies for achieving each of its

performance goals. But in many cases, the plan does not provide a

rationale for how the strategy will contribute to accomplishing the

expected level of performance. OPM’s performance plan could also be

enhanced by discussing external factors that could significantly affect

performance.

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Connecting Strategies to

Results

We found that OPM’s strategies are connected to its performance goals, but

because many of the performance goals are not results-oriented, it is

unclear how the strategies will contribute to achieving an intended result

related to OPM’s mission. For example, OPM’s performance goal to improve

recognition of OPM as a leading source for effective, efficient technical

assistance in a broad range of employment programs does not readily

indicate what result this would help OPM to achieve. Consequently, it is

also difficult to determine whether its corresponding strategy to monitor

current and emerging issues, trends, and stakeholder interests will

contribute to achieving a results-oriented change, such as improving the

effectiveness of federal employees.

In other cases, it was unclear how a strategy related to its associated

performance goal. For example, OPM has a goal to complete a plan for

central personnel data file (CPDF) modernization in fiscal year 1999 in

coordination with the Human Resources Technology Council. That

performance goal has an associated strategy to “use electronic media to

collect and disseminate information widely and cost-effectively.” While

this strategy may be useful for improving the collection and dissemination

of CPDF information, it is not clear how this strategy is related to getting

the CPDF modernization plan, itself, done.

OPM’s plan discusses the actions it plans to take to use information

technology and capital investments to improve performance and help

achieve performance goals in terms of (1) reducing costs, (2) increasing

productivity, (3) decreasing cycle or processing time, (4) improving

service quality, and (5) increasing customer satisfaction. For example, OPM

has established a goal placing responsibility with its Chief Information

Officer for providing independent oversight of major OPM information

technology initiatives and investments to ensure that OPM’s core functions

can meet their business goals and objectives through the prudent

application of technology and improved use of IT through the

implementation of the requirements of the Clinger-Cohen Act. OPM also

plans to

• oversee major IT initiatives, including modernization of the retirement

program’s service delivery systems and the earned benefit financial

systems, modernization of the CPDF system, and development and

integration of OPM’s employment information systems;

• implement a sound and integrated IT architecture;

• manage OPM’s IT capital planning and investment control process and

implement a performance-based IT management system; and

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• implement an agencywide systems development life-cycle methodology

and train staff in its use to support OPM’s achievement of Software

Engineering Institute Capability Maturity Model level 3 for systems

development.

One area that is unclear from OPM’s discussion in its plan for the

Clinger-Cohen Act implementation is whether or not OPM has or plans to

establish a separate Investment Review Board to ensure that senior

executives are involved in information management decisions. The

Clinger-Cohen Act calls for agencies to establish such boards to help

improve performance and meet strategic goals. Although not stated in the

plan, OPM officials have told us they plan to establish an Investment

Review Board.

In its September 1997 strategic plan, OPM identified several external factors

that could affect achievement of its goals and objectives, which it

organized by the following categories: (1) governmentwide issues,

(2) relationships with other federal agencies, and (3) the personnel

community. OPM’s performance plan does not explicitly discuss these

factors or their impact on achieving the performance goals. While not

required by the Results Act, we believe that a discussion of these external

factors would provide additional context regarding anticipated

performance. For example, several large agencies recently have been

granted, or are seeking to be granted, wide flexibility to deviate from

standard provisions of title 5 of the U.S. Code. These include the Internal

Revenue Service, the Federal Aviation Administration, and the Department

of Defense (civilian workforce). Although these changes could

significantly affect OPM’s role as the central personnel agency, the plan has

little discussion of how such changes were taken into account in setting

performance goals.

Connecting Resources to

Strategies

OPM’s performance plan partially discusses the resources it will use to

achieve the performance goals. OPM’s plan does not consistently describe

the capital, human, information, and other resources the agency will use to

achieve its performance goals. For example, the plan explains that OPM will

spend approximately $2.6 million in fiscal year 1999 on implementing an

action plan to develop a governmentwide electronic personnel

recordkeeping system that will support its goal of helping the Human

Resources Technology Council design an electronic official personnel

folder to replace paper records. In contrast, the plan generally does not

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mention specific training or workforce skills that will be needed to achieve

OPM’s performance goals.

