Financial Regulators: Agencies Have Implemented Key Performance Management Practices, but Opportunities for Improvement Exist
Published: 2007-06-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Congress granted financial regulators flexibility to establish their own compensation systems and required certain agencies to seek to maintain comparability with each other in pay and benefits to help the agencies overcome impediments to recruiting and retaining employees and avoid competing for the same employees. In response to a request, this report reviews (1) how the performance-based pay systems of 10 financial regulators are aligned with six key practices for effective performance management systems, (2) the actions these agencies have taken to assess and implement comparability in pay and benefits, and (3) the extent to which employees in selected occupations have moved between or left any of the agencies. GAO analyzed agency guidance and policies, agency data on performance ratings and pay increases, agency pay and benefits surveys, data from the Central Personnel Data File, and interviewed agency officials.
section_title: What GAO Found
paragraphs: The 10 federal financial regulatory agencies have generally implemented key practices for effective performance management but could improve implementation of certain practices as they continue to refine their systems. All of the financial regulators awarded some pay increases during the appraisal cycles we reviewed that were linked to employees' performance ratings, although two also provided across-the-board pay adjustments, even to employees who had not received acceptable performance ratings, weakening the linkage of pay to performance. Both agencies have indicated in the future annual pay adjustments will not be awarded to unsuccessful performers. The agencies have generally aligned individual performance expectations and organizational goals, connected performance expectations to crosscutting goals, used competencies to provide a fuller assessment of performance, and involved employees and stakeholders in the process. All of the agencies built safeguards into their performance management systems to enhance credibility and fairness. However, the extent to which the agencies communicated overall results of performance rating and pay increase decisions to all employees varied, and some could increase transparency by letting employees know where they stand relative to their peers in the organization, while protecting individual confidentiality. Financial regulators have hired external compensation consultants to conduct pay and benefits comparability surveys, exchanged pay and benefits information, explored the feasibility of conducting a common survey, and adjusted pay and benefits to seek to maintain comparability with each other. Although financial regulators have adjusted pay and benefits partly based on the results of their comparability efforts, there is some variation in pay ranges and benefit packages among the agencies. According to agency officials, factors such as the year the agencies first became subject to comparability provisions, budget constraints, and the needs and preferences of workforces play a role in compensation decisions and contribute to this variation. Furthermore, agency officials emphasized that it was not their goal to have identical pay and benefits packages; rather, they considered pay and benefits as a total package when seeking to maintain comparability and when setting pay policies aimed at recruiting and retaining employees. Between fiscal years 1990 and 2006, few employees moved among financial regulators and the movement among these agencies presented no discernible trend. Specifically, 86 percent (13,433) of the 15,627 employees that left during this period (i.e., moving or resigning but not retiring), resigned from federal employment. Annually, the percentage of employees who moved to another financial regulator ranged from a low of 1 percent in fiscal year 1997 (16 out of the 1,362 who moved or resigned) to a high of 8 percent in fiscal year 1991 (97 out of the 1,229 who moved or resigned). The total number of financial regulatory employees was 15,400 and 19,796 during those 2 years, respectively.

section_title: Letter
paragraphs: The federal government must adapt to a range of major trends and  challenges in the nation and the world, and to respond, it must have the  institutional capacity to plan more strategically, identify and react more  expeditiously, and focus on achieving results. Critical to the success of this  transformation are the federal government’s people—its human capital. Yet  the government has not transformed, in many cases, how it classifies,  compensates, develops, and motivates its employees to achieve maximum  results within available resources and existing authorities. One of the  questions being addressed as the federal government transforms is how to  update its compensation system to be more market based and performance  oriented. In this type of system, organizations consider the skills,  knowledge, and performance of employees as well as the labor market  when making pay decisions.
Congress has recognized the need for flexibility in how selected agencies  compensate employees. Congress granted the federal financial regulatory  agencies the flexibility to establish their own compensation systems  recognizing that the existing approach to compensating employees could  impede these agencies’ ability to recruit and retain employees critical to  meeting their organizational missions. In addition to the flexibility provided  to the agencies over the years, Congress also directed most of the agencies  to seek to maintain pay comparability and to consult with each other in  doing so to ensure the agencies do not compete with each other for  employees. The 10 federal financial regulatory agencies reviewed in this  report are the Commodity Futures Trading Commission (CFTC), the Farm  Credit Administration (FCA), the Federal Deposit Insurance Corporation  (FDIC), the Federal Housing Finance Board (FHFB), the Board of  Governors of the Federal Reserve System (Federal Reserve Board), the  National Credit Union Administration (NCUA), the Office of the  Comptroller of the Currency (OCC), the Office of Federal Housing  Enterprise Oversight (OFHEO), the Office of Thrift Supervision (OTS), and  the Securities and Exchange Commission (SEC).
In our prior work, we identified key practices for effective performance  management systems that collectively create a “line of sight” showing how  team, unit, and individual performance can contribute to overall  organizational goals and help individuals understand the connection  between their daily activities and the organization’s success.
In your February 2006 letter, you noted that the financial regulatory  agencies are at different stages of implementing their performance-based  pay systems and compensation authorities and that an examination of how  they are implementing their systems could be valuable to other agencies  pursuing performance-based pay systems. Our past work looking at  agencies’ implementation of performance management and performance- based pay systems has shown that better linking pay to performance is very  much a work in progress at the federal level.
In response to your request, this report examines (1) how the performance- based pay systems of 10 federal financial regulatory agencies are aligned  with six key practices for effective performance management systems,   (2) the actions 10 federal regulatory agencies have taken to assess and  implement comparability in pay and benefits with each other, and (3) the  extent to which employees in selected occupations have moved between or  left any of the agencies.
For purposes of this review, we focused on six key practices for effective  performance management, which are more closely related to planning,  rating, and rewarding individual performance:  1. Align individual performance expectations with organizational goals. 2. Connect performance expectations to crosscutting goals. 3. Use competencies to provide a fuller assessment of performance. 4. Link pay to individual and organizational performance. 5. Make meaningful distinctions in performance. 6.
Involve employees and stakeholders to gain ownership of performance  management systems.
In this report, we present important aspects of the agencies’  implementation of the practices of linking pay to individual and  organizational performance, which includes providing adequate safeguards  to help ensure fairness and guard against abuse, and making meaningful  distinctions in performance. We discuss the agencies’ implementation of  the four other practices included in the list in appendix III.
To address our first objective, we analyzed the selected agencies’  performance management and pay systems’ guidance, policies, and  procedures and other related documents; interviewed key agency officials  and representatives of unions or other employee groups; examined a small,  select set of employees’ individual performance plans to illustrate annual  performance expectations for employees; and analyzed agencies’  performance management data, such as the distribution of performance  ratings and performance-based pay increases. The individual performance  plans, selected in conjunction with agency officials to reflect a mix of key  locations, occupations, and grade levels at each agency, as well as the  performance management data from each agency that we examined,  pertained to each agency’s last completed performance appraisal cycle  when we began this review.
To address our second objective, we analyzed relevant statutes and  legislative histories for the selected agencies; reviewed the most recent pay  and benefits surveys from these agencies; obtained agency pay and benefits  data; and discussed agencies’ informal interactions to assess pay  comparability with agency officials. For the third objective, we analyzed  data from the Central Personnel Data File (CPDF), which includes  information on pay, benefits, personnel actions, and other data to support  statistical analyses of executive branch personnel management programs,  to determine employee movement.
We conducted various inspections and electronic testing of agency data  obtained for the first objective for reasonableness and the presence of any  obvious or potential errors in accuracy and completeness. We also  reviewed related agency documentation, interviewed agency officials  knowledgeable about the data, and brought to the attention of these  officials any concerns or discrepancies we found with the data for  correction or updating. On the basis of these procedures, we believe the  data are sufficiently reliable for use in the analyses presented in this report.  Our data collection strategies were not designed to guarantee that we  would identify all potential examples of how agencies may have  implemented the various practices. An agency may have implemented a  particular practice even if it is not specifically mentioned in the report. We  did not independently verify the data in the pay and benefits comparability  surveys the consultants conducted for the agencies or the pay and benefits  data we received from the agencies. On the basis of our data reliability  testing of CPDF data, we believe the CPDF data are sufficiently reliable for  this review. Appendix I provides additional information on our scope and  methodology. We conducted our work from February 2006 through June  2007 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: The 10 federal financial regulatory agencies in our review vary in size,  mission, funding structure, whether they bargain with a union, and how  long they have been implementing aspects of performance-based pay  systems. For example, FHFB is the smallest agency with just over 120  employees, while FDIC, the largest agency, had more than 4,300 employees  as of September 2006 and has been implementing pay for performance  since 1998. Likewise, these agencies regulate a range of activities including  banking and securities and futures. Appendix II includes the financial  regulators’ missions, funding structures, and whether they are unionized  and bargain with a union over pay and benefits.
Under Title 5 of the U.S. Code, the financial regulatory agencies have the  flexibility to establish their own compensation programs without regard to  various statutory provisions on classification and pay for executive branch  agencies. At the same time these financial regulators received increased  flexibility regarding compensation, Congress also generally required that  they seek compensation comparability with each other. A provision in  FIRREA requires six agencies—FDIC, OCC, NCUA, FHFB, FCA, and OTS— in establishing and adjusting compensation and benefits, to inform each  other and Congress of such compensation and benefits, and to seek to  maintain comparability regarding compensation and benefits. Additional  FIRREA provisions require FCA, FHFB, NCUA, OCC, and OTS to seek to  maintain compensation and benefit comparability with the Federal Reserve  Board. Although the Federal Reserve Board is under no obligation to seek  to maintain compensation or benefit comparability with these or any of the  other financial regulators, it has agreed to share compensation information  with the other financial regulators.
The other three agencies are subject to their own compensation  comparability provisions. As required by its 1992 enabling legislation,  OFHEO must maintain comparability with the compensation of employees  from the Federal Reserve Board, OCC, FDIC, and OTS and consult with  those agencies in that regard. In 2002 legislation, SEC and CFTC were  placed under comparability requirements. SEC must consult with and seek  to maintain compensation comparability with FDIC, OCC, NCUA, FHFB,  FCA, OTS and CFTC. However, as shown in table 1, this legislation did not  require these agencies to seek to maintain compensation comparability  with SEC. Similarly, CFTC must consult and seek to maintain  compensation comparability with the six FIRREA agencies, but those  agencies are not required to seek to maintain compensation comparability  with CFTC.
We previously identified key practices for effective performance  management based on public sector organizations’ experiences both here  and abroad. High-performing organizations seek to create pay, incentive,  and reward systems that clearly link employee knowledge, skills, and  contributions to organizational results. Performance-based systems reward  employees according to their performance by using performance ratings as  the basis for pay increases. Linking pay to performance can help to create a  performance-oriented culture by providing monetary incentives to become  a top- performing employee. At the same time, as a precondition to linking  pay to performance, performance management systems need to provide  adequate safeguards to ensure fairness and guard against abuse. Providing  adequate safeguards that help to ensure transparency can improve the  credibility of the performance-based pay system by promoting fairness and  trust. Safeguards can include establishing clear criteria for making rating  decisions and determining merit increases, and providing overall results of  performance rating and pay increase decisions to all employees, while  protecting confidentiality. Effective performance management systems  also make meaningful distinctions between acceptable and outstanding  performance of individuals and appropriately reward those who perform at  the highest level. As we have previously reported, effective performance  management systems can provide management with the objective and fact- based information it needs to reward top performance and provide the  necessary information and documentation to deal with poor performers.
section_title: Financial Regulators Generally Have Linked Pay to Performance and Made Distinctions in Performance, but Opportunities Exist for Improvements
paragraphs: Overall, the federal financial regulators have implemented key practices for  effective performance management systems in ways that consider the  unique needs of their organizational cultures and structures, but some have  not fully implemented certain practices. For purposes of this section, we  focus on the regulators’ implementation of the two key practices of (1)  linking pay to performance (which includes building in safeguards), and (2)  making meaningful distinctions in performance. First, we found that while  the regulators generally linked pay to performance, two regulators  awarded across-the-board increases to employees regardless of their  performance. Second, while most regulators generally used safeguards in  varying ways to increase transparency, one did not establish and  communicate performance standards to its nonexecutives, which resulted  in questions about how decisions were made and could compromise the  credibility of the performance system. Third, many regulators did not fully  implement the safeguard of providing overall ratings and pay results to all  employees, which reduced the transparency of their performance-based  pay systems. Fourth, we found that while most regulators used multiple  rating levels to make meaningful distinctions in performance, employees  were usually concentrated in one or two rating categories and all had very  few poor performers. Finally, one agency did not complete performance  ratings for senior officers due to lack of funding for pay increases, thereby  missing an opportunity to provide valuable feedback. For information  about the other four key practices as well as additional material pertaining  to the linking pay to performance practice, see appendix III.
subsections: section_title: Financial Regulators Generally Have Linked Pay to Performance, but Two Regulators Still Provided Increases to Performers at All Levels
paragraphs: All of the regulators awarded some performance-based increases during  the appraisal cycles we reviewed that were linked to employees’  performance ratings, although two financial regulators also provided  annual pay adjustments to employees, regardless of performance, during  the appraisal cycles we reviewed. Specifically, CFTC provided an across- the-board pay increase to all employees to be equivalent to the cost of  living adjustment received by General Schedule employees of the federal  government in January 2006. During the 2005 appraisal cycle, SEC also  provided all employees an across-the-board pay adjustment of 2.1 percent,  regardless of their performance. SEC officials noted that this across-the- board pay adjustment was in accordance with the negotiated compensation  agreement with the union. While the percentages of employees rated as  unsuccessful or unacceptable at CFTC and SEC during those cycles were  extremely small (less than 1 percent), these agencies lost opportunities to  reinforce the linkage of pay to performance in their performance  management systems. CFTC officials told us that the performance-based  pay portion of the new performance management system that will begin on  July 1, 2007, will require a minimum threshold performance rating for an employee to be eligible for a pay increase. SEC and its union are currently  negotiating implementation of a new Compensation and Benefits  Agreement, which provides that employees rated as unacceptable will not  receive annual pay adjustments. SEC officials acknowledged that a  negative perception occurs when employees who are not performing  satisfactorily receive a pay increase.
Most of the financial regulators used their rating systems to differentiate  individual performance to award performance-based increases and reward  top performers during the appraisal cycles we reviewed. Furthermore, all  of the agencies also provided increases that, while not directly linked to  performance ratings, considered employee performance in some way.  These increases included special bonuses or awards given to individuals or  teams for special accomplishments or contributions, as well as promotions  and within-pay-band increases. For example, FCA provided Achievement  or Special Act Awards to employees for significant achievements or  innovations towards a special program, project, or assignment that  contributed to the agency’s or organizational unit’s mission, goals, and  objectives. To receive these awards, employees had to have performed  their regular duties at least at a fully successful level of performance. FCA  also provided some pay increases for competitive and noncompetitive  promotions during the completed appraisal cycle we reviewed.
Pay increases linked to performance ratings accounted for only part of the  total increases awarded to individual employees during the appraisal cycles  we reviewed. See appendix III for more information on the different ways  in which the regulators translated performance ratings into pay increases  and budgeted for performance-based increases, as well as more  information on other pay increases that involved considerations of  performance.
section_title: Financial Regulators Generally Used Safeguards to Increase Transparency, but SEC Did Not Establish or Communicate Performance Standards for its Nonexecutive Employees
paragraphs: All of the financial regulatory agencies have built safeguards into their  performance management systems to enhance the credibility and fairness  of their systems, although they varied in how safeguards have been  implemented. For example, with the exception of SEC, the agencies have  used the safeguard of establishing and communicating (1) standards for  differentiating among performance rating categories and (2) criteria for  performance-based pay decisions, thus enhancing transparency, which can  improve employee confidence in the performance management system.  (See app. III for information on the financial regulators’ implementation of  additional safeguards.)
