GAO

United States General Accounting Office

A

Testimony

Before the Subcommittee on Civil Service and Agency 

Organization, Committee on Government Reform, House 

of Representatives

For Release on Delivery

Expected at 2:00 p.m. EDT

Wednesday, July 16, 2003

GAO

Additional Human Capital 

Flexibilities Are Needed

Statement of David M. Walker

Comptroller General of the United States

GAO-03-1024T
As an arm of the legislative branch, GAO exists to support the Congress in 

meeting its constitutional responsibilities and to help improve the 

performance and ensure the accountability of the federal government for the 

American people. Unlike many executive branch agencies, which have 

either recently received or are just requesting new broad-based human 

capital tools and flexibilities, GAO has had certain human capital tools and 

flexibilities for over two decades. GAO’s latest proposal combines diverse 

initiatives that, collectively, should further GAO’s ability to enhance its 

performance, assure its accountability, and help ensure that it can attract, 

retain, motivate, and reward a top-quality and high-performing workforce 

currently and in future years. 

Specifically, GAO is requesting that the Congress (1) make permanent GAO’s 

3-year authority to offer early outs and buyouts, (2) allow GAO to set its own 

annual pay adjustment system separate from the executive branch, 

(3) permit GAO to set the pay of an employee demoted as a result of 

workforce restructuring or reclassification to keep his/her basic pay but to 

set future increases consistent with the new position’s pay parameters, 

(4) provide authority to reimburse employees for some relocation expenses 

when that transfer has some benefit to GAO but does not meet the legal 

requirements for reimbursement, (5) provide authority to place upper-level 

hires with fewer than 3 years of federal experience in the 6-hour leave 

category, (6) authorize an executive exchange program with the private 

sector, and (7) change GAO’s legal name from the “General Accounting 

Office” to the “Government Accountability Office.” 

GAO has used the narrowly tailored flexibilities granted by the Congress 

previously in Public Law 106-303, the GAO Personnel Flexibilities Act, 

responsibly, prudently, and strategically. GAO believes that it is vitally 

important to its future to continue modernizing and updating its human 

capital policies and system in light of the changing environment and 

anticipated challenges ahead. GAO’s proposal represents a logical 

incremental advancement in modernizing GAO’s human capital policies. 

Based on employee feedback, there is little or no concern relating to most of 

the proposal’s provisions. Although some elements of GAO’s initial straw 

proposal were controversial (e.g., GAO’s pay adjustment provision), the 

Comptroller General has made a number of changes, clarifications, and 

commitments to address employee concerns. While GAO believes that some 

employees remain concerned about the pay adjustment provision, GAO also 

believes that employee concerns have been reduced considerably due to the 

clarifications, changes, and commitments the Comptroller General has 

made. Given GAO’s human capital infrastructure and unique role in leading 

by example in major management areas, the rest of the federal government 

can benefit from GAO’s pay system experience. 

The Subcommittee seeks GAO’s 

views on its latest human capital 

proposal that is slated to be 

introduced as a bill entitled the 

GAO Human Capital Reform Act of 

2003. 

GAO believes that its proposal is 

well reasoned and reasonable. 

Although GAO’s request for 

authority to adjust its annual pay 

system separate from the executive 

branch appears broad based, there 

are compelling reasons why GAO 

ought to be given this authority. 

These include the fact that GAO 

already has a hybrid pay system 

established by the authority the 

Congress granted it over two 

decades ago, the proposed 

authority is not radical if viewed in 

the light of authorities already 

granted and requested by other 

agencies, and GAO already has a 

number of key systems and 

safeguards in place and has plans 

to build in additional safeguards if 

granted the authority. 

GAO has conducted extensive 

external and internal outreach 

efforts on its latest human capital 

proposal. GAO respectfully 

requests the Subcommittee’s 

support and prompt passage by the 

Congress. 

www.gao.gov/cgi-bin/getrpt?GAO-03-1024T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Sallyanne 

Harper at (202) 512-5800 or 

harpers@gao.gov. 

Highlights of GAO-03-1024T, a testimony 

before the Subcommittee on Civil Service 

and Agency Organization, Committee on 

Government Reform, House of 

Representatives 

July 16, 2003 

GAO 

Additional Human Capital Flexibilities Are 

Needed 
Page 1 GAO-03-1024T 

Madam Chairwoman and Members of the Subcommittee:

I am pleased to be here today to discuss GAO’s latest human capital 

proposal. Chairwoman Davis, we at GAO appreciate your support of our 

proposal and your leadership in seeking additional sponsors for the bill you 

plan to introduce, the GAO Human Capital Reform Act of 2003.

As I have testified on many occasions, strategic human capital management 

must be the centerpiece of any serious government transformation effort. 

A key component of this is modern, effective, and credible human capital 

policies, which are critical to the successful functioning of any enterprise, 

both public and private. As the Chief Executive Officer and primary 

steward of GAO, I am not just responsible for GAO’s current economy, 

efficiency, and effectiveness, I am also responsible for ensuring that we are 

well positioned to serve our congressional clients, maximize our 

performance, and assure our accountability in the future. 

With this important responsibility in mind, I asked this committee and 

others over 3 years ago to grant GAO certain additional narrowly tailored 

human capital authorities. In enacting Public Law 106-303, known as the 

GAO Personnel Flexibilities Act, the Congress granted GAO certain 

flexibilities, which we have used responsibly to help strategically reshape 

the organization in order to better support the Congress and the American 

people. After reviewing the range and limits of our existing administrative 

and legal authorities, I have concluded that we now need to seek from the 

Congress additional human capital flexibilities in order for GAO to: ensure 

quality service to the Congress; continue leading by example in the 

government transformation, in general, and human capital reform areas in 

particular; and continue to attract, retain, motivate, and reward a quality 

and high- performing workforce, both currently and in future years. We 

believe that our proposal is well reasoned and reasonable, especially if 

viewed in the light of authorities already granted and requested by other 

agencies and the extensive external and internal outreach efforts we have 

conducted. We also respectfully request your support and prompt passage 

by the Congress. 

GAO: A Unique Agency 

with a Hybrid System

As an arm of the legislative branch, GAO exists to support the Congress in 

meeting its constitutional responsibilities and to help improve the 

performance and ensure the accountability of the federal government for 

the benefit of the American people. Today, GAO is a multidisciplinary 

professional services organization, comprised of about 3,250 employees, 
Page 2 GAO-03-1024T 

that conducts a wide range of financial and performance audits, program 

evaluations, management reviews, investigations, and legal services 

spanning a broad range of government programs and functions. GAO’s 

work covers everything from the challenges of securing our homeland, to 

the demands of an information age, to emerging national security threats, 

and the complexities of globalization. We are committed to transforming 

how the federal government does business and to helping government 

agencies become organizations that are more results oriented and 

accountable to the public. We are also committed to leading by example in 

all major management areas. 

Given GAO’s role as a key provider of information and analyses to the 

Congress, maintaining the right mix of technical knowledge and subject 

matter expertise as well as general analytical skills is vital to achieving the 

agency’s mission. Carrying out GAO’s mission today is a multidisciplinary 

staff reflecting the diversity of knowledge and competencies needed to 

deliver a wide array of products and services to support the Congress. Our 

mission staff—at least 67 percent of whom have graduate degrees—hold 

degrees in a variety of academic disciplines, such as accounting, law, 

engineering, public administration, economics, and social and physical 

sciences. I am extremely proud of our GAO employees and the difference 

that they make for the Congress and the nation. They make GAO the 

world-class organization that it is, and I think it is fair to say that while they 

account for about 80 percent of our costs, they constitute 100 percent of 

our real assets. 

Because of our unique role as an independent overseer of federal 

expenditures, fact finder, and honest broker, GAO has evolved into an 

agency with hybrid systems. This is particularly evident in GAO’s 

personnel and performance management systems. Unlike many executive 

branch agencies, which have either recently received or are just requesting 

new broad-based human capital tools and flexibilities, GAO has had certain 

human capital tools and flexibilities for over two decades. As a result, we 

have been able to some extent to operate our personnel system with a 

degree of independence that most agencies in the executive branch do not 

have. For example, we are excepted from certain provisions of Title 5, 

which governs the competitive service, and we are not subject to Office of 

Personnel Management (OPM) oversight. 

Until 1980, our personnel system was indistinguishable from those of 

executive branch agencies—that is, GAO was subject to the same laws, 

regulations, and policies as they were. However, with the expansion of 
Page 3 GAO-03-1024T 

GAO’s role in congressional oversight of federal agencies and programs, 

concerns grew about the potential for conflicts of interest. Could GAO 

conduct independent and objective reviews of executive branch agencies, 

such as OPM, when these agencies had the authority to review GAO’s 

internal personnel activities? As a result, GAO worked with the Congress 

to pass the GAO Personnel Act of 1980, the principal goal of which was to 

avoid potential conflicts by making GAO’s personnel system more 

independent of the executive branch. 

