Human Capital: OPM Needs to Better Analyze and Manage Dual Compensation Waiver Data
Released: 2015-01-05T00:00:00

Letter

Background

OPM may waive application of the salary offset requirement for reemployed annuitants—thereby permitting dual compensation—pursuant to 5 U.S.C. § 8344(i) and § 8468(f). Under these authorities, agencies may request that OPM waive the offset requirement for individuals on a case-by-case basis, or, that OPM delegate to the agency head the authority to waive the offset requirement for individuals on a case-by-case basis. The statutes provide OPM the authority to consider and approve agencies’ waiver requests. OPM evaluates and may approve agency requests for waivers on a case-by-case basis for four authorized purposes: need to retain an individual, and other unusual circumstances.

OPM evaluates and may approve agency requests for delegation of authority to waive salary offsets on a case-by-case basis for two authorized purposes: other unusual circumstances.

Agencies requesting waivers or waiver authority must provide purpose- specific information about the circumstances for which the waiver or authority is requested, as summarized in table 1.

In order to obtain delegated authority to waive salary offsets, an agency must describe an emergency or other unusual circumstance comparable to the third and fourth categories above. In addition to the purpose- specific information, agencies must identify the occupations, grades, and locations of positions that might be filled under the delegated authority and provide a statement of expected duration of reemployment to be approved under the requested authority. For individual requests, agencies must identify the individual for whom the exception is requested, the appointing authority to be used, and the position to which he or she will be appointed. In addition, the agency must demonstrate that the annuitant will not agree to reemployment without the waiver. Agencies may also seek to extend previously granted delegated authority.

Under 5 C.F.R. 553.201(g), agencies may also request extensions for previously granted individual waivers. Agencies must show that the conditions justifying the original waiver still exist. During this process, OPM asks the agency for the reason why an extension is needed and why other staffing options were unavailable.

Should the delegated agreement between OPM and the agency permit the agency to renew individual waivers granted by the agency, the agency may grant an extension of individual waivers.

There are other authorities permitting dual compensation for which OPM does not exercise approval authority or otherwise regulate. For example, government-wide waiver authority was contained in the National Defense Authorization Act (NDAA) for Fiscal Year 2010 and allows agencies to waive offset requirements on a temporary basis. Although that authority was set to expire in October 2014, Congress recently passed an extension of that authority through December 2019. In 2012, we reported on the use of the NDAA authority and a few examples of other waiver authorities which OPM does not manage, including waiver authorities unique to Foreign Service annuitants and the Nuclear Regulatory Commission. Additionally, the Department of Defense (DOD) does not seek waiver approval from OPM because DOD has its own authority which permits the reemployment of annuitants without subjecting salaries to offset.

Use of Reemployed Annuitants Increased Between 2004 and 2013 with Most Concentrated in the Department of Defense

Our analysis of OPM’s data indicate that agencies’ use of reemployed annuitants has increased, with the number of on-board uniformed and civil service annuitants rising from over 95,000 in September 2004 to around 171,000 in September 2013 (from about 5 percent to 8 percent of the federal workforce). This is inclusive of reemployed annuitants with and without dual compensation waivers, as well as retired uniformed service members whose retirement or retainer pay is not subject to reduction. More than half of these reemployed civilian annuitants, specifically DOD’s civil service reemployed annuitants, would not be covered under OPM’s waiver authority. DOD accounted for 83 percent of the increase in annuitants from 2004 to 2013— of this increase, approximately 3 percent were civil service annuitants and about 98 percent were uniformed service annuitants. In comparison, our analysis of OPM’s data found that the overall size of the permanent career federal workforce, as reflected in the number of employees in the 24 Chief Financial Officers (CFO) Act agencies, increased about 11 percent over the same period and that DOD accounted for about 40 percent of this increase. The increase in reemployed annuitants reflects agencies’ greater reliance on all types of annuitants, including former uniformed service members covered by military pension systems as well as retirees from federal civilian service covered by the Federal Employees’ Retirement System (FERS) and the Civil Service Retirement System (CSRS). Use of annuitants was concentrated in the three largest agencies—DOD, Veterans Affairs (VA), and Homeland Security (DHS)— which collectively employed about 92 percent of annuitants in 2013, with nearly 80 percent employed at DOD alone. Most of the increased reliance on annuitants in DOD is tied to reemployment of uniformed service members: 98 percent of DOD’s annuitants were retired uniformed service members.

