Human Capital: The Department of Health and Human Service's and Environmental Protection Agency's Use of Special Pay Rates for Consultants and Scientists
Published: 2012-09-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: HHS and EPA have been using special hiring authority provided under 42 U.S.C. §§209(f) and (g)referred to in this testimony as Title 42to appoint individuals to fill mission critical positions in science and medicine and, in many cases, pay them above salary limits usually applicable to federal government employees. GAO was asked to review the extent to which HHS and EPA have (1) used authority under Title 42 to appoint and compensate employees since 2006, and (2) followed applicable agency policy, guidance, and internal controls for appointments and compensation. GAO was also asked to determine if there are statutory caps on pay for consultants and scientists appointed pursuant to Title 42.
This testimony is based on GAOs July 2012 report (GAO-12-692) and a legal opinion on whether there are statutory caps on pay for consultants and scientists appointed pursuant to 42 U.S.C. §§ 209(f) or (g). (B-3223357)
section_title: What GAO Found
paragraphs: The Department of Health and Human Services (HHS) use of special hiring authorities under 42 U.S.C. §§ 209(f) and (g) has increased in recent years, from 5,361 positions in 2006 to 6,697 positions in 2010, an increase of around 25 percent. Nearly all HHS Title 42 employees work in one of three HHS operating divisions: the National Institutes of Health (NIH), the Food and Drug Administration (FDA), and the Centers for Disease Control and Prevention (CDC). Title 42 employees at HHS serve in a variety of areas, including scientific and medical research support and in senior, director-level leadership positions. At NIH, one-quarter of all employees, and 44 percent of its researchers and clinical practitioners, were Title 42 appointees.
HHS reported that Title 42 enables the agency to quickly fill knowledge gaps so medical research can progress and to respond to medical emergencies. HHS further reported Title 42 provides the compensation flexibility needed to compete with the private sector. In 2010, 1,461 of HHSs Title 42 employees earned salaries over $155,500. The highest base pay amount under the General Schedule  the system under which most federal employees are paid  was $155,500 in 2010. Under certain types of Title 42 appointments, statutory pay caps may apply. 2010 was the last year of HHS data available at the time of GAOs review.
HHS does not have reliable data to manage and provide oversight of its use of Title 42. Moreover, HHS did not consistently adhere to certain sections of its Title 42 section 209(f) policy. For example, the policy states that 209(f) appointments may only be made after non-Title 42 authorities have failed to yield a qualified candidate, but GAO found few instances where such efforts were documented. HHS has recently issued updated 209(f) policy that addresses most of these issues. HHS is developing agencywide policy for appointing and compensating employees under Title 42 section 209(g), but it is not clear the policy will address important issues such as documenting the basis for compensation.
Since 2006, the Environmental Protection Agency (EPA) has used section 209(g) to appoint 17 employees. Fifteen of EPAs 17 Title 42 employees earned salaries over $155,500 in 2010. EPA appointment and compensation practices were generally consistent with its guidance; however, EPA does not have post-appointment procedures in place to ensure Title 42 employees meet ethics requirements to which they have previously agreed.
In its legal opinion, GAO concluded that an appropriations pay cap applies to certain, but not all, employees appointed under 42 U.S.C. §§ 209(f) and (g). If Congress desires upper pay limits for appointments not currently subject to the pay cap, it may wish to consider legislation to specifically establish such limits.
section_title: What GAO Recommends
paragraphs: In the report on which this testimony is based, GAO made recommendations to HHS to improve oversight and management of its Title 42 authority and a recommendation to EPA to improve enforcement of its ethics requirements. HHS agreed with GAOs recommendations, while EPA disagreed, citing actions already taken. GAO acknowledged EPAs plans to address these issues, but maintained the recommendation was needed to ensure implementation.

section_title: Letter
paragraphs: Thank you for the opportunity to be here today to discuss a special hiring  authority used by the Department of Health and Human Services (HHS)  and the Environmental Protection Agency (EPA) to help them overcome  difficulties in recruiting and retaining individuals in medicine, science,  engineering, and other fields in support of their missions. One reason for  these difficulties, according to agency officials, is that salaries available  under typical federal government hiring authorities are not always  competitive with those in the private sector for individuals in these highly  specialized fields. Since 2001, we have designated strategic human  capital management a government-wide high-risk area in part because of  the need to address current and emerging critical skills gaps that are  undermining agencies’ abilities to meet their missions. Effective use of  various human capital flexibilities such as special hiring authority is one  way agencies can be more competitive in the labor market for top notch  employees. At the same time, adequate internal controls are needed to  ensure the flexibilities are used cost-effectively and in accordance with  applicable laws and agency guidance.
