United States General Accounting Office

GAO Report to the Ranking Minority Member,

Subcommittee on Post Office and Civil

Service, Committee on Governmental

Affairs, U.S. Senate

December 1995 RETENTION

ALLOWANCES

Usage and Compliance

Vary Among Federal

Agencies

GAO/GGD-96-32

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-260236 

December 11, 1995

The Honorable David Pryor

Ranking Minority Member

Subcommittee on Post Office

 and Civil Service

Committee on Governmental Affairs

United States Senate

Dear Senator Pryor:

This report responds to your September 30, 1994, request that we review

federal agencies’ use of retention allowances as salary supplements to

retain essential employees. In that letter and in subsequent meetings with

your office, you asked that we report on (1) the total and average values of

the allowances, as well as the highest values of individual allowances, at

selected federal agencies for the period 1991 through 1994; (2) the extent

to which Senior Executive Service (SES) employees are receiving retention

allowances; (3) any compliance issues identified during limited review of

agencies’ retention allowance awards; (4) whether agencies are preparing

retention allowance plans in accordance with Office of Personnel

Management (OPM) regulations; and (5) the extent to which OPM is

performing oversight of the use of retention allowances.

Background The retention allowance authority was established by section 208 of the

Federal Employees Pay Comparability Act of 1990 (FEPCA).1

 The act

required OPM to issue governmentwide regulations on retention

allowances, which it did on March 28, 1991. The act and OPM’s

implementing regulations require agencies to document that (1) each

allowance paid is based on a determination that unusually high or unique

qualifications of the employee or a special need of the agency for the

employee’s services makes it essential to retain the employee and (2) in

the absence of such an allowance, the employee would be likely to leave

federal employment. The agency must also document the extent to which

the employee’s departure would affect the agency’s ability to carry out an

activity or perform a function deemed essential to the agency’s mission.

The regulations also require agencies to prepare retention allowance

plans. The plans must include (1) criteria that must be met or considered

in authorizing allowances, including criteria for determining the size of an

allowance; (2) a designation of officials with authority to review and

1

5 U.S.C. 5754.

Page 1 GAO/GGD-96-32 Retention Allowances
B-260236 

approve payment of retention allowances; (3) procedures for paying

allowances; and (4) documentation and recordkeeping requirements

sufficient to allow reconstruction of the actions taken to award the

allowance.

Agencies are permitted to pay employees allowances of up to an additional

25 percent of their basic pay. An agency may continue to pay a retention

allowance as long as the conditions giving rise to the original

determination to pay the allowance still exist, but it must conduct a formal

review at least annually to determine whether the retention allowance is

still warranted and document this review by means of an authorized

official’s written certification.

Results in Brief As of September 30, 1994, 354 of the 2.9 million civilian executive branch

employees were receiving retention allowances.2

 On an annualized basis,

the cost of these allowances was approximately $2.8 million. Five

agencies—the Departments of Defense (DOD), Energy (DOE), and

Agriculture (USDA); the Export-Import Bank (Ex-Im Bank); and the

Securities and Exchange Commission (SEC)—awarded 334 (94 percent) of

these retention allowances.3

 As agreed with your office, we focused our

review on these five agencies and found that Ex-Im Bank awarded

allowances to 21.7 percent of its employees in fiscal year 1994, while the

other agencies gave allowances to 0.3 percent or fewer of their employees.

The average allowance at the five agencies during fiscal years 1991

through 1994 was $7,789 per employee,4

 with the highest

allowance—$28,925—awarded to a DOD employee.5

 Five allowances were

awarded to SES employees at these agencies.

Ex-Im Bank did not appear to comply with the statutory requirement that

it must determine that prospective recipients would be likely to leave the

2

After completion of our review, OPM said that it had discovered that the Department of Health and

Human Services (HHS) had not reported allowance data and that HHS had an estimated 20 employees

who had received allowances during fiscal year 1994. Since OPM did not know the exact number of

HHS employees receiving allowances as of September 30, 1994, the 354 allowances does not include

HHS.

