General Management Laws: A Compendium

CRS Report for Congress
General Management Laws: A Compendium
Updated May 19, 2004
Clinton T. Brass, Coordinator
Analyst in American National Government
Government and Finance Division


Congressional Research Service ˜ The Library of Congress

General Management Laws: A Compendium
Summary
This report (hereafter “compendium”) is a companion to CRS Report RL32388,
General Management Laws: Major Themes and Management Policy Options. In
combination, these reports have three main objectives: (1) to identify and describe
the major management laws under which the executive branch of the federal
government is required to operate, including their rationale, design, and scope; (2)
to assist Members of Congress and their staff in oversight of executive branch
management; and (3) to help Congress when considering potential changes to the
management laws themselves, as well as other legislation, including authorization
statutes and appropriations.
The compendium contains profiles of selected “general management laws” —
broad statutes designed to regulate the activities, procedures, and administration of
all or most executive branch agencies. The quality of the general management laws,
as well as their implementation, are considered crucial to maintaining the
accountability of the executive branch to Congress, the President, and the public.
Moreover, these laws influence the effectiveness of federal agencies when they
implement, evaluate, and help formulate public policies.
The compendium includes more than 90 separate entries that describe general
management laws for the executive branch of the federal government. The entries
in the compendium are organized into the following seven functional categories: (1)
Information and Regulatory Management; (2) Strategic Planning, Performance
Measurement, and Program Evaluation; (3) Financial Management, Budget, and
Accounting; (4) Organization; (5) Procurement and Real Property Management; (6)
Intergovernmental Relations Management; and (7) Human Resources Management
and Ethics. These categories include many laws and topics, including the Freedom
of Information Act (FOIA, section I.E.), Privacy Act (I.F.), Federal Advisory
Committee Act (FACA, I.G.), National Environmental Policy Act (NEPA, I.L.), Data
Quality Act (I.O.; increasingly known as the Information Quality Act (IQA)),
Inspector General Act (II.A.), Government Performance and Results Act (II.B.),
Balanced Budget and Emergency Deficit Control Act (III.D.), Budget Enforcement
Act (III.E.), Government Corporation Control Act (IV.A.), Davis-Bacon Act (V.F.),
Unfunded Mandates Reform Act (UMRA, VI.C.), Hatch Act (VII.A.(5) and
VII.A.(29)), Ethics in Government Act (VII.B.), Federal Tort Claims Act (VII.E.),
and issues like information security (section I), improper payments (section III),
services acquisition and contracting (section V), and federal employees and civil
service laws (e.g., the National Security Personnel System at the Department of
Defense, and the Department of Homeland Security personnel system (section
VII.A)).
For each entry in the compendium, one or more CRS analysts present a brief
history of the general management law, describe the law’s major provisions, discuss
key developments and issues, and provide source readings for readers who want more
information. The compendium reflects the status of general management laws at the
end of the first session of the 108th Congress, and will be updated along with theth
companion report to reflect actions taken through the close of the 108 Congress.



Acknowledgments
The following CRS analysts contributed to this compendium.
Coordinator: Clinton T. Brass
Mildred L. AmerKevin R. Kosar
Keith BeaJohn R. Luckey
Richard S. BethBob Lyke
James M. BickleyVirginia A. McMurtry
Clinton T. BrassSteven Maguire
Hinda Ripps ChaikindGerald Mayer
Henry CohenJohn D. Moteff
Curtis W. CopelandThomas Nicola
Charles V. DalePatrick J. Purcell
Louis FisherHarold C. Relyea
Sharon S. GressleMorton Rosenberg
L. Elaine HalchinJames V. Saturno
T. J. HalsteadBarbara L. Schwemle
Bill Heniff Jr.Christine Scott
Henry B. HogueJeffrey W. Seifert
H. Steven HughesMichael V. Seitzinger
Mark JicklingMichael Simpson
Frederick M. KaiserStephanie Smith
Robert KeithMitchel A. Sollenberger
Genevieve J. KnezoWilliam G. Whittaker
Mildred Boyle provided research production assistance.
Suggestions and comments for future editions may be sent to [cbrass@crs.loc.gov].



Contents
In troduction ......................................................1
Purposes .....................................................1
How the Compendium and Companion Report Are Organized..........2
Compendium .............................................2
Companion Report.........................................3
I. Information and Regulatory Management.............................5
A. Federal Register Act.........................................5
B. Administrative Procedure Act.................................9
C. Federal Records Act and Related Chapters of Title 44.............16
D. Congressional Review of Regulations Act......................20
E. Freedom of Information Act..................................26
F. Privacy Act...............................................30
G. Federal Advisory Committee Act.............................35
H. Government in the Sunshine Act..............................38
I. Paperwork Reduction Act of 1995.............................42
J. Regulatory Flexibility Act of 1980.............................46
K. Negotiated Rulemaking Act..................................49
L. National Environmental Policy Act............................52
M. E-Government Act of 2002..................................58
N. Federal Information Security Management Act of 2002............65
O. Data Quality Act (Information Quality Act (IQA))................70
II. Strategic Planning, Performance Measurement, and Program Evaluation...73
A. Inspector General Act of 1978................................73
B. Government Performance and Results Act of 1993................82
C. Clinger-Cohen Act of 1996..................................88
III. Financial Management, Budget, and Accounting.....................93
A. Antideficiency Act.........................................93
B. Budget and Accounting Act of 1921...........................98
C. Budget and Accounting Procedures Act of 1950.................103
D. Balanced Budget and Emergency Deficit Control Act.............109
E. Budget Enforcement Acts of 1990 and 1997....................115
F. Congressional Budget and Impoundment Control Act.............122
G. Chief Financial Officers Act of 1990..........................128
H. Government Management Reform Act of 1994..................135
I. Accountability of Tax Dollars Act of 2002......................140
J. Federal Managers’ Financial Integrity Act of 1982................145
K. Federal Financial Management Improvement Act of 1996.........150
L. Federal Credit Reform Act of 1990...........................156
M. Federal Claims Collection Act of 1966........................164
N. Debt Collection Act of 1982................................166
O. Federal Debt Collection Procedures Act of 1990................170
P. Debt Collection Improvement Act of 1996.....................174
Q. Improper Payments Information Act of 2002...................180
R. Cash Management Improvement Act (CMIA) of 1990............187



IV. Organization.................................................196
A. Government Corporation Control Act.........................196
B. Reorganization Act of 1977, as Amended......................200
C. Federal Vacancies Reform Act of 1998........................204
V. Procurement and Real Property Management........................209
A. Public Buildings Act of 1959................................209
B. Federal Acquisition Streamlining Act of 1994...................212
C. Federal Activities Inventory Reform (FAIR) Act of 1998..........215
D. Services Acquisition Reform Act (SARA) of 2003...............218
E. Competition in Contracting Act..............................220
F. Federal Contract Labor Standards Statutes......................223
G. Prompt Payment Act......................................226
VI. Intergovernmental Relations Management.........................228
A. Intergovernmental Cooperation Act...........................228
B. Intergovernmental Personnel Act of 1970......................231
C. Unfunded Mandates Reform Act of 1995......................234
D. Single Audit Act..........................................238
VII. Human Resources Management and Ethics.......................243
A. Title 5: The Federal Civil Service............................243
Title 5, Part II — Civil Service Functions and Responsibilities
(Chapters 11-15)
(1) Office of Personnel Management (Chapter 11)..............248
(2) Merit Systems Protection Board; Office of Special Counsel;
and Employee Right of Action (Chapter 12)...............253
(3) Special Authority (Chapter 13)..........................257
(4) Agency Chief Human Capital Officers (Chapter 14)..........259
(5) Political Activity of Certain State and Local Employees
(Chapter 15)........................................262
Title 5, Part III — Employees
(Subparts A through I, Chapters 21-99)
Subpart A, General Provisions
(6) Definitions (Chapter 21)................................265
(7) Merit System Principles (Chapter 23).....................266
Subpart B, Employment and Retention
(8) Authority for Employment (Chapter 31)...................272
(9) Examination, Selection, and Placement (Chapter 33).........276
(10) Part-Time Career Employment Opportunities (Chapter 34)...281
(11) Retention Preference, Voluntary Separation Incentive
Payments, Restoration, and Reemployment (Chapter 35).....283
(12) Information Technology Exchange Program (Chapter 37)....287



(13) Training (Chapter 41).................................289
(14) Performance Appraisal (Chapter 43).....................291
(15) Incentive Awards (Chapter 45).........................295
(16) Personnel Research Programs and Demonstration Projects
(Chapter 47)........................................297
(17) Agency Personnel Demonstration Project (Chapter 48)......301
Subpart D, Pay and Allowances
(18) Classification (Chapter 51).............................303
(19) Pay Rates and Systems (Chapter 53).....................305
(20) Human Capital Performance Fund (Chapter 54)............309
(21) Pay Administration (Chapter 55)........................312
(22) Travel, Transportation, and Subsistence (Chapter 57)........315
(23) Allowances (Chapter 59)..............................318
Subpart E, Attendance and Leave
(24) Hours of Work (Chapter 61)...........................320
(25) Leave (Chapter 63)...................................322
Subpart F, Labor-Management and Employee Relations
(26) Labor-Management Relations (Chapter 71)................325
(27) Antidiscrimination in Employment and Employees’ Right
to Petition Congress (Chapter 72).......................329
(28) Suitability, Security, and Conduct (Chapter 73)............333
(29) Political Activities (Chapter 73, Subchapter III)............335
(30) Adverse Actions (Chapter 75)..........................338
(31) Appeals (Chapter 77).................................340
(32) Services to Employees (Chapter 79).....................342
Subpart G, Insurance and Annuities
(33) Retirement (Chapter 83)...............................344
(34) Federal Employees’ Retirement System (Chapter 84)........347
(35) Health Insurance (Chapter 89)..........................349
(36) Long-Term Care Insurance (Chapter 90)..................352
Subpart I, Miscellaneous
(37) Personnel Flexibilities Relating to the
Internal Revenue Service (Chapter 95)...................356
(38) Department of Homeland Security (Chapter 97)............362
(39) Department of Defense National Security Personnel System
(Chapter 99)........................................367
B. Ethics in Government Act..................................373
C. Ethics Reform Act of 1989..................................376
D. Lobbying with Appropriated Monies Act......................379
E. Federal Tort Claims Act....................................382



General Management Laws: A Compendium
Introduction
Purposes
This report, General Management Laws: A Compendium (hereafter
“compendium”), is a companion to CRS Report RL32388, General Management
Laws: Major Themes and Management Policy Options, by Clinton T. Brass. In
combination, these reports have three main objectives:
!to identify and describe the major general management laws under
which the executive branch is required to operate, including their
rationale, design, and scope;
!to assist Members of Congress and their staff in overseeing
management of the executive branch; and
!to help Congress when considering potential changes to the
management laws, as well as other legislation, including authorizing1
statutes and appropriations.
The compendium contains profiles of selected “general management laws” — broad
statutes designed to regulate the activities, procedures, and administration of all or2
most executive branch agencies. The quality of the general management laws, as
well as their implementation, are considered crucial to maintaining the accountability
of the executive branch to Congress, the President, and the public. Moreover, these
laws influence the effectiveness of federal agencies when they implement, evaluate,
and help formulate public policies.
As a complement to this compendium, the General Management Laws: Major
Themes and Management Policy Options report (“companion report”) focuses on
major themes and possible management policy options for Congress that emerge
when the general management laws are viewed together, as a whole. The
compendium reflects the status of general management laws at the end of the first


1 A related report, CRS Report RL30240, Congressional Oversight Manual, describes the
major purposes, processes, techniques, and information sources for congressional oversight
of the executive branch.
2 Agencies are sometimes exempted from the coverage of specific general management laws
due to a category into which they fall (e.g., department, government corporation, etc.),
specific provisions in an agency’s authorizing statute or appropriations, or provisions in the
general management law itself.

session of the 108th Congress, and will be updated along with the companion report
to reflect actions taken through the close of the 108th Congress.3
How the Compendium and Companion Report
Are Organized
Compendium. This compendium includes more than 90 separate entries that
describe general management laws for the executive branch. The entries are
organized into the following seven functional categories:4
!Information and Regulatory Management;
!Strategic Planning, Performance Measurement, and Program
Evaluation;
!Financial Management, Budget, and Accounting;
! Organiz ation;
!Procurement and Real Property Management;
!Intergovernmental Relations Management; and
!Human Resources Management and Ethics.
Within the management field, functions typically refer to “business areas that require
related bundles of skill” or “groups of people with similar skills and performing
similar tasks.”5 (In the private sector, by way of comparison, functions often include
marketing, finance, production, and human resources.) This functional orientation
is a major theme that the companion report addresses.