CFTC’s four-level rating system (i.e., unsuccessful, successful, highly  successful, and exemplary) defined the successful level of performance for  areas that CFTC had identified as critical to employees’ job performance,  and included some information on how to distinguish variations from the  successful level of performance. However, an employee representative at  CFTC maintained that the rating level descriptions did not sufficiently  communicate to employees the skills and behaviors employees needed to  demonstrate in order to move, for example, from the “successful” to the  “highly successful” level. Employee representatives stated that even though  there was helpful guidance on distinguishing between levels of  performance in a CFTC manual, these descriptions were hard to  understand and most employees did not refer to the CFTC manual for  guidance. An agency official told us that the revised performance  management system that went into effect in October 2006 is a five-level  system, and includes descriptions of all five performance levels rather than  only the successful rating level described in the system it replaced.
Similarly, OFHEO defined how employees would be rated on its five-level  rating scale for each of the performance elements included in their  performance plans. These performance standards defined the middle level  of performance (fully successful), and included what the rater should look  at to determine if an employee is performing better or worse than this  benchmark. An employee’s performance for each element was assessed  and a total score was determined. OFHEO further distinguished between  “high” and “low” levels within rating categories. For example, a rating of  “outstanding” would be classified as being in either the high or low level of  the outstanding rating category based on the performance score the  employee received. Merit increases at OFHEO have been determined  directly by employees’ performance ratings, so employees could ascertain  the merit increases they would receive for given performance ratings. For  example, an employee rated “high” commendable receives a higher merit  pay increase than one who is rated “low” commendable. OFHEO employee  working group members noted that both supervisors and employees  understand how the performance elements and standards have been  applied through rating decisions, and they stated that employees generally  understood what was expected of them to attain higher levels of  performance and associated merit increases. However, an employee  working group member also commented that when distinguishing between  performance rating levels, some managers seemed to apply the  performance standards more effectively than others, which could result in  differences in how rating decisions were made.
At FDIC, for nonexecutive/nonmanager employees to be eligible for  performance-based pay increases, employees had to first earn a “meets  expectations” rating. Then, in a second process called the “Pay for  Performance” system, FDIC nonexecutive/nonmanagers were placed into  one of four pay groups, based on an assessment of total performance and  corporate contributions as compared with other employees in the same pay  pool. The pay for performance program was essentially comparative,  meaning that the contributions and performance of each employee were  evaluated and rewarded on a relative basis within his or her pay pool, as  compared to peers. According to union representatives, employees were  not informed about how management made the distinctions in pay increase  groupings. According to FDIC officials, there are no definitive descriptions  or definitions of the performance levels for each of the three pay groups  because employees are assessed compared to each other, not against fixed  standards. Officials also said that information on the system for  determining pay groups was provided to all employees in early 2006 after  the compensation and benefits agreement became effective, when the  system was first rolled out, and is explained to new employees at  orientation. We did not determine how widespread the concern about how  management made distinctions in pay increase groupings was among FDIC  employees.
In contrast, SEC officials did not establish standards upon which to base  rating decisions for nonexecutive employees, nor did they communicate  criteria used to make performance-based pay decisions to these  employees. For its nonexecutive employees, SEC used a two-level rating  system in which individuals’ performance was rated as acceptable or  unacceptable. According to agency management, SEC followed the  definitions under Title 5 that are used by the rest of the government for  differentiating between acceptable and unacceptable performance.  However, SEC did not establish written performance standards for  appraising employees’ performance as acceptable or unacceptable.
To determine performance-based pay increase amounts for nonexecutive  employees, SEC developed a second phase process that involved making  distinctions in contributions for those individuals who received a summary  performance rating of acceptable. As part of the second phase, employees  and their supervisors submitted contribution statements summarizing the  employees’ accomplishments during the appraisal cycle. Using the  summary statements and the supervisors’ own assessments, supervisors  placed employees into one of four categories: (1) made contributions of the  highest quality, (2) made contributions of high quality, (3) made  contributions of quality, and (4) made no significant contribution beyond  an acceptable level of performance. Next, a compensation committee  within each office or division evaluated the contribution statements and  the supervisors’ placements. For each employee, the committee  recommended a merit pay increase ranging from zero to 4.41 percent  (corresponding to “steps” 0 to 3) to an official from each office or division,  who made the final determination of the employee’s merit increase.
However, SEC did not develop criteria to differentiate between the four  contribution categories that the compensation committees considered  when recommending merit pay step increase amounts. In addition, SEC  employee representatives told us that it was not clear to employees how  the contribution statements and the subsequent supervisory  recommendations were translated into the decisions about the four  contribution categories into which employees would be placed. SEC  officials noted that employees received copies of narratives written by their  supervisors to describe the employees’ contributions; however, they  acknowledged that the system could be more transparent. According to  SEC officials, in an effort to increase transparency in the future, they plan  to share with employees information on supervisors’ preliminary  recommendations on ratings that are provided to the compensation  committee, so that employees can see into which of the four contribution  categories they were recommended for placement and the supporting  documentation. If the committee changes an initial recommendation from  a supervisor, SEC will provide the employee with the rationale for the  change. An agency official indicated they are developing broad statements,  such as “the committee had a broader perspective of employee  contributions,” that address a range of possible reasons for changes.
section_title: Some Financial Regulators Did Not Fully Implement the Safeguard of Providing Overall Ratings and Pay Increase Results to All Employees, Which Would Increase Transparency in Their Performance-Based Pay Systems
paragraphs: The extent to which the financial regulators shared the overall results of  performance ratings and pay increase decisions with all employees varied,  and some agencies did not make this information widely available to  employees. We have previously reported that the safeguard of  communicating the overall results of performance appraisal and pay  increase decisions while protecting individual confidentiality can improve  transparency by letting employees know where they stand in the  organization. An employee’s summary performance rating conveys  information about how well an employee has performed against  established performance standards, which is important, but not sufficient  to provide a clear picture of how the employee’s performance compares  with that of other employees within the organization. When the  organization communicates where an employee stands, management can  gain credibility by having honestly disclosed to the employee the basis for  making pay, promotion, or developmental opportunity decisions that may  have been based upon relative performance.
The Federal Reserve Board communicated the overall results of the  performance appraisal decisions to all employees by sharing annual  performance rating distributions with all employees, disaggregated by  division. Since this system for determining the amounts of performance- based increases for individuals based on their performance ratings is  essentially driven by formula, employees know what their merit increases  will be relative to others after receiving their performance ratings.
At FDIC, the distribution of pay group assignments for all nonexecutive/  nonmanager employees who passed the first assessment process is fixed  by the negotiated agreement with the union, so those employees know how  performance-based pay increases will be distributed and the amounts of  increases received by the various pay groups. Further, FDIC officials told  us that, in accordance with the collective bargaining agreement, after  completion of each annual pay for performance cycle they share data on  the results of the pay grouping decisions for employees covered by the  bargaining unit contract with union representatives. These include  summary pay group data analyzed according to the agreement with the  union, such as certain demographic data and individual rating information.
According to an agency official, OCC began to post some limited  information on the average size of some performance-based pay increases  on the agency intranet in November 2006. The information included the  average, agencywide percentage increases for merit increases, merit  bonuses, and special act and spot awards, as well as the percentage of  employees receiving the increases.
During the performance appraisal cycle we reviewed, OTS shared with  union representatives some data on average pay increases. The agency did  not share ratings distribution data with the union, and did not make either  performance-based pay increase or rating results information available to  all employees. However, in November 2006, OTS distributed to all  employees information for the recently completed appraisal cycle on the  percentage of employees who received each performance rating level and  the average pay increase percentages to be received by people at each  level. The information was disaggregated by regions and Washington, D.C.
While SEC did not make the results of performance rating decisions  available to all employees, officials said that they reported information on  performance awards (bonuses) to the union and that, under  implementation of the compensation and benefits agreement currently  being negotiated, they plan to publish aggregated information on  performance ratings under the planned new performance management  system for nonexecutive employees. SEC officials also told us that they  plan to provide information at the lowest possible organizational level  while still protecting individual confidentiality.
The remaining five financial regulators did not share overall data on ratings  or performance increases widely with all employees, although in some  cases some information was shared with managers. The following outlines  how information was shared:   CFTC shared information on the results of ratings and award decisions  with managers on a Pay Parity Governance Committee, but not with all  employees, for the appraisal cycle we reviewed. CFTC officials told us  that there is no prohibition against sharing this type of information  under the new performance management system directive, and they are  aware that there is some interest among employees in receiving it. They  said that the pay parity committee will determine whether there is value  in releasing this information to all employees in the future.
At FHFB, an official told us that office directors see all the ratings within  their offices and make the decisions about the performance-based pay  increases for employees, but this information is not shared across  offices or with all employees. However, the director of the Office of  Supervision, FHFB’s largest office, has shared information with all staff  in the office on the ranges of pay increases corresponding to different  performance rating levels and base salary levels that were received by  staff within the office for a given year, as well as the standards used to  assign the merit increase amounts.
Officials at OFHEO told us that just last year they started sharing  information on the results of ratings and pay increase decisions with  management, but that they have not yet shared this type of information  with all employees.
FCA officials told us that they do not share aggregate results of the  performance rating and pay increase decisions with all employees. They  explained that, under a previous administration, in early 2000, an  executive summary was prepared and posted that all employees could  potentially access, which contained information on the results of ratings  and pay increases. However, this information was not broadly  disseminated directly to employees.
NCUA shares information on the results of the merit pay decisions with  directors, but not with all employees. An NCUA official told us that it is  up to the directors to decide whether or not to share this information  with their staff. In comments on the draft report, NCUA explained that  this is one of the issues involved in its current negotiations over pay and  benefits with the National Treasury Employees Union, and that the  agency’s proposal to the union does provide for this type of  transparency.
Agencies provided a variety of reasons for not sharing overall ratings and  pay increase information more widely. Officials from FHFB and FCA told  us that the relatively small size of their agencies, 122 and 248 employees,  respectively, makes it harder to share this type of information while  protecting individual confidentiality and that an FHFB official was not  aware of employee demand for this type of information. FCA officials also  mentioned that the emphasis in their performance management system is  on rating individual employees against the standards, not against other  employees and they wanted employees to focus on their individual ratings  and performance. According to union representatives at OCC, the union  has made multiple requests for data on the results of the performance  rating and pay increase decisions but management has declined to share  information that would enable the union to, in their words, perform a  meaningful independent analysis of the ratings and pay increase decisions.  OCC officials told us that they prefer not to share with employees  disaggregated information on ratings and pay increase distributions  because organizational units administer the process differently. For  example, the percentages of individuals rated at the highest level (4) and  next highest level (3) vary from unit to unit. Because units receive fixed  pools of funds for performance-based increases, the average size of a merit  increase that an employee receiving a level 4 may receive can vary from  unit to unit, depending on how many individuals receive the highest  rating. OCC officials told us that sharing information on average merit  increases by unit with employees, without sufficient context of the factors  considered when making these decisions, including more detailed rating  information (which is privacy protected), could lead to misinterpretation of  the data.
However, not sharing information on the results of the performance rating  and pay increase decisions processes can detract from the goal of a  transparent and fair performance management system. This information  needs to be presented in ways that protect individual confidentiality, such  as by aggregating it. Without access to this type of information, individual  employees can lose a valuable opportunity to understand how their  performance stands relative to others in their organization. In cases where  agencies negotiate agreements with unions, an important consideration is  to reach agreement to share aggregate results of the rating and pay increase  decisions with employees, while protecting individual confidentiality.
section_title: While Financial Regulators Generally Used Multiple Rating Levels to Make Meaningful Distinctions in Performance, Employees at Most Agencies Were Concentrated in One or Two Rating Categories, with Very Few Poor Performers
paragraphs: While most of the financial regulatory agencies used multiple rating levels  to assess employee performance and make distinctions in performance, at  most agencies employees were concentrated in one or two rating  categories and very few received poor performance ratings. By using  multiple-level rating systems, agencies have the capability to make  meaningful distinctions in performance. Effective performance  management systems make meaningful distinctions between acceptable  and outstanding performance of individuals and appropriately reward  those who perform at the highest level. As we have previously reported,  performance management systems can provide management with the  objective and fact-based information it needs to reward top performers and  provide the necessary information and documentation to deal with poor  performers. More specifically, using multiple rating levels provides a  useful framework for making distinctions in performance by allowing an  agency to differentiate, at a minimum, between poor, acceptable, and  outstanding performance. We have reported that two-level rating systems  by definition will generally not provide meaningful distinctions in  performance ratings, with possible exceptions for employees in entry-level  or developmental bands.
Eight agencies used four or more rating levels. For example, as described  earlier, OFHEO used a five-level rating category system to appraise  employee performance and contributions toward achieving agency goals,  and further distinguished between high and low performance scores within  rating categories. As shown in figure 1, at the eight agencies with four- or  five-level rating systems, the largest percentage of employees fell into the  second highest rating category, except at OFHEO and the Federal Reserve  Board. At OFHEO, more than half of the employees were placed into the  high or low levels of the top rating category. Conversely, at the Federal  Reserve Board (excluding economists), almost half of the employees fell  into the third highest or middle (commendable) rating category. Across the  eight agencies shown in figure 1, the percentage of employees who fell into  the highest rating category varied from 10.6 percent for economists at the  Federal Reserve Board, to 55 percent of employees at OFHEO. (This page is left intentionally blank.)
SEC and FDIC used two-level rating systems (essentially pass/fail systems)  to appraise the performance of certain groups of employees. Although two- level rating systems by definition will not provide meaningful distinctions  in performance ratings, both SEC and FDIC used a second process to  determine performance-based pay increases and effectively make more  meaningful performance distinctions. As figure 2 shows, the highest  percentage of employees at FDIC fell into the second highest of four  categories, in keeping with the fixed percentages included in the negotiated  agreement with the union. At SEC, the largest percentage of employees fell  into the third highest of four rating categories.
As shown in figures 1 and 2, the percentage of employees rated as poor  performers at each agency was very small during the completed  performance appraisal cycles we reviewed. Employees rated at below the  successful and meets expectations rating levels accounted for less than 3  percent of employees across the agencies. OTS had zero employees in the  bottom two rating categories combined—all OTS employees received fully  successful or higher ratings. Similarly at NCUA, no executives and 2.1  percent of nonexecutives were rated below minimally successful.
While the financial regulators rated very few employees as poor  performers, all of the agencies have established procedures to deal with  poor performers. When an employee does not perform up to a threshold  standard for satisfactory performance, most agencies place the employee  on a performance improvement plan or provide counseling for the  employee, and the employee does not receive a performance-based  increase at the end of the performance cycle. For example, OTS has  addressed poor performance by working with the employee to improve his  or her area of deficiency. An employee who receives a rating at the  unacceptable level is placed on a performance improvement plan for a  minimum of 90 days. Specifically, OTS policy advises supervisors to  develop a performance improvement plan by identifying the performance  areas in which the employee is deficient and the types of improvements,  including specific work products and steps to be followed which the  employee must complete to attain the fully successful performance level.  In addition, according to OTS policy, the agency may provide the employee  with closer supervision, or on-the-job or formal training.
