GAO

United States General Accounting Office

A

Testimony

Before the Senate Committee on Governmental Affairs

For Release on Delivery

Expected at 9:30 a.m. EDT

Tuesday, September 16, 2003

GAO’S PROPOSED 

HUMAN CAPITAL 

LEGISLATION

Views of the Employee 

Advisory Council

Statement for the Record by GAO’s Employee Advisory 

Council

GAO-03-1162T
Page 1 GAO-03-1162T 

Mr. Chairman and Members of the Committee:

We are pleased to have the opportunity to comment on the Comptroller 

General’s Human Capital II proposal. The Comptroller General formed the 

EAC about 4 years ago to be fully representative of the GAO population and 

advise him on issues pertaining to both management and employees. The 

members of the EAC represent a variety of employee groups and almost all 

employees outside of the senior executive service (more than 3,000 of 

GAO’s 3,200 employees or 94 percent). The EAC operates as an umbrella 

organization that incorporates representatives of GAO’s long-standing 

employee organizations including groups representing the disabled, 

Hispanics, Asian-Americans, African-Americans, gays and lesbians, 

veterans, and women,1

 as well as employees in various pay bands, 

attorneys, and administrative and professional staff.2

As established in our charter, the Employee Advisory Council serves as an 

advisory body to the Comptroller General and other senior executives by: 

• seeking and conveying the views and concerns of the individual 

employee groups it represents while being sensitive to the mutual 

interests of all employees, regardless of their grade, band, or 

classification group;

• proposing solutions to concerns raised by employees, as appropriate;

• providing input by assessing and commenting on GAO policies, 

procedures, plans, and practices; and,

• communicating issues and concerns of the Comptroller General and 

other senior managers to employees.

In preparing this statement, the EAC considered the results of discussions 

with constituents, and input from Council representatives, including 

information gathered from employees during the initial introduction of the 

proposal and comments provided on the Comptroller General’s revised 

1

 While these organizations historically operated under separate charters by the Comptroller 

General, they now are included in the charter of the EAC and appoint representatives to 

serve on the Council. 

2

 These members are elected by their constituency to two-year terms and may seek 

reelection once.
Page 2 GAO-03-1162T 

proposal. Although we have limited quantitative data in this regard and 

recognize that not all employees have the same opinions regarding all 

provisions of the proposed legislation, we believe our testimony is 

representative of a substantial cross-section of GAO employees. 

In summary, GAO employees generally support many of the provisions in 

the proposed legislation. For example, most employees expressed support 

for

• the provision to make GAO’s authority to offer voluntary early 

retirement permanent, 

• provisions to enhance vacation time for upper-level hires and relocation 

expenses deemed necessary by the Comptroller General to recruit and 

retain top employees, and 

• the provision to establish an exchange program with the private sector. 

However, many employees have expressed concerns about the proposals 

that affect pay. Specifically, many staff are concerned about the potential 

negative impact of the change in the basis for annual salary increases, 

although some staff recognize the potential benefits for additional reward 

and management flexibility. To a lesser extent, staff are concerned about 

changes to pay protections provided under traditional federal employment 

rules. Staff have differing opinions on the provision to change GAO’s name 

to the Government Accountability Office. 

The EAC recognizes and appreciates the efforts the Comptroller General 

has made to address employees’ concerns regarding provisions affecting 

pay by (1) providing assurances that the new system will sustain 

employees’ purchasing power and provide parity with prevailing locality 

pay, (2) proposing short- and longer-term modifications to GAO’s 

performance management system, and (3) incorporating a 2-year transition 

period for implementation of the new system. We hope that if the 

legislation is enacted, the Comptroller General will continue to be 

responsive to the concerns of employees as the agency moves forward in 

implementing these changes.
Page 3 GAO-03-1162T 

GAO Employees 

Support Most Aspects 

of the Proposed 

Legislation but Have 

Concerns about Pay 

Provisions and 

Differing Opinions 

about the Proposed 

Name Change

Outreach efforts by EAC representatives indicate that most employees 

support many portions of the legislative proposal under consideration by 

the Subcommittee but have concerns about provisions in the proposal 

related to pay. Specifically, employees generally support provisions that 

make the authorities provided to GAO for voluntary early retirement pay 

incentives permanent, to provide enhancements in vacation time and 

relocation expenses deemed necessary by the Comptroller General to 

recruit and retain top employees, and to establish a private sector 

exchange program. However, many employees are concerned about the 

provisions that change the way that annual pay decisions are made and, to 

a lesser extent, the proposed change to traditional protections for pay 

retention. Employees had differing opinions about the proposed change to 

GAO’s name. 