OPM’s Performance

Plan Could Better

Provide Confidence

That the Agency’s

Performance

Information Will Be

Credible

We found that OPM’s performance plan could better provide confidence

that its performance information will be credible. OPM’s annual

performance plan material for each program activity includes a

verification and validation section. The material in those sections

generally describes various assessments and measures that OPM intends to

use in gauging progress toward the performance goals and how they will

be audited, benchmarked, and validated. These sections sometimes do not

provide a clear view of the current problems OPM faces with data

verification and validation. We also found that the plan does not discuss or

identify any significant data limitations and their implications for assessing

the achievement of performance goals.

Verifying and Validating

Performance

OPM’s performance plan partially discusses how the agency will ensure that

its performance information is sufficiently complete, accurate, and

consistent. Specifically, the plan highlights the importance of having

credible data and generally meets the intent of the Results Act by

identifying actions that OPM believes will identify data problems. These

actions include audits of its financial statements by an independent

accounting firm. The plan also includes specific actions or goals that could

contribute to improved reliability of data, such as installing a new financial

management system. However, it does not include plans for audits of

nonfinancial data, which were one technique for ensuring data integrity as

envisioned by Congress.

Although the performance plan provides proposed indicators for each

performance goal, it is not clear that data exist for all of the indicators or

that the specific data OPM proposes to use would be a valid measure for

assessing progress toward achieving its associated performance goal. For

instance, for its goal of supporting OPM leadership of the Human Resources

Technology Council, OMSOE proposes to use as an indicator “improved HRM

operations as measured by 10-year efficiency and quality indicators, e.g.,

improved ratios of personnel operations staff to employees covered.”

However, the plan does not indicate what data OPM would use to measure

the quality of HRM operations. Further, the proposed efficiency measure,

the ratio of personnelists to other employees, while a potentially useful

measure, can be imprecise when agencies have staff performing

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personnel-related duties who are not specifically in job classifications

normally considered to be “personnelist” occupations.

Recognizing Data

Limitations

OPM’s performance plan does not discuss a number of known data

limitations that may affect the validity of many performance measures OPM

plans to use. OPM lacks the timely, accurate, and reliable program data

needed to effectively manage and oversee some of its various activities

and programs. For example, OPM’s December 1997 report on the agency’s

management controls required by the Federal Managers’ Financial

Integrity Act noted that there are a number of key areas where controls

and reconciliations are either weak or not implemented. This report noted

that OPM does not have an effective system in place to ensure the accuracy

of claims paid by experience-rated carriers participating in the Federal

Employees Health Benefits Program (FEHBP). The report also noted that a

significant opportunity exists for fraudulent claims to persist undetected

owing to the lengthy audit cycle of FEHBP carriers, which was 15 years in

1992—longer than the requirement for carriers to retain auditable records

(3 to 5 years).

Similarly, in his October 31, 1997, semiannual report to Congress, OPM’s

Inspector General expressed concern with the infrequency of IG audits of

FEHBP insurance carriers and with the consolidation of unaudited data

from experience-rated carriers with agency data, which contributed to the

disclaimer of opinion on OPM’s health benefit program financial

statements. The annual performance plan section on the Inspector

General’s Office requests five additional staff to meet the goal of a shorter

audit cycle. OPM’s plan states that in addition to providing increased FEHBP

oversight, reducing the audit cycle to 5 years would result in considerable

financial recoveries.

Finally, the independent audit of OPM’s 1996 and 1997 financial statements

noted internal control weaknesses in a number of areas for OPM’s

retirement, health benefits, and life insurance programs. For example, OPM

has prescribed minimum records, documentation, and reconciliation

requirements to the employer agencies, but it does not monitor the

effectiveness of employer agencies’ controls or their degree of compliance

with controls. As a result, OPM does not have a basis for relying on other

agencies’ internal controls as they relate to contributions recorded in its

accounting records and other data received, which support amounts

recorded in the financial statements.

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The independent accountant also noted in the 1997 report that OPM’s

financial management system does not support all program

decisionmaking because the system does not produce cost reports or

other types of reports at meaningful levels. Despite such evidence that

suggests that internal controls over data reliability are still a major

problem area, the performance plan deals with these problems only on a

very broad level in those portions of the plan that alert readers to the

limitations associated with data that OPM intends to use to gauge its

performance against planned goals. Although OPM’s fiscal year 1997

retirement and life insurance program financial statements received

unqualified opinions, the independent auditor disclaimed an opinion on

the health benefits program financial statements for reasons related to

inadequate controls. At a minimum, it would have been helpful if the plan

had an explicit discussion of specific current program performance data

problems and how OPM plans to address them.