However, governmentwide, 29.7 percent of employees indicated in the 2006  Office of Personnel Management (OPM) Federal Human Capital Survey  that they agreed or strongly agreed that differences in performance within  the work unit were recognized in a meaningful way. Positive responses to  this question for the eight financial regulators who participated in the  survey ranged from 24.9 percent for CFTC to 41.6 percent for OCC. None of  these agencies had a majority of their employees provide positive  responses to this question, and only three of the eight agencies had more  than one third of their employees provide positive responses to this  question.
section_title: SEC Did Not Complete Performance Ratings for Senior Officers, Missing an Opportunity to Provide Valuable Feedback
paragraphs: While it may have been an isolated incident, for senior officers, SEC  effectively did not make distinctions in rating their performance during the  appraisal cycle we reviewed because the agency did not complete  performance ratings for them in 2005. According to SEC officials, no funds  were available for performance-based bonuses (which are normally  dependent on performance ratings) during that assessment cycle. As a  result, divisions performed assessments of senior officers, but the  assessment process was not completed and their ratings were not signed  by the Chairman for the October 1, 2004, to September 30, 2005,  performance appraisal cycle. A recent SEC Inspector General report  confirmed that senior officers in SEC’s Enforcement Division did not  prepare performance review documents for the performance cycle that  ended on September 30, 2005, and recommended that required steps of the  senior officer performance appraisal process be conducted in accordance  with Commission policy, even when merit increases are not awarded. All  senior officers received annual across-the-board salary increases during  that cycle. Conducting performance appraisals and making distinctions in  performance are important not only for determining performance-based  pay increases, but for providing feedback to help employees improve their  performance and assess how their work contributed to achieving  organizational goals. By not appraising their performance, SEC missed an  opportunity to provide valuable feedback to senior officers.
section_title: Agencies Have Taken Various Actions to Seek to Maintain Pay and Benefits Comparability
paragraphs: Financial regulators have hired external compensation consultants to  conduct individual, formal comparability surveys, exchanged pay and  benefits information, explored the feasibility of conducting a common  survey, and adjusted pay and benefits to seek to maintain pay and benefits  comparability. The majority of the financial regulators conducted pay  comparability surveys that have included other financial regulators and in  some instances, private-sector entities. To compare pay across agencies,  consultants send questionnaires on behalf of the sponsoring agency and  ask participating agencies to match the jobs based on the job descriptions  provided. To compare benefits, consultants use various methods, such as  side-by-side comparisons of benefits and calculation of total cost of  benefits per employee. In addition to these surveys, human capital officials  at the 10 financial regulators have formed an interagency group to  exchange information and consult on topics such as updates on merit pay  ranges and bonuses. However, agency officials told us that because many  of the financial regulators conduct separate comparability surveys, their  staffs have to respond to numerous and often overlapping inquiries, which  can be inefficient. To begin addressing the inefficiencies of this process, the  agencies formed a subcommittee in December 2006 to study the feasibility  of conducting a common survey on pay and benefits. According to agency  officials, the subcommittee also has discussed the feasibility of establishing  a Web-based data system to make the most current pay and benefits  information available to participating agencies.
In the absence of a legislative definition of what constitutes comparability,  agency officials told us that they use various methods to assess pay and  benefits comparability after they have obtained relevant data from the  other agencies. For example, FDIC has sought to set its total pay ranges  (base pay plus locality pay) for specific occupations and grade levels within  10 percent of the average of FIRREA agencies. FCA used the average  market rate paid by other financial regulators as a benchmark. Finally,  partly on the basis of the results of the comparability surveys and  discussions among the agencies, the financial regulators have adjusted  their pay and benefits policies in their efforts to seek to maintain  comparability. For example, as a result of gaining pay flexibilities, CFTC  implemented new pay ranges for its 2003 pay schedule, and increased base  pay by 20 percent for all eligible employees to partially close the 25 percent  gap between CFTC and FIRREA agencies. Appendix IV provides additional  information on our analysis of individual agency actions.
While the regulators have taken actions to seek to maintain comparability  in their pay and benefits, there are some variations in base pay ranges and  benefit packages among the agencies. Figure 3 shows the base pay ranges  (minimum and maximum) for the mission-critical occupations, excluding  executives at the 10 agencies. As shown in the same figure, the actual  average base pay among the 10 agencies also varies somewhat in relation to  the agencies’ respective base pay ranges, which according to agency  officials, could be affected by the average length of service of employees,  and the fact that some agencies tend to hire employees at certain grade  levels.
Because each financial regulator sets its own locality pay percentage based  on its respective policies, locality pay percentages often differ from those  that OPM sets for General Schedule employees (with the exception of  CFTC) and vary among agencies for the same duty station. For example, in  New York City, the OPM locality pay percentage is 22.97 percent but the  regulators’ locality pay percentages range from 21.19 at FDIC and FHFB to  33.20 percent at OTS. Table 2 shows the locality pay percentages for OPM  and for the eight financial regulators that have locality pay percentages for  selected cities.
The benefits that the 10 financial regulators offered also varied, which we  discuss in detail in appendix IV. For example, half of the regulators offer  their employees 401(k) retirement savings plans with varying employer  contributions in addition to offering the governmentwide Federal Thrift  Saving Plan (except for the Federal Reserve Board). According to agency  officials, factors such as the year an agency first became subject to  comparability provisions, budget constraints, the needs and preferences of  different workforces, and ways to attract and retain workforces play a role  in compensation decisions and contribute to the variations in pay ranges  and benefits. Moreover, agency officials emphasized that it was not their  goal to have identical pay and benefits packages; rather, they considered  pay and benefits as a total package when seeking to maintain pay and  benefits comparability and when setting pay policies aimed at recruiting  and retaining employees.
section_title: Few Employees Have Moved among the Financial Regulators, Most Resigned from Federal Employment
paragraphs: While the total number of financial regulatory employees resigning from  federal employment between fiscal years 1990 and 2006 generally declined,  there was no clear trend among the number who moved to another  financial regulator. As shown in figure 4, the number of employees leaving  one federal regulator for another declined from the previous fiscal year in  10 of the 16 years and increased from the previous fiscal year in the other 6  years. Figure 4 also shows the percentage of financial regulatory  employees who went to another financial regulator, went to other federal  agencies, and resigned from federal employment, and the total number of  financial regulatory employees during this period. Of all the employees  who left their financial regulatory agency voluntarily (moved to another  financial regulator or executive branch agency, or resigned) from fiscal  year 1990 through fiscal year 2006, the vast majority—86 percent (13,433)— of the 15,627 employees leaving the regulators voluntarily (i.e., moved or  resigned), resigned from the federal government. The number of employees  who moved to another financial regulator ranged from a low of 16 of 1,362  who moved or resigned in fiscal year 1997 to a high of 97 of 1,229 who  moved or resigned in fiscal year 1991. The total number of financial  regulator employees was 15,400 and 19,796 during those 2 years,  respectively. Similar lows were also experienced in 1996 and 2003. Some  agency officials told us that they believe that the FIRREA comparability  provision and similar provisions in subsequent laws applicable to financial  regulators have been effective in ensuring that regulators’ pay and benefits  are generally comparable among the 10 agencies, which probably helps  minimize employee movement among financial regulatory agencies. Of the  financial regulator employees who moved or resigned, the percentage of  those who resigned from federal employment fluctuated slightly over the  period, ranging from a low of 73.7 percent in fiscal year 2003 to a high of  94.8 percent in fiscal year 1996.
The movement of mission-critical employees among financial regulators  also did not reveal a discernible trend. For the number of employees who  moved to another financial regulator from fiscal year 1990 through fiscal  year 2006, see table 10 in appendix V. The numbers ranged from no  movement for 7 of the 11 occupational categories (accountants, auditors,  business specialists, economists, financial analysts, investigators, and  information technology (IT) specialists) in at least 1 of the fiscal years we  reviewed to a high of 37 employees (38.1 percent of all those who moved  that fiscal year) for the “all other” occupational category in fiscal year  1991. During this period (fiscal years 1990 to 2006), some occupational  categories experienced very little movement. For example, fewer  accountants, auditors, business specialists, and investigators moved than  employees in the other categories. In contrast, examiners had the largest  number of employees moving among financial regulators in 8 of the 17  years, including the 3 most recent years for which data were available. The  average number of employees in mission-critical occupations moving  among the 9 financial regulators from fiscal year 1990 through fiscal year  2006 ranged from 0.1 for investigators to 11.7 for examiners. See appendix  V for additional data on employee movement.
For those employees that did not move to another financial regulator, we  could not determine in all cases where the employees moved because  CPDF, the most complete data set available with federal employment  information, does not include information on employment outside  executive branch agencies. We were able to identify those employees that  went to another federal agency. These numbers ranged from a low of 48 in  fiscal year 1994 to a high of 128 in fiscal year 1991, higher than the number  of employees who moved to another financial regulator, which was 23 in  fiscal year 1994 and 97 in fiscal year 1991. Officials from the 9 agencies told  us that they do not track the employment of their employees after the  employees leave their agencies. Further, they said that their employees  generally sought employment outside the federal government, including  the private sector and state and local government, but that their main  competitors were private-sector entities.
section_title: Conclusions
paragraphs: Like other federal agencies, the experiences of the financial regulators  illustrate the challenges inherent in establishing well-functioning,  performance-based pay systems and that these systems are works in  progress that are constantly evolving. These regulators have taken various  approaches to revise their performance management systems and  introduce performance-based pay. Although the regulators have  incorporated many of the key practices for effective performance  management systems, opportunities exist for a number of them to make  improvements as they continue to refine their systems. Specifically, some  regulators have opportunities in the areas of strengthening safeguards to  enhance transparency and fairness and making meaningful distinctions in  performance. As some regulators develop new systems or revise their  existing systems, they have an opportunity to build in aspects of the key  practices, such as improving transparency by communicating the overall  results of performance appraisal rating and performance-based pay  increase decisions to all employees to help employees understand how  they performed relative to other employees in their organization, while  protecting individual confidentiality. For regulators that negotiate with  unions, there are also opportunities to work together to accomplish this.
SEC has some additional opportunities to pursue improvements in specific  aspects of its performance management system, which it is in the process  of revamping. For example, SEC can establish and communicate to  nonexecutive employees using the new system clear criteria for making  performance rating and pay increase decisions. Finally, while it may have  been an isolated incident, by not completing performance assessments of  senior officers in the 2005 performance appraisal cycle we reviewed, SEC  missed an opportunity for two-way feedback and assessments of individual  and organizational progress toward organizational goals. While funding  circumstances specific to that appraisal cycle contributed to this situation,  in the future it will be important to complete assessments regardless of the  availability of funding for increases.
The agencies have taken a variety of actions in seeking to maintain pay and  benefits comparability. While we did find some variation in base pay  ranges, locality pay percentages, actual average pay, and benefits among  the agencies, we found that a number of reasons could contribute to the  variation, including the following: regulators were granted flexibility under  Title V and subject to comparability requirements at varying times, pay and  benefits are considered comprehensively in seeking comparability, the  average length of service of employees, and where employees are located.
While pay and benefits comparability cannot be precisely determined, all  the agencies are working to maintain comparability in pay and benefits.  One recent initiative—studying the feasibility of conducting a common  survey on pay and benefits—should help to increase the efficiency of this  effort. In addition, given the relatively small amount of employee  movement among federal regulators, the variation in pay, benefits, and  locality pay percentages in some locations across the regulators does not  appear to be encouraging large numbers of employees to move among  financial regulators. This may be an indication that the comparability  provisions of FIRREA and other pertinent legislation have been working as  intended. Moreover, from fiscal years 1990 through 2006, the agencies’  attrition rates have trended downward indicating that a smaller percentage  of employees were leaving.
section_title: Recommendations for Executive Action
paragraphs: The Chairman of the Board and Chief Executive Officer of the Farm Credit  Administration, the Chairman of the Federal Housing Finance Board, and  the Director of the Office of Federal Housing Enterprise Oversight should  communicate the overall results of the performance appraisal and pay  increase decisions to all employees agencywide while protecting  individual confidentiality.
The Chairman of the National Credit Union Administration and the  Chairman of the Commodity Futures Trading Commission should  work with unions to communicate the overall results of the  performance appraisal and pay increase decisions to all employees  agencywide while protecting individual confidentiality.
The Chairman of the Securities and Exchange Commission should  communicate clearly the criteria for making performance rating and pay  increase decisions to nonexecutive employees   work with the union to communicate the overall results of the  performance appraisal and pay increase decisions to all employees  agencywide while protecting individual confidentiality and  assess senior executives’ performance at the end of the performance  appraisal cycle regardless of the amount of funding available for  performance-based pay increases.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided drafts of this report to the Chairman, Commodity Futures  Trading Commission; Chairman of the Board and Chief Executive Officer,  Farm Credit Administration; Chairman, Federal Deposit Insurance  Corporation; Chairman, Federal Housing Finance Board; Chairman, Board  of Governors of the Federal Reserve System; Chairman, National Credit  Union Administration; Comptroller of the Currency, Office of the  Comptroller of the Currency; Director, Office of Federal Housing  Enterprise Oversight; Director, Office of Thrift Supervision; and Chairman,  Securities and Exchange Commission; for review and comment.
We received written comments from six of the agencies. See appendixes VI,  VII, VIII, IX, X, and XI for letters received from CFTC, the Federal Reserve  Board, FHFB, NCUA, OFHEO, and SEC. These six, along with the other  four agencies, also provided clarifying and technical comments, which we  incorporated as appropriate.
The agencies generally agreed with our recommendations. With respect to  the recommendation to communicate the overall results of the  performance appraisal and pay increase decisions on an agency-wide basis,  CFTC, FCA, FHFB, NCUA, OFHEO, and SEC indicated that they plan to  implement the recommendation. In describing specific actions, the  executive director of CFTC explained that the agency has already  discussed working with the unions to communicate overall results of  performance appraisal and pay decisions across the agency as part of the  development of their new performance management and pay-for- performance systems. The Chief Human Capital Officer of FCA stated that  the agency plans to communicate the overall results of the 2006  performance appraisal and 2007 pay increase decisions to FCA employees  by the end of June 2007. The Executive Director of NCUA explained that  sharing overall information on ratings and pay increase decisions with all  employees is one of the issues being negotiated as part of the ongoing  negotiations over pay and benefits with the National Treasury Employees  Union, and stated that the agency’s proposal to the union provides for this  type of transparency. The Executive Director of SEC agreed with the report  findings and stated that SEC has established a new branch within the Office  of Human Resources to oversee performance-related issues and has  launched a new pilot performance management system that will address  the recommendations. Finally, the Acting Director of FHFB and the Chief  Human Capital Officer of OFHEO also stated that their respective agencies  will implement the recommendation.
We will send copies of this report to the appropriate congressional  committees; the Chairman, Commodity Futures Trading Commission;  Chairman of the Board and Chief Executive Officer, Farm Credit  Administration; Chairman, Federal Deposit Insurance Corporation;  Chairman, Federal Housing Finance Board; Chairman, Board of Governors  of the Federal Reserve System; Chairman, National Credit Union  Administration; Comptroller of the Currency, Office of the Comptroller of  the Currency; Director, Office of Federal Housing Enterprise Oversight;  Director, Office of Thrift Supervision; Chairman, Securities and Exchange  Commission; and other interested parties. We will make copies available to  others upon request. The report will also be available at no charge on our  Web site at http://www.gao.gov.
If you or your staff have any questions regarding this report, please contact  Orice M. Williams at (202) 512-8678 or williamso@gao.gov or Brenda Farrell  at (202)512-5140 or farrellb@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix XII.
section_title: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to (1) review how the performance- based pay systems of 10 federal financial regulatory agencies are aligned  with six key practices for effective performance management systems, (2)  review actions these 10 agencies have taken to assess and implement  comparability in compensation, and (3) review the extent to which  individuals in selected occupations have moved between or left any of the  agencies. These agencies are the Commodity Futures Trading Commission  (CFTC), the Farm Credit Administration (FCA), the Federal Deposit  Insurance Corporation (FDIC), the Federal Housing Finance Board  (FHFB), the Board of Governors of the Federal Reserve System (the  Federal Reserve Board), the National Credit Union Administration  (NCUA), the Office of the Comptroller of the Currency (OCC), the Office of  Federal Housing Enterprise Oversight (OFHEO), the Office of Thrift  Supervision (OTS), and the Securities and Exchange Commission (SEC).
