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Performance and Accountability Series:

January 2003:

Major Management Challenges and Program Risks:

Office of Personnel Management:


A Glance at the Agency Covered in This Report:

The Office of Personnel Management provides human capital leadership, 

guidance, and expertise to the President, and to federal agencies and 

their employees. It also ensures compliance with personnel laws and 

regulations and provides retirement, health benefits, and other 

insurance services to employees, annuitants, and beneficiaries. OPM 

is in the midst of a major transformation effort and has revised its 

strategic plan to both drive and reflect that effort. The strategic 

plan outlines the following three goals for the agency: 

* ensuring that federal agencies adopt human capital management 

systems that improve their ability to build successful, high-performing 


* ensuring that federal agencies use effective merit-based human 

capital strategies to create a rewarding work environment that 

accomplishes the mission; and

* meeting the needs of federal agencies, employees, and annuitants 

through the delivery of efficient and effective products and services.

The Office of Personnel Management’s Budgetary and Staff Resources

[See PDF for image]

a Budgetary resources include new budget authority (BA) and 

unobligated balances of previous BA.

b Budget and staff resources are actuals for FY 1998-2001. FY 2002 

are estimates from the FY 2003 budget, which are the latest publicly 

available figures on a consistent basis as of January 2003. Actuals 

for FY 2002 will be contained in the President’s FY 2004 budget to be 

released in February 2003.

Source: Budget of the United States Government.

[End of figure]

This Series:

This report is part of a special GAO series, first issued in 1999 and 

updated in 2001, entitled the Performance and Accountability Series: 

Major Management Challenges and Program Risks. The 2003 Performance 

and Accountability Series contains separate reports covering each 

cabinet department, most major independent agencies, and the U.S. 

Postal Service. The series also includes a governmentwide perspective 

on transforming the way the government does business in order to meet 

21st century challenges and address long-term fiscal needs. The 

companion 2003 High-Risk Series: An Update identifies areas at 

high risk due to either their greater vulnerabilities to waste, fraud, 

abuse, and mismanagement or major challenges associated with their 


efficiency, or effectiveness. A list of all of the reports in this 

series is included at the end of this report.

GAO Highlights:

Highlights of GAO-03-115, a report to Congress included as part of 

GAO’s Performance and Accountability Series

Why GAO Did This Report:

This is GAO’s first performance and accountability series report on the 

Office of Personnel Management (OPM), the federal government’s human 

capital agency. OPM faces challenges in four key areas: leadership, 

oversight, internal management, and administration of the federal 

retirement and health insurance programs. The data presented in this 

report are intended to help sustain congressional attention and an 

agency focus in addressing these challenges and ultimately overcoming 

them. This report is part of a special series of reports on 

governmentwide and agency-specific issues.  

What GAO Found:

OPM has implemented important initiatives and has others under way to 

improve its mission and management performance. Building on these 

efforts, OPM has additional opportunities to overcome the following 

management challenges. 

Leading strategic human capital management governmentwide. Many 

agencies continue to experience human capital shortfalls.  They 

want and need greater OPM leadership and assistance to help them 

strategically manage their human capital and address challenges 

in recruiting, retaining, and rewarding talented staff—caused, in 

part, by long-standing problems with the federal pay, classification, 

and hiring systems.

Overseeing agency human capital management systems. Merit system 

surveys and studies continue to show a need for strong oversight of 

agency human capital systems. Surveys show employees continue to 

believe agencies are not adhering to several of the merit principles. 

Transforming OPM and managing its internal operations. As in other 

areas, OPM has major efforts under way to address this challenge. 

It is realigning its organizational structure, has prepared a 

draft succession plan, is implementing a new financial management 

system, and is addressing several information security weaknesses. 

But more remains to be done as OPM transitions to its new structure.  

For example, OPM should implement workforce and succession planning 

strategies to address the expected staff losses from retirements 

and to close skill and knowledge gaps, fully implement an 

agencywide security program and conduct security risk assessments 

of its information systems, and continue to take steps to address 

historical weaknesses in activities of its discretionary 

appropriation funds.

Administering the retirement and health insurance programs. OPM 

has made major strides in managing these programs, which have 

received high ratings from customers over the past few years—for 

example, over 90 percent of federal annuitants are satisfied 

with OPM’s retirement services.  But customer satisfaction could 

fall if OPM is not able to handle the impending retirement wave 

or implement measures to limit health care premiums.

What Remains to Be Done:

Consistent with OPM’s ongoing internal transformation efforts, 

GAO believes that OPM should:

* accelerate efforts to seek and implement solutions to problems 

with the federal pay and hiring systems,

* ensure that agencies establish and maintain merit-based human 

capital management systems and promote agency self-monitoring 

programs, and

* ensure that it effectively transitions to its new 

organizational structure while continuing to address its human 

capital, financial management, and information security 


To view the full report, click on the link above.

For more information, contact Chris Mihm at or 

(202) 512-6806.

Transmittal Letter:

Major Performance and Accountability Challenges:

GAO Contacts:

Related GAO Products:

Performance and Accountability and High-Risk Series:

This is a work of the U.S. Government and is not subject to 

copyright protection in the United States. It may be 

reproduced and distributed  in its entirety without further 

permission from GAO. It may contain copyrighted graphics, 

images or other materials. Permission from the copyright 

holder may be necessary should you wish to reproduce 

copyrighted materials separately from GAO’s product.

Transmittal Letter January 2003:

The President of the Senate

The Speaker of the House of Representatives:

This report addresses, for the first time, the major performance and 

accountability challenges facing the Office of Personnel Management 

(OPM) as it seeks to ensure that the federal government’s human capital 

management systems are merit-based and support agencies in recruiting, 

hiring, and retaining the high-quality, diverse workforce necessary to 

meet the current and emerging needs of the American people. It includes 

a summary of actions that OPM has taken and that are under way to 

address these challenges. It also outlines further actions that GAO 

believes are necessary.

This analysis should help the new Congress and the administration carry 

out their responsibilities and improve government for the benefit of 

all Americans. For additional information about this report, please 

contact J. Christopher Mihm, Director, Strategic Issues, at (202) 512-

6806 or at

David M. Walker

Comptroller General

of the United States:

Signed by David M. Walker

Major Performance and Accountability Challenges:

The Office of Personnel Management (OPM), the President’s agent and 

advisor for human capital matters, is charged with overseeing the 

management of the federal government’s most important asset--its 

people. In January 2001, we added strategic human capital management to 

our list of federal programs and operations that we have identified as 

high risk.[Footnote 1] OPM’s charge entails leading agencies and 

holding them accountable for shaping their human capital management 

systems in a manner that ensures that (1) the federal government 

acquires, develops, manages, and retains employees with the knowledge, 

skills, and abilities needed to deliver services the American people 

want and deserve and (2) governmentwide values, such as the merit 

system principles, veterans’ preference, and workforce diversity, are 

consistently upheld. OPM is also charged with providing retirement, 

health benefits, and other insurance services to employees, annuitants, 

and beneficiaries.

OPM’s leadership in helping agencies shape their human capital 

management systems has become more crucial as a result of the tragic 

events of September 11, 2001. These events led to a change in our world 

and the priorities of our policymakers and produced new challenges to 

create and staff new governmental structures and restructure some 

existing ones to fight terrorism and secure our homeland. At the same 

time, agencies across the federal government need to transform what 

they do, how they do it, and with whom they partner. These 

transformations will have enormous implications for the federal 

government’s “people” policies and procedures as well as cultures of 

government organizations. OPM plays a key role in helping individual 

agencies and the government as a whole overcome the broad range of 

human capital challenges, which are at the root of transformation. The 

four pervasive governmentwide human capital challenges, identified in 

our 2001 High-Risk Update, are (1) strategic human capital planning and 

organizational alignment, (2) leadership continuity and succession 

planning, (3) acquiring and developing staffs whose size, skills, and 

deployment meet agency needs, and (4) creating results-oriented 

organizational cultures. OPM carries out its leadership role in a 

decentralized environment where both it and the agencies have shared 

responsibilities for addressing the human capital and related 

challenges facing the government.

OPM is in the process of transformation--from less of a rulemaker, 

enforcer, and independent agent to more of a consultant, toolmaker, and 

strategic partner in leading and supporting executive agencies’ human 

capital management systems. As OPM’s transformation evolves and it 

seeks to constructively partner and consult with other executive 

agencies in shaping their human capital management systems, it must 

also strive to maintain the degree of institutional independence needed 

to oversee agencies’ human capital efforts objectively.

OPM’s transformation has been occurring against the backdrop of at 

least 15 reorganizations since its inception in 1979 and a nearly 50 

percent drop in staff over the last decade, largely due to 

governmentwide downsizing in the mid-1990s. OPM’s total workforce 

dropped from nearly 6,800 in 1990 to about 3,700 in 2002. OPM’s 

operating budget was also affected during this time frame but not to 

the same degree. From fiscal years 1990 through 2002, OPM’s operating 

budget fluctuated--ranging from a high of

$227 million in fiscal year 2002 to a low of $186 million in 

1998.[Footnote 2] Overall, after adjusting for inflation, OPM’s funding 

declined 10 percent over the 1990 through 2002 period.

The changes that have been occurring in OPM’s culture and organization 

since its creation, as well as the different operating philosophies of 

each of its directors, have influenced how the agency has carried out 

its leadership role and mission. OPM’s overarching challenge today is 

to lead agencies in shaping their human capital management systems 

while also undergoing its own internal transformation. As it addresses 

this overall challenge, OPM faces several performance and 

accountability challenges that affect its ability to effectively 

execute its mission and become a high-performing organization focused 

more on results and less on process. These include the following:

[See PDF for image]

[End of figure]

OPM has taken a number of important steps and has several initiatives 

under way or planned to address each of its challenges. For example, 

OPM has exerted greater human capital leadership by issuing agencies 

its Human Capital Scorecard[Footnote 3] to assist them in improving 

strategic management of their human capital and administering an annual 

governmentwide survey on human capital to help assess agencies’ 

progress in achieving performance goals for each of the five dimensions 

of human capital management contained in its Human Capital Scorecard. 

