Human Capital: Continued Opportunities Exist for FDA and OPM to Improve Oversight of Recruitment, Relocation, and Retention Incentives
Published: 2010-01-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Food and Drug Administration (FDA) within the Department of Health and Human Services (HHS) has faced challenges in obtaining the workforce needed to support its responsibilities and similar to other agencies, has paid selected employees recruitment, relocation, and retention (3R) incentives. This report examines (1) the extent to which FDA is linking its use of 3R incentives to its strategic human capital approaches to address its current and emerging challenges; (2) the extent to which FDA's 3R incentives were awarded consistent with regulations and the internal controls FDA has in place to ensure proper disbursement of 3R incentives; and (3) the steps the Office of Personnel Management (OPM) has taken to help ensure that agencies have effective oversight of their 3R incentive programs and how HHS is providing oversight. GAO analyzed a stratified sample of FDA's 3R incentives files, 3R data provided by HHS, HHS's 3R policy and FDA's guidance, and interviewed HHS, FDA, and OPM senior officials.
section_title: What GAO Found
paragraphs: Retention incentives encompass the majority of 3R incentives awarded to FDA employees in recent years. FDA's employees in mission-critical occupations received the greatest number of 3R incentives from 2007 to 2009. However, without an updated strategic workforce plan or established agencywide indicators for tracking its use of 3R incentives, FDA cannot assess the impact that these incentives have on its overall human capital strategy. While FDA collects data on workforce indicators at the agency and center levels, it has not analyzed how 3R incentives are helping the agency achieve its recruitment and retention goals. On the basis of GAO's review of a stratified sample of FDA's 3R incentive files awarded from January 2007 through October 2008, GAO found that FDA maintained documentation which provided sufficient explanation to justify each award. However, several of the incentive files we reviewed lacked adherence to certain other requirements, such as prescribed contents of a service agreement, which in most instances may have resulted from a lack of documentation. To help ensure the proper awarding of 3R incentives, FDA has various internal controls in place, such as a centralized review and approval process for incentive requests. Over the past 3 years, FDA has made some changes to its internal controls, such as updating its guidance including the standard forms for 3R incentive requests. If effectively implemented, FDA's revisions to its internal controls may help ensure that in the future 3R incentives are properly awarded and documentation exists to support the incentives. While both OPM and HHS provide oversight of 3R incentives through various mechanisms, including guidance and periodic evaluations and accountability reviews, there are opportunities for improvement. As a next step, OPM could provide guidance to all agencies on the importance of considering succession planning in the decision process for awarding retention incentives. While HHS's 3R incentive policy generally addressed the requirements for 3R incentive plans as outlined in OPM's regulations, there were several instances where the policy omitted or did not clearly address certain important requirements, such as the conditions for terminating or reducing an incentive.

section_title: Letter
paragraphs: The Food and Drug Administration (FDA) within the Department of  Health and Human Services (HHS), has had difficulties carrying out its  expanding mission in part because of challenges in obtaining the  workforce needed to support its increased responsibilities. We have  designated two areas of federal oversight under FDA—food safety and  medical products—as high risk in 2007 and 2009, respectively, and  reported on the significant challenges that continue to compromise the  agency’s ability to protect Americans from unsafe food and ineffective  drugs and medical products.
FDA has announced plans that may help it address some of its resource  challenges, such as a major, multiyear hiring initiative and an information  technology modernization effort. Although these are positive steps, FDA  still faces workforce challenges. For example, about 70 percent of FDA’s  career employees onboard as of fiscal year 2008 will be eligible to retire by  the end of fiscal year 2014, which may lead to gaps in institutional  knowledge at all levels. FDA will face high retirement eligibility rates with  career employees in certain mission-critical occupations, with about 63  percent of mathematical statisticians and 73 percent of pharmacologists  onboard as of fiscal year 2008 eligible to retire by the end of fiscal year  2014.
To help the federal government improve its competitiveness in recruiting  and maintaining a high-quality workforce, the Federal Workforce  Flexibility Act of 2004 provided federal agencies increased flexibilities to  award recruitment, relocation, and retention (3R) incentives.  Governmentwide, federal agencies awarded 3R incentives totaling more  than $207 million in 2007 with retention incentives accounting for the  majority of 3R incentive costs at $127 million. In May 2009, the U.S. Office  of Personnel Management (OPM) asked agencies to review their 3R  incentive programs to ensure that current and future incentives are used  only when necessary to support their mission and program needs, and are  consistent with the criteria in law and regulations. As a next step, in July  2009, OPM directed agencies to review and certify that 3R incentive plans  and internal approval and monitoring procedures were consistent with  regulations.
In the last few years, FDA’s use of retention incentives has come under  greater congressional scrutiny. Specific issues concerned the number and  dollar amount of incentives being given to FDA managers and whether  they met OPM regulatory requirements. At your request, this report  examines (1) the extent to which FDA is linking its use of 3R incentives to  its strategic human capital approaches to address its current and emerging  challenges; (2) the extent to which FDA’s 3R incentives were awarded  consistent with the law, regulations, and guidance and the internal  controls FDA has in place to ensure proper disbursement of 3R incentives  and encourage efficient use; and (3) the steps OPM has taken to help  ensure that agencies including HHS have effective strategic oversight of  their 3R incentive programs and how HHS is providing oversight of its 3R  incentive program.
To meet our objectives, we used a data collection instrument to analyze a  stratified sample of FDA’s files for 3R incentives awarded from January 1,  2007, to October 31, 2008 by year and incentive type. We randomly  selected files for review from the 2007 and 2008 retention incentives and  2008 recruitment incentives. For the 2007 and 2008 relocation incentives  and 2007 recruitment incentives, we reviewed all of the files due to the  small population size. For the randomly selected files, we weighted each  incentive file so that our sample statistically represented the population. In  addition, we analyzed data provided by HHS on FDA’s and the  department’s use of 3R incentives for calendar years 2007 to 2009 (as of  July 4) along various categories including type of incentive, pay plan,  occupational series, and duty station; analyzed FDA data from OPM’s  Central Personnel Data File (CPDF) for fiscal year 2008 to identify trends  in FDA’s workforce, such as retirement eligibility by occupational series  for career permanent employees; analyzed HHS’s 3R incentive policy to  determine consistency with OPM’s regulatory requirements; and  interviewed HHS, FDA, and OPM senior officials knowledgeable about 3R  incentives. We checked the 3R incentive data provided by HHS for  reasonableness and the presence of any obvious or potential errors in  accuracy and completeness. We interviewed selected HHS officials  knowledgeable about the data, and brought to the attention of these  officials any concerns or discrepancies we found with the data for  correcting or updating and further clarification. On the basis of these  procedures, we believe the data provided by HHS are sufficiently reliable  for use in the analyses presented in this report. (See app. I for a more  detailed discussion of our objectives, scope, and methodology.)
We conducted this performance audit from December 2008 through  January 2010 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: 3R incentives are among the human capital flexibilities intended to help  federal agencies address human capital challenges and to build and  maintain a high-performing workforce with essential skills and  competencies. According to OPM, the intent of 3R incentives is to provide  agencies with discretionary authority to use nonbase compensation to  help recruit, relocate, and retain employees in difficult staffing situations.  On the basis of OPM’s regulations for 3R incentives, employees eligible to  receive these incentives include the following positions: General Schedule  (GS), senior-level, scientific or professional, Senior Executive Service  (SES), law enforcement, Executive Schedule or those whose pay is set at a  rate equal to a rate for the Executive Schedule, prevailing rate positions  (employment in a recognized trade or manual labor occupation), and  employees in a category approved by OPM at the request of the head of an  agency. The regulations also prohibit certain employees from receiving 3R  incentives including those who are in positions that are appointed by the  President with or without Senate confirmation, noncareer SES members,  agency heads or those expected to receive an appointment as an agency  head, and employees in positions excepted from the competitive service  by reason of their confidential, policy-determining, policy-making, or  policy-advocating duties (i.e., Schedule C employees).
At FDA, certain physicians and dentists appointed under title 38 of the  United States Code and Senior Biomedical Research Service employees  appointed under 42 U.S.C. § 237 are also eligible for 3R incentives. FDA  employees appointed pursuant to 42 U.S.C. §§ 209(f) and 209(g) are not  eligible to receive 3R incentives under the authority contained in title 5 of  the United States Code. According to an HHS official, FDA’s authority to  award incentive payments to these employees is derived from the  appointment provisions themselves. Beginning in 2007, FDA began  phasing out the use of retention incentives for employees paid under titles  38 and 42. (See app. II for additional details on employee eligibility.)
