Human Capital: Job Classification 

04-01 
Farm Credit Administration Office of the Inspector General 

 Farm Credit Administration 

 1501 Farm Credit Drive 

 McLean, Virginia 22102-5090

 

June 29, 2004 

The Honorable Nancy C. Pellett 

Chairman of the Board and 

 Chief Executive Officer 

Farm Credit Administration 

1501 Farm Credit Drive 

McLean, Virginia 22102-5090 

Dear Ms. Pellett: 

The Office of the Inspector General completed an audit of the Farm Credit Administration job evaluation 

program and position management. The objectives of this audit were to determine whether the Farm Credit 

Administration position management is adequately administered and whether the job evaluation program 

reflects sound management principles. 

We found that if administered properly the Farm Credit Administration job evaluation program is effective in 

achieving a “performance based system” reflecting equal pay for equal work. In addition, we found that 

desk audits completed on job positions were generally well documented and completed fairly and 

objectively. However, to ensure job classification continues to be in alignment with position value at Farm 

Credit Administration, periodic reviews should be completed on the job evaluation criteria. In addition, 

management must be held accountable for reasonable decision making on issues that effect job 

classification. Internal controls should also be improved to ensure position management is effectively 

administered. 

 

 We conducted the audit in accordance with Government Auditing Standards issued by the Comptroller 

General for audits of Federal organizations, program, activities, and functions. We conducted fieldwork 

from November 2003 through April 2004. We provided a draft report to management on May 14, 2004. 

We conducted an exit conference and discussed the draft report with the Office of Chief Administrative 

Officer and the Chief Operating Officer on June 8, 2004. Where actions were presented to the Office of 

Inspector General that would resolve audit findings, the recommendations were changed to agreed upon 

actions. 

If you have any questions about this audit, I would be pleased to meet with you at your convenience. 

Respectfully, 

Stephen G. Smith 

Inspector General
Table of Contents 

BACKGROUND _______________________________________________________________ 1 

OBJECTIVE AND SCOPE _______________________________________________________ 2 

FINIDINGS AND RECOMMENDATIONS ____________________________________________ 2 

Job Evaluation System Review _______________________________________________________________________ 2 

Management Decision Making ________________________________________________________________________ 4 

Appropriate Accountability____________________________________________________________________________ 6 

Internal Controls ___________________________________________________________________________________ 7 
1

BACKGROUND 

The Farm Credit Administration (FCA or Agency) is an independent Federal bank regulatory agency 

that employs approximately 284 persons. Salaries and employee benefits accounted for $30.8 million 

or 81.5 percent of the total funds used in FY 2003. Under the 1989 Financial Institution Reform, 

Recovery, and Enforcement Act and the Farm Credit Act, FCA is exempt from standard Federal 

government compensation benefits programs. The Farm Credit Act states “In setting and adjusting the 

total amount of compensation and benefits for the employees of the Administration, the Chairman shall 

consult with, and seek to maintain comparability with other financial regulatory agencies”. The Agency 

periodically conducts salary surveys of agencies covered by the Financial Institution Reform, Recovery, 

and Enforcement Act of 1989. 

The Office of the Chief Administration Officer (OCAO) is responsible for the FCA compensation 

program administration. The compensation program primary objectives are to: 

• Attract, retain and motivate Agency employees. 

• Maintain “comparability” with other financial regulatory agencies and the private sector labor 

market. 

• Set pay at any dollar amount in the assigned pay range. 

• Award pay increases on the basis of individual performance and position in the salary range, 

without regard to any non-merit factors. 

The Agency Policies and Procedures Manual 819 “Farm Credit Administration Position Management 

and Job Evaluation Program” establish practices and procedures for administering the FCA position 

management and job evaluation program. According to the manual, the job evaluation process 

provides the framework for establishing Agency salary ranges and pay decisions. Through a 

systematic process, Agency positions are graded according to their internal value (their relative 

contribution to accomplishment of Agency goals, objectives and mission requirements). The following 

diagram describes the process. 

Job Evaluation Process 

 

Phase 1 

Position Requirements 

• Review job description. 

• Assess work environment 

needs. 

• Interview incumbent and 

supervisor. 

• For a new position, the 

supervisor prepares a 

position summary that 

consists of a short 

statement of primary 

purpose of the job and 

specification of principle 

duties and 

responsibilities. 

• Complete job analysis 

questionnaire using data 

collected. 

Phase 2 

Evaluation Factor and 

Rating Criteria 

• Six factors are used to 

classify all positions. 