3

Our work at DOD included Army, Navy, and Air Force civilian personnel who received 98 percent of

all DOD retention allowances during fiscal years 1992 through 1994.

4

The $7,789 average was computed without including 61 retention allowances awarded by DOD in

fiscal years 1992 through 1994 because DOD did not provide the award amounts in time for publication

of this report.

5

We did not evaluate the appropriateness of individual allowance amounts or of the proportion of

employees at each agency who received allowances.

Page 2 GAO/GGD-96-32 Retention Allowances
B-260236 

agency if they did not receive an allowance. We informed OPM of our

preliminary compliance concerns. Subsequently, in furtherance of its

oversight responsibility, OPM initiated an in-depth review of Ex-Im Bank’s

use of retention allowances and recruitment bonuses. Accordingly, we

decided to forgo further work on this compliance issue.

While the five agencies’ retention allowance plans contained most of the

features required by OPM regulations, such as criteria for selecting and

approving retention allowance recipients, three of the five agencies—DOD,

Ex-Im Bank, and SEC—did not include the criteria to be used for

determining the amount of employees’ allowances in their plans.

OPM’s regulations do not require agencies to review and recertify retention

allowances as the result of an increase in the employee’s basic pay. Most

agencies told us that they allowed their employees’ allowances to increase

automatically if the basic pay increases during the allowance period, such

as governmentwide pay increases, were minimal. However, officials at two

of the agencies said that, for some situations at least, their approving

officials may have permitted allowances to increase automatically even if

the employees’ basic pay increases were significant, such as when they

were promoted.6

 An OPM official told us that, although OPM intended in

writing the regulations to give agencies flexibility in administering

retention allowances, OPM nevertheless believed that agencies would likely

review employees’ allowances when employees received significant

increases in basic pay.

OPM has developed regulations and conducted longitudinal studies of

FEPCA’s incentive pay programs, including some on-site compliance

reviews of FEPCA actions by selected installations. These reviews did not

reveal systemic problems in the use of these authorities. However, after

we discussed our preliminary findings with OPM, it began an in-depth

review of Ex-Im Bank’s use of pay flexibilities provided by FEPCA, including

retention allowances.

Scope and

Methodology

To identify which agencies gave the largest number of retention

allowances and the highest amounts awarded, as well as to determine the

total value of retention allowances and the number of SES employees

awarded allowances, we reviewed OPM retention allowance reports for

6

We did not expand our sample to verify whether some officials had permitted allowances to increase

automatically.

Page 3 GAO/GGD-96-32 Retention Allowances
B-260236 

fiscal years 1991 through 1994,7 which were derived from OPM’s Central

Personnel Data File (CPDF).8

 We selected the five agencies that the data

showed had the most allowances from fiscal years 1991 through

1994—DOD, Ex-Im Bank, SEC, DOE, and USDA.

To assess whether agencies were preparing retention allowance plans in

accordance with OPM regulations, we obtained and reviewed agencies’

retention allowance plans and compared the provisions and other

information in these documents with requirements in OPM retention

allowance regulations. In addition, we interviewed agency officials about

their plans. To perform a limited review of agencies’ retention allowance

awards, we interviewed agency officials about their award procedures and

reviewed individual retention allowance justification documents for 43

selected awards at the five agencies. We did not evaluate the

appropriateness of individual allowance amounts or the proportion of

agencies’ employees who received allowances. The 43 awards, although

randomly selected from groups of retention allowances that were

stratified based on grade levels, are not projectable because we were

unable to review sufficient numbers of awards at each agency due to time

constraints.9

To determine the extent of OPM’s oversight efforts, we interviewed OPM

program and oversight officials and reviewed documentation they

provided, including reports statistically analyzing retention allowances by

agency. We also informed OPM’s program and oversight officials of our

preliminary compliance concerns at Ex-Im Bank. Subsequently, OPM

officials decided to conduct an in-depth review of Ex-Im Bank’s use of

retention allowances and recruitment bonus programs.