3 Previous versions of this compendium, coordinated by Ronald C. Moe, reflected the status
of general management laws at the close of the 104th, 105th, and 106th Congresses,
respectively. This compendium stands on the shoulders of these efforts.
4 The listed functions are not necessarily the only way to categorize the report’s entries into
sections, which could have been aggregated differently or further broken down.
5 For more discussion of functional structures and perspectives within a management
context, see John R. Schermerhorn Jr., Core Concepts of Management (Hoboken, NJ: John
Wiley & Sons, 2004), pp. 119-120, and Peter F. Drucker, Management (New York: Harper
& Row, 1974), pp. 558-563. This usage of the term function differs from usages found in
Title 5 of the United States Code and in budgetary accounting. In Title 5, the term function
is used in several contexts, including agency strategic plans (5 U.S.C. § 306, requiring
agencies to specify goals and objectives for major functions and operations of the agency),
transfer of functions (5 U.S.C. § 3503), and reductions in force (5 U.S.C. § 3502). Title 5
does not define the term, but the implementing regulations for transfer of functions and
reductions in force define function as “all or a clearly identifiable segment of an agency’s
mission (including all integral parts of that mission), regardless of how it is performed” (5
C.F.R. § 351.203). With regard to budgetary accounting, the term function refers to
categories of federal spending, organized according to the purpose or mission of government
(e.g., income security, energy, and international affairs). The Congressional Budget and
Impoundment Control Act of 1974 established the first statutory foundation for budget
function classifications (see 2 U.S.C. § 632(a)(4) and 31 U.S.C. § 1104(c)). For background
on budget function classifications, see CRS Report 98-280, Functional Categories of the
Federal Budget, by Bill Heniff Jr.; and U.S. General Accounting Office, Budget Function
Classifications: Origins, Trends, and Implications for Current Uses, GAO/AIMD-98-67,
Feb. 1998.

Most of the compendium’s entries discuss a specific law, or in some cases,
several related laws. The “Human Resources Management and Ethics” section,
however, presents most civil service laws according to their codification in Title 5
of the United States Code — the way that practitioners and specialists typically
discuss these laws. For each entry in this compendium, one or more CRS analysts
present a brief history of the general management law in a section entitled Statutory
Intent and History, describe the law itself in a section entitled Major Provisions, and
close with a summary of key developments and issues in a Discussion section.
Finally, for readers interested in more detail, each entry cites Selected Source
Reading.
All the entries in the compendium conform to the overall structure described
above; but because the laws have different audiences, levels of complexity, and
histories, the entries sometimes differ in extent, level of detail, or emphasis.
Companion Report. In turn, as a complement to this compendium, the6
companion report identifies potential management policy options for Congress.
First, the companion report provides historical context on the roles that Congress and
the President play in managing the executive branch. Next, the companion report
briefly discusses the extent to which management in the public and private sectors
can be compared. Finally, the largest share of the companion report analyzes major
themes that run through the general management laws and identifies potential
management policy options for Congress. The themes include:
!Discretion for the Executive Branch. Congress frequently faces
the issue of how much discretion to give the executive branch.
Congress has several management policy options to address
delegation situations and help balance agency flexibility with
accountability.
!Standardization vs. Customization. Should the management laws
under which agencies operate be standardized, with rules that apply
uniformly to many different agencies? Or should some agencies
have agency-specific laws that are customized to each agency’s
internal and external environments? Or should there be a mix of the
two approaches? The report discusses advantages and disadvantages
of the different approaches and analyzes two options for Congress
when making these decisions.
!Functional Silos vs. Integrated General Management. A
functional perspective (e.g., looking at agency operations from the
perspective of a budget officer or human resources officer) is
important, because it can boost efficiency through specialization and
ensure centralized control over strategic decisions. However, if
functional orientations become inward-looking, various functions
can operate as “silos” — in isolation from one another — resulting


6 CRS Report RL32388, General Management Laws: Major Themes and Management
Policy Options, by Clinton T. Brass.

in coordination problems or missed opportunities. The report
analyzes policy options for Congress to bring an integrated general
management perspective to solve agency management problems.
!Making and Measuring Progress. For over two decades, many
executive branch agencies have suffered from persistent, major
management problems. Often these problems relate to areas the
general management laws were intended to address. The report
analyzes potential options for measuring and motivating agency
progress in improving management practices.
!Agency “Chief Officers” and Interagency Councils. Statutorily
created “chief officers” (e.g., chief financial officers and chief
acquisition officers) have increased in number and importance in
federal agencies, as in the private sector. Congress also established
interagency councils of these officers. The report analyzes options
for Congress in considering whether additional chief officers and
councils should be established, and how Congress might make the
councils more accountable.



I. Information and Regulatory Management
A. Federal Register Act
Statutory Intent and History
The Federal Register Act was originally legislated in 1935 (49 Stat. 500) to
establish accountability and publication arrangements for presidential proclamations
and executive orders and for federal agency rules and regulations. The centerpiece
of the resulting system is the Federal Register, an executive gazette produced by the
Office of the Federal Register of the National Archives and Records Administration.
It is printed by the Government Printing Office and lately has been available, as well,
in electronic formats (online and via CD-ROM).7
In many respects, the Federal Register Act of 1935 was a response to the
increasing number of regulations, rules, and related administrative actions of the New
Deal era, and the fugitive status of these instruments. The expansion of the federal
government during World War I had resulted in the presidential and agency issuance
of a growing quantity of administrative requirements. Brief experience with a gazette
— The Official Bulletin — had been beneficial, but of temporary, wartime,
duration.8 Its disappearance made a difficult situation worse. A contemporary9
observer characterized the operative situation in 1920 as one of “confusion,” and
another described the deteriorating conditions in 1934 as “chaos.”10 During the early
days of the New Deal, administrative law pronouncements were in such disarray that,
on one occasion, government attorneys arguing a lawsuit before the Supreme Court11
were embarrassed to find their case was based upon a nonexistent regulation, and
on another occasion, discovered they were pursuing litigation under a revoked
executive order.
The response was the mandating of the Federal Register. Produced in a
magazine format, it is now published each business day. Soon after enacting the
Federal Register Act, Congress, in 1937, amended it and inaugurated the Code of
Federal Regulations, a useful supplement to the Register (50 Stat. 304). This
cumulation of the instruments and authorities appearing in the gazette contains
almost all operative agency regulations, and is now updated annually.


7 Commercially produced electronic versions of the Federal Register are available for
purchase from private sector vendors who have introduced value-added features, such as
search capability or annotations, to the basic GPO text.
8 John Walters, “The Official Bulletin of the United States: America’s First Official
Gazette,” Government Publications Review, vol. 19, May-June 1992, pp. 243-256.
9 John A. Fairlie, “Administrative Legislation,” Michigan Law Review, vol. 18 (Jan. 1920),
p. 199.
10 Erwin N. Griswold, “Government in Ignorance of the Law — A Plea for Better
Publication of Executive Legislation,” Harvard Law Review, vol. 48 (Dec. 1934), p. 199.
11 United States v. Smith, 292 U.S. 633 (1934), appeal dismissed on the motion of the
appellant without consideration by the Court.

Later, the general statutory authority underlying the Federal Register was relied
upon for the creation of other series of publications — the United States Government
Manual, which has been available for public purchase since 1939; the Public Papers
of the Presidents, which were first published in 1960; and the Weekly Compilation
of Presidential Documents, which was begun in the summer of 1965.
Major Provisions
The cumulative and operative authority of the Federal Register Act may be
found in Chapter 15 of Title 44, United States Code. The Office of the Federal
Register (OFR) is mandated and the appointment of its director by the Archivist of
the United States is authorized. Responsibility for the production of the Federal
Register and the preservation of the original copies of documents published in it are
vested in the Archivist.
The original and two duplicate originals or certified copies of a document
required or authorized to be published in the Federal Register must be filed with the
OFR. Materials so filed are marked with a notation as to the date and hour of receipt.
One copy of filed materials is immediately available for public inspection at the OFR.
Filed materials are transmitted to the Government Printing Office (GPO), which
is responsible for the production and distribution of the Federal Register. The GPO
also prepares, produces, and distributes periodic cumulative indices of the daily
issues of the Register.
Documents which must be published in the Federal Register include:
!presidential proclamations and executive orders, except those not
having general applicability and legal effect or effective only against
federal agencies or persons in their capacity as officers, agents, or
employees thereof;12
!documents or classes of documents that the President may determine
from time to time have general applicability and legal effect;
!documents or classes of documents that may be required to be so
published by act of Congress; and
!other documents or classes of documents authorized to be published
by regulations prescribed with the approval of the President.
Conversely, the act declares that “comments or news items of any character may
not be published in the Federal Register” (44 U.S.C. § 1505(b)).
The requirements for filing documents for publication in the Federal Register
may be suspended by the President during “an attack or threatened attack upon the


12 The Federal Register Act states that “every document or order which prescribes a penalty
has general applicability and legal effect” (44 U.S.C. § 1505).

continental United States.” Such a suspension remains in effect “until revoked by the
President, or by concurrent resolution of the Congress” (44 U.S.C. § 1505(c)).
Federal Register operations are supervised by the Administrative Committee
of the Federal Register, which is chaired by the Archivist of the United States and
includes a Department of Justice officer designated by the Attorney General, and the
Public Printer. The director of the Office of the Federal Register serves as committee
secretary. This panel, with the approval of the President, prescribes the regulations
governing the Federal Register, including such matters as the documents to be
authorized by regulation for publication in the gazette, the manner and form in which
the Register is produced, and certain distribution matters and charges concerning it.
The Administrative Committee, with the approval of the President, also
supervises and manages the production of the Code of Federal Regulations. The
Code is a “complete codification of the documents of each agency of the Government
having general applicability and legal effect, issued or promulgated by the agency by
publication in the Federal Register or by filing with the Administrative Committee,
and are relied upon by the agency as authority for, or are invoked or used by it in the
discharge of, its activities or functions” (44 U.S.C. § 1510(a)). The Office of the
Federal Register prepares and publishes the codifications appearing in the Code.
The Federal Register, the Code of Federal Regulations, and other series of
publications produced pursuant to the general authority of the Federal Register Act
are available to the public through sales, OFR and other websites
([http://www.archives.gov/federal_register/index.htm]), and distribution to federal
depository libraries.
Discussion
While most major federal administrative law instruments — such as executive
orders, presidential proclamations, and agency rules and regulations — are published
in the Federal Register and Code of Federal Regulations, not all such authorities are
so produced. During the past few years, concern has been expressed from time to
time in Congress about certain national security directives of the President not being
subject to accountability or publication under the Federal Register Act. They have
been variously denominated as National Security Decision Memoranda during the
Nixon-Ford Administrations, as Presidential Directives during the Carter
Administration, as National Security Decision Directives during the Reagan
Administration, as National Security Directives during the George H. W. Bush
Administration, and as Presidential Decision Directives by the Clinton
Administration. In 1988, a House subcommittee held hearings on a proposal to
amend the Federal Register Act to provide accountability in the use of these
presidential directives. A complication in so legislating is that these instruments are
usually all security classified. Another type — Homeland Security Presidential
Directives — was launched by President George W. Bush in late October 2002. This
development sparked renewed congressional concern about accountability for these
presidential directives.