For example, OPM will be able identify the extent to which workforces 

in individual agencies as well as the federal government as a whole 

lack the necessary job-relevant knowledge and skills to accomplish 

organizational goals. In addition to using the results of the survey to 

assess and report on federal agency progress overall in achieving the 

human capital management performance goals contained in its scorecard, 

OPM intends to compare and benchmark the human capital survey results 

with private sector organizations. OPM has also exerted greater human 

capital leadership by developing a set of legislative proposals for 

providing agency managers the additional flexibilities and tools they 

need to manage their human capital effectively.[Footnote 4] OPM is 

addressing its oversight challenge, in part, by encouraging agencies to 

develop and maintain internal accountability systems in line with its 

HRM Accountability System Standards.

Internally, OPM has launched an effort to transform its organizational 

structure and workforce to be more customer-focused and results-

oriented. OPM outlined its new organizational structure in September 

2002 and is currently implementing it. OPM has also taken several steps 

to manage its human capital more strategically (such as aligning its 

human capital goals with program-specific goals), correct financial 

management weaknesses (such as implementing a new financial management 

system), and secure its information resources (such as issuing an 

agencywide security policy). Given its governmentwide leadership 

responsibilities, it is particularly important that OPM seeks to “lead 

by example” in its internal management, particularly with its own human 

capital approaches and initiatives.

In addition to launching the new federal long-term care insurance 

program, OPM has made significant strides in administering the federal 

employees retirement and health benefits programs, which customers have 

rated highly. For example, OPM has taken steps to modernize its 

retirement systems and limit the extent of the health care premium 

increases. Although customers have rated the retirement and health 

benefits programs highly, these high satisfaction rates could fall if 

OPM is not prepared to handle the expected retirement wave and 

implement cost-containment measures that limit health care premium 


Building on these efforts, OPM should also exert greater leadership in 

seeking and implementing solutions to long-standing problems with the 

federal pay and hiring systems and in working with other interested 

parties to prepare the way for more comprehensive civil service reform; 

ensure that agencies establish and maintain merit-based human capital 

management systems and promote agency self-monitoring programs; and 

ensure that it effectively transitions to its new organizational 

structure while continuing to address its internal human capital, 

financial management, and information security challenges.

Leadership of Human Capital:

Strategic human capital management is a pervasive challenge facing 

agencies across the federal government, and overcoming this challenge 

will require vigorous and sustained leadership from multiple parties--

OPM as well as other key human capital players, such as the President; 

the Office of Management and Budget (OMB); Congress; and department and 

agency leaders. Since designating strategic human capital management as 

a high-risk area in January 2001,[Footnote 5] our work and the work of 

others continues to show that agencies need and want greater leadership 

from OPM in helping them to address their human capital challenges. OPM 

recognizes the importance of exerting a stronger and more visible 

leadership role. It, along with several other key human capital 

players, including GAO, has taken or proposed actions within the last 2 

years that are aimed at improving human capital management across 

government and a real momentum for reform is now evident. Nevertheless, 

while addressing the challenge of strategic human capital management is 

a shared responsibility among multiple parties, continuing and 

augmented leadership from OPM, as the President’s primary advisor on 

human capital issues, is critically needed in addressing this 


Our work and that of others has shown that many agencies are continuing 

to experience human capital shortfalls that erode their ability, as 

well as threaten the ability of others, to perform their missions 

economically, efficiently, and effectively. The following examples 

illustrate the seriousness of the human capital challenges facing 


* The federal government is facing several human capital challenges in 

its civilian acquisition workforce. This workforce declined by 22 

percent over the last decade. As the number of acquisition workers 

declines, the demand increases for an acquisition workforce with more 

sophisticated technical, financial, and management skills to handle the 

procurement of $200 billion in goods and services annually.[Footnote 6]

* The Federal Aviation Administration (FAA) will likely need to hire 

thousands of air traffic controllers in the next decade to meet 

increasing traffic demands and to address the anticipated attrition of 

experienced controllers, predominately because of retirement. Yet, we 

reported in June 2002 that FAA had not developed a comprehensive human 

capital workforce strategy to address its impending controller 

needs.[Footnote 7]

* The Securities and Exchange Commission’s (SEC) workload has increased 

in volume and complexity over the past decade due to the tremendous 

growth in the U.S. securities markets. SEC’s growing workload has 

caused staffing imbalances and put the agency under increasing 

pressure. In addition, staffing shortages have delayed critical 

regulatory activities, such as reviewing rule findings and issuing 

guidance, and affected its oversight and supervisory 

functions.[Footnote 8]

* The Department of Homeland Security is bringing together 170,000 

federal employees from 22 agencies with their own cultures and often 

differing performance management, personnel, and payroll systems. 

Merging these disparate entities into a coherent, unified, and high-

performing department represents a great challenge for the new 

leadership as well as for OPM in advising and supporting the 

leadership.[Footnote 9]

Although federal departments and agencies have primary responsibility 

for strategically managing their people and addressing their human 

capital challenges, OPM has an important role and responsibility in 

leading agency and governmentwide human capital efforts. OPM defines 

its human capital leadership role as supporting agencies in achieving 

their strategic goals and managing their human capital more effectively 

and strategically by:

* creating a personnel system (policies, procedures, and tools) that 

gives agencies the flexibility they need to recruit, retain, train, and 

manage employees and to align their workforces in a manner appropriate 

to their unique needs;

* providing guidance and assistance through its Web site as well as 

through other means to alert agency managers to their human capital 

responsibilities and authorities;

* making the hiring process more effective and efficient, including 

improving the attractiveness of the federal government as an employer 

to people of diverse backgrounds;

* providing expert advice on performance management, classification, 

and compensation, including proposing options for market-based, 

performance-oriented compensation reform to enable agencies to recruit 

and retain high-quality employees;

* promoting demonstration projects that help agencies develop more 

effective human capital programs and practices as well as providing 

them a wide range of human capital products and services, such as 

examining and testing job applicants;

* encouraging agencies to use workforce and succession planning to 

strategically manage the impact of demographic and other workforce 


* disseminating information about the federal labor-management 

relations program to agencies, labor organizations, and the general 

public and consulting with labor organizations on the national level 

about governmentwide human capital issues; and:

* ensuring that essential governmentwide values--such as merit system 

principles and accountability, veterans’ preference, workforce 

diversity, and family-friendly policies--are sustained.

While important efforts have recently been taken and more are planned 

or under way, there are additional opportunities for OPM leadership. 

For example, as a part of our work on human capital flexibilities for a 

forthcoming report, half or more of the human resource (HR) directors 

we surveyed in 2001 and 2002 at 24 agencies and departments told us 

that OPM had not sufficiently assisted them in identifying new 

flexibilities. Our ongoing review of the federal hiring process is 

identifying additional areas where OPM can target its efforts. We 

reported in July 2001 and in an earlier report that OPM should take a 

more active role in agency workforce planning efforts in light of the 

expected retirement wave.[Footnote 10] Our July 2001 report also 

pointed out that OPM should focus its performance goals more squarely 

on the degree to which the federal workforce has the right skill mix. 

Twenty-six percent of the HR directors responding to OPM’s fiscal year 

2001 customer satisfaction survey said employees in their agencies 

lacked the skills needed to meet their agencies’ missions.

The Merit Systems Protection Board (MSPB) has also called for greater 

leadership on the part of OPM. MSPB, which is required by statute to 

periodically review OPM’s activities, reported in December 

2001[Footnote 11] that OPM has made commendable progress in a number of 

areas, such as decentralizing the civil service and improving HR 

oversight. However, its leadership needs to be more vigorous in 

responding to a number of critical program areas, such as applicant 

examining, staffing, and employee compensation policies and practices. 

MSPB said that OPM is in an ideal position to demonstrate leadership by 

championing the development and use of the best assessment tools for 

evaluating candidates. Regarding staffing, MSPB said that many managers 

and HR specialists continue to be convinced that they are not getting 

high-quality candidates because policies, laws, and regulations impose 

restrictions on how agencies are to select, appoint, and promote 

employees. As the government’s human capital leader and expert, MSPB 

said that OPM should forcefully use its influence to help bring about 

changes in civil service laws, policies, and practices that either 

conflict with or detract from a merit-based employment system.

MSPB’s 2001 report also noted opportunities for greater OPM leadership 

in improving the federal government’s classification and compensation 

systems and in addressing key obstacles within the hiring process. For 

example, MSPB reported that critics of the classification system, which 

remains the primary determinant of employees’ pay after over 50 years, 

view it as antiquated and irrelevant to the work and workers of today. 

MSPB also reported that several HR directors said that OPM has relied 

on a piecemeal approach to solving problems with the compensation 

system, while others expressed frustration with OPM’s lack of progress 

in creating a system that helps them recruit and retain high-quality 

workforces. In particular, MSPB has called on OPM to address key 

problems with the hiring process, including revamping the system for 

compensating workers, reducing the number of hiring authorities, and 

developing new candidate assessment tools.

OPM also has a key role to play in improving the governmentwide systems 

in place for managing employee performance at all levels and holding 

employees accountable for results, adequately compensating employees at 

all levels, and maintaining effective employee and labor relations. As 

we discuss in our 2003 High-Risk Series: Strategic Human Capital 

Management,[Footnote 12] modernizing agency performance management 

systems and linking them to agency strategic plans and desired outcomes 

should be a top priority. We also noted that (1) long-standing issues 

and concerns over executive compensation and pay compression need to be 

carefully examined in the context of how to make any pay increases 

variable and performance-based rather than across-the-board and fixed 

and (2) effective employee-management relations can aid in achieving 

organizational outcomes by fostering an environment in which managers 

and employees work collaboratively. OPM can also assist agencies as 

they seek to form high-performing organizations. Agencies need to form 

high-performing organizations to better determine competitive sourcing 


OPM is taking several steps to exercise broad overall leadership over 

federal human capital management. OPM has the key role leading the 

administration’s efforts to address strategic human capital management, 

a critical part of the President’s Management Agenda for improving 

federal management and performance, and has dedicated staff to work 

directly with agency leaders to ensure that they are effectively 

transforming their strategic human capital management. In December 

2001, OPM issued its Human Capital Scorecard, which is designed to help 

agencies achieve the human capital standards for success that are part 

of the Executive Branch Management Scorecard. In November 2002, OPM 

posted on its Web site the administration’s revised Human Capital 

Standards for Success that were based on a collaborative effort by OPM, 

OMB, and us. The revised standards replaced OPM’s Human Capital 

Scorecard and more fully reflect the key themes in our strategic human 

capital model.[Footnote 13] OPM says it is using these standards to 

assess agencies’ human capital practices.