Most Employees Support 

Proposals to Improve GAO’s 

Ability to Realign the 

Workforce and Attract and 

Retain High Quality 

Employees 

Most employees support the Comptroller General’s proposed provisions to 

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

and voluntary separation payments to provide flexibility to realign GAO’s 

workforce. In addition, GAO employees recognize that attracting and 

retaining high-quality employees and managers throughout the 

organization is vitally important for the future of GAO. Employees thus 

generally support the provisions to offer flexible relocation 

reimbursements, provide upper-level hires with 6-hour leave accrual, and 

establish an executive exchange program with private sector organizations. 

Most employees commented positively on these authorities so long as 

there are internal controls to monitor and report on their use, as are 

present to provide accountability for other authorities throughout GAO.3

 

Many Employees Are 

Concerned about the 

Provisions That Affect Pay

Many employees expressed concern about the provisions that affect the 

determination of annual pay increases and pay retention. The opinions 

expressed by employees generally fall into three categories: (1) general 

concerns and some supporting views regarding changes in traditional civil 

service employment rules that could reduce the amount of annual pay 

increases provided for economic adjustments but provide greater 

3

 For example, the Comptroller General detailed GAO’s use of the flexibilities provided in 

the first round of authorities granted in the GAO Personnel Flexibilities Act of October 2000 

in U.S. General Accounting Office, Assessment of Public Law 106-303, GAO-03-954SP

(Washington, D.C., June 27, 2003). 
Page 4 GAO-03-1162T 

opportunity for rewarding performance, (2) concerns about making a 

portion of annual economic adjustments variable based on performance 

assessment, and to a lesser extent (3) concerns about the loss of traditional 

pay retention protections. 

Concerns and Supporting Views 

on Proposed Changes That 

Could Reduce Annual Pay 

Provided for Economic 

Adjustments but Provide Greater 

Rewards

The first area of employee concern is proposed changes to traditional 

federal civil service employment rules that have historically provided a 

fixed annual increase for all federal employees determined by the President 

and the Congress. Government employees in general, and GAO employees 

in particular, often conduct work that can have far reaching implications 

and impacts. Such work can positively or negatively affect segments of the 

population and thereby the general public’s perceptions of, and reactions 

to, the federal government, including Members of Congress. Over the 

years, the Congress has developed a bulwark of protections to shield 

federal workers from reprisals that might result from their service as 

employees. Included among these has been the process by which federal 

employees’ salaries are annually adjusted as a result of the passage of, and 

signing into law, of the annual budget. 

The historical process relies on passage of legislation which includes an 

annual increase in pay to reflect increases in inflation and overall 

employment costs, followed by determinations by the President (and the 

Office of Personnel Management) to calculate the distribution of the 

legislative economic adjustments between an overall cost-of-living 

adjustment and locality-based increases to reflect differences in cities 

across the nation. The current mechanism for annual federal pay 

adjustments is found in Public Law 101-509, the Federal Employees Pay 

Comparability Act.4

4

While the goal of the act is to achieve full comparability, namely pay parity, between federal 

employees and their nonfederal counterparts on a locality-by-locality basis, the law has 

never been implemented as originally enacted as a result of a provision in the law that 

authorizes the President to offer an alternative pay plan in times of war or “serious 

economic conditions affecting the general welfare.”
Page 5 GAO-03-1162T 

The Comptroller General has expressed his concern about trends in the 

executive branch that make it highly likely that the current civil service pay 

system will be the subject of comprehensive reform within the next few 

years. Citing federal agencies that already have many of these flexibilities, 

such as the Federal Aviation Administration5 and the new Department of 

Homeland Security, as well as agencies currently seeking reform, such as 

the Department of Defense, he has stated his belief that GAO needs to be 

“ahead of the curve.”