We provided a draft of this report for comment to the heads of DOD, DOE,

Ex-Im Bank, OPM, SEC, and USDA. Their comments are summarized on pages

12 through 14. Written comments from DOD, Ex-Im Bank, and SEC are

reproduced in appendixes I through III, respectively.

Our review was conducted in the agencies’ Washington, D.C., headquarters

offices from November 1994 to September 1995 in accordance with

generally accepted government auditing standards.

7

Office of Workforce Information Central Personnel Data File Report, prepared quarterly by OPM.

8

The CPDF is OPM’s automated system that contains personnel information for most federal civilian

employees in the executive branch, as well as for employees at selected agencies in the legislative

branch. We did not independently verify the accuracy of CPDF data for the allowance reports.

9

We reviewed 19 allowances at DOD, 7 allowances at Ex-Im Bank, 12 allowances at USDA, 2

allowances at DOE, and 3 allowances at SEC.

Page 4 GAO/GGD-96-32 Retention Allowances
B-260236 

Retention Allowances

Were Generally

Awarded to a Limited

Number of Employees

As of September 30, 1994, 354 employees (excluding HHS employees), or

about 0.01 percent of the approximately 2.9 million federal civilian

employees, were receiving retention allowances.10 Of these allowances,

334 (94 percent) had been awarded by the five agencies we reviewed. The

number and amount of retention allowances awarded at the five agencies

in fiscal years 1991 through 1994 are presented in table 1. As shown in the

table, the annualized value of retention allowances for these agencies

increased from approximately $21,000 in fiscal year 1991 to about

$2.8 million in fiscal year 1994.

Table 1: Numbers and Amounts of Five Agencies’ Retention Allowances, Fiscal Years 1991 Through 1994

1991 1992 1993 1994

Dollars in thousands

Agency Number Amount Number Amount Number Amount Number Amount

DOD 0 $0 76 $351.3 158 $1,077.3 248 $1,993.3

Ex-Im Bank 0 0 0 0 0 0 100 498.9

DOE 1 10.6 3 56.9 4 63.3 6 89.6

USDA 1 10.5 6 40.0 4 31.3 12 124.4

SEC 0 0 0 0 3 16.3 8 68.5

Total 2 $21.1 85 $448.2 169 $1,188.2 374a $2,774.7

aThe 374 allowances represent cumulative awards during fiscal year 1994 as compared to the

334 allowances mentioned previously, which were in effect as of September 30, 1994.

Source: Data provided by officials in personnel offices of the listed agencies.

The average allowance at the five agencies during fiscal years 1991

through 1994 was $7,789 per employee.11 In fiscal year 1994, the highest

allowance of $28,925 was awarded by DOD, and the average amounts

awarded per agency varied from $4,989 at Ex-Im Bank to $14,928 at DOE. In

addition, five retention allowances were awarded to SES employees in four

of the five agencies during fiscal years 1991 through 1994.12 Table 2

presents the average and highest amounts for retention allowances

awarded by each of the five agencies in fiscal years 1991 through 1994.

10Office of Workforce Information Central Personnel Data File Report, dated September 1994. This

OPM report lists allowances awarded during the previous quarter and ongoing allowances awarded

during prior quarters.

11The $7,789 average was computed without including 61 retention allowances awarded by DOD in

fiscal years 1992 through 1994 because DOD did not provide the award amounts in time for publication

of this report.

12Ex-Im Bank does not have any SES positions, and its policy does not permit use of retention

allowances for its equivalent Senior Level positions.

Page 5 GAO/GGD-96-32 Retention Allowances
B-260236 

Table 2: Average and Highest Amounts for Retention Allowances Awarded by Five Agencies, Fiscal Years 1991 Through

1994

1991 1992 1993 1994

Agency Average

High

amount Average

High

amount Average

High

amount Average

High

amount

DOD $0 $0 $5,516 $25,125 $6,950 $21,647 $9,771 $28,925

Ex-Im Bank 0 0 0 0 0 0 4,989 12,836

DOE 10,513 10,513 18,962 28,025 15,814 20,598 14,928 21,092

USDA 10,567 10,567 6,668 11,010 7,834 11,418 10,364 17,097

SEC 0 0 0 0 5,431 7,708 8,558 10,148

Source: Data provided by officials in personnel offices of the listed agencies.

