Detailed Information on the
Merit System Compliance Assessment

Develop and refine standardized data collection systems and methodologies that will be used by OPM and agency self-accountability systems for government wide analysis to better inform Federal human resource policy and practices. A proposal should be submitted by November 30, 2005 that describes 1) how and when violations are recorded; and 2) a description of how this information will be maintained and accessed for government-wide analysis. This proposal should also serve as a model for how agencies will report violations after conducting self assessments.

Establish internal HR Metrics Group to review current measures (program measures, effective and efficiency measures) and propose recommended measures by the end of FY 2008.

Identify efficiency measures for the audit activities so that program resources are used effectively. Provide at least two proposed efficiency measures for the audit activity by October 31, 2005. This follow up action will be completed when both OPM and OMB agree to the wording and use of the efficiency measures.

Evaluate whether an agency's compliance with veterans' preference laws can be used as a leading indicator to measure an agency's overall compliance with all other civil service laws and regulations. OPM should provide data on veterans' preference violations and other violations sorted by agency. The first baseline data submission is due December 15, 2005. Future fiscal year data submission will be due October 31, 2006 and October 31, 2007.

Conduct a rigorous and unbiased evaluation of the effectiveness and impact of the compliance program, comparing the program against others with similar purposes. By December 15, 2005, OPM should provide an update on this effort.

Collaborate with the Equal Employment Opportunity Commission on activities that overlap to improve overall Federal government efficiency in the area of compliance reviews. OPM should provide an update on their progress by December 15, 2005.

Measure: Percentage of classification and job grading appeals decisions that exceed timeliness standards (60 days after receipt of the appeal administrative report).

Explanation:This is a long standing measure for the appellate function. Because due process depends on timely decisions ("justice delayed is justice denied"), the appellate function measure focuses on OPM's goal to quickly resolve employee appeals of certain agency personnel decisions. The appellate activity attempts to complete an employee's appeal within 60 workdays after the receipt of the appeal administrative report. Receipt of the administrative report means that all relevant documentation from both the agency and the appellant has been received and the case is adjudicable. Completion is when the classification appeals officer submits a completed decision to the appeals program manager.

Measure: The percentage of agenices with violations of veterans' preference laws, rules, and regulations.

Explanation:This new measure for the agency HRM audit activity assesses PMC and small agency compliance with veteran's preference laws. OPM asserts that agencies that administer veterans' preference correctly have fewer total violations of civil service laws, rules and regulations, making veterans' preference violations a leading indicator for overall compliance. (OPM must gather data to support this hypothesis.) Unlike other laws, rules and regulations governing Federal human resource management, veterans' preference requirements apply to all executive agencies, including those not covered by Title 5 or that operate alternative personnel systems. Violating veterans' preference requirements is a serious violation and can constitute a prohibited personnel practice punishable by adverse action, debarment from Federal service, and/or civil penalty. Although this is a new measure, the program has been collecting this data over several years. The PART process served to refine how this data would be used to measure performance.

Measure: Percentage of agencies with severe problems in a DEU demonstrate improvement within one year following completion of an audit.

Explanation:This new measure for the Delegated Examining Unit (DEU) audit activity assesses agency compliance with laws related to hiring personnel using delegating examining authorities. It is related to the merit principle of fair and open competition through monitoring agency competitive examining authority. Improvement is defined as the DEU adopting compliant examining practices or the agency shifting examining away from the DEU. It is a failure if OPM revokes or suspends an agency's examining authority. Severe problems in DEUs are those that invalidate or destroy public confidence in the examining process. They can be systemic problems or isolated practices with special circumstances (e.g., intentional abuse, nepotism, etc.). Although this is a new measure, the program has been collecting this data over several years. The PART process served to refine how this data would be used to measure performance.

Measure: The number of PMC agenices that fully implement a system of internal compliance with merit system principles and laws, rules and regulations in accordance with OPM standards (basic system requirements) for agency accountability systems.

Explanation:This new measure for the agency HRM audit activity addresses OPM's goal of building strong agency accountability systems that can serve as the first level of compliance. OPM has developed self-accountability standards to improve oversight at the 26 President's Management Council agencies, representing 93% of the Federal workforce. Both MSPB and GAO agree that OPM must continue to promote agency self-monitoring programs in recognition of the growing decentralization of the federal government's personnel system. These systems are also required by 5 CFR Part 10 Rule 10 and must be assessed with standards developed by OPM to execute the requirements of the CHCO Act of 2002 (5 U.S.C. 1103(c)).

Is the program purpose clear?

Explanation: The purpose of the program is to ensure that executive agencies exercise their delegated personnel management authorities in accordance with merit system principles, Civil Service laws and regulations, and OPM standards.

Evidence: Under the "Findings and Statement of Purpose" section of P.L. 95-454, the Congress states that the function of filling positions and other personnel functions in the competitive service and in the executive branch should be delegated in appropriate cases to the agencies to expedite processing appointments and other personnel functions. The law also states that the control and oversight of this delegation is to be maintained by OPM to protect against prohibited personnel practices and the use of unsound management practices by the agencies. If OPM finds that an agency has taken an action contrary to any law rule or regulation, or any OPM standard, the agency involved must take any corrective action OPM requires. These oversight authorities and responsibilities and are embedded in 5 U.S.C. 1103, 1104, 5103, 5110-5113, 5346, 5366, 5 CFR 5.1-5.3, and in sections 1304, 1312, 1313, 1321, 1322, and 1331 of the Chief Human Capital Officers Act of 2002. In addition, under E.O. 13197, OPM is given the authority to review the human resource management programs and practices of any agency and report to the head of the agency and the President on the effectiveness of these programs and practices, including whether they are consistent with merit system principles. The E.O. also authorizes OPM to require that an agency establish and maintain a system of accountability for merit system principles.

Does the program address a specific and existing problem, interest, or need?

Explanation: OPM's compliance program addresses both the Congress' and the President's continued interest in agencies upholding the merit system principles when filling positions and performing other personnel functions. In addition, current data collected from agencies by the OPM compliance program show continuing problems of noncompliance with personnel laws, rules and regulations. Both MSPB and GAO agree that OPM must continue to promote agency self-monitoring programs in recognition of the growing decentralization of the federal government's personnel system. In a January 2003 GAO report (GAO-03-115) entitled, "Major Management Challenges and Program Risks: Office of Personnel Management," GAO states, "Effective and strategic oversight of agencies' systems is even more critical today because an increasing number of agencies are using human capital flexibilities, delegating authorities to line managers, and seeking and obtaining exemptions from the requirements of title 5 of the U.S. Code."