To address our first objective, we analyzed documents on the regulators’  performance management and pay systems, including guidance, policies,  and procedures on the systems; performance planning and appraisal forms;  union contracts and agreements; training materials; internal evaluations of  systems; and materials used to communicate with employees about the  systems. We also reviewed documents assessing the agencies’ systems,  including results from the 2006 Federal Human Capital Survey conducted  by the Office of Personnel Management (OPM), recent human resources  operations audits performed by OPM, and relevant material from agencies’  offices of inspector general.
We also interviewed key human resources officials at each agency, as well  as officials from other functional areas knowledgeable about each agency’s  performance-based pay practices. In addition, we interviewed employees at  the agencies who served as members of employee groups. At six of the  agencies, the employees we spoke with were union representatives.  Specifically, employees at FDIC, OCC, NCUA, and SEC are represented by  the National Treasury Employees Union, and OTS headquarters staff and  CFTC staff at two regional offices are represented by the American  Federation of Government Employees. Employees at FCA, the Federal  Reserve Board, FHFB, and OFHEO did not have a union; at these agencies  we spoke with employees who served on employee committees or working  groups.
In addition, we examined small, select sets of individual performance plans  for employees, which outline the annual performance expectations for  employees. The selection of these performance plans was not intended to  allow us to make generalizations about all performance plans at the  agencies, and we have used information from the plans for illustrative  purposes only. The performance plans we received were selected by  agency officials based on our request for a mix of occupations and grade  levels at each agency. The smallest number of performance plans we  examined from an agency was one, in a case where the performance plans  for all employees are completely standardized. The largest number of plans  we reviewed from an agency was 32. The individual performance plans we  examined pertained to each agency’s last completed performance appraisal  cycle when we began this review. Table 3 shows the appraisal cycle by  agency.
Finally, we analyzed data from each agency on performance ratings and  performance-based pay awarded to employees as well as aggregate data on  all types of pay increases at each agency not linked to performance ratings.  We used these data to calculate the Spearman rank correlation coefficient  to show the strength of the relationship between employee performance  ratings and the associated performance-based percentage pay increases at each agency. In computing the correlation coefficients, we noted that a  few agencies used a table or procedure that specified particular pay  increases corresponding to specific ratings. Taken in isolation, the use of  the table or procedure would be expected to produce a perfect correlation,  i.e., +1.0. However, other aspects of these agencies’ systems contributed to  the resulting coefficients being less than +1.0. For example, at one agency,  employees with rating scores below a certain threshold were not eligible  for any pay increase. While these employees may have had different rating  scores, none of them received a pay increase, which contributed to a  coefficient that was less than perfect. Other mechanistic factors in these  agencies’ systems, such as adjusting or changing the specified percentage  pay increase based on the grade level or current salary of the employee,  also had the effect of producing a less than perfect coefficient at these  agencies. Given the influence that these procedural but nondiscretionary  variations may have had on the resulting coefficients at these agencies, the  coefficients are primarily useful in their overall demonstration of the  positive linkage between ratings and pay increases at all the agencies, and  the range of coefficients that occurs. The magnitude of the coefficients,  however, is not sufficient for ranking the agencies or making other types of  comparisons.
We also analyzed agency data on performance ratings to determine the  distribution of employee performance ratings at each agency. All data were  provided to us by agency officials, and pertained to the performance  appraisal cycles noted in table 3.
To address our second objective, we first analyzed the content of  compensation comparability provisions in the agencies’ laws and related  legislative histories. We reviewed the most recent pay and benefits surveys  conducted by external compensation consultants for these agencies,  obtained agency pay and benefits data, and analyzed actual pay data from  CPDF. In addition, we interviewed agency officials about their experience  with these surveys and the agencies’ informal interactions to assess pay  comparability and to determine the feasibility of conducting a common  survey.
To report on the pay ranges for non-executive employees in selected  occupations, we analyzed the base pay data provided to us for mission-  critical occupations at nine of the agencies in our review. We selected the  mission critical occupations by: (1) identifying nonclerical and nonblue- collar occupations with 45 or more employees in at least one financial  regulatory agency and (2) vetting this list with the 10 agencies. The  agencies provided us with pay range information as set forth in each  agency’s pay policies as of September 2006 for every job title under each  occupational category, including jobs with no incumbents at the time the  agencies reported the data to us.
To report on the actual average base pay of employees in the selected  occupations, we analyzed actual pay data from CPDF for fiscal year 2006.  Because the CPDF does not include data for all agencies, the Federal  Reserve Board provided us with actual pay data for our analysis of its  employees' actual average pay for fiscal year 2006. To show the financial  regulators’ locality pay percentages and general schedule employees’  locality pay percentages, we selected the cities where four or more  financial regulators had duty stations in fiscal year 2006. We obtained fiscal  year 2006 locality pay percentages information from the financial  regulators and general schedule locality pay percentages from the OPM  Web site. To report on the benefits offered by the agencies, we obtained  and analyzed data from each agency that included a list of benefits the  financial regulators offered as of September 2006 and brief descriptions of  each benefit. We also interviewed agency officials about the factors that  affect the actual average base pay, and how each agency sets its locality  pay percentage.
To address our third objective, we analyzed movement data from CPDF for  fiscal years 1990 to 2006, the most recent available data as of December  2006. For each fiscal year, we identified the number of employees in  selected mission-critical occupations at a financial regulator who (1)  moved to another financial regulator, (2) moved to other federal agencies,  and (3) resigned from federal employment. We identified those who moved  from one financial regulatory agency to another by identifying employees  who had a CPDF separation code for a voluntary transfer and who also had  a CPDF accession code from another financial regulatory agency within 25  days of the transfer out. Also, for each mission-critical occupation, we  examined the number of financial regulator employees who moved to  another financial regulator in each fiscal year and the average number of  employees who moved among the nine financial regulators over the 16  years of our review. Our analysis of supervisors included executives, who  constituted 1 to 2 percent of all supervisors who moved to another financial  regulator. We also included all other agency occupations that were not  classified as “mission-critical occupations” in an “all other” category, which  includes occupations such as specialists in human resources management,  administration, clerical, management and program analysis, blue collar  occupations, financial administration, and paralegal work.
We did not include the Federal Reserve Board in our analysis of the  movement of financial regulator employees because CPDF does not  include data on the Federal Reserve Board. Federal Reserve Board officials  told us that data on employee movement for fiscal years 1990 to 1996 are  not readily accessible. The agency provided us some data for fiscal years  1997 to 2005, including data on employees who transferred, resigned, were  fired, were subject to a reduction in force, or otherwise separated, and the  agency’s total number of employees, but was unable to identify whether  their employees left for another financial regulator. Because the data the  agency provided were not comparable with the CPDF data we used for the  other financial regulators, we did not include the Federal Reserve Board in  our analysis. We also did not include information on the employment of  financial regulatory employees after they left federal employment because  CPDF does not include data on employment outside some agencies and  officials told us that they do not track the employment of their employees  after the employees leave their agencies.
We assessed the reliability of the various sets of data used in our study. To  assess the reliability of the performance and pay increase data provided by  the agencies, we conducted various inspections and electronic testing of  the data for reasonableness and the presence of any obvious or potential  errors in accuracy and completeness. We also reviewed related agency  documentation, interviewed agency officials knowledgeable about the  data, and brought to the attention of these officials any concerns or  discrepancies we found with the data for correction or updating. Based on  the results of these procedures, we believe the data are sufficiently reliable  for use in the analyses presented in this report. We did not independently  verify the pay and benefits data we received from the agencies but consider  these data sufficiently reliable for the illustrative purpose of our review.  Based on our data reliability testing of CPDF data, we believe the CPDF  data are sufficiently reliable for this review. When analyzing employee  movement using CPDF data, we found exceptions from standard personnel  procedures, such as employees with a transfer-out code but with an  accession code in the hiring agency that was not a transfer-in code, or  employee records with transfer-out and transfer-in dates that exceeded 3  calendar days. We also found duplicate separation or accession records for  the same individual on the same day. We deleted one of the duplicate  records. We also found cases where an individual had two separation  actions on the same day but they were different types of actions (e.g., a  transfer out and a resignation). Because we could not determine which  separation action was the correct one, we deleted both records. However,  these types of data problems represented less than one-tenth of 1 percent  of the data used. As a result, we concluded that the data were sufficiently  reliable to show the magnitude of movement between financial regulatory  agencies, to other federal agencies, and to nonfederal employers.
We conducted our work from February 2006 through June 2007 in  accordance with generally accepted government auditing standards.
section_title: Financial Regulators Have Implemented Key Practices in Varying Ways
paragraphs: High-performing organizations have recognized that a critical success  factor in fostering a results-oriented culture is a performance management  system that creates a “line of sight” showing how team, unit, and individual  performance can contribute to overall organizational goals and helping  employees understand the connection between their daily activities and the  organization’s success. Effective performance management systems are  essential for successfully implementing performance-based pay. In the  letter, we addressed important aspects of how 10 financial regulatory  agencies have implemented two key practices: (1) linking pay to  performance and (2) making meaningful distinctions in performance. This  appendix provides detailed information on the financial regulators’  implementation of four additional key practices important for effective  performance management systems, as well as some additional material  pertaining to the linking pay to performance practice covered in the letter.  The four additional practices are:  Align individual performance expectations with organizational goals.
Connect performance expectations to crosscutting goals.
Use competencies to provide a fuller assessment of performance.
Involve employees and stakeholders to gain ownership of performance  management systems.
The 10 financial regulatory agencies have implemented these four key  practices for effective performance management systems in various ways,  reflecting the unique needs of their organizational cultures and structures.
subsections: section_title: Agencies Have Aligned Individual Performance Expectations with Organizational Goals in Different Ways
paragraphs: The 10 federal financial regulatory agencies have implemented the practice  of alignment in a variety of ways. An explicit alignment of daily activities  with broader results is a key feature of effective performance management  systems in high-performing organizations. These organizations use their  performance management systems to improve performance by helping  individuals see the connection between their daily activities and  organizational goals and encouraging individuals to focus on their roles and  responsibilities in helping to achieve these goals. The financial regulators  reinforced alignment of individual performance expectations to  organizational goals in policy and guidance documents for their  performance management systems, used standardized performance  elements or standards for employees in their performance plans, used  customized individual performance expectations that contributed to  organizational goals in individual performance plans, and included the  corresponding organizational goals directly on the individual performance  plan forms.
subsections: section_title: Agencies Have Reinforced Alignment in Policies and Guidance for Performance Management Systems
paragraphs: Several of the financial regulatory agencies, including FDIC, OCC, FHFB,  and OFHEO, have reinforced alignment by including language on linking  individual performance expectations to organizational goals in policy and  guidance materials for the performance management systems. The  following are examples of how selected agencies have reinforced  alignment through policies and guidance.
A key objective of FDIC’s performance management program as stated  in a policy directive is to “establish fair and equitable performance  expectations and goals for individuals that are tied to accomplishing the  organization’s mission and objectives.” The directive further states that  employees at FDIC are assessed against performance criteria, which are  defined as “the major goals, objectives, and/or primary responsibilities  of a position which contribute toward accomplishing overall  organizational goals and objectives” (as found in FDIC’s strategic plan  and annual performance plan).
At OCC, the Policies and Procedures Manual for the performance  management system states that the system is designed to align  employee performance expectations with organizational objectives and  priorities. The manual also explains that the starting point for  identifying individual performance expectations should be unit  objectives established at the executive committee, district, field office,  or division level.
The handbook and guide for FHFB’s and OFHEO’s performance  management systems, respectively, contain several references to  alignment of individual expectations to organizational goals.
section_title: Agencies Have Included Alignment in Standardized Performance Elements for Employees
paragraphs: Several of the financial regulators, including FCA, CFTC, FHFB, OCC and  OTS, have reinforced alignment by including standardized performance  elements or performance standards that link performance expectations to  organizational goals in employees’ performance plans. We have previously  reported that results-oriented performance agreements can be effective  mechanisms to define accountability for specific goals and to align daily  activities with results. Individuals from the agencies with standardized  performance elements in their individual performance plans are assessed  against the same set of performance elements and standards at the end of  the appraisal cycle, as the following examples illustrate.
FCA has included a requirement to contribute to the achievement of  organizational goals in standardized performance elements for all  employees in their individual performance plans. Specifically, FCA has  developed a set of standardized performance elements for each of its  four occupational groups and in some of these elements, requires  individuals to contribute to achieving organizational goals and  objectives. For the senior manager’s occupational group, individuals  have a standardized performance element—“Leadership and Motivation  Skills”—in their individual performance plans that measures the  employees’ ability to accomplish the agency’s goals and objectives. For  the other three occupational groups, individuals have a standardized  performance element—“Teamwork and Interpersonal Skills”—in their  individual performance plans that measures the extent to which the  employee places emphasis on achieving organizational and team goals.  In this way, all employees at FCA are assessed on the extent to which  they contribute to organizational objectives through a standardized  performance element.
While not requiring a standardized performance element related to  alignment in the individual performance plans for all employees, CFTC  has reinforced alignment through the performance standards used for  rating all employees at the end of the performance appraisal cycle.  Specifically, in order for all employees to achieve the highest summary  performance rating, individuals must “achieve element objectives with  extensive impact on organizational mission,” which reinforces the line  of sight between individual performance and organizational results. In  this way, for all employees at CFTC, the individual’s contributions to  organizational goals affect his or her ability to achieve the highest  possible performance rating. Alignment is further reinforced for  managerial employees at CFTC because they are also assessed on the  standardized performance element of “Effective Leadership,” which  requires them to, among other things, accomplish the mission and  organizational goals of the work unit, and communicate organizational  goals to subordinates.
FHFB has reinforced alignment in standardized performance elements  for several occupational groups. Standardized elements for executives,  managers/supervisors, staff attorneys, and professional positions  contain references to aligning with or contributing to organizational  goals.
OCC has applied an alignment focus in a generic performance standard  for four occupational groups at the agency. Executives, managers,  commissioned examiners, and specialists are all rated against a  standardized performance standard that requires them to contribute to  organizational goals in order to get the highest rating level of 4 for a  particular performance element. For example, managers have a  standardized performance element called “leadership skills,” for which  the highest level performance standard includes language on meeting  OCC goals and objectives. Commissioned examiners and specialists  have a standardized performance element in their individual  performance plans called “organizational skills,” with an accompanying  performance standard that requires individuals’ work products to be  closely aligned with OCC’s goals, objectives, and priorities in order to  receive the highest rating level.
OTS has reinforced alignment in a standardized performance element  for managers and senior managers. Under the “Leadership Skills”  standardized performance element, managers are assessed on  accomplishing the agency’s goals and objectives, taking initiative and  incorporating organizational objectives into the organization, and  scheduling work assignments. In addition, senior managers have a  supplemental performance element that holds them responsible for  supporting the achievement of OTS’s strategic plan. An OTS official  stated that the agency is considering expanding the requirement for  alignment as it makes future changes to the performance management  system.
section_title: Agencies Have Strengthened Alignment by Linking Customized Individual Performance Expectations to Organizational Goals
paragraphs: Several financial regulatory agencies, including SEC, OCC, and the Federal  Reserve Board, have reinforced alignment for some individual employees  through customized performance expectations specific to individuals that  link to higher organizational goals. We have reported that high-performing  organizations use their performance management systems to improve  performance by helping individuals see the connection between their daily  activities and organizational goals and encouraging individuals to focus on  their roles and responsibilities to help achieve these goals. One way to  encourage this is to align performance expectations of individual  employees with organizational goals in individual performance plans. We  reviewed a small, select set of individual performance plans from each  agency, and identified the following examples of individual performance  expectations that linked to higher organizational goals.