To increase agencies’ awareness and use of effective human capital 

flexibilities, OPM published two reports in 2001. One report, 

Demonstration Projects and Alternative Personnel Systems: HR 

Flexibilities and Lessons Learned, describes best practices and lessons 

learned from testing a variety of flexibilities, such as pay banding, 

categorical ranking, and market-based pay, under demonstration projects 

and alternative personnel systems. The other report, Human Resources 

Flexibilities and Authorities in the Federal Government, is a handbook 

that is designed to provide agencies information on how they can use 

the HR flexibilities to address their human capital challenges. Also in 

2001, OPM began sending “strike force” teams of HR experts to agencies 

that requested specific assistance in using existing HR flexibilities.

OPM has also begun to exercise more leadership to address the long-

standing problems with the federal government’s cumbersome hiring 

process and inadequate pay and classification systems. OPM began an 

initiative in the spring of 2002 to improve the hiring process. The 

hiring initiative will, in part, entail revising the vacancy 

announcements to make them more reader friendly; providing federal job 

seekers a single application point through Recruitment One-Stop, an 

electronic government (e-Gov) initiative;[Footnote 14] and taking steps 

to build the image of public service. OPM is developing a resource 

guide for managers and HR professionals that will highlight efficient 

and effective hiring practices that can be implemented under existing 

authorities available to agencies. The resource guide is scheduled to 

be released in 2003, according to OPM. In addition, OPM’s 2003 

performance plan indicates increased attention to improving applicant 

assessment tools, a key obstacle to effective hiring. One of the 

strategic objectives in OPM’s 2003 plan states that by 2005, 

governmentwide hiring selections are to be based on assessment tools 

that are more comprehensive in assessing the full range of competencies 

needed to perform the jobs of the future.

Regarding pay and classification, OPM issued a white paper in April 

2002[Footnote 15] describing the need for reform of the white-collar 

federal pay system to make it more flexible, market-sensitive, and 

performance-oriented as well as a better tool for improving strategic 

human capital management. The paper characterized the federal 

government’s pay and classification (also called job evaluation) 

systems as rigid and antiquated with work level descriptions dating 

back over half a century that are not meaningful for today’s knowledge-

driven organizations. In July 2002, we testified before the National 

Commission on the Public Service that OPM’s white paper provides a good 

foundation for the results-oriented pay reform discussion that now 

needs to take place and noted that the greater use of broadbanding is 

an option that deserves to be discussed. In that testimony, we also 

noted that Congress may wish to explore the benefits of (1) giving OPM 

additional flexibility that would enable it to grant governmentwide 

authority for all agencies (i.e., class exemptions) to use broadbanding 

for certain critical occupations and/or (2) allowing agencies to apply 

to OPM (i.e., case exemptions) for broadbanding authority for their 

specific critical occupations. However, agencies should be required to 

demonstrate to OPM’s satisfaction that they have modern, effective, and 

validated performance management systems before they are allowed to use 

broadbanding.[Footnote 16]

OPM also had a central role in the development of key personnel reforms 

that were part of the administration’s reform legislation. Some of 

these reforms were included in the recently enacted Homeland Security 

Act of 2002,[Footnote 17] which created the new Department of Homeland 

Security. According to OPM, it has been the principal advisor on HR 

flexibilities for the new department and is working with the 

department’s leadership to develop specific HR recommendations in the 

six areas of management flexibility provided in the legislation--

performance management, pay systems, position classification, hiring, 

labor-management relations, and disciplinary actions and appeals. In 

addition to providing the President with additional authority to create 

new policies for managing the workforce within the new department, the 

legislation includes provisions that authorize agencies across the 

federal government to use additional personnel flexibilities. For 

example, agencies will now be permitted (1) to offer early outs and 

buyouts to their employees without the requirement to reduce their 

overall number of employees and (2) to use a more flexible approach in 

the rating and ranking of job candidates during the hiring and staffing 

process. In addition, under the legislation agencies will be required 

to incorporate strategic workforce planning into their performance 

plans and reports and appoint “chief human capital officers” to oversee 

workforce management.

Although OPM has initiated several actions to help address 

governmentwide strategic human capital management challenges, there are 

opportunities for OPM to augment its leadership. As we have noted 

earlier in this report and MSPB has outlined in several studies, OPM 

can build on the steps it has taken and exert aggressive leadership in 

seeking and implementing solutions to key human capital challenges. 

Continuing efforts are particularly needed to address hiring and 

compensations issues, which have plagued federal human capital 

management for years.

Oversight of Agency Human Capital Management Systems:

Agencies and OPM share responsibility for ensuring that human capital 

practices are effective and carried out in accordance with the merit 

system principles[Footnote 18] and other national goals. Effective 

implementation of human capital practices in accordance with the merit 

system principles and other national goals is important to ensuring a 

skilled and qualified federal workforce as well as maintaining the 

integrity of and public confidence in the federal civil service. In 

recognition of the importance of this issue, one of the dimensions of 

effective human capital management in the administration’s Human 

Capital Standards for Success is “Agency human capital decisions are 

guided by a data-driven, results-oriented planning and accountability 

system.” While agencies are primarily responsible for managing their 

human capital, OPM has governmentwide oversight responsibilities. OPM 

recognizes that oversight is important to improving governmentwide 

strategic human capital management, especially in the changing human 

capital environment of increased flexibility in managing human capital 

both inside and outside the requirements of title 5 of the U.S. Code, 

which defines much of the federal government’s personnel system 

requirements. In recognition of this growing decentralization of the 

federal personnel system, OPM has taken actions to strengthen its 

oversight program. Building on these efforts, OPM needs to do more to 

ensure that agencies are effectively operating their human capital 

management systems and adhering to the merit system principles. 

Promoting agency self-monitoring programs is one area needing continued 

OPM attention.

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. This is taking place at a time when OPM’s and agencies’ 

human capital staffs for overseeing these activities have dwindled 

substantially. In response to this development, OPM is carrying out its 

oversight by encouraging and monitoring agency self-assessment efforts, 

analyzing agency-specific and governmentwide data, conducting 

governmentwide annual surveys on the merit system principles and human 

capital to gather employees’ perceptions of the systems’ fairness and 

effectiveness, and conducting on-site reviews of agencies’ human 

capital management systems.

The results of several merit principle surveys conducted by OPM and 

MSPB continue to raise questions about how effectively the agencies and 

OPM are carrying out their responsibilities for ensuring that human 

capital practices are carried out in accordance with the merit system 

principles. Over the years, these surveys have revealed that a varying 

and sometimes substantial percentage of employees have expressed a 

belief that their agencies are not adhering to these principles. OPM’s 

Merit System Principles Questionnaire results for 1999 through 2001 

showed less than half of the responding employees believed that their 

agencies protect them against reprisal and provide equal pay for equal 

work as well as reward excellence. OPM’s survey results are broadly 

consistent with a 1998 MSPB survey where 40 percent of those surveyed 

said they believed they had inadequate protection against the 

possibility of a prohibited personnel action being taken against them. 

MSPB said of these results, “the fact that such a high percentage felt 

[this way] is a cause for concern and continued vigilance.” To its 

credit, OPM acknowledged in its 2001 performance report that employees’ 

low perceptions of their agencies’ adherence to the aforementioned 

merit principles were unacceptable and that it planned to address the 

perception issue in future plans and strategies. Its 2003 performance 

plan says it expects improvement to occur over a period of years, but 

it does not address what specific steps OPM and others need to take to 

improve the percentage of positive responses.

MSPB survey data collected from 1986 through 2001 showed that employees 

are not convinced that favoritism and unfair advantage have been 

removed from the government’s hiring and promotion processes. For 

example, 28 percent of employees surveyed in 1986 said they believed 

they had been denied a job or job reward because of the operation of a 

“buddy system” without regard to merit. In a study published in 

December 2001, MSPB reported that 69 percent of surveyed employees 

believed that “connections to other important people in government” was 

the single factor most likely to play a role in promotions or 

selections for vacant positions in their organizations.[Footnote 19]

To address these ongoing issues in its oversight program, OPM has taken 

a number of actions. For example, in January 2002, OPM issued HRM 

Accountability System Standards in response to Executive Order 13197. 

The standards describe the essential elements of internal human 

resources management (HRM) accountability systems, set criteria for 

agencies in establishing and maintaining these systems, and provide OPM 

a framework for reviewing and assessing agencies’ systems. OPM reported 

in its 2001 performance report that the executive order gave the agency 

clear authority to require agencies to establish and maintain HRM 

accountability systems. OPM officials told us it is encouraging 

agencies to develop an internal accountability system in line with 

these standards and has issued a “toolkit” to assist them in doing so.

Recognizing that it is increasingly important for agencies to have a 

strong internal capability for ensuring accountability and compliance 

with the merit principles in the currently decentralized HRM 

environment, OPM established a strategic objective in its fiscal year 

2003 performance plan that all agencies implement accountability 

systems by fiscal year 2005 that “effectively hold responsible 

officials accountable for their human resources operations and 

results.” To achieve this objective, OPM set a goal to “develop and 

improve agency accountability for conducting HRM in accordance with the 

merit system principles and in alignment with mission.” OPM expects to 

meet this goal by assessing agency accountability systems; improving 

ways to evaluate the effectiveness of HRM accountability systems; and 

promoting and assisting agencies in developing and improving their 

accountability systems through sharing of best practices, developing 

and distributing educational materials, and providing guidance and 

individual consultation. Meeting this important goal will entail an 

enormous effort on the part of OPM and the agencies.