Along with this independence, the act gave GAO greater flexibility in hiring 

and managing its workforce. Among other things, it granted the 

Comptroller General authority to

• appoint, promote, and assign employees without regard to Title 5 

requirements in these areas;

• set employees’ pay without regard to the federal government’s General 

Schedule (GS) pay system’s classification standards and requirements; 

and 

• establish a merit pay system for appropriate officers and employees. 

By excepting our agency from the above requirements, the GAO Personnel 

Act of 1980 allowed us to pursue some significant innovations in managing 

our people. One key innovation was the establishment of a “broad 

banding,” or “pay banding,” approach for classifying and paying our Analyst 

and Attorney workforce in 1989. This was coupled with the adoption of a 

pay for performance system for this portion of our workforce. Therefore, 

while other agencies are only now requesting the authority to establish 

broad banding and pay for performance systems, GAO has had almost 15 

years of experience with such systems. 

Although GAO’s personnel and pay systems are not similar to those of 

many executive branch agencies, I must emphasize that in important ways, 

our human capital policies and programs are very much and will continue 

to remain similar to those of the larger federal community. GAO’s current 

human capital proposal will not change our continued support for certain 

national goals (e.g., commitment to federal merit principles, protection 

from prohibited personnel practices, employee due process through a 

specially created entity—the Personnel Appeals Board (PAB), and 

application of veterans’ preference consistent with its application in the 

executive branch for appointments and all appropriate reductions-in-
Page 4 GAO-03-1024T 

force). Furthermore, our pay system is and will continue to be consistent 

with the statutory principle of equal pay for equal work while making pay 

distinctions on the basis of an individual’s responsibilities and 

performance. In addition, we are covered and will remain covered by Title 

VII of the Civil Rights Act, which forbids employment discrimination. At 

GAO, we also emphasize opportunity and inclusiveness for a diverse 

workforce and have zero tolerance for discrimination of any kind. We have 

taken and will continue to take disciplinary action when it “will promote 

the efficiency of the service”—which for us includes such things as GAO’s 

ability to do its work and accomplish its mission. 

Although we are not subject to OPM oversight, we are nevertheless subject 

to the oversight of the Congress including our appropriations 

committees—the Senate Committee on Appropriations’ Subcommittee on 

the Legislative Branch and the House Committee on Appropriations’ 

Subcommittee on Legislative—and our oversight committees—the Senate 

Committee on Governmental Affairs and the House Committee on 

Government Reform. In addition, GAO’s management actions are subject 

to the review of an independent five member board, the Personnel Appeals 

Board, which performs functions similar to those provided by the Merit 

Systems Protection Board for federal executive branch employees’ 

personnel grievances. The Congress authorized the establishment of the 

PAB specifically for GAO in order to protect GAO’s independence as an 

agency. As with other federal executive branch employees, our employees 

have the right to appeal certain kinds of management actions including 

removal, suspension for more than 14 days, reductions in pay or grade, 

furloughs of not more than 30 days, a prohibited personnel practice, an 

action involving prohibited discrimination, a prohibited political activity, a 

within-grade denial, unfair labor practices or other labor relations issue. 

However, they do so to the PAB rather than the MSPB. 

While we currently do not have any bargaining units at GAO, our 

employees are free to join employee organizations, including unions. In 

addition, we engage in a range of ongoing communication and coordination 

efforts to empower our employees while tapping their ideas. For example, 

we regularly discuss a range of issues of mutual interest and concern with 

our democratically elected Employee Advisory Council (EAC). Chris 

Keisling, who is a Band III field office representative of the EAC, is 

testifying with me today. In addition, I consult regularly with our managing 

directors on issues of mutual interest and concern. In that spirit, I will 

consult with the managing directors and the EAC before implementing the 

provisions related to our human capital proposal. As we did with the 
Page 5 GAO-03-1024T 

flexibilities granted it under Public Law 106-303, the GAO Personnel 

Flexibilities Act, we will implement the authorities granted under this 

provision of our proposal only after issuing draft regulations and providing 

all employees notice and an opportunity for comment. Specifically, for the 

authorities granted to us under Public Law 106-303, we posted the draft 

regulations on our internal Web site and sent a notice to all GAO staff 

advising them of the draft regulations and seeking their comments. 

Key Elements of GAO’s 

Proposal

GAO’s proposal combines diverse initiatives that, collectively, should 

further GAO’s ability to enhance our performance, assure our 

accountability, and help ensure that we can attract, retain, motivate, and 

reward a top quality and high-performing workforce currently and in future 

years. These initiatives should also have the benefit of helping guide other 

agencies in their human capital transformation efforts. Specifically, we are 

requesting that the Congress provide us the following additional human 

capital tools and flexibilities: 

• make permanent GAO’s 3-year authority to offer voluntary early 

retirement and voluntary separation payments; 

• allow the Comptroller General to adjust the rates of basic pay of GAO on 

a separate basis than the annual adjustments authorized for employees 

of the executive branch; 

• permit GAO to set the pay of an employee demoted as a result of 

workforce restructuring or reclassification at his or her current rate 

with no automatic annual increase to basic pay until his or her salary is 

less than the maximum rate of their new position; 

• provide authority in appropriate circumstances to reimburse employees 

for some relocation expenses when that transfer does not meet current 

legal requirements for entitlement to reimbursement but still benefits 

GAO; 

• provide authority to put upper-level hires with less than 3 years of 

federal experience in the 6-hour leave category; 

• authorize an executive exchange program with private sector 

organizations working in areas of mutual concern and involving areas in 

which GAO has a supply-demand imbalance; and
Page 6 GAO-03-1024T 

• change GAO’s legal name from the “General Accounting Office” to the 

“Government Accountability Office.”

I will go into more detail later in my testimony on the details and rationale 

for each of these proposals.

Process for Developing 

the Proposal

In developing our proposal, we used a phased approach that involved 

(1) developing a straw proposal, (2) vetting the straw proposal broadly 

both externally and internally, and (3) making appropriate adjustments 

based on comments and concerns raised during the vetting process. As we 

have previously testified, many of the management tools and flexibilities 

we needed to pursue modern human capital management approaches are 

already available to us and we have used them. We have chosen to come to 

the Congress for legislation only where the tools and flexibilities we have 

were inadequate for addressing the challenges we faced. For example, the 

Congress enacted Public Law 106-303 to provide us with certain narrowly 

tailored flexibilities we needed to reshape our workforce and establish 

senior-level technical positions in critical areas. These flexibilities were 

needed to help GAO address the past decade’s dramatic downsizing 

(approximately 40 percent from 1992 through 1997) combined with a 

significant increase in the retirement-eligible workforce that jeopardized 

our ability to perform our mission in the years ahead. 

In developing our preliminary proposal, we gathered suggestions for 

addressing GAO’s human capital challenges as well as challenges faced by 

the rest of the federal government, discussed and debated them internally, 

and compiled a preliminary list of proposals. We received a number of 

viable proposals that we separated into two groups: (1) proposals that 

would be more applicable government-wide and (2) proposals GAO should 

undertake. I had our Office of General Counsel review the proposals GAO 

should undertake to determine whether we needed to seek legislative 

authority to implement them or whether I could implement them under the 

Comptroller General’s existing authority. 

Mindful of the need to keep the Congress appropriately informed, my staff 

and I began our outreach to GAO’s appropriations and oversight 

committees on the need for additional human capital flexibilities beginning 

late last year. In early spring of this year, we shared with these committees 

a confidential draft of a preliminary draft proposal. We also advised them 

that we planned to conduct a broad range of outreach and consultation on 

the proposal with our employees and other interested parties and that we 
Page 7 GAO-03-1024T 

would send them our revised legislative proposal at a later date. We 

conducted an extensive outreach and consultation effort with members of 

the Congress, including chairmen and ranking minority members of our 

appropriations and oversight committees and a number of local delegation 

members; congressional staff; the Director of OPM; the Deputy Director for 

Management of the Office of Management and Budget; public sector 

employee associations and unions; and various “good government” 

organizations. 

Within GAO, members of the Executive Committee (EC), which includes 

our Chief Operating Officer, our General Counsel, our Chief Mission 

Support Officer and me, engaged in an extensive and unprecedented range 

of outreach and consultation with GAO employees. This outreach included 

numerous discussions with our managing directors, who manage most of 

GAO’s workforce, and members of the EAC. 