The performance plan for a senior officer at SEC included the  performance expectation “Plans and Coordinates Inspection Programs  and Ensures that Internal Management Controls Exist and Operate  Effectively” that supports SEC’s strategic goal to “Maximize the Use of  SEC Resources.”
In individual performance plans, OCC has used customized performance  expectations unique to the individual in addition to standardized  performance elements to appraise employees. Specifically, the  performance plan for an information technology (IT) specialist included  a customized expectation to provide timely, professional, and quality IT  support to promote efficient utilization of OCC resources. This  expectation supported the annual OCC objective—“OCC reflects an  efficient and effective organization.”
At the Federal Reserve Board, a performance plan for an economist  contained a performance expectation to produce a weekly monitoring  report on Japan and cover Japanese banking and financial issues, which  contributed to one of the Board’s annual performance objectives in the  area of monetary policy function: “contribute to the development of U.S.  international policies and procedures, in cooperation with the U.S.  Department of the Treasury and other agencies.”
section_title: Agencies Have Strengthened Alignment by Stating Organizational Goals in Individual Performance Plans
paragraphs: FHFB and OCC have reinforced the linkage between the individual’s  performance expectations and organizational goals by including the  corresponding organizational goals directly on the individual performance  plan forms. This helps make clear the line of sight between the employee’s  work and agency goals, as the following examples illustrate.
FHFB has included the agency mission statement and office mission  statement to which an employee is contributing at the top of the first  page of the performance plan form.
In many of the individual performance plans we examined from OCC,  the annual OCC objective to which each customized performance  element contributed was listed on the form, along with performance  measures. According to an official, while OCC’s performance  management policy does not specifically require that the higher  organizational objective to which each customized performance  element contributes be listed on the employee’s performance evaluation  form, managers are advised to include the organizational goals and the  majority of forms do include them. The official stated that it was an  oversight not to include this requirement in the policy, and they plan to  revise the performance evaluation form to include space for the  corresponding organizational objectives. Figure 5 shows an example of  how a customized performance element on an individual performance  plan is linked to an agency goal, clarifying the relationship between  individual and organizational performance.
section_title: Agencies Have Connected Performance Expectations to Crosscutting Goals in Different Ways
paragraphs: The financial regulatory agencies have connected performance  expectations to crosscutting goals in several ways. As public sector  organizations shift their focus of accountability from outputs to results,  they have recognized that the activities needed to achieve those results  often transcend specific organizational boundaries. We reported that key  characteristics of high-performing organizations are collaboration,  interaction, and teamwork across organizational boundaries. High- performing organizations use their performance management systems to  strengthen accountability for results, specifically by placing greater  emphasis on those characteristics fostering the necessary collaboration,  both within and across organizational boundaries, to achieve results.
The specific ways in which the financial regulatory agencies have  connected performance expectations to crosscutting goals vary. In our  review of a small, select set of performance plans from some of the  agencies, we identified some examples of customized individual  performance plans that identified crosscutting goals that would require  collaboration to achieve, as well as either the internal or external  organizations with which the individuals would collaborate to achieve  those goals. All of the agencies recognized the importance of collaboration  by including performance elements for collaboration or teamwork within  and across organizational boundaries in individual performance plans for  at least some employees. Several agencies applied standardized  performance elements related to teamwork or collaboration to employees.
subsections: section_title: Agencies Have Identified Crosscutting Goals and Organizations for Collaboration in Individual Performance Plans
paragraphs: We found examples of performance plans customized to individuals at  OCC, FCA, the Federal Reserve Board, and SEC that identified crosscutting  goals, as well as either the internal or external organizations with which the  individuals would collaborate to achieve these goals. We have reported that  more progress is needed to foster the necessary collaboration both within  and across organizational boundaries to achieve results. One strategy for  fostering collaboration is identifying in individual performance plans  specific programmatic crosscutting goals that would require collaboration  to achieve. Another strategy for fostering collaboration is identifying the  relevant internal or external organizations with which individuals would  collaborate to reinforce a focus across organizational boundaries in  individuals’ performance plans, as the following examples illustrate.
At OCC, an employee had an expectation in his individual performance  plan to enhance the division’s ability to work cooperatively and  effectively together with other operational risk divisions, as well as  enhance coordination with federal and state agencies and outside  banking groups to promote consistency and to advance OCC  viewpoints, while contributing to OCC’s objective for U.S. and  international financial supervisory authorities to cooperate on common  interests.
A senior manager at FCA had a customized expectation in his individual  performance plan to work closely with and coordinate Office of  Examination initiatives with other offices, notably the Office of General  Counsel and Office of Public Affairs, to support the FCA Chairman and  Chief Executive Officer’s three strategic goals, which are (1) improving  communications and relationships with the Farm Credit System,   (2) gaining greater efficiency and effectiveness of the agency, and   (3) promoting the Farm Credit System to become the Premier Financier  of Agriculture and Rural America.
An executive at the Federal Reserve Board had an expectation in his  individual performance plan to undertake expanded discussions with  SEC on information-sharing, cooperation, and coordination with the aim  of strengthening consolidated supervision and achieving consistency in  the implementation of Basel II.
At SEC, a senior officer in the market regulation division had an  expectation in his individual performance plan to advance market  regulation objectives through cooperative efforts by coordinating with  other SEC offices, other U.S. agencies, self-regulatory organizations,  international regulators, and the securities industry.
section_title: Agencies Have Included Performance Elements Related to Collaboration or Teamwork in Individual Performance Plans
paragraphs: All of the financial regulators included performance elements related to  collaboration or teamwork within and across organizational boundaries in  individual performance plans for at least some of their employees.  Performance elements related to collaboration or teamwork in individual  performance plans can help reinforce behaviors and actions that support  crosscutting goals and provide a consistent message to all employees about  how they are expected to achieve results. CFTC, FHFB, NCUA, and the  Federal Reserve Board provide examples of how standardized  performance elements pertaining to teamwork or collaboration have been  applied to employees.
CFTC has established a standardized performance element for all  employees that emphasizes collaboration or teamwork, called  “Professional Behavior,” which requires employees to behave in a  professional and cooperative manner when interacting with coworkers  or the public and willingly initiate and respond to collaborative efforts  with coworkers, among other things.
At FHFB, all employees have performance elements or standards  related to collaboration or teamwork in the standardized performance  plans for their occupational groups. For example, the standardized  performance plan for executives includes a performance element for  “teamwork” that requires executives to collaborate effectively with  associates and promote positive and credible relations with associates,  among other things. The standardized performance plan for  administrative positions also includes a “teamwork” performance  element. For the other three occupational groups, collaboration or  teamwork is captured in a performance standard. For example, the  standardized performance plans for professional positions and  managers/supervisors have a performance element that emphasizes  collaboration or teamwork, called “Professionalism,” which requires the  employee to develop and maintain effective working relationships with  all employees at all levels throughout the agency and external to the  agency and foster effective internal and external communication, among  other things.
NCUA has performance elements related to collaboration or teamwork  in the standardized individual performance plans for some occupational  groups, such as examiners. For example, in the standardized  performance plan for some examiners, there is a performance element  for “customer service and teamwork” that requires the individual to  demonstrate initiative, responsibility, and accountability to both internal  and external customers and work in collaboration with coworkers and  others toward common goals. NCUA officials stated that a  collaboration/teamwork performance element may not be applicable to  all positions. They also said that, to the extent that this is an appropriate  performance element on which an employee should be rated, the agency  has or will include it in that employee’s performance plan.
According to Federal Reserve Board officials, the performance plans for  some occupations at the agency, such as security and administrative  positions, include teamwork as a standard element. Officials also said  that customized performance plans for other occupations typically  include teamwork or collaboration as a competency.
section_title: Agencies Have Used Competencies in Various Ways to Provide a Fuller Assessment of Performance
paragraphs: All 10 of the financial regulatory agencies have used competencies, which  define the skills and supporting behaviors that individuals are expected to  demonstrate to carry out their work effectively. High-performing  organizations use competencies to examine individual contributions to  organizational results. We have reported that core competencies applied  organizationwide can help reinforce behaviors and actions that support the  organization’s mission, goals, and values and can provide a consistent  message about how employees are expected to achieve results. As  previously discussed, while some of the financial regulatory agencies have  included customized performance expectations specific to individuals in  performance plans, we found that all of the agencies have used  competencies. There are some variations in the ways in which the agencies  have structured and applied competencies to evaluate employee  performance. One of these variations concerns whether or not the agency  has assigned different weights to competencies when determining overall  summary ratings for individuals.
subsections: section_title: Agencies Have Applied Competencies Organizationwide
paragraphs: With the exception of the Federal Reserve Board, all of the federal financial  regulatory agencies have developed sets of core competencies that apply to  groups of employees, and assess employee performance using those  competencies as part of the annual performance appraisal process. Using  competencies can help strengthen the line of sight between individual  performance and organizational success by reinforcing performance  expectations that support achievement of the agency’s goals, as the  following examples illustrate.
FCA has a different standardized performance plan for each of four  occupational groups of employees—senior managers, supervisors,  examiners/attorneys/analysts/other specialists (non-supervisory), and  administrative/technicians. Each of the plans includes a standard set of  competencies, called critical elements, which applies to all employees in  that group. Specifically, the performance plan for employees in the  examiners/attorneys/analysts/other specialists group contains the  following competencies—technical and analytical skills; organizational  and project management skills; teamwork and interpersonal skills;  written and oral communication skills; and equal employment  opportunity (EEO), diversity and other agency initiatives. A few  sentences are included on the performance plan form to describe what  each element measures in terms of the employee’s knowledge, skills,  and behavior, as shown in figure 6.
For the July 2005 to June 2006 performance appraisal cycle we reviewed  at CFTC, all employees were assessed on a set of five competencies,  called critical elements. Managerial employees were also assessed on  three additional competencies having to do with leadership, developing  staff, and supporting diversity and EEO programs.
FDIC has 27 different performance plans with corresponding sets of  competencies, called performance criteria, to cover all employees.  According to agency officials, FDIC has learned from experience that  having a performance management system that is based on standardized  sets of competencies has allowed employees’ performance to be  compared more easily to the standards from period to period. In  addition, FDIC’s system bases merit pay increases for individuals at  least partly on corporate contributions (defined as contributions to  corporate, division, or unit-level goals). Officials said that this type of  system really enhances employee line of sight and has helped employees  focus on how their contributions align with the achievement of  organizational goals. In their view, this type of system promotes  alignment and consistency more effectively than a system of individual  contracts between supervisors and their employees.
NCUA has approximately 240 detailed performance plans that are  tailored to specific occupations and grade levels of employees and that  include competencies, which are called elements. All of the employees  to whom a particular performance plan applies are assessed on the  same set of elements and performance standards. Elements for some  employees within the same occupation are universal, but standards can  differ by grade level. For example, the performance plans for examiners  in grades 7, 11, and 12 all include basically the same elements, but some  of the performance standards upon which individuals are to be  appraised for each element vary by grade level.
The Federal Reserve Board differs from the other financial regulatory  agencies in the way it uses competencies. The agency does not have sets  of core competencies that apply to specified groups of employees  across the agency. Instead, divisions have latitude to vary the design and  implementation of the performance plan form and process. According to  agency officials, divisions select competencies that best suit  occupational types and the divisions’ goals, because the Board has  multiple responsibilities dealing with monetary policy and financial  institution regulation. It is possible for employees in the same  occupational group, but in different divisions, to be rated against  different sets of competencies. Agency officials said that they have not  heard complaints from similar occupational groups that they may be  assessed against different competencies. Further, all officers, managers,  and supervisors are rated against the same four management objectives  of communications, staff development, effective planning and  administration of financial resources, and equal employment  opportunity.
section_title: Agencies Have Assigned Weights to Competencies
paragraphs: A few of the agencies, such as OFHEO, FCA, and NCUA, allow differing  weights to be assigned to specific competencies when determining overall  summary performance ratings for individuals. Using weights enables the  organization to place more emphasis on selected competencies that are  deemed to be more important in assessing the overall performance of  individuals in particular positions. Other agencies, including OCC, OTS,  FDIC, CFTC, and FHFB, do not assign differing weights to competencies,  as the following examples illustrate.
At OFHEO, the rating official for each employee assigns a weight to  each of the competencies (called performance elements) included in the  individual’s performance plan, in consultation with the reviewing  official. Each competency must have a minimum weight of at least 5,  with the total weight of all the competencies in an individual  performance plan equaling 100. Any competency with a weight of 20 or  higher is considered to be critical. Each competency element is  weighted and scored (see figure 7), and then the weighted ratings for the  competencies are summed to derive the total summary rating for the  individual.
FCA also permits supervisors to assign different weights to  competencies for individual employees, within the standardized  performance plans, at the beginning of the appraisal period. No  competency can be weighted less than 5 percent or more than 40  percent.
At NCUA, the elements for the various occupations and grade levels  have different weights assigned to them, depending on the priorities and  skills pertaining to the positions. The weights are specified on the  performance plan form for each position.
Some of the financial regulatory agencies, including OCC, OTS, FDIC,  CFTC, and FHFB, do not assign different weights to competencies when  appraising employee performance. Instead, all of the competencies in an  employee’s performance plan are equally considered during the  appraisal. For example, at OCC, all of the competencies (which are  called skill-based performance elements) that are contained in an  individual’s performance plan are considered to be critical, so they  receive equal weight when determining the overall summary rating for  that individual, according to an official.
section_title: Agencies Have Involved Employees and Stakeholders in Various Ways to Gain Ownership of Performance Management Systems
paragraphs: The financial regulatory agencies have used several strategies to involve  employees in their systems, including (1) soliciting or considering input  from employees on developing or refining their performance management  systems, (2) offering employees opportunities to participate in the  performance planning and appraisal process, and (3) ensuring that  employees were adequately trained on the performance management  system when rolling out the system and when changes were made to the  system. Overall, the 10 agencies have employed these strategies differently.  Effective performance management systems depend on individuals’, their  supervisors’, and management’s common understanding, support, and use  of these systems to reinforce the connection between performance  management and organizational results. Employee involvement improves  the quality of the system by providing a front-line perspective and helping  to create organizationwide understanding and ownership.
subsections: section_title: Agencies Have Considered Employee Input for Developing or Refining Performance Management Systems
paragraphs: All of the financial regulatory agencies, in some way, solicited or  considered employee input for developing or refining their performance  management systems by working with unions or employee groups to gather  employee opinions or conducting employee surveys or focus groups. An  important step to ensure the success of a new performance management  system is to consult a wide range of stakeholders and to do so early in the  process. High-performing organizations have found that actively involving  employees and stakeholders, such as unions or other employee groups that  represent employee views, when developing results-oriented performance  management systems helps to improve employees’ confidence and belief in  the fairness of the system and increase their understanding and ownership  of organizational goals and objectives. Feedback obtained from these  sources is also important when creating or refining competencies and  performance standards used in performance plans. However, in order for  employees to gain ownership of the system, employee input must receive  adequate acknowledgement and consideration from management.