Selected Source Reading
U.S. Congress. House. Committee on Government Operations. Executive Orders
and Proclamations: A Study of a Use of Presidential Powers. Committee print.

85th Congress, 1st session. Washington: GPO, 1957.


——. Presidential Directives and Records Accountability Act. Hearing on H.R.thnd

5092. 100 Congress, 2 session. Washington: GPO, 1989.


CRS Report 98-611. Presidential Directives: Background and Overview, by Harold
C. Relyea.
U.S. National Archives and Records Administration. Office of the Federal Register.
Code of Federal Regulations: Title 1 — General Provisions. Washington:
GPO, 1997.
Harold C. Relyea



B. Administrative Procedure Act
Statutory Intent and History
With the advent of the New Deal, greater expectations and reliance were placed
upon the federal government for the achievement of certain political and social
objectives. This required the development of both an expanded administrative law
process and new regulatory agencies. Unlike a number of European states at that
time, the United States did not have in place a sophisticated administrative system
and had to build one. The first step was the passage of the Federal Register Act
(described elsewhere in this compendium) in 1935, which required all federal
agencies to publish notice of their rules, proposed rules, and legal notices in a single,
readily available source, later to be known as the Federal Register.
Although substantial progress was made in uniform public notice and
publication processes for regulation making by the agencies, a single general
management law covering all the agencies was not passed until after World War II.
The Administrative Procedure Act (APA; 60 Stat. 237; 5 U.S.C. § 551 et seq.),
enacted in 1946, is considered the seminal federal administrative legislation of the
modern era. The major contribution of the act was to establish for the first time
minimum procedural requirements for certain types of agency decision making
processes. Its general purposes were to (1) require agencies to keep the public
currently informed of agency organization, procedures, and rules; (2) provide for
public participation in the rulemaking process; (3) prescribe uniform standards for
the conduct of formal rulemaking and adjudicatory proceedings (i.e., proceedings
required by statute to be made on the record after opportunity for agency hearing);
and (4) restate the law of judicial review of agency action.
The act imposes on agencies certain requirements for two modes of agency
decision making: rulemaking and adjudication. In general, the term agency refers to
any authority of the government of the United States, whether or not it is within, or
subject to review by, another agency. Congress, the courts, and the governments of
territories, possessions, and the District of Columbia are excluded.
Major Provisions
The APA has two major subdivisions: Sections 551-559, dealing with general
agency procedures, and Sections 701-706, dealing with judicial review. In addition,
several sections dealing with administrative law judges are scattered throughout Title

5 (Sections 1305, 3105, 3344, 5372, and 7521).


The structure of the APA is shaped around the distinction between rulemaking
and adjudication, with different schemes of procedural requirements prescribed for
each. Rulemaking is agency action that formulates the future conduct of persons,
through the development and issuance of an agency statement designed to implement,
interpret, or prescribe law or policy. It is essentially legislative in nature because of
its future general applicability and its concern for policy considerations.
Adjudication, on the other hand, is concerned with determination of past and present
rights and liabilities. The result of an adjudicative proceeding is the issuance of an
order.



Beyond the distinction between rulemaking and adjudication, the APA
subdivides each of these categories of agency action into formal and informal
proceedings. Whether a particular rulemaking or adjudicatory proceeding is
considered to be “formal” depends on whether the proceeding is required by statute
to be “on the record after opportunity for an agency hearing” (5 U.S.C. § 553(c), §
554(a)). The act prescribes elaborate procedures for both formal rulemaking and
formal adjudication, and relatively minimal procedures for informal rulemaking.
Virtually no procedures are prescribed by the APA for the remaining category of
informal adjudication, which is by far the most prevalent form of governmental
action.
Rulemaking. Section 553 sets the requirements for informal rulemaking (also
known as notice and comment rulemaking). An agency must publish a notice of
proposed rulemaking in the Federal Register, afford interested persons an
opportunity to participate in the proceeding through the submission of written
comments or, at the discretion of the agency, by oral presentation, and when
consideration of the matter is completed, incorporate in the rules adopted “a concise
general statement of their basis and purpose” (5 U.S.C. § 553(c)). A final rule must
be published in the Federal Register “not less than 30 days before its effective date”
(5 U.S.C. § 553(d)). Interested persons have a right to petition for the issuance,
amendment or repeal of a rule (5 U.S.C. § 553(e)). Although the APA does not
specify a minimum period for public comment, at least 30 days have been13
traditionally allotted. More recently, Executive Order 12866 has prescribed that
covered agencies allow at least 60 days. Agencies are free to grant additional
procedural rights, and Congress has at times particularized requirements for certain
agencies or programs.
The APA also provides for formal rulemaking, a procedure employed when
rules are required by statute to be made on the record after an opportunity for agency
hearing. Essentially, this procedure requires that the agency issue its rule after the
kind of trial-type hearings procedures normally reserved for adjudicatory orders
(discussed below).
Adjudication. Sections 554, 556, and 557 apply to formal adjudications (i.e.,
cases for which an adjudicatory proceeding is required by statute to be determined
on the record after an agency proceeding). Sections 556 and 557 spell out the
specific procedures to be utilized in formal adjudication. In brief, a trial type hearing
must be held, presided over by members of the agency or an administrative law judge
(ALJ). Section 556 prescribes the duties of ALJs, the allocation of burden of proof,
and parties’ rights to cross-examination. Section 557 provides that an ALJ must
issue an initial decision, which becomes the agency’s final decision if not appealed.
The record must show the ruling on each finding, conclusion, or exception raised.
Ex parte communications relevant to the merits of a pending formal agency
proceeding are prohibited.
Judicial Review of Agency Action. Sections 701-706 constitute a general
restatement of the principles of judicial review embodied in many statutes and


13 3 C.F.R., 1993 Comp., pp. 638-649.

judicial decisions; however, they leave the mechanics regarding judicial review to be
governed by other statutes or court rules.
Section 701 establishes a presumption of reviewability of agency actions by
providing that the action “of each authority of the Government of the United States”
is subject to judicial review except where “statutes preclude judicial review,” or
“where agency action is committed to agency discretion by law” (Section
701(a)(1),(2)). The Supreme Court has consistently supported the strong
presumption of reviewability, requiring a “showing of ‘clear and convincing’
evidence of a ... legislative intent to restrict access to judicial review.” (Citizens to
Protect Overton Park v. Volpe, 401 U.S. 402, 410 (1971); Abbott Laboratories v.
Gardner, 387 U.S. 136, 141 (1967); Bowen v. Michigan Academy of Family
Physicians, 476 U.S. 667, 681 (1986)). Moreover, the exception for actions
“committed to agency discretion” is narrowly construed and is applicable only in
“rare instances where statutes are drawn in such broad terms that in a given case,
there is no law to apply” (Volpe, supra, 401 U.S. at 410).
A challenge may be brought by any person who is “adversely affected or
aggrieved” by the action “within the meaning of the relevant statute” (5 U.S.C. §
702). Courts deciding the standing of a person challenging a rule also must comply
with the limitations on federal court jurisdiction imposed by the “case or
controversy” requirement of Article III of the Constitution, which has been
interpreted to require that a party bringing an action in federal court demonstrate an
“injury in fact,” caused by the violation of a legally protected interest, that is concrete
and particularized, and actual or imminent, as opposed to conjectural or hypothetical
(see Valley Forge Christian College v. Americans United for Separation of Church
and State, 454 U.S. 473 (1982); see also Lujan v. Defenders of Wildlife, 504 U.S. 555
(1992)). In addition, parties seeking to establish constitutional standing are required
to show that their injury “fairly can be traced to the challenged action” and that the
injury is likely to be redressed by a favorable judicial decision (Allen v. Wright, 468
U.S. 737 (1984); Valley Forge, supra, at 472). A person challenging an agency rule
who satisfies Section 702*s test is also likely to satisfy the injury requirement for
constitutional standing. Indeed, courts typically merge their discussions of Section
702*s “adversely affected or aggrieved” language with the constitutional injury
requirement (see, e.g., Wilderness Society v. Griles, 824 F.2d 4, 11 (D.C. Cir.

1987)).


In addition to constitutional requirements, the judiciary has developed prudential
rules to constrain the instances in which review may be obtained. Like their
constitutional counterparts, these judicially imposed limits on the exercise of federal
jurisdiction are “founded in concern about the proper — and properly limited — role
of the courts in a democratic society” (see Warth v. Seldin, 422 U.S. 490, 498
(1974)). However, unlike their constitutional counterparts, they may be modified or
abrogated by Congress. The prudential components of the standing doctrine require
that (1) a plaintiff assert his own legal rights and interests rather than those of third
parties; (2) a plaintiff’s complaint be encompassed by the “zone of interests”
protected or regulated by the constitutional or statutory guarantee at issue; and (3)
courts decline to adjudicate “‘abstract questions of wide public significance’ which
amount to ‘generalized grievances’ pervasively shared and most appropriately
addressed in the representative branches” (Valley Forge, supra, at 472).