OPM also issued a Human Capital Assessment and Accountability Framework 

(Framework) in October 2002 that is based on the revised standards for 

success contained in the administration’s Executive Branch Management 

Scorecard. The Framework provides agencies consolidated guidance on 

critical success factors and performance indicators that they can refer 

to as they transform their strategic human capital management programs. 

It is also intended to support agencies’ internal assessment and 

accountability systems and OPM’s evaluation of agency accountability 

systems and human capital efforts. According to OPM, under its recent 

restructuring, agency human capital efforts, including accountability 

systems, are to be evaluated by its Agency Merit System Accountability 

and Human Resources Programs Office.

Although the actions OPM has taken and planned to improve 

governmentwide oversight of agencies’ human capital systems are 

promising, the results of the merit principles surveys and MSPB’s 2001 

report show that there continues to be a need for strong oversight of 

the merit system from both OPM and the agencies, especially in this era 

of delegation and decentralization. MSPB reported in December 2001 that 

OPM needs to show strong leadership in fostering agency self-monitoring 

programs and find a way for its oversight reviews to address HRM 

accountability at the line manager and supervisor levels. While OPM’s 

actions to improve governmentwide oversight are promising, the agency 

needs to do more to accomplish its oversight mission in a decentralized 

human capital environment in which responsibility for human capital 

management accountability continues to shift to agencies. Given that 

OPM’s oversight approach includes encouraging and monitoring agency 

self-assessment programs, it could strengthen this approach by 

requiring, rather than encouraging, agencies to establish and maintain 

internal oversight programs and to meet its HRM Accountability System 

Standards. OPM could also develop standards that agencies’ oversight 

staffs would need to meet to be fully qualified to conduct agency 

oversight reviews. In short, there are opportunities for OPM to build 

upon the positive efforts it has under way to promote agency self-

monitoring programs and ensure that agencies have mechanisms in place 

for holding their managers and supervisors accountable.

OPM’s Organizational Transformation Initiatives:

As OPM implements its organizational transformation initiatives, which 

are shifting its role from less of a rule maker and enforcer to more of 

a strategic partner in leading and supporting executive agencies’ human 

capital management systems, it is addressing the need to strategically 

manage its human capital, including effectively aligning its 

organizational structure and people resources to achieve its mission 

and goals, protect its information technology systems against security 

threats, and manage its financial resources. OPM has undertaken a 

number of initiatives to address these challenges. However, the 

experiences of successful major change management initiatives in large 

private and public sector organizations suggest that it can often take 

at least 5 to 7 years until such initiatives are fully implemented and 

the related cultures are transformed in a sustainable manner. Thus, it 

is entirely to be expected that as OPM moves forward, there are 

opportunities to strengthen and deepen its current efforts.

Strategic Human Capital Management:

As the federal government’s human capital agency, OPM must lead by 

example in managing its people. While OPM faces many of the same human 

capital challenges as other agencies, it must serve as a role model to 

other agencies in how to address these challenges. OPM has taken and 

planned actions to address its human capital challenges, and its 

actions are in line with the administration’s Human Capital Standards 

for Success. OPM’s actions also align with the four cornerstones of 

effective strategic human capital management outlined in our March 2002 

model of strategic human capital management:[Footnote 20] (1) 

leadership, (2) strategic human capital planning, (3) acquiring, 

developing, and retaining talent, and (4) creating results-oriented 

organizational cultures.


In addition to demonstrating commitment to strategic human capital 

management governmentwide, OPM’s top leadership has demonstrated this 

commitment internally by viewing people as important enablers of agency 

performance. In November 2002, OPM’s Director changed the makeup of her 

senior leadership team by appointing four executives to new associate 

director positions to help implement the agency’s restructuring effort 

approved in September 2002. The Director noted that the four executives 

collectively possess special skills in innovative HR reforms, e-Gov, 

and labor-management relations as well as knowledge of civil service 

protections. OPM also (1) sought input on its restructuring from its 

employees, local union representatives, and key external stakeholders 

such as departments and agencies, Congress, and academic and other 

public administration advocates, (2) involved employees in cross-

organizational taskforces on other major agencywide projects, and (3) 

implemented employee-friendly workplace policies, such as 


The rate of turnover among OPM’s career Senior Executive Service (SES), 

due largely to retirements, varied widely from 0 percent in fiscal year 

1997 to 21 percent in fiscal year 2001, according to OPM’s 

calculations. The size of OPM’s career SES workforce during this 5-year 

period ranged from 36 in fiscal year 1997 to 40 in fiscal year 1999. 

OPM’s projected retirement rate for its SES over the next 10 years will 

be the largest--8 percent each year--of any group in its workforce, 

according to its June 2001 workforce analysis. The recent and projected 

losses in OPM’s SES workforce will provide it with a challenge to 

maintain an effective leadership team.

In light of the impending retirements among its SES workforce, OPM has 

engaged in succession planning to ensure that it has the leadership 

talent in place to manage a transformed OPM effectively. OPM’s 

succession planning initiative, begun in 2000, was not fully 

implemented due to other priorities and the need to consider succession 

planning in the context of OPM’s transformation and restructuring 

efforts. These efforts naturally have implications for the competencies 

and career paths OPM will need to be successful. Nonetheless, now that 

the restructuring effort is being implemented, OPM can revisit and, if 

necessary, augment its succession planning strategies.

Strategic Human Capital Planning:

OPM, like other agencies, was required by OMB to analyze its workforce 

and develop a plan for restructuring the agency that would meet the 

President’s goals of creating agency organizational structures that are 

citizen-centered, results-oriented, and market-driven.[Footnote 21] 

OPM prepared and submitted its workforce analysis and restructuring 

plan to OMB and has taken and planned actions to address human capital 

challenges identified as a result of its workforce analysis.

In analyzing its workforce, OPM found that 4.2 percent of its employees 

(about 123 per year), on average, are projected to retire each year 

over the next 10 years, and as we discussed earlier, the largest 

percentage of projected retirements,[Footnote 22] about 8 percent per 

year, will come from members of its career SES. OPM’s expected 

retirement rate for its workforce overall is more than the annual 

retirement rate of 2 percent governmentwide identified in our April 

2001 report.[Footnote 23] OPM’s projected career SES retirement rate 

also exceeds the career SES governmentwide rate of 6 percent, on 

average, each year identified in our May 2000 report.[Footnote 24] In 

addition, OPM’s workforce analysis found that of the 123 employees 

expected to retire each year over the next 10 years, about 25 percent 

of those retirements will come from employees in OPM’s human resources 

specialist and retirement benefits specialist positions--two positions 

OPM has identified as being critical to its mission.

Significantly, the workforce analysis also found that skill gaps exist 

at varying levels in the majority of the jobs occupied by OPM employees 

as of September 30, 2000. These gaps exist in competencies needed by 

employees to perform OPM’s work both now and in the future. The skill 

gap analysis revealed that, overall, OPM’s long-term skill needs were 

greater than its short-term needs, which according to OPM, reflects the 

impact of the agency’s changing work and the high predicted turnover in 

mission-critical occupations. OPM employees’ competency needs were 

determined through a survey of OPM executives, managers, and 

supervisors. Gaps were identified in competencies such as attention to 

detail, customer service, interpersonal skills, writing, oral 

communication, planning and evaluation, and technical competence.

OPM has developed plans to prepare for the expected retirements in its 

workforce and address skill imbalances. Its plans and strategies for 

addressing these and other human capital challenges are described in 

its Restructuring Plan and Human Capital Scorecard Action Plan 

submitted to OMB in September 2001 and January 2002, respectively. For 

example, in its Restructuring Plan, OPM identified strategies such as 

training to address skill gaps and recruiting and hiring from all 

sources to replace expected staff losses due to the impending 

retirements. And in its Human Capital Scorecard Action Plan, OPM 

identified goals and plans that related to (1) recruiting, hiring, 

developing, and retaining employees with the strategic competencies for 

its mission-critical occupations and (2) aligning its human capital 

policies and organizational structure with its mission, vision, and 

strategies. OPM’s plans and strategies for addressing its human capital 

challenges represent important steps toward strategic human capital 


OPM’s Restructuring Plan identified goals and strategies for addressing 

human capital challenges in each of its program offices. This action is 

in line with a recommendation we made in our July 2001 report as a 

result of reviewing OPM’s fiscal year 2002 performance plan and fiscal 

year 2000 performance report as part of our Government Performance and 

Results Act work.[Footnote 25] In that report, we recommended that OPM 

better link its internal strategic human capital management goals to 

specific OPM programs and outcomes. Its Human Capital Scorecard Action 

Plan lays out specific action items and target dates for completing 

each item that align with dimensions of its Human Capital Scorecard, 

released to agencies governmentwide in December 2001.

Realigning its organizational structure and workforce in a way that 

will best achieve its mission, goals, and results has been challenging 

for OPM for several years. Since its creation in 1979, OPM has 

undergone a number of reorganizations[Footnote 26]--three of which, 

including its most recent one that was approved in September 2002, have 

involved major restructurings of the agency. Some of the 

reorganizations resulted, in part, from different operating 

philosophies of its directors. OPM’s latest restructuring, which it 

intends to complete by March 2003, is designed to create a new, 

flexible structure that will “de-stovepipe” the agency; enable it to be 

more responsive to its primary customers, federal departments and 

agencies; and focus on the agency’s core mission. For example, OPM has 

decided to put its various program development offices under the 

control of one associate director and its product and services 

functions under another associate director to ensure that it 

appropriately and efficiently responds to its customers. Effective 

implementation of OPM’s latest organizational and workforce realignment 

will be crucial to maximizing its performance as the federal 

government’s human capital leader, assuring its own and other agencies’ 

accountability, and ultimately achieving its goals.