Evidence: Under the "Findings and Statement of Purpose" section of the Civil Service Reform Act of 1978, the Congress stated its interest in having a Federal personnel management system that was consistent with merit system principles and free from prohibited personnel practices. More recently, the Congress specified that the new personnel systems at DoD and DHS (P.L. 107-296 and P.L. 108-136) not waive, modify or otherwise affect 5 USC 2301 (merit system principles) and 5 USC 2302 (prohibited personnel practices). Further evidence of continued interest in oversight is seen in E.O. 13197, dated January 25, 2001, where it states, "In an era of decentralization of Federal human resources management, it is increasingly important to ensure that merit system principles are applied consistently across the Federal government?? The President and the public need to be assured that the Federal agencies are monitoring the exercise of all human resources management authorities that have been delegated to them." E.O. 13197 also authorizes OPM to review personnel management systems and practices. To meet its oversight responsibilities, the OPM compliance program regularly conducts audits of agency personnel practices, including agency use of delegated examining authorities (i.e., authorities to fill positions). Samples of agency audit reports indicate a variety of legal and regulatory problems are still occurring within agency human resource operations. Out of 130 Delegated Examining Units audited in 2004, a significant proportion had severe (11 percent) or moderate (72 percent) problems including errors in veterans' preference, qualification determinations, and incomplete or incorrect vacancy announcements. Through its Appellate function, OPM also reviews employee appeals of agency personnel decisions. Of the 57 classification appeal and job grading decisions issued by the Appellate function in 2004, two (2) resulted in upgrades for the employees and eight (8) were downgrades.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The program is designed so that it is not redundant or duplicative of any other Federal, State, local or private effort. Only OPM oversees individual agency implementation of delegated examining authorities and other personnel functions. Only OPM is charged with designing a set of systems, including appropriate metrics, for assessing the management of human capital by Federal agencies (P.L. 107-296, Sec. 1304). The Compliance program 1) oversees agency compliance with all civil service laws; 2) conducts regularly scheduled agency specific audits and special governmentwide audits; and 3) enforces certain personnel laws and regulations. No other Federal effort provides such a comprehensive, systemic, government wide and agency specific approach to ensuring compliance with the civil service laws and regulations. The Congress did give other Federal offices separate and distinct oversight responsibilities so that compliance could be assessed and enforced from different angles. However, these other Federal efforts are limited by the specific laws that they cover versus the wide range of personnel laws, regulations and activities that OPM must oversee (e.g., EEOC, OSC); or are limited in their enforcement authority when violations are identified (IG, GAO).

Evidence: ??MSPB, in a sense, audits the auditors (OPM). Under 5 U.S.C. 1204(a)(2) and 1206, MSPB conducts periodic special studies relating to the civil service and to other merit systems in the executive branch and report to the President and the Congress as to whether the public interest in a civil service free of prohibited personnel practices is being adequately protected. MSPB reviews OPM rules and regulations and must also submit to the Congress an annual report which reviews significant actions of OPM. ??OSC, under 5 U.S.C 1212, receives and investigates allegations of prohibited personnel practices and where appropriate - brings petitions for stays and corrective actions; and files complaints or make recommendations for disciplinary action. OSC also reviews rules and regulations issued by OPM, and where the Special Counsel finds that such rule or regulation would, on its face or as implemented, require the commission of a prohibited personnel practice, files a complaint with MSPB. ??GAO conducts audits and reviews only at the request of Congress or if considered necessary by the Comptroller General, but has no enforcement authority if they find violations. Under 5 U.S.C. 2304, GAO conducts these audits and reviews to assure compliance with the laws, rules, and regulations governing employment in the executive branch to assess the effectiveness and soundness of Federal personnel management. ??EEOC, under E.O. 12067 and Management Directive 715, provides leadership and coordination to the efforts of the Federal departments and agencies to enforce all Federal statutes, E.O.s, regulations and policies which require equal employment opportunity without regard to race, color, religion, sex, national origin, age or handicap. As described in the GAO report, "Equal Employment Opportunity: The Policy Framework in the Federal Workplace and the Roles of EEOC and OPM, GAO-05-195, April 29, 2005, "Although both EEOC and OPM have responsibilities and carry out activities within the EEO framework, EEOC is responsible under statute and executive order for providing leadership and coordination of federal EEO efforts." ??Agency IG's do not provide broad oversight of their own agencies' adherence to merit system principles and avoidance of prohibited personnel practices. Under the Inspector General Act of 1978, IG's have authority to investigate cases of fraud, waste and abuse and have the authority to look at allegations of improper personnel actions within their own agencies or at the request of other non-IG agencies. ??DOL, under P.L. 105-339, investigates and attempt to resolve formal complaints filed by veterans alleging violations of veterans' preference. Among the other general labor laws it oversees, DOL also enforces the Uniformed Services Employment and Reemployment Rights Act, which assures returning service members of reinstatement in the jobs that they would have held in the absence of their military service.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: There are no major design flaws that would limit the compliance program's effectiveness or efficiency. The compliance program operates three activities to ensure that agencies use their personnel authorities in accordance with merit system principles, civil service laws, rules and regulations: 1) agency human resource management (HRM) audits; 2) delegated examining unit (DEU) audits; and 3) appellate function. There is currently no strong evidence that another approach would be more effective or efficient, however OPM is also working to strengthen agency self accountability systems as another means to ensure compliance with merit system principles. OPM is refining the program by gathering more consistent compliance data from year to year for better governmentwide analysis, and, as noted by MSPB, by "finding a proper balance between examining for process compliance and reviewing on the basis of results." An often cited criticism is that the compliance program focuses on OPM institutional concerns or Administration interests rather than the long term health of the merit system. MSPB defended OPM by stating, "OPM must balance its roles, making decisions that are in the best interest of the Federal human resources and the merit system, while at the same time, doing what is consistent with the administration's plans for the civil service??We believe that OPM has done fairly well at achieving this balance." Another concern is that the program's success is based on a reduction of violations uncovered by the program's audits or self-reported by agencies. Although there is no evidence such activity occurs, there is the potential and inherent interest to underreport violations. The compliance program must seek ways to maintain the integrity of the information gathered on violations.

Evidence: The agency HRM audit activity reviews one-third of the large executive agencies and ten small agencies each year and assesses these agencies' recruitment, retention, employee training and other human resource practices for compliance with law, regulation and merit system principles. The audit also assesses how well the agency's self accountability system is operating. Agency HRM audits may be conducted outside the normal review cycle to address known or suspected merit system violations at particular agencies or installations. The program has developed a corporate audit protocol to promote coverage consistency and to enable the identification of systemic human resource issues. The DEU audit activity identifies legal and regulatory violations, and systemic and programmatic deficiencies in the operation of DEUs. These units exist in virtually all agencies across the country and abroad. During FY 2004, 130 audits of delegated competitive examining were conducted. Agencies must take corrective action on any legal or regulatory violations and make recommended programmatic improvements. The DEU audits also assess whether the agency has an adequate accountability system for delegated examining, as required by the Interagency Agreement between OPM and the agency. Audit findings are also used to make adjustments in the OPM training program to promote improved DEU operations. By law, OPM maintains an appellate function that enables Federal employees to request OPM review of agency actions to determine if the agency complied with laws and regulations in decisions on job classification (i.e., duties, qualification requirements and grade of a position), compensation and leave,. The Classification Appeals Program Manager provides central program management, ensuring that appellate decisions prepared by the classification appeals officers in the field are accurate and consistent with established classification principles. Cases involving potential downgrades are desk audited to ensure the appellant receives the maximum due process. Caseloads are declining as a result of court decisions that require certain employees use negotiated grievance procedures to resolve FLSA and compensation and leave claims. Referenced reports include: ??MSPB report issued September 3, 2002, entitled "Making the Public Service Work: Recommendations for Change." ??MSPB report issued December, 2001, entitled "The U.S. Office of Personnel Management in Retrospect: Achievements and Challenges after Two Decades." ??MSPB report issued July, 1998, entitled "Civil Service Evaluation: The Evolving Role of the U.S. Office of Personnel Management."

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Yes, OPM's compliance program is effectively targeted to ensure agencies properly exercise the statutory and regulatory authority delegated to them in accordance with law, regulation and merit system principles. Using a three pronged approach (agency HRM audits, DEU audits and appellate function) the OPM compliance program oversees all large and small executive departments and agencies and provides a means for employees to appeal certain agency personnel decisions. OPM's Agency HRM and DEU audit staff work directly with agency staff to make their HR operations more effective (including assisting agencies in strengthening their self accountability systems), identify problems, and make immediate corrections when necessary. In the agency HRM and DEU audit reports given to agency heads, OPM identifies any systemic HR issues, highlights moderate and severe compliance problems, and makes recommendations. Agencies then respond back to OPM and describe any corrective or other actions taken. The program also adjusts its audit schedules to target problem agencies where it has identified chronic, severe or high interest (e.g., veteran's preference) compliance problems in the past.