Agencies Have Involved Employee Groups in the Performance  Management System Process Unions and employee groups had some role in providing comments or  input into the performance management systems at some of the financial  regulators. Six of the regulators (CFTC, FDIC, NCUA, OCC, OTS, and SEC)  had active union chapters, and four agencies (FCA, Federal Reserve Board,  FHFB, and OFHEO) had employee groups. We have previously reported  that obtaining union cooperation and support through effective labor- management relations can help achieve consensus on planned changes to a  system, avoid misunderstandings, and more expeditiously resolve  problems that occur. The degree to which unions and employee groups  were involved in providing comments or input into the development or  implementation of performance management systems varied from agency  to agency. A few of the agencies with unions have to negotiate over  compensation. Unions at some agencies were involved in participating in  negotiations, entering into formal agreements such as contracts and  memoranda of understanding, and initiating litigation concerning the  development or implementation of performance management systems. At  other regulators, employee groups were invited to comment on aspects of  the performance management system, as the following examples illustrate.
OFHEO has used ad hoc employee working groups to study different  human capital issues and advise management on recommendations for  changes. Specifically, OFHEO established a working group to look at  teamwork and communication in the agency and the group  recommended changes to the individual performance plans relevant to  teamwork and communications. As a result of the group’s  recommendation, OFHEO included additional language for the agency’s  performance plans in the performance elements of teamwork and  communication.
At FDIC, the union participated with management in formal negotiations  regarding the establishment of the agency’s performance management  and pay for performance systems and how the systems would work.  Both parties are bound by the terms of the formal agreements that  resulted.
At NCUA, union representatives together with management issued a  memorandum of understanding in June 2006 detailing how supervisors  are supposed to introduce new performance plans for specified  examiner positions. The agreement set the timing of the introduction of  new performance standards, required training for rating officials,  required supervisors to give progress reviews to their employees on  achievements to date, and required supervisors and employees to  discuss the new standards.
SEC will implement a new compensation and benefits system as a result  of an October 2006 ruling from the Federal Service Impasses Panel  (Panel). The Panel became involved when SEC and union negotiations  over a compensation and benefits agreement reached an impasse. SEC  management told us that they have formed a labor-management working  committee to discuss how to implement the terms of the new  Compensation and Benefits Agreement as provided for under the Panel  ruling.
Agencies Have Directly Engaged Employees in Consultations about  the Performance Management System The financial regulatory agencies involved employees in different ways  when developing their performance management systems. This process  can involve directly engaging individual employees and collecting opinions  from all employees through focus groups, surveys, or other forms of  feedback to develop a successful performance management system.  Further, soliciting employee input is also important when developing or  revising competencies or performance elements and related performance  standards in a performance management system in order to ensure that the  competencies and standards reflect skills and behaviors that are relevant to  employee tasks and responsibilities. While all of the financial regulators  involved employees to some degree, as the following examples illustrate,  NCUA did not consistently solicit input on developing or revising the  competencies and standards.
In 2003-2004, when the Federal Reserve Board sought to revamp its  performance management system, the agency hired an outside  consultant to conduct focus groups with the intent of identifying issues  raised by employees and making recommendations to address any  concerns. Some focus group participants said that the agency’s  recommended rating distribution guidelines might prevent some  employees from achieving a rating in the highest category. Furthermore,  some employees were concerned about possible unfairness in ratings  and wanted to see the distribution of the performance ratings for all  employees published. As a result of this feedback, management began  publishing the agency’s ratings distributions, and added information on  the system’s process to the agency’s internal Web site on the  performance management system.
When developing its first performance-based pay system in 2006, CFTC  solicited employee input through a variety of methods. The agency hired  a contractor to conduct focus groups and to survey employees about  transitioning to a performance-based pay system and the administration  of a performance management system. The contractor also hosted a  Webinar, a Web-based interactive seminar that allows for the submission  of anonymous questions and comments, to present the results of the  employee survey. Additionally, CFTC conducted town hall meetings to  inform employees about development of the system. As a result of  employee feedback, management decided to delay the first phase of  implementation of the system from July 2006 until October 2006 in order  to allow additional time for employees to learn about the system and  make the transition. Union representatives at CFTC (Chicago and New  York) told us that prior to CFTC’s transition to performance-based pay,  the agency’s management communicated frequently with the union and  provided appropriate notice prior to implementing changes.
Through internal surveys, OFHEO received feedback on employee  concerns regarding opportunities for promotion and the frequency of  progress reviews. According to an agency official, feedback from an  employee survey indicated that employees wanted more opportunities  for promotion than the prior six pay-band system allowed. On the basis  of this employee feedback, OFHEO made the decision to switch to 18  pay grades and created career ladders. Further, employees commented  through the survey that they wanted more feedback on their  performance during the year. As a result, OFHEO increased the number  of progress review meetings from two to four per year. An agency  official stated that the Office of Human Resources Management  monitors these meetings to ensure that they have been held.
SEC has analyzed data on SEC responses to OPM’s governmentwide  Federal Human Capital Survey. According to agency officials, SEC has  tracked employee responses to questions on, for example, how well the  agency rewards good performers and deals with poor performers. In  addition, SEC has created a mailbox for anonymous employee  comments and constructive criticism on the performance management  system.
FCA circulated a draft of its proposed performance management system  in 2002, and solicited comments from employees. As a result of  employee comments, FCA revised the descriptions of performance  elements in the performance plans, changed the weight of an element  dealing with equal opportunity employment, eliminated one element,  and provided additional guidance and training. To show how employee  feedback was addressed, FCA management presented a briefing to  employees, which listed some of the employee comments about the  individual performance plans with accompanying responses from  management.
According to an NCUA official present at the time when the agency  originally developed its performance elements and standards, NCUA  conducted job analysis studies for all positions, which involved  employees and supervisors in identifying specific duties, skills, and  competencies needed to accomplish different jobs. In addition to the  studies, she said that NCUA surveyed employees and conducted an  assessment to identify any gaps in the performance elements and  standards. In 2006, when NCUA revised the elements and standards for  some examiner positions, NCUA used a committee consisting of  managers, supervisors, and one employee to develop the new elements  and standards. Union representatives told us they were briefed on the  final version of the elements and standards, but were not asked for  input. NCUA is currently revising individual performance plans for other  positions and the process does not include provisions for soliciting and  incorporating employee input. In comments on the draft of this report,  NCUA officials stated that NCUA sought to solicit input from employees  for certain positions, but that it was not necessary for positions that are  common across the government, since NCUA usually adopts the  competencies established by OPM for those positions.
Some union and employee group representatives we spoke with did not  think that management gave adequate consideration to employee input.  For example, the Employees’ Committee at the Federal Reserve Board,  which provides advice to the Management Division on a variety of issues,  was asked to provide comments during the latest revision of the  performance management system. According to committee members, the  committee submitted a paper containing recommendations in response to  this management request. The committee, however, did not receive a  written response from management acknowledging their recommended  changes. Committee members told us they are now hesitant to submit input  during the current strategic planning process because they are concerned  about the usefulness of putting time and energy into developing  recommendations that may not be considered. According to agency  officials, the responses from the Employees’ Committee and other  employee focus groups held on this topic were summarized by the  consultant hired for the project and the consultant presented the summary  comments to management through the executive oversight committee. In  addition, management officials stated that they met with other committee  members (i.e., the heads of special interest groups) to discuss their input.  The Federal Reserve Board’s Administrative Governor has also held  monthly meetings with randomly selected employees as an opportunity for  employees to voice their concerns about the performance management  program, among other topics.
section_title: Agencies Have Encouraged Employee Participation in Performance Planning and Appraisals
paragraphs: All of the agencies, including FCA and FHFB, required or encouraged  employee participation in developing individual performance plans or  writing self assessments, contribution statements, or reports summarizing  accomplishments at the end of the appraisal cycle. In high-performing  organizations, employees and supervisors share the responsibility for  individual performance management and both should be actively involved  in identifying how individuals can contribute to organizational results and  be held accountable for their contributions. By actively participating,  employees are not just recipients of performance expectations and ratings,  but rather, have their ideas heard and considered in work planning and  assessment decisions. However, employee representatives from some  agencies, such as FDIC, OTS, and OCC, expressed concern that employees  were not actively involved in the performance planning and appraisal  processes even when the agency required or encouraged such  participation.
At FCA, employees could participate in performance planning by  working with their rating officials to identify accomplishments expected  to be achieved during the appraisal period. In addition to participating in  an official mid-year performance review, at the end of the appraisal  cycle, employees and supervisors could meet for a pre-appraisal  interview to discuss the employees’ accomplishments during the  previous year. Additionally, employees could submit an optional self  assessment of their performance. This input was supposed to be  considered when the supervisor evaluated the employee, according to  FCA policy.
Employees at FHFB had several options for participating in developing  their performance plans—working with the supervisor to develop the  plan, providing the supervisor with a draft plan, or commenting on a  plan prepared by the supervisor.
Although FDIC, OTS, and OCC provided some opportunities for employee  participation in the planning and appraisal processes, we heard from union  representatives at these agencies that this participation did not always  occur, as the following examples illustrate.
FDIC’s performance management directive requires that the employee  and the supervisor have a meeting to discuss all performance criteria  included in the employee’s performance plan and any expectations  regarding the quality, quantity or timeliness of work assignments. The  policy also encourages the employee to submit an accomplishment  report and to submit written comments on his or her supervisor’s draft  assessment of the employee’s “Total Performance” before it is  forwarded to higher levels of review within a pay pool. However, union  representatives told us that expectation-setting meetings have not been  consistently conducted; instead, sometimes employees have simply  signed a form to acknowledge receipt of their performance plans.  Additionally, employee comments on the appraisal form have not been  taken into account by supervisors, according to union representatives.  FDIC officials stated that the rating official and employee are required  to meet to discuss expectations at the beginning of the rating period or  whenever there is a change in performance criteria. Officials also noted  that the performance management program is a collaborative process  that relies on communication between a manager and his or her  employees, and that the employee is supposed to seek clarification on  performance criteria or expectations from the supervisor if necessary,  as is explained in the directive.
An employee union representative at OTS maintained that employees  have not been very involved in setting their own performance  expectations; instead, supervisors have informed them about what they  should do at the beginning of the performance appraisal cycle. The  representative told us that supervisors may discuss changing  expectations with employees during the year, but these discussions have  not always occurred. According to an agency official, OTS has  encouraged managers to regularly meet with their employees and  provide a clear picture of what is expected of employees for the year in  terms of their individual roles and responsibilities for the standardized  performance expectations and what will be considered in appraising the  employees’ performance.
Although OCC provided opportunities for employee participation in the  performance planning and appraisal processes, union representatives  told us that this participation did not always occur. At OCC, employees  may participate in developing their individual performance plans and  are supposed to submit accomplishment reports. Further, officials  explained that many employees at OCC have secondary objectives in  their performance plans. Because secondary objectives are customized,  there should be a discussion between the supervisor and the employee.  According to an official, if an employee has customized secondary  objectives included in his or her individual performance plan, the  employee and supervisor are supposed to have a discussion about it.  However, representatives from the union at OCC told us that  performance plans are pretty generic and are distributed to individuals  based on their grade levels. They said that some employees do not sit  with their managers to tailor the plans; instead, employees just sign the  forms to acknowledge receipt of the plans.
section_title: Agencies Have Provided Training on Performance Management Systems
paragraphs: All of the financial regulatory agencies have conducted some form of  training or information dissemination on topics related to performance  management. Asking employees to provide feedback should not be a one- time process, but an ongoing process that occurs through the training of  employees at all levels of the organization to ensure common  understanding of the evaluation, implementation, and results of the  systems. Providing training when changes are made to a performance  management system can help ensure that employees stay connected to the  system and reinforce the importance of connecting individual performance  expectations to organizational goals. At some agencies, such as SEC and  FHFB, training has been mainly directed at supervisors, while at FDIC  training has been given to nonmanagers as well. Formal training for  nonsupervisors at the agencies has typically been directed at new  employees or has occurred when significant changes were being made to a  performance management system. Some agencies have distributed  materials through the agency intranet, memos, emails, or other written  documents, as the following examples illustrate.
SEC has offered several opportunities for supervisors to learn the  mechanics and skills necessary for administering the performance  management system. Specifically, new supervisors have received  general training on supervisory roles and responsibilities, including  performance management. For supervisors, SEC has offered two levels  of classes on managing performance and communicating expectations.  Supervisors have also had the opportunity to receive training on  managing labor relations, which has included discussions of SEC’s  agreement with the union, and the performance-based pay and award  systems. Supervisors could also attend a briefing on performance  management concepts and processes. In addition to offering supervisor  training, SEC informs new employees about the performance  management system during the orientation program. Performance  management information is also available to employees through the  agency’s intranet web site. Finally, supervisors are supposed to brief  new employees on the performance management system at the  beginning of the rating cycle, during discussions of individual  performance standards.
Most employees at FHFB have not received training on performance  management since the late 1990s, and are expected to learn about the  system from their supervisors. However, FHFB offered training for  managers and supervisors in 2004 on the performance management  system and how to conduct performance appraisals.
FDIC has conducted several training sessions and disseminated  information to managers and employees related to its performance  management and pay for performance programs. This has included in- person training sessions, taped sessions made available for viewing on  IPTV, and “question and answer” documents and policy directives  available on the agency intranet. FDIC provided specific training for  nonsupervisors in 2006 when management and union representatives  jointly conducted training sessions on the agency’s new compensation  agreement. Training was intended for non-management employees,  including bargaining unit and non-bargaining unit employees, and was  conducted in a variety of formats. Sessions included discussions of  employees’ roles and responsibilities in the performance management  and pay for performance systems.
section_title: Agencies Generally Have Linked Pay to Performance and Built in Safeguards
paragraphs: As discussed, the 10 financial regulatory agencies linked pay to  performance and built safeguards into their performance management  systems but could make improvements to ensure that poor performers do  not receive pay increases and to improve the communication of  performance standards and transparency of performance results. This  section provides more detailed information on the different ways in which  the agencies translated performance ratings into pay increases and used  different budgeting strategies for performance-based pay. The section also  discusses how the agencies awarded pay increases that considered  performance but were not dependent on ratings. Finally, information is  presented on agency implementation of two additional safeguards: higher- level reviews of performance rating decisions and establishing appeals  processes for performance rating decisions.
subsections: section_title: Agencies Used Differing Methods to Translate Performance Ratings into Pay Increases
paragraphs: For increases that were linked to performance ratings, the financial  regulatory agencies used different methods to translate employee  performance ratings into pay increases. These methods included  establishing ranges for increases, using formulas, and considering current  salaries when making decisions on the amounts of performance-based pay  increases for individuals.
Several agencies established ranges of potential pay increases  corresponding to the various performance rating levels. These systems  gave managers the discretion to determine the exact pay increase amounts  for individuals, within those ranges, as the following examples illustrate.
At OTS, employees who received a rating of 5 (on a 5-level scale)  received between a 5.5 percent and 7.5 percent pay increase, while  employees who received a rating of 3 received between a 1.5 percent  and 3.25 percent pay increase during the appraisal cycle we reviewed.  Employees who received a rating of 1 or 2 did not receive any pay  increase. OTS gave managers the flexibility to determine the specific  pay amount each employee would receive within the range of possible  pay increases corresponding to that performance rating.
OCC established ranges of potential pay increases that corresponded to  different performance rating levels and gave managers the flexibility to  decide on the exact amount of pay increase that each individual would  receive within the range that corresponded to that employee’s rating  level. Each year OCC adopts a merit pay matrix that defines a range of  allowable percentage increases that may be paid for performance rating  levels 3 and 4 (the two highest rating categories). During the appraisal  cycle we reviewed, individuals with a level 3 performance rating were  eligible to receive a merit increase between 2.1 percent and 5.5 percent,  and individuals with a level 4 rating could receive a merit increase  between 5 percent and 9 percent. The rating official recommended the  percentage of merit pay that each employee with a summary rating of 3  or 4 should receive. Agency officials told us that it can be challenging for  managers to determine the pay increase amount for each employee  within those preestablished pay increase ranges. Managers want to  ensure consistency among employees with similar levels of  performance and often consult with other managers or human  resources staff for advice when making these pay increase decisions.  Employee representatives expressed some concern about the  overlapping ranges for pay increases, and a representative said that  employees are unclear about what performance behaviors are needed to  achieve merit increases.
