GAO backs boost in oversight of executive pay-for-performance

The government should improve the certification process for federal agencies with performance-based pay systems for members of the Senior Executive Service, according to a new report by the Government Accountability Office.

The report (GAO-09-82) found that while oversight of the systems by the Office of Personnel Management and Office of Management and Budget generally was satisfactory, the two could identify ways to further improve and streamline the certification process for the SES pay system and provide agencies with the guidance, tools and training needed to implement those systems.

Currently, agencies are allowed to raise the SES pay cap from $158,000 to $172,200 if OPM and OMB agree that an agency's appraisal system meets nine certification criteria. Those include a requirement that SES performance is linked to the organization's goals.

Two Senate subcommittees requested the report, which examined policies and procedures for evaluating SES performance at six agencies -- the Defense, Energy, State and Treasury departments, Nuclear Regulatory Commission, and U.S. Agency for International Development.

"Effective performance management systems that hold executives accountable for results can help provide continuity during times of leadership transition, such as the upcoming change in administration, by maintaining a consistent focus on organizational priorities," GAO said.

The report found that the selected agencies except USAID provided organizational performance assessments and communicated the importance of such assessments to reviewing officials.

The report also noted that senior executives were concentrated at the top two rating levels during the fiscal 2007 appraisal cycle, an issue that raises questions about the extent to which meaningful distinctions on performance were crafted. OPM has emphasized that forced distributions of performance ratings are prohibited, but it has not provided specific guidance to agencies on how to determine nuances in performance while avoiding the perception of forced distributions, the report said.

"Communicating this information … can help agencies begin to transform their cultures to one where a fully successful rating is valued and rewarded," GAO concluded.

The report also found that all the selected agencies' systems have safeguards in place, including higher level reviews of appraisal recommendations and transparency in communicating aggregate results.

GAO recommended that OPM communicate better with agencies on accountability involving certification. Senior-level officials at the selected agencies suggested that OPM move to an electronic submission process and lengthen certification coverage beyond two years once agency systems reach the fully certified level.

USAID should provide uniform organizational performance assessments to reviewing officials to help inform their recommendations, the report said.

In response to a draft of the report, acting Director Michael Hager said OPM already has taken several steps to improve its communication with agencies, particularly through workshops, forums, activities of the Chief Human Capital Officers Council and briefings. OPM also plans to conduct additional workshops on system certification using the SES performance appraisal assessment tool, which was recently introduced to improve the process, he added.