The Federal Employees Pay Comparability Act of 1990 first authorized  OPM to allow federal agencies to give 3R incentives to employees under  the following circumstances.
A recruitment incentive could be given to a new employee in a federal  position and a relocation incentive to a current employee who had to  move to accept a different federal position if it was determined that the  agency would be likely to encounter difficulty filling the position in the  absence of such an incentive.
A retention incentive could be given to a current employee if the unusually  high or unique qualifications of the employee or a special need of the  agency made retaining that employee essential, and it was determined that  the employee would be likely to leave federal service without the  incentive.
The Federal Workforce Flexibility Act of 2004 revised prior 3R incentive  authorities with the goal of increasing agencies’ flexibility in using 3R  incentives. We and OPM had reported that 3R incentives were effective  human capital management tools, but agencies were failing to use them  extensively due to a variety of factors including limited funds and reduced  hiring due to downsizing. The 2004 act increased the number of situations  in which agencies may give 3R incentives; allowed for alternative methods  of payments, such as installments or lump sum; and increased the  potential size of the incentives. For example, individual retention  incentives that were capped at 25 percent of the employee’s basic pay rate  could be increased to up to 50 percent in cases of critical agency need  with OPM’s approval. The act also required OPM to annually report to  Congress to ensure the incentives were being used effectively. In  December 2007, OPM issued final regulations on 3R incentives reflecting  its technical modifications and corrections to and clarifications of the  interim regulations issued in May 2005. Separately, in November 2007,  OPM issued final regulations implementing an additional authority to  agencies to pay a retention incentive to an employee who would be likely  to leave for a different federal position before the closure or relocation of  the employee’s office, activity, or organization.
Through its regulations, OPM requires agencies to develop plans for using  3R incentives outlining, among other things, the required documentation  for the justification and any criteria for determining the amount of the  incentive and the length of the service period under a service agreement,  which is a written agreement between the agency and the employee  outlining the terms of the incentive. According to OPM officials, agencies  do not need OPM approval of their 3R incentive plans in order to use these  incentives. HHS has issued a departmentwide 3R incentive plan or policy  that applies to all of its agencies or operating divisions (OPDIV), as HHS  refers to them, including FDA. According to HHS’s Deputy Assistant  Secretary for Human Resources, the OPDIVs are allowed to develop more  stringent internal guidance to supplement HHS’s policy, but they cannot  make their internal processes for awarding 3R incentives more lenient.  Building on HHS’s 3R incentive policy for the department, FDA issues  supplemental guidance and instructions to its employees for awarding 3R  incentives. Applicable to all of its centers and offices, FDA uses standard  forms for requesting recruitment, relocation, and retention incentives with  instructions attached for completing the forms that outline the regulatory  and HHS policy requirements for those types of incentives. The official  who is recommending the individual for the incentive must complete the  form prior to seeking approval of the award.
section_title: FDA Uses 3R Incentives to Recruit and Retain Mission- Critical Staff, but Lacks Agencywide Indicators for Tracking the Progress of 3R Incentives in Addressing Its Recruitment and Retention Goals
paragraphs: Employees in mission-critical occupations as identified by FDA make up  the majority of FDA’s workforce and have also received the greatest  number of 3R incentives from 2007 to 2009. According to the Assistant  Commissioner for Management at FDA, mission-critical positions are  broadly categorized at the agency level and not specific to FDA centers.  These positions encompass the core scientific base of FDA, and include  occupations such as medical officers, pharmacologists, and consumer  safety officers. According to this official, mission-critical positions have  remained unchanged with the exception of a few positions that have  become more significant as the nature of FDA’s work has evolved, such as  operations research analysts and veterinary medical officers.
As shown in figure 1, employees in different mission-critical occupations  received different percentages of each type of incentive. Medical officers,  which includes physicians and surgeons, consistently received on average  the greatest number of recruitment incentives of any mission-critical  occupation from 2007 to 2009. Consumer safety officers, which is the  largest mission-critical occupation according to FDA, on average received  the majority of relocation incentives among mission-critical occupations,  while pharmacologists on average ranked first among all mission-critical  occupations that received retention incentives over this time period.
subsections: section_title: FDA Lacks an Updated Strategic Workforce Plan to Document Its Strategies for Achieving Its Recruitment and Retention Goals
paragraphs: FDA is facing potential retirements that could result in a loss of leadership  and institutional knowledge in its mission-critical occupations. For  example, an average of 24 percent of FDA top leadership is retirement  eligible in 2014 according to FDA. Additionally, about 73 percent of  career pharmacologists and about 68 percent of career medical officers  onboard as of fiscal year 2008 will be eligible for retirement by the end of  2014. Therefore, it is important to ensure that FDA’s 3R incentives are  helping the agency meet its human capital goals. Our previous work has  shown that federal agencies should ensure that the use of human capital  flexibilities including 3R incentives are part of an overall human capital  strategy clearly linked to the mission and program goals of the  organization. Agencies need to plan for how they will use and fund these  flexibilities, what results they expect to achieve, and what methods they  will use to evaluate actual results, such as establishing indicators for  measuring success. Importantly, 3R incentives are just one type of  flexibility available to agencies for recruiting and retaining a quality  workforce. Agencies need to assess and determine which human capital  flexibilities are the most appropriate and effective for managing their  workforces. Furthermore, an updated strategic workforce plan would help  FDA clearly document its strategies for addressing gaps in the number,  skills, competencies, and deployment of its workforce and how human  capital flexibilities, such as 3R incentives, are being used to help achieve  recruitment and retention goals.
FDA has outlined its goals and approaches for recruiting and retaining the  necessary workforce to meet its mission and program goals in its  succession plan and strategic workforce plan. In its succession plan for  2009-2012, FDA defines succession management as the ongoing  development of potential successors to ensure a smooth transition and  minimum loss of efficiency when management vacancies occur. To help  prepare its current and future leadership, FDA outlines specific succession  planning initiatives in its plan, such as individual development planning  and training that aligns with organizational goals. According to officials at  FDA, succession planning has played a significant role in filling mission- critical occupations at its centers and the plan should help assist FDA with  these efforts. While some of what is described in FDA’s succession plan is  prospective, FDA officials told us that they are partnering with a university  in Florida in an attempt to satisfy the agency’s long-term staffing needs for  a mission-critical occupation. Specifically, they are developing an  undergraduate curriculum for pharmacokineticists intended to help  increase FDA’s recruitment pool for this occupation.
FDA’s fiscal year 2006 workforce plan provides an overview of past and  projected workforce trends and emphasizes the staffing needs of FDA’s  mission-critical programs. According to the Assistant Commissioner for  Management at FDA, the plan was intended to be a road map for future  hiring strategies across the agency. However, FDA has not updated the  workforce plan since 2006 and targets for its recent hiring surges have not  been included. According to this official, managing FDA leadership  transitions has been a higher priority than strategic workforce planning.  FDA is preparing to begin a workforce planning effort in fiscal year 2010 to  address key agency-level initiatives and provide linkages between the  agency’s use of 3R incentives and broader human capital decisions. Having  an agencywide workforce plan that clearly documents the recruiting and  retention goals and strategies FDA is working to achieve can help to  ensure that the centers are aware of the agency’s goals and strategies and  strategically managing their workforces in a manner that meets the  agency’s needs. Given FDA’s period of leadership transitions, developing  such a workforce plan creates a road map for the agency to use to move  from the current to the future workforce needed to achieve agency goals.
While not documented in its current workforce plan, FDA has set  recruitment targets for the agency to address the need to hire additional  employees in recent years. Specifically, as part of its hiring surges in fiscal  years 2008 and 2009, FDA set staffing goals that were linked to the agency  achieving its mission and goals. For example, the agency set targets to fill  more than 600 new positions and to backfill over 700 others in fiscal year  2008 to implement new responsibilities as a result of legislation, which it  achieved within the first 6 or 7 months, according to FDA’s Assistant  Commissioner for Management. That was nearly triple the number of  people FDA hired from 2005 to 2007. Similarly in fiscal year 2009, the  agency set a goal to hire 1,600 additional full-time equivalent positions.  According to FDA officials, the agency has exceeded its 2009 hiring goals  by 22 percent and these targets were set within the centers based on their  staffing needs. Further, FDA officials told us one of its recruitment  strategies to increase its Hispanic workforce was to target this population  during its interview job fairs, but this strategy is not documented in its  current workforce plan.