HHS has other special hiring authorities provided under Title 42 of the U.S. Code, but this  testimony deals exclusively with the special hiring authorities under 42 U.S.C. §§ 209 (f)  and (g). to 30 persons at any one time through fiscal year 2015. HHS has used  sections 209(f) and (g) and EPA has used section 209(g) to appoint  individuals from the private sector and academia as well as to convert  federal government employees under other pay systems—such as the  General Schedule—to Title 42.
In implementing Title 42, HHS and EPA can set higher pay limits than  those provided under typical civil service hiring authorities. According to  HHS and EPA officials, the pay setting flexibility is needed to compete  with the private sector and academia to recruit and retain critical  personnel. For example, the highest base pay amount in the General  Schedule in 2012 is $155,500. In comparison, per HHS policy, the annual  base salary for many appointments under Title 42 at HHS cannot exceed  $250,000 per calendar year, with total compensation not to exceed  $275,000 unless approved by the Secretary. Similarly, EPA policy caps  annual base salary for Title 42 employees at $250,000, with total  compensation that may not exceed $275,000. As discussed below, under  certain types of Title 42 appointments, statutory pay caps may apply.
To obtain a better understanding of the appointment and compensation  practices under sections 209(f) and 209(g), we were asked to review the  extent to which HHS and EPA have (1) used the authority under sections  209(f) and (g) to appoint and set pay for employees since January 2006,  and (2) followed applicable agency policy, guidance, and internal controls  for appointments and compensation. whether there are any statutory caps on pay for consultants and scientists  appointed under sections 209(f) and (g). This testimony is based on our  report ( 2012 that both addressed the questions above.
According to HHS human resource officials, personnel data prior to 2006 were likely not  reliable for our analysis. EPA began using Title 42 in 2006. HHS data are available  through the end of 2010, the last year of complete data available at the time we did our  study; and at EPA, through the end of 2011.
For the report and legal opinion, we analyzed agency Title 42 data,  interviewed agency officials, and conducted file reviews. Details on our  objectives, scope, and methodology are contained in those two products.  The audit work upon which this statement is based was conducted in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: HHS Has Increased Its Use of Title 42, but More Reliable Data Could Improve HHS’s Oversight
paragraphs: During calendar year 2010, HHS had 6,697 employees who were  appointed under sections 209(f) or (g).served at the National Institutes of Health (NIH), the Food and Drug  Administration (FDA), or the Centers for Disease Control and Prevention  (CDC), while the remaining employees served in the Office of the  Secretary or within other operating divisions, as shown in figure 1.
section_title: EPA Employs a Limited Number of Title 42 Fellows in Leadership Positions and Could Improve Procedures for Resolving Potential Conflicts of Interest
paragraphs: Congress provided EPA with the authority to use Title 42 to employ up to  30 persons at any one time through fiscal year 2015. At the time of our  study, EPA had appointed 17 fellows in its Office of Research and  Development from 2006 to 2011 under section 209(g) and all 17 fellows  remained with EPA. Appointments for the three fellows hired in 2006 have  been renewed for another 5-year term. Figure 2 shows the cumulative  onboard Title 42 staff, by new hire or conversion.
According to EPA officials, the agency has identified mission critical  personnel needs and is actively recruiting to fill the 13 remaining  authorized Title 42 positions. The agency has no plans to use authority  under section 209(f) at this time, but may consider it in the future. Officials  told us EPA would need to develop guidance for implementing section  209(f) before using the authority.
Title 42 fellows at EPA lead scientific research initiatives, are considered  experts in the related scientific discipline, and some manage or direct a  division or office. According to EPA officials, Title 42 provides two  important tools EPA needs to achieve its mission: (1) the flexibility to be  competitive in recruiting top experts who are also sought after by other  federal agencies, private industry, and academia; and (2) the appointment  flexibility needed to align experts with specific skills to changing scientific  priorities. EPA officials stated it is not the agency’s intention to hire a  fellow long-term under Title 42, but rather employ the individual as long  as a priority remains high.