Other agencies used formulas for determining the amounts of pay increases  linked to performance ratings to be awarded, as the following example  illustrates.
NCUA used a pay matrix tied to employees’ performance rating scores  (which could range from 0 to 300) to calculate the pay increase  percentages. All employees in the same pay pool that received the same  performance rating would receive the same pay increase percentage.  Specifically, an employee who received a performance rating score of  234 fell within the “fully successful” performance rating range and  received a pay increase of 3.066 percent. Another employee who  received a performance rating score of 235 fell within the “highly  successful” performance rating range and received a pay increase of  3.076 percent. Employees who received a performance rating score  below 165 fell within the “unsatisfactory” or “minimally successful”  performance rating ranges and did not receive any pay increases.
Some agencies considered employees’ current salaries when deciding on  the amounts for pay increases linked to performance ratings, as the  following example illustrates.
At FCA, the percentage pay increase an employee received depended on  where the employee’s current salary fell within the pay band. FCA used  a merit matrix to calculate merit pay increases. The matrix considered  an employee’s existing salary position within the relevant pay band  (with position defined in terms of one of five possible quintiles), as well  as the employee’s performance rating, and determined the percentage  pay increase corresponding to those factors. For example, for the  performance appraisal cycle we reviewed at FCA, the percentage  increase in pay that an employee who received a fully successful  performance rating could receive ranged from 3.5 percent (for an  individual whose salary was in the bottom quintile of the pay band) to  2.0 percent (for an individual whose salary was in the top quintile of the  pay band). For employees with the same performance rating, an  employee whose salary was considered to be below market rate at the  bottom of the pay band would receive a larger percentage pay increase  than an employee whose salary was considered to be at or above market  rate. FCA provided pay increases only to employees who performed  above a minimally successful rating level.
At many of the agencies, as an employee’s salary approached the top of the  pay range for a position, increases linked to performance ratings could be  received as a combination of permanent salary increase and a one-time,  lump sum cash payment, as the following example illustrates.
At FHFB, for an employee in a position with a pay range of $70,000– $90,000, if the individual’s salary was near the top of the pay range, he or  she would receive a performance-based merit increase to take his or her  salary to the top of the salary range and then receive a lump sum  payment.
Across the various methods used to translate performance ratings into pay  increases, the expectation would be that larger pay increases are  associated with higher performance ratings. As a means of providing a  quantified descriptor of how strongly increases in ratings were associated  with increases in pay linked to those ratings at each of the agencies, we  computed a Spearman rank correlation coefficient between employees’  performance ratings and the percentage increases in pay that were linked  to performance ratings. Although the correlation coefficients for the eight  agencies varied from +0.63 and +0.94, they all demonstrated a strong positive association between higher performance ratings and higher  ratings-linked pay increases (expressed as a percentage increase in  salary).
While the correlation coefficients provide some additional perspective on  the linkage between performance ratings and pay increases at the financial  regulatory agencies, they should be viewed as a rough gauge of the overall  strength of the relationship across the agencies and are not sufficient for  ranking or making other comparisons between agencies. In reviewing the  coefficients, we noted that agencies with some of the lowest correlations  were using a four-level rating system that produced rather constrained  ratings distributions. In one instance, for example, employees rated at the  two lowest performance levels (called levels 1 and 2) were not eligible for  pay increases, and over two-thirds of all employees received a level 3  rating. Both the base pay increases and bonus amounts that could be  awarded for level 3 performance overlapped with those for level 4 (the  highest level), such that some employees rated at level 3 realized a  percentage increase in pay that was twice the amount obtained by other  level-3-rated employees, as well as even some level-4-rated employees.
section_title: Agencies Used Different Budgeting Strategies for Performance-Based Pay
paragraphs: The federal financial agencies also varied in their strategies to budget for  pay increases directly linked to performance ratings. Many of the agencies  set aside funds each year for performance-based pay increases. At some  agencies, these funds were treated as an agencywide funding pool or pools  for performance-based pay increases, as the following examples illustrate.
According to agency officials, NCUA established two agencywide merit  funding pools for different employee grade-level groups because higher  graded employees usually received higher ratings and consequently,  higher merit pay increases. Officials stated that the establishment of two  merit funding pools was more advantageous to lower graded employees  and increased the amount of funds available for their merit pay.
SEC established one pool of funds for performance bonuses and quality  step increases available for senior officers, and another pool for all  other employees.
At some agencies the performance-based pay increases budget was divided  into separate pay pools by suborganizational unit, and the responsibility for  distributing merit pay increases was delegated to management at the  subunit level, as the following examples illustrate.
For the “Pay for Performance” program at FDIC that covers bargaining  unit and nonbargaining unit employees, the agency established pay  pools at the division level (and at the regional level for the large Division  of Supervision and Consumer Protection), and allocated funds for  performance-based pay increases to the pools. Funds were allocated  through pay pools to each division and office, with subsequent  separations of each division or office into separate populations for  bargaining unit and nonbargaining unit employees. (Corporate  managers and executives at FDIC are covered by a separate pay-at-risk  compensation system.)
FHFB provided each office with a pay pool for performance-based  annual pay increases. The merit increase pool amounts were determined  based on the approved governmentwide general increase plus 2.5  percent of the total base salaries for all employees in the office. An  FHFB official stated that the reason each office was provided with a  pool of funds was to avoid comparing individuals with different  functions and responsibilities to each other, and this official believed  that FHFB had greater control when pay decisions were made at the  office level. For example, an office director could decide to assess all his  staff at the outstanding level, but less performance-based pay would be  available for each office employee. Office directors were responsible for  determining the sum of all merit increases and lump sum payments for  their offices, while not exceeding their offices’ merit increase pool  allocations.
section_title: Agencies Provided Other Increases That Considered Performance
paragraphs: In addition to providing ratings-based pay increases, the financial  regulatory agencies awarded pay increases that considered individual  performance in some way without being directly linked to employees’  performance ratings. The following are additional examples of these types  of pay increases at the agencies to supplement the material presented in  the body of the report.
The Federal Reserve Board offered a cash awards program, which  accounted for about 2.5 percent of the total agency salary budget, to  reward employees who sustained exceptional performance or made  significant contributions to successful projects, according to officials.  According to the Federal Reserve Board’s criteria for this awards  program, cash awards could be given to employees who initiated,  recommended, or accomplished actions that achieved important  Federal Reserve Board goals, realized significant cost reductions, or  improved the productivity or quality of Board services. These awards  could be made in any amount up to a maximum of 10 percent of an  employee’s base pay within the same performance cycle. The 10 percent  maximum did not apply to variable pay awards, which are given instead  of cash awards to economists, attorneys, or Federal Reserve Board  officers.
For some regulators, these types of pay increases were sizeable. For  example, at OCC, approximately 10 percent of employees were awarded  a special increase during the completed appraisal cycle we reviewed.  The awards represented a 5 percent raise for those individuals.  According to OCC policy, special increases are to be awarded to  recognize increased value an employee contributes to his or her job by  applying desirable skills over a significant period of time or by assuming  higher-level responsibilities within his or her pay band. OCC also  provided some pay increases for competitive and noncompetitive  promotions during the appraisal cycle we reviewed. Interestingly, of the  eight financial regulators that participated in OPM’s 2006 Federal  Human Capital Survey, OCC had the largest percentage of employees  agreeing with the view that awards in their work units depended on how  well employees performed their jobs. At OCC, 55.7 percent of employees  agreed with this view. Governmentwide the corresponding figure was  39.8 percent of employees. Two other agencies, FCA and NCUA, also  had slightly over 50 percent of their employees agreeing with this  statement.
Results from the 2006 OPM Federal Human Capital Survey suggest that the  financial regulatory agencies have done relatively better than many  agencies governmentwide in linking pay to performance. All eight of the  financial regulators that participated in the 2006 survey had percentages of  positive responses from their employees that were about the same as or  better than the governmentwide percentage of 21.7 positive responses to  an item asking employees whether they agreed or disagreed with the  statement that pay raises depended on how well employees performed  their jobs at their agencies. The percentage of employees giving a positive  response to this item was at least twice as high as the governmentwide  value for a majority of the eight agencies participating in the survey.
section_title: Agencies Built in Safeguards
paragraphs: While the financial regulatory agencies built safeguards into their  performance management systems, the agencies established and  communicated standards for differentiating among performance rating  categories and criteria for performance-based pay decisions to varying  degrees. The agencies also built in additional safeguards of establishing  higher-level reviews of performance rating decisions by either higher-level  officials or oversight groups, and all have established appeals processes for  employees to request reconsiderations of performance rating decisions. It  is important for agencies to have modern, effective, credible, and, as  appropriate, validated performance management systems in place with  adequate safeguards to ensure fairness and prevent politicization and  abuse. We have reported that a common concern that employees express  about any performance-based pay system is whether supervisors have the  ability and willingness to assess employees’ performance fairly. Using  safeguards can help to allay these concerns and build a fair and credible  system.
Agencies Implemented Higher-Level Reviews of Performance Rating  Decisions Although they have used different approaches, all of the federal financial  regulatory agencies have provided higher-level reviews of individual  performance rating decisions to help ensure that performance standards  were consistently and equitably applied across the agency. All of the  agencies have established at least one level of review of employees’  performance ratings to help ensure that performance standards were  applied appropriately. At some agencies, this oversight process has  involved a second-line supervisor or higher-level official reviewing the  employee’s performance rating to ensure that the rating was appropriate  and consistent with any narrative describing the employee’s performance.  Some agencies also have offices outside of the employee’s team/office,  such as the Human Capital Office, review employee performance ratings to  ensure that rating decisions for groups of employees (agencywide, or by  division or region) were fair and equitable, as the following examples  illustrate.
OCC officials indicated that at the end of every appraisal cycle, they  have evaluated the results of the performance management and pay  system by looking, for example, at the differentiation in ratings and pay  decisions and how the pay ranges were used. The human resources  officials have discussed these results with managers to show them how  their employees’ performance ratings and pay decisions influenced  OCC’s overall results. For example, OCC introduced merit bonuses for  the first time in the 2005 performance appraisal cycle. Upon reviewing  the results of the merit bonus decisions, OCC officials found that the  percentage of employees in each organizational unit that received a  merit bonus varied widely among the units—ranging from a high of over  80 percent of employees receiving a bonus in one unit to 30 percent in  another unit. As a result, according to agency officials, OCC decided to  recommend a minimum amount for bonuses and restrict the percentage  of staff who can receive a bonus to 50 percent within each  organizational unit. Agency officials also indicated that they have  identified areas of future training on the system based on the results of  reviews and subsequent discussions with managers, in order to improve  implementation of the system.
At NCUA, an employee’s performance rating was completed and signed  by the rating official, and then a reviewing official (an office or regional  director) reviewed the employee’s performance rating to ensure that the  rating was supported. Reviewers also look for consistency throughout  the rating process. For example, an Associate Regional Director will  look across all examiners’ ratings in the region for consistency.
FHFB provided a supervisory review of performance ratings to help  ensure that an employee’s recommended rating was justified as well as  consistent with other ratings in the employee’s work group. Once the  rating official (usually a first-line supervisor) recommended an initial  summary rating, the rating official would forward the rating to a second- line supervisory reviewer (usually the division director or deputy  director), called a reviewing official. According to FHFB officials, the  reviewing official was usually knowledgeable about the employee’s  performance and could discuss the rating narrative and final rating  decision with the rating official before the rating was shared with the  employee. In addition, the reviewing official checked whether  performance rating narratives supported individual performance  elements, summary ratings were properly calculated and appropriately  signed, and there was consistency of ratings across the work group.  FHFB employee representatives with whom we spoke stated a belief  that the rating review process was effective and that supervisors did not  give ratings unless they first reviewed their decisions with management.  Employee representatives noted that there is a commitment in the  agency to be fair and equitable in assigning ratings.
FCA provided multiple levels of reviews of ratings to ensure the  appropriateness of rating scores and consistency in applying  performance standards across FCA offices. After the rating official  completed an initial rating, a second-line reviewer was assigned to  review each employee’s rating against the standards. Before final ratings  were issued, FCA’s Office of Management Services provided a check to  ensure that offices were appropriately and consistently applying  performance standards and to look for any significant outliers.  Employee performance assessments rated as outstanding and as less  than fully successful would be reviewed to determine whether rating  scores matched the narrative discussions. Any potential issues  identified would be brought to the attention of the rating official for  discussion and resolution. Management officials told us that the Chief  Human Capital Officer would meet with division management to discuss  whether the rating criteria were appropriately applied and then division  managers would determine whether to change any performance ratings.  In addition, the Office of Management Services performed a post-rating  distribution audit to review final rating distributions to help inform  future rating practices.
Establish Appeals Processes for Performance Rating Decisions As mentioned previously, all of the federal financial regulatory agencies  have established appeals processes for employees to request  reconsiderations of performance rating decisions to help ensure accuracy  and fairness in the process. Providing mechanisms for employees to  dispute rating decisions when they believe decisions are unfair can help  employees gain more trust in the system, as the following examples  illustrate.
Employees at CFTC could ask for an appeal of their overall rating  through the agency’s reconsideration process. An employee could first  appeal his or her rating to the manager who reviewed the rating (called  the reviewing official) by defending his or her position orally or in  writing. This Reviewing Official then considered the employee’s  justification as well as the original rater’s opinion and provided a final  decision on the matter. According to CFTC officials, employees  sometimes wanted to change the wording in their performance  evaluations.
OTS has defined a grievance policy for employees who are dissatisfied  with their performance ratings. Employees covered by the bargaining  unit agreement may file a grievance under the negotiated agreement  while employees not covered by the agreement may request a grievance  (within 10 days of receiving their ratings) under the agency’s  administrative grievance procedures. OTS’ union representative  reported that in the past, management and union representatives had  resolved many cases of rating disputes prior to employees filing formal  grievances.
The Federal Reserve Board has established an appeals process so that  an employee can appeal the fairness of an overall rating decision, the  rating on an individual element, or any adverse comments appearing on  the performance assessment form. Employee representatives we spoke  with said that they believe that employees understand the appeals  process, but thought that more employees could take advantage of this  opportunity. An employee may first appeal his or her performance rating  to a division director, who in turn will notify the appropriate supervisor  who submitted the rating. Then, the division director will determine  whether the rating is appropriate based upon a review of documentation  provided by both the employee and supervisor. If the employee is not  satisfied with the first-level appeal decision, the employee may make a  second-level appeal to the Associate Director of Human Resources and  specify areas of disagreement with the performance assessment. The  Associate Director for the second-level appeal will then determine  whether the division has reasonably followed procedures and whether  performance assessment guidelines were applied consistently to other  employees reporting to the same supervisor. This supporting  documentation submitted by the division will be shared with the  employee, except in cases where doing so infringes on the  confidentiality of other employees. As a result, first- or second- level  appeal decisions may result in changes to an overall rating, changes to  the rating of an individual element, or changes in the language in the  employee’s performance assessment.