The EAC is an important source of input and a key communications link 

between executive management and the constituent groups its members 

represent. Comprising employees who represent a cross-section of the 

agency, the EAC meets at least quarterly with me and members of our 

senior executive team. The EAC’s participation is an important source of 

front-end input and feedback on our human capital and other major 

management initiatives. Specifically, EAC members convey the views and 

concerns of the groups they represent, while remaining sensitive to the 

collective best interest of all GAO employees; propose solutions to 

concerns raised by employees; provide input to and comment on GAO 

policies, procedures, plans, and practices; and help to communicate 

management’s issues and concerns to employees. 

I have also used my periodic “CG chats,” closed circuit televised broadcasts 

to all GAO employees, as a means of explaining our proposal and 

responding to staff concerns and questions. Specifically, I have held two 

televised chats to inform GAO staff about the proposal. One of these chats 

was conducted in the form of a general listening session, open to all 

headquarters and field office staff, featuring questions from members of 

the EAC and field office employees. I have also discussed the proposal 

with the Band IIs (GS-13-14 equivalents) in sessions held in April 2003, and 

with our Senior Executive Service (SES) and Senior Level members at our 

May off-site meeting. In addition to my CG chats, I have personally held a 

number of listening sessions, including a session with members of our 

Office of General Counsel, two sessions with our administrative support 

staff, and sessions with staff in several field offices. Furthermore, the Chief 
Page 8 GAO-03-1024T 

Operating Officer represented me in a listening session with Band I field 

office personnel. Finally, I have also personally received and considered a 

number of E-mails, notes, and verbal comments on the human capital 

proposal. 

I would like to point out to others seeking human capital flexibilities that 

the outreach process, while necessary, is indeed time-consuming and 

requires real and persistent commitment on the part of an agency’s top 

management team. In order for the process to work effectively, it also 

requires an ongoing education and dialogue process that will, at times, 

involve candid, yet constructive, discussion between management and 

employees. This is, however, both necessary and appropriate as part of the 

overall change management process. To facilitate the education process on 

the proposal, we posted materials on GAO’s internal website, including 

Questions and Answers developed in response to employees’ questions and 

concerns, for all employees to review. Unfortunately, others who have 

sought and are seeking additional human capital flexibilities have not 

employed such an extensive outreach process.

Nature of GAO 

Employee Concerns

Based on feedback from GAO employees, there is little or no concern 

relating to most of the provisions in our proposal. There has been 

significant concern expressed over GAO’s proposal to decouple GAO’s pay 

system from that of the executive branch. Some concerns have also been 

expressed regarding the pay retention provision and the proposed name 

change. As addressed below, we do believe, however, that these employee 

concerns, have been reduced considerably due to the clarifications, 

changes, and commitments resulting from our extensive outreach and 

consultation effort. 

On the basis of various forms of GAO employee feedback, it is not 

surprising, since pay is important to all employees, that the provision that 

has caused the most stir within GAO has been the pay adjustment 

provision. Fundamentally, some of our employees would prefer to remain 

with the executive branch’s GS system for various types of pay increases. 

There are others close to retirement who are concerned with their “high 

three” and how the modified pay system, when fully implemented, might 

affect permanent base pay, which is the key component of their retirement 

annuity computation. Overall, there is a great desire on the part of GAO 

employees to know specifically how this authority would be implemented. 
Page 9 GAO-03-1024T 

It is important to note that, even in the best of circumstances, it is difficult 

to garner a broad-based consensus of employee support for any major pay 

system changes. While it is my impression, based on employee feedback, 

that we have made significant strides in allaying the significant initial 

concerns expressed by employees regarding the pay adjustment provision, 

I believe that some of these concerns will remain throughout 

implementation. In addition, some can never be resolved because they 

involve philosophical differences or personal interest considerations on 

behalf of individual GAO employees.

GAO’s history with pay banding certainly is illustrative of how difficult it is 

for an organization to allay employee fears even in the face of obvious 

benefits. While history has proven that an overwhelming majority of GAO 

employees have benefited from GAO’s decision to migrate our Analysts and 

Attorneys into pay banding and pay for performance systems, there was 

significant opposition by GAO employees regarding the decision to move 

into these systems. The experience of the executive branch’s pay 

demonstration projects involving federal science and technology 

laboratories shows that employee support at the beginning of the pay 

demonstration projects ranged from 34 percent to 63 percent. In fact, OPM 

reports that it takes about 5 years to get support from two-thirds of 

employees with managers generally supporting demonstrations at a higher 

rate than employees. 

Following the pay adjustment provision but a distant second in terms of 

employee concern, has been the pay reclassification provision, which 

would allow GAO employees demoted as a result of workforce 

restructuring or reclassification to keep their basic pay rates; however, 

future pay increases would be set consistent with the new positions’ pay 

parameters. Currently, employees subject to a reduction-in-force or 

reclassification can be paid at a rate that exceeds the value of their duties 

for an extended period. 

A distant third in terms of employee concern is the proposed name change 

from the “General Accounting Office’ to the “Government Accountability 

Office,” which would allow the agency’s title to more accurately reflect its 

mission, core values, and work. My sense is that some GAO employees 

who have been with GAO for many years have grown comfortable with the 

name and may prefer to keep it. At the same time, I believe that a 

significant majority of our employees support the proposed name change. 

Importantly, all of our external advisory groups, including the Comptroller 

General’s Advisory Council, consisting of distinguished individuals from 
Page 10 GAO-03-1024T 

the public and private sectors, and the Comptroller General’s Educators 

Advisory Council, consisting of distinguished individuals from the 

academic community, and a variety of “good government” groups strongly 

support the proposed name change. 

Changes Made in 

Response to Employee 

Feedback

The members of the EC and I took our employees’ feedback seriously and 

have seriously considered their concerns. Key considerations in our 

decision making were our institutional responsibility as leaders and 

stewards of GAO and the overwhelming support expressed through 

anonymous balloting by our senior executives, who also serve as leaders 

and stewards for GAO, for proceeding with all of the provisions of our 

human capital proposal, including the pay adjustment provision. 

Specifically, in a recent confidential electronic balloting of our senior 

executives, support for each element of our proposal ranged from over 2 to 

1 to unanimous, depending on the provision. Support for the proposed pay 

adjustment provision was over 3 to 1, and support for the proposed pay 

protection provision was over 4 to 1. Given this and other considerations, 

ultimately, we decided to proceed with the proposal but adopted a number 

of the suggestions made by employees in these sessions, including several 

relating to the proposal to decouple GAO annual pay adjustments from 

those applicable to many executive branch agencies. 

A key suggestion adopted include a minimum 2-year transition period for 

ensuring the smooth implementation of the pay provisions which would 

also allow time for developing appropriate methodologies and issuing 

regulations for notice and comment by all employees. Another key 

suggestion adopted was the commitment to guarantee annual across the 

board purchase power protection and to address locality pay 

considerations to all employees rated as performing at a satisfactory level 

or above (i.e., meeting expectations or above) absent extraordinary 

economic circumstances or severe budgetary constraints. We have chosen 

to implement this guarantee through a future GAO Order rather than 

through legislative language because prior “pay protection” guarantees 

relating to pay banding made by my predecessor, Comptroller General 

Charles A. Bowsher, used this means effectively to document and 

operationalize that guarantee. I have committed to our employees that I 

would include this guarantee in my statement here today so that it could be 

included as part of the legislative record. Additional safeguards relating to 

our pay proposal are set forth below. 
Page 11 GAO-03-1024T 

The following represents additional information regarding our specific 

proposal.

Voluntary Early 

Retirement and 

Separation Incentive 

Payment Authorities

Section 2 of our proposal would make permanent the authority of GAO 

under section 1 and 2 of Public Law 106-303, the GAO Personnel 

Flexibilities Act of 2000, to offer voluntary early retirements (commonly 

termed “early outs”) and voluntary separation payments (commonly 

termed “buyouts”) to certain GAO employees when necessary to realign 

GAO’s workforce in order to meet budgetary or mission needs, correct skill 

imbalances, or reduce high-grade positions. We believe that we have 

behaved responsibly in exercising the flexibilities that the Congress 

granted us and deserve a permanent continuation of these authorities. In 

addition, the two flexibilities which we would like to be made permanent 

are narrowly drawn and voluntary in nature, since the employees have the 

right to decide if they are interested in being considered for the benefits. 

Further, the provisions also have built in limits: no more than 10 percent of 

the workforce in any one year can be given early outs and no more than 5 

percent can be given buyouts. 

