An Unfunded Fund

In 2003, the White House and lawmakers came up with the bright idea of creating incentives for hard work through a special set-aside fund. The fund was to be reserved for rewarding the top-performing federal employees with permanent pay raises.

Hence was born the Human Capital Performance Fund--an account slated to hold $500 million a year.

"The purpose of this is to promote … greater performance in the federal government," the law establishing the account stated. "This fund will offer federal managers a new tool to recognize employee performance that is critical to the achievement of agency missions."

But two years later, no employees have pocketed raises from the fund. It's not because agencies couldn't find a single high-performing employee. It's because the fund was never funded.

According to the Office of Management and Budget, Congress provided money for the fund only for fiscal 2004. That year it appropriated a meager $1 million, which, after a mandated across-the-board rescission, left $994,100 for the program.

As a result, the Office of Personnel Management, which was charged with managing the fund, was never able to do so and the small amount placed in the account was allowed to lapse.

In Nov. 17 testimony before the Senate Homeland Security and Governmental Affairs Committee regarding the Pentagon's wide-reaching pay-for-performance system, Comptroller General David M. Walker reminded Congress of this failure to follow through on promises of personnel reform.

"Congress established the Human Capital Performance Fund to reward agencies' highest-performing and most valuable employees," Walker said. "According to OPM, the provision was never implemented due to lack of sufficient funding. We believe that a central fund has merit and can help agencies build the infrastructure needed to implement a more market-based and performance-oriented pay system."

A spokesman for OPM said the infrastructure for the fund remains and that Congress could provide the money to make it work.

"It was insufficiently funded to reward top performers and therefore is not sustainable as envisioned by the Bush administration," an OPM spokesperson said. "Congress could still come back with increased funding."

That might not be true for long, however. The Bush administration has been floating draft legislation known as the Working for America Act that would bring all domestic agencies under a performance-based pay system.

"Due to lack of sufficient funding, [the Human Capital Performance Fund] has never been implemented," an OMB analysis of the draft Working for America Act stated. "Given the significant pay-for-performance provisions … added by this act, the [fund] is no longer needed."

OMB spokesman Alex Conant said the act, if formally transmitted to Congress and passed into law, would go far beyond the capability of this fund.

"WFAA would allow agencies to allocate a portion of each individual employee's raise based on performance, not just the highest performers, as the Human Capital Performance Fund would have," Conant said.

As stabs at personnel reform go, the Human Capital Performance Fund probably wouldn't rate as one of the highest performers.