Agency Comments

and Our Evaluation

We provided OPM with copies of a draft of our observations on its annual

performance plan. On April 10, 1998, we met with OPM’s Chief of Staff and

other officials to discuss the draft. In an April 13, 1998, letter, the OPM

Director raised a number of concerns about the draft observations, which

we addressed in a revised draft. In an April 30, 1998, letter, the OPM

Director provided written comments on the revised draft (see app. I). OPM

said that it found the meeting with us to be particularly helpful as OPM

further develops and refines its plan—which OPM views as an evolutionary

process that will enable it to continually improve and articulate its focus

on improving federal human resource management. OPM also said that it

was especially pleased to see that the revised draft included changes on

some of the points discussed in the meeting.

OPM also said that the revised draft contains an inappropriate “imbalance

in its overall negative tone,” which may lead readers to conclude that the

OPM plan is substantially weaker than it is strong. OPM described our

discussions of the plan’s weaknesses as “lengthy” and said that they

overwhelm our “relatively short” statements regarding the plan’s strengths.

We agree that the Results Act planning process is evolutionary and

assessed OPM’s annual performance plan from the standpoint of how well it

can, as currently written, assist Congress and OPM as they work to realize

the potential of a results-focused planning process. We believe that our

assessment recognizes strengths in OPM’s annual performance plan while

also providing a sufficiently in-depth discussion to adequately describe

Page 14 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
B-280255 

areas in which further improvement is warranted. Thus, it was not our

intention to create an unduly negative tone, and we have made changes to

avoid such an impression.

OPM made additional comments that, for example, provided an explanation

of its intentions in developing its annual performance plan and suggested

additional context concerning some of our observations. We made

changes where appropriate to reflect these comments. Appendix I

includes OPM’s letter and our additional comments.

We are sending copies of this report to the Chairmen and Ranking

Minority Members of interested congressional committees; the Director,

Office of Personnel Management; and other interested parties. Upon

request, we will also make copies available to others. Major contributors

to this report are listed in appendix II. Please contact me on (202) 512-8676

if you or your staff have any questions concerning this report.

Michael Brostek

Associate Director, Federal Management

 and Workforce Issues

Page 15 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Contents

Letter 1

Appendix I 

Comments From the

Office of Personnel

Management

18

Appendix II 

Major Contributors to

This Report

24

Abbreviations

CPDF Central Personnel Data File

FEHBP Federal Employees Health Benefits Program

HRM Human resource management

IG Inspector General

IT Information technology

OMB Office of Management and Budget

OMSOE Office of Merit Systems Oversight and Effectiveness

OPM Office of Personnel Management

Page 16 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Page 17 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Appendix I 

Comments From the Office of Personnel

Management

See comment 1.

Page 18 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Appendix I 

Comments From the Office of Personnel

Management

See comment 2.

Now on p. 13.

See comment 3.

Page 19 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Appendix I 

Comments From the Office of Personnel

Management

See comment 1.

See comment 4.

See comment 5.

Page 20 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Appendix I 

Comments From the Office of Personnel

Management

The following are GAO’s comments on the Office of Personnel

Management’s letter dated April 30, 1998.

GAO Comments 1. OPM stated that in several cases where we suggested its annual

performance plan could be improved, the underlying problem seemed to

be a continuing disagreement between us and OPM on the strategic goals,

objectives, and measures included in its Results Act strategic plan. OPM

further said it was required by law to develop an annual performance plan

that presented annual performance goals for fiscal year 1999 that it

determined to be necessary to achieve that strategic plan’s goals and

outcomes. In a previous analysis of OPM’s strategic plan, we did find that

the goals in OPM’s strategic plan tended to be process or activity goals as

opposed to results-oriented goals. This may contribute to the annual plan

goals’ also focusing on processes or activities, which is one of the key

areas in which we believe the annual performance plan could be

improved. Nevertheless, even with a set of strategic goals that are processor activity-focused, annual performance goals can to some extent be

results-oriented. This is demonstrated in part by OPM’s performance plan

itself, which does include some results-oriented goals. Further, even when

actual results-oriented goals are not established, identifying and tracking

results-oriented performance measures can be useful to establish

performance baselines and to lead to more informed goal-setting in the

future. We have revised the report to make these points more clearly.