Annual salaries for Title 42 fellows at EPA range from approximately  $153,000 to $216,000, with an average salary of about $176,000 and a  median salary of about $171,000. As shown in table 4, 15 of the 17 EPA  fellows had salaries exceeding Executive Level IV.
In December 2010, EPA began a pilot of using market salary data to  estimate salaries of what Title 42 candidates could earn in positions  outside of government given their education, experience, professional  standing, and other factors. EPA used the market salary data to inform  salary negotiations for the five fellows appointed since the implementation  of the pilot. According to EPA officials, the market salary pilot concludes  in December 2012 and its effect will be analyzed at that time.
In appointing Title 42 fellows, EPA generally followed appointment  guidance described in its Title 42 Operations Manual. EPA could,  however, improve procedures for resolving potential conflicts of interest.  We conducted 10 case file reviews of EPA Title 42 employees and in two  cases we reviewed, employees had potential conflict of interest situations  arise after appointment resulting, in part, from the agency’s failure to  ensure Title 42 employees followed agreed upon ethics requirements.  EPA acknowledged it could improve its postappointment ethics oversight  and reported it has plans to ensure that Title 42 employees follow  requirements such as submitting confirmation of stock divestitures to its  General Counsel, for example, and other ethics requirements. However,  at the time of our review, EPA had not provided us with implementation  plans or timeframes for its improved oversight.
To address this issue, we recommended that EPA, as part of its efforts to  improve postappointment ethics oversight, develop and document a  systematic approach for ensuring Title 42 employees are compliant with  ethics requirements after appointment. EPA disagreed with our  recommendation, citing certain actions already taken, such as a plan to  require proof of compliance with ethics agreements. We acknowledged  EPA’s plans to address these issues, but maintained the recommendation  was needed to ensure implementation because the two ethics issues we  reported occurred over 2 years ago.
section_title: Legal Opinion Whether There are Statutory Caps on Pay for Consultants and Scientists Appointed under Title 42
paragraphs: Our legal opinion, issued on July 11, 2012, responded to a Congressional  request for our views on whether there are statutory caps on pay for  consultants and scientists appointed pursuant to 42 U.S.C. §§ 209(f) or  (g). We concluded that an appropriations law provision enacted as part  of the Fiscal Year 1993 Labor-HHS-Education Appropriations Act  established a permanent appropriation cap on the pay of individuals  appointed on a limited-time basis under 42 U.S.C. §§ 209(f) or (g) at  agencies funded through that Act. With regard to individuals not subject to  this cap, we concluded further that two other pay limitations set forth in  Title 5 of the U.S. Code that we considered do not apply to appointments  made pursuant to 42 U.S.C. §§ 209(f) or (g).
Federal pay systems are extremely complex, and we encountered  challenges in attempting to resolve ambiguities arising from pay laws  enacted at different times over nearly 70 years. Sections 209(f) and (g) of  title 42 were enacted in 1944 and have not been amended since that  time. There have, however, been many significant changes in related  laws and regulations that were relevant to our consideration of the issues  raised. Consequently, we conducted extensive research of legislative  history to aid in our understanding of congressional actions and the  interplay of the laws addressed below, and examined regulations issued  pursuant to these provisions over the last 65 years. We also solicited the  views of HHS, the Office of Personnel Management (OPM), and the EPA.
The appropriations for each fiscal year from 1957 through 1993 included  a cap on pay for “consultants or individual scientists appointed for limited  periods of time” (underscoring added) pursuant to 42 U.S.C. §§ 209(f) or  (g). The appropriations for fiscal year 1993 established a permanent cap  on such compensation, providing that pay may be set at rates not to  exceed “the per diem rate equivalent to the maximum rate payable for  senior-level positions under 5 U.S.C. § 5376.” This cap currently limits  base pay to $155,500. Our review of the legislative history of the first  appropriation to contain the limit indicated that it was enacted due to other  restrictions in law on compensation as an increase over then-existing pay  authority.
We considered the meaning of the phrase “for limited periods of time,”  which has appeared in all of the relevant appropriations provisions from  1956 to 1993. In 1956, when this language was first included in the  appropriations law, the Public Health Service’s regulations included time  limitations on employment. Thus the time limit generally applied to all  consultant appointments made under section 209(f) beginning in 1947,  when the regulation containing the limit was first promulgated, unless  “special circumstances” led the administrator to approve an extension.  Further, the limit was in effect in 1956, when the first appropriations law  provision referring to consultants appointed for “limited periods of time”  was enacted.