FDA officials told us that they award 3R incentives where they are needed  most and the type of incentive awarded depends largely on the location.  For example, recruitment is a larger issue in some of FDA’s field locations,  including areas in Montana and in the southwest along the Mexican  border. To address this challenge FDA offers relocation incentives to  employees in its headquarters and field to move to other areas of the  country. Recognizing the challenge of recruitment in its remote field  locations, FDA is looking for additional sources of recruiting, including  state and local governments in these areas. FDA officials have found that  retention usually is not a problem in its field locations.
section_title: FDA Should Better Track How Its Use of 3R Incentives Is Helping the Agency Achieve Its Recruitment and Retention Goals
paragraphs: We have reported on the importance of establishing the necessary data  and indicators to track a program’s effectiveness, as well as establishing a  baseline to measure the changes over time and assess the program in the  future. Agencies need such measurements to help them determine if a  program is worth the investment compared to other available human  capital flexibilities targeted at recruitment and retention of employees,  such as student loan repayment. FDA has not established agencywide  indicators for tracking the progress of 3R incentives in addressing  recruitment and retention needs. While FDA collects data on workforce  indicators at the agency and center levels, it has not analyzed how 3R  incentives are helping the agency achieve its recruitment and retention  goals.
FDA collects data on agencywide workforce indicators, such as attrition,  retirement, and declination rates, which measure the number of jobs  offered that are declined by potential employees. In addition, FDA’s  centers and offices are responsible for tracking their own workforce data  as well as the effect of 3R incentives on their organizational goals.  Specifically, FDA has asked its centers to provide more detailed attrition  rates over a 2-year period to help support the need for 3R incentives.  Officials stated that FDA has no agencywide exit interview process; rather,  it uses HHS’s quarterly exit survey results. Although some centers track  exit survey results to determine why employees are leaving the agency, the  center data are not necessarily provided to the Office of Management—the  human capital office within FDA—according to the Assistant  Commissioner for Management at FDA. Further, FDA officials stated that  the agency relies on HHS-provided data for tracking the number of  responses to job announcements, and the basis for employee separations,  but FDA does not have access to all of the necessary data in a useful  format to accurately track workforce statistics and the linkage to the use  of 3R incentives.
Additionally, FDA’s Assistant Commissioner for Management said the  agency does not track the use of 3R incentives to assess the effectiveness  of these payments or how they contribute to FDA’s human capital goals.  For example, FDA does not track statistics on its diversity initiatives or  the impact of 3R incentives on diversity recruiting because there is a lack  of available data. However, FDA officials said they need to document the  agency’s short- and long-term goals for its 3R incentive program and  identify better agencywide indicators to support the need for 3R  incentives. Presently FDA’s guiding principles for awarding 3R incentives  developed in the summer of 2009 are the only documented guidance to  centers on 3R incentives, but the guiding principles do not address how 3R  incentives should be used strategically to help achieve agencywide  recruitment and retention goals.
Updating its workforce plan to document its recruitment and retention  goals and strategies and include indicators to track the progress of 3R  incentives in achieving these goals will help ensure FDA makes maximum  use of funds to recruit and retain key talent, a critical goal in an era of  fiscal constraints. As we have found in our work on human capital  flexibilities, gauging the 3R incentive program’s direct effect on  recruitment and retention trends may be difficult because a 3R incentive is  not likely to be the only major factor in an employee’s decision to join or  stay with an agency, although the incentive may help to tip the scale in the  agency’s favor. FDA officials told us that they have recently found that  other factors, such as labor market conditions, could affect these  decisions.
section_title: Retention Incentives Account for the Majority of 3R Incentives Awarded by FDA and the Percentage of 3R Incentives Awarded by FDA Is Large Compared to HHS
paragraphs: In 2008 and 2009, recruitment and retention incentives accounted for  greater than 95 percent of all 3R incentives awarded in FDA, as shown in  table 1. The majority of the FDA employees receiving 3R incentives in 2007  and 2008 were in positions within the GS pay plan, which includes  consumer safety officers, medical officers, and mathematical statisticians,  and paid at grades 14 or higher in the case of retention incentives. To  explain the large decrease in the number of retention incentives between  2007 and 2008, FDA officials told us that they have taken a more strategic  approach to awarding retention incentives over the last few years by  elevating the approving authority of retention incentive renewals to the  Commissioner and phasing out the use of retention incentives for certain  employees paid under titles 38 and 42 of the United States Code given  existing compensation flexibilities with those positions. For example, in  2007, FDA employees appointed under title 42, which includes service or  staff fellows and senior science managers, received 15 percent of all  retention incentives FDA awarded and 5 percent of retention incentives  awarded as of July 4, 2009. As a result of its detailed review of its 3R  incentives in 2009, FDA officials said several retention incentives were  eliminated. In addition, FDA does not allow any new recruitment incentive  requests for any new employees except for rare and unusual  circumstances that require the Commissioner’s approval. According to  FDA, the agency continued to honor any recruitment incentives that were  promised during recruitment discussions with potential employees.
In comparing FDA’s use of 3R incentives to HHS’s use of the incentives  departmentwide, FDA’s percentage of HHS’s recruitment incentives  awarded exceeded 25 percent from 2008 to 2009. Specifically, in 2008, FDA  accounted for 50 percent of all recruitment incentives in HHS, which was  due to FDA’s hiring surge that year. In contrast, FDA’s total number of  retention incentives awarded steadily decreased from 2007 to 2009 due to  the elimination of these incentives for certain employees. (See fig. 2.) As a  point of comparison, in 2008, FDA spent over $11 million, which was over  half of the total dollars spent by HHS on 3R incentive payments; however,  FDA employees made up only about 16 percent of HHS’s total workforce  in fiscal year 2008.
HHS (exclding FDA)
section_title: FDA Generally Awarded 3R Incentives Consistent with Law and OPM Regulations, but Adherence to Some Requirements Was Lacking and FDA Could Improve Its Internal Controls
paragraphs: OPM regulations outline requirements for the proper awarding of 3R  incentives and require agencies to keep documentation and records  sufficient to allow a reviewer to reconstruct the 3R incentive process and  decision. We reviewed the files of a random, stratified sample of 3R  incentives awarded at FDA from January 2007 through October 2008 to  determine whether they met requirements in law, OPM regulations, HHS  policy, and FDA guidance. All the FDA files we reviewed provided  sufficient explanation to justify the awards, addressing one or more of the  factors for each type of incentive which OPM regulations state must be  considered, as applicable to the case at hand, to support the awarding of  the incentive. These factors are to guide the agency in determining  whether a particular position would be difficult to fill in the absence of a  recruitment or relocation incentive, or whether the unusually high or  unique qualifications of the employee or a special need of the agency for  the employee’s services makes it essential to retain the employee and the  employee would be likely to leave the federal service in the absence of a  retention incentive. According to OPM, since the regulations require an  agency to document only those factors that are applicable to the case at  hand, one factor could be sufficient support for authorizing the incentive.  We estimate that every 3R incentive awarded during the time of our file  review included at least one factor of support in the justification for the  incentive. Figure 3 lists the factors that an agency must consider in  justifying a 3R incentive.
The 3R incentive files met additional statutory and regulatory  requirements, such as awarding 3R incentives only to eligible employees  and paying of 3R incentives within applicable aggregate pay limits  prescribed under 5 U.S.C. § 5307 or, for certain administratively  determined pay plans, within the aggregate pay limits established by  HHS. (See app. II for additional information on the aggregate pay limits  and other results from the file review.)