GAO’s transformation effort is a work in progress, and for that reason, the 

agency is seeking legislation to make the voluntary early retirement 

provision in section 1 of the law permanent. While the overall number of 

employees electing early retirement has been relatively small, GAO 

believes that careful use of voluntary early retirement has been an 

important tool in incrementally improving the agency’s overall human 

capital profile. Each separation has freed resources for other uses, enabling 

GAO to fill an entry-level position or to fill a position that will reduce a skill 

gap or address other succession concerns. Similarly, we are seeking 

legislation to make section 2—authorizing the payment of voluntary 

separation incentives—permanent. Although GAO has not yet used its 

buyout authority and has no plans to do so in the foreseeable future, we are 

seeking to retain this flexibility. The continuation of this provision 

maximizes the options available to the agency to deal with future 

circumstances, which cannot be reasonably anticipated at this time. 

Importantly, this provision seems fully appropriate since the Homeland 

Security Act of 2002 provides most federal agencies with permanent early 

out and buyout authority.

Public Law 106-303 required that GAO perform an assessment of the 

exercise of the authorities provided under that law, which included the 

authority for the Comptroller General to provide voluntary early retirement 
Page 12 GAO-03-1024T 

and voluntary separation incentive payments. With your permission, I 

would like to submit the assessment entitled Assessment of Public Law 

106-303: The Role of Personnel Flexibilities in Strengthening GAO’s 

Human Capital, issued on June 27, 2003, for the record. I will now 

highlight for you our observations from that assessment on voluntary early 

retirement and buyouts. 

Voluntary Early Retirement Public Law 106-303 also allows the Comptroller General to offer voluntary 

early retirement to up to 10 percent of the workforce when necessary or 

appropriate to realign the workforce to address budgetary or mission 

constraints; correct skill imbalances; or reduce high-grade, supervisory, or 

managerial positions. This flexibility represents a proactive use of early 

retirement to shape the workforce to prevent or ameliorate future 

problems. GAO Order 2931.1, Voluntary Early Retirement, containing the 

agency’s final regulations, was issued in April 2001. Under the regulations, 

each time the Comptroller General approves a voluntary early retirement 

opportunity, he establishes the categories of employees who are eligible to 

apply. These categories are based on the need to ensure that those 

employees who are eligible to request voluntary early retirement are those 

whose separations are consistent with one or more of the three reasons for 

which the Comptroller General may authorize early retirements. Pursuant 

to GAO’s regulations, these categories are defined in terms of one or more 

of the following criteria:

• organizational unit or subunits,

• occupational series,

• grade or band level, 

• skill or knowledge requirements,

• performance appraisal average,

• geographic location, or

• other similar factors that the Comptroller General deems necessary and 

appropriate.

Since it is essential that GAO retain employees with critical skills as well as 

its highest performers, certain categories of employees have been ineligible 
Page 13 GAO-03-1024T 

under the criteria. Some examples of ineligible categories are employees 

receiving retention allowances because of their unusually high or unique 

qualifications; economists, because of the difficulty that the agency has 

experienced in recruiting them; and staff in the information technology 

area. In addition, employees with performance appraisal averages above a 

specified level have not been eligible under the criteria. 

To give the fullest consideration to all interested employees, however, any 

employee may apply for consideration when an early retirement 

opportunity is announced, even if he or she does not meet the stated 

criteria. Furthermore, under our order, the Comptroller General may 

authorize early retirements for these applicants on the basis of the facts 

and circumstances of each case. The Comptroller General or his EC 

designee considers each applicant and makes final decisions based on 

GAO’s institutional needs. Only employees whose release is consistent 

with the law and GAO’s objective in allowing early retirement are 

authorized to retire early. In some cases, this has meant that an employee’s 

request must be denied. 

GAO held its first voluntary early retirement opportunity in July 2001. 

Employees who were approved for early retirement were required to 

separate in the first quarter of fiscal 2002. As required by the act, 

information on the fiscal 2002 early retirements was reported in an 

appendix to our 2002 Performance and Accountability Report. Another 

voluntary early retirement opportunity was authorized in fiscal 2003, and 

employees were required to separate by March 14, 2003. In anticipation of 

the 3-year sunset on our authority to provide voluntary early retirements, I 

have recently announced a final voluntary early retirement opportunity 

under our current authority. Table 1 provides the data on the number of 

employees separated by voluntary early retirement as of May 30, 2003. 
Page 14 GAO-03-1024T 

Table 1: Summary Data on Voluntary Early Retirements

Source: GAO.

As you can see from the table, of the 79 employees who separated from 

GAO through voluntary early retirement, 66, or 83.5 percent, were highgrade, supervisory, or managerial employees. High-grade, supervisory, or 

managerial employees are those who are GS-13s or above, if covered by 

GAO’s GS system; Band IIs or above, if covered by GAO’s banded systems 

for Analysts and Attorneys; or in any position in GAO’s SES or Senior-Level 

system. 

In recommending that GAO’s voluntary early out authority be made 

permanent, I would like to point to our progress in changing the overall 

shape of the organization. The 1990s were a difficult period for ensuring 

that GAO’s workforce would remain appropriately sized, shaped, and 

skilled to meet client demands and agency needs. Severe downsizing of the 

workforce, including a suspension of most hiring from 1992 through 1997, 

and constrained investments in such areas as training, performance 

incentives, rewards, and enabling technology left GAO with a range of 

human capital and operational challenges to address. Over 3 years ago, 

when GAO sought additional human capital flexibilities, our workforce was 

sparse at the entry level and plentiful at the midlevel. We were concerned 

about our ability to support the Congress with experienced and 

knowledgeable staff over time, given the significant percentage of the 

agency’s senior managers and analysts reaching retirement eligibility and 

the small number of entry-level employees who were training to replace 

more senior staff. 

As illustrated in figure 1, by the end of fiscal year 2002, GAO had almost a 

74 percent increase in the proportion of staff at the entry level (Band I) 

Applications/Status

of applications

Fiscal 2002 Fiscal 2003 Totals

Number

Percentage

of total Number

Percentage

of total Number

Percentage

of total

Total applications submitted 78 100.0 39 100.0 117 100.0

Approved applications 72 92.3 37 94.8 109 93.1

Disapproved applications 6 7.7 2 5.1 8 6.8

Approved applications withdrawn by 

employees 18 23.0 12 30.7 30 25.6

Applicants separated by voluntary early 

retirement 54 69.3 25 64.1 79 67.5
Page 15 GAO-03-1024T 

compared with fiscal year 1998. Also, the proportion of the agency’s 

workforce at the midlevel (Band II) decreased by 16 percent. 

Figure 1: GAO’s Human Capital Profile

Voluntary Separation 

Payments

In addition to authorizing voluntary early retirement for GAO employees, 

Public Law 106-303 permits the Comptroller General to offer voluntary 

separation incentive payments—buyouts—when necessary or appropriate 

to realign the workforce to meet budgetary constraints or mission needs; 

correct skill imbalances; or reduce high-grade, supervisory, or managerial 

positions. Under the act, up to 5 percent of employees could be offered 

such an incentive, subject to criteria established by the Comptroller 

General. 

The act requires GAO to deposit into the U.S. Treasury an amount 

equivalent to 45 percent of the final annual basic salary of each employee to 

whom a buyout is paid. The deposit is in addition to the actual buyout 

amount, which can be up to $25,000 for an approved individual. Given the 

many demands on agency resources, these costs present a strong financial 

disincentive to use the provision if at all. GAO anticipates little, if any, use 

of this authority because of the associated costs. For this reason, as well as 

to avoid creating unrealistic employee expectations, GAO has not 

developed and issued agency regulations to implement this section of the 

act. Nevertheless, as stated earlier, it is prudent for us to seek the 

continuation of this provision because it maximizes the options available to 

the agency to deal with future circumstances. Since GAO is also eligible to 

request buyouts under the provisions of the Homeland Security Act, the 

Mission

Mission Supportb

SES/SL

Band III

Band II

Band I

Othera

Figures in percentages

FY 1998 FY 2002

12.2

45.6

13.1

21.5 19.5

3.4 3.5

12.0

38.1

22.8

4.2 4.1

Source: GAO.
Page 16 GAO-03-1024T 

agency will consider its options under this provision as well. However, 

under the Homeland Security Act, GAO would have to seek OPM approval 

of any buyouts, which raises serious independence concerns.

Annual Pay Setting 

Policy and 

Adjustments

Section 3 and 4 of our proposal would provide GAO greater discretion in 

determining the annual across the board and locality pay increases for our 

employees. Under our proposal, GAO would have the discretion to set 

annual pay increases by taking into account alternative methodologies 

from those used by the executive branch and various other factors, such as 

extraordinary economic conditions or serious budgetary constraints. 