In addition, although the Results Act requires that strategic plans be

updated at least every 3 years, it does not prohibit more frequent revisions.

More frequent revisions might be appropriate in these early years of

implementing the Act as all parties gain experience with the challenges

and benefits of results-oriented planning. At least two agencies began

revising their strategic plans even as they were developing their first

annual performance plans. Thus, if OPM believes that its current strategic

plan inhibits its ability to achieve a results orientation in its annual

performance plans, it could reconsider its strategic plan.

2. OPM said that it continues to believe that the Transfers from the Trust

Funds section of the Salaries and Expenses Account portion of its

performance plan is the proper location for its annual performance goals

for its mandatory spending program activities related to federal, health,

life, and retirement programs. Nevertheless, OPM said that its annual

performance plans for fiscal year 2000 and beyond will include

appropriate statements that direct readers to the Transfers and Trust

Page 21 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Appendix I 

Comments From the Office of Personnel

Management

Funds section for goals that would pertain to the mandatory spending

program activities. We agree that providing a reference to the relevant

goals in OPM’s presentation of its mandatory spending accounts would

appropriately guide users of the plan to the goals and measures associated

with the accounts.

OPM also stated that our report implies that, because of the method OPM

used to establish and communicate relevant annual performance goals for

its mandatory spending program activities, OPM’s performance plan is not

consistent with its strategic plan and is, consequently, deficient. It was not

our intention to imply that OPM’s plan was inconsistent with its strategic

plan. We have revised the appropriate section of the report to more

accurately reflect our observations.

3. OPM also disagreed with our assessment that its performance plan deals

with certain internal and management control weaknesses in the earned

benefits programs only on a very broad level. OPM said that its plan

contains five specific annual performance goals in the Transfers from

Trust Funds section and an additional two such goals in the Office of

Inspector General section that deal specifically with these problems. More

importantly than how broad its description of how it approaches a matter,

according to OPM, is the fact that OPM has made a commitment to overcome

a problem, solve an issue, or otherwise deal with an important matter

affecting the government’s Human Resource Management Program.

We think it is commendable that OPM is committed to overcoming its

internal control problems. However, our comment about OPM’s dealing

with these problems only on a very broad level was made in the context of

pointing out that these internal control problems affect the reliability of

the performance measures OPM proposes to use to gauge progress toward

achieving its goals. Our report, Agencies’ Annual Performance Plans Under

the Results Act: An Assessment Guide to Facilitate Congressional Decision

Making (GAO/GGD/AIMD-10.1.18, p. 23) states that explaining the limitations of

performance information can provide Congress with a context for

understanding and assessing agencies’ performance and the costs and

challenges agencies face in gathering, processing, and analyzing needed

data. Thus, we believe a more specific discussion of internal control

problems and their effect on data limitations would be desirable. We made

clarifying changes to the report on this matter.

4. OPM expressed concern that we cited one of its performance goals as

one of “several” other performance goals using almost $12 million from the

Page 22 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Appendix I 

Comments From the Office of Personnel

Management

Employment Service program activity rather than state that the particular

performance goal is 1 of “11” major performance goals in the program

activity. We have revised the report to reflect this fact.

5. In reference to our statement that OPM’s plan does not mention specific

training or workforce skills that will be needed to achieve its performance

goals, OPM referenced the statement in its plan that states that OPM has a

major initiative underway to ensure that gaps in core competencies are

addressed. Our position on this issue remains unchanged since OPM’s plan

does not specify the training or skills needed nor does it link these needs

to specific performance goals. This information is needed for

policymakers to make informed judgments concerning whether OPM’s

staffing will in fact be adequate to successfully execute its plan.

Page 23 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
Appendix II 

Major Contributors to This Report

General Government

Division

Steven J. Wozny, Assistant Director

Clifton G. Douglas, Jr., Evaluator-in-Charge

Accounting and

Information

Management Division

Ronald B. Bageant, Assistant Director

Joan B. Hawkins, Assistant Director

Brian C. Spencer, Technical Assistant Director

Scott E. McNulty, Senior Auditor

Laura E. Castro, Senior Evaluator

Office of the General

Counsel

Alan N. Belkin, Assistant General Counsel

(410326) Page 24 GAO/GGD-98-130 Observations on OPM’s Annual Performance Plan
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