Any standing inquiry is further complicated in instances when an organization
seeks to challenge agency action. An organization may have standing to sue if it has
been injured as an entity, and may likewise possess standing to sue on behalf of its
members, so long as the members would otherwise have standing to sue in their own
right; the interests the organization seeks to protect are germane to its purpose; and
neither the claim asserted nor the relief requested requires the participation of
individual members (see Hunt v. Washington State Apple Advertising Commission,

432 U.S. 333, 343 (1977)).


The forum for judicial review of agency rules is determined by statute. Statutes
containing judicial review provisions applicable to rulemaking generally call for
direct, pre-enforcement review in the courts of appeals, and usually specify
requirements as to venue, timing of review, and scope of review. If there is no
specifically applicable judicial review provision governing the agency’s rule, a
challenge to the rule will normally be through an action for an injunction or
declaratory relief in a district court. Jurisdiction must be obtained through one of the
general jurisdictional statutes, the most frequently asserted being 28 U.S.C. § 1331,
the so-called “federal question” provision, which gives district courts “original
jurisdiction of all civil actions wherever the matter in controversy ... arises under the
Constitution, laws, or treaties of the United States.” Other jurisdictional provisions
that may be used are 28 U.S.C. § 1337 (actions arising under commerce-related
statutes) and 28 U.S.C. § 1361 (mandamus jurisdiction).
Section 706 sets forth the scope of review of agency actions. In general, the
scope of review depends on the nature of the agency determination under challenge.
Agency conclusions on questions of law are reviewed de novo. When a court
reviews an agency’s construction of a statute it administers, the court is required to
uphold Congress’s intent where Congress has directly spoken to the precise statutory
question at issue. If the statute is silent or ambiguous with respect to the specific
issue, however, the agency’s interpretation of the statute must be upheld if the
agency’s construction of the statute is permissible (see Chevron U.S.A. v. NRDC, 467
U.S. 837 (1984)). The Supreme Court has clarified the limits of this standard, ruling
that Chevron deference applies only in instances when Congress has delegated
authority to an agency to make rules carrying the force of law, and when the agency
interpretation claiming deference was promulgated pursuant to that authority (see
United States v. Mead Corp., 533 U.S. 218, 229 (2001)).
Agency exercises of judgment or discretion, such as in informal rulemaking or
informal adjudication, are reviewed under the “arbitrary, capricious, abuse of
discretion” standard. Under this standard, an agency determination will be upheld
if it is rational, based on a consideration of the relevant factors, and within the scope
of the authority delegated to the agency by Congress. The agency must examine the
relevant data and articulate a satisfactory explanation for its action, including a
rational connection between the facts found and the choices made. A court is not to
substitute its judgment for that of the agency (see Motor Vehicle Mfr’s Assoc. v.
State Farm Mut. Auto Ins. Co., 463, U.S. 29, 42-43 (1983)).
Agency determinations of fact, typically in challenges of agency adjudications,
are reviewed under the “substantial evidence” test when the agency determination is
reviewed on the record of an agency proceeding required by statute (see Consolo v.



FMC, 383 U.S. 607, 618-21 (1966)), citing (Universal Camera v. NLRB, 340 U.S.

474 (1951)).


Discussion
The APA retains its preeminence as the general management law governing
agency decisionmaking by means of rulemaking and adjudication. Essentially
unamended by Congress since 1946, it has maintained its vitality in the face of vast
and fundamental changes in the nature and scope of federal government
responsibilities. In great measure this accommodation has come about because of
judicial rulings that have effected important transformations of the meaning and
scope of its otherwise neutral and spare terminology. The hallmark of our modern
administrative state — agency rulemaking through the process of informal
rulemaking — is a creative judicial cultivation. With the encouragement of the
courts, rulemaking replaced adjudication as the dominant formal decision making
process. Administrative lawmaking was “democratized” in a series of decisions
between 1965 and 1983 that expanded both the obligations of agencies and the role
of reviewing courts. The result has been the transformation, without benefit of
legislative amendment, of informal rulemaking into a new, on-the-record proceeding
that has fostered widespread public participation in the process.
To be sure, Congress has not simply silently acquiesced in this revolutionary
transformation. Although Congress has never undertaken a comprehensive revision
of the APA, it has always recognized that it could do so, and with increasing
frequency, it has supplanted the APA’s requirements with more explicit directives
for particular agencies and programs mirroring the above-described judicial
innovations. Often this legislation has been aimed at formalizing the procedural
protections ensuring effective and meaningful public participation in agency
policymaking. Thus, certain health, environmental, and consumer protection statutes,
for example, contain detailed “hybrid-rulemaking” requirements and procedural as
well as substantive changes.14
Moreover, the deregulation movement of the 1970s and 1980s successfully
focused attention on the economic consequences of regulation and the need for a
broader analytic approach to regulatory decision making that assessed the impacts of
costs and new technologies. The executive branch took the lead by adding new
layers of clearances for rules by executive order that included requirements for
consideration and evaluation of their costs and benefits. (See Executive Orders
12291, 12498, and 12866).15 Proposed regulatory reform legislation in recent
Congresses has included bills that not only would have codified the judicially created
procedural requirements of the last two decades, but also would have required all


14 See, e.g., 42 U.S.C. § 300g-1(d) (requiring public hearing prior to the promulgation of
regulations pursuant to the Safe Drinking Water Act); 15 U.S.C. § 2605 (providing for
public hearing and opportunity for cross-examination of witnesses prior to promulgation of
regulations under the Toxic Substances Control Act); and 15 U.S.C. § 2058 (providing for
a public hearing before promulgation of rules under the Consumer Product Safety Act).
15 See 3 C.F.R., 1981 Comp., pp. 127-134; 3 C.F.R., 1985 Comp., pp. 323-325; and 3 C.F.R.,

1993 Comp., pp. 638-649, respectively.



agencies engaged in rulemaking to utilize methodologies requiring detailed risk
assessment and cost benefit analysis for major regulations which would have been
subjected to intense judicial review. While these particular reform efforts have been
unsuccessful, Congress has passed several notable measures, including a mechanism
that subjects all agency rules to congressional review and possible veto; a procedure
to require the General Accounting Office to conduct an independent evaluation of an
agency’s cost-benefit analysis of a proposed or final rule when requested by a chair
or ranking member of a committee of jurisdiction; a process designed to restrict
regulations imposing unfunded costs on state and local governments and the private
sector; and a process designed to ensure that federal agencies use and disseminate
accurate information. There is also an emerging and controversial trend on the part
of agencies to attempt to enhance public participation in the administrative process
by accepting electronically submitted comments.
While the APA’s basic rulemaking model is relatively straightforward, it has
been argued that the additional requirements that have been imposed by Congress,
the executive branch, and the courts have made the rulemaking process rigid and
burdensome upon agencies. In turn, this has led to the argument that rulemaking has
become “ossified,” with agencies either undertaking resource and time intensive steps
to ensure that a rule will withstand increased scrutiny, or simply circumventing the
traditional rulemaking process by issuing policy statements and interpretive rules to
effectuate compliance with a regulatory agenda. Ultimately, however, it would appear
that the current APA scheme is likely to continue to be the key vehicle for
formulating and implementing agency policy directives.
Selected Source Reading
Aman, Alfred C. Jr., and William T. Mayton. Administrative Law and Process.
New York: Matthew Bender, 1993.
Johnson, Stephen M. “The Internet Changes Everything: Revolutionizing Public
Participation and Access to Government Information Through the Internet.”
Administrative Law Review, vol. 50 (spring 1998), pp. 277-337.
Kerwin, Cornelius M. Rulemaking: How Government Agencies Write Law and Makend
Policy, 2 ed. Washington: CQ Press, 1999.
Koch, Charles H. Administrative Law and Practice, 2nd ed., 3 vols. St. Paul, MN:
West Publishing Co., 1997.
Lubbers, Jeffrey S. A Guide to Federal Rulemaking, 3rd ed. Washington: American
Bar Association, 1998.
McGarity, Thomas O. “Some Thoughts on ‘Deossifying’ the Rulemaking Process.”
Duke Law Journal, vol. 41, 1992, pp. 1385-1462.
O’Reilly, James T. “The 411 on 515: How OIRA’s Expanded Information Roles in
2002 Will Impact Rulemaking and Agency Publicity Actions.” Administrative
Law Review, vol. 54 (spring 2002), pp. 835-851.



Pierce, Richard J. Jr. “Seven Ways to Deossify Agency Rulemaking.”
Administrative Law Review, vol. 47 (winter 1995), pp. 59-95.
Shepherd, George B. “Fierce Compromise: The Administrative Procedure Act
Emerges From New Deal Politics.” Northwestern University Law Review, vol.

90 (1996), pp. 1557-1683.


Verkuil, Paul R. “Comment: Rulemaking Ossification — A Modest Proposal.”
Administrative Law Review, vol. 47 (summer 1995), pp. 453-459.
CRS Report RL32339, Federal Regulations: Efforts to Estimate Total Costs and
Benefits of Rules, by Curtis W. Copeland.
CRS Report RL32356, Federal Regulatory Reform: An Overview, by Curtis W.
Copeland.
CRS Report RL32240, The Federal Rulemaking Process: An Overview, by Curtis W.
Copeland.
Morton Rosenberg
T. J. Halstead



C. Federal Records Act and Related Chapters of Title 44
Statutory Intent and History
Proper maintenance of federal records within the departments and agencies has
been legislatively addressed by Congress since the earliest days of the republic.
When chartering the initial departments, for example, Congress authorized the heads
of these entities to issue regulations for, among other matters, the custody, use, and16
preservation of the records, papers, and property. It was also the responsibility of
these officials to ensure that these regulations were observed in practice.
Through the years, Congress from time to time legislated additional
requirements and administrative arrangements concerning federal records. In 1934,
for instance, a major step was taken with the mandating of the National Archives (4817
Stat. 1122). The head of this entity, the Archivist of the United States, has
subsequently become a major policy leader regarding the entire life cycle of federal
records, including their (1) creation or collection; (2) processing; (3) transmittal,
including access and dissemination; (4) use; (5) active storage; (6) inactive storage;18
and (7) final disposition.
The Federal Records Act of 1950 (64 Stat. 583) was another milestone. While
it is most often remembered for its placement of the Archivist and the National
Archives under the authority of the Administrator of the General Services
Administration,19 among the statute’s important innovations were:
!creation of the National Historical Publications Commission to
“make plans, estimates, and recommendations for such historical
works and collections of sources as it deems appropriate for printing
or otherwise recording at the public expense ... [and to] cooperate
with and encourage both governmental and nongovernmental
institutions, societies, and individuals in collecting and preserving
and, when it deems such action to be desirable, in editing and
publishing the papers of outstanding citizens of the United States
and such other documents as may be important for an understanding
and appreciation of the history of the United States” (44 U.S.C. §§

2501-2506);


16 See, for example, 1 Stat. 28, 49, and 65; these and similar provisions were consolidated
in the Revised Statutes of the United States (1878) at Section 161, which is presently located
in the United States Code at 5 U.S.C. § 301.
17 The National Archives was rechartered in the National Archives and Records
Administration Act of 1984 (98 Stat. 2280), which largely constitutes Chapter 21 of Title

44 of the United States Code.


18 Peter Hernon, “Information Life Cycle: Its Place in the Management of U.S. Government
Information Resources,” Government Information Quarterly, vol. 11, 1994, pp. 143-170.
19 This relationship ended in 1984 when the National Archives was restored to the status of
an independent agency within the executive branch.

!authorizing the analysis, development, promotion, and coordination
of standards, procedures, and techniques “designed to improve the
management of records, to insure the maintenance and security of
records deemed appropriate for preservation, and to facilitate the
segregation and disposal of records of temporary value,” and other
related actions (44 U.S.C. §§ 2904-2906);
!authorizing the establishment, maintenance, and operation of records
centers “for the storage, processing, and servicing of records for
Federal agencies pending their deposit with the National Archives
of the United States or their disposition in any other manner
authorized by law” (44 U.S.C. § 2907);
!prescribing the records management responsibilities of agency heads
(44 U.S.C. §§ 3101-3107); and
!prescribing archival administration responsibilities for the deposit of
federal agency and congressional records “determined by the
Archivist to have sufficient historical or other value to warrant their
continued preservation by the United States Government” in the
National Archives, and other related actions (44 U.S.C. §§ 2107-

2111).