Our analysis also indicates that the other 21 CFO Act agencies saw increases in reemployed annuitants, as well. For these agencies, the number of on-board annuitants increased from over 23,000 in 2004 to about 36,000 in 2013 (about 2 to 3 percent of these agencies’ workforce). Although these agencies collectively relied more heavily on civil service annuitants than VA and DHS, reemployed uniformed service members still comprised nearly 79 percent of the on-board annuitants among these agencies in 2013. Greater reliance on annuitants suggests recent losses in key staff and institutional knowledge due to retirement. The number of voluntary retirements at the 24 CFO Act agencies increased in recent years, from 41,735 employees in 2004 to 58,313 in 2013 (2.4 to 3 percent of these agencies’ workforce). In addition, many of these agencies experienced hiring freezes between 2011and 2013, limiting their options for replacing staff who retired or separated for other reasons. In response to these circumstances and the increasing size of the retirement eligible workforce—about 30 percent eligible to retire in five years—agencies appear to have turned to annuitants to bridge potential staffing gaps.Figure 1 shows the number of annuitants in the federal workforce from 2004 to 2013.

Our analysis of OPM data shows that in 2013, 83 percent of on-board annuitants were in administrative, technical, or professional occupations, which include positions related to administration and management, information technology, and engineering, among others. Among civil service annuitants on-board in 2013, aggregate annualized salaries were highest in DOD, at $113.4 million (0.2 percent of DOD employees’ aggregate salaries) compared to $246.6 million among the other CFO act agencies collectively (or 0.2 percent of employees’ aggregate salaries). Among uniformed service annuitants on-board in 2013, aggregate annualized salaries were also highest in DOD, at $10.2 billion (18.9 percent of DOD employees’ aggregate salaries) compared to $2.3 billion among the other CFO Act agencies collectively (2.3 percent of employees’ aggregate salaries). Similar to career employees, reemployed annuitants generally had full-time schedules. However, most civil service annuitants were also on term limited appointments, generally serving from one to five years after retirement. Figure 2 shows the salary costs of annuitants as a percentage of agencies aggregate annualized salary rates.

OPM Does Not Conduct Trend Analysis of Dual Compensation Waiver Requests and Has Not Developed Policies and Procedures to Manage Waiver Documentation

OPM officials said that they do not conduct trend analysis of dual compensation waiver requests because each waiver is so unique that there is no trend or pattern to analyze. However, in our review of the small sample of 16 waiver request submissions provided by OPM, we found that “other unusual circumstance” was among the most often cited reasons for requesting a waiver and agencies were requesting waivers for individuals in administrative or professional occupations. An example of an unusual circumstance cited by agencies requesting a delegation is an urgent need to rehire annuitants to support the hiring of critical staff. For example, DHS cited a need to rehire investigative program specialists to support the hiring of law enforcement officers to meet a Congressional mandate. In another example, OPM cited a need to hire retired judges to help review applications for administrative law judge vacancies. This suggests that there may be some benefit to conducting analysis of these waivers because there may be trends that OPM is currently not aware of. While there is no specific statutory requirement for OPM to conduct trend analysis, without such analysis, OPM may be missing opportunities to analyze this information that can help guide the human capital management tools and guidance it develops and provides to agencies government-wide. Ensuring OPM is identifying challenges and assisting agencies as issues emerge is especially important given the increasing number of retirement-eligible employees across the federal government. As we have previously reported, unanticipated retirements could cause skills gaps to further widen and adversely impact the ability of agencies’ to carry out their diverse responsibilities.