While the authority requested may initially appear to be broad based, there 

are compelling reasons why GAO ought to be given such authority. First, as 

I discussed at the beginning of my testimony, GAO is an agency within the 

legislative branch and already has a hybrid pay system established under 

the authority the Congress granted over two decades ago. Therefore, our 

proposal represents a natural evolution in GAO’s pay for performance 

system. Second, GAO’s proposal is not radical if viewed from the vantage 

point of the broad-based authority that has been granted the Department of 

Homeland Security (DHS) under the Homeland Security Act of 2002; 

agencies that the Congress has already granted the authority to develop 

their own pay systems; the authorities granted to various demonstration 

projects over the past two decades; and the authority Congress is currently 

contemplating providing the Department of Defense (DOD). Third, GAO 

already has a number of key safeguards and has plans to build additional 

safeguards into our modified pay system if granted this authority. 

Our proposal seeks to take a constructive step in addressing what has been 

widely recognized as fundamental flaws in the federal government’s 

approach to white-collar pay. These flaws and the need for reform have 

been addressed in more detail in OPM’s April 2002 White Paper, A Fresh 

Start For Federal Pay: A Case for Modernization, and more recently the 

National Commission on the Public Service’s January 2003 report on 

revitalizing the public service. The current federal pay and classification 

system was established over 60 years ago for a federal workforce that was 

made up largely of clerks performing routine tasks which were relatively 

simple to assess and measure. Today’s federal workforce is composed of 

much higher graded and knowledge-based workers.

Although there have been attempts over the years to refine the system by 

enacting such legislation as the Federal Employees Pay Comparability Act 

(FEPCA) which sought to address, among other things, the issue of pay 
Page 17 GAO-03-1024T 

comparability with the nonfederal sector, the system still contains certain 

fundamental flaws. The current system emphasizes placing employees in a 

relative hierarchy of positions based on grade; is a “one size fits all 

approach” since it does not recognize changes in local market rates for 

different occupations; and is performance insensitive in that all employees 

are eligible for the automatic across the board pay increases regardless of 

their performance. Specifically, the annual across the board base pay 

increase, also commonly referred to as the cost of living adjustment 

(COLA) or the January Pay Increase which the President recommends and 

the Congress approves, provides a time driven annual raise keyed to the 

Employment Cost Index (ECI) to all employees regardless of performance. 

In certain geographic areas, employees receive a locality adjustment tied to 

the local labor markets. However, in calculating the locality adjustment, 

for example, it is my understanding that FEPCA requires the calculation of 

a single average, based on the dominant federal employer in an area, which 

does not sufficiently recognize the differences in pay rates for different 

occupations and skills. In view of the fact that today we are in a knowledgebased economy competing for the best knowledge workers in the job 

market, I believe that new approaches and methodologies are warranted. 

This is especially appropriate for GAO’s highly educated and skilled 

workforce. 

Our proposed pay adjustment provision along with the other provisions of 

GAO’s human capital proposal are collectively designed to help GAO 

maintain a competitive advantage in attracting, motivating, retaining, and 

rewarding a high performing and top-quality workforce both currently and 

in future years. First, under our proposal, GAO would no longer be 

required to provide automatic pay increases to employees who are rated as 

performing at a below satisfactory level. Second, when the proposal is fully 

implemented, GAO would be able to allocate more of the funding—

currently allocated for automatic across-the-board pay adjustments to all 

employees—to permanent base pay adjustments that would vary based on 

performance. In addition, our proposal would affect all GAO, non-wage 

grade employees, including the SES and Senior Level staff. 

Ultimately, if GAO is granted this authority, all GAO employees who 

perform at a satisfactory level will receive an annual base pay adjustment 

composed of purchase power protection and locality based pay increases 

absent extraordinary economic circumstances or severe budgetary 

constraints. GAO will be able to develop and apply its own methodology 

for annual cost-of-living and locality pay adjustments. The locality pay 

increase would be based on compensation surveys conducted by GAO and 
Page 18 GAO-03-1024T 

which would be tailored to the nature, skills, and composition of GAO’s 

workforce. The performance part of an employee’s annual raise would 

depend on the level of the employee’s performance and that employee’s pay 

band. We estimate that at least 95 percent of the workforce will qualify for 

an additional performance-based increase. However, under this provision, 

employees who perform below a satisfactory level will not receive an 

annual increase of either type. 

How GAO Plans to Use This 

Authority

GAO’s major non-SES pay groups include (1) Analysts and Attorneys which 

comprises the majority of our workforce and is our mission group, (2) the 

Professional Development Program staff (PDP) which is our entry level 

mission group, (3) the Administrative Professional Support Staff (APSS), 

which is our mission support group for the most part, and (4) Wage Grade 

employees who primarily operate our print plant. Each of these groups 

currently operate in a different pay system. Generally, our mission staff are 

all in pay bands whereby they currently receive the annual across-theboard base pay increase and locality pay increase similar to the GS pay 

system, along with performance-based annual increases that are based on 

merit. Generally, our mission support staff, with some exceptions, remain 

in a system similar to the GS pay system with its annual across- the-board 

pay increases, locality pay, quality step increases, and within grade 

increases. We are currently in the process of migrating the mission support 

staff into pay bands and a pay for performance system. Our Wage Grade 

staff will continue to be covered by the federal compensation system for 

trade, craft, and laboring employees. Because of the small number of 

employees and the nature of their work, we have no plans to apply the pay 

adjustment provision authority to this group. 

I would like to point out the tables in appendices I through IV, which 

succinctly describe how GAO plans to operationalize our authority under 

our proposed annual pay adjustment provision over time. 

GAO’s Proposed Pay 

Authority Is Reasonable

GAO’s proposal for additional pay flexibility is reasonable in view of the 

authority the Congress has already granted DHS through the Homeland 

Security Act of 2002; the other agencies for whom the Congress has granted 

the authority to develop their own pay systems; the demonstration projects 

that OPM has authorized; and the authorities that other agencies in the 

executive branch are currently seeking (e.g., DOD). 
Page 19 GAO-03-1024T 

While we are aware that the passage of the Homeland Security Act of 2002 

was not without its difficult moments, particularly with respect to the 

broad-based authorities granted the department, we are also aware that the 

process employed by DOD and certain of its human capital proposals are 

highly controversial. It is important to point out that GAO’s proposal and 

proposed pay flexibilities pale in respect to those granted to the DHS and to 

those requested by the DOD in the Defense Transformation for the 21st

Century Act of 2003. Collectively, these two agencies represent almost 45 

percent of the non-postal federal civilian workforce. Specifically, in 

November 2002, the Congress passed the Homeland Security Act of 2002, 

which created DHS and provided the department with significant 

flexibilities to design a modern human capital management system, which 

could have the potential, if properly developed, for application 

governmentwide. DOD’s proposed National Security Personnel System 

(NSPS) would provide wide-ranging changes to its civilian personnel pay 

and performance management systems, collective bargaining, rightsizing, 

and a variety of other human capital areas. NSPS would enable DOD to 

develop and implement a consistent, DOD-wide civilian personnel system. 

In addition to DHS, there are a number of federal agencies with authority 

for their own pay systems. Some of these agencies are, for example, the 

Congressional Budget Office, which is one of our sister agencies in the 

legislative branch; the Federal Aviation Administration (FAA); the 

Securities and Exchange Commission (SEC) ; and the Office of the 

Comptroller of the Currency (OCC) within the Department of the Treasury. 

When the Congress created the CBO in 1974, it granted that legislative 

branch agency significant flexibilities in the human capital area. For 

example, CBO has “at will” employment. In addition, CBO is not subject to 

the annual executive branch pay adjustments. Further, CBO has extensive 

flexibility regarding its pay system subject only to certain statutory annual 

compensation limits. 

Furthermore, there are twelve executive branch demonstration projects 

involving pay for performance. These projects have taken different 

approaches to the sources of funding for salary increases that are tied to 

performance and not provided as entitlements. Many of the demonstration 

projects reduce or deny the annual across the board base pay increase for 

employees with unacceptable ratings (e.g., the Department of Navy’s China 

Lake demonstration, DOD’s Civil Acquisition Workforce demonstration, the 

Department of Air Force’s Research Laboratory demonstration, and the 

Department of Navy’s Research Laboratory demonstration, among others.) 

Others, including the National Institute of Standards and Technology and 
Page 20 GAO-03-1024T 

the Department of Commerce demonstration projects, deny both the 

annual across the board base pay increase and the locality pay adjustment 

for employees with unacceptable ratings. 

Currently, this Congress is considering a NASA human capital proposal. 

This proposal would provide NASA with further flexibilities and authorities 

for attracting, retaining, developing, and reshaping a skilled workforce. 

These include a scholarship-for-service program; a streamlined hiring 

authority for certain scientific positions; larger and more flexible 

recruitment, relocation, and retention bonuses; noncompetitive 

conversions of term employees to permanent status; a more flexible critical 

pay authority; a more flexible limited-term appointment authority for the 

SES; and greater flexibility in determining annual leave accrual rate for 

new hires.