However, several of the incentive files we reviewed lacked adherence to  certain other requirements, such as approval prior to the incentive  payment, proof of employee relocation, and prescribed contents of a  service agreement, which in most instances may have resulted from a lack  of documentation. Overall, the deficiencies we found with the lack of  adherence to requirements would not invalidate an incentive. Internal  controls are important for managing an agency’s human capital system,  including the 3R incentive program, to help ensure the effective and  efficient use of these incentives in accordance with the law and OPM  regulations. Over the past 3 years, FDA has made some changes to its  internal controls, such as continuing to revise its centralized review and  approval process for 3R incentive requests and updating its guidance  including the standard forms for 3R incentive requests. If effectively  implemented, the revisions to its internal controls may help ensure that in  the future 3R incentives are properly awarded and documentation exists  to support the incentives.
subsections: section_title: 3R Incentives Were Not Always Processed Consistent with Regulations and FDA Guidance, but Revisions to FDA’s Centralized Review and Approval Process May Lead to Improvements
paragraphs: OPM regulations require that all incentives must be approved by the  agency prior to payment to the employee. We estimate that 92 percent of  all 3R incentives awarded from 2007 through October 2008 were approved  by the agency, as evidenced by the approving official’s signature—the FDA  Commissioner or designee—prior to payment to the employee. In  addition, the regulations require an agency to make the determination to  pay a recruitment or relocation incentive before the employee enters on  duty in the position for which he or she was recruited or relocated. We  estimate that for all recruitment incentives the agency made the  determination to pay the incentive, as evidenced by the date of the  approving official’s signature, before the prospective employee entered on  duty. In 4 of 12 of the relocation incentive files (the universe during the  time of our file review), the agency did not make the determination to pay  the relocation incentive, as evidenced by the date of the approving  official’s signature, before the prospective employee entered on duty.  However, we verified that no payment was made to the recipients of these  relocation incentives until after the employee relocated to the new  position. According to a senior FDA official, the center in FDA that  requested these relocation incentives did not understand that the  incentives needed to be provided to the Office of Management—the  human capital office within FDA—for processing and approval prior to the  employee entering on duty and mistakenly believed that the former  Commissioner’s memorandum authorizing a broad approval of incentives  for their center covered these relocation incentive requests. The official  said that this was an isolated misunderstanding that has been corrected  with further discussions with the center.
In addition, according to HHS policy and FDA guidance, the official who is  recommending the employee for the 3R incentive must sign off on the  request before the official who approves the award, which in FDA’s case is  the Commissioner or designee. We estimate that in less than 2 percent of  3R incentives awarded from 2007 through October 2008 the recommending  official did not sign off on the request before the approving official. In the  three relocation incentive files that we reviewed where this occurred, the  agency used a justification and approval for the awards signed by the  approving official more than 22 months before the awards were  recommended. When asked why this occurred, FDA said the incentives  were mistakenly signed out of order.
Beginning in March 2006, FDA revised its 3R incentive review and  approval process by centralizing the process—a key internal control that if  implemented properly may improve the processing sequence of the  incentives. Since that time, FDA has continued to streamline its process,  assign oversight responsibility to its Executive Review Board (ERB), and  issue updated guidance, which it calls guiding principles. FDA’s ERB,  which consists of the Principal Deputy Commissioner who serves as the  chair, the center directors, the Associate Commissioner for Policy, and the  Assistant Commissioner for Management, is responsible for reviewing all  compensation programs and flexibilities including 3R incentives across  the agency and developing guidelines for implementing each program.  Since the time of our file review, FDA undertook a detailed review of its  3R incentive program and as a result of its review, clarified details of  FDA’s process for approving 3R incentives and the role of the ERB. Figure  4 shows the revised review and approval process for 3R incentive requests  that FDA currently follows.
Beginning in September 2009, FDA’s procedures call for its Office of  Management to certify if a new 3R incentive request addresses FDA’s  guiding principles prior to submitting the incentive request to the ERB for  its review. Further, in an effort to streamline the process, the ERB Chair  may review and recommend some of the incentive requests to the  Commissioner without the full ERB review when the Office of  Management certifies the request. The ERB Chair can request a review by  the full ERB for any incentive request, according to a senior FDA official.  Finally, according to a senior official from the Rockville Human Resources  Center (RHRC), which is responsible for processing FDA’s personnel  actions such as incentive requests, the center adopted the practice of  double checking the incentive file to ensure the documentation in the file,  such as the commencement and termination dates on the service  agreements, are complete after the incentive has been processed.
section_title: Relocation Incentive Files Did Not Consistently Document Employees’ Relocation, but Revisions to the Incentive Form Address These Requirements
paragraphs: OPM regulations for relocation incentives require that in order to receive a  relocation incentive the employee’s work site for the new position must be  50 miles or more from the work site of the position held immediately  before the move, unless the agency waives the 50-mile requirement, and  the employee must establish a new residence to accept the position. We  found that in 3 of 12 of the relocation incentives awarded from 2007  through October 2008, the incentive files did not document that the  employee’s new work site was more than 50 miles from the previous work  site. For example, an individual who received a relocation incentive was  transferring from another federal agency to work at FDA in the  Washington, D.C., area and the file did not document where that previous  agency was located (e.g., Washington, D.C., or another city). In addition, 8  of 12 of the relocation incentives were paid to the employee before or on  the same day that the agency had record of the employee establishing a  residence in the new geographic area. In three of these cases, the  sequence of dates was less than a month different, but in three other cases  it was several months. For the remaining two cases, the first record of the  employee’s residence in HHS’s human capital data system was the date of  the incentive payment. By reviewing the data system and additional  employee records, we found proof that for 11 of the 12 relocation  incentives, the employee eventually established a residence in the new  geographic area. For one incentive the previous address on file was an  Army P.O. box with no city or state included. According to FDA, this  individual was deployed with the military to Europe prior to establishing a  residence in the geographic area for the new position. While the relocation  incentive forms we reviewed did not include these relocation  requirements, in the fall of 2008, FDA recognized the need to more clearly  document these relocation requirements and revised its recruitment or  relocation incentive form to include check boxes addressing these  requirements.
In response to our finding on the dates of relocation, senior officials from  FDA and RHRC acknowledged that there is no formal process to  document that the new work site is greater than 50 miles from the  previous work site or that the individual has established a residence in the  new geographic area before the incentive is awarded. Rather, the RHRC  official said they check these requirements through more informal  means—conversations with the employee, reviewing the resume, and  knowledge of where the person is coming from, which in some cases, is  such a great distance from the new duty station that it is common  knowledge that the new work site is greater than 50 miles from the  previous work site and the individual has established a residence in the  new geographic area. According to FDA, the centers are to verify the  change of residence before submitting the incentive request for payment  processing to RHRC by checking that a personnel action for an address  change to the new duty station has been submitted. As a next step, the  centers are to check in the data system that the address has been changed.  In addition, FDA and RHRC officials said there may be a delay in RHRC’s  processing of the change of address from the time the employee submits  the request, which may account for the sequence of dates.
As another explanation for the difference in dates, a senior FDA official  explained that employees who have received the incentive are permitted  to stay in temporary housing after receiving the incentive before they  officially establish a new residence and change their residence with the  agency. OPM officials stated that the regulations do not define “residence”  for this purpose and since relocation incentives may be paid for temporary  work site changes, it is not necessary for an employee to move his or her  permanent residence to qualify for a relocation incentive; establishing  temporary housing is acceptable. FDA and RHRC officials noted that in  some of the older files we reviewed there was no place to document that  an employee had established a new residence or relocated a distance  greater than 50 miles, as the current incentive form now allows.
section_title: Service Agreements Failed to Include Elements Required in Statute and OPM Regulations, but Revised Guidance May Lead to Some Improvement
paragraphs: The service agreements frequently failed to include contents prescribed by  statute and OPM regulations. Consistent with the statute and regulations,  FDA requires service agreements for recruitment and relocation  incentives, but does not use service agreements for retention incentives.  In some areas, we observed appropriate documentation of the prescribed  contents in the service agreement, such as the total amount of the  incentive and length of the service period, but other areas were lacking,  such as the method of paying the incentive and timing and amounts of  each incentive payment. Not including the prescribed contents of the  service agreement may affect FDA’s ability to recover funds should the  agency terminate or reduce an incentive. For an employee who leaves the  position prior to completing the service period for the incentive, FDA uses  information in the service agreement to determine the prorated amount of  the incentive payment that needs to be collected from the former  employee. Since the time of our file review, FDA has updated its guidance  and recruitment or relocation incentive form including the service  agreement section, which if effectively implemented may help prevent  future problems associated with deficient service agreements.