OPM has also decided that its Equal Employment Opportunity (EEO) 

Officer will have direct access to the agency head on EEO case and 

policy issues but will directly report to, be rated by with input from 

the agency head, and be supervised by the Associate Director for 

Management on a day-to-day basis. Although OPM recognizes that 

regulatory and implementing guidance issued by the Equal Employment 

Opportunity Commission (EEOC) requires an agency’s EEO Director to 

report to and be directly supervised by the agency head,[Footnote 27] 

OPM officials indicated the reporting arrangement between its EEO 

Officer and agency head is in line with the intent or spirit of EEOC’s 

requirement because it will allow the EEO Officer to report directly to 

the agency head on EEO case and policy issues when the EEO Officer 

deems it is necessary, which is critical. The OPM officials also 

indicated that an advantage of the reporting arrangement between OPM’s 

EEO Officer and agency head is that it does not separate the EEO 

function from other HR functions that are the responsibility of the 

Associate Director for Management.

In implementing this arrangement, we believe that it is important for 

OPM to ensure that its EEO Officer’s independence is not undermined as 

a result of placing him/her under the direct supervision of the 

Associate Director for Management who is responsible for the overall 

management of the agency, including overseeing EEO functions, which 

could affect HR functions. We also believe that it is important for the 

EEO Officer to have regular one-on-one meetings with the agency head in 

order for this reporting arrangement to work.


Similar to other agencies, OPM faces challenges in recruiting and 

retaining a high-quality, diverse workforce. In its workforce analysis, 

OPM said that its challenges in attracting and retaining employees are 

the result of lack of competitive pay with the private sector, 

cumbersome recruitment and hiring procedures for certain occupations, 

and a declining attraction of the public service--reasons that are not 

unique to OPM.

OPM will need to hire and develop employees to replace the loss of 

knowledge and expertise caused by departing employees and to address 

gaps in employees’ skills identified through its workforce analysis. In 

addition, OPM will need to address shortfalls in employees’ knowledge 

in two areas--non-title 5 personnel systems and a modernized retirement 

system environment. OPM recognizes that because an increasing number of 

agencies are being exempted from title 5 requirements, it will need to 

ensure that its employees are trained in the various laws, rules, and 

regulations that govern non-title 5 systems as well as the multiple 

environments in which they operate to oversee and evaluate them 

effectively. OPM also recognizes that as the focus of the retirement 

program shifts from transactions to customer service under its 

retirement systems modernization initiative[Footnote 28] currently 

under way, it will need to ensure that its employees have the knowledge 

and skills to operate in this new environment. Our interviews with OPM 

officials and a review of OPM’s workforce analysis, Restructuring Plan, 

and related documents indicate that OPM has strategies in place to meet 

these challenges. These strategies include expanding its hiring and 

recruitment sources and providing a variety of training and 

developmental opportunities to broaden employees’ skills. While OPM 

does not have any numerical hiring goals over the next 5 years, it 

plans to hire and recruit from the widest sources possible to ensure 

that the agency has an available group of diverse and skilled 

candidates in line to assume future leadership responsibilities. OPM 

also plans to continue to use the Presidential Management Intern 


To broaden the skills of employees, OPM notes that a particularly 

effective strategy has been its use of rotational assignments, special 

projects, and details to “cross-train” employees at various levels of 

the organization. These opportunities are intended to augment existing 

staff skills, teach new competencies, and better prepare employees and 

their work units for vacancies in key positions. OPM has made use of 

cross-organizational task forces to manage agencywide projects such as 

the restructuring plan, succession plan, and revision of its strategic 

plan. OPM says that participants serving on these task forces gain 

exposure to the full range of OPM’s responsibilities and a deeper 

understanding of the work performed by other offices. In order to pass 

on the knowledge of departing staff members and expose less experienced 

staff members to OPM’s institutional culture and history, OPM is 

developing a mentoring program called FOCUS (Facilitating Opportunities 

& Change that Unleash Success). This program, also a part of the 

agency’s succession plan, is intended to broaden employees’ knowledge 

and mitigate skill gaps within the agency.

While OPM’s strategies to address its internal recruitment and 

retention needs are moving in the right direction, past studies have 

raised concerns about OPM’s training program for new supervisors and 

its Core Competency Training and Development Model for all employees. 

In particular, a 1999 oversight review conducted by OPM’s Office of 

Merit System Oversight and Effectiveness (OMSOE),[Footnote 29] 

undertaken to assess the state of human capital management at OPM, 

reported that “newer supervisors” expressed concern about their 

preparation for supervisory responsibilities and stated that initial 

training for new supervisors was “uneven and sometimes nonexistent.” 

The findings from OMSOE’s report[Footnote 30] are consistent with the 

findings from a March 2001 “environmental scan” of OPM’s internal human 

capital management performed by the National Academy of Public 

Administration (NAPA) at OPM’s request.[Footnote 31] NAPA reported that 

OPM employees stated in focus groups that there was not a central focus 

within OPM on training needs assessment and that supervisory training 

within OPM was an area “needing attention.”:

In light of the fact that OPM has fewer supervisors now than in the 

past due to downsizing; is losing some of its more experienced 

executives, managers, and supervisors to retirement over the next few 

years; and is increasing its efforts to hire at the entry level, it is 

important that OPM have a strong training program for new supervisors 

in place. Supervisory training is also important to help OPM transform 

from a rules-monitoring organization to a customer-oriented 

organization that partners with agencies in managing their human 

capital. OMSOE recommended in its 1999 report that OPM’s Office of 

Human Resources and Equal Employment Opportunity develop a training 

course for new supervisors. According to OPM officials, a core training 

and development curriculum for new supervisors was introduced in the 

first quarter of fiscal year 2003 that is designed to provide new 

supervisors with the tools and competencies they need to perform 

effectively in their current positions and in future leadership 


OMSOE’s 1999 oversight review also raised concerns with OPM’s Core 

Competency Training and Development Model for all of its employees. 

While the review said that the model was a useful tool for new 

employees, it also reported that (1) experienced employees expressed 

disinterest in the Core Competency Training and Development Model 

because they did not believe it would help them advance, (2) managers 

felt that experienced employees did not want to use the model because 

they did not want to be viewed as needing training, (3) nonsupervisory 

employees felt that the training model was not job related, (4) 

supervisors felt that they could not track the results of the training 

model back to job performance, and 

(5) managers and supervisors felt that the model emphasized skills at 

the basic but not the advanced level. To address these concerns, OMSOE 

recommended that OPM explore establishing a structured program to 

provide rotational assignments throughout the agency and suggested that 

the Core Competency Training and Development Model might be the 

appropriate avenue for launching the rotational program. To increase 

employees’ perceived usefulness of the core competency model and 

encourage greater use of it, OMSOE also suggested that OPM consider 

linking the model to other HR programs, such as career development and 

workforce planning. An OPM official told us that the agency is updating 

the Core Competency Training and Development Model.

Creating Results-Oriented Cultures:

OPM has taken measures to ensure that the focus of individual 

expectations and accountability are centered on contributions to 

achieve organizational results. For example, OPM set a goal in fiscal 

year 1999 of aligning all of its employees’ individual performance 

plans with the agency’s strategic plan. OPM reported in its fiscal year 

2000 performance and accountability report that it had achieved 

alignment for about 90 percent of its employees. OPM told us in July 

2002 that all of its employees’ performance plans have now been aligned 

with the agency’s former strategic plan, fully accomplishing the goal 

it set in 1999. However, with the publication of OPM’s new strategic 

plan in November 2002, OPM officials told us that employees’ 

performance plans will be revised where needed to provide the critical 

link between organizational and individual performance and that 

realignment of the plans will be completed in early 2003.

In addition to aligning all of its employees’ performance plans with 

the agency’s strategic plan, OPM told us that the selection criteria 

for its highest award, the Director’s Award for Excellence, have been 

revamped and revised to ensure that the award recognizes those who have 

made clear contributions to the agency’s strategic objectives and 

furthered the President’s goal of creating a government that is 

citizen-centered, results-oriented, and market-based. Finally, OPM has 

taken steps to revise all of its executives’ performance standards to 

include clear benchmarks for managing human and financial resources, 

furthering the President’s management objectives, leading positive 

change, and building effective coalitions.

Information Security:

Over the last 2 years, significant weaknesses have been identified in 

OPM’s information systems’ security program. OPM’s information systems, 

which support its human capital and financial management operations, 

are used to manage billions of dollars in the retirement benefits, 

health benefits, and life insurance trust funds. These systems are also 

used to process retirement benefits for millions of annuitants and 

survivors and HR data for millions of active federal employees. And as 

OPM continues to develop and roll out the five e-Gov projects that the 

administration assigned it to lead--Recruitment One-Stop, e-Training, 

e-Clearance, Enterprise Human Resource Integration, and e-Payroll--

these systems will also be used to maintain and process HR data. 

Because OPM’s information systems are used to process significant 

amounts of sensitive but unclassified data supporting both human 

capital and financial management operations, protecting these systems 

from computer-based attacks is crucial. Since 1997, we have designated 

information security as a governmentwide high-risk area because 

evidence indicated that controls over computerized federal operations 

were not effective and the related risks were escalating, in part, due 

to increasing reliance on the Internet. Furthermore, governmentwide 

audits conducted in 2001 and 2002 continued to show that operations and 

assets across the federal government were highly vulnerable to 

computer-based attack.