Safeguards Provided As we have testified, agencies should have modern, effective, credible, and 

as appropriate, validated performance management systems in place with 

adequate safeguards, including reasonable transparency and appropriate 

accountability mechanisms, to ensure fairness and prevent politicization 

and abuse. While GAO’s transformation is a work in progress, we believe 

that we are in the lead compared to executive branch agencies in having 

the human capital infrastructure in place to provide such safeguards and 

implement a modified pay system that is more performance oriented. 

Specifically, for our Analyst pay group, we have gone through the first cycle 

of a validated performance management system that has adequate 

safeguards, including reasonable transparency and appropriate 

accountability mechanisms. We have learned from what has worked and 

what improvements can and should be made with respect to the first cycle. 

In fact, we have adopted many of the recommendations and suggestions of 

our managing directors and EAC and are now in the process of 

implementing these suggestions. 

The following is an initial list of possible safeguards, developed at the 

request of Congressman Danny Davis, for Congress to consider to help 

ensure that any pay for performance systems in the government are fair, 

effective, and credible. GAO’s current human capital infrastructure has 

most of these safeguards built in, and the others are in the process of being 

incorporated.

• Assure that the agency’s performance management systems (1) link to 

the agency’s strategic plan, related goals, and desired outcomes and 
Page 21 GAO-03-1024T 

(2) result in meaningful distinctions in individual employee 

performance. This should include consideration of critical 

competencies and achievement of concrete results.

• Involve employees, their representatives, and other stakeholders in the 

design of the system, including having employees directly involved in 

validating any related competencies, as appropriate.

• Ensure that certain predecisional internal safeguards exist to help 

achieve the consistency, equity, nondiscrimination, and 

nonpoliticization of the performance management process (e.g., 

independent reasonableness reviews by the human capital offices 

and/or the offices of opportunity and inclusiveness or its equivalent in 

establishing and implementing a performance appraisal system, as well 

as reviews of performance rating decisions, pay determinations, and 

promotion actions before they are finalized to ensure that they are 

merit-based; internal grievance processes to address employee 

complaints; and pay panels predominately made up of career officials 

who would consider the results of the performance appraisal process 

and other information in making final pay decisions). 

• Assure reasonable transparency and appropriate accountability 

mechanisms in connection with the results of the performance 

management process (e.g., publish overall results of performance 

management and pay decisions while protecting individual 

confidentiality, and report periodically on internal assessments and 

employee survey results).

Transition Period We have provided a statutory period minimum to allow for a smooth 

implementation of the law as it applies to both our mission and mission 

support staff. Specifically, for our Analyst and Attorney communities, we 

plan to allow for at least a two-year period, during which they will continue 

to receive their annual across the board pay raise and their locality pay, if 

applicable, based on the amount set by the GS system. Once the proposal 

is fully implemented, the new across-the-board increase, which provides 

for inflation protection and locality pay where applicable, would be 

computed based on GAO compensation studies, and the performancebased merit pay would be provided based on an employee’s performance. 

For our APSS employees, the transition period of at least 2 years would 

allow for a smooth migration to the pay bands and the implementation of at 
Page 22 GAO-03-1024T 

least one performance cycle of a newly validated competency based 

performance appraisal system for that component of GAO’s workforce. 

Our APSS employees are currently still in the GS system, but we are in the 

process of moving them into pay bands. We will allow time for the group 

to migrate to broad bands and to have at least one performance cycle under 

pay bands before moving it into the new pay system. Therefore, as with the 

analysts and attorneys, the administrative support staff will move into a 

hybrid pay system once they migrate to pay bands. Also, as with the 

analysts and attorneys, I have committed to providing them “pay 

protection.” This guarantee would continue even after GAO’s authority to 

adjust pay is fully implemented. 

We have a small Wage Grade community of under 20 employees. As 

mentioned earlier, we do not contemplate having the pay adjustment 

provision apply to them. 

“Pay Protection” Guarantee My predecessor, Comptroller General Charles A. Bowsher, provided the 

analysts and attorneys a “pay protection” guarantee at the time of their 

conversion to broad bands. This guarantee, later spelled out in a GAO 

order, provided that the analyst and attorneys rated as meeting 

expectations in all categories would fare at least as well under pay bands as 

under the GS system. This guarantee would not apply to employees who 

are promoted after conversion or demoted, and to new employees hired 

after the conversion. It is my understanding that this guarantee provided 

by my predecessor is unique to GAO and has generally not been applied by 

other agencies that have migrated their employees to pay bands. 

Currently, 535 GAO employees are still covered by this “pay protection” 

guarantee, while less than 10 employees annually have their pay readjusted 

after the merit pay process. I have committed to GAO employees that even 

if we receive the new pay adjustment authority, I would still honor my 

predecessor’s pay protection guarantee. In addition, our mission support 

staff will also receive this guarantee upon conversion to pay bands. This 

guarantee will continue through the implementation period for our new 

human capital authority. 

Pay Retention Section 5 of our proposal would allow GAO not to provide any automatic 

increase in basic pay to an employee demoted as a result of workforce 

restructuring or reclassification at his or her current rate until his or her 
Page 23 GAO-03-1024T 

salary is less than the maximum rate of the new position. Under current 

law, the grade and pay retention provisions allow employees to continue to 

be paid at a rate that exceeds the value of the duties they are performing for 

an extended period. Specifically, employees who are demoted (e.g., incur a 

loss of grade or band) due to, among other things, reduction-in-force 

procedures or reclassification receive full statutory pay increases for 2 

years and then receive 50 percent of the statutory pay increases until the 

pay of their new positions falls within the range of pay for those positions. 

We believe that this antiquated system is inconsistent with the merit 

principle that there should be equal pay for work of equal value. 

In granting GAO this authority, we would be able to immediately place 

employees in the band or grade commensurate with their roles and 

responsibilities. It is important to note that we have a key safeguard—

employees whose basic pay exceeds the maximum rate of the grade or 

band in which the employee is placed will not have their basic pay reduced. 

These employees, who would still be eligible to increase their overall pay 

through certain types of performance-based awards (e.g., incentive 

awards), would retain this rate until their basic pay is less than the 

maximum for their grade or band. As with all the provisions in our 

proposal, we will not implement this pay retention provision until we have 

consulted with the EAC and managing directors and have provided all GAO 

employees an opportunity for notice and comment on any regulations. 

Relocation Expenses Section 6 would provide GAO the authority, in appropriate circumstances, 

to reimburse employees for some relocation expenses when transfers do 

not meet current legal requirements for entitlement to reimbursement but 

still benefit GAO. Under current law, employees who qualify for relocation 

benefits are entitled to full benefits; however, employees whose transfer 

may be of some benefit or value to the agency would not be eligible to 

receive any reimbursement. This provision would provide these employees 

some relief from the high cost of relocating while at the same time allowing 

GAO the flexibility to promulgate regulations in order to provide such 

relief. This authority has been previously granted to other agencies, 

including the FAA. 

Leave for Upper Level 

Hires

Section 7 of the proposal provides GAO the authority to provide 160 hours 

(20 days) of annual leave to appropriate employees in high-grade, 

managerial or supervisory positions who have less than 3 years of federal 
Page 24 GAO-03-1024T 

service. This is narrowly tailored authority that would apply only to GAO 

and not to executive branch agencies. While it is been a long-standing tenet 

that all federal employees earn annual leave based on years of federal 

service, we believe that there is substantial merit in revisiting this in view 

of today’s human capital environment and challenges. We have found that, 

in recruiting experienced mid- and upper-level hires, the loss of leave they 

would incur upon moving from the private to the federal sector is a major 

disincentive. For example, an individual, regardless of the level at which 

he enters first enters the federal workforce, is eligible to earn 4 hours of 

annual leave for each pay period and, therefore, could accrue a total of 104 

hours (13 days) annually so long as they do not use any of that leave during 

the year. This amount increases to 6 hours of annual leave after 3 years of 

federal service. By increasing the annual leave that certain newly hired 

officers and employees may earn, this provision is designed to help attract 

and retain highly skilled employees needed to best serve the Congress and 

the country. 

Executive Exchange 

Program

Section 8 would authorize GAO to establish an executive exchange 

program between GAO and private sector entities. Currently, GAO has the 

authority to conduct such an exchange with public entities and non profit 

organizations under the Intergovernmental Personnel Act; there is no such 

authority for private sector exchanges. Under this program, high-grade, 

managerial or supervisory employees from GAO may work in the private 

sector, and private sector employees may work at GAO. While GAO will 

establish the details of this program in duly promulgated regulations, we 

have generally fashioned, with exceptions where appropriate, the legal 

framework for this program on the Information Technology Exchange 

Program authorized by Public Law 107-347, the E-Government Act of 2002, 

which the Congress enacted to address human capital challenges within 

the executive branch in the information technology area. 