However, this time limitation was removed from the regulations in 1966.  31 Fed. Reg. 12,939 (Oct. 5, 1966). Therefore, the appropriations pay  cap applied to all section 209(f) consultants from 1956 until HHS changed  the regulations in 1966 allowing for the hiring of consultants for indefinite  periods.
Although the regulations implementing section 209(f) no longer included a  time limitation on the employment of special consultants after 1966, the  appropriations provisions for 1967 and subsequent years, using virtually  identical language each year, imposed a cap only on pay of “consultants  or individual scientists appointed for limited periods of time pursuant to  .” The appropriations restriction did not impose  any cap on pay for those consultants whose appointments were not  limited in time. As a result, after the 1966 regulations were promulgated  and continuing to the present, HHS has employed two categories of  consultants: those appointed for limited periods of time, to whom the pay  cap applies, and consultants appointed for indefinite periods, to whom the  pay cap does not apply.
Importantly, the appropriations pay restriction is applicable only to  payments made from Labor-HHS-Education Appropriations Acts. Three  components of the Public Health Service (the Agency for Toxic  Substances and Disease Registrations, the Food and Drug  Administration, and the Indian Health Services) are funded by  appropriations acts other than the Labor-HHS-Education Appropriations  Act, and are not covered by a restriction on funds appropriated under that  Act. Thus, we concluded that there is a cap of Executive Level IV on the  pay of consultants and scientists employed for limited periods of time  pursuant to 42 U.S.C. §§ 209(f) or (g) in all but three of the Public Health  Service Agencies.
With respect to individuals not covered by the appropriation cap, we  examined the applicability of two pay limitations found in title 5: section  3109, which limits pay for consultants “procure” on a temporary or  intermittent basis, and section 5373, which limits pay fixed by  administrative action.
Section 3109, enacted in 1946, establishes specific legal parameters,  including a pay cap and a limit on appointment duration, governing the  employment of experts or consultants whose appointment must be  authorized by an “appropriation or other statute.” That pay cap applies  unless a different cap is authorized by the appropriation or another  statute.
Beginning in 1956, Congressional actions signaled that section 3109 did  not apply to section 209(f) appointments. From1956 and continuing until  1993, Congress enacted provisions yearly in appropriations acts that set  a cap (which may or may not have been higher than that found in section  3109 in any given year) for all those appointed pursuant to sections 209(f)  or (g) for a limited period of time and funded out of the Labor-HHS- Education Appropriations Act. From fiscal year 1970 until the provisions  became permanent in fiscal year 1993, the appropriations acts for HHS  contained separate provisions placing identical compensation limits for  experts and consultants subject to 5 U.S.C. § 3109, and for consultants  and scientists appointed for limited periods of time pursuant to 42 U.S.C.  §§ 209(f) or (g). Identical provisions would have been unnecessary if  Congress believed that the limitations in 5 U.S.C. § 3109 would apply to  42 U.S.C. §§ 209(f) and (g) consultants or scientists.
Further, in 1992, Congress added subsection (d) to section 3109. It  directs OPM to prescribe regulations necessary to administer section  3109. OPM subsequently issued regulations which provide that section  3109 does not apply to the appointment of experts or consultants under  other authorities. 5 C.F.R. § 304.101. It also informed us that it “does not  consider the cap under 5 U.S.C. § 3109 to apply to consultants under 42  U.S.C. § 209(f).” This interpretation is entitled to considerable weight  since OPM is the agency charged with administering section 3109.
Based on our review, we found that Congress had not spoken directly on  the applicability of section 3109 to the authorities in 42 U.S.C. 209(f) and  (g) and that OPM’s interpretation was reasonable. Therefore, we  concluded that the provisions of section 3109 do not apply to consultants  employed pursuant to 42 U.S.C. § 209(f).
The other pay cap that we considered is found in section 5373 of title 5 of  the United States Code, which places limits on pay fixed by administrative  action. Pay fixed by administrative action refers to the various pay-setting  authorities in which pay is determined by the agency instead of pursuant  to pay rates under otherwise applicable statutory pay systems, such as  the General Schedule. Congress first enacted section 5373 in 1964, 20  years after it passed sections 209(f) and (g). Section 5373 limits pay set  by administrative action to no more than the rate for level IV of the  Executive Schedule, and lists specific pay authorities which are excepted  from coverage. The rate for level IV of the Executive Schedule is currently  $155,500 per year. 42 U.S.C. §§ 209(f) and (g) are not among the  authorities explicitly excepted from section 5373.