OPM is working to resolve the weaknesses in its information security 

program that were identified during audits by an independent accounting 

firm, OPM’s Office of the Inspector General (OIG), and us[Footnote 32] 

during fiscal years 2001 and 2002. OPM has implemented new security 

guidance and has developed a plan to resolve these weaknesses. Also, 

OPM told us that it has consistently completed actions contained in the 

plan and is on schedule to meet its remaining milestones. OPM’s efforts 

to address weaknesses in its information security program are part of 

its ongoing actions to achieve compliance with federal financial 

management statutes as they relate to information security and with 

information security requirements contained in the Government 

Information Security Reform provisions (commonly referred to as 

“GISRA”).[Footnote 33] As part of its fiscal year 2001 financial 

statement audit, the independent accounting firm assessed OPM’s 

compliance with the Federal Financial Management Improvement Act of 

1996[Footnote 34] (FFMIA) requirements as they relate to information 

systems security. The independent accounting firm found that OPM had 

not provided adequate systems security. It also found that OPM’s 

electronic data processing (EDP) general control environment continues 

to be a reportable condition from the prior year[Footnote 35] and five 

areas of EDP general control need to be strengthened: (1) agencywide 

security program management, (2) access controls, (3) system software 


(4) software development and change controls, and (5) service 

continuity. According to the independent accounting firm, these 

conditions could affect OPM’s ability to prevent and detect 

unauthorized changes to financial information, control electronic 

access to sensitive information, and protect OPM’s information 


As required by GISRA, OPM’s OIG independently evaluated OPM’s 

information security program and reported in September 2002[Footnote 

36] that OPM had made significant progress in improving its information 

security program since 2001 but could make more improvements. For 

example, the OIG noted that OPM had integrated its information security 

requirements and costs estimates into its capital planning and 

investment control process and took significant steps to meet its 

governmentwide security training responsibilities. The OIG also noted 

that OPM’s agencywide security policy, originally released in June 2001 

and revised in March 2002, and its efforts to certify and accredit its 

two general support systems--the Enterprise server and local area 

network/wide area network--are two positive steps that will help OPM to 

achieve greater compliance with GISRA’s requirements. However, the OIG 

said that although no material weaknesses were found in OPM’s 

information security controls, a number of reportable conditions were 

identified that OPM needs to address. For example, the OIG said OPM 

still had not (1) fully implemented its agencywide security program, 

although it issued implementation guides during the year, (2) 

integrated its information security program with its critical 

infrastructure responsibilities, (3) conducted risk assessments for all 

of its systems, (4) completed security plans for all of its systems, or

(5) developed a process to track and monitor specialized training 

requirements for personnel with significant security responsibilities. 

These reportable conditions are addressed in OPM’s action plan, and 

according to OPM officials, progress has been made in overcoming them.

The independent accounting firm’s and OPM’s OIG findings are consistent 

with ours. In March 2002, we testified on the federal government’s 

efforts in implementing GISRA requirements during fiscal year 

2001.[Footnote 37] We testified that OPM and 23 other large agencies 

had not conducted risk assessments for all of their systems, and almost 

half of the agencies had not established effective performance measures 

to show how well program officials had assessed the risk to operations 

and assets under their control. Our review disclosed significant 

weaknesses in four out of six major areas of OPM’s general controls--

the policies, procedures, and technical controls that apply to all or a 

large segment of OPM’s information systems and help to ensure their 

proper operation. In particular, we found weaknesses in OPM’s (1) 

security program management, (2) access controls, (3) change controls, 

and (4) service continuity.

In its plan of action and milestones (POA&M) report submitted to OMB in 

November 2001,[Footnote 38] OPM proposed corrective actions to address 

a total of 15 weaknesses in its information security program. As of 

April 30, 2002, OPM reported that it had completed actions for 2 of the 

15 identified weaknesses and that corrective actions for the remaining 

13 were ongoing. OPM has also taken steps to implement its agencywide 

security program. For example, it issued an updated information 

technology security policy in March 2002 that, in part, requires and 

ensures that security planning is integrated into each of its systems’ 

development life cycle processes and established a formal working group 

to oversee implementation of the security policy and security program 

at OPM. OPM also told us that it is applying its information security 

policy to the five e-Gov projects it is leading and developing a 

specific e-government Security Management Plan for each e-Gov project. 

According to OPM, each e-government project’s Security Management Plan 

covers, as appropriate, risk assessment, data encryption, intrusion 

detection and repudiation, information availability and assurance, 

audit tracking, user authentication, physical site security, 

catastrophic disaster recovery, data and power supply redundancy and 

backup, and computer virus detection and prevention. OPM expects to 

fully implement its agencywide security program in September 2003 

according to its POA&M report submitted to OMB in November 2001.

Although OPM has taken positive steps to improve its information 

security program, it must continue its efforts to achieve compliance 

with GISRA and federal financial management statutes as they relate to 

information security. In addition, it is important that OPM continues 

its plans to incorporate appropriate information security controls into 

the design and development of the five e-Gov projects it has been 

assigned to lead. These controls will help to ensure the integrity, 

reliability, and availability of data and systems used for the e-Gov 


Financial Management:

OPM received an unqualified or “clean” opinion on its fiscal year 2000 

and 2001 consolidated financial statements, and the independent public 

accounting firm hired by OPM’s OIG to perform these audits reported no 

material weaknesses[Footnote 39] in internal controls over financial 

reporting. However, the independent accounting firm identified several 

reportable conditions[Footnote 40] over financial reporting, many of 

which relate to long-standing problems with OPM’s accounting for the 

activities of its two discretionary accounts--the Salaries and Expenses 

account and the Revolving Fund. In its audit report, the independent 

accounting firm also stated that the financial management systems 

supporting OPM’s discretionary accounts as well as its retirement, 

health benefits, and life insurance programs did not substantially 

comply with certain requirements of FFMIA[Footnote 41] that relate to 

federal financial management system requirements and the U.S. 

Government Standard General Ledger at the transaction level.

Historical weaknesses in accounting for and reporting on the activities 

of the Revolving Fund and the Salaries and Expenses account have 

included (1) the inability to substantiate and reconcile reported 

account balances with OPM’s own subsidiary records as well as 

information maintained by other federal agencies, (2) lack of or 

failure to adequately implement policies and procedures, and (3) 

insufficient analyses and review of the financial statements, 

footnotes, and related adjusting entries. Contributing to some of these 

weaknesses have been staffing limitations and skill deficiencies as 

well as weaknesses in computer controls. Evidence of these continuing 

weaknesses led the independent accounting firm to conclude that as of 

the end of fiscal year 2001, OPM’s financial management systems were 

not in substantial compliance with FFMIA. These weaknesses call into 

question OPM’s ability to produce timely and accurate financial 

information for management decision making and financial reporting 

purposes relative to these two accounts.

The independent accounting firm and OPM’s OIG both agree that OPM made 

progress during fiscal year 2001 in addressing these various 

weaknesses. A key step to resolving many of its reportable conditions 

and material system nonconformances is OPM’s phased implementation of a 

new financial management system that supports the Revolving Fund and 

Salaries and Expenses account and that will eventually interface with 

the benefit plans’ financial systems to enable timely and accurate 

preparation of consolidated agency financial statements. OPM expects to 

have completed the last phase of the system implementation by the end 

of fiscal year 2003, at which time OPM plans to have audits performed 

on the stand-alone Revolving Fund and Salaries and Expenses account 

financial statements, in addition to the consolidated agency financial 

statements, to demonstrate that the discretionary funds’ financial 

statements can successfully pass an audit. OPM has stated that the new 

system, once fully operational, will improve its overall financial 

performance by allowing it to routinely report the full cost of 

programs and projects; integrate program, budget, and financial 

information; and use this information to measure, monitor, and report 

on program performance.

Federal Retirement and Health Benefits Program Administration:

Through its retirement and health insurance programs, OPM delivers 

retirement and health insurance benefits to millions of federal 

employees, annuitants, and their dependents totaling billions of 

dollars annually. In fiscal year 2001, OPM paid $47 billion in 

annuities to more than 2 million retired federal employees, annuitants, 

and their dependents. OPM--which is the largest purchaser of employee 

health benefits--also paid almost 

$21 billion in health insurance premiums for more than 8 million 

enrollees and their dependents in fiscal year 2001. Thus, OPM’s 

accurate, cost-effective, and efficient administration of the 

retirement and health insurance programs is critical given the 

substantial dollar outlays. Results of recent independent 

surveys[Footnote 42] indicated that OPM’s customers have been satisfied 

with the quality of retirement services and health insurance products 

and services. The results of OPM’s own client satisfaction survey have 

also indicated that retirees have been highly satisfied with services 

provided by the agency. However, customer satisfaction could fall in 

the coming years if OPM is not prepared to handle the expected federal 

employee retirement wave and implement cost-containment strategies for 

limiting health care premium increases while continuing to ensure that 

employees are provided access to quality health care.

In 2001, as in prior years, OPM’s retiree customers responding to the 

American Customer Satisfaction Index survey reported that they were 

highly satisfied with services they received from OPM. For example, in 

2001 OPM received an overall satisfaction rating of 78 (out of a 

possible 100) for delivery of retirement services, such as timeliness 

of benefit payments and timeliness of OPM’s response to inquiries. 

OPM’s 2001 satisfaction rating represented an increase over its 1999 

and 2000 ratings of 75 and 73, respectively, and surpassed the private 

sector rating of 70.5. In addition, over 90 percent of annuitants 

responding to OPM’s client satisfaction survey said they were satisfied 

with overall retirement services during 1999 through 2001. Moreover, 

for fiscal years 1999 through 2001, erroneous retirement payments 

constituted less than 1 percent of total retirement payments. OPM also 

reduced its processing times for retirement claims in 2001 and 

surpassed its target.[Footnote 43] However, the level of customer 

satisfaction OPM has achieved and its timeliness in processing claims 

could dwindle over the next few years if the agency is not able to 

handle the dramatic increase expected in the number of employees 

seeking retirement services. By 2006, about one-third (493,000 

employees) of the federal workforce will be eligible to retire and 

about one-half (236,000 employees) of those eligible are expected to 

retire. OPM’s modernized retirement systems--the agency’s long-term 

strategy for delivering more cost-efficient, timely, and accurate 

retirement services--is planned to be fully operational in 2010. 

Because modernization of the retirement systems is a complex, long-term 

undertaking and given the costs and implementation risks associated 

with it, OPM is considering outsourcing the claims processing and 

customer service functions.

