SEC was created by Congress in 1934 primarily to protect investors; maintain fair, honest, and efficient securities markets; and facilitate capital formation. SEC’s oversight responsibilities include rule making, surveilling the markets, interpreting laws and regulations, reviewing corporate filings, conducting inspections and examinations, and determining compliance with federal securities laws. In addition, SEC monitors and regulates a variety of key market participants, which as of July 2004 included more than 7,200 broker-dealers, 900 transfer agents, almost 500 municipal and government securities dealers, and self-regulatory organizations (SRO). However, as we have reported previously, SEC has faced resource and management challenges that affected its ability to achieve its mission. The following sections include a discussion of SEC’s organizational structure and its human capital challenges, as well as a discussion of principles for human capital management and planning. As of August 2005, SEC had approximately 3,800 staff working in four divisions and 21 offices in Washington, D.C., and 11 regional and district offices. Approximately 41 percent of staff were attorneys, 25 percent were accountants or financial analysts, and 6 percent were investigators or examiners. The remaining 28 percent were other professional, technical, administrative, and clerical staff. Figure 1 depicts SEC’s organizational structure, including the Chairman’s office and the agency’s key divisions and offices. The Managing Executive for Operations and Management, who works in the Office of the Chairman, is responsible for overseeing all efforts to enhance agency productivity, retain qualified staff, and manage agency resources. In coordination with the Office of the Executive Director, the Managing Executive for Operations and Management has primary responsibility for OHR, which develops, implements, and evaluates SEC’s programs for human resource and personnel management. Over the past years, we have produced several reports relevant to human capital and workforce planning issues at SEC. In 2001, we recommended that the Chairman of SEC include a strategy for succession planning and develop a comprehensive, coordinated workforce planning effort as part of the agency’s annual performance plan. In March 2002, we found that SEC had not reviewed its staffing and resource needs independent of the budget process and that SEC generally developed its annual budget request based on the previous year’s appropriation, not on what the agency actually needed to fulfill its mission. We also commented that SEC was making its staffing allocation decisions without the benefit of a strategic plan. We recommended that SEC broaden its strategic planning process to determine its regulatory priorities and the resources needed to fulfill its mission, including identifying the staff skills needed to do so. In July 2004, we found that although SEC received more flexible pay and hiring authority, it continued to face challenges filling critical vacancies, such as for accountants. Furthermore, we reported that although SEC’s allocation of its newly authorized positions was generally consistent with Sarbanes-Oxley directions, these decisions were made without the benefit of an updated strategic plan that outlined the agency’s priorities—a tool that could be used to help ensure that SEC was deploying its resources to maximize organizational effectiveness. Later, in November 2004, we reported the results of a GAO survey of human capital issues at SEC to benchmark employee views following the implementation of pay parity and several work-life programs. We found that the significant improvement in employee satisfaction with compensation and work-life programs could be attributed to SEC’s recent implementation of pay parity and an increased focus on the use of flexible work schedules and telework programs since 2001. In May 2005, we audited SEC’s financial statements for fiscal year 2004 and found that SEC’s preparation of its financial statements was manually intensive and consumed significant staff resources. To address the weaknesses found in the audit, SEC stated that it would increase the number of financial reporting staff. Finally, in August 2005, as a result of our review of SEC’s facilities project management and related budget planning, we recommended that SEC complete the hiring of new positions in the Office of Administrative Services and the Office of Financial Management. Studies by several organizations, including GAO, have shown that successful organizations in both the public and private sectors use strategic management approaches to prepare their workforces to meet present and future mission requirements. For example, preparing a strategic human capital plan encourages agency managers and stakeholders to systematically consider what is to be done, how it will be done, and how to gauge progress and results. Federal agencies have used varying frameworks for developing and presenting their strategic human capital plans. More recently, various agencies have begun using OPM’s Human Capital Assessment and Accountability Framework (HCAAF) as the basis for preparing such plans. HCAAF, which OPM developed in conjunction with OMB and us, outlines six standards for success, key questions to consider, and suggested performance indicators for measuring progress and results. These six standards for success and related definitions are as follows: Strategic