While the Information Technology Exchange Program only involves 

technology exchanges, GAO’s exchange program will cover not only those 

who work in information technology fields, but also accountants, 

economists, lawyers, actuaries, and other highly skilled professionals. This 

program will help us address certain skills imbalances in such areas as well 

as a range of succession planning challenges. Specifically, by fiscal year 

2007, 52 percent of our senior executives, 37 percent of our managementlevel analysts, and 29 percent of our analysts and related staff will be 

eligible for retirement. Moreover, at a time when a significant percentage 

of our workforce is nearing retirement age, marketplace, demographic, 
Page 25 GAO-03-1024T 

economic, and technological changes indicate that competition for skilled 

employees will be greater in the future, making the challenge of attracting 

and retaining talent even more complex. 

One of the key concerns raised in the past regarding private sector 

exchange programs has been the issue of conflict of interest. We believe 

that in this regard GAO differs from executive branch agencies in that, as 

reviewers, we are not as subject to potential conflicts of interest. 

Nevertheless, it is important to note in requesting this authority that we 

have made clear that the private sector participants would be subject to the 

same laws and regulations regarding conflict of interest, financial 

disclosure, and standards of conduct applicable to all employees of GAO. 

Under the program, private sector participants would receive their salaries 

and benefits from their employers and GAO need not contribute to these 

costs. We also believe that this will also encourage private sector 

individuals to devote a portion of their careers to the public sector without 

incurring substantial financial sacrifice. 

Changing GAO’s Name 

to the “Government 

Accountability Office”

Section 9 would change the name of our agency from the “General 

Accounting Office” to the “Government Accountability Office.” At the 

same time, the well-known acronym “GAO,” which has over 80 years of 

history behind it, will be maintained. We believe that the new name will 

better reflect the current mission of GAO as incorporated into its strategic 

plan, which was developed in consultation with the Congress. As stated in 

GAO’s strategic plan, our activities are designed to ensure the executive 

branch’s accountability to the American people. Indeed, the word 

accountability is one of GAO’s core values along with integrity and 

reliability. These core values are also incorporated in GAO’s strategic plan 

for serving the Congress. 

The GAO of today is a far cry from the GAO of 1921, the year that the 

Congress established it through the enactment of the Budget and 

Accounting Act. In 1921, GAO pre-audited agency vouchers for the legality, 

propriety, and accuracy of expenditures. In the 1950s, GAO’s statutory 

work shifted to the comprehensive auditing of government agencies. Later, 

beginning during the tenure of Comptroller General Elmer B. Staats, GAO’s 

work expanded to include program evaluation and policy analysis. 

Whereas GAO’s workforce consisted primarily of accounting clerks during 

the first three decades of its existence, today it is a multidisciplinary 

professional services organization with staff reflecting the diversity of 
Page 26 GAO-03-1024T 

knowledge and skills needed to deliver a wide range of services to the 

Congress. 

Although currently less than 15 percent of agency resources are devoted to 

traditional auditing and accounting activities, members of the public, the 

press, as well as the Congress often incorrectly assume that GAO is still 

solely a financial auditing organization. In addition, our name clearly 

confuses many potential applicants, who assume that GAO is only 

interested in hiring accountants. We believe that the new name will help 

attract applicants and address certain “expectation gaps” that exist outside 

of GAO. 

Concluding 

Observations

In conclusion, I believe that GAO’s human capital proposal merits prompt 

passage by this committee and, ultimately, the Congress. We have used the 

narrowly tailored flexibilities the Congress provided us previously in Public 

Law 106-303 responsibly, prudently, and strategically to help posture GAO 

to ensure the accountability of the federal government for the benefit of the 

Congress and the American people. Although some elements of our initial 

straw proposal were controversial, we have made a number of changes, 

clarifications, and commitments to address various comments and 

concerns raised by GAO employees. We recognize that the pay adjustment 

provision of this proposal remains of concern to some of our staff. 

However, we believe that it is vitally important to GAO’s future that we 

continue modernizing and updating our human capital policies and system 

in light of the changing environment and anticipated challenges ahead. We 

believe that the proposal as presented and envisioned is well reasoned and 

reasonable with adequate safeguards for GAO employees. Given our 

human capital infrastructure and our unique role in leading by example in 

major management areas, including human capital management, the 

federal government could benefit from GAO’s experience with pay for 

performance systems. Overall, we believe that this proposal represents a 

logical incremental advancement in modernizing GAO’s human capital 

policies, and with your support, we believe that it will make a big difference 

for the GAO of the future. 

Chairwoman Jo Ann Davis, Mr. Davis, and Members of the Committee, this 

concludes my prepared statement. I would be pleased to respond to any 

questions you may have. 
Page 27 GAO-03-1024T 

Contacts For further information regarding this testimony, please contact Sallyanne 

Harper, Chief Mission Support Officer, on (202) 512-5800 or at 

harpers@gao.gov or Jesse Hoskins, Chief Human Capital Officer, on (202) 

512-5553 or at hoskinsj@gao.gov.
Page 28 GAO-03-1024T 

Appendix I

Analysts and Attorneys: Pay Increases under 

GAO’s Current System and Human Capital 

Proposal ApendxiI

a

The percentage allocated to each type of pay increase varies annually. 

b

Under our current pay system, GAO is linked to the executive branch for annual base and locality pay 

adjustments; however, since the implementation of broad banding, has not been linked to the executive 

branch for performance-based merit pay increases, performance bonuses/dividends, and other 

incentive award pay increases. The Executive Committee determines on an annual basis which pay 

categories, if any, are eligible for bonuses and dividends. For example, individuals in pay categories 

one and two received dividends for their FY 02 performance. 

c

During the transition period, GAO staff rated as performing at a satisfactory level (i.e., meeting 

expectations or higher) will be guaranteed, at a minimum, barring extraordinary economic 

Included Included Included

Locality pay

Incentive awards

 This element is applicable

N/A This element is not applicable

One-time

One-time

One-time

One-time

One-time

One-time

One-time

One-time

One-time

Source: GAO.

(Percentages 

determined by EC 

annually; actual 

incremental amount 

will vary over time) 

(Percentage 

decoupled from 

executive branch GS;

 for all satisfactory 

performers) 

(Percentage 

decoupled from 

executive branch GS;

 for all satisfactory 

performers) 

(Percentages determined 

by EC annually; initial 

additional performancebased funds limited due 

to transition period 

guarantee) 

(Same percentage as 

executive branch GS; 

for all satisfactory 

performers) 

(Same percentage as 

executive branch GS; 

for all satisfactory 

performers) 

Implementation Periodd

(Pay Protection from Band 

Conversion)

Permanent

base pay 

Permanent

base pay 

Permanent

base pay 

Transition Periodc

(Guaranteed Minimum; 

Pay Protection from Band Conversion)

Current Pay Systemb

(Broad band)

Types of Pay 

Increasesa 

Annual across-the-board 

base pay 

(Percentages 

determined by 

EC annually)

Performance-based pay 

(Merit increases) 

Performance bonusesb-d

 (for individuals who are 

pay capped) 

Dividendsb-d 
Appendix I

Analysts and Attorneys: Pay Increases under 

GAO’s Current System and Human Capital 

Proposal

Page 29 GAO-03-1024T 

circumstances or serious budgetary constraints, base pay and locality pay according to the same 

adjustment provided to executive branch employees. All such GAO staff will also be eligible for 

additional performance-based merit pay increases, performance bonuses (if pay capped)/dividends, 

and incentive awards. During the transition period, GAO will continue to raise the pay cap for its pay 

bands commensurate with executive branch pay cap increases absent extraordinary economic 

circumstances or serious budgetary constraints. The Executive Committee will determine on an 

annual basis which categories, if any, are eligible for bonuses and dividends. 

d

Under its human capital proposal, GAO proposes to decouple itself from the executive branch for base 

and locality pay adjustments after a 2 plus year transition period. After the transition period, GAO will 

fully implement a modified pay system in which absent extraordinary economic conditions or serious 

budgetary constraints, all GAO staff rated as performing at a satisfactory level (i.e., meeting 

expectations or higher) can expect to receive at a minimum an annual adjustment designed to protect 

purchasing power (e.g., the Consumer Price Index) and address differences in compensation ranges 

by localities. In addition, all such staff will continue to be eligible for performance-based merit pay 

increases, performance bonuses (if pay capped)/dividends, and incentive awards. Before finalizing 

and implementing a modified pay system, GAO will seek the advice of the managing directors and 