OPM measures its success in administering the Federal Employees Health 

Benefits Program (FEHBP), in part, by active and retired employees’ 

perceptions of the quality of the health plans and their accreditation. 

OPM reported that 82 percent of employees enrolled in FEHBP were in 

highly rated health plans in 2001, which indicates that they were 

receiving high-quality health insurance products and services. Other 

measures of OPM’s success in administering the health benefits program 

are the agency’s progress in achieving less fraud and abuse in the 

program and improving performance and financial oversight of the 

program--areas that have been identified as top management challenges 

facing OPM at some point over the last 2 years.

In January 2002, OPM’s OIG removed fraud and abuse in FEHBP from its 

list of top challenges facing OPM because it found no material 

weaknesses and fewer errors in the program. In fiscal year 2001, 

erroneous health benefit payments constituted less than 1 percent of 

total health benefit payments. However, the OIG still recognizes that 

health care fraud is a nationwide problem and that FEHBP continues to 

be subjected to this problem.

Regarding improving performance of the health benefits program, 

controlling the costs of premiums is a great concern to the government 

because it pays, on average, 72 percent of the total premium, according 

OPM’s OIG. The OIG noted that OPM is often limited in how it can 

control cost increases without also cutting desired health care 

benefits. We recently reported that during the period 1991 through 

2002, FEHBP premium increases, overall, have been similar to those for 

other large purchasers of employee health benefits, although the 

increases in the FEHBP premiums rose slightly faster than other large 

purchasers from 1997 through 2002.[Footnote 44] In 2003, health care 

premiums under FEHBP increased, on average, 11 percent, continuing a 3-

year trend of double-digit premium increases, although the 2003 premium 

increase is less than those for some other large purchasers of 

employer-sponsored health insurance. For example, the California Public 

Employees’ Retirement System (CalPERS)--the second largest public 

purchaser of employee health benefits--announced that its health 

maintenance organizations premiums increased an average of 26 percent 

in 2003. To help mitigate FEHBP premium increases for 2003, OPM told us 

that it initiated a four-point strategy that contributed to these 

premium increases being below national trends. OPM’s strategy, in part, 

included OPM asking FEHBP health plan carriers to develop and submit 

innovative benefit proposals that would not only maintain the quality 

of but also contain the cost of health care.

We also reported that OPM relies on enrollee choice, competition among 

plans, and its annual negotiations with participating plans to help 

control premium increases, whereas other large public and private 

purchasers adopt different negotiating strategies. For example, we 

noted that in the past, OPM has encouraged plans to consider cost-

containment strategies, such as increased use of generic drugs and 

expansion of preferred provider organizations, to lower the cost of 

premiums. For the 2003 federal health benefits open season, OPM 

encouraged plans to consider cost-containment strategies such as 

increasing enrollees’ out-of-pocket costs and emphasizing care 

management for enrollees with chronic conditions. Other major 

purchasers use other approaches to lower the cost of health benefit 

premiums. For example, CalPERS and General Motors negotiate based on 

standard benefit packages, and at the end of negotiations can decide 

not to include a plan that does not meet their cost or quality 


Regarding financial oversight of FEHBP, OPM’s OIG reported in January 

2002 that OPM has taken steps to provide more effective financial 

oversight of the program, such as issuing an Audit Guide that requires 

experienced-rated carriers to obtain an annual audit of FEHBP 

activities and to report on their internal control structures. However, 

the OIG also reported that OPM still needs to improve its oversight and 

monitoring of the reconciliation of monies paid as premiums to 

participating community-rated carriers with the enrollees for whom they 

were being paid. The OIG noted that because OPM’s existing systems were 

not designed to reconcile differences between enrollment and premium 

payments, the potential exists for carriers to provide benefits to 

employees who are not covered by their plans at the time services are 

rendered. To address this problem, OPM implemented the Centralized 

Enrollment Clearinghouse System in the summer of 2002. This system is 

expected to facilitate the carrier and agency reconciliation process.

[End of section]

GAO Contacts:

Subject(s) covered in this report: Strategic human capital management 

leadership and oversight; ; Agency transformation and workforce 

realignment; Contact person: J. Christopher Mihm, Director; Strategic 

Issues; (202) 512-6806;

Subject(s) covered in this report: Information security; Contact 

person: Robert F. Dacey, Director; Information Technology; (202) 512-


Subject(s) covered in this report: Financial management; Contact 

person: Linda M. Calbom, Director; Financial Management and Assurance; 

(202) 512-9508;

Subject(s) covered in this report: Federal retirement program 

administration; Contact person: Barbara D. Bovbjerg, Director; 

Education, Workforce, and Income Security; (202) 512-7215;

Subject(s) covered in this report: Federal health benefits program 

administration; Contact person: Kathryn G. Allen, Director; Health 

Care; (202) 512-7118;

[End of table]

[End of section]

Related GAO Products:

Human Capital:

High-Risk Series: Strategic Human Capital Management. GAO-03-120. 

Washington, D.C.: January 2003.

Acquisition Workforce: Status of Agency Efforts to Address Future 

Needs. GAO-03-55. Washington, D.C.: December 18, 2002.

Highlights of a GAO Forum: Mergers and Transformation--Lessons Learned 

for a Department of Homeland Security and Other Federal Agencies. GAO-

03-293SP. Washington, D.C: November 14, 2002.

Managing for Results: Using Strategic Human Capital Management to Drive 

Transformational Change. GAO-02-940T. Washington, D.C.: July 15, 

2002. :

Air Traffic Control: FAA Needs to Better Prepare for Impending Wave of 

Controller Attrition. GAO-02-591. Washington, D.C.: June 14, 2002. :

A Model of Strategic Human Capital Management. GAO-02-373SP. 

Washington, D.C.: March 15, 2002. :

SEC Operations: Increased Workload Creates Challenges. GAO-02-302. 

Washington, D.C.: March 5, 2002. :

Federal Employee Retirements: Expected Increase Over the Next 5 Years 

Illustrates Need for Workforce Planning. GAO-01-509. Washington, D.C.: 

April 27, 2001. :

High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January 

2001. :

Senior Executive Service: Retirement Trends Underscore the Importance 

of Succession Planning. GAO/GGD-00-113BR. Washington, D.C.: May 12, 

2000. :

Homeland Security:

Homeland Security: Critical Design and Implementation Issues. GAO-02-

957T. Washington, D.C.: July 17, 2002.

Information Security:

Information Security: Additional Actions Needed to Fully Implement 

Reform Legislation. GAO-02-470T. Washington, D.C.: March 6, 2002. :

Office of Personnel Management:

Federal Employees’ Health Plans: Premium Growth and OPM’s Role in 

Negotiating Benefits. GAO-03-236. Washington, D.C.: December 31, 

2002. :

Office of Personnel Management: Status of Achieving Key Outcomes and 

Addressing Major Management Challenges. GAO-01-884. Washington, D.C.: 

July 9, 2001. :

[End of section]

Performance and Accountability and High-Risk Series:

[End of section]

Major Management Challenges and Program Risks: A Governmentwide 

Perspective. GAO-03-95.

Major Management Challenges and Program Risks: Department of 

Agriculture. GAO-03-96.

Major Management Challenges and Program Risks: Department of Commerce. 


Major Management Challenges and Program Risks: Department of Defense. 


Major Management Challenges and Program Risks: Department of Education. 


Major Management Challenges and Program Risks: Department of Energy. 


Major Management Challenges and Program Risks: Department of Health and 

Human Services. GAO-03-101.

Major Management Challenges and Program Risks: Department of Homeland 

Security. GAO-03-102.

Major Management Challenges and Program Risks: Department of Housing 

and Urban Development. GAO-03-103.

Major Management Challenges and Program Risks: Department of the 

Interior. GAO-03-104.

Major Management Challenges and Program Risks: Department of Justice. 


Major Management Challenges and Program Risks: Department of Labor. 


Major Management Challenges and Program Risks: Department of State. 


Major Management Challenges and Program Risks: Department of 

Transportation. GAO-03-108.

Major Management Challenges and Program Risks: Department of the 

Treasury. GAO-03-109.

Major Management Challenges and Program Risks: Department of Veterans 

Affairs. GAO-03-110.

Major Management Challenges and Program Risks: U.S. Agency for 

International Development. GAO-03-111.

Major Management Challenges and Program Risks: Environmental Protection 

Agency. GAO-03-112.

Major Management Challenges and Program Risks: Federal Emergency 

Management Agency. GAO-03-113.

Major Management Challenges and Program Risks: National Aeronautics and 

Space Administration. GAO-03-114.

Major Management Challenges and Program Risks: Office of Personnel 

Management. GAO-03-115.

Major Management Challenges and Program Risks: Small Business 

Administration. GAO-03-116.

Major Management Challenges and Program Risks: Social Security 

Administration. GAO-03-117.

Major Management Challenges and Program Risks: U.S. Postal Service. 


High-Risk Series: An Update. GAO-03-119.

High-Risk Series: Strategic Human Capital Management. GAO-03-120.

High-Risk Series: Protecting Information Systems Supporting the Federal 

Government and the Nation’s Critical Infrastructures. GAO-03-121.

High-Risk Series: Federal Real Property. GAO-03-122.


[1] U.S. General Accounting Office, High-Risk Series: An Update, GAO-

01-263 (Washington, D.C.: January 2001).

[2] These amounts do not reflect OPM’s total budget. OPM’s total 

budget, which is shown in the inside cover of this report, primarily 

consists of the trust funds for civil service retirement and federal 

health benefits. For the last 5 years, OPM’s total budget increased 

each year from $112 billion in fiscal year 1998 to an estimated $134 

billion in fiscal year 2002.

[3] OPM’s Human Capital Scorecard, issued in December 2001, contains 

dimensions for strategic alignment, strategic competencies (talent), 

leadership, performance culture (strategic awareness), and learning 

(knowledge management). 

[4] Some of the proposals were included in the governmentwide human 

capital provisions in the Homeland Security Act of 2002.

[5] GAO-01-263.