alignment. The organization’s human capital strategy is aligned with mission, goals, and organizational objectives and integrated into its strategic plans, performance plans, and budgets. Workforce planning and deployment. The organization is strategically utilizing staff in order to achieve mission goals in the most efficient ways. Leadership and knowledge management. The organization’s leaders and managers effectively manage people, ensure continuity of leadership, and sustain a learning environment that drives continuous improvement in performance. Results-oriented performance culture. The organization has a diverse, results-oriented, high-performance workforce, and a performance management system that effectively differentiates between high and low performance and links individual, team, or unit performance to organizational goals and desired results. Talent management. The organization makes progress toward closing gaps or making up deficiencies in most mission-critical skills, knowledge, and competencies. Accountability. The organization’s human capital decisions are guided by a data-driven, results-oriented planning and accountability system. Strategic workforce planning, an integral part of human capital management and the strategic workforce plan, involves systematic assessments of current and future human capital needs and the development of long-term strategies to fill the gaps between an agency’s current and future workforce requirements. Agency approaches to such planning can vary with each agency’s particular needs and mission; however, our previous work suggests that irrespective of the context in which workforce planning is done, such a process should incorporate five key principles: (1) involve management and employees, (2) analyze workforce gaps, (3) employ workforce strategies to fill the gaps, (4) build the capabilities needed to support workforce strategies, and (5) evaluate and revise strategies. Figure 2 provides a fuller description of each of the five principles. SEC has shown progress on a number of strategic human capital management initiatives that could help strengthen SEC’s efforts in workforce planning and is developing its strategic human capital plan. These initiatives include splitting its Office of Administrative and Personnel Management into the Office of Administrative Services and OHR in order to improve efficiency and effectiveness in both and creating a more structured and institutionalized human capital council by expanding the role of the ERB, now called the HCRB. Furthermore, SEC is in the process of creating its first strategic human capital plan. According to SEC, this plan is to be based on OPM’s HCAAF. In 2003, after the passage of Sarbanes-Oxley, SEC undertook an extensive workforce and work-flow review, and the ERB became the vehicle through which SEC leadership met to align its programmatic goals and new responsibilities with its human capital approaches and existing and new resources. The ERB—composed of senior division managers, the Managing Executive for Operations, and the head of OHR (after the creation of that office)—met monthly and on an ad hoc basis to deal with special issues, and produced recommendations for the Chairman’s approval. The 2003 workforce and work-flow review process required division and office directors to present justifications for resource requests to the ERB for the board’s approval. One outcome of the 2003 review was the decision to split SEC’s Office of Administrative and Personnel Management into two offices—the Office of Administrative Services and OHR. According to OHR, the separation of the office’s administrative and personnel functions was made to improve efficiency and effectiveness in these functions, which was necessitated by the agency’s growth of approximately 1,000 individuals after the implementation of Sarbanes-Oxley. In addition, the split created an opportunity for SEC to hire an Associate Executive Director for OHR, who is tasked with assessing, developing, and implementing human resources programs. Following the creation of OHR, SEC broadened the role of the ERB—renamed the HCRB in April 2005—to include a senior executive review of all human capital issues. SEC staff said that the HCRB has a standing 2- to 3-hour biweekly meeting and is composed of (1) directors from the major divisions and offices—Divisions of Corporation Finance; Investment Management; Market Regulation; Enforcement; and the Office of Compliance, Inspections, and Examinations (OCIE); (2) a designee representing the interests of the field offices; (3) the Executive Director (who serves as Chair); (4) a representative from the Chairman’s office; and (5) the Associate Executive Director of OHR. According to SEC, although smaller offices do not regularly participate in the HCRB, the Executive Director is responsible for representing the interests of these offices. In addition, these offices make presentations to the HCRB on an as-needed basis. The HCRB approves all human capital decisions, including staffing allocations. Specifically, staffing allocations and current structures for each division and office can now only be amended with the approval of the HCRB. According to SEC officials, HCRB’s staffing decisions are made on a consensus rather than formal voting basis. SEC staff also said that although the commission does not directly participate in the agency’s human capital planning process, a representative from the Chairman’s office attends HCRB meetings.