GAO’s Employee Advisory Council. We will also draft revised pay regulations and publish them for 

review and comment by all employees. 
Page 30 GAO-03-1024T 

Appendix II

Professional Development Program (PDP) Apendxies

Staff: Pay Increases under GAO’s Current 

System and Human Capital Proposal ApendxiI

Note: PDP Staff who are Band IF (full performance) are covered by the merit pay system. See chart for 

Analysts & Attorneys.

a

The percentage allocated to each type of pay increase varies annually.

b

Under our current pay system, GAO is linked to the executive branch for base and locality pay. Band I 

staff in the PDP are eligible for periodic performance based PDP pay increases that are not available in 

the executive branch. PDP staff are not eligible for performance based merit increases and dividends. 

c

During the transition period, PDP staff rated as performing at a satisfactory level (i.e., meeting 

expectations or higher) will be guaranteed, at a minimum, barring extraordinary economic 

circumstances or serious budgetary constraints, base pay and locality pay according to the same 

adjustment provided to the executive branch employees. PDP staff rated as performing at the 

satisfactory level (i.e., meeting expectations or higher) will be eligible for performance-based PDP pay 

increases. During and after the transition period, PDP staff will not be eligible for dividends because 

PDP staff are evaluated every 6 months for performance based PDP increases. During the transition 

period, GAO will raise the pay cap for its Band I pay band commensurate with executive branch pay 

cap increases absent extraordinary economic circumstances or serious budgetary constraints. The 

Current Pay Systemb

(Broad band/PDP)

Transition Periodc

Guaranteed Minimum

Implementation

Periodd Types of Pay

Increasesa 

Included Permanent 

base pay Included Permanentbase pay Included Permanent

base pay 

Annual across-the-board

base pay 

Locality pay

Performance-based pay (Percentages

determined by

EC annually)

(Percentages

determined by

EC annually)

(Percentages

determined by

EC annually)

Performance bonusesb-e

(for individuals who are 

pay capped)

Dividendsc-e N/A N/A N/A N/A N/A N/A

Incentive awards

 This element is applicable

N/A This element is not applicable

(Same percentage 

as executive 

branch GS; 

for all satisfactory 

performers) 

(Same percentage 

as executive 

branch GS; 

for all satisfactory 

performers) 

(Percentage 

decoupled 

from executive 

branch GS; 

for all satisfactory 

performers) 

(Percentage 

decoupled 

from executive 

branch GS; 

for all satisfactory 

performers) 

One-time One-time One-time

One-time One-time One-time

Source: GAO.
Appendix II

Professional Development Program (PDP) 

Staff: Pay Increases under GAO’s Current 

System and Human Capital Proposal

Page 31 GAO-03-1024T 

Executive Committee will determine on an annual basis which pay categories, if any, are eligible for 

PDP bonuses.

d

Under its human capital proposal, GAO proposes to decouple itself from the executive branch for base 

and locality pay after a 2 plus year transition period. After the transition period, GAO will fully 

implement a modified pay system in which absent extraordinary economic conditions or serious 

budgetary constraints, all PDP staff rated as performing at a satisfactory level (i.e., meeting 

expectations or higher) can expect to receive at a minimum, an annual adjustment designed to protect 

purchasing power (e.g., the Consumer Price Index) and address differences in compensation ranges 

by localities. In addition, PDP staff rated as performing at a satisfactory level (i.e., meeting 

expectations or higher) will continue to be eligible for additional performance-based compensation, 

including performance-based PDP pay increases and incentive awards. Before finalizing and 

implementing a modified pay system, GAO will seek the advice of the managing directors and GAO’s 

Employee Advisory Council. We will also draft revised pay regulations and publish them for review and 

comment by all employees.
Page 32 GAO-03-1024T 

Appendix III

Administrative Professional Support Staff 

(APSS): Pay Increases under GAO’s Current 

System and Human Capital Proposal ApendxiI

a

The percentage allocated to each type of pay increase varies annually. This chart applies only to 

APSS employees who are under the General Schedule (GS) system. APSS employees who are 

already in broad bands should see the chart for Analysts and Attorneys. 

b

Under our current pay system, GAO is linked to the executive branch for annual base, locality, QSI, 

and WIG pay adjustments. APSS staff are eligible for performance incentive award pay increases; 

however, they are not eligible for performance bonuses (if pay capped) or dividends. 

c

During the transition period, GAO will implement broad banding for the APSS community between 

April – June 2004 and allow at least one full cycle of a new competency-based performance appraisal 

system before implementing any additional performance-based pay adjustments envisioned under HC 

II. Upon conversion to broad bands, GAO, as it did with its Analyst and Attorney communities, will 

replace QSIs and WIGs with performance pay increases that are not linked to the executive branch. 

Also, as it did with its Analyst and Attorney communities when they were converted to bands, GAO will 

provide a pay protection guarantee. Specifically, APSS staff who perform at the meets expectations 

level on any performance rating will earn a salary at least as high as they would have received had 

they remained under the General Schedule at their grade at the time of conversion. However, this 

Current Pay Systemb

(GS)

Types of Pay

Increasesa

Included Included Included

Locality pay

N/A N/A N/A N/A

N/A N/A N/A N/A

Performance-based pay

(merit increases)

N/A N/A

N/A

N/A

N/A

Dividendsb-d N/A

Incentive awards

N/A

 This element is applicable

N/A This element is not applicable

One-time One-time

One-time One-time One-time

Source: GAO.

Transition Periodc

(Broad band)

Pay Protection from Band 

Conversion

Implementation Periodd

Pay Protection from Band Conversion

Permanent

base pay 

Permanent

base pay

Permanent

base pay 

Performance bonusesb-d

(for individuals who are 

pay capped)

(Percentages determined by 

EC annually; actual incremental 

amount will vary over time) 

Percentage decoupled from 

executive branch GS; 

for all satisfactory performers) 

Percentage decoupled from 

executive branch GS; 

for all satisfactory performers) 

Annual across-the-board

base pay

(Same percentage 

as executive 

branch GS)

(Same percentage 

as executive 

branch GS)

(Percentages 

determined by 

EC annually)

Within grade increase 

(WIG)

Quality step increase 

(QSI)
Appendix III

Administrative Professional Support Staff 

(APSS): Pay Increases under GAO’s Current 

System and Human Capital Proposal

Page 33 GAO-03-1024T 

guarantee will not apply to staff who are promoted after conversion or demoted and to new employees 

hired after the conversion. APSS staff will be eligible for performance-based merit increases, 

performance bonuses (if pay capped) /dividends, and incentive awards. During the transition period, 

GAO will continue to raise the pay cap for its pay bands commensurate with executive branch pay cap 

increases. The Executive Committee will determine on an annual basis which pay categories, if any, 

are eligible for bonuses and dividends. 

d

Under its human capital proposal, GAO proposes to decouple itself from the executive branch for base 

and locality pay after a two plus year transition for the broad band conversion. After the transition 

period, GAO will fully implement a modified pay system in which absent extraordinary economic 

conditions or serious budgetary constraints, all GAO staff rated as performing at a satisfactory level 

(i.e., meeting expectations or higher) can expect to receive at a minimum, an annual adjustment 

designed to protect purchasing power (e.g., the Consumer Price Index) and address differences in 

compensation ranges by localities. In addition, all APSS staff will continue to be eligible for 

performance-based merit pay increases, performance bonuses (if pay capped)/dividends, and 

incentive awards. Before finalizing and implementing a modified pay system, GAO will seek the advice 

of the managing directors and GAO’s Employee Advisory Council. We will also draft revised pay 

regulations and publish them for review and comment by all employees. In addition, APSS staff 

receiving the pay protection guarantee from their conversion into pay bands will continue to be eligible 

for pay protection during the implementation period.
Page 34 GAO-03-1024T 

Appendix IV

Wage Grade (WG) Staff: Pay Increases under 

GAO’s Current System and Human Capital 

Proposal ApendxiIV

Note: HC II refers to GAO’s human capital proposal.

a

The percentage allocated to each type of pay increase varies annually. 

b

Under its current wage grade pay system, GAO is linked to the executive branch for base, locality, and 

WIG pay increases. Wage grade employees are not eligible for QSIs and locality pay increases in 

GAO or anywhere in the federal government. Because its wage grade community is so small, GAO 

does not plan to include the wage grade community in the modified pay system under its human 

capital proposal. 

c

Wage grade staff are not eligible for bonuses and dividends. 

Types of Pay Increasesa

Current Pay Systemb

(Wage Grade)

System Same Under HC II

Included Permanent 

Annual across-the-board base pay

Locality pay N/A N/A

Quality step increase (QSI) N/A N/A 

Within grade increase (WIG)

Incentive awardsc One-time

· This element is applicable

N/A This element is not applicable

Source: GAO.

(997900)
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