With regard to guidance provided to agencies, OPM officials said that they occasionally identify or provide other tools or resources for human capital workforce management to agencies requesting waivers, but they do not do so routinely. For example, OPM may provide information on advertising tools or other resources to agencies experiencing difficulty hiring qualified candidates. OPM officials said that agency officials submitting waiver requests are generally familiar with OPM’s tools or guidance. However, we have previously found that agencies’ chief human capital officers were either unfamiliar with some OPM tools or guidance, or found the tools or guidance fell short of their agencies’ needs. OPM officials said that on infrequent occasions they refer agencies that make repeated requests to extend dual compensation waivers to OPM’s workforce planning division for consultation on how to use its workforce management tools more strategically. As we have recently reported, in an era of limited fiscal resources, it is critical that OPM and agencies are developing and using the most cost-effective tools to ensure agencies can meet their missions.

OPM Has Not Developed Effective Policies and Procedures for Managing Waiver Request Documentation

We found that OPM lacks effective policies and procedures for documenting waiver requests which may hamper its ability to conduct trend analysis. OPM officials said that they do not have a systematic and reliable process for maintaining dual compensation waiver documentation. Specifically, OPM officials said they do not have a standard policy for how dual compensation waivers are labeled or saved and, therefore must individually review thousands of electronic documents in their document management system database to identify the waiver records. Officials said the waiver requests and supporting materials are submitted to OPM and assigned to individuals for preliminary review and analysis. OPM staff save these in the document management system, but save documents inconsistently, sometimes merging the request and documentation and saving the evidence separately, without any standard labeling. Officials said that staff create a routing slip, called an executive decision summary, for each file. OPM staff use the routing slip to record the names of officials and dates of their review to recommend approval or denial. However the routing slip may or may not be saved with the corresponding waiver materials and does not include summary information about the waiver request.

Federal internal control standards state that agencies should clearly document significant transactions and events and the documentation should be readily available for examination. These actions help organizations run their operations efficiently and effectively, report reliable information about their operations, and comply with applicable laws and regulations. Agencies can achieve this by developing and implementing policies ensuring accountability for records, appropriate documentation of transactions, and sufficient information and communication about programs. However, OPM does not have such a policy to guide its management of the dual compensation waiver files. As a result, OPM was unable to retrieve these files in a timely manner for our review.

OPM Limits Duration of Waivers Approved In Lieu of Monitoring Agency Compliance

According to OPM officials, OPM does not monitor the agency’s implementation of an individual dual compensation waiver once a waiver is granted. The officials said OPM may require agencies to submit documentation before approving delegated waiver authority in order to determine whether the agency is complying with relevant requirements. OPM officials said OPM’s role is limited to application review and approval of dual compensation waiver requests and extensions, and that it does not have a role in their implementation or oversight. OPM officials also said individual and delegated waiver requests may be approved, pending specific actions first taken by the requesting agency. However, OPM officials said it is the requesting agency’s responsibility to ensure that it meets the conditions outlined in the dual compensation waiver approval letter. Officials said there was one exception—OPM requires and reviews evidence from agencies requesting approval to extend a previously granted waiver beyond the original term to determine if the circumstances justifying the waiver still exist.

The statutory provisions authorizing OPM to grant individual and delegated waiver requests do not specifically require OPM to conduct oversight or monitoring of how agencies implement the authority granted by OPM. However, OPM is generally required to maintain oversight over delegated activities under 5 U.S.C. § 1104(b)(2). Accordingly, OPM regulations recognize the need for some oversight where OPM delegates waiver authority to an agency with no time limit on that grant of authority. In those instances, OPM regulations state that it may terminate an agency’s delegated authority if it determines that the circumstances justifying the delegation have changed substantially, or if the agency has failed to manage the authority in accordance with the law, regulations, or OPM officials stated that they do establish the terms of the agreement.time limits on delegation agreements and, in the one delegated waiver example OPM provided for our review, the waiver was authorized for a specific period. Given OPM’s document management challenges, as previously discussed, OPM was unable to provide us with a representative sample of waiver approval letters to determine whether OPM consistently established time limits on the delegation of waiver authority provided to agencies and, if not, whether there were instances where monitoring or oversight was necessary.