Supervisory and 

Management 

Responsibilities, Problem 

Solving, Authority to Act, 

Key Relationships 

(Internal), Key 

Relationships (External), 

Knowledge. 

• Using the rating plan, select 

the statement under each 

factor that best describes 

the position requirement. 

Phase 3 

Processing 

Grade Level 

• Individual ratings for 

each factor are 

computer processed to 

produce the grade level 

assignment. 

• Each factor is weighted 

based on relevance to 

Agency goals, objectives 

and mission 

requirements. 

• Each position has a 

unique multiple 

regression job 

evaluation equation 

which is used to 

compute the grade 

level. 
2

Agency policy also outlines position management activities as follows: 

• Agency supervisors review individual job descriptions annually. Supervisors are to sign 

and date the job description and certify accuracy. 

• Human resource specialists will certify that the title, series, and grade of the position are in 

accordance with the FCA compensation and job evaluation program. 

• OCAO will periodically review Agency work units and/or individual positions to assure the 

accuracy of the individual evaluations and assessing compliance with the Agency’s 

position management and job evaluation program. 

OBJECTIVES AND SCOPE 

The objectives of this audit were to determine whether the job evaluation program reflects sound 

business practices and whether position management is adequately administered. We reviewed 

FCA policies and procedures on job evaluation and position management. We reviewed data on 

the pay system and compensation study reports. We reviewed documentation on revisions to the 

job evaluation program. We reviewed desk audit files from July 1998-October 2003. We 

compared job evaluation scores with grade classification for all FCA personnel. We also 

interviewed appropriate FCA staff in relation to audit objectives. 

FINDINGS AND RECOMMENDATIONS 

The Federal government is strongly encouraging agencies to use merit-based programs because 

such programs provide more variable rewards that are directly tied to performance results. Overall 

we found if administered properly the FCA job evaluation process is effective in achieving a 

“performance-based system” reflecting equal pay for equal work. In addition, we found that desk 

audits completed on job positions were generally well documented and completed fairly and 

objectively. However, to ensure the job classification continues to be in alignment with position 

value at FCA, periodic reviews should be completed on the job evaluation criteria. In addition, 

management must be held accountable for reasonable decision making time on issues that affect 

job classification. Management decisions that affect job classification must remain fair and they 

need to be implemented responsibly. Also, internal controls should be improved to ensure position 

management is effectively administered. 

Job Evaluation System Review 

Since the inception of the compensation program in 1992, reviews of salary administration have 

been primarily focused on market surveys of other financial regulatory agencies. Management 

conducted these reviews to ensure salary ranges remain competitive with market movement. 

Although market comparability studies are essential to ensure the compensation program remains 

comparable, it is equally essential that reviews be completed to determine whether job evaluation 

criteria remain consistent with the Agency’s goals, objectives and mission requirements. In a 2002 

survey conducted on FCA compensation practices, it was revealed that FCA’s pay ranges were 

the least competitive for the following positions: Accountant VH-37; General Counsel VH-44; 

Computer Specialist VH-39 and Policy Analyst VH-39. Because the study was not focused on the 

job evaluation system, a recommendation was made that the Agency assess whether grade 

assignments continue to be consistent with the intent of the Agency’s job evaluation system. 

When developing the job evaluation system, FCA’s intent was to develop a system that would 

classify a position according to the value the position had to FCA. Over the years FCA’s 

organization structure has changed. In 1992, FCA had 513 positions with seven directorates 
3

reporting directly to the Chief Executive Officer (CEO). In 2003, FCA has approximately 284 

employees with twelve directorates reporting directly to the CEO or Chief Operating Officer (COO). 

With fewer employees and more directorates reporting directly to upper management, FCA’s 

organization structure has resulted in a flatter organization with fewer management levels. This 

type of change may impact job classification. For example, the job evaluation factor, “internal 

relationship” addresses a job position contact level to upper management. Consequently job 

position classifications can become out of alignment with FCA job value. We compared the 1992 

career ladders for certain positions with the current grade levels. Our comparison showed that over 

time grade levels have increased beyond the established career ladder grade level. For positions 

reviewed, the chart below shows the percentage of positions that exceed the career ladders grade 

level. According to OCAO, grade levels that exceed career ladders are primarily due to specialized 

work within an occupational series or increased duties and responsibilities. 