The provisions of the Federal Records Act and those of subsequent records
management statutes are largely codified in chapters of Title 44 of the United States
Code.
Major Provisions
Within Title 44 of the United States Code, Chapters 21, 22, 29, 31, and 33
contain major provisions of records management law. The first of these, Chapter 21,
after prescribing the establishment, organization, and principal leadership of the
National Archives and Records Administration, specifies certain general authority,
duties, and responsibilities of the Archivist. These include procedures and conditions
for the acceptance of records for historical preservation; responsibility for the
custody, use, and withdrawal of records transferred to the Archives; responsibilities
for the preservation, arrangement, duplication, and exhibition of records by the
Archivist; and the procedures and conditions governing the establishment of a
presidential archival depository or presidential library to be accepted and maintained20
by the Archivist.
Chapter 22 contains the provisions of the Presidential Records Act of 1978 (92
Stat. 2523), which marked a major change in federal policy on the custody and
preservation of presidential records. As a consequence of the Watergate incident and
related matters, the official papers and records of President Richard Nixon were


20 Concerning the acceptance and maintenance of presidential archival depositories by the
Archivist, see CRS Report RS20825, Presidential Libraries: The Federal System and
Related Legislation, by Harold C. Relyea.

placed under federal custody by specially legislated arrangements — the Presidential
Recordings and Materials Preservation Act of 1974 (88 Stat. 1695). This statute
requires that these materials remain in Washington, DC, where they are maintained
under the supervision of the Archivist. Thus, Nixon neither could take his
presidential records and documents with him when he left office, nor could place
them in a presidential library outside the nation’s capital.
This 1974 statute also created the temporary National Study Commission on
Records and Documents of Federal Officials (88 Stat. 1698). The panel was tasked
“to study problems and questions with respect to the control, disposition, and
preservation of records and documents produced by on behalf of Federal officials,
with a view toward the development of appropriate legislative recommendations and
other recommendations regarding appropriate rules and procedures with respect to
such control, disposition, and preservation.” Its final report was issued in March

1977.21


Responding partly to some of the commission’s recommendations, Congress
legislated the Presidential Records Act in 1978. After defining “presidential
records,” the statute specifies that all such materials created on or after January 20,
1981, are subject to its provisions. It effectively made presidential records federal
property, to remain under the custody and control of the Archivist when each
incumbent President left the White House. Jimmy Carter was the last occupant of
the Oval Office who could freely take away his records and papers.
Chapter 29, setting out the records management authority and responsibilities
of the Archivist and the Administrator of General Services, contains core provisions
from the Federal Records Act of 1950. Specified here are the objectives of federal
records management, the two officials’ general responsibilities for records
management, and the Archivist’s authority to establish standards for the selective
retention of records, inspect agency records, and establish, maintain, and operate
records centers.
Chapter 31, also containing core provisions from the Federal Records Act,
prescribes the records management responsibilities of the federal agencies, including
the general duties of agency heads, the requirement to establish and maintain “an
active, continuing program for the economical and efficient management of the
records of the agency,” and certain related procedural matters.
Chapter 33 is devoted to the disposal of federal records. It authorizes the
Archivist to issue regulations and utilize a system of records lists and disposition
schedules to eliminate non-current agency records lacking preservation value.


21 U.S. National Study Commission on Records and Documents of Federal Officials, Final
Report of the National Study Commission on Records and Documents of Federal Officials
(Washington: GPO, 1977). Also see Anna Kasten Nelson, “The Public Documents
Commission: Politics and Presidential Records,” Government Publications Review, vol. 9,
Sept./Oct. 1982, pp. 431-451.

Discussion
Most of the existing statutory law concerning records management was
developed when paper formats dominated federal recordkeeping and production.
During the past few decades, the adequacy of this authority has come into question
as electronic forms and formats have become more prevalent. The many challenges
of the electronic record phenomenon continue to be discussed and evaluated.
General Records Schedule (GRS) 20, a primary, government-wide, records
management directive, has been revised recently, and efforts are underway to develop
an electronic records archive at the National Archives.
Selected Source Reading
National Research Council. Building an Electronic Records Archive at the National
Archives and Records Administration: Recommendations for Initial
Development. Washington: National Academies Press, 2003.
U.S. National Archives and Records Administration. Disposition of Federal
Records. Washington: GPO, 1992.
——. Guide to Record Retention Requirements in the Code of Federal Regulations.
Washington: GPO, 1986.
Harold C. Relyea



D. Congressional Review of Regulations Act
Statutory Intent and History
The Supreme Court’s acceptance in 1937 of the New Deal’s rejection of passive,
minimalist governance, and its replacement by a more activist governmental
philosophy, signaled the beginning of the era of the administrative state that has seen
the emergence of a pattern of pervasive governmental economic and social
regulation. Since 1937, an unbroken line of Supreme Court and lower court
decisions has provided legitimacy for broad delegations of congressional power to
the executive, and has fostered and nurtured the hallmark of the modern
administrative state, agency lawmaking through the process of informal rulemaking.
With the encouragement of the courts, rulemaking has replaced adjudication as the
dominant formal administrative decision making process.
The necessity to delegate increasing amounts of legislative power to
administrative agencies to accomplish the expanded objective of government, while
at the same time maintaining congressional control and responsibility over the
exercise of the delegated authority, created a constitutional tension, however. This
tension has been manifested over the years by a variety of legislative attempts to
develop a review mechanism that would allow Congress to exercise its oversight
responsibility to assure agency accountability in the exercise of delegated authority.
Initially, Congress increasingly relied on the legislative veto, a device that allowed
it to delegate power conditionally and to retrieve it, or block agency exercise of its
delegated authority, by the action of both houses, one house, a committee, or, at
times, by a committee chairman alone. In 1983, in INS v. Chadha (462 U.S. 919
(1983)), the Supreme Court found all such veto mechanisms to be an unconstitutional
exercise of legislative power because of their failure to follow the Constitution’s
exclusive prescription for lawmaking: bicameral passage and presentment to the
President for his signature or veto.
The immediate consequence of the Supreme Court’s ruling was to force
Congress to rely more heavily on its traditional mechanisms of control of
administrative action, such as the authorization and appropriations process,
committee oversight and investigations, and the confirmation process as means of
restraining perceived regulatory excesses. In addition, regulatory reform proposals
throughout the 1980s and 1990s consistently contained requirements that agencies
perform cost-benefit, cost-effectiveness and risk assessment analyses as integral parts
of their rulemaking processes.
None of these government-wide reforms succeeded until the enactment of the
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA; 110 Stat.
857-874). Subtitle E of the act for the first time established a mechanism by which
Congress can disapprove, on a fast-track, virtually all federal agency rules. Failure
to report a covered rule for congressional review will prevent the rule from becoming
effective. The effectiveness of major rules is stayed for 60 days to allow for
congressional scrutiny. A rule vetoed by the passage of a joint resolution of
disapproval is deemed never to have been effective and an agency may not propose
to issue a substantially similar rule without further congressional authorization.



However, a number of unresolved interpretive issues, as well as certain structural
problems, have limited the effectiveness of this review mechanism.
Major Provisions
The congressional review mechanism, codified at 5 U.S.C. §§ 801-808, requires
that all agencies promulgating a covered rule must submit a report to each house of
Congress and to the Comptroller General (CG) that contains a copy of the rule, a
concise general statement describing the rule (including whether it is deemed to be
a major rule), and the proposed effective date of the rule. A rule cannot take effect
if the report is not submitted (Section 801(a)(1)(A)). Each house must send a copy
of the report to the chairman and ranking minority member of each jurisdictional
committee (Section 801(a)(1)(C)). In addition, the promulgating agency must submit
to the CG (1) a complete copy of any cost-benefit analysis; (2) a description of the
agency*s actions pursuant to the requirements of the Regulatory Flexibility Act and
the Unfunded Mandates Reform Act of 1995; and (3) any other relevant information
required under any other act or executive order. Such information must also be made
“available” to each house (Section 801(a)(1)(B)).
Section 804(3) adopts the definition of rule found at 5 U.S.C. § 551(4) which
provides that the term “means the whole or part of an agency statement of general ...
applicability and future effect designed to implement, interpret, or prescribe law or
policy.”22 The legislative history of Section 551 (4) indicates that the term is to be
broadly construed: “The definition of rule is not limited to substantive rules, but
embraces interpretive, organizational and procedural rules as well.”23 The courts
have recognized the breadth of the term, indicating that it encompasses “virtually
every statement an agency may make,”24 including interpretive and substantive rules,
guidelines, formal and informal statements, policy proclamations, and memoranda
of understanding, among other types of actions.25 Thus a broad range of agency
action is potentially subject to congressional review.


22 Section 804(3) excludes from the definition “(A) any rule of particular applicability,
including a rule that approves or prescribes for the future rates, wages, prices, services, or
allowance therefore, corporate or financial structures, reorganizations, mergers, or
acquisitions thereof, or accounting practices or disclosures bearing on any of the foregoing;
(B) any rule relating to agency management or personnel; or (C) any rule of agency
organization, or practice that does not substantially affect the rights or obligations of non-
agency parties.”
23 U.S. Attorney General, Manual on the Administrative Procedure Act, 13 (1948).
24 Avoyelles Sportsmen’s League, Inc., v. Marsh, 715 F.2d 897 (5th Cir. 1983).
25 See, for example, Chem Service, Inc. v. EPA, 12 F.3d 1256 (3rd Cir. 1993)(memorandum
of understanding); Caudill v. Blue Cross and Blue Shield of North Carolina, 999 F.2d 74th
(4 Cir. 1993)(interpretative rules); National Treasury Employees Union v. Reagan, 685
F.Supp 1346 (E.D. La 1988)(federal personnel manual letter issued by the Office of
Personnel Management); New York City Employment Retirement Board v. SEC, 45 F.3d 7nd
(2 Cir. 1995)(affirming lower court’s ruling that SEC “no action” letter was a rule within
Section 551(4)).

The Comptroller General and the administrator of the Office of Information and
Regulatory Affairs (OIRA) of the Office of Management and Budget have particular
responsibilities with respect to a “major rule,” defined as a rule that will likely have
an annual effect on the economy of $100 million or more, increase costs of
processing for consumers, industries, or state and governments, or have significant
adverse effects on the economy. The determination of whether a rule is major is
assigned exclusively to the OIRA administrator (Section 804(2)). If a rule is deemed
major by the OIRA administrator, the CG must prepare a report for each
jurisdictional committee within 15 calendar days of the submission of the agency
report required by Section 801 (a)(1) or its publication in the Federal Register,
whichever is later. The statute requires that the CG’s report “shall include an
assessment of the agency’s compliance with the procedural steps required by Section
801(a)(1)(B).” However, the CG has interpreted his duty under this provision
narrowly as requiring that he simply determine whether the prescribed action has
been taken, i.e., whether a required cost-benefit analysis has been provided, and
whether the required actions under the Regulatory Flexibility Act, the Unfunded
Mandates Reform Act of 1995, and any other relevant requirements under any other
legislation or executive orders were taken, not whether the action was properly done
or was in accord with congressional intent.
The designation of a rule as major also affects its effective date. A major rule
may become effective on the latest of the following scenarios: (1) 60 days after
Congress receives the report submitted pursuant to Section 801(a)(1) or after the rule
is published in the Federal Register; (2) if Congress passes a joint resolution of
disapproval and the President vetoes it, the earlier of when one house votes and fails
to override the veto, or 30 days after Congress receives the message; or (3) the date
the rules would otherwise have taken effect (unless a joint resolution is enacted)
(Section 801(a)(3)).
Thus, the earliest a major rule can become effective is 60 days after the
submission of the report required by Section 801(a)(1) or its publication in the
Federal Register, unless some other provision of the law provides an exception for
an earlier date. Three possibilities exist. Under Section 808(2) an agency may
determine that a rule should become effective notwithstanding Section 801(a)(3)
where it finds “good cause in that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest.” Second, the President
may determine that a rule should take effect earlier because of an imminent threat to
health or safety or other emergency; to insure the enforcement of the criminal laws;
for national security purposes; or to implement an international trade agreement
(Section 801(c)). Finally, a third route is available under Section 801(a)(5), which
provides that “the effective date of a rule shall not be delayed by operation of this
chapter beyond the date on which either House of Congress votes to reject a joint
resolution of disapproval under Section 802.” All other rules take effect “as
otherwise allowed by law,” after having been submitted to Congress under Section

801(a)(1) (Section 801(a)(4)).