Under the proposal, rather than relying on the administration’s 

determination and the Congress’ mandate for an annual salary adjustment, 

GAO can develop and apply its own methodology for the annual cost-ofliving adjustments and compensation differences by locality that the 

Comptroller General believes would be more representative of the nature, 

skills, and composition of GAO’s workforce. Some employees have 

expressed following concerns. 

• Removing GAO from the traditional process significantly alters a key 

element of federal pay protection that led some employees to seek 

employment in the federal sector. Changing this protection could 

diminish the attractiveness of federal service and result in the need for 

higher salaries to attract top candidates.

• A portion of appropriations historically intended to provide all federal 

employees with increases to keep pace with inflation and the cost of 

living in particular localities should not be tied to individual 

performance. 

• GAO-based annual economic adjustments are more likely to be less 

than, rather than more than, amounts annually provided by the 

Congress; thus employees performing at lower (but satisfactory) levels 

who may not receive an equal or greater amount in the form of a bonus 

or dividend may experience an effective pay cut from amounts 

traditionally provided.

• The flexibility for the Comptroller General to use funds appropriated for 

cost-of-living adjustments for pay-for-performance purposes could 

5

 While the Federal Aviation Administration is not required to grant cost of living allowances 

or locality pay increases, agency management has elected to continue providing these pay 

adjustments as they are generally applied to the federal pay system. 
Page 6 GAO-03-1162T 

imperil future GAO budgets by making that portion of the annual budget 

discretionary where it was once mandatory. 

• The wide latitude provided in the proposal gives the Comptroller 

General broad discretion and limited accountability for determining 

whether employees receive annual across-the-board economic 

adjustments, the amount of such adjustments, and the timing of 

adjustments could result in unfair financial harm for some employees if 

the broad authorities were improperly exercised.6

 

• The Comptroller General has not made a compelling case regarding the 

need for these pay-related and other legislative changes, for example by 

showing that existing cost-of-living adjustment mechanisms are 

inaccurate or that the agency has had difficulty in attracting and 

retaining high-quality employees. 

On the other hand, some employees also recognize that the proposed pay 

provisions may offer some distinct advantages for some employees. Some 

employees commented in support of the provision indicating that 

• the existing system for calculating inflation and local cost adjustments 

may not accurately reflect reality;

• most employees would not likely be harmed by a system that allocates a 

greater share of pay to performance-based compensation;

• the authorities would allow GAO managers to provide greater financial 

rewards to the agency’s top performers, as compared to the present payfor-performance system; 

• making a stronger link between pay and performance could facilitate 

GAO’s recruitment of top talent.

In addition, the provision may, to a limited extent, address a concern of 

some field employees by providing alternatives to reductions in force in 

times when mandated pay increases are not fully funded or in other 

6

 While management’s salary increase decisions for employees are not subject to appeal 

under the current system, some employees feel that the application of any methodology that 

GAO establishes to determine the amount of annual economic increases under the proposed 

approach should be subject to appeal.
Page 7 GAO-03-1162T 

extraordinary circumstances. For example, from 1992 to 1997, GAO 

underwent budgetary cuts totaling 33 percent (in constant fiscal year 1992 

dollars.) To achieve these budgetary reductions, GAO staff was reduced by 

39 percent, primarily through field office closures and the associated 

elimination of field-based employees. While we hope the agency will never 

again have to manage budget reductions of this magnitude, this provides a 

painful example of the vulnerability of staffing levels, particularly in the 

field, to budgetary fluctuations. The proposed pay provisions would 

provide the Comptroller General with greater flexibility to manage any 

future budget crises by adjusting the annual pay increases of all employees 

without adversely and disproportionately impacting the careers and lives of 

field-based employees. 

Concerns about Making a 

Portion of Annual Pay Increases 

Variable Based on Performance 

Assessment 

In addition to the revised basis for calculating annual economic 

adjustments, employees are concerned about the provision that transforms 

a portion of the annual pay increases that have historically been granted to 

federal employees for cost-of-living and locality-pay adjustments into 

variable, performance-based pay increases and bonuses. Because the GAO 

workforce is comprised of a wide range of highly qualified and talented 

people performing a similarly wide range of tasks, employees recognize 

that it is likely that some employees at times have more productive years 

with greater contributions than others. Therefore, most agree with the 

underlying principle of the provision to provide larger financial rewards for 

employees determined to be performing at the highest level. However, in 

commenting on the proposal, some employees said that GAO management 

already has multiple options to reward high performers through bonuses, 

placement in top pay-for-performance categories, and promotions. Others 

expressed concern that increased emphasis on individual performance 

could result in diminished teamwork, collaboration, and morale because 

GAO work typically is conducted in teams, often comprised of employees 

who are peers. 