OFHEO has established a three-level appeals process to ensure that  employees can dispute rating decisions when they disagree with rating  decisions. Employees can appeal the overall performance rating or  individual performance elements within the rating. For the first-level  appeal, the employee can submit a request with supporting  documentation to the performance rating official for reconsideration. If  an appeal is not resolved at the first level, the employee can request that  the second-level supervisor review the performance rating and  supporting documentation. Finally, the employee can request a third- level appeal by the third-level supervisor, if necessary.
section_title: Actions Taken by Financial Regulators to Seek to Maintain Pay and Benefits Comparability and Pay and Benefits Data
paragraphs: The federal financial regulatory agencies have made an effort to meet the  comparability requirements as required by the Financial Institutions  Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and subsequent  legislation. However, we found that factors such as funding constraints,  when the agency was granted flexibility under Title V of the U.S. Code, the  needs or preferences of their respective workforces, and each agency’s pay  and benefits policies can result in some variation in their pay and benefits.  They have also taken steps to explore a common survey that would enable  them to more efficiently collect information for pay and benefit  comparability purposes.
subsections: section_title: Financial Regulators Have Conducted Individual Pay and Benefits Comparability Surveys and Regularly Consult with Each Other, but Noted Some Inefficiencies in the Process
paragraphs: To seek to maintain pay and benefits comparability, the majority of the 10  federal financial regulators have hired external compensation consultants  to conduct individual formal pay and benefits comparability surveys that  have included the other financial regulators. As shown in table 5, 7 of the 10  financial regulators conducted pay and benefits comparability surveys. Of  the 7, 5 agencies also have included benefits in their formal surveys.  According to agency officials, because some of the 10 agencies perceive the  private sector as their main competitor for skilled employees, they have  included private-sector entities in their pay and benefits surveys or have  obtained additional private-sector data through the Bureau of Labor  Statistics and private vendors to complement their pay and benefits  surveys.
The remaining three regulators (CFTC, OTS, and SEC) have participated in  the pay and benefits surveys of other agencies, and officials from these  agencies said that they have used the results of these surveys, but have not  conducted their own. For example, an SEC official told us that his agency  often uses FDIC’s data because, like SEC, FDIC has a large number of  compliance examiners and must negotiate pay and benefits with the same  union as SEC. In 2002 and 2003, CFTC has also hired consultants to review  existing surveys from FDIC and OCC as well as from information gathered  from other regulators.
The agencies hired external compensation consultants to conduct the  surveys because, according to officials from FCA and FDIC, these  consultants provide an objective view of their agencies’ pay and benefits.  And, because they have often worked with other FIRREA agencies, the  consultants can provide insights and perspectives based on information  from other agencies. For pay comparability surveys, external  compensation consultants compare base pay ranges for a given  occupation, locality pay percentages and, to a lesser extent, annual bonus  and other cash award policies. To compare pay across agencies,  consultants send questionnaires on behalf of the sponsoring agency and  ask participating agencies to match the jobs based on the job descriptions  provided. The job descriptions usually contain information on duties, scope  of responsibilities, and educational requirements. External compensation  consultants also have used various methods to assess the comparability of  benefits. For example, the consultant for FDIC did a side-by-side  comparison of benefits offered at other agencies, and also calculated the  total cost of benefits per employee.
In addition to conducting comparability surveys, agency officials told us  that human capital officials at the 10 regulators have formed an interagency  Financial Regulatory Agency Group. The members regularly consult with  each other on pay and benefits issues, and as they prepare their budgets for  the coming year, they meet to exchange information on potential and actual  changes to pay and benefits. For example, the group has exchanged  information on updates in merit pay ranges, bonuses, salary pay caps, and  benefits such as flexible work schedules. Agency officials also have taken  turns to update a spreadsheet that lists the pay ranges and benefits for all  10 financial regulators, a key document the agencies use to compare pay  and especially benefits informally across agencies.
However, in consulting with each other to meet comparability  requirements, agency officials told us that because many of the financial  regulators conduct comparability surveys, their staffs have had to respond  to numerous and often overlapping inquiries, which can be burdensome  and inefficient. This is especially the case for smaller agencies, such as FCA  and FHFB, which tend to have smaller human capital (personnel)  departments than larger agencies that may have pay and benefits  specialists who can handle comparability issues full time, including filling  out and processing various comparability surveys. According to officials  from a few regulators, partly as a result of the substantial investment of  time and resources, some agencies have not been timely or forthcoming in  sharing their pay and benefits information.
section_title: Regulators Are Exploring the Feasibility of a Common Survey
paragraphs: According to several agency officials, in response to renewed interest of  upper management from several agencies in consolidating pay and benefits  surveys, the regulators are studying the feasibility of such a method. In  December 2006, the regulators formed a subcommittee within the Financial  Regulatory Agency Group to study the feasibility of a common survey.  Agency officials are exploring whether consolidating the various  comparability surveys into a common survey will improve the process for  job matching and result in more efficient use of resources. They also told  us that the subcommittee also has discussed the feasibility of establishing a  Web-based data system to make the most current pay and benefits  information available to participating agencies. The subcommittee is  working on the details of allocating costs of a common survey among the  agencies, but has suggested that costs might be prorated based on the size  of each regulatory agency. As of March 2007, agency officials had not yet  received cost figures from potential consultants.
Agency officials who attended the first subcommittee meeting told us that  implementation of a common survey would require collaboration and  agreement on a number of matters, such as   choice of external compensation consultant to conduct the common  survey, since different consultants have different approaches to carry  out the common survey;  group of jobs to be benchmarked for the common survey and best  approach for job matching, as some jobs are unique to certain agencies;  timing and frequency of the common survey to meet everyone’s needs  since agencies determine pay and benefits at different times of the year  and would need the updated information when the need arises;   number and types of organizations to include in the common survey  because while all agencies would want to include the financial  regulators, some may need information from certain private-sector  entities; and,   cost of the common survey may be substantial, which according to some  agencies, is a potential concern.
By forming the subcommittee to explore issues associated with developing  a common survey, agency officials have adopted some of the practices that  we identified that would enhance and sustain collaborative efforts. These  practices include defining and articulating a common outcome,  establishing means to operate across agency boundaries, and leveraging  resources.
Agency officials who are members of the subcommittee told us that the  officials have sent a formal request for information to several consultant  candidates. The request inquired about the consultants’ ability to plan and  execute a common survey that will provide customizable reports for each  agency and also create a secure, centralized data source on pay and  benefits. In addition, agency officials asked how the consultants would  approach job matching, a complicated task. For example, officials from  FDIC, OFHEO, and SEC told us that the use of different pay plans and  grades among agencies and the location of field offices in cities with  different employment market conditions contributed to the difficulty in  matching jobs across regulators. In addition, some agency officials said  that it is difficult to match jobs because agencies have different job  requirements that may differ even when a job title is the same. The  subcommittee received responses from various consultants and as of  March 2007 was in the process of contacting the consultants to gather more  details and to discuss the options available to them.
section_title: Most Regulators Used Benchmarks Developed from Surveys and Other Data to Assess Comparability and Make Adjustments to Pay and Benefits
paragraphs: In the absence of a legislative definition, agency officials told us that  agencies have used various benchmarks, as shown in table 6, to assess pay  and benefits comparability. For example, FDIC has sought to set its total  pay ranges (base pay plus locality pay) for specific occupations and grade  levels within 10 percent of the average of FIRREA agencies, a benchmark  that pay and benefits consultants have used in their comparability surveys.  FCA uses benchmarks, including average market rate paid by other  financial regulators. CFTC uses average payroll and salary structure  relative to other regulators. FHFB, NCUA, OTS, and SEC told us that they  have not used specific benchmarks, and OTS uses informal benchmarks as  needed.
Agency officials told us that all agencies, including the three agencies that  have not conducted formal benefits surveys, have assessed their benefits  comparability by comparing individual benefit items as well as agency  contributions to specific benefits. They added that most agencies have  used the interagency group spreadsheet that lists all the benefits and  agency contributions offered.
According to agency officials, the financial regulators have used  information from the pay and benefits comparability surveys and  discussions among the agencies in their efforts to seek to maintain  comparability. Table 7 provides some recent examples of these efforts.
section_title: Agency Pay and Benefits Policies and Several Other Factors Contribute to Variations in Pay and Benefits
paragraphs: Although the financial regulators have adjusted their pay and benefits to  seek to maintain comparability, several factors influence compensation  decisions that lead to some variations in pay ranges and benefit packages.  As shown in figure 3 in the report, with the exception of the Federal  Reserve Board and OFHEO, the financial regulators’ total pay ranges  consist of base pay and locality pay percentages that are calculated based  on the employees’ duty station. The Federal Reserve Board and OFHEO do  not have separate locality pay percentages because Washington, D.C., is  their only duty station. Figure 3 also shows that, for examiners, FDIC and  NCUA pay ranges generally have lower minimum base pay than other  agencies, and FDIC and OCC have higher maximum base pay for  examiners. In addition, for economists, CFTC and FDIC pay ranges have lower minimum base pay than other agencies, and the CFTC and OCC pay  ranges have higher maximum base pay.
Actual average base pay figures that we obtained from the Central  Personnel Data File and from the Federal Reserve Board also vary among  the 10 agencies in relation to the agencies’ respective base pay ranges, as  shown in figure 3 in the report. For example, the actual average base pay  for examiners at OCC ($92,371) is 52 percent of the maximum pay range of  $177,600. However, actual average base pay as a percentage of maximum  pay can vary considerably, as in the case of SEC attorneys. Their actual  average base pay ($124,379) is 98 percent of the maximum pay range of  $126,987.
According to agency officials, two factors affect where actual average base  pay falls within an agency’s pay range. One is the distribution of the length  of service among employees. For example, the actual average base pay for  agencies with a higher proportion of long-tenured employees would be  closer to the maximum of its pay range. Conversely, actual average base  pay for agencies with a higher proportion of new hires would fall closer to  the minimum of the pay scale. An OCC official told us that despite the fact  that OCC also has a large number of experienced examiners, the actual  average pay for OCC examiners may seem low compared to other agencies  because OCC has hired a large number of examiners during the last 2 years.  Officials from several federal regulators also told us that they rarely hire at  the lower grade level for some occupations. For example, FHFB tends to  hire mid-level employees because its relatively small office cannot afford a  long training period for new hires.
As shown in table 2 in the report, locality pay percentages vary among  agencies for the same duty station. Table 8 shows the methods that  agencies are currently using to determine their respective locality pay  percentages and adjustments.
The benefits that the 10 financial regulators offered also varied. Although  all of the agencies offer standard federal government benefits, there are  variations in the extent of agency contributions and types of additional  benefits these agencies offer. For example, all financial regulators offer the  Federal Employees Health Benefits program, but agency contributions  differ. Some agencies pay for a percentage of the health premium (e.g. 70  percent at FCA and 90 percent at OFHEO). CFTC contributes 100 percent  for reservists called to active duty. The following are selected examples of  the additional benefits that some financial regulators offer as of September  2006 unless noted otherwise:   Five of the 10 regulators— FDIC, FHFB, the Federal Reserve Board,  OCC, and OTS—offer their employees 401(k) retirement savings plans  with varying employer contributions. In addition, all agencies except the  Federal Reserve Board offer the federal Thrift Savings Plan.
The Federal Reserve Board and OCC offer domestic partner benefits for  some types of plans.
FCA and SEC offer child care subsidies, and FDIC and OTS offer on-site  day care.
FCA, FDIC, FHFB, and OCC reimburse employee expenses related to  items such as fitness, recreation, and adoption in their wellness  accounts. Amounts differ from $250 per year at FDIC to $700 per year at  FHFB.
According to agency officials, a number of factors have influenced their  pay and benefits policies and could have contributed to the variations in  their pay ranges and benefits. For example, the length of time an agency  has been under the comparability requirements and related compensation  flexibility provisions affected compensation. CFTC and SEC officials told  us that because their agencies received pay and benefits flexibilities and  were put under a comparability requirement much later (in 2002) than the  six FIRREA agencies (in 1989), CFTC and SEC have taken an incremental  approach to slowly increase their pay and benefits to close the gap with the  other financial regulators. According to a CFTC official, this would allow  time for employee input and acceptance while building agency capacity to  manage the authority. Budgetary constraints represent another factor.  OFHEO officials told us that OFHEO did not implement a new 401(k)  retirement savings plan recommended by its external compensation  consultant, Watson Wyatt, in its 2005 comparability survey because OFHEO  is working to control the growth of its personnel expenses and because  budget limitations resulting from being part of the appropriations process  has caused OFHEO to curtail new benefits programs. Furthermore, agency  officials said that an agency has to consider the particular needs and  preferences of the agency’s workforce as well as ways to attract and retain  its workforce. For example, CFTC added a fully paid dental benefit as a  result of an online vote by employees on preferred benefits options. FDIC  officials indicated that its employees greatly value the matching  contribution FDIC provides on its 401(k) plan, and found that the matching  contribution is also an effective retention tool. Similarly, OCC added a  401(k) retirement savings plan in order to attract and retain employees.  According to an SEC official, SEC uses a student loan repayment benefit  because the benefit helps to attract and retain employees, many of whom  are recent law school graduates. Agency officials emphasized that it was  not their goal to have identical pay and benefits packages; rather, they  considered pay and benefits as a total package when seeking to maintain  pay and benefits comparability and when setting pay and benefits policies  aimed at recruiting and retaining employees. See table 9 for more detailed  information on the benefits that the 10 financial regulators offer.
The following table lists selected benefits identified by 10 financial  regulators as of September 2006, unless otherwise noted in the table. We  included the following categories of benefits: insurance, pre-tax benefits,  child care, leave, travel and relocation, educational and professional  expenses, retirement, work/life benefits, and other benefits and payments.
section_title: Analysis of Movement Data of Financial Regulator Employees from Fiscal Years 1990 through 2006
paragraphs: We reviewed the movement of financial regulator employees from fiscal  year 1990 through 2006 using data from the Central Personnel Data File  (CPDF). We found that the movement of employees among the financial  regulators was very low and presented no discernible trend, but that 86  percent (13,433 of the 15,627) of employees leaving the regulators  voluntarily (i.e., moving or resigning) resigned from the federal  government. Our analysis did not include the Federal Reserve Board of  Governors because CPDF does not contain data from the Federal Reserve  Board. (For more detail on our methodology, see app. I.) This appendix  includes additional data for fiscal years 1990 through 2006 on the average  number of these employees moving among the 9 financial regulators; the  movement of employees among 9 of the 10 financial regulatory agencies by  occupation; and employment by occupation and employee movement  agency snapshots.
Figure 8 shows the average number of employees in mission-critical and  other occupations moving among the 9 financial regulators for which we  have data from fiscal year 1990 through fiscal year 2006. On average, a total  of 919 employees per year moved or resigned. Movement ranged from an  average of less than 1 for investigators to an average of over 11 for  examiners.
Table 10 provides the actual number of financial regulator employees for  whom we had data, by mission-critical and other occupations, who moved  to another financial regulator from fiscal year 1990 through 2006.
Tables 11 through 19 provide employment by occupation and movement  data for 9 of the 10 agencies from fiscal year 1990 through 2006.
section_title: Comments from the U.S. Commodity Futures Trading Commission
section_title: Comments from the Board of Governors of the Federal Reserve System
section_title: Comments from the Federal Housing Finance Board
section_title: Comments from the National Credit Union Administration
section_title: Comments from the Office of Federal Housing Enterprise Oversight
section_title: Comments from the Securities and Exchange Commission
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Belva Martin and Karen Tremba,  Assistant Directors; Thomas Beall; Amy Friedlander; Robert Goldenkoff;  Eugene Gray; Simin Ho; Anne Inserra; Janice Latimer; Donna Miller; Marc  Molino; Jennifer Neer; Barbara Roesmann; Lou Smith; Tonya Walton;  Lindsay Welter; Gregory Wilmoth; and Robert Yetvin made major  contributions.