All covered rules are subject to disapproval even if they have gone into effect.
Congress has reserved to itself a review period of at least 60 days. Moreover, if a
rule is reported within 60 session days of the Senate or 60 legislative days of the
House prior to the date Congress adjourns a session of Congress, the period during



which Congress may consider and pass a joint resolution of disapproval is extended
to the next succeeding session of Congress (Section 801(d)(1)). Such held-over rules
are treated as if they were published on the 15th session day of the Senate and the 15th
legislative day of the House in the succeeding session, and as though a report under
Section 801(a)(1) was submitted on that date (Section 801(d)(2)(A), (e)(2)). But a
held-over rule takes effect as otherwise provided (Section 801(d)(3)). Only the
opportunity to consider and disapprove is extended.
If a joint resolution of disapproval is enacted into law, the rule is deemed not to
have had any effect at any time (Section 801(f)). If a rule that is subject to any
statutory, regulatory, or judicial deadline for its promulgation is not allowed to take
effect, or is terminated by the passage of a joint resolution, any deadline is extended
for one year after the date of enactment of the joint resolution (Section 803). A rule
that does not take effect, or is not continued because of passage of a disapproval
resolution, may not be reissued in substantially the same form. Indeed, any reissued
or new rule that is “substantially the same” as a disapproved rule cannot be issued
unless it is specifically authorized by a law enacted subsequent to the disapproval of
the original rule (Section 801(b)(2)).
Section 802(a) provides a process for an up-or-down vote on a joint resolution
of disapproval within a 60-day period (excluding days when either house is adjourned
for more than three days). The period begins running either on the date on which the
Section 801(a)(1) report is submitted, or when the rule is published in the Federal
Register, whichever is later.
The law spells out an expedited consideration procedure for the Senate. If the
committee to which a joint resolution is referred has not reported it out within 20
calendar days, it may be discharged from further consideration by a written petition
of 30 Members of the Senate, at which point the measure is placed on the calendar.
After committee report or discharge, it is in order at any time for a motion to proceed
to consideration. All points of order against the joint resolution (and against
consideration of the measure) are waived, and the motion is not subject to
amendment or postponement, or to a motion to proceed to other business. If the
motion to consider is agreed to, it remains as unfinished business of the Senate until
disposed of (Section 802(d)(1)). Debate on the floor is limited to 10 hours.
Amendments to the resolution and motions to postpone or to proceed to other
business are not in order (Section 802(d)(2)). At the conclusion of debate, an up-or-
down vote on the joint resolution is to be taken (Section 802(d)(3)).
There is no special procedure for expedited consideration and processing of
joint resolutions in the House. But if one house passes a joint resolution before the
other house acts, the measure of the other house is not referred to a committee. The
procedure of the house receiving a joint resolution “shall be the same as if no joint
resolution had been received from the other house, but the vote on final passage shall
be on the joint resolution of the other house” (Section 802(f)(1)(2)).
Section 805 precludes judicial review of any “determination, finding, action or
omission under this chapter.” This would insulate from court review, for example,
a determination by the OIRA administration that a rule is major or not, a presidential
determination that a rule should become effective immediately, an agency



determination that “good cause” requires a rule to go into effect at once, or a question
as to the adequacy of a Comptroller General’s assessment of an agency’s report.
Discussion
As of January 14, 2004, the Comptroller General had submitted reports pursuant
to Section 801(a)(2)(A) to Congress on 488 major rules.26 In addition, GAO has
cataloged the submission of 32,865 non-major rules as required by Section
801(a)(1)(A). To date, 29 joint resolutions of disapproval have been introduced
relating to 21 rules. One rule has been disapproved: the Occupational Safety and
Health Administration’s (OSHA’s) ergonomics standard in March 2001. A second
rule, the Federal Communication Commission’s (FCC’s) rule relating to broadcast
media ownership, was disapproved by the Senate on September 16, 2003 but was not
acted upon by the House.
After eight years, the limited use to which the rulemaking review mechanism
has been put does not appear to be attributable to a lack of familiarity with the law,
but rather to a number of other factors. Some have argued that agencies are more
carefully assessing their regulations to avoid possible congressional disapproval
resolutions. Others maintain that the current review process discourages utilization
of the act. These critics point to a number of interpretive issues concerning the scope
of the law’s coverage, the judicial enforceability of its key requirements, and whether
a disapproval resolution may be directed at part of a rule as factors which introduce
uncertainties into the use of the disapproval resolution process.
Specific problems identified by critics of the current process include (1) the lack
of a screening mechanism to identify rules that require congressional review; (2) the
absence of an expedited review procedure in the House of Representatives; (3) the
deterrent effect of the ultimate need for a supermajority of both houses to veto a rule;
(4) the reluctance to disapprove an omnibus rule where only a part of the rule raises
objections; (5) the uncertainty of which rules are covered by the act; (6) the
uncertainty whether the failure to report a covered rule to Congress can be reviewed
and sanctioned by a court; and (7) the scope of the limitation that precludes an agency
from promulgating a “substantially similar rule” after the disapproval of a rule.
Perceived agency failures to report rules covered by the CRA for review and the lack
of any basis to timely challenge the substantiality of agency cost-benefit analyses
were the subject of oversight hearings in both houses during the 106th Congress. A
product of those inquiries was the passage of the Truth in Regulating Act of 2000,
which required the Comptroller General to conduct an independent evaluation of an
agency’s cost-benefit assessment accompanying a proposed or final economically
significant rule when requested by a chair or ranking minority member of a
committee of jurisdiction. The CG’s evaluations were to be completed within 180
days of the request. Although the CG’s evaluations were not integrated to coincide
with time requirements of the CRA, they could have provided a basis for prompting
review action under this mechanism. However, no monies were ever appropriated
for the pilot program, and its authorization expired in January 2004.


26 U.S. General Accounting Office, Reports on Federal Agency Major Rules, available at
[http://www.gao.gov/decisions/majrule/majrule.htm], visited Jan. 22, 2004.

Two bills have been introduced in the 108th Congress to address some of the
deficiencies cited by critics of the review mechanism. H.R. 110 would require that
all rules encompassed by the definition of rule in 5 U.S.C. § 551(4) cannot “have the
force and effect of law” unless they are enacted into law by means of expedited
consideration procedures established for each house by the proposal. The bill would
apparently displace the current CRA mechanism. H.R. 3356 would amend the CRA
by establishing a Joint Administrative Procedures Committee (JAPC) composed of
24 Members, 12 from each house, which would act as an oversight and screening
body for Congress with respect to existing and proposed major rules. The bill also
would provide for expedited consideration procedures for joint resolutions of
disapproval for the House of Representatives comparable to those of the Senate;
authorize the JACP, within 30 days after the required report to Congress was
received, to report a committee resolution recommending that each standing
committee with jurisdiction to which such report was provided report a joint
resolution of disapproval; and would allow an agency to reissue or promulgate a new
rule to replace a disapproved rule if it carried out the recommendation, if any, of the
JACP in the report submitted by the joint committee to the committees of jurisdiction
recommending disapproval action. Neither of the bills has as yet received committee
action.
Selected Source Reading
Cohen, Daniel and Peter L. Strauss. “Congressional Review of Agency
Regulations.” Administrative Law Review, vol. 49 (winter 1997), pp. 95-110.
CRS Report RL30116. Congressional Review of Agency Rulemaking: An Update
and Assessment After Nullification of OSHA’s Ergonomics Standard, by Morton
Rosenberg.
Parks, Julie A. “Lessons in Politics: Initial Use of the Congressional Review Act.”
Administrative Law Review, vol. 55 (2003), pp. 187-210.
Pfohl, Peter A. “Congressional Review of Agency Rulemaking: The 104th Congress
and the Salvage Timber Directive.” Journal of Law and Politics, vol. 14
(winter 1998), pp. 1-31.
Rosenberg, Morton. “Whatever Happened to Congressional Review of Agency
Rulemaking?: A Brief Overview, Assessment, and Proposal for Reform.”
Administrative Law Review, vol. 51 (fall 1999), pp. 1051-1092.
Morton Rosenberg



E. Freedom of Information Act
Statutory Intent and History
The Freedom of Information (FOI) Act was originally adopted by Congress in
1966 (80 Stat. 250) and was codified in 1967 (81 Stat. 54; 5 U.S.C. § 552), when it
also became operative law. As enacted, the FOI Act replaced the public information
section of the Administrative Procedure Act (APA) (60 Stat. 237), which was found
to be ineffective in providing the public with a means of access to unpublished
records of federal departments and agencies. Subsection (a) of the FOI Act reiterated
the requirements of the APA public information section that certain operational
information — e.g., organization descriptions, delegations of final authority, and
substantive rules of general policy — be published in the Federal Register.
Subsection (b) statutorily established a presumptive right of access by any
person — individual or corporate, regardless of nationality — to identifiable,
existing, unpublished records of federal departments and agencies without having to
demonstrate a need or even a reason for such a request. Subsection (b)(1)-(9) lists
nine categories of information that may be exempted from the rule of disclosure. The
burden of proof for withholding material sought by the public was placed upon the
government. Denials of requests could be appealed to the head of the agency holding
the sought records, and ultimately pursued in federal district court. The law specifies
the direct costs which agencies may recover when responding to requests for records.
The product of 11 years of investigation and deliberation in the House of
Representatives and half as many years of consideration in the Senate, the FOI Act
was legislated by Congress in the face of considerable opposition by the executive
departments and agencies. This opposition produced a hostile environment for the
development, passage, and early administration of the statute. As a result, portions
of the law have been subjected to a high judicial gloss for reasons of both
clarification and interpretation. To maintain faithful administration of the FOI Act
and to preserve its purpose, Congress has found it necessary to conduct vigorous
oversight of its implementation and, on four occasions, to amend its provisions.
Reporting in 1972 on the initial implementation of the statute, a House oversight
committee concluded that the “efficient operation of the Freedom of Information Act
has been hindered by 5 years of foot-dragging by the Federal bureaucracy ... of two
administrations.”27 To remedy the situation, the following amendments to the FOI
Act were approved in 1974 (88 Stat. 1561): (1) a request need only “reasonably
describe” the material being sought; (2) only the direct costs of search for and
duplication of requested records could be recovered by agencies; (3) documents
could be furnished without charge or at reduced cost if doing so would be in the
public interest; (4) a court might inspect records in camera when making a
determination concerning their exemption from disclosure; (5) response to an initial
request must be made within 10 working days, and to an administrative appeal


27 U.S. Congress, House Committee on Government Operations, Administration of the
Freedom of Information Act, H.Rept. 92-1419, 92nd Cong., 2nd sess. (Washington: GPO,