These concerns are compounded by long-standing widespread employee 

concerns regarding the accuracy and validity of GAO’s performance 

appraisal system, which is used for the current system of performancebased pay adjustments. Any effort to increase the link between pay and 

performance implicitly relies upon the existence of a reliable method for 

gauging individual performance. We received comments that the varying 

levels of complexity, time frames, resource availability, and sensitivity of 

GAO work make it difficult to objectively assess individual performance 

and to fairly and accurately compare employees’ performance with 

sufficient precision. In other words, some employees believe that the 
Page 8 GAO-03-1162T 

subjectivity inherent in the system does not provide a valid basis for 

distinguishing between subtle differences in performance that may be 

measured in tenths of a percentage point between performance categories. 

Employee concerns about performance assessment have not significantly 

changed as a result of the new competency-based system GAO 

implemented last year. The comments we have heard are consistent with 

the concerns expressed to the Congress by GAO employees in 1993:

“The PFP (pay-for-performance) process involves managers making very fine distinctions in 

staff’s performance in order to place them in discrete performance management categories. 

These categories set artificial limits on the number of staff being recognized for their 

contributions with merit pay and bonuses.”

Related to concerns about subjectivity in the performance assessment 

system, Council representatives and employees expressed concern about 

data indicating that as a group, minorities, veterans, and field-based 

employees have historically received lower ratings than the employee 

population as a whole. While the data indicate that the disparity is 

considerably improved or eliminated for employees who have been with 

the agency fewer than 5 years, some employees have serious reservations 

about providing even greater discretion in allocating pay based on the 

current performance management system. 

Concerns about the Loss of 

Traditional Pay Retention 

Protections

To a lesser extent, some employees expressed concerns about the 

elimination of traditional federal employment rules related to grade and 

pay retention for employees who are demoted due to such conditions as a 

workforce restructuring or reclassification. The proposed legislation will 

allow the Comptroller General to set the pay of employees downgraded as 

a result of workforce restructuring or reclassification at their current rates 

(i.e., no drop in current pay), but with no automatic annual increase to 

basic pay until their salaries are less than the maximum rates of their new 

grades or bands. 

Employee concern, particularly among some Band II analysts and mission 

support staff, focuses on the extent to which this provision may result in a 

substantial erosion in future pay, since there is a strong possibility that 

these two groups may be restructured in the near future. For example, one 

observation is that the salary range within pay bands is such that senior 

analysts who are demoted would likely wait several years for their next 

increase in pay or bonus. In this circumstance, employees would need to 

reconcile themselves to no permanent pay increases regardless of their 

performance. Some employees cited this potential negative impact on staff 

motivation and productivity and emphasized that to continue providing 
Page 9 GAO-03-1162T 

service at the level of excellence that the Congress and the American 

people expect from GAO, this agency needs the best contributions of all its 

midlevel and journeymen employees. However, the EAC recognizes that, 

absent this kind of authority and given some of the authorities already 

provided to the Comptroller General, some employees who may be 

demoted could otherwise face termination rather than diminished salary 

increases. 

Employee Had Differing 

Opinions regarding a 

Change in GAO’s Name

Finally, employees had differing opinions regarding the provision to change 

GAO’s name to the Government Accountability Office. Some employees 

are concerned that the proposed change in GAO’s name to more accurately 

reflect the work that we do will damage GAO’s “brand recognition.” Most 

employees who oppose the name change do not see the current name as an 

impediment to doing our work or to attracting quality employees. Some 

employees expressed concern that the legacy of high-quality service to the 

Congress that is embedded in the name “United States General Accounting 

Office” might be lost by changing the name. Other employees support the 

name change and cited their own experiences in being recruited or 

recruiting others and in their interaction with other federal agencies. In 

their opinion, the title “General Accounting Office” reflects 

misunderstandings and incorrect assumptions about GAO’s role and 

function by those who are not familiar with our operations and may serve 

as a deterrent to attracting employees who are otherwise not interested in 

accounting.