We looked at multiple issues in determining that the section 5373 cap  does not apply to 42 U.S.C. §§ 209(f) or (g) appointees. We found no  evidence that Congress had considered the section 209 authorities when  the administrative pay cap was enacted. Sections 209(f) and (g) allow for  compensation “without regard to the Classification Act of 1923.” We  parsed laws enacted in 1923 and later to see if this language should be  interpreted to create an exemption from section 5373, which of course  was enacted over 40 years after the Classification Act of 1923, and after  several additional pay laws had also been enacted. Finally, we looked at  Congressional action in appropriations passed from 1964 through 1993,  and in extending section 209 authority to EPA in 2005 and in 2009. These  Congressional actions led us to believe that it did not intend for the 5  U.S.C. § 5373 pay cap to apply to consultants and scientists hired  pursuant to 42 U.S.C. §§ 209(f) and (g). Given the evidence of how  Congress viewed the authority, we did not object to HHS’s interpretation  that the 1993 appropriations cap is the only restriction on its authority to  compensate individuals appointed under 42 U.S.C. §§ 209(f) or (g).
In conclusion, with respect to the first issue, the 1993 appropriations act  unequivocally limits the pay of consultants and scientists appointed for  limited periods of time pursuant to 42 U.S.C. §§ 209(f) or (g) at agencies  that are funded by Labor-HHS-Education Appropriations Acts. With  regard to the two title 5 limitations, we think that the pay limitations do not  apply to appointments made pursuant to 42 U.S.C. §§ 209(f) or (g).
The statutory pay provisions we analyzed, as mentioned earlier, were  enacted over the course of nearly 70 years, and are in different federal  pay systems. As one court has observed, “although some pay systems  are ‘linked’ to one another,” they have not been “fastidiously integrated” to  achieve uniform federal compensation policies.” In this case, the issues  raised – in particular the applicability of the two title 5 limitations on the  title 42 authority to hire special consultants and fellows – reflect the  difficulty of applying distinct statutory schemes to determine whether  specific pay limits apply. Thus if Congress desires upper pay limits for  appointments under sections 209(f) and (g), it may wish to consider  amending these provisions to specifically establish such limits.
section_title: Concluding Observations
paragraphs: Both HHS and EPA have used Title 42 to recruit and retain highly skilled,  in-demand personnel to government service in order to execute their  missions. At the same time, HHS’s lack of complete data and guidance  on its use of Title 42 may limit the agency’s ability to strategically manage  its use and provide oversight of the authority. Effective monitoring of the  use of Title 42 is particularly important in light of HHS’s increasing use of  the authority and the number of employees earning salaries higher than  most federal employees.
EPA generally followed its Title 42 policies and has incorporated some  modifications to improve its appointment and compensation practices;  however, EPA’s current ethics guidance does not sufficiently ensure Title  42 employees meet ethics requirements after appointment. EPA  acknowledged it could improve its post-appointment ethics oversight and  reported it has plans to ensure that Title 42 employees send its General  Counsel confirmation of stock divestitures and other ethics requirements.  However, at the time of our review, EPA had not provided us with  implementation plans or timeframes. Although its plans appear to be  prudent steps for addressing the specific issues that arose in the cases  we reported, it will be important for EPA to implement them as soon as  possible to mitigate the risk of future potential conflict of interest issues.
Going forward, our recommendations to HHS and EPA to strengthen  certain practices under Title 42, if implemented, should help strengthen  the management and oversight of this special hiring authority.
Chairman Pitts, Ranking Member Pallone, and Members of the  Subcommittee, this completes our prepared statement. We would be  pleased to respond to any questions you or others may have at this time.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For further information regarding this statement, please contact Robert  Cramer, Managing Associate General Counsel, at (202) 512-7227, or  Cramerr@gao.gov, or Robert Goldenkoff, Director, Strategic Issues, at  (202) 512-2757, or Goldenkoffr@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this statement. Individuals making key contributions to this  testimony include Trina Lewis, Assistant Director; Shea Bader, Analyst-In- Charge; Dewi Djunaidy; Karin Fangman; and Sabrina Streagle.
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