GPRA calls for agencies to address human capital in the context of performance-based management and specifically requires that annual performance plans describe how agencies will use their human capital to support the accomplishment of their goals and objectives. In addition, OMB’s fiscal year 2001 guidance for agencies’ annual performance plans (OMB Circular No. A-11, Part 2) states that agencies’ annual plans may include agencywide goals for internal agency functions and operations, such as employee skills and training, workforce diversity, retention, downsizing, and streamlining. Building on the fiscal year 2001 guidance, the fiscal year 2002 guidance notes the increased emphasis on the use of workforce planning and other specific strategies that align human capital with the fulfillment of an agency’s mission. The fiscal year 2002 guidance specifies for the first time that agencies should include performance goals covering human capital management areas, such as recruitment, retention, skill development and training, and appraisals linked to program performance. We have noted that the more useful annual performance plans discuss, or refer to a separate plan, the human capital needs—in terms of knowledge, skills, and abilities—necessary for achieving goals and the workforce planning methods by which these needs were determined. Also, the more useful plans describe how strategies—in such areas as recruitment and hiring, retention and separation, training and career development, employee incentives, and accountability systems—meet workforce needs and support the achievement of goals. Addressing the federal government’s human capital challenges is a responsibility shared by many parties. We have noted that OPM and OMB have substantial roles to play in fostering a more results-oriented approach to strategic human capital management across the government.OPM has begun stressing to agencies the importance of integrating strategic human capital management with agency planning. OPM has also rolled out a workforce planning model, with associated research tools, and has launched a Web site to facilitate information-sharing about workforce planning issues. In addition, OPM has published A Handbook for Measuring Employee Performance: Aligning Employee Performance Plans with Organizational Goals. Recently, OPM revised the Senior Executive Service performance management regulations so that a balanced scorecard of customer satisfaction, employee perspectives, and organizational results is to be used by agencies to evaluate executives’ performance. OPM’s sustained commitment and attention will be critical to making a real difference in the way federal agencies manage human capital. It is likely that OPM will continue moving from “rules to tools,” and that its most valuable contributions in the future will come less from traditional compliance and approval activities than from its initiatives for assisting agencies as a strategic partner. For example, we have noted that OPM could make a substantial contribution by continuing to review, streamline, and simplify OPM regulations and guidance to determine their continued relevance and utility. Related to this, we also have noted that OPM could make human capital flexibilities and best practices more widely known to agencies by communicating “how to” success stories and taking full advantage of its ability to facilitate information-sharing and outreach to human capital managers throughout the federal government. While OMB had played a limited role in strategic human capital management, recent actions show OMB’s growing interest and potential importance in working with agencies to ensure that they have the human capital capabilities needed to achieve their strategic goals and missions. First, the President’s fiscal year 2001 budget gave new prominence to human capital management by making the alignment of federal human capital to support agency goals a Priority Management Objective. Another positive step is the increased attention to strategic human capital issues in OMB’s Circular No. A-11, Part 2, guidance to agencies on preparing the fiscal year 2002 performance plans. Most recently, in another important and positive step, the President’s fiscal year 2002 budget notes that the current civil service system does not do all it should to reward achievement or encourage excellence and limits the ability of agencies to compete successfully for highly skilled senior talent. The budget states that the administration will seek legislation to provide program managers new and expanded workforce restructuring tools. According to the budget, these actions, combined with improved accountability through better linkage of program performance with budget decisionmaking and other reforms, will make the federal government more responsive and effective. OMB is perfectly positioned to assume greater leadership over governmentwide strategic human capital issues. First, given its central role in the budget process and responsibility for overall leadership over executive branch management improvement, OMB has the ability to leverage the cabinet secretaries and deputy secretaries to help ensure that their agencies view strategic human capital management as critically important in their overall strategic planning, performance management, and budgeting efforts. Second, OMB has the ability through resource allocations to help ensure that agencies give greater attention to the linkages between agency missions and the human