We estimate that all of the recruitment incentive files and 11 of 12 of the  relocation incentive files awarded from 2007 through October 2008  documented a permitted total incentive amount in the service  agreement—the maximum amount is 25 percent of base pay—with the  exception of the 1 relocation incentive file that lacked a service  agreement, but documented an appropriate total incentive amount  elsewhere in the file. While considering the criteria in HHS’s 3R incentive  policy, FDA has established guidelines for determining the amounts of the  3R incentives. Specifically, during the time of our file review, recruitment  and relocation incentives were to be between 10 and 15 percent of base  pay.
The service period, which is a specified period of employment with the  agency the employee agrees to complete in exchange for payment of the  incentive, may not exceed 4 years for recruitment and relocation  incentives with a minimum of 6 months for recruitment incentives. With  the exception of one relocation incentive file which lacked a service  agreement, all the recruitment and relocation incentive files documented a  permitted length of service in the service agreement length field. FDA  sets guidelines for determining the length of the service period for  recruitment and relocation incentives. According to a senior FDA official,  FDA has traditionally used 12 months as the length, but in early 2008, as  FDA began hiring a large number of employees, it started requiring a  length of 18 months. If FDA authorized multiple incentives to an employee,  e.g., student loan repayment in addition to a recruitment incentive, it  required a 24-month service period and in some cases where FDA  approved a higher percentage for the incentive amount, it required a 36- month service period.
Further, the service agreement for recruitment and relocation incentives  must specify the method of paying the incentive, and the timing and  amounts of each incentive payment (i.e., a lump sum at the beginning or  end of the service period, installments throughout the service period, or a  combination). We estimate that 12 percent of the recruitment incentives,  and 1 of 12 of the relocation incentives awarded from 2007 to October  2008, included how the incentive was to be paid—a lump sum payment— and the amount. None of the recruitment and relocation incentives  included when the incentive would be paid—at the beginning of the  service period—in the service agreements. According to a senior FDA  official, FDA has traditionally paid recruitment and relocation incentives  as lump sum payments at the beginning of the service period because it is  most attractive to prospective employees at recruitment fairs or interviews  and it places less burden on FDA to maintain records and monitor  payments than biweekly or quarterly payments. According to this official,  FDA has previously explored providing managers with other payment  options and managers overwhelmingly responded that this payment  method was most effective. The service agreement section of FDA’s  current recruitment or relocation incentive form now states that the  payment is to be made as a lump sum, but does not specify the timing of  the payment.
FDA’s service agreements for recruitment and relocation incentives also  included fields for the commencement and termination dates of the  service period as required. We estimate that about 25 percent of  recruitment incentive files, and 1 of 12 of the relocation incentive files  during the time of our file review, included both commencement and  termination dates. A senior FDA official explained that once the  Commissioner approves the award, the Office of Management sends the  incentive file to RHRC, which is responsible for processing the incentives.  During the processing of the award, the dates of the service period are  finalized and according to this FDA official, RHRC officials must fill in the  dates once they determine the official effective date of the incentive. A  senior RHRC official noted that there previously has been no system to  add these dates, so this step was often missed. As discussed earlier,  according to this official, in the fall of 2009, RHRC adopted the practice of  double checking the incentives to ensure the documentation in the file,  such as the commencement and termination dates on the service  agreements, are complete after the incentive has been processed.
OPM officials responsible for administering the governmentwide 3R  incentive program commented that while not necessarily invalidating the  incentive, these missing elements in the service agreements are potentially  significant omissions and a lack of documentation may lead to problems in  paying the incentives. For example, the timing and amount of each  incentive payment needs to be documented in the service agreement for  disbursement purposes and to ensure that the employee and agency  concur about the payment schedule. Without this information, the agency  may have a difficult time supporting its case if the employee questions  payments, and the payment schedule is not documented in the file. OPM  officials said that the agency has a general responsibility to ensure all  requirements of the incentive are clearly laid out in the incentive file and  communicated to the employee. The officials added that it was important  that the commencement and termination dates of the service period be  documented because FDA may be hindered in exercising proper oversight.  Without the dates, it could be difficult for the agency to recover incorrect  payments or establish that an employee has left the position prior to  completing the service period outlined in the service agreement.
section_title: FDA Could Further Improve Its Guidance for 3R Incentives
paragraphs: While FDA revised its guidance since the time of our file review, FDA has  not addressed several areas specified in the regulations in its guidance for  retention incentives. First, FDA’s guidance states that all recruitment and  relocation incentives are to be paid as lump sum payments, but FDA does  not include the method it uses to pay retention incentives—biweekly  installment payments—in its guidance. A senior FDA official said it has  been a long-standing practice in HHS to give retention incentive payments  in biweekly installments and acknowledged that the guidance should be  updated to reflect this practice. By including the payment method in its  guidance, FDA will help ensure that the method is communicated to all  employees and that payments are made in accordance with regulations.
Second, as specified in the regulations, FDA’s guidance does not include a  condition for terminating a retention incentive when no service agreement  is required based solely on the management needs of the agency. Not  including all of the termination conditions in its guidance could hinder  employees’ understanding of the conditions under which they would no  longer receive incentive payments, such as due to insufficient agency  funds. While FDA’s guidance generally addresses the conditions for  terminating retention incentives due to the fault of the employee, such as  receiving a performance rating of less than “fully successful,” the other  conditions for termination are impressed upon managers through  meetings and other communication on the importance of using these  incentives as discretionary flexibilities, according to a senior FDA official.  As OPM has stated, the agency has a general responsibility to ensure all  requirements of the incentive are clearly communicated to the employee.
section_title: OPM and HHS Provide Oversight of 3R Incentives, but Improvements Can Be Made
subsections: section_title: OPM Provides Oversight of 3R Incentives through Various Mechanisms, but a Stronger Emphasis on Agencies’ Strategic Use of 3R Incentives Is Needed
paragraphs: The 3R incentive authorities provided under the Federal Workforce  Flexibility Act of 2004 were designed to provide agencies with additional  flexibility to help recruit and retain employees and better meet agency  strategic human capital needs. Since agencies began using the new  flexibilities, OPM has provided governmentwide oversight by reviewing  and reporting on agencies’ use of 3R incentives, providing guidance to  agencies, and evaluating agencies’ human capital systems including the  use of 3R incentives.
subsections: section_title: OPM Annually Reviews and Reports on Agencies’ Use of 3R Incentives
paragraphs: Because the Federal Workforce Flexibility Act of 2004 requires OPM to  annually report to Congress on how agencies used 3R incentives, OPM  requires agencies to report that information annually to OPM. Agencies  must submit data on the number and dollar amount paid by incentive type,  pay grade or work level, occupational series, and other variables and  descriptive information on how the 3R incentive authority was used that  year. For the 2007 annual report to Congress, OPM also asked agencies to  provide information on how the use of 3R incentives helped improve their  agencies’ recruitment and retention efforts and identify any barriers the  agencies faced in using 3R incentives. However, the descriptive  information in OPM’s annual report to Congress that agencies provided on  how 3R incentives helped address their recruitment and retention efforts  is anecdotal, and according to OPM’s Deputy Associate Director in the  Center for Pay & Leave Administration, OPM’s annual report is not  intended to be an evaluation determining whether agencies are following  the regulations and using the 3R incentive authorities appropriately. The  act’s reporting requirement will sunset after OPM’s report covering 2009,  but according to OPM, OPM may ask agencies to continue their 3R  incentive reporting. Therefore, it will be important for OPM to determine  what it will do with that information going forward.
In July 2009, the OPM Director initiated a governmentwide review of 3R  incentives to help ensure effective use of 3R incentives and identify  opportunities to strengthen the 3R incentive program administration and  oversight. When asked about the impetus for this review, the Deputy  Associate Director said the economic situation the nation is facing and the  renewed interest in federal service caused the OPM Director and  administration to question if the need for 3R incentives and the amount of  money agencies spend on these incentives—in particular retention  incentives—was still necessary.
OPM directed agencies to review their use of 3R incentives and if needed,  update their 3R incentive plans, approval, and monitoring procedures to  ensure they meet regulatory requirements. OPM requested agencies certify  that they completed the review by signing a form and submitting it to OPM  by the end of August 2009. A senior HHS official in the human resources  office said HHS completed its review and certified to OPM that HHS has a  plan for awarding 3R incentives that meets regulations. According to  OPM’s Deputy Associate Director, the agency review was a one-time  request by OPM to help ensure that agencies’ 3R incentive plans comply  with the most recent version of the regulations.