Conclusions

Given the budgetary and long-term fiscal challenges facing the nation, agencies must identify options to meet their missions with fewer resources. While federal agencies shoulder this responsibility, OPM, through its authority to review and approve dual compensation waivers, as well as its responsibility to assist agencies with all aspects of human capital management, should identify trends in waiver use and develop cost-effective human capital tools and resources, where appropriate. These objectives cannot be achieved without analysis of dual compensation waiver information. However, OPM has not developed adequate policies and procedures for the management of dual compensation waiver documentation. Given the increasing use of reemployed annuitants and the impending wave of retirements, OPM is missing an opportunity to leverage the information gained through the review and approval of dual compensation waivers to inform and improve upon the assistance it provides federal agencies in their management of human capital.

Recommendations for Executive Action

To improve OPM’s assistance to agencies and management of its dual compensation waiver program, we recommend that the Director of OPM take the following two actions: 1. Analyze dual compensation waivers to identify trends that can inform OPM’s human capital management tools. 2. Establish policies and procedures for documenting the dual compensation waiver review process.

Agency Comments and Our Evaluation

We provided a draft of this product to OPM for review and comment. In written comments, which are reprinted in appendix II, OPM did not concur with one recommendation and partially concurred with one. OPM also provided technical comments, which we incorporated as appropriate.

OPM stated that it did not concur with our recommendation to analyze dual compensation waivers to identify trends that can inform OPM’s human capital management tools. OPM noted that the waivers are authorized for specific purposes and that the statue does not require OPM to conduct any trend analysis. OPM also noted that it does not grant a large number of waivers and that those patterns are identified when particular circumstances, like natural disasters prompt agencies to seek waivers for similar issues. As noted in the report, we agree that there are clearly defined purposes and that there is no statutory requirement for OPM to conduct a trend analysis. While our analysis did find that most of rehired annuitants were likely hired under an authority maintained by the Department of Defense, OPM was unable to provide evidence of the number of individual or delegated waivers that it had approved in any year, including currently active waivers. Further, given the likelihood of future agency requests for dual compensation waivers for natural disasters, the patterns OPM identified after Hurricane Katrina and potential lessons learned are evidence of the kind of insight that could be informing OPM’s other human capital management tools or resources. We continue to believe that OPM should analyze waivers and identify trends that could improve its other tools.

OPM stated that it partially concurred with our recommendation to establish policies and procedures for documenting the dual compensation waiver review process. OPM noted that it has policies and procedures for adjudicating waivers and that it is in compliance with the National Archives and Records Administration policies. However, OPM was unable to provide evidence of any such policies and procedures. In fact, OPM could not demonstrate adherence to federal internal control standards stating agencies should clearly document significant transactions and events and the documentation should be readily available for examination. Further, while OPM was able to ultimately produce 16 waiver decision letters, it was unable to provide a single complete, agency waiver application along with the supporting documentation and corresponding OPM decision letter. OPM also could not identify the total number of waivers for any given time period, meaning that even if OPM individually reviewed the thousands of documents in its document management system, it would not know if all materials were maintained appropriately. We continue to believe that OPM should take action to fully address this recommendation and comply with federal internal control standards.

We are sending copies of this report to the appropriate congressional committees and to the Director of the Office of Personnel Management. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 7 days from the report date. At that time, we will send copies to the Committee on Homeland Security and Government Affairs. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report please contact me at (202) 512-2717 or jonesy@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 key contributions to this report are listed in appendix III.