Evidence: Agency HRM Audits - All 26 large executive agencies are audited over three (3) years while the smaller agencies are audited over 4 years. OPM analyzes previous audit results and reviews agency statistical data including the numbers and types of hires, survey data, and other information. This analysis is used to inform the program and help prioritize which agency sites to visit. An agency evaluation plan is customized to the agency's organization, human resource servicing structure, size, and known problems and issues, within the audit protocol framework. OPM staff makes on-site visits in accordance with the plan, including records reviews, analysis of various program documents, and interviews with human resource officials, managers, employees, and union officials. Individual site reports are then compiled into an agency report summarizing findings about human capital management within a specific Federal agency. Agency reports highlight violations and any systemic issues, identify corrective actions, and make recommendations for improvement. Delegated Examining Oversight - The delegated examining system is highly vulnerable to violations of merit system principles, veteran's preference, and other laws, rules, and regulations. Delegated examining audits are numerous and carefully targeted; at least 125 DEU's are audited each year (note: there are approximately 450 DEUs governmentwide). When possible, OPM audits DEUs in conjunction with agency HRM audits; other criteria for DEU audit selection include level of activity, time since last audit visit, results of last audit, and known or suspected irregularities. DEU audits include an assessment of the agency's DE accountability system. A report documents each audit, specifying strengths and weaknesses, identifying needed improvements, and requiring corrective action for any legal or regulatory violation. Agencies then provide responses to the reports outlining how corrections or modifications were made to their practices. Eighty-three percent (83%) of DEUs visited in FY 2004 had moderate or severe problems. Because OPM also trains agencies on how to conduct competitive examining, audit findings inform training program adjustments to promote improved DEU operations. Appellate Function - All appeals, complaints, and claims are reviewed on receipt to ensure that they meet statutory and regulatory criteria for adjudication. Agencies must prepare administrative reports to provide information necessary to adjudicate the case, including a response to the employee's technical case issues. The employee and the agency share any information submitted to OPM with each other to keep the process transparent.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The following long-term performance measures are only recently established, however data for each measure has been collected over the years and has been regularly used to inform the Compliance program to help prioritize and target activities. The PART process helped to determine the measures and refine the use of the data. Agency HRM Audits - The first long-term measure for the agency HRM audit activity supports OPM's goal of building strong agency accountability systems that can serve as the first level of compliance - "The number of PMC agencies that fully implement a system of internal compliance with merit system principles and laws, rules and regulations in accordance with OPM standards for agency accountability systems." OPM has developed self-accountability standards to improve oversight at the 26 President's Management Council agencies, representing 93% of the Federal workforce. Both MSPB and GAO agree that OPM must continue to promote agency self-monitoring programs in recognition of the growing decentralization of the federal government's personnel system. The second long term measure for the agency HRM audit assesses PMC and small agency compliance with veteran's preference laws: "The number of agencies that violate veterans' preference laws, rules, and regulations." OPM asserts that agencies that administer veterans' preference correctly have fewer total violations of civil service laws, rules and regulations, making veterans' preference violations a leading indicator for overall compliance. DEU Audits - The long term measure for the DEU audit activity assesses agency compliance with laws related to hiring personnel using delegating examining authorities: "Agencies with severe problems in a DEU demonstrate improvement within one year following completion of an audit." This measure is related to the merit principle of fair and open competition through monitoring agency competitive examining authority. Improvement is defined as the DEU adopting compliant examining practices or the agency shifting examining away from the DEU. It is a failure if OPM revokes or suspends an agency's examining authority. Severe problems in DEUs are those that invalidate or destroy public confidence in the examining process. They can be systemic problems or isolated practices with special circumstances (e.g., intentional abuse, nepotism, etc). Appellate Function - Because due process depends on timely decisions ("justice delayed is justice denied"), the appellate function has an efficiency measure that focuses on OPM's goal to quickly resolve employee appeals of certain agency personnel decisions: "Number of classification appeal and job grading appeal decisions that exceed timelines." The appellate activity attempts to complete an employee's appeal within 60 workdays after the receipt of the appeal administrative report. Receipt of the administrative report means that all relevant documentation from both the agency and the appellant has been received and the case is adjudicable. Completion is when the classification appeals officer submits a completed decision to the appeals program manager.

Evidence: The Compliance program is aligned with Goal 2 in OPM's 2002-2007 Strategic Plan (www.opm.gov/strategicplan/) which states "Federal agencies use effective merit-based human capital strategies to create a rewarding work environment that accomplishes the mission." Outcomes listed for Goal 2 include 1) Agencies' human capital practices comply with merit principles and prescribed standards; and 2) Merit system abuses are resolved and prevented from recurring. The Strategic Objective for Goal 2, which is aligned with the Compliance program, is to "Monitor and assess agencies' effectiveness in implementing merit-based strategies that support their mission." Each of Compliance program's performance measures supports the current outcome goals and strategic objectives, but it is expected that the Strategic Plan will be updated to include the newly established performance measures above. Agency HRM Audits - Agency accountability systems are required by 5 CFR Part 10 Rule 10 and must be assessed with standards developed by OPM to execute the requirements of the CHCO Act of 2002 (5 U.S.C. 1103(c)). Agencies have also had long standing requirements for establishing self accountability systems in conjunction with their delegated examining authority. Agencies must enter into Interagency Delegated Examining Agreements which require agencies to establish and maintain an internal accountability system designed to assure that the use of delegated examining authorities is in compliance with law and merit system principles. Finally, the following reports advocate the use of agency self-monitoring systems - MSPB report issued December, 2001, entitled "The U.S. Office of Personnel Management in Retrospect: Achievements and Challenges after Two Decades;" and GAO report issued January 2003, entitled "Performance and Accountability Series: Office of Personnel Management." Agency HRM Audits - Unlike other laws, rules and regulations governing Federal human resource management, veterans' preference requirements apply to all executive agencies, including those not covered by Title 5 or that operate alternative personnel systems. Violating veterans' preference requirements is a serious violation and can constitute a prohibited personnel practice punishable by adverse action, debarment from Federal service, and/or civil penalty. Veterans' preference laws and regulations can be found at 5 U.S.C. 3309, 3311, 3312, 3317, 3318, 3327, 3330, and at 5 CFR 332. OPM seeks to make compliance with veterans' preference laws a leading indicator of overall compliance, however, OPM must collect data to prove that this correlation exists. DEU Audits - OPM issues an annual Delegated Examining Summary report which identifies the agencies audited during that year and the severity of violations that were found. OPM established the above DEU performance measure to help ensure that the compliance program takes immediate action with agencies with severe problems in a DEU. Appellate function - The timeliness measure for the appellate function has been long established and a database is used to monitor lapses in meeting the timeframe described. See also performance measures tab.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: The targets and timeframes for the compliance program's long-term measures are ambitious and achievable. Although these measures are new, OPM has been collecting the relevant data for several years and have used it to inform and prioritize the program's activities. The PART process helped to clarify what targets and timeframes should be set using the existing data. Agency HRM Audits - For the measure on agency accountability systems, the target is that all large executive agencies (26) will have systems that meet OPM's standards by 2010. As of 2004, the baseline year, only one agency has met the OPM standard for self accountability. Because the OPM standards for these agency accountability systems have only recently been established, it will be difficult to gauge full implementation within the next year. As a result, OPM expects to verify that only one additional agency has an accountability system during FY 2005, but plans to rapidly increase the number to 10 by 2006 and the remainder by 2010. Agency HRM Audits - For the measure on veterans' preference violations, the target is to reduce the percentage of agencies with these violations to 0% by 2010. In 2000, 43% of the agencies had violations. As of 2004, the baseline year, 40% of the agencies had violations. However, what makes this an ambitious target is the fact that during FY 2002, records show that 58% of the agencies had violations. This spike may have been due to the increased focus on veterans' issues that year which also included a special audit on veterans' preference personnel actions. DEU Audits - The target is that 100% of the agencies with severe problems in their DEUs demonstrate improvement within one-year. In 2001, three (3) agencies audited had DEUs with severe problems. Of these, 66% improved. During the baseline year of 2004, 80% of the agencies audited in the previous year improved. This measure requires that OPM take action more immediately than they have in the past with agencies that have had severe problems with a DEU. Appellate Function - The appellate function target is to reduce those decisions exceeding timeframes to less than 5% by FY 2010. In FY 2003, 34.6% of classification and job grading appeal decisions exceeded the 60 day timeframe. During the baseline year of 2004, 12% of the appeal decisions exceeded the timeframe. Since there will always be uncontrollable factors that cause delays in decisions, this target is reasonable, yet ambitious since it has not been closely achieved in the recent past.