Among the five agencies, Ex-Im Bank awarded allowances to the largest

proportion of its employees. Ex-Im Bank awarded allowances to

21.7 percent of its 462 employees during fiscal year 1994, while none of the

other agencies awarded allowances to more than 0.3 percent of their

employees.13 Table 3 presents the percentage of employees receiving

allowances at each of the five agencies during fiscal year 1994.

Table 3: Percentage of Employees

Receiving Allowances in Fiscal Year

1994 at Five Agencies Agency

Number of

allowances

Number of

employees Percent

DOD 248 731,321 0.03%

Ex-Im Bank 100 462 21.65

DOE 6 19,899 0.03

USDA 12 119,558 0.01

SEC 8 2,689 0.30

Total 374 873,929 0.04%

Source: Developed by GAO from OPM and agencies’ data.

13We did not evaluate the appropriateness of individual allowance amounts or the proportion of

employees at each agency who received allowances.

Page 6 GAO/GGD-96-32 Retention Allowances
B-260236 

When Awarding

Allowances, Ex-Im

Bank Did Not Appear

to Determine That an

Employee Was Likely

to Leave, Absent an

Allowance

Ex-Im Bank did not appear to comply with the statutory requirement that

it determine that the employee was likely to leave if the employee did not

receive an allowance, which could result in unnecessarily spending funds

for allowances. None of the seven Ex-Im Bank allowances we reviewed

contained information that indicated the employee was considering

leaving the agency. Bank officials stated that approximately 90 percent of

the 100 allowances awarded were initiated based on management’s

recognition of the employees’ special talents and their attractiveness to

other employers, rather than on more definitive information, such as

whether the employees were considering other job offers.

Ex-Im Bank officials said that high level performance is a major criterion

for selecting award recipients; that is, allowance recipients are generally

selected from those employees who have outstanding performance ratings

because this group includes those most necessary to the Bank’s successful

accomplishment of its mission. Officials said that they time the awards of

new retention allowances and the recertification of existing allowances to

coincide with the results of their performance appraisal process. Ex-Im

Bank officials noted, however, that there is no direct linkage between a

performance rating and a retention allowance. In justifying the use of

performance ratings in awarding retention allowances, Ex-Im Bank

officials said that high performing employees have been found to be

particularly attractive to the private sector and, therefore, more likely to

have opportunities to leave the agency.

In 1992, prior to initiating its retention allowance program, Ex-Im Bank

requested special pay rate authorities from OPM to pay certain of its

employees more money. Ex-Im Bank officials said that OPM denied their

request and encouraged them to consider other remedies to their staffing

problems, including retention allowances. OPM officials told us that they

had discussed various pay and nonpay flexibilities, including retention

allowances, with Ex-Im Bank officials. OPM officials also provided us with

copies of the governmentwide guidance that they had provided to Ex-Im

Bank. They noted that, while they encourage agencies to use available pay

flexibilities, agencies need to follow established regulations—for example,

determining whether the employee was likely to leave without the

retention allowance and documenting the extent to which the employee’s

departure would affect the agency’s ability to carry out its mission. OPM

officials said that the fact that an employee had a high performance rating

is not sufficient to meet these requirements.

Page 7 GAO/GGD-96-32 Retention Allowances
B-260236 

We discussed with OPM officials our concern that, in the seven cases we

reviewed, Ex-Im Bank did not appear to determine that the employee was

likely to leave if the employee did not receive an allowance. After these

discussions and in furtherance of its oversight responsibility, OPM initiated

an in-depth review of Ex-Im Bank’s use of pay flexibilities, including

retention allowances and recruitment bonuses. Because of OPM’s oversight

role and its decision to review a larger number of Ex-Im Bank cases to

pursue the compliance issue on a systemic basis, we decided to forgo

further work on the issue.