OPM is analyzing trends in the use of 3R incentives governmentwide and  in the 12 agencies (including HHS) that spent the most in terms of overall  dollars on 3R incentives according to 2007 data the agencies submitted for  OPM’s annual report to Congress. For these 12 agencies, OPM is also  analyzing trends in their workforce data, such as the number of  recruitment incentives as a percentage of new hires. According to an OPM  official, OPM expects to complete its review in early 2010 and will share  the results with agencies shortly after. Further, OPM formed a workgroup  of the compensation experts from these 12 agencies to develop  recommendations for measuring the cost-benefit of the 3R incentive  program for the federal government and evaluating what the impact would  be on recruitment and retention efforts if agencies were to scale back their  funding of the 3R incentives. According to this OPM official, as of October  2009, the workgroup has drafted recommendations and is discussing how  to share its recommendations with the Chief Human Capital Officers  Council.
According to OPM, OPM’s and the agencies’ reviews of 3R incentives could  result in OPM guidance on metrics agencies may use to ensure the  incentives are being used effectively and addressing their recruitment and  retention goals. Such metrics would enable agencies to report more  systematically on the results of their use of 3R incentives. Continuing to  have governmentwide information on 3R incentives will provide OPM and  policymakers with the information they need to help assess trends in the  overall usage of the 3R incentive program across the government and  determine if changes are needed.
section_title: OPM’s 3R Incentive Guidance to Agencies Could More Fully Emphasize the Importance of Considering Succession Planning in the Decision Process for Awarding Retention Incentives
paragraphs: Since issuing interim regulations for 3R incentives in 2005, OPM has issued  final regulations for 3R incentives and retention incentives for employees  who are likely to leave for a different federal position before the closure or  relocation of the employee’s office, issued memorandums and posted  frequently asked questions and fact sheets providing guidance on the use  of 3R incentives on its Web site, and held forums for agency officials to  discuss the regulatory changes and other topics in May 2005 and March  2008. According to OPM, OPM also provides guidance in response to  agency inquiries through e-mails or phone calls on agency-specific 3R  issues. In the 2009 memorandums providing guidance to agencies for  reviewing their 3R incentive programs, the OPM Director stressed the  importance of ensuring the money spent on 3R incentives is being used  effectively and that the cost of using any pay flexibilities, including 3R  incentives, should be weighed against the benefits gained especially in the  case of retention incentives, which account for the majority of 3R  incentive costs.
As a next step, OPM could provide guidance to all agencies on the  importance of considering succession planning in the decision process for  awarding retention incentives. We have noted the importance of  succession planning to strengthen both current and future organizational  capacity and identify, develop, and select successors who are the right  people, with the right skills, at the right time for leadership and other key  positions. OPM supports succession planning as a vital tool for  maintaining a highly-skilled workforce and, according to OPM, succession  planning may help an agency reduce its need more quickly for an  employee’s services to a level that makes it unnecessary to continue  paying the retention incentive and allows the agency to terminate it.  However, through its regulations and guidance, OPM does not require  agencies to consider succession planning as part of the decision and  documentation process for awarding a retention incentive. The regulations  allow agencies to award retention incentives to employees, including  those who are eligible to retire and are likely to leave federal service in the  absence of receiving an incentive. While requiring agencies to annually  review the conditions for giving the retention incentive to ensure they are  still present when a service agreement is not required, OPM regulations do  not place any restriction on the number of consecutive years an individual  can receive a retention incentive.
section_title: OPM Evaluates Agencies’ Human Capital Management Systems Including the Use of 3R Incentives
paragraphs: OPM provides oversight of agencies’ human capital systems including the  use of 3R incentives by periodically conducting two types of evaluations— human capital management evaluations and delegated examining  reviews—and participating in agency-led evaluations as part of their  broader human capital accountability requirements under OPM’s Human  Capital Assessment and Accountability Framework by providing guidance  and assistance. As part of these evaluations, OPM reviews an agency’s 3R  incentive plan including designation of the proper approval authority,  documentation of individual incentive decisions, and agency 3R incentive  data for compliance with applicable regulations. An OPM official  responsible for conducting the evaluations said examples of 3R incentive  problems that OPM may find would be an incomplete or missing incentive  request form or justifications lacking the necessary documentation for the  incentive. If OPM finds that an agency’s 3R incentive plan or payments do  not comply with regulations, OPM includes a required action in its  evaluation report, which gives the agency 60 days to submit to OPM for  approval the evidence that it has corrected any identified violations.  According to this official, OPM may make recommendations to the agency  for improvements, but it does not follow up on the implementation of  these recommendations since they do not pertain to legal or regulatory  violations. Regarding an opportunity for improvement that OPM sees for  agencies’ use of 3R incentives based on these evaluations, the official  stated that OPM would like to see a more strategic approach to overall 3R  incentive program design and implementation to help ensure the  incentives are used appropriately to reflect changing conditions in the  agency and the labor market. OPM expects each agency to perform the  necessary analysis to determine the tools and flexibilities, including 3R  incentives, which would help each agency achieve its goals as part of each  agency’s strategic workforce planning process, according to this official. It  is important for OPM to encourage agencies to take this step and identify  the linkage between an agency’s use of 3R incentives and meeting its  recruitment and retention goals.
Most recently, OPM conducted several delegated examining reviews for  organizations within HHS including RHRC, which provides human capital  services to FDA, in fiscal year 2006. OPM has not recently conducted any  human capital management evaluations at HHS; rather, OPM participates  in the HHS-led accountability reviews, such as the reviews of several  OPDIVs including FDA in fiscal year 2007. OPM did not examine HHS’s 3R  incentive program as part of its delegated examining reviews and found no  problems with the use of 3R incentives in its participation in the HHS-led  reviews of several OPDIVs in fiscal year 2007.
section_title: HHS Provides Oversight of 3R Incentives, but Areas of Its 3R Incentive Policy Could Be Strengthened
paragraphs: HHS provides oversight of its OPDIVs’—the agencies within HHS—use of  3R incentives by implementing a departmentwide 3R incentive policy and  monitoring and periodically conducting accountability reviews of its  OPDIVs’ human capital systems including the use of 3R incentives.
subsections: section_title: HHS Implements a Departmentwide Policy for 3R Incentives, but the Policy Does Not Clearly Address Certain Important Requirements
paragraphs: According to OPM regulations, the agency’s 3R incentive plan must cover  certain requirements, such as the designation of officials with authority to  review and approve the payments, required documentation for justifying  the incentive, and conditions for terminating an incentive and obligations  of the agency and employee upon such termination, among other things.  HHS developed a written policy for authorizing the use of 3R incentives  across the department. While HHS’s 3R incentive policy generally  addressed the requirements for 3R incentive plans as outlined in OPM’s  regulations, there were several instances where the policy omitted or did  not clearly address certain important requirements. Clearly incorporating  the regulatory requirements into the policy will help to ensure that  managers and OPDIVs are using 3R incentives consistent with the law and  regulations. According to a senior HHS official, HHS is reviewing the  current 3R incentive policy and determining if updates are needed as part  of its review of 3R incentives in response to OPM’s directive to agencies in  May 2009 to review their 3R incentive programs. We found that HHS’s 3R  incentive policy could be strengthened in the following areas.
Conditions for reducing or terminating an incentive. HHS’s policy  generally addressed the mandatory and discretionary conditions for  reducing or terminating an employee’s incentive payment and the agency’s  and employee’s obligations with regard to notification, payments, and  repayment of the incentive. However, HHS’s policy incorrectly refers to a  condition for reducing or terminating a retention incentive authorization  as a discretionary (may) condition, when it should be documented as a  mandatory (must) condition. Specifically, when no service agreement is  required, payment of a retention incentive must be reduced or terminated  when the original determination to pay the incentive no longer applies or  when payment is no longer warranted at the level originally approved.  Further, HHS’s policy does not include a mandatory termination condition  for retention incentives when no service agreement is required due to the  employee being demoted or separated for cause or the employee receiving  a rating of less than “fully successful.” The policy only discusses this  condition for retention incentives with service agreements. HHS officials  acknowledged these errors in the 3R incentive policy and stated that the  policy should be corrected and more specific than the general rules for  terminating service agreements that are currently in the policy. Not  correctly specifying the mandatory and discretionary conditions for  reducing or terminating 3R incentives and service agreements could  hinder OPDIVs’ interpretation and understanding of these conditions when  reductions or terminations of the incentives may be in order.