Evidence: See measures tab. These targets are newly established and have been agreed to by OMB. They are expected to be included in OPM's updated 2006 GPRA documents.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: As noted in OPM 2002-2007 Strategic Plan, the program's outcome goals include 1) Agencies' human capital practices comply with merit principles and prescribed standards; and 2) Merit system abuses are resolved and prevented from recurring. The following annual measures closely mirror the long term measures since both will demonstrate progress toward the program's goals. Agency HRM Audits - Number of agencies that fully implement a system of internal compliance with merit system principles and laws, rules and regulations in accordance with OPM standards for agency accountability systems. Agency HRM Audits - Annual percent of agencies audited that year that violate veterans' preference laws, rules, and regulations. DEU Audits - Annual percent of agencies with severe problems in one or more DEUs that demonstrate improvement within one year following completion of an audit. Appellate Function - Annual percent of classification appeal and job grading appeal decisions that exceed timeframes.

Evidence: See measures tab. These annual measures are newly established and have been agreed to by OMB. They are expected to be included in OPM's updated 2006 GPRA documents.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Baselines and ambitious targets have been established for the compliance program's annual measures. Given the historical data that has already been collected which shows fluctuations in some years, these targets are ambitious and would demonstrate that agencies are fully complying with all civil service laws and regulations. Again, while these targets are only recently established, the relevant data has been previously used to inform and prioritize the program's activities. The PART process helped to clarify what annual targets should be set based on existing data. Agency HRM Audits - For the measure on agency accountability systems, the target is that all large executive agencies (26) will have accountability systems that meet OPM's standards by 2010. Baseline FY 2004 1 meets requirements Annual Targets FY 2005 2 meet requirements FY 2006 10 meet requirements FY 2007 13 meet requirements FY 2008 16 meet requirements FY 2009 19 meet requirements FY 2010 26 meet requirements Agency HRM audits - For the measure on the number of agencies audited each year that violate veterans' preference laws, rules, and regulations, the baseline and annual targets are as follows: Actual FY 2000 43% have violations Actual FY 2002 58% have violations Baseline: FY 2004 40% have violations Annual Targets: FY 2005 35% have violations FY 2006 30% have violations FY 2007 20% have violations FY 2008 10% have violations FY 2009 6% have violations FY 2010 0% have violations DEU Audits - For the measure on the annual percentage of agencies with severe problems in an audited DEU, the baseline and annual targets are as follows: Actual FY 2001 66% demonstrate improvement Actual FY 2002 50% demonstrate improvement Actual FY 2003 79% demonstrate improvement Baseline FY 2004 80% demonstrate improvement Annual Targets FY 2005 82% demonstrate improvement FY 2006 85% demonstrate improvement FY 2007 88% demonstrate improvement FY 2008 92% demonstrate improvement FY 2009 97% demonstrate improvement FY 2010 100% demonstrate improvement Appellate function - For the appellate function's efficiency measure of timeliness, the baseline and targets are as follows: Actual FY 2003 35% exceed timelines Baseline FY 2004 12% exceed timelines Annual Targets FY 2005 10% exceed timelines FY 2006 9% exceed timelines FY 2007 8% exceed timelines FY 2008 7% exceed timelines FY 2009 6% exceed timelines FY 2010 5% exceed timelines

Evidence: These annual targets and baselines are newly established and have been agreed to by OMB. They are expected to be included in OPM's updated 2006 GPRA documents.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Using Memorandums of Understanding (MOU) and other agreements, OPM's compliance program maintains partnerships with agencies to work toward the common goal of agency compliance with merit system principles and civil service laws and regulations. In the past, the Department of Army and the Social Security Administration entered into such MOUs, and under the terms of such agreements, worked with OPM staff to administer self audits. Each agency must, as designated in the MOU, provide an acceptable level of oversight of its human resource activities. Future plans call for OPM to move away from MOUs to certifications of agency self accountability systems. In this new scheme, agencies will self report their level of achievement for compliance. Every agency that conducts delegated examining must have a signed Interagency Agreement for Delegated Examining. The agreement requires agencies to conduct delegated examining in accordance with merit system principles and standards, comply with findings resulting from OPM's DEU audits, and establish an internal accountability system to assure that examining is conducted in compliance with law, regulation and merit system principles. Sample letters from agencies that have been audited indicate that the agencies follow OPM's recommendations and take corrective actions on violations.

Evidence: In addition to the MOUs for the Army and Social Security Administration, and the standard Interagency Delegated Examining Agreement document, OPM provided several examples of agency responses to audits and appellate decisions which demonstrated how agencies follow up on OPM's required as well as recommended actions. For example, as a required action, OPM instructed the Small Business Administration (SBA) to ensure preference eligible claimants' entitlement is supported by appropriate documentation, as required in the SBA announcement format so that all applicants are held to the same requirement. SBA formally responded in a memorandum that they had instructed their staff not to give veterans' preference credit unless documentation is received with the application or is provided later. SMA noted that Team Leaders and Supervisors will spot check files for compliance and that the Workforce Effectiveness Division would add this as an element during their periodic audits. Another example was where OPM recommended that NASA provide formal and periodic refresher training on the merit system principles and prohibited personnel practices. OPM recommended that NASA get this training from the Office of Special Counsel (OSC). NASA responded that formal training had been provided to employees and managers and that they would continue to provide explanations of merit system principles and prohibited personnel practices to all new employees on their first day. NASA also noted that they had been certified by OSC as having met the requirements under Title 5 U.S.C. 2302(c) which requires agencies to inform all employees of their right to be free from prohibited personnel practices.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Within the Executive Branch, MSPB is statutorily required (5 U.S.C. 1206) to submit an annual report to the President and Congress reviewing significant actions of OPM and analyzing whether OPM's actions are in accord with merit system principles and free from prohibited personnel practices. MSPB has independently evaluated OPM's oversight program five times since the 1978 Civil Service Reform Act including its most recent evaluation/report issued July, 1998, entitled: Civil Service Evaluation: The Evolving Role of the US Office of Personnel Management. A December 2001, follow up report from MSPB entitled, "The U.S. Office of Personnel Management in Retrospect: Achievements and Challenges after Two Decades," included an updated evaluation of OPM's oversight program. The two reports concluded that the OPM oversight program was sound. OPM also plans to have an independent contractor conduct a rigorous and unbiased evaluation of the effectiveness and impact of the compliance program, comparing the OPM program against others with similar purposes.