Three Agencies’ Plans

Failed to Include

Required Rationale

for Allowance

Amount

While the five agencies’ retention allowance plans included most

provisions required by OPM regulations, including designating officials with

authority to review and approve allowances and providing criteria for

selecting allowance recipients, DOD, Ex-Im Bank, and SEC did not include

their rationales for determining the amount of the retention allowances in

any of their plans. Without the documented rationale, it is impossible for

an approving official to readily assess the appropriateness of the proposed

award amount and to ensure that the agency is not awarding higher

amounts than are necessary to retain the employee.

A DOD wage administration specialist told us that a specific DOD-wide

rationale was not included in its plan because DOD wanted to give the

individual approving officials flexibility in awarding allowances, including

the authority to determine the amounts of retention allowances. The

official said, however, that a planned revision of the plan will indicate that

appointing officials should apply criteria for determining retention

allowance amounts consistent with OPM’s regulations. SEC said that, as a

small agency, it is able to handle the retention allowance process on a

case-by-case basis and thus had not seen a need to formalize criteria for

determining the size of an allowance. Both the Vice President for

Management Services and a personnel specialist at Ex-Im Bank said that

the omission of a rationale in their retention allowance plan was an

oversight. Both individuals said that the agency wants the plan to comply

with all of OPM’s regulations and that the plan would be revised

accordingly.

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B-260236 

Agencies Have

Varying Views About

OPM’s Regulatory

Requirements for

Recertification of

Retention Allowances

OPM regulations do not require written recertification when an employee

receives an increase in basic pay. However, the agencies we reviewed

generally believed that retention allowances should be recertified when

their employees received significant increases in basic pay. For minimal

increases, such as government-wide pay raises, DOD, DOE, Ex-Im Bank, and

USDA do not specifically require recertification, thereby permitting the

allowances to continue at the same percentage rates, recognizing that the

allowances increase in amounts proportionate to the increases in

employees’ basic pay. Ex-Im Bank said that it also allows for automatic

recertification for promotions at lower grade levels. Conversely, SEC

believed all allowances should be recertified whenever basic pay

increases, regardless of the size of the increase.

A USDA official told us that, while most approving officials recertify

allowances when employees are promoted, some officials have interpreted

OPM’s regulations as allowing the allowances to continue at the same

percentage rate when any basic pay increase occurs, including those due

to promotions. Similarly, DOD officials said that they believed most

approving officials recertify promoted employees’ allowances, but that

they could not be sure that some officials do not automatically increase

allowances in proportion to promotions or other significant pay increases.

DOE and Ex-Im Bank officials said that they believed that promotion to a

new position with significantly higher pay results in changes to the

conditions that justified the allowance and that the regulations therefore

require that a new decision be made regarding the retention allowance.

An SEC personnel official told us that he believed a recertification is

required for any increase to an employee’s allowance. He added that it

would be unlikely for SEC to increase the value of an allowance when the

basic pay rates increased, because the initial award established an amount

that the employee in effect agreed was sufficient to retain his/her services.

Thus, it would be more likely that the allowance would be decreased or

terminated when the employee’s basic pay was increased.

OPM Compensation Administration Division officials said that OPM

regulations do not require that the allowance percentage be changed when

an employee receives an increase in his/her basic pay. OPM officials

pointed out that the law (5 U.S.C. 5754(b)) requires that a retention

allowance be stated as a percentage of the rate of basic pay and that this

supports the notion that it may be appropriate to adjust retention

allowances automatically based on changes in the rate of basic pay. One of

the OPM officials told us that OPM intended to allow agencies flexibility in

Page 9 GAO/GGD-96-32 Retention Allowances
B-260236 

their approaches to these increases, including not necessarily requiring

recertification, but that OPM believed that agencies would likely review

employees’ allowances when employees received significant increases in

basic pay.

