Implementation of the Merit Pay System

The Department of the Interior requested an opinion on the administration of several special funds by the Bureau of Indian Affairs (BIA) for the benefit of Indians. Interior questioned whether the funds could legally be commingled with BIA regular appropriated funds for a merit pay fund pool. Under the Merit Pay System, Federal managers and supervisors compete for financial rewards for job performance; the funds that would normally be used to grant these employees salary increases are withheld and placed in a pool from which selected employees are awarded merit pay. Interior described three funds which are representative of the special Indian funds: Indian moneys, which are the proceeds of labor; tribal funds; and funds derived from the operation of an irrigation and power system. The potential difficulty in using withholdings from these funds for deposit in a merit pay pool is that some special fund moneys might be used for merit payments to employees whose services have not been used for the benefit of special funds. GAO held that funds from various appropriation accounts for salaries may be merged into and distributed from a single merit pay pool within an agency and that the trust nature of these funds does not require different treatment. Accordingly, since the BIA merit pay withholdings were part of an authorized compensation package, GAO found no reason why the withholdings should not be charged to the funds benefitting from the services of eligible employees and deposited in a merit pay pool.