Evidence: The 1998 MSPB report was of sufficient quality and scope and addressed OPM's effectiveness in overseeing Federal personnel systems and agencies' personnel programs. The information sources and methods used for this report included administering two surveys: one to all 67 agency members of the Interagency Advisory Group Committee on Accountability, and one to the senior HRM official in each of the 23 Federal departments and largest independent agencies and 27 smaller independent agencies or major components of cabinet-level agencies. MSPB also conducted focus group meetings with representatives from 7 departments and agencies and interviews with 15 agencies and agency components. They also interviewed nearly 40 OPM officials and employees including those involved directly with the oversight program. MSPB read more than 90 reports prepared by OPM evaluators (auditors) and reviewed OPM's "Strategic Plan for FY 1997-FY 2002" and other documents prepared by OPM staff. Collectively, these sources provided a multifaceted view of OPM's oversight program at that time. The report was comprehensive in that it evaluated the program's effectiveness in meeting its goals of 1) protecting and promoting a merit based Federal civil service by structure, operations, focus, methods; 2) Identifying opportunities for improving Federal personnel policies and programs; and 3) Helping agencies meet mission goals through effective recruitment, development, and utilization of employees.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The compliance program's recent budget requests have been explicitly tied to accomplishing its previously established annual and long term goals. The most recent request, the FY 2006 Congressional Budget Justification and Performance Budget, included a separate line item for the compliance program that was tied to meeting OPM Strategic Objective 2 - "Monitor and assess agencies' effectiveness in implementing merit-based strategies that support their mission." The budget request displayed the program activities, outputs, outcomes and performance indicators including targets. The display clearly showed what would be accomplished with the requested funding and FTE levels. The program is entirely funded through direct appropriations with most of the costs being in the personnel and travel expense areas. It is expected that for the FY 2007 budget request, the program's performance measures and targets will be updated to reflect the measures and targets included in this PART.

Evidence: The FY 2006 budget request showed that with 136 FTE and $16.3M, the Compliance program would be able to audit 35% of the President's Management Council (PMC) agencies and ensure that all of the PMC agencies would meet OPM's standards for agency accountability systems. OPM has since updated their standards for agency accountability systems, so this target has been revised downward. Although several other measures/indicators and targets were displayed, they have now become less relevant as a result of the measures developed during the PART process. The request also breaks out costs by line item expenditures (e.g., personnel compensation and benefits, travel, equipment, etc.) and by funding type (e.g., directly appropriated salaries and expenditures, trust fund, etc.) The budget request shows that OPM is already in the practice of associating funding requests with specific goals and will be able to fully incorporate the newly established performance measures and targets in next year's budget request. In terms of budget development, OPM's Compliance program develops its budget request using a zero based budgeting approach whereby the funding is based on the planned activities versus an incremental increase from previous year's spending. OPM provided a chart depicting how the Compliance program's FTE's are determined for each of their field offices based on the number and type of audits and classification appeals that they plan to accomplish, as well as related clerical and other support. Based on these FTE estimates, the Compliance program is then able to closely estimate the personnel funding requirement which comprises the vast majority of the program costs.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: In 2003, OPM reorganized its organizational management structure to create the Division for Human Capital Leadership & Merit System Accountability (HCLMSA) which includes both the compliance program and OPM's human capital leadership program. The reorganization addressed MSPB's concerns with OPM's oversight program and was designed to support the President's Human Capital initiative. OPM is also using a contractor-designed strategy mapping tool to guide the strategic management of all HCLMSA programs including the compliance program. Both MSPB and GAO recommended that OPM encourage agencies to implement effective self-assessment programs and OPM's HCLMSA division has made this one of its highest priorities. Using the authorities in 5 U.S.C. 1103(c) and E.O. 13197, OPM aims to strengthen agency manager accountability for adherence to law, regulation, and merit system principles. OPM currently uses the President's Management Agenda (PMA) scorecard process to grade agency accountability systems against OPM standards. MSPB also recommended that other OPM offices make good use of information provided to them as a consequence of oversight review. This recommendation was addressed when the compliance program realigned its field offices under agency centers and assigned audit responsibilities by agency. The 2003 reorganization enabled more effective sharing of information between the audit function and the human capital leadership function for specific agencies. The agency centers now inform OPM's PMA efforts by providing compliance information to the HCLMSA human capital officers assigned to specific agencies for the PMA scorecard process.

Evidence: The following reports were used by the program to help identify areas where modifications should be made - ??MSPB report issued December 25, 2001, entitled "The U.S. Office of Personnel Management in Retrospect: Achievements and Challenges after Two Decades" ??MSPB report, issued July 1998, entitled "Civil Service Evaluation: The Evolving Role of the U.S. Office of Personnel Management" ??GAO report (GAO-03-115) issued January 2003, entitled, "Major Management Challenges and Program Risks: Office of Personnel Management" OPM provided a new organization chart which depicts the new field office and account configuration that groups both the compliance and leadership functions within HCLMSA under specific agency oriented centers (i.e., Centers for General Government, National Security, Natural Resources, Small agencies). OPM also provided an example of a 2003 PMA scorecard for an agency that included the following comment - "An OPM-led review of HUD's Delegated Examining Unit uncovered serious errors in 80 percent of the sample of cases reviewed." This example illustrated how the Compliance program's agency specific audit results now inform the HCLMSA leadership function in their management of the PMA human capital initiative. Finally, the Compliance program plans for all 26 President's Management Council agencies to fully implement self accountability systems for 2010 and has included this as a performance measure and target.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The program regularly collects compliance information from agency audits and uses it to manage program improvements, adjust audit schedules, and inform policy, training, and human capital leadership efforts. OPM audit protocols for agency HRM audits state that OPM will "use compliance results to inform the policy process, working closely with the Strategic Human Resources Policy division to ensure OPM policies are improved as needed." For example, FY 2002 data indicated that agencies were failing to implement sound delegated examining accountability systems. As a result, beginning in FY 2003, DEU auditors actively looked for the presence of such an accountability system. Also, after FY 2003 performance data showed a sudden increase in DEUs exhibiting severe problems, the DEU audit target was raised from 90 audits per year in FY 2003 to 125 in FY 2004 and FY 2005. OPM increased DEU audit frequency to improve oversight. Extensive data is collected on DEU audits including sites audited, types of problems found, implementation of agency accountability system, etc. The DEU audit process requires a stratified sample of personnel actions be reviewed for compliance in order to draw valid conclusions on agency examining processes. The conclusions drawn from the data about trends in merit system violations are more credibile when multiple personnel actions with similar characteristics are reviewed. Auditors check an agency's internal consistency as an indicator of whether or not violations are systemic or random. Agency DE staff must complete initial and refresher training on competitive examining processes, and the participants evaluate the accomplishment of training objectives were met, the quality of instruction, the quality of materials, and whether or not their knowledge of examining procedures improved. This feedback is used to make any necessary adjustments in the program's training plans and methods. Finally, the appellate function uses an automated system to run monthly reports to track case status and timeliness of decisions. These reports help to determine whether cases should be transferred from one adjudicating office to another to maximize effective resource use and enhance case timeliness.