OPM noted that, as part of their responsibility for administering the

program, agencies are expected to reduce or terminate a retention

allowance whenever they become aware that the original set of conditions

justifying the allowance have changed to the extent that the approved

allowance is no longer warranted. Further, OPM believes that agency

evaluations of changes in a variety of related factors—for example, the

employee’s rate of basic pay, an agency’s continuing need for the services

of the employee, the employee’s performance, and staffing and labor

market factors—like the original determinations for granting retention

allowances, are matters of judgment that cannot easily be reduced to a

precise formula. Moreover, changes in a single factor, such as an increase

in the rate of basic pay, do not necessarily mean that a full review and a

new written certification are necessary. OPM believes that approving

officials need to weigh all relevant factors and that they are in the best

position to determine whether and when a formal review or changes are

necessary. In any event, OPM’s regulations require agencies to review each

retention allowance annually and to certify in writing whether the

payment is still warranted.

OPM’s Oversight of

the Retention

Allowance Program

In carrying out its oversight responsibility, OPM has relied on agencies to

report retention allowance activity to OPM’s CPDF. Most federal agencies

report specific personnel-related information on the awarding of retention

allowances, including the recipient’s name, pay plan, performance rating,

basic pay rate, position, and the value of the allowance. OPM has used this

information to produce quarterly reports showing active retention

allowance data governmentwide. To monitor the program, OPM has done

statistical analyses of the agency-provided information, which included

determining whether the allowance exceeded the 25-percent limitation

and whether the allowance—when added to the total compensation

received by the employee during the calendar year—exceeded the rate

payable for level I of the Executive Schedule, the current statutory

maximum pay rate. OPM officials said that they had not identified any

noncompliance using these analyses.

Until March 1994, OPM also conducted periodic longitudinal studies of

FEPCA’s incentive pay programs, including retention allowances, to

Page 10 GAO/GGD-96-32 Retention Allowances
B-260236 

examine both OPM’s and agencies’ implementation of the act. The studies,

which began in 1991, resulted in three reports that addressed such issues

as statistical comparisons, by sex and race, of retention allowances

awarded. OPM officials said that they terminated these studies in fiscal year

1995 because they were not finding any significant problems and because

of budget concerns. However, OPM said that it conducted on-site

compliance reviews of FEPCA actions at randomly selected installations

during this same period.

As previously noted, we discussed with OPM our concerns about Ex-Im

Bank’s retention allowance award process, and OPM subsequently decided

to conduct an in-depth review of Ex-Im Bank’s use of retention

allowances.

Conclusions Retention allowances were awarded to a limited number of employees

governmentwide. With the exception of the Ex-Im Bank, the proportion of

agencies’ employees who received allowances was low.

Ex-Im Bank did not appear to comply with a statutory requirement in

awarding retention allowances, and Ex-Im Bank’s, DOD’s, and SEC’s

retention allowance plans did not satisfy an OPM planning requirement.

Also, OPM’s regulations did not address whether agencies should review

and/or recertify allowances when employees receive significant pay

increases during the year.

Ex-Im Bank appeared to award allowances without determining that

employees would be likely to leave in the absence of allowances, a

practice which could result in unnecessarily spending allowance funds.

OPM, as the agency responsible for governmentwide oversight of retention

allowances, is conducting a review of compensation practices at Ex-Im

Bank that should enable it to determine whether Ex-Im Bank needs to

more adequately address this issue. Accordingly, we decided to forgo

further work on the issue.

The retention allowance plans for DOD, Ex-Im Bank, and SEC did not

include criteria for determining the amounts of allowances. Without a

documented agencywide rationale, lower level managers did not have

guidance for establishing the amounts of individual allowances. In

addition, since the individual award justifications developed by these

managers were not required to include the rationale for the award amount,

and thus frequently did not, agency officials and others reviewing the

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B-260236 

awards lacked sufficient information with which to assess the

appropriateness of the amounts awarded. Thus, the agencies could not

ensure that the amounts awarded were not in excess of amounts

necessary to retain the employee.