Annual review of retention incentives with no service agreement.
OPM regulations state that for retention incentives that are paid when no  service agreement is required, an agency must review each determination  to pay the incentive at least annually to determine whether payment is still  warranted and certify this determination in writing. HHS’s policy does not  provide that retention incentives paid biweekly, which require no service  agreements, need to be reviewed annually. According to HHS officials,  HHS does not provide any guidance on this requirement; it is up to the  OPDIVs to determine how they will review their incentives, including the  annual review for retention incentives without service agreements. The  officials stated that they plan to build a check of this requirement into the  future accountability reviews of 3R incentives across HHS.
Conditions for repayment of an incentive. According to OPM  regulations, if a 3R incentive service agreement is terminated due to  employee fault or failure related to performance, the employee can retain  payments received for completed work, but the agency does not have to  pay the amount attributed to completed work that has not been received  unless agreed to in the service agreement, nor is the agency obligated to  pay any incentive payments attributable to uncompleted service. HHS’s  policy on the department’s obligations in the event of the termination of a  3R incentive is not clear, suggesting that an agency may be obligated to  make outstanding payments attributed to uncompleted service if provided  for in a service agreement, which is not permissible when terminated due  to employee fault.
According to an HHS official, HHS has not yet awarded retention  incentives to employees who would be likely to leave for a different  position in the federal service before the closure or relocation of the  employee’s office or organization. HHS’s policy does not address all the  regulatory requirements that apply when using retention incentives in this  manner, such as the requirement that these incentives cannot be paid in  biweekly installments at the full incentive percentage rate. A senior HHS  official said HHS has not yet determined if it will update the policy to  document these requirements because it has not yet used this type of  incentive. Moving forward, HHS should have the policy in place before  using this type of retention incentive to help ensure the OPDIVs use this  flexibility in a manner that meets the approval of HHS and regulatory  requirements.
section_title: HHS Monitors and Periodically Conducts Accountability Reviews of Its OPDIVs’ Human Capital Systems Including the Use of 3R Incentives
paragraphs: OPM regulations require agencies to monitor the use of 3R incentives to  ensure the incentive plan and payments are consistent with the law and  regulatory requirements. In its 3R incentive policy, HHS assigns its OPDIVs  the responsibility of ongoing monitoring of 3R incentives to ensure  compliance with regulations and HHS policy. HHS does not uniformly  review the OPDIVs’ guidance outlining the internal process they follow or  3R incentive forms, but a senior HHS official stated that HHS provides  advice to OPDIVs when requested or required. While its ongoing  monitoring of 3R incentives has been minimal in the past, according to  another senior HHS official, HHS is planning to take a more active role in  light of its recent review of 3R incentives in response to OPM’s directive to  agencies in May 2009 to review their 3R incentive programs. The official  stated that HHS is deciding how to implement the results of its 3R  incentive review and build ongoing monitoring and future reviews of 3R  incentives into the existing human capital accountability reviews  conducted by the Office of Human Resources.
Providing further oversight of 3R incentives, HHS’s Human Capital and  Accountability Division within the Office of Human Resources conducts  accountability reviews of the OPDIVs’ human capital systems, including  the use of 3R incentives as part of OPM’s Human Capital Assessment and  Accountability Framework requirements. The purpose of the  accountability reviews is to ensure the OPDIV’s’ human capital programs  and policies are effective and adhere to merit system principles and other  pertinent laws and regulations. In response to HHS’s recommendations  and required actions as a result of its reviews, an HHS official responsible  for conducting the accountability reviews said the OPDIVs are asked to  respond to all recommendations and required actions identified by HHS,  but HHS only requires a response to the required actions, which are legal  or regulatory violations. Moving forward, the official said that HHS plans  to conduct its accountability reviews of departmentwide programs, such  as 3R incentives, instead of the OPDIV-specific reviews, to enable the audit  team to examine specific details of the programs across HHS, which the  current approach does not allow. HHS is planning an accountability  program review of 3R incentives in fiscal year 2010.
For its accountability review of FDA in fiscal year 2007, HHS reviewed  FDA’s compensation strategies, including 3R incentives, and reported that  they helped attract and retain quality employees. As part of the review,  HHS said the team reviewed 13 group retention incentive actions at FDA  to ensure that the files were completed properly and contained correct  documentation. HHS did not identify any required actions for FDA on 3R  incentives or other aspects of its human capital system, but it did identify a  number of recommendations for improvements in the human capital area  including one specific to retention incentives. HHS found that overall  FDA’s retention policies and practices appear to meet the requirements of  HHS policy and other governmental guidelines. However, HHS reported  that FDA had not incorporated the use of retention tools into its  workforce plan and recommended that FDA identify existing retention  tools, analyze their effectiveness, and incorporate retention strategies into  the FDA workforce plan. According FDA’s Assistant Commissioner for  Management, FDA plans to address this recommendation in the scheduled  update of its strategic workforce plan in fiscal year 2010. HHS has not  reviewed FDA since fiscal year 2007 and plans to include FDA as part of its  scheduled program review of 3R incentives for fiscal year 2010.
section_title: Conclusions
paragraphs: Federal agencies have a number of available flexibilities, including 3R  incentives, to help them strategically manage their workforces. OPM’s call  to agencies to review their 3R incentive programs has raised awareness  about the importance of ensuring that current and future incentives are  used only when necessary to support agency mission and program needs.  FDA, OPM, and HHS have an opportunity to make further improvements  to internal controls and oversight of 3R incentives. FDA lacks an updated  strategic workforce plan that would help it determine how its use of 3R  incentives is contributing to its human capital goals. Despite positive  enhancements over the past 3 years, FDA’s internal controls have  weaknesses related to requesting, approving, and processing 3R incentive  requests. Strong internal controls help provide assurance that 3R  incentives are used efficiently and effectively.
As for oversight, OPM requiring all federal agencies to incorporate  succession planning in the decision process for awarding retention  incentives would help to ensure that agencies consider other effective  means to acquire and retain talent. Clearly incorporating important  requirements into HHS’s 3R incentive policy will help to ensure that  managers and OPDIVs are using 3R incentives consistent with the law and  regulations.
section_title: Recommendations for Executive Action
paragraphs: To better align the use of 3R incentives with the agency’s human capital  goals, we recommend that the Commissioner of FDA update FDA’s  strategic workforce plan to document the agency’s recruitment and  retention goals and strategies and as part of that update, identify  indicators to better track the progress of 3R incentives over time in  addressing the agency’s recruitment and retention goals.
As FDA implements the results of its 2009 review of 3R incentives, we  recommend that the Commissioner of FDA continue to strengthen FDA’s  internal controls for requesting, approving, and processing 3R incentives  by taking the following two actions:    update the guidance for awarding 3R incentives to include the payment  method used for retention incentives and all the conditions for terminating  a retention incentive when no service agreement is required, and    ensure 3R incentive files are properly completed and reviewed to address  policy and regulatory requirements before the employees receive the  incentive payments.
As OPM implements the results of its governmentwide 3R incentive  review, we recommend that the Director of OPM require agencies to  incorporate succession planning efforts into the decision process for  awarding retention incentives and document this requirement for  succession planning in their 3R incentive plans.
To ensure the department and OPDIVs are aware of HHS’s policy in all  areas of 3R incentives and use these incentives consistent with law and  OPM regulations, we recommend that the Secretary of HHS revise HHS’s  3R incentive policy to ensure that the guidance provided clearly addresses  certain important requirements outlined in the regulations.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a copy of the draft report to the Secretary of HHS and  Director of OPM for their review and comment. HHS’s Acting Assistant  Secretary for Legislation provided written comments that included  comments from FDA (see app. III). FDA generally agreed with our  recommendations. FDA stated that it will continue to review its 3R  incentives to ensure that their use is consistent with the agency’s guidance  for the use of 3R incentives. In response to its recommendation, HHS  acknowledged the need to revise its 3R incentive policy and stated that it  is in the process of reviewing and making the appropriate changes. HHS  also provided technical comments on the draft report, which we  incorporated as appropriate.