Evidence: OPM provided the agency HRM and Delegated Examining Unit audit guides that are used by the program's audit staff. These guides reflect how information and lessons learned from previous years is used to direct the audit staff's activities. For example, the 2003 Guidance for Delegated Examining Oversight included the following instructions to the auditors - "Our focus this year will be twofold: 1) assess how well delegated examining programs are operating in terms of efficiency, effectiveness and legal compliance; and 2) ensure agencies have an established program of accountability for delegated examining. Past reviews have shown that a number of agencies still do not have an active accountability program for delegated examining." OPM also provided the 2004 Delegated Examining Audit Summary which included a listing of the most frequently cited problems during 2004 along with the number of occurrences. The Summary noted in its conclusion that "with but few exceptions, there appear to be few adverse consequences for those DEUs that continue ineffective or inefficient operations year after year, audit after audit." The program has since established an outcome measure that focuses on requiring agencies that have DEU's with severe problems to improve within one year of an audit.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: The program's executives and managers are held accountable for performance results of agency audits, DEU audits, and appellate functions through the performance appraisal process. Individual managers' plans include expectations that are linked to strategic program goals and objectives. For example, the program managers' performance plans contain quantifiable performance standards for establishing agency self accountability systems, meeting classification appeal timelines, and for ensuring that agencies take appropriate action on audit recommendations. OPM holds its program partners (agencies) accountable through Interagency Delegated Examining Agreements, Memorandums of Understanding (MOU) and by periodic agency and DEU audit reporting. These MOUs and agreements specify schedules for agencies to conduct their own comprehensive HRM evaluation for all major sites on a cyclical basis. An interagency agreement is signed by a high-level agency executive (e.g., Departmental Secretary) and the OPM Director, and specifies the responsibilities of both OPM and the agency. An agency's authority to examine may be withdrawn if it does not meet its responsibilities. Where OPM finds violations, agencies must take corrective actions as required by 5 U.S.C. 1104(c).

Evidence: OPM provided copies of the performance appraisals of the managers over the Agency HRM audit and Delegated Examining Unit audit activities and the Appellate function. In addition, to copies of the MOU's for DOD and the Social Security Administration (which included audit schedules), OPM also provided copies of how the Department of the Navy responded to the Appellate office's inquiry on a classification appeal. The Navy outlined how the Commander Navy Installations updated the appellants' position description and took appropriate personnel actions to reflect the classification of their duties and responsibilities. More examples of agency responses to the Appellate office's requests were also provided.

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: The compliance program's funding is in OPM's S&E account, and these funds are obligated in a timely manner. Staff salaries comprise the bulk of the program's funding requirements, and payroll dollars are obligated biweekly. The compliance program is managed within the overall Human Capital Leadership and Merit System Accountability (HCLMSA) budget and consistent with the goals and priorities outlined in OPM's strategic plan. No funds allocated to the program are redirected to other OPM programs. The HCLMSA Resource Management Officer and the Associate Director conduct quarterly assessments of spending and report projected expenditures for the upcoming quarter to the CFO. This assessment covers costs associated with salaries and benefits, travel, and other objects such as training. This process facilitates resource planning and management, allowing for adjustments as needed to accomplish identified program needs. The compliance program has 135 full-time equivalent employees. To ensure that funds are obligated and spent as intended, both HCLMSA and OPM budget and financial management staffers analyze OPM's Government Financial Information System (GFIS) transactions almost daily to identify and resolve any problems pertaining to funds being obligated and expensed. OPM budget staffers establish budgetary resource levels in GFIS for each fiscal quarter against which compliance program staff charge appropriate business expenses, most of which are payroll costs. OPM budget and financial management staff post in GFIS, or record on the financial statement worksheets, any necessary corrective entries so that the financial information received by management is complete and accurate. Although there exists a long-standing fund imbalance with Treasury which affects OPM's entire Salaries and Expense (S&E) account, this imbalance is tracked separately by financial management staff in a suspense fund.

Evidence: OPM provided CFO reports including Salaries & Expenses reports and operating plan budget reports including travel expenses. OPM also provided materials from the FY 2005 2nd Quarter Director's review which highlighted where the HCLMSA program was either on schedule or behind schedule in meeting its performance targets for the fiscal year. These documents demonstrated that OPM monitors closely the obligations of the HCLMSA expenses, which includes those of the Compliance program. As further evidence, OPM also provided examples of the daily emails that are sent from the CFO office to the financial managers of OPM's different programs. These emails solicit the recipient to review attached printouts from the GFIS system which list open or unprocessed requisitions, purchase orders and receiving reports so that than can be either completed or closed by the last day of the month. This is an agency wide effort to validate and reconcile the data in GFIS on a frequent basis. In the examples provided, only one transaction was associated with the Compliance program, but that would be expected in a program whose primary expenses are in the personnel and travel areas.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: OPM's financial management system has not been updated to reflect the current organizational structure following the reorganization of 2003. As a result, the current account structure in the financial system does not include a separate line item for the compliance program or its three activities - agency HRM audits, DEU audits and appellate processes. The compliance program's total costs are rolled into the higher level HCLMSA budget. While program expenditures are obligated and recorded properly within the HCLMSA account, there is no evidence that the compliance program can accurately capture the total costs of its activities. As a result, there is no way to determine if there is a more cost effective way to operate the program. OPM is currently working to update its financial system to represent the current OPM structure. Once this is accomplished, or before, OPM should identify efficiency measures for the audit activities so that resources are used effectively. There is also no evidence that the compliance program benchmarks its activities against similar Federal efforts such as the EEOC.

Evidence: OPM provided various HCLMSA financial reports including a quarterly assessment and report with projected expenditures for the upcoming quarter, along with an operating plan and monthly status of funds report. However, none of these documents demonstrated that the program could isolate the expenditures of the Compliance program from the higher level HCLMSA expenditures. Without this information, the program may not be able to identify opportunities to either accelerate the audit schedule in order to increase oversight, or find more cost efficient ways to conduct the audits. OPM also explained that the Compliance program is not subject to A-76 competition because it is an Inherently Governmental Activity (IGA), so the results of such a competition are not available as an indicator of cost-efficient processes. An IGA requires the exercise of substantial discretion in applying government authority. The program applies analysis of OPM program regulations, standards, and directives to agency activities, as required by the basic OPM authority in title 5 of the United States Code, especially 5 U.S.C. §§ 1103(a)(5) and (7). It clearly requires that program auditors have extensive working knowledge of OPM regulations and procedures and use discretion in applying these polices specific agency setting. This function is inherently different than "compliance auditing" in the traditional sense of an audit of dollars allocated or how funds expenditures are reported in a balance sheet or financial fund review. The merit system compliance program is not a traditional "audit" but rather a review of systems to determine compliance with rules and regulations, and consistency with OPM human capital policy.

Does the program collaborate and coordinate effectively with related programs?

Explanation: During 2002, OPM's compliance program collaborated with OSC in the development and funding of a web based tutorial that educates users, including Federal managers, supervisors, employees and HR professional, on the merit system principles and prohibited personnel practices. This effort led to an Interagency Agreement which authorized the transfer of $25,000 from OSC to OPM to further enhance an OPM training module that focused on prohibited personnel practices. OSC requested the enhancement so that the OPM module could be used as a stand-alone training instrument to support OSC's 2302(c) certification program which aims to assist federal agencies in educating their employees about the rights and remedies available to them under the whistleblower protection and prohibited personnel practice provisions of the Whistleblower Protection Act. Both OPM and OSC continue to refer Federal managers and staff to the free web based tutorial to promote awareness of prohibited personnel practices. Although EEOC has the statutory requirement to coordinate EEO efforts, OPM should seek similar opportunities for collaboration with that office since, as GAO noted, "both OPM and EEOC have responsibilities and carry out activities within the EEO framework."