Current 

Position Title 

Occupational 

Series 

1992 Career 

Ladders 

Percentage of Current 

Positions that Exceed 

Career Ladders 

FCA Examiner 1101 VH-38 VH-39(65%)/ VH- 40(7%) 

Financial Analyst 1160 VH-38 VH-39 (33%)/ VH-40 (67%) 

Computer Specialist 334 VH-34-38 VH-39 (33%)/VH-40 (67%) 

Information Technology 

Specialist 2210 VH-34-38 VH-39 (50%) 

Human Resource 

Specialist 201 VH-33-38 VH-39 (67%) 

Attorney* 905 VH-37-40 VH-41 (40%) 

* Excepted service positions. Promotions are not subject to the same rules as competitive services. 

The job evaluation program focuses pay decisions on job content. The job evaluation factors are 

the primary basis for assessing how job content fits into the Agency’s job hierarchy. FCA’s job 

evaluation factors and weights associated with each factor were derived in 1992 and reflected the 

Agency’s organization structure, culture and values at that time. High performing organizations are 

continually reviewing and revising their compensation programs to support their strategic goals. 

Because the Agency’s organization structure has changed over the years and the Agency’s core 

values have been formalized, the job evaluation criteria should be reviewed to determine whether it 

still remains relevant to the Agency’s goals and objectives, and whether the FCA’s job hierarchy 

supports the Agency’s strategic plan. 

Agreed Upon Actions

1. The Chief Administrative Officer will conduct a review of the job evaluation program. The 

review will include the following: 

a. an assessment on whether grade assignments are consistent with the intent of the 

Agency’s job evaluation system and compensation philosophy. 

b. an assessment on whether job evaluation factors and weights placed on those factors are 

in alignment with the Agency’s goals and objectives. 
4

Management Decision Making 

Our review showed that management’s delay in making a decision on the Office of the Chief 

Financial Officer (OCFO) reorganization has resulted in employees being paid for work not 

performed. We found two instances where management’s three- year delay in making a decision 

on the OCFO organizational structure has resulted in two employees’ grade classification being 

higher than actual duties and responsibilities performed. The following is a chronological listings of 

events related to the OCFO reorganization. 

September 2000 FCA Board created the OCFO. The CFO envisioned the OCFO having three 

divisions: 1) Systems, 2) Financial Reporting and 3) Budgeting and Analysis. 

According to the CFO proposed reorganization chart, each division would 

have a director at grade 41. 

October 2000 FCA announced a position for an Assistant CFO for Systems. Applicants 

were requested to provide a narrative that supported their ability to direct and 

supervise employees. 

December 2000 An Assistant CFO for Systems was hired at grade 41. The position 

description specifically states duties and responsibilities will include directly 

supervising a division staff. The employee has not performed supervisory 

work since entering the position. 

March 2001 The financial statement management letter dated March 8, 2001 

recommended that the FCA management ensure personnel preparing 

financial statement have skill levels that include knowledge of Federal 

accounting standards. 

 April 2001 The CFO submitted a personnel action to recruit for an Assistant CFO for 

Budgeting and Analysis (VH-41), a Senior Systems Accountant (VH-40), and 

an Assistant CFO for Financial Reporting (VH-41). 

Summer 2001 The CFO submitted a proposed reorganization plan to the COO. The CFO 

discussed with the CEO and COO plans for creating three divisions. The 

Chief Administrative Officer (CAO) also reviewed the reorganization plan. 

June 2001 In a memo to the CEO, the CAO raised concerns with the reorganization 

plan. Specifically the CAO felt the reorganization plan did not provide enough 

detail on how employees were to be organized; it appeared as if positions 

and responsibilities were overlapping; and the average grade level in OCFO 

would be raised to the grade 40 level, the second highest divisional grade 

level in the Agency. Based on the CAO concerns, the CEO initially delayed 

the announcement for the Assistant CFO for Financial Reporting. 

August 2001 FCA announced a job for an Assistant CFO for Financial Reporting even 

though no changes had been made to the reorganization plan and it had not 

been formally approved. 

January 2002 An Assistant CFO for Financial Reporting was hired at grade 41. The position 

description specifically states duties and responsibilities will include directly 

supervising a division staff but the employee has not performed supervisory 

work since entering the position. 
5

January 2002 The Office of Inspector General issued an audit report that addressed the 

OCFO’s lack of an organization structure plan based on workload 

requirements. The report included an agreed upon action which stated the 

CFO would redesign the organizational structure based upon a complete 

review of all job requirements. The review was to include an evaluation of all 

job position descriptions to incorporate new job requirements and eliminate 

outdated job requirements. It has been 28 months since issuance of the 

report and corrective actions to address the agreed upon action have not 

been completed. 