OPM provided written comments, which are included in appendix IV. OPM  agreed with our recommendation and stated that it will develop future  guidance on the importance of considering succession planning in the  decision process for awarding retention incentive. OPM stated that it is  working with agencies to review the 3R incentive program and its current  regulations, guidance, and monitoring policies to identify areas where  improvements can be made, such as developing and using metrics to  monitor and evaluate 3R incentive usage. OPM also provided technical  comments on the draft report, which we incorporated as appropriate.
As we agreed with your offices, unless you publicly announce the contents  of this report earlier, we plan no further distribution of it until 30 days  from the date of this letter. At that time, we will send copies of this report  to the appropriate congressional committees, the Secretary of HHS,  Commissioner of FDA, Director of OPM, and other interested parties. The  report will also be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please  contact me at (202) 512-6806 or goldenkoffr@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 V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines (1) the extent to which the Food and Drug  Administration (FDA) is linking its use of recruitment, relocation, and  retention (3R) incentives to its strategic human capital approaches to  address its current and emerging challenges; (2) the extent to which FDA’s  3R incentives were awarded consistent with the law, regulations, and  guidance and the internal controls FDA has in place to ensure proper  disbursement of 3R incentives and encourage efficient use; and (3) the  steps the Office of Personnel Management (OPM) has taken to help ensure  that agencies, including the Department of Health and Human Services  (HHS), have effective strategic oversight of their 3R incentive programs,  and how HHS is providing oversight of its 3R incentive program.
To address our first objective, we collected and analyzed aggregate pay  data as provided by HHS on the amount and number of 3R incentives by  various categories for employees in FDA and the rest of HHS from January  1, 2007, through July 4, 2009, and data on FDA’s workforce from OPM’s  Central Personnel Data File (CPDF) for fiscal year 2008. To describe  FDA’s use of 3R incentives and draw a comparison to the rest of HHS, we  analyzed and compared the data on FDA and the rest of HHS to determine  the number of each type of 3R incentive provided to employees and the  aggregate distributions across various categories including duty location,  pay plan, and occupational series by calendar year. Using the HHS pay  data, we calculated the percentage of FDA and HHS total numbers of 3R  incentives and total expenditures on these incentives, the mission-critical  occupational series’ percentage of FDA’s total number of 3R incentives  with mission-critical occupations as defined by FDA, the average  distribution of FDA 3R incentives by top occupational series, and the  distribution of FDA 3R incentives by pay plan.
To compare the use of 3R incentives in FDA with trends in its workforce,  using data from CPDF, we calculated FDA retirement eligibility by  occupational series for career permanent employees, and FDA’s  percentage of HHS’s total workforce. As a point of comparison on the  governmentwide use of 3R incentives, we reviewed OPM’s Recruitment,  Relocation, and Retention Incentives Calendar Year 2007: Report to the  Congress, issued in September 2008, and identified the total dollar amount  spent on 3R incentives in 2007. We checked the HHS data for  reasonableness and the presence of any obvious or potential errors in  accuracy and completeness. We conducted interviews with selected HHS  officials knowledgeable about the data, and brought to the attention of  these officials any concerns or discrepancies we found with the data for  correcting or updating and further clarification. On the basis of these  procedures, we believe the data provided by HHS are sufficiently reliable  for use in the analyses presented in this report. In addition, we believe the  CPDF is sufficiently reliable for the informational purpose of this report.
To identify linkage with the use of 3R incentives and FDA’s human capital  documents, we analyzed FDA’s Fiscal Year 2006 Workforce Plan—the  most recent workforce plan available—and FDA’s Succession Plan 2009- 2012. We also conducted interviews with FDA officials about the trends  we identified in the 3R incentives pay data, FDA’s strategic human capital  approaches and how the use of 3R incentives fits into broader human  capital decisions at the agencywide and center-specific levels, and how the  agency tracks the use of 3R incentives to assess the effectiveness of these  payments and how they contribute to FDA’s broader human capital goals.
To address our second objective, we identified all elements that are  required to be included in documenting the awarding of an incentive. We  analyzed applicable provisions of title 5 of the United States Code, OPM  regulations, HHS policy, and FDA guidance, and interviewed HHS, FDA,  and OPM officials to create a data collection instrument identifying the  applicable requirements. We used this data collection instrument to  analyze a sample of 3R incentives awarded by FDA in 2007 and 2008 in  order to determine the extent to which documentation elements required  for the awarding of 3R incentives were present.
To review the FDA 3R incentive files, we took a stratified sample. We  looked at new incentives for three categories of incentive files—  recruitment, relocation, and retention—from 2007 and 2008. There were  2,056 incentive actions in this population from January 1, 2007, to October  31, 2008. We randomly selected files for review from each set, or stratum,  of incentive actions for each category and year, except for three strata  where we reviewed all of the files due to the small population size. Our  sample size was 107 files, with the number of selected files per stratum  shown in table 2.
Subsequent analysis of the 107 files showed that 2 of the files were not in  the scope for this review, leaving us with a random sample of 105 files. We  applied our data collection instrument to the random sample of 105 files to  determine whether each file contained all the elements that needed to be  documented in the awarding of a 3R incentive. Each incentive file was  weighted so that our random sample statistically represented the  population in each stratum.
Because we followed a probability procedure based on random selections,  our sample of 3R incentive files was only one of a large number of samples  that we might have drawn. Because each sample could have provided  different estimates, we express our confidence in the precision of our  particular sample’s results in 95 percent confidence intervals. These are  intervals that would contain the actual population values for 95 percent of  the samples we could have drawn. As a result, we are 95 percent confident  that each of the confidence intervals in this report will include the true  values in the study population. All percentage estimates from the 3R  incentive file review have margins of error at the 95 percent confidence  level of plus or minus 10 percentage points or less, unless otherwise noted.
The practical difficulties of utilizing any data collection instrument may  introduce errors, commonly referred to as nonsampling errors. For  example, difficulties in how a particular question is interpreted, in the  sources of information that are available to respondents, or in how the  data are entered into a database or were analyzed can introduce unwanted  variability into the results. We took steps in the development of the  instrument, the data collection, and the data analysis to minimize these  nonsampling errors, including providing detailed instructions of the data  collection instrument. In addition, we had a second independent reviewer  for the data analysis to further minimize such errors.
We interviewed OPM officials to help understand OPM’s policy on  oversight of 3R incentives and the regulations, their interpretation of  HHS’s policy and FDA’s guidance on 3R incentives, and how the results of  the file review were viewed in this context. We did not ask OPM to review  HHS’s policy or FDA’s guidance on 3R incentives as part of our review. We  also interviewed FDA officials to discuss their internal controls relating to  the awarding and oversight of 3R incentives, and how the findings of our  review fit within the context of their oversight. We reviewed FDA’s most  recent review of its policy and usage of 3R incentives to identify revisions  that were made to internal controls.
To address the third objective, we analyzed OPM’s guidance on 3R  incentives including regulations, memorandums, and fact sheets;  templates for its human capital evaluations; and the 3R incentive report to  Congress for calendar year 2007. We also interviewed cognizant officials  from the two divisions in OPM that are responsible for developing the 3R  incentive regulations and annual reports and monitoring agencies’ use of  3R incentives. To obtain information on HHS’s oversight of 3R incentives,  we analyzed HHS’s 3R incentive policy to determine consistency with OPM  regulations on 3R incentives, HHS’s fiscal year 2007 human capital  accountability review of FDA to identify relevant findings on 3R  incentives, and other relevant documentation; interviewed senior-level  HHS officials responsible for implementing the 3R incentive policy and  conducting accountability reviews of the operating divisions’ human  capital management systems including 3R incentives; and interviewed  senior-level FDA officials familiar with HHS’s monitoring and oversight of  3R incentives.
We conducted our work from December 2008 through January 2010 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Highlights of the Food and Drug Administration 3R Incentive File Review Results
paragraphs: The following table provides examples of the results for our review of  FDA’s 3R incentive files. We reviewed the files of a random, stratified  sample of 3R incentives awarded from January 2007 through October 2008  to determine whether they met requirements in law, OPM regulations, HHS  policy, and FDA guidance.
section_title: Appendix III: Comments from the Department of Health and Human Services
section_title: Appendix IV: Comments from the Office of Personnel Management
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Belva Martin, Acting Director;  Carl Barden; David Bobruff; Sara Daleski; Karin Fangman; Peter Gilchrist;  Wati Kadzai; Janice Latimer; Meredith Moore; Melanie Papasian; Jeffery  Schmerling; and Gregory Wilmoth made major contributions to this report.