Evidence: As noted in a 2001 memorandum from the Special Counsel to the OPM Director, "the OPM and OSC have intersecting responsibilities for protecting the merit system." That same memorandum noted how OSC worked cooperatively with OPM's compliance program on areas of mutual concern and had received referrals of cases from that office where its audits uncovered serious and systemic prohibited personnel practices. Following this memorandum, OSC worked jointly with OPM to pilot the 2302(c) program under which OPM was the first agency certified by OSC to be in compliance with 5 U.S.C. 2302(c). OSC has since certified over 25 Departments and agencies under its 2302(c) certification program. The web based tutorial continues to supplement the training for the 2302(c) certification program. During agency audits, OPM's compliance program also refers agency staff to the web based tutorial when a training need has been identified. OPM provided copies of the Interagency Agreement, signed in September 2002, and other financial documents which showed the transfer of $25,000 from OSC to OPM. OSC confirmed that the dollars were obligated. Several other memorandums, press releases, and internal correspondence also demonstrated how OPM and OSC worked together in the development of the web based training module and 2302(c) certification program. The description of the web based tutorial on prohibited personnel practices can be found at the following website - www.usalearning.gov/coursecatalog/index.cfm?fuseaction=oltoverview&intCourseID=4779&AddPopularity=1 As a reference, see the GAO report (GAO-05-195), dated April 29, 2005, entitled "Equal Employment Opportunity: The Policy Framework in the Federal Workplace and the Roles of EEOC and OPM"

Does the program use strong financial management practices?

Explanation: OPM's independent auditors identified a material weakness in internal controls over S&E financial operations during their FY 2004 audit of OPM's consolidated financial statements. The reported weakness primarily stems from longstanding unreconciled differences between OPM fund balances and comparable balances maintained by the Department of the Treasury. Most of the overall differences occurred in prior fiscal years. Personnel in the office of the Chief Financial Officer (OCFO) have developed and implemented a detailed remediation plan to address the causal factors contributing to the material weakness. OCFO staffers have made significant progress in resolving the weakness. OPM's CFO expects the independent audit of the agency's FY 2005 consolidated financial statements to confirm the effective resolution of this material weakness. Compliance program management uses data and reports from OPM's financial management system and its Federal Data Portal, as well as data and reports from GSA's FEDDESK suite of systems, to account for revenues, expenditures, obligations and overall financial status of each line of business.

Evidence: The KPMG auditor's report prepared for OPM in 2004 noted the reportable condition of financial management and reporting processes of the Division of Management and Chief Financial Officer was a material weakness. Also, in the message from the Director that accompanied OPM's FY 2004 Performance Accountability Report, it states, "I have also determined that OPM does not comply substantially with the FFMIA requirements for adherence with applicable Federal accounting standards and the application of the SGL for the Revolving Fund Programs and Salaries and Expenses." OPM provided a copy of their detailed remediation plan to overcome the FY 2004 audit findings. The plan describes the deficiencies and audit recommendations to correct, the corrective actions to be taken along with products and deliverables, and the status as of May 17, 2005. There are also planned completion dates to address all recommendations from the auditors. It appears that OPM is on track to address all issues by the close of FY 2005.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: During FY 2005, OPM continued to focus its efforts to substantially improve the agency's financial management, internal controls, operations, and reporting. These improvements will include adding accounting line items for the compliance program. OPM's CFO expects to receive the agency's sixth consecutive unqualified ("clean") opinion on the agency's FY 2005 annual consolidated financial statements. In addition, OPM developed and is successfully executing a remediation plan to straightforwardly and aggressively address the causal factors contributing to a material internal control weakness identified and reported in its FY 2004 financial audit. The material weakness related to internal control over financial reporting and its operations within the Revolving Fund (RF) and S&E accounts. (These conditions had been reported as a "reportable condition" in OPM's FY 2003 and prior years' financial audit reports.) To date, OPM's completed corrective actions include: ??Developing and implementing standard procedures for reconciling the RF and S&E fund balances ("cash") with related balances maintained by the Department of the Treasury. Liquidating $77 million of open receivables documents for all OPM programs, which dated back to the implementation of OPM's current financial management system in FY 2001, and prior, and the outstanding conversion balances from the predecessor system. Thus, the amount of receivables reflected in OPM's financial system is now significantly lower and more accurate. ??Reviewing and taking the necessary action to deobligate $266 million of open obligations from prior fiscal years. Thus, the financial data reflected in OPM's financial system for fiscal years 2001 and 2002 is now significantly more accurate. ??Working cooperatively with its Center for Internal Control Risk Management, OPM implemented more stringent internal controls over various financial management processes, including disbursements, receiving reports and related financial transaction processing. ??Developed and implemented regular status of funds and full-time equivalency management reports which are distributed to program managers monthly and quarterly to support the decision making process. ??OPM leadership has decided to cross service OPM financial management with another entity. ??Finally, OPM financial management and budget staffers are working with program staff to adjust the financial structure so it fully meets program-reporting needs.

Evidence: OPM provided a copy of their detailed remediation plan to overcome the FY 2004 audit findings. The plan describes the deficiencies and audit recommendations to correct, the corrective actions to be taken along with products and deliverables, and the status as of May 17, 2005. There are also planned completion dates to address all recommendations from the auditors. It appears that OPM is on track to address all issues by the close of FY 2005.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: To a small extent, the compliance program is meeting its long term performance goals of reducing veterans' preference and other violations in agencies and DEUs, establishing self accountability systems in agencies, and completing appeal decisions on time. Independent evaluations from MSPB have assessed OPM's progress on two closely related goals. In a 1998, report entitled Civil Service Evaluation: The Evolving Role of the U.S. Office of Personnel Management, MSPB found that agencies rated the oversight program's effectiveness as "very great" or "considerable" for the goal of protecting and promoting a merit-based Federal civil service. There were, however mixed reviews for the program's efforts to develop agency self assessment programs. In a later report entitled, The U.S. Office of Personnel Management in Retrospect: Achievements and Challenges after Two Decades, issued in 2001, MSPB noted, "Overall, OPM's oversight program is one that agency personnel officials are generally pleased with, and one that seems to have been given the appropriate amount of attention and support??As OPM enters its third decade, the oversight program is sound, with OPM recognizing the oversight problems that it still faces and continuing to devise ways to address those challenges."

Evidence: Although the measures are newly established, the Compliance program has been collecting relevant data over several years. The PART process served to refine how the data is used to measure performance. Historical performance data from the program shows the following: Agency HRM Audits - For the measure on agency accountability systems, the target is that all large executive agencies (26) will have accountability systems that meet OPM's standards (basic system requirements) by 2010. OPM recently updated its standard and so far one agency has met the new standard and the program is on track to verify that one more will meet the standard by the end of FY 2005 Baseline FY 2004 1 meets requirements Annual Targets FY 2005 2 meet requirements Agency HRM Audits - For the measure on the number of agencies audited each year that violate veterans' preference laws, rules, and regulations, the success has been uneven. During FY 2001, the OPM director created a Veterans' Issues Task Force and later ordered a special Veteran's employment audit. As a result, auditors focused on how agencies followed veteran's preference processes and identified more violations. Since then, occurrence of these violations has steadily decreased. Actual FY 2000 43% have violations Actual FY 2002 58% have violations Baseline: FY 2004 40% have violations DEU Audits - For the measure on the number of agencies with severe problems in an audited DEU that show improvement within a year, the data shows uneven results. Actual FY 2001 66% demonstrate improvement Actual FY 2002 50% demonstrate improvement Actual FY 2003 79% demonstrate improvement Baseline FY 2004 80% demonstrate improvement Appellate Function - For the appellate function's efficiency measure of timeliness, the data shows good progress. Actual FY 2003 35% exceed timelines Baseline FY 2004 12% exceed timelines

Does the program (including program partners) achieve its annual performance goals?