The CFO acknowledges the importance of establishing an organization structure that supports 

employees’ grade classification. However, the CFO has no time frame on when OCFO will be 

reorganized appropriately. In addition, upper management has overlooked organization structure 

disparity within the OCFO and facilitated the CFO’s ability to circumvent the Agency’s policies and 

procedures on position management. Consequently, employees continue to be paid for duties and 

responsibilities they are not performing. Our review of the job evaluation process showed that if 

the supervisory factor was removed from the Assistant CFOs’ position descriptions, the job 

evaluation score would probably result in a grade 40. In addition, removal of the supervisory factor 

can result in lower adjustments of other job evaluation factors such as authority to act, internal 

contacts and the knowledge area. We calculated the difference in salary between a grade 40 and 

grade 41. Using the midpoint salary range average, the salary difference is $14,284. Over a three 

year period for these two positions the salary difference totals $85,704. 

Authority to make organizational changes within any office rests with the CEO and may be 

delegated to the COO or Office Director. Further, supervisors are responsible for reviewing job 

descriptions annually and certifying their accuracy. During the review, if any substantive changes 

to position descriptions are noted, such as duties not being performed, the changes should be 

documented and subject to reevaluation by OCAO. Unfortunately, if job classification issues 

remain unresolved for a long period of time it creates misunderstanding by Agency personnel and 

can result in administrative and financial burden to the Agency. 

Agreed Upon Actions

2. The Chief Operating Officer will review the grade levels of the Assistant Chief Financial Officer 

for Systems and the Assistant Chief Financial Officer for Financial Reporting positions by: 

a. Obtaining approval for the Office of the Chief Financial Officer organizational structure from 

the Chief Executive Officer. 

b. Directing the Chief Financial Officer to update the Assistant Chief Financial Officer position 

descriptions to accurately reflect duties and responsibilities performed within the approved 

organization structure. 

c. Directing the Chief Administrative Officer to reevaluate the positions based on actual duties 

and responsibilities performed and recommending appropriate personnel actions. 

d. Making a decision on the personnel actions, recommended by the Chief Administrative 

Officer, whether the Assistant Chief Financial Officer for Systems and the Assistant Chief 

Financial Officer for Financial Reporting positions should be reclassified. 
6

Appropriate Accountability 

We found some instances where management decisions have resulted in job evaluation score 

overrides. This has an impact of higher grade classifications than job evaluation scores. The FCA 

job evaluation program consists of a computerized evaluation process and a related data base 

containing the current job evaluation scores in effect for all positions throughout the Agency. It is 

imperative that the job evaluation process values the content of the position, not the capabilities or 

qualities of individual employees. We reviewed 152 job positions and compared their job evaluation 

scores to the current grade levels. Overall, grade positions within FCA were consistent with job 

evaluation scores. However, we did find five positions, at or above grade VH-40, where the grade 

classifications were higher than the job evaluation scores. 

The difference between 

grade classification and 

job evaluation score* 

Reasons for Higher 

Grade Classification 

2.46 Through reorganization upper management reassigned 

the employee to a lower grade position as incumbency 

allocation. Incumbency allocation allows the employee 

exemption from downgrading and the employee keeps 

their current grade level for the duration of their tenure in 

the position. 

2.36 Due to an office’s reorganization the employee was 

reassigned to a lower grade and will maintain their grade 

for two years. 

1 Employee reassigned as incumbency allocation and able 

to maintain their grade from previous position. 

.76 Employee was reassigned and the current position duties 

and responsibilities do not support current grade. 

.57 Over time the employee’s responsibilities and duties have 

decreased resulting in a lower grade classification. 

*Differences were calculated by subtracting the job evaluation score from the grade level 

(i.e. 41 [grade level] - 39.21[job evaluation score] = 1.79 increase grade level.) 