The EAC Appreciates 

the Comptroller 

General’s Efforts to 

Address Concerns of 

GAO Employees about 

Pay-Related Human 

Capital II Provisions 

We appreciate the Comptroller General’s efforts to involve the Employee 

Advisory Council and to solicit employee input through discussions of the 

proposal. As a result of employee feedback and feedback from GAO 

managers and the EAC, the Comptroller General has made a number of 

revisions and clarifications to the legislative proposal along with 

commitments to address concerns relating to the annual pay adjustment by 

issuing formal GAO policy to formally establish his intent to retain 

employees’ earning power in implementing the authorities; by revising the 

performance management system; and by deferring implementation of pay 

changes until 2005. 

Retention of Earning Power 

and Locality Pay Parity

Key among the commitments made by the Comptroller General is his 

assurance to explicitly consider factors such as cost-of-living and locality-
Page 10 GAO-03-1162T 

pay differentials among other factors, both items that were not in the 

preliminary proposal. In addition, the Comptroller General has said that 

employees who are performing adequately will be assured of some annual 

increase that maintains spending power. He outlined his assurance in 

GAO’s weekly newsletter for June 30th that successful employees will not 

witness erosion in earning power and will receive an annual adjustment 

commensurate with locality-specific costs and salaries. According to the 

Comptroller General, pay protection commitments that are not included in 

the statute will be incorporated in the GAO orders required to implement 

the new authorities. This is consistent with the approach followed when 

GAO made similar pay protection commitments during the conversion to 

broad bands in the 1980s. To the extent that these steps are taken, overall 

employee opinion of the changes should improve because much of the 

concern has focused on making sure that staff who are performing 

adequately do not witness economic erosion in their pay. 

Planned Revisions to 

Performance Management

In response to concerns regarding the performance management system 

and the related variable elements of annual pay increases raised by the 

EAC, employees, and senior managers, the Comptroller General has told 

employees that he will provide increased transparency in the area of 

ratings distributions, for example by releasing summary-level performance 

appraisal results. In addition, the Comptroller General has stated that he 

plans to take steps to improve the performance management system that 

could further reduce any disparities. Specifically, on June 26, the 

Comptroller General released a "Performance Management System 

Improvement Proposal for the FY 2003 Performance Cycle" that outlines 

proposed short-term improvements to the analyst performance 

management system that applies to the majority of GAO employees. These 

include additional training for staff and performance managers and a 

reduction in the number of pay categories from five to four. A number of 

longer-term improvements to the performance appraisal system requiring 

validation are also under consideration, including weighting competencies 

and modifying, adding, or eliminating competencies. For all employees to 

embrace any additional pay-for-performance efforts, it is vital that the 

Comptroller General take steps that will provide an increased level of 

confidence that the appraisal process is capable of accurately identifying 

high performers and fairly distinguishing between levels of performance. 
Page 11 GAO-03-1162T 

Deferred Implementation of 

Pay Provisions 

Finally, the Comptroller General has agreed to delay implementation of the 

pay-for-performance provisions of the proposal until October 1, 2005. This 

change should provide an opportunity to assess efforts to improve the 

annual assessment process and lessen any impact of changes in the 

permanent annual pay increase process for employees approaching 

retirement. It should also provide an opportunity to implement a number 

of measures designed to improve confidence in the annual assessment 

process. 

Conclusion In summary, as GAO employees we are proud of our work assisting the 

Congress and federal agencies to make government operations more 

efficient and effective. Although all of us would agree that our agency is 

not perfect, the EAC believes GAO is making a concerted effort to become 

a more effective organization. We will continue to work closely with 

management to improve GAO, particularly in efforts to implement and 

monitor any additional authorities granted to the Comptroller General. We 

believe that it is vital that we help to develop and implement innovative 

approaches to human capital management that will enable GAO to 

continue to meet the needs of the Congress; further improve the work 

environment to maximize the potential of our highly skilled, diverse, and 

dedicated workforce; and serve as a model for the rest of the federal 

government.

(997901)
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