[6] U.S. General Accounting Office, Acquisition Workforce: Status of 

Agency Efforts to Address Future Needs, GAO-03-55 (Washington, D.C.: 

Dec. 18, 2002). 

[7] U.S. General Accounting Office, Air Traffic Control: FAA Needs to 

Better Prepare for Impending Wave of Controller Attrition, GAO-02-591 

(Washington, D.C.: June 14, 2002).

[8] U.S. General Accounting Office, SEC Operations: Increased Workload 

Creates Challenges, GAO-02-302 (Washington, D.C.: Mar. 5, 2002).

[9] U.S. General Accounting Office, Homeland Security: Critical Design 

and Implementation Issues, GAO-02-957T (Washington, D.C.: July 17, 

2002), and Highlights of a GAO Forum: Mergers and Transformation: 

Lessons Learned for a Department of Homeland Security and Other Federal 

Agencies, GAO-03-293SP (Washington, D.C: Nov. 14, 2002).

[10] U.S. General Accounting Office, Office of Personnel Management: 

Status of Achieving Key Outcomes and Addressing Major Management 

Challenges, GAO-01-884 (Washington, D.C.: July 9, 2001), and Senior 

Executive Service: Retirement Trends Underscore the Importance of 

Succession Planning, GAO/GGD-00-113BR (Washington, D.C.: May 12, 2000).

[11] U.S. Merit Systems Protection Board, The U.S. Office of Personnel 

Management in Retrospective: Achievements and Challenges After Two 

Decades (Washington, D.C.: December 2001).

[12] U.S. General Accounting Office, High-Risk Series: Strategic Human 

Capital Management, GAO-03-120 (Washington, D.C.: January 2003).

[13] U.S. General Accounting Office, A Model of Strategic Human Capital 

Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002). The model, 

which was issued as an exposure draft, is intended to be a tool to help 

federal agency leaders better manage their people. 

[14] Recruitment One-Stop is one of five crosscutting e-Gov projects 

initiated under the President’s Management Agenda that OPM is charged 

with leading. The other four projects are e-Clearance, e-Payroll, e-

Training, and the Enterprise Human Resource Integration initiative. 

These projects cover a spectrum of human capital activities.

[15] U.S. Office of Personnel Management, A Fresh Start for Federal 

Pay: The Case for Modernization (Washington, D.C.: April 2002).

[16] U.S. General Accounting Office, Managing for Results: Using 

Strategic Human Capital Management to Drive Transformational Change, 

GAO-02-940T (Washington, D.C.: July 15, 2002).

[17] Pub. L. No. 107-296, Nov. 25, 2002.

[18] The nine merit principles, defined in law at 5 U.S.C. 2301(b), are 

broad principles that define how federal personnel management should be 

implemented. The principles cover topics such as recruitment, pay, and 

employee performance.

[19] U.S. Merit Systems Protection Board, The Federal Merit Promotion 

Program: Process vs. Outcome (Washington, D.C.: December 2001).

[20] GAO-02-373SP.

[21] OMB Bulletin No. 01-07, dated May 8, 2001, required agencies to 

conduct workforce analyses and to develop restructuring plans based on 

the workforce analyses. OMB directed agencies to submit their workforce 

analyses by June 29, 2001. The restructuring plans were to be submitted 

as a part of the agencies’ 2003 budget submissions and annual 

performance plans. 

[22] OPM based its retirement projections on the yearly retirement 

patterns of permanent employees on board as of October 1, 1995, and 

then applied these patterns to determine retirement probabilities in 

each of the next 5 years. OPM controlled for variables, such as gender, 

occupational category, retirement system, and length of retirement 

eligibility, in determining the retirement probabilities. It then 

averaged the 1-year probabilities to obtain a composite 1-year 

probability estimate.

[23] U.S. General Accounting Office, Federal Employee Retirements: 

Expected Increase Over the Next 5 Years Illustrates Need for Workforce 

Planning, GAO-01-509 (Washington, D.C.: Apr. 27, 2001). In that report, 

we calculated a retirement rate of 2 percent per year until 2006 for 

employees at 24 executive branch agencies, which comprise about 98 

percent of the federal workforce, excluding Postal Service, Federal 

Reserve, Tennessee Valley Authority, and intelligence agency employees. 

Our retirement projections covered the period from 1999 through 2006. 

For more information on our retirement projections, their assumptions, 

and methodology, see that report. 

[24] U.S. General Accounting Office, Senior Executive Service: 

Retirement Trends Underscore the Importance of Succession Planning, 

GAO/GGD-00-113BR (Washington, D.C.: May 12, 2000). In that report, we 

calculated the average estimated annual SES retirement rate for fiscal 

years 1999 through 2005 on the basis of OPM’s estimate of the SES 

retirement rate for that entire 7-year period. OPM’s retirement 

estimate was based on the actual number of career SES retirements 

during fiscal years 1996 through 1998 to eliminate the effect of 

downsizing during the mid-1990s and the increase in retirements during 

fiscal year 1994 following the substantial 1991 SES pay raise.

[25] GAO-01-884.

[26] For purposes of this report, a reorganization is defined as a 

change in the agency’s organizational structure and/or reporting 

relationships, including adding or abolishing an office or function.

[27] EEOC’s regulation, 29 C.F.R. 1614.102(b)(4), and guidance (EEOC 

Management Directive 110, Chapter 1) require an agency’s EEO director 

to report to and be supervised directly by the agency head for the 

purposes of demonstrating the importance of EEO to employees and 

ensuring that the EEO director’s independence is not undermined, 

particularly in situations where the person to whom he or she reports 

is involved in or would be affected by the EEO director’s actions in 

implementing the agency’s EEO program.

[28] The retirement systems modernization initiative, which is being 

implemented in phases, is OPM’s long-term strategy for reengineering 

business processes in order to improve all aspects of the delivery of 

retirement services. OPM expects the initiative to be fully operational 

in 2010.

[29] OMSOE, which is now a part of OPM’s Agency Merit System 

Accountability and Human Resources Programs, assesses agencies’ 

effectiveness in personnel management at the governmentwide, agency, 

and installation levels to gather information for policy development 

and program refinement, ensure compliance with personnel laws and 

regulations, enhance agency capability for human resources management 

accountability, and assist agencies in operating personnel programs 

that effectively support accomplishment of their primary missions 

consistent with merit system principles. OMSOE also works with federal 

agencies to explore potential improvements in personnel systems and 

better and simpler ways to manage federal personnel. 

[30] U.S. Office of Personnel Management, Office of Merit Systems 

Oversight and Effectiveness, Report of an Oversight Review: Office of 

Personnel Management (Washington, D.C.: June 1999).

[31] National Academy of Public Administration, An Environmental Scan 

for the Office of Human Resources and Equal Employment Opportunity, 

U.S. Office of Personnel Management (Washington, D.C.: March 2001).

[32] This work was performed as part of our assessment of 24 agencies’ 

compliance with the Government Information Security Reform provisions 

in the National Defense Authorization Act for Fiscal Year 2001 (Pub. L. 

No. 106-398, Oct. 30, 2000). Our findings were presented in testimony 

before the Subcommittee on Government Efficiency, Financial Management 

and Intergovernmental Relations, Committee on Government Reform, House 

of Representatives entitled Information Security: Additional Actions 

Needed to Fully Implement Reform Legislation, GAO-02-470T (Washington, 

D.C.: Mar. 6, 2002). In presenting the results of our work, we reported 

the results for 24 agencies in the aggregate but did not report the 

results for each of the 24 agencies individually.

[33] Similar to other agencies, OPM is subject to the requirements of 

GISRA, which require, in part, that (1) agencies establish agencywide, 

risk-based information security programs, 

(2) the inspector general of each agency conduct an independent 

evaluation of the agency’s information security program, and (3) OMB 

submit an annual report to Congress summarizing the results of 

agencies’ evaluations of their information security programs. 

[34] 31 U.S.C. section 3512 note.

[35] A reportable condition is a matter coming to an auditor’s 

attention relating to significant deficiencies in the design or 

operation of the internal controls over financial reporting that, in 

the auditor’s judgment, could adversely affect an agency’s ability to 

record, process, summarize, and report financial data consistent with 

the assertions by management in financial statements. 

[36] U.S. Office of Personnel Management, Office of the Inspector 

General, Government Information Security Reform Act Fiscal Year 2002 

Independent Evaluation, Executive Summary (Washington, D.C.: Sept. 9, 


[37] U.S. General Accounting Office, Information Security: Additional 

Actions Needed to Fully Implement Reform Legislation, GAO-02-470T 

(Washington, D.C.: Mar. 6, 2002).

[38] OPM’s POA&M report is a list of corrective actions that OPM will 

take in response to information security weaknesses identified by its 

Chief Information Officer, independent auditor, OIG, or us.

[39] Material weaknesses in internal control are reportable conditions 

in which the design or operation of the internal control does not 

reduce to a relatively low level the risk that errors, fraud, or 

noncompliance in amounts that would be material in relation to the 

financial statements or other required information being audited may 

occur and not be detected within a timely period by employees in the 

normal course of performing their assigned duties.

[40] See footnote 35.

[41] Under FFMIA, an agency head must determine whether his or her 

agency is in substantial compliance with three requirements: (1) 

federal financial management system requirements, (2) federal 

accounting standards, and (3) the U.S. Government Standard General 

Ledger at the transaction level.

[42] The independent surveys include the American Customer Satisfaction 

Index, which is used to measure customer satisfaction with OPM’s 

retirement services, and the Consumer Assessment of Health Plans Study, 

which is used to get customer feedback on performance of health plans 

in the Federal Employees Health Benefits Program.

[43] OPM’s target time for processing Civil Service Retirement System 

claims was 55 calendar days; actual time was 54 calendar days. For 

Federal Employees Retirement System claims, the target time was 150 

calendar days; actual time was 101 calendar days.

[44] U.S. General Accounting Office, Federal Employees’ Health Plans: 

Premium Growth and OPM’s Role in Negotiating Benefits, GAO-03-236 

(Washington, D.C.: Dec. 31, 2002).

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