Appendix I: Scope and Methodology

To analyze reemployed annuitant trends, we used the Office of Personnel Management’s (OPM) Enterprise Human Resources Integration (EHRI) Statistical Data Mart, which contains personnel action and on board data for most federal civilian employees. We analyzed agency-level EHRI data for the 24 Chief Financial Officers (CFO) Act agencies, which represent the major departments (such as the Department of Defense) and most of the executive branch workforce. We analyzed EHRI data starting with fiscal year 2004 because personnel data for the Department of Homeland Security (which was formed in 2003) had stabilized by 2004. We selected 2013 as the endpoint because it was the most recent, complete fiscal year of data available during most of our review.

We classified annuitants in two ways: 1. Military only annuitants (retired uniformed service officers or service enlisted members who are receiving retired or retainer pay).2. Military and Federal Employees’ Retirement System or Civil Service Retirement System annuitants (including individuals with all valid EHRI annuitant codes).

We analyzed on-board trends for most of the executive branch workforce, including temporary and term-limited employees. However, we focused on career permanent employees in our analysis of separation trends and retirement eligibility because these employees comprise most of the federal workforce and become eligible to retire with a pension, for which temporary and term limited employees are ineligible. To calculate the number of federal civilian employees, we included all on board staff, regardless of their pay status. In addition, we excluded Foreign Service workers at the State Department since those employees were not included in OPM data for the years after 2004.

We examined on-board and annuitant counts, voluntary separations, adjusted base pay, and retirement eligibility trends by agency, and occupation. Occupational categories include Professional, Administrative, Technical, Clerical, Blue Collar, and Other white-collar (PATCO) groupings and are defined by the educational requirements of the occupation and the subject matter and level of difficulty or responsibility of the work assigned. Occupations within each category are defined by OPM.

To calculate voluntary separation rates, we added the number of career permanent employees with personnel actions indicating they had separated from federal service with either mandatory or voluntary retirement personnel actions and divided that by the 2-year on board average. To calculate retirement eligibility for the next 5 years, we computed the date at which the employee would be eligible for voluntary retirement at an unreduced annuity, using age at hire, years of service, birth date, and retirement plan coverage.

We used the EHRI adjusted base pay to examine the annualized salaries of on-board individuals. It is important to note that this amount does not necessarily reflect the actual amount annuitants were paid in the fiscal year, but rather, the total annualized salary of annuitants in the data.

We assessed the reliability of the EHRI data through electronic testing to identify missing data, out of range values, and logical inconsistencies. We also reviewed our prior work assessing the reliability of these data and interviewed OPM officials knowledgeable about the data to discuss the data’s accuracy and the steps OPM takes to ensure reliability. On the basis of this assessment, we believe the EHRI data we used are sufficiently reliable for the purpose of this report.

To evaluate the extent to which OPM analyzes trends in the reasons for waiver requests and provides related guidance, we reviewed OPM’s policies and procedures for evaluating waiver requests, analyzed documentation from OPM, and interviewed officials.

To evaluate the extent to which OPM ensures compliance with conditions under which the waivers were granted, we reviewed relevant statutes, regulations, OPM’s policies and procedures for reviewing waiver requests, and interviewed OPM officials. We also reviewed the 16 waiver decision letters that OPM was able to provide. According to OPM officials, the waivers were selected to represent examples of the types of requests for the different authorized waiver purposes. We were unable to assess whether the examples OPM provided to us were representative of the universe of waiver requests because of the conditions in which the files are maintained. We compared information gathered from reviewing these letters as well as interviews with OPM officials to the statutory and regulatory provisions, OPM’s policies and procedures, and internal controls standards for the federal government.

Appendix II: Comments from the Office of Personnel Management

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgment

In addition to the individual named above, Chelsa Gurkin (Assistant Director), Anthony Patterson (Analyst-in-Charge), Vida Awumey, Sara Daleski, Karin Fangman, Kimberly McGatlin, and Rebecca Shea made major contributions to this report.