The job evaluation system provides a basis for the Agency to evaluate positions in a fair and 

objective way. The job evaluation system also affords a mechanism for achieving pay equity the 

principle of equal pay for substantially equal work. Therefore, the decision to allow employees to 

maintain “incumbency allocation” status must be thought out carefully to ensure the process 

remains fair and objective. In addition, when desk audits are completed on positions, OCAO 

should send a memo to the appropriate level of management stating the desk audit results. This 

ensures that management is aware of employee’s grade classification. When management is 

aware that an employee’s grade classification is higher than the position’s job evaluation score, 

action should be taken to ensure duties and responsibilities support the grade classification. If 

grade classifications are not supported by job evaluation scores, it gives the appearance of 

unfairness and can erode the merit system principle concept of “equal pay for equal work”. 
7

Agreed Upon Action

3. The Chief Administrative Officer will send a memo to the appropriate level of management 

stating results of all desk audit reviews. A copy of the memo will be maintained in the desk audit 

file. 

Internal Controls 

OCAO has some effective internal controls to ensure the job evaluation process is administered 

appropriately. For example, our review of 22 desk audit files from July 1998 to October 2003 

showed that OCAO had adequate controls to ensure the process was fair and objective. 

Specifically: 

• OCAO had established comprehensive policies and procedures for completing desk audit 

reviews and overall procedures are followed. 

• The human resource specialist responsible for completing reviews demonstrated competence 

in the process and understanding the importance of completing fair and objective reviews. 

• Desk audits were completed timely and overall files reviewed contained sufficient 

documentation to support desk audit results. 

• There was adequate separation of duties. The person completing the reviews and the person 

making final promotional decisions is not the same. 

OCAO also completes periodic reviews on personnel files to ensure appropriate documentation is 

maintained. We commend OCAO for taking steps to make sure the job evaluation program is fair. 

However, because our review showed other internal control weaknesses, resulting in grade 

classification disparity, additional steps must be taken to strengthen controls over the job evaluation 

program. Additional controls exist which, if followed, could prevent the grade classification 

disparities we found in our review. 

According to Agency Policies and Procedures Manual 819, OCAO is to complete periodic reviews 

of Agency work units and/or individual positions to assure the accuracy of individual evaluations 

and compliance with guidance on job evaluation and position management. OCAO is supposed to 

distribute summary reports to the CEO/COO and office director stating review results. According to 

OCAO, these reviews are not performed. Agency resources need to be focused on activities that 

have a major impact on Agency expenditures. In 2003, salary and benefits accounted for 81.5 

percent of Agency costs. Given the high impact of position grades on administrative costs, the 

reviews prescribed by existing procedures would be an effective control over the administration of 

the job evaluation program. Therefore, OCAO should ensure it dedicates the resources to perform 

periodic reviews of Agency work units’ compliance with job evaluation and position management 

guidance. 

In addition, to properly assess the accuracy of job descriptions, organizational charts must be 

current and accurate. According to Agency’s guidance, the FCA Board approves the FCA 

organization chart down to the office level. To validate approval FCA’s organizational chart is 

signed and dated by the Chairman of the Board. Authority to make organizational changes within 

any office rest with the CEO and can be delegated to the COO or office director. However offices’ 

organizational charts are not signed or dated to validate approval. Consequently offices’ 

organizational charts are not always current or accurate. For example, the former Office of 

Congressional and Public Affairs was reorganized into the Office of Communication and Public 

Affairs and the Office of Congressional and Legislative Affairs. There are no organizational charts 

for the newly created offices. Further the Office of Policy and Analysis organizational chart does 
8

not reflect a significant supervisory position within the office organization structure. Therefore, to 

ensure all offices organizational charts are valid, the COO should sign and date them and OCAO 

should maintain a file of all approved organizational charts. 

Agreed Upon Actions

4. The Chief Administrative Officer will establish a plan to assess at least 20 percent of all positions 

each year so that all positions are reviewed at least every fifth year. The Chief Administrative 

Officer will provide the Chief Executive Officer and the Board with an annual summary of 

assessments. Each assessment will include the following: 

a. Reviewing job descriptions for accuracy. 

b. Assessing whether grade classification is supported by an approved organizational 

structure. 

c. Assessing compliance with position management policies and procedures. 

5. The Chief Administrative Officer will make sure all offices’ organizational charts are approved 

with a signature and date. The approved organizational charts will be retained in the Office of 

Chief Administrative Officer. 

 
9

REPORT 

Fraud  Waste  Abuse  Mismanagement 

FARM CREDIT ADMINISTRATION 

OFFICE OF INSPECTOR GENERAL 

 Phone: Toll Free (800) 437-7322 

 (703) 883-4316 

 Fax: (703) 883-4059 

 e-mail: fca-ig-hotline@starpower.net

 mail: Farm Credit Administration 

 Office of Inspector General 

1501 Farm Credit Drive 

 McLean, VA 22102-5090