OPM’s regulations do not require that allowances be reviewed or recertified

in writing whenever there are significant increases to employees’ basic pay

during the year. As a result, agencies may not be reviewing or recertifying

allowances in conjunction with increases to employees’ basic pay in

circumstances where such increases might affect the conditions justifying

the allowances. In such circumstances, a review might make a significant

difference.

Recommendations We recommend that the Chairman of Ex-Im Bank, the Secretary of

Defense, and the Chairman of SEC include the required criteria for

determining the value of retention allowances in their retention allowance

plans.

We recommend that the Director of OPM take action to ensure that

retention allowance regulations are revised to explicitly address whether,

and if so when, an agency should review or recertify the amount of an

allowance as a result of basic pay rate increases or other relevant changes

in the conditions justifying the allowance.

Agency Comments

and Our Evaluation

DOD, DOE, Ex-Im Bank, OPM, SEC, and USDA provided comments on a draft of

this report; these comments are summarized below. DOD, Ex-Im Bank, and

SEC provided written comments, which are included in their entirety in

appendixes I through III, respectively. We received oral comments from

the Deputy Assistant Secretary for Human Resources, DOE, on

September 25, 1995; the Chief of the Compensation Administration

Division, OPM, on September 26, 1995; and the Director of Personnel, USDA,

on September 26, 1995.

DOD, DOE, SEC, and USDA concurred with the findings and conclusions in our

report. In addition, DOD and SEC agreed to implement our recommendation

to them and suggested some technical changes, which we have

incorporated in the report. OPM offered a proposed revision to our

recommendation that OPM revise its regulations to clearly define whether,

and if so when, reviews or recertifications should be performed. OPM also

provided technical comments, which we incorporated where appropriate.

Page 12 GAO/GGD-96-32 Retention Allowances
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Ex-Im Bank granted that it may have “cut some procedural corners” but

distinguished this from substance by asserting that its actions were

consistent with legislative intent and regulatory guidelines as applied to its

particular human resources requirements. Ex-Im Bank also expressed

concern that we believed their rationales for determining allowance

amounts were suspect or in some way unprincipled because the rationales

were insufficiently documented. Ex-Im Bank did concur with our

recommendation that it incorporate criteria for determining the amount of

an allowance in its plan.

While we agree that a failure to document retention allowance

decisions—including the reasoning behind those decisions—is a

procedural deficiency, we believe the Bank’s apparent failure to

systematically determine that, in the absence of an allowance, an

employee would be likely to leave would, if confirmed, be a deficiency of

substance. This is the reason we decided to inform OPM of our concerns

regarding this issue. Further, both the act and OPM regulations clearly

require that each allowance paid should include a determination that, in

the absence of such an allowance, the employee would be likely to leave.

We note that the Ex-Im Bank’s First Vice President and Vice Chairman, in

commenting on a draft of this report, confirmed that he did not typically

base his award decisions on whether there might be an actual or imminent

competing offer of employment. However, we neither state nor intend to

imply in the report that Ex-Im Bank’s rationales for allowance amounts

were suspect or unprincipled.

To avoid the misinterpretation that we viewed Ex-Im Bank’s apparent

noncompliance as a procedural rather than a substantive deficiency, we

eliminated the wording in our draft report that could imply that all five

agencies generally complied with federal requirements. We now make it

clear that our review showed that Ex-Im Bank did not appear to comply

with the “likely to leave” requirement, but we decided to forgo further

work when OPM decided to start an in-depth review of Ex-Im Bank’s award

decisions. Our draft wording that the agencies generally complied with the

requirements was not intended to excuse the Ex-Im Bank’s apparent

noncompliance with that specific requirement.

OPM would prefer that we merely recommend that it consider revising the

regulations. We continue to believe, however, that, given the agencies’

varying interpretations of OPM’s regulations, OPM needs to explicitly

address the issue of whether and when retention allowance reviews and

recertifications, other than the current annual requirement, should be

Page 13 GAO/GGD-96-32 Retention Allowances
B-260236 

conducted. We did modify the draft recommendation, as OPM suggested, to

include other reasons for reviewing allowances in addition to the basic

one of a pay rate increase.