1972), p. 8.



request, within 20 working days; (6) responsive pleading to an FOI Act lawsuit must
be made within 20 days; (7) complainants who substantially prevail in FOI Act
lawsuits may be awarded court costs and attorney fees; and (8) any segregable portion
of a requested record shall be disclosed after exempt parts are deleted. The
amendments also expanded the definition of agency for FOI Act matters, required
agencies to report annually on FOI Act administration and operations, and clarified
two of the statute’s exemptions.
In 1976, an FOI Act amendment clarifying the language of the third exemption
to the rule of disclosure was attached to the Government in the Sunshine Act, another
open government law (90 Stat. 1241, at 1247).
Additional amendments to the FOI Act were enacted in 1986 as a rider to an
omnibus anti-drug abuse law (100 Stat. 3207-48). These modifications strengthened
protections concerning law enforcement records and revised the fee and fee waiver
provisions of the FOI Act. In this latter regard, separate fee arrangements were
prescribed when records are requested (1) for commercial use; (2) by an educational
or noncommercial scientific institution or a news media representative; and (3) by all
others besides these types of requesters. The Office of Management and Budget was
mandated to issue government-wide fee and fee waiver guidelines.28
The most recent amendment of the FOI Act occurred in 1996 during the closing
weeks of the 104th Congress. These amendments (110 Stat. 3048), addressing
shortcomings in administration as well as the new challenges posed by electronic
forms and formats, inclusively defined covered records, required materials to be
provided in the form or format requested, increased the initial response period from
10 to 20 days, encouraged agencies to maintain multitrack processing systems based
upon the complexity of requests received, established expedited processing in cases
where a “compelling need” is demonstrated, and modified agency reporting
requirements, among other changes.
Major Provisions
Subsection (a) of the FOI Act requires that certain operational information —
e.g., organization descriptions, delegations of final authority, and substantive rules
of general policy — be published in the Federal Register.
Subsection (b) prescribes a procedure whereby any person may request access
to identifiable, existing, unpublished records of the federal departments and agencies.
No need, ‘or even a reason’, for such a request must be demonstrated. The burden
of proof for withholding material sought by the public is placed upon the
government.
Although the statute specifies nine categories of information which may be
protected from disclosure, these exemptions do not require agencies to withhold
records, but merely permit access restriction. Allowance is made in the law for the


28 These guidelines are found in the Federal Register, vol. 52, Mar. 27, 1987, pp. 10012-

10020.



exemption of (1) information properly classified for national defense or foreign
policy purposes as secret under criteria established by an executive order; (2)
information relating solely to agency internal personnel rules and practices; (3) data
specifically excepted from disclosure by a statute which either requires that matters
be withheld in a non-discretionary manner, or establishes particular criteria for
withholding, or refers to particular types of matters to be withheld; (4) trade secrets
and commercial or financial information obtained from a person and privileged or
confidential; (5) inter- or intra-agency memoranda or letters which would not be
available by law except to an agency in litigation; (6) personnel, medical, and similar
files the disclosure of which would constitute an unwarranted invasion of personal
privacy; (7) certain kinds of investigatory records compiled for law enforcement
purposes; (8) certain information relating to the regulation of financial institutions;
and (9) geological and geophysical information and data, including maps, concerning
oil and gas wells. Disputes over the availability of agency records may ultimately be
settled in court.
Agencies responding to FOI Act requests are permitted by the statute to charge
fees for certain activities — document search, duplication, and review — depending
on the type of requester: a commercial user; an educational or noncommercial
scientific institution, whose purpose is scholarly or scientific research; a news media
representative; or the general public. However, requested records may be furnished
by an agency without any charge or at a reduced cost, according to the law, “if
disclosure of the information is in the public interest because it is likely to contribute
significantly to public understanding of the operations or activities of the government
and is not primarily in the commercial interest of the requester.” Both the Office of
Management and Budget and the Department of Justice coordinate FOI Act policy
and activities within the executive branch.
Discussion
The effective operation of the FOI Act owes much to diligent congressional
oversight and corrective amendment of the statute. Initial agency hostility to the
statute has subsided over the subsequent 35 years, but some agency administrative
practices adverse to the effective operation of the law continue to be problematic.
Ongoing judicial scrutiny and interpretation is closely watched by Congress for
departures from congressional intent. Apart from these continuing challenges,
information developments, such as more widespread government use of e-mail, could
prompt congressional review of whether additional FOI Act adjustments may be
needed.
Selected Source Reading
Foerstel, Herbert N. Freedom of Information and the Right to Know. Westport, CT:
Greenwood Press, 1999.
Hammitt, Harry A., David L. Sobel, and Mark S. Zaid, eds. Litigation Under the
Federal Open Government Laws 2002. Washington: Electronic Privacy
Information Center, 2002.



U.S. Congress. House. Committee on Government Operations [and] Senate
Committee on the Judiciary. Freedom of Information Act and Amendments of
1974 (P.L. 93-502). Source Book: Legislative History, Texts, and Other
Documents. Joint committee print. 94th Congress, 1st session. Washington:
GPO, 1975.
U.S. Congress. House. Committee on Government Reform. A Citizen’s Guide on
Using the Freedom of Information Act and the Privacy Act of 1974 to Request
Government Records, H.Rept. 108-172. 108th Congress, 1st session.
Washington: GPO, 2003.
U.S. Congress. Senate Committee on the Judiciary. Freedom of Information Act
Source Book: Legislative Materials, Cases, Articles. S.Doc. 93-82. 93rd
Congress, 2nd session. Washington: GPO, 1974.
U.S. General Accounting Office. Information Management: Progress in
Implementing the 1996 Electronic Freedom of Information Act Amendments.
GAO-01-378. March 2001.
Harold C. Relyea



F. Privacy Act
Statutory Intent and History
In the Privacy Act of 1974 (5 U.S.C. § 552a) Congress mandated personal
privacy protection in several regards concerning federal agency operations and
practices. Its eclectic provisions can be traced to several contemporaneous events
prompting congressional interest in securing personal privacy.
Since the years of the late 19th century, various developments — not the least
of which the introduction of new, intrusive technologies — have contributed to more
disparate understandings of the concept of privacy and infringements upon it.
Congress made an initial effort at legislating a new kind of privacy protection in 1970
when enacting the Fair Credit Reporting Act regulating the collection and
dissemination of personal information by consumer reporting entities (84 Stat. 1128;

15 U.S.C. § 1681 et seq.).


With the Crime Control Act of 1973, Congress prohibited federal personnel and
state agencies receiving law enforcement assistance funds pursuant to the statute
from making unauthorized disclosures of personally identifiable criminal history
research or statistical information. It also permitted “an individual who believes that
criminal history information concerning him contained in an automated system is
inaccurate, incomplete, or maintained in violation of this [law] ... to review such
information and to obtain a copy of it for the purpose of challenge or correction” (87
Stat. 197, at 215-216; 42 U.S.C. § 3789g).
That same year, the Advisory Committee on Automated Personal Data Systems,
established by Secretary of Health, Education, and Welfare Elliot L. Richardson in
early 1972, offered an important consideration. The panel’s July 1973 final report
recommended “the enactment of legislation establishing a Code of Fair Information
Practice for all automated personal data systems.” Such a code would: punish unfair
information practice with civil and criminal penalties; provide injunctive relief to
prevent violations of safeguard requirements; empower individuals to bring suits for
unfair information practices to recover actual, liquidated, and punitive damages, in
individual or class actions; and allow the recovery of reasonable attorneys’ fees and
other costs of litigation incurred by individuals who bring successful suits.29
Congressional efforts to legislate notice, access, and emendation arrangements
for individuals concerning personally identifiable records maintained on these
individuals by federal departments and agencies began in the House in June 1972, butnd
did not extend beyond the subcommittee hearing stage during the 92 Congress.
However, a few days before these inaugural House hearings on legislation that would
evolve into the Privacy Act, a burglary occurred at Democratic National Committee
headquarters. It was the beginning of the Watergate incident, which would


29 U. S. Department of Health, Education, and Welfare, Secretary’s Advisory Committee on
Automated Personal Data Systems, Records, Computers, and the Rights of Citizens
(Washington: GPO, 1973), pp. xxiii and 50.

significantly affect attitudes toward privacy protection legislation and the leadership
for such legislation.
Legislation leading to the enactment of the Privacy Act began in the House
largely to create a procedure whereby individuals could learn if federal agencies
maintained files on them, review the contents of the records in these files, correct
inaccuracies they contained, and know how this information was being used and by
whom. In the Senate, a privacy protection bill sponsored by Senator Sam Ervin Jr.,
initially sought largely to establish a Federal Privacy Board and to create standards
and management systems for handling personally identifiable information in federal
agencies, state and local governments, and other organizations. Other aspects of
privacy policy were added to these bills as they moved through their respective
houses of Congress, and then were reconciled in a somewhat unusual manner to
create an amalgamated bill acceptable to the House, the Senate, and the President.
House hearings began in mid-February 1974 under Representative William S.
Moorhead, chairman of the Subcommittee on Foreign Operations and Government
Information of the Committee on Government Operations, and a principal manager
of the legislation. The subcommittee held markup discussions in May, June, and
July. These deliberations resulted in a clean bill (H.R. 16373), which was introduced
by Representative Moorhead with 13 bipartisan co-sponsors in mid-August and
favorably reported by the subcommittee without a dissenting vote. The Committee
on Government Operations considered the legislation in mid-September, substituted
revised text for the original language, and favorably reported it. President Gerald
Ford, who had recently succeeded to the Oval Office after President Richard Nixon’s
early August resignation, endorsed the House bill in an October 9 statement.30 The
measure was considered by the House on November 20 and 21, and approved, with
amendments, on a 353-1 yea-and-nay vote.31
A somewhat different counterpart privacy proposal emerged in the Senate.
Senator Ervin introduced his bill (S. 3418) on May 1, 1974, with bipartisan
cosponsorship. Hearings on this and related legislation occurred in June. During
June, July, and August, staff of the Senate Committee on Government Operations,
its Ad Hoc Subcommittee on Privacy and Information Systems, and the
Subcommittee on Constitutional Rights of the Committee on the Judiciary — all
panels chaired by Senator Ervin — further refined the language of the bill. In a mid-
August committee markup, a staff-developed version of the measure was amended
and favorably reported to the Senate.
The new text of the bill would have established the Privacy Protection
Commission, composed of five members appointed by the President from private life
and subject to Senate approval. The commission would have been responsible for
compiling and publishing an annual directory of information systems subject to the
provisions of the bill, enforcing the legislation, and developing model guidelines for


30 U.S. Office of the President, Public Papers of the Presidents of the United States: Gerald
R. Ford, 1974, Book I (Washington: GPO, 1976), pp. 243-244.
31 Congressional Record, vol. 120, Nov. 20, 1974, pp. 36643-36660; ibid., Nov. 21, 1974,
pp. 36955-36977.