capital needed to pursue them. To meet our objective, we reviewed the fiscal year 2001 performance plans that the 24 CFO agencies submitted to Congress. In addition, we reviewed our individual reports on agencies’ fiscal year 2001 performance plans; GPRA requirements for agencies’ performance plans; guidelines contained in OMB’s Circular No. A-11, Part 2; and our guidance, reports, and testimonies discussing strategic human capital management. We selected examples based on our guides to assist agencies and Congress with effectively implementing GPRA, specifically our guides to improving the usefulness of agency performance plans. We did our work from September 2000 to March 2001 in Washington, D.C., in accordance with generally accepted government auditing standards. We requested comments on a draft of this report from the Director of OMB and the Acting Director of OPM, and we asked officials in each of the agencies profiled to verify the accuracy of the information presented from their respective fiscal year 2001 performance plans. We incorporated their comments where applicable. We did not independently verify the accuracy of the information contained in the agencies’ fiscal year 2001 performance plans. Agencies’ fiscal year 2001 performance plans covered a variety of human capital activities, as illustrated by the following examples. 1. Recruit and Retain Employees on the Basis of Current and Projected Needs. A high-performing organization identifies the best strategies for filling its talent needs through recruiting and hiring and follows up with appropriate investments to develop and retain the best possible workforce. Agencies’ performance plans reflected different levels of attention to employee recruitment and retention. As part of a discussion of challenges confronting the agency, the U.S. Mint’s fiscal year 2001 plan notes that a key issue facing the agency is its ability to attract and retain employees with the skills needed to perform the agency’s unique mission. The Mint explains that it is difficult for the agency to successfully compete for and retain employees with skills more commonly found in the private manufacturing and marketing sectors as well as in information technology. The Mint notes that it is exploring ways to increase the attractiveness of employment, such as rewarding and evaluating employees in accordance with its strategic plan goals and objectives, although the plan does not provide any performance goals or measures directly associated with the Mint’s human capital challenges or initiatives. Going beyond describing challenges facing the agency, the Department of Justice set a goal to “strengthen human resource recruitment and retention efforts, providing for a workforce that is well-trained and diverse.” Specifically, Justice states that on the basis of an assessment of recruitment and retention issues, the Immigration and Naturalization Service (INS) needs to recruit and retain qualified Border Patrol agents. Consequently, INS set a fiscal year 2001 target to increase its deployment of border patrol agents to 9,807 from the level of 7,982 achieved in fiscal year 1998. (See fig. 3.) As part of its human capital strategy to increase the number of these agents on board, the plan states that INS will train over 200 border patrol agents as recruiters, establish a toll-free job information hotline, and consider recruitment bonuses. Consistent with GPRA requirements for annual performance plans, INS also describes its procedures to validate and verify its data on the number of agents on board. Our work has found that the Department of Defense (DOD) faces an especially significant challenge in retaining the hundreds of thousands of new recruits it enlists each year. DOD set a performance goal to “recruit, retain, and develop personnel to maintain a highly skilled and motivated force capable of meeting tomorrow’s challenges” and states it will use four measures—enlisted recruiting, recruit quality benchmarks, active retention rates, and reserve attrition rates—to demonstrate its progress in meeting this goal. Specifically, for its enlisted recruiting measure, DOD set a fiscal year 2001 target of 205,248 for new active force personnel and notes that this target allows for discharges, promotions, and anticipated retirements to maintain statutorily defined military end-strengths. DOD reports that in fiscal year 1999 it recruited 186,600 personnel and had not met its target of 194,500. According to its plan, DOD intends to improve the results of its recruiting efforts by expanding advertising, increasing the number of recruiters, and providing enhanced enlistment bonuses. 2. Hire a Diverse Workforce. A high-performing organization maintains an environment characterized by inclusiveness that reflects a variety of styles and personal backgrounds and is responsive to the needs of diverse groups of employees. Agencies present different approaches in their performance plans to address diversity. For example, the National Science Foundation focuses on the total number of hires to science and engineering positions from underrepresented groups. The Department of the Interior plans to increase the general diversity of its workforce rather than the growth rate of specific groups and set a goal to increase the diverse representation of its total workforce by at least 3.1 percent for fiscal year 2001 from an unspecified fiscal year 1997 level. Interior states that more detailed supporting documents are being developed.