Explanation: To a small extent, OPM's compliance program is achieving its annual performance goals. Although the measures are newly established, the Compliance program has been collecting relevant data over several years. The PART process served to refine how the data is used to measure performance. Based on the data collected, the Compliance program appears to be meet its annual goals. Agency HRM Audits - OPM recently updated its standards for agency accountability systems and the performance measure for these systems is based on the new standards. So far, one agency has successfully met the new standard during FY 2004, but two more agencies are on track for meeting these standards by the end of FY 2005. Agency HRM Audits - Although incidence of veterans' preference violations has decreased since FY 2000, when auditors found violations at 43% of agencies audited, this measure spiked in FY 2002 with 58% of agencies showing violations. This spike coincided with a special audit ordered by the OPM Director to focus on veterans preference issues. By FY 2004, the number was back down to 40%. The compliance program is on track to reduce veterans' preference violations in agencies to 35% in FY 2005 and to 30% by the end of FY 2006 due to their efforts to promote greater agency accountability. DEU Audits - Of the 14 agencies whose DEUs showed severe problems in FY 2003, 79% improved. The program continues to work with the 12 agencies whose DEUs had severe problems in FY 2004 and projects 80% will improve or shift examining to compliant units. Because the number of agencies with severely troubled DEUs can vary widely from year to year, percentages are highly sensitive to minor changes in the status of one or two agencies. Appellate Function - The Appellate function is meeting its annual goals to improve decision timeliness. Over 34% of the appellate decisions in FY 2003 exceeded time standards. In FY 2004, only 12% exceeded timelines.

Evidence: See the measure tab for all historical performance data available. Note that the data was pulled from the long standing DEU data records, Agency HRM reports and the Appellate function database.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: At this time, the compliance program cannot accurately capture the total cost of its activities so there is no way to demonstrate improved efficiency or cost effectiveness. OPM's financial management system has not been updated to reflect the current organizational structure following the reorganization of 2003. As a result, the current account structure in the financial system does not include a separate line item for the compliance program or its three activities - agency HRM audits, DEU audits and appellate processes. The compliance program's total costs are rolled into the higher level HCLMSA budget. OPM is currently working to update its financial system to represent the current OPM structure. There is also no evidence that the compliance program benchmarks its activities against similar Federal efforts such as the EEOC.

Evidence: OPM provided various HCLMSA financial reports including a quarterly assessment and report with projected expenditures for the upcoming quarter, along with an operating plan and monthly status of funds report. However, none of these documents demonstrated that the program could isolate the expenditures of the Compliance program from the higher level HCLMSA expenditures. Without this information, the program may not be able to identify opportunities to either accelerate the audit schedule in order increase oversight, or find more cost efficient ways to conduct the audits. OPM also explained that the Compliance program is not subject to A-76 competition because it is an Inherently Governmental Activity (IGA), so the results of such a competition are not available as an indicator of cost-efficient processes. An IGA requires the exercise of substantial discretion in applying government authority. The program applies analysis of OPM program regulations, standards, and directives to agency activities, as required by the basic OPM authority in title 5 of the United States Code, especially 5 U.S.C. §§ 1103(a)(5) and (7). It clearly requires that program auditors have extensive working knowledge of OPM regulations and procedures and use discretion in applying these polices specific agency setting. This function is inherently different than "compliance auditing" in the traditional sense of an audit of dollars allocated or how funds expenditures are reported in a balance sheet or financial fund review. The merit system compliance program is not a traditional "audit" but rather a review of systems to determine compliance with rules and regulations, and consistency with OPM human capital policy.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: OPM's merit compliance program compares favorably with similar national and state programs. A 1999 Canadian study compared the compliance programs of four western democracies (Canada, Great Britain, New Zealand, and the United States) and commended the United States' system for using several best practices recommended to improve compliance. Great Britain recently codified its own merit principles for government hiring and began periodic audits of agencies and departments similar to those conducted by OPM. Great Britain has also recently emphasized the importance of agency self-assessment of compliance, combining national oversight and agency self-audits to improve compliance with merit principles. Several state governments conduct audits to assess agencies' compliance with merit principles and civil service laws. Like OPM, Maine auditors may proscribe corrective action when needed, and Louisiana compliance officials adapt training programs to meet demonstrated needs. Although few states perform regular compliance audits, more states employ appeals processes, in which employees may appeal classification and pay decisions. Some of these states emphasize timeliness of appeal resolution, setting targets in statute or guidance.

Evidence: In a December 1999 report entitled, "Merit Systems in Western Democracies: Current Problems and Selected Best Practices," the Public Service Commission of Canada commended OPM's program for its merit training initiatives, the content of which is informed by audit results. Other cited best practices included oversight mechanisms (whereby OPM's compliance program is monitored by MSPB) and accountability mechanisms (making line managers aware of and accountable for upholding merit system principles). Great Britain's Civil Service Commissioners' Annual Report (2004-2005) identifies actions the Commissioners took during the year to protect the public's interest and values. The report identifies the methods with which the commissioners assess agencies' compliance with the Recruitment Code (the British merit system principles for government hiring). In response to a KPMG audit, the Commission is placing a greater emphasis on self-audits by agencies and scheduling its own on-site compliance checks based on an assessment of those internal systems. A web query yielded information on the compliance activities of a subset of American states. Louisiana, Maine, Maryland and North Dakota perform audits to assess agencies' compliance with merit principles and civil service laws. All of the aforementioned governments also employ similar appeals processes by which employees may appeal classification and pay decisions, as do West Virginia, New Jersey, Nebraska, and Delaware. Louisiana and Delaware both set 90 day targets for officials to respond to employee appeals; Maine officials must respond within 30 days. In an April 2005 report entitled "Equal Employment Opportunity: The Policy Framework in the Federal Workplace and the Roles of EEOC and OPM," GAO reported on how EEOC and OPM carry out their duties with regard to promoting equal opportunity employment and pursuing affirmative employment and workforce diversity objectives. While there was no evaluation of how each program performed, the report noted how similar actions were taken by both agencies to meet similar objectives.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: In July 1998, MSPB completed a comprehensive independent evaluation of the OPM compliance program and issued a report entitled Civil Service Evaluation: The Evolving Role of the U.S. Office of Personnel Management. This was MSPB's fifth evaluation of OPM's oversight program since the 1978 Civil Service Reform Act. The 1998 report was of sufficient quality and scope and addressed OPM's effectiveness in overseeing Federal personnel systems and agencies' personnel programs. MSPB found that agencies rated the oversight program's effectiveness as "very great" or "considerable" for the goal of protecting and promoting a merit-based Federal civil service. However, MSPB gave the program mixed reviews for its efforts to develop agency self-assessment programs and to use information gathered from auditors to affect change in Federal HRM policy and practice. A later MSPB report entitled, The U.S. Office of Personnel Management in Retrospect: Achievements and Challenges after Two Decades, issued December 25, 2001, provided an updated review of OPM's oversight program. The report stated "Overall, OPM's oversight program is one that agency personnel officials are generally pleased with, and one that seems to have been given the appropriate amount of attention and support. In fact, the oversight function is fully funded by appropriated funds (unlike a number of other critical OPM services that are marketed and sold to the agencies), and thus avoids potential conflicts of interest. As OPM enters its third decade, the oversight program is sound, with OPM recognizing the oversight problems that it still faces and continuing to devise ways to address those challenges."

Evidence: The following reports were referenced: ??MSPB report issued July 1998, entitled Civil Service Evaluation: The Evolving Role of the U.S. Office of Personnel Management. ??MSPB report issued December 25, 2001, entitled The U.S. Office of Personnel Management in Retrospect: Achievements and Challenges after Two Decades.