As arranged with your office, we plan no further distribution of this

document until 14 days after the date of issuance unless you publicly

announce its contents earlier. At that time, we will send copies of this

report to the Chairmen and Ranking Minority Members of the Senate

Committee on Governmental Affairs, the House Committee on

Government Reform and Oversight, and the House Subcommittee on Civil

Service; the Secretaries of Agriculture, Defense, and Energy; the Chairmen

of Ex-Im Bank and SEC; and the Director of OPM; and will make copies

available to other interested parties.

Major contributors to this report are listed in appendix IV. If you have any

questions about this report, please call me at (202) 512-7680.

Sincerely yours,

Timothy P. Bowling

Associate Director

Federal Management

 and Workforce Issues

Page 14 GAO/GGD-96-32 Retention Allowances
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Contents

Letter 1

Appendix I 

Comments From the

Department of

Defense

18

Appendix II 

Comments From the

Export-Import Bank

19

Appendix III 

Comments From the

Securities and

Exchange

Commission

25

Appendix IV 

Major Contributors to

This Report

27

Tables Table 1: Numbers and Amounts of Five Agencies’ Retention

Allowances, Fiscal Years 1991 Through 1994

5

Table 2: Average and Highest Amounts for Retention Allowances

Awarded by Five Agencies, Fiscal Years 1991 Through 1994

6

Table 3: Percentage of Employees Receiving Allowances in Fiscal

Year 1994 at Five Agencies

6

Page 16 GAO/GGD-96-32 Retention Allowances
Contents

Abbreviations

CPDF Central Personnel Data File

DOD Department of Defense

DOE Department of Energy

FEPCA Federal Employees Pay Comparability Act of 1990

HHS Department of Health and Human Services

OPM Office of Personnel Management

SEC Securities and Exchange Commission

SES Senior Executive Service

USDA U.S. Department of Agriculture

Page 17 GAO/GGD-96-32 Retention Allowances
Appendix I 

Comments From the Department of Defense

Page 18 GAO/GGD-96-32 Retention Allowances
Appendix II 

Comments From the Export-Import Bank

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See comment 1.

See pp. 12-13.

Page 19 GAO/GGD-96-32 Retention Allowances
Appendix II 

Comments From the Export-Import Bank

Page 20 GAO/GGD-96-32 Retention Allowances
Appendix II 

Comments From the Export-Import Bank

Page 21 GAO/GGD-96-32 Retention Allowances
Appendix II 

Comments From the Export-Import Bank

See pp.12-13.

Page 22 GAO/GGD-96-32 Retention Allowances
Appendix II 

Comments From the Export-Import Bank

Page 23 GAO/GGD-96-32 Retention Allowances
Appendix II 

Comments From the Export-Import Bank

The following is GAO’s comment on Ex-Im Bank’s letter dated

September 27, 1995.

GAO Comment While we made most of the language changes proposed by Ex-Im Bank, we

did not revise our report sections addressing allowance determinations.

Our reasons for not revising the sections on determinations are addressed

on page 13.

Page 24 GAO/GGD-96-32 Retention Allowances
Appendix III 

Comments From the Securities and

Exchange Commission

Page 25 GAO/GGD-96-32 Retention Allowances
Appendix III 

Comments From the Securities and

Exchange Commission

Page 26 GAO/GGD-96-32 Retention Allowances
Appendix IV 

Major Contributors to This Report

General Government

Division, Washington,

D.C.

Larry Endy, Assistant Director, Federal Management and

 Workforce Issues

Thomas Davies, Assignment Manager

Jeffrey Dawson, Evaluator-in-Charge

Office of the General

Counsel, Washington,

D.C.

Alan Belkin, Assistant General Counsel

Robert Heitzman, Senior Attorney

(966637) Page 27 GAO/GGD-96-32 Retention Allowances
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