its implementation, including the conduct of research in this regard. The bill also
would have established federal agency standards and management systems for
handling information relating to individuals. These included fair information
practice principles, disclosure standards, mailing list restrictions, and civil and
criminal penalties.
On November 21, the Senate considered the Ervin legislation; amendments
developed by committee staff and the Office of Management and Budget (OMB)
were adopted, and the resulting version of the legislation was approved.32 The
following day, the Senate took up the House counterpart bill, struck its language and
substituted in lieu thereof the language of the Ervin bill, and approved the amended
version of the House bill.33
With only a few weeks remaining before the 93rd Congress would adjourn sine
die, House and Senate managers found they had very little time to reconcile the two
differing bills. There was, however, strong desire for the passage of such legislation,
not only as a so-called Watergate reform, but also as a tribute and memorial to
Senator Ervin, who was retiring from congressional service. Consequently,
Representative Moorhead and Senator Ervin, with the concurrence of their respective
committees, agreed to the rare arrangement of having their committee staffs negotiate
a mutually agreeable legislative measure. After this effort reduced 108 substantive
differences to eight, the leaders of the respective House and Senate committees
brought those to resolution.34 In lieu of a conference committee report, a staff
analysis of the compromise legislation was produced.35 The major concession was
the relegation of the enforcement commission to the status of a temporary national
study commission. Its oversight responsibilities were vested in OMB, but without
enforcement authority.
On December 11, the House adopted the Senate bill after striking its original
language and inserting in lieu thereof provisions of its own bill.36 The Senate
concurred in the House amendment by passing its own amendment on a 77-8 vote on
December 17, clearing the measure for further House action.37 The following day,
the House agreed to the Senate amendments with an amendment of its own,38 and the
Senate concurred with the House amendments the same day, clearing the measure for
the President’s signature.39 The Privacy Act was signed into law by President Ford
on December 31, 1974 (88 Stat. 1896; 5 U.S.C. § 552a). In his signing statement, the
President said the new law “signified an historic beginning by codifying fundamental


32 Congressional Record, vol. 120, Nov. 21, 1974, pp. 36882-36921.
33 Ibid., Nov. 22, 1974, pp. 37064-37069.
34 Ibid., Dec. 17, 1974, p. 40400.
35 See ibid., pp. 40405-40408.
36 Ibid., Dec. 11, 1974, pp. 39200-39204.
37 Ibid., Dec. 17, 1974, pp. 40397-40413.
38 Ibid., Dec. 18, 1974, pp. 40879-40886.
39 Ibid., pp. 40730-40731.

principles to safeguard personal privacy in the collection and handling of recorded
personal information by federal agencies.”40
Major Provisions
The Privacy Act provides privacy protection in several ways. First, it sustains
some traditional major privacy principles. For example, an agency shall “maintain
no record describing how any individual exercises rights guaranteed by the First
Amendment unless expressly authorized by statute or by the individual about whom
the record is maintained or unless pertinent to and within the scope of an authorized
law enforcement activity” (5 U.S.C. § 552(e)(7)).
Second, similar to the Fair Credit Reporting Act, the Privacy Act provides an
individual who is a citizen of the United States, or an alien lawfully admitted for
permanent residence, with access and emendation arrangements for records
maintained on him or her by most, but not all, federal agencies. General exemptions
in this regard are provided for systems of records maintained by the Central
Intelligence Agency and federal criminal law enforcement agencies.
Third, the statute embodies a number of principles of fair information practice.
For example, it sets certain conditions concerning the disclosure of personally
identifiable information; prescribes requirements for the accounting of certain
disclosures of such information; requires agencies to “collect information to the
greatest extent practicable directly from the subject individual when the information
may result in adverse determinations about an individual’s rights, benefits, and
privileges under Federal programs”; requires agencies to specify their authority and
purposes for collecting personally identifiable information from an individual;
requires agencies to “maintain all records which are used by the agency in making
any determination about any individual with such accuracy, relevance, timeliness,
and completeness as is reasonably necessary to assure fairness to the individual in the
determination”; and provides civil and criminal enforcement arrangements.
Discussion
Since its enactment, the Privacy Act has been amended on five occasions. In
1982, the Debt Collection Act added a new exception to the disclosure prohibition
for disclosures made to consumer credit reporting agencies (96 Stat. 1749, adding 5
U.S.C. § 552a(b)(12)). That same year, the Congressional Reports Elimination Act
changed the annual report requirement of the Privacy Act and modified the provision
for publication of agency systems of records (96 Stat. 1819, at 1821-1822, modifying
5 U.S.C. § 552a(e)(4) and (p)). In 1984, the Central Intelligence Agency Information
Act resolved a long-standing controversy by specifying that the Privacy Act is not
authority “to withhold from an individual any record which is otherwise accessible
to the individual under the provisions of” the Freedom of Information Act (96 Stat.

2209, at 2211-2212, adding 5 U.S.C. § 552a(q)(2)). Amendments in 1988 (102 Stat.


2507, adding 5 U.S.C. § 552a(o),(p),(q), and (u), and amending 5 U.S.C. § 552a(a),


40 Public Papers of the Presidents of the United States: Gerald R. Ford, 1975, Book I, pp.

1-2.



(e), and (v)) and 1990 (104 Stat. 1388-334, modifying 5 U.S.C. § 552a(p))
established new procedures and data protection boards to ensure privacy, integrity,
and verification of data disclosed for computer matching.
Perhaps the facet of the Privacy Act that has been the most successful is its
access procedure. The volume of access requests by record subjects has grown
steadily, for the most part, since the Privacy Act was first implemented. It is,
however, about a third of the access request volume of the Freedom of Information
Act. Moreover, it appears that the total denial caseload is small in proportion to
request volume.
Similarly, the volume of requests to amend personal records is also steadily
growing, though it is not nearly so great as the volume of access requests, and the
total denial caseload is small in proportion to the amendment request volume.
In a June 2003 report, the General Accounting Office urged improved leadership
and guidance by the Office of Management and Budget to improve agency
compliance with the Privacy Act. Around this same time, as public revelations about
the efforts of some agencies to engage in data mining for homeland security purposes
— searching private sector databases for personal information — became known,
some urged amendment of the Privacy Act to clarify its scope regarding such
practices.
Selected Source Reading
Hammitt, Harry A., David L. Sobel, and Mark S. Zaid, eds. Litigation Under the
Federal Open Government Laws 2002. Washington: Electronic Privacy
Information Center, 2002.
U.S. Congress. House. Committee on Government Reform. A Citizen’s Guide on
Using the Freedom of Information Act and the Privacy Act of 1974 to Requestthst
Government Records. H.Rept. 108-172. 108 Congress, 1 session.
Washington: GPO, 2003.
U.S. Congress. Senate Committee on Government Operations [and] House
Committee on Government Operations. Legislative History of the Privacy Act
of 1974: S. 3418 (Public Law 93-579), Source Book on Privacy. Jointthnd
committee print. 94 Congress, 2 session. Washington: GPO, 1976.
U.S. General Accounting Office. Privacy Act: OMB Leadership Needed to Improve
Agency Compliance. GAO-03-304. June 2003.
U.S. Privacy Protection Study Commission. Personal Privacy in an Information
Society. Washington: GPO, 1977.
_____. The Privacy Act of 1974: An Assessment, Appendix 4. Washington: GPO,

1977.


Harold C. Relyea



G. Federal Advisory Committee Act
Statutory Intent and History
Congress formally acknowledged the merits of using advisory committees to
obtain expert views drawn from business, academic, government, and other interests
when it enacted the Federal Advisory Committee Act (FACA) in 1972 (5 U.S.C.
Appendix; 86 Stat. 700).
The legislative history pertaining to FACA reveals that Congress had two major
concerns about advisory committees before 1972. The first concern was that the
public perceived many advisory committees as duplicative and inefficient, and
otherwise lacking adequate controls or oversight. The second concern was the
widespread belief that advisory committees did not adequately represent the public
interest, and that committee meetings were too often closed to the public.
Congressional enactment of FACA established the first requirements for the
management and oversight of federal advisory committees to ensure impartial and
relevant expertise. As required by FACA, the General Services Administration
(GSA) administers and provides management guidelines for advisory committees.
GSA also submits an annual report to the President and Congress, based on the
information provided by the federal agencies concerning the meetings, costs, and
membership of advisory committees. During FY2003, GSA reported a total of 953
advisory committees, with 31,385 individuals serving as members during the year.
Related expenditures of $282.5 million were used in FY2003 to provide member
compensation, travel and per diem expenses, and other administrative costs
associated with advisory committees. On March 14, 2000, GSA announced the
elimination of its annual report on advisory committees, relying instead on its website
to make available the detailed reports covering each committee’s activities during the
fiscal year.41 GSA also issues an annual summary report for Congress pertaining to
advisory committee management and performance.
Major Provisions
FACA requires that the advice provided by advisory committees be objective
and accessible to the public. Each advisory committee meeting is presumptively
open to the public, with certain exceptions. Adequate notice of meetings must be
published in advance in the Federal Register. Subject to the requirements of the
Freedom of Information Act, all papers, records, and minutes of meetings must be
made available for public inspection.
FACA contains guidelines for membership, mandating that any legislation
establishing an advisory committee be “fairly balanced in terms of the points of view
represented and the functions to be performed,” and that the committee’s
recommendations not be inappropriately influenced by the appointing authority or by
any special interest.


41 The GSA website is available at [http://fido.gov/facadatabase], visited Dec. 11, 2003.

Each advisory committee must file a charter containing its mandate and duties,
frequency of meetings, membership, and the agency to which, or official to whom,
the committee reports. The act requires the Library of Congress to maintain a
depository of committee reports, papers, and charters. Pursuant to FACA, each
advisory committee goes out of existence after two years unless its charter is renewed
or is otherwise prescribed by statute.
Discussion
Since the enactment of FACA in 1972, congressional oversight hearings have
revealed that, while the goals of FACA are still relevant, some of its provisions have
occasionally needed clarification. From 1983 through 1989, legislation was
introduced in the Senate to strengthen FACA’s management controls, as well as to
establish new ethical, financial, and conflict of interest disclosure requirements for
committee members.42 These proposed amendments were never enacted, in part due
to the stringent disclosure requirements required of potential committee members.
In 1997, FACA was amended to provide for increased public participation in
activities by committees created by the National Academy of Sciences and the
National Academy of Public Administration in support of executive branch decision43
making processes.
Because federal agencies needed clarification of FACA’s statutory requirements,
GSA began issuing administrative and interpretive guidelines in 1983 pertaining to
the implementation of FACA. These final rules provide guidance to agency
committee management officers (CMOs) for the establishment and management of
advisory committees. On January 14, 2000, GSA issued a proposed rule for revised
management guidelines in the Federal Register.44 The following year, on July 19,
2001, GSA issued its final rule providing additional guidance to CMOs based on
statutory provisions and internal agency procedures.45
In order to curtail the proliferation of advisory committees, President William
Clinton issued E.O. 12838 in 1993, requiring the elimination of one-third of the
advisory committees not created by statute.46 In addition, executive branch
departments and agencies were proscribed from administratively creating new
advisory committees without the approval of the Director of the Office and
Management and Budget (OMB). The following year, as part of the National
Performance Review, Vice President Albert Gore issued a memorandum indicating
each agency should reduce advisory committee costs by 5%. The memorandum also
stated that President Clinton would not support legislation establishing new advisory


42 S. 1641 was introduced on July 19, 1983, and S. 2127 was introduced on Nov. 17, 1983;
S. 2721 was introduced on Aug. 10, 1988, and S. 444 was introduced on Feb.23, 1989.
43 111 Stat. 2689.
44 65 Federal Register 2504.
45 41 C.F.R. § 102-3 (2003, pp. 11-44).
46 3 C.F.R., 1994 Comp., p. 590.

committees or exemptions from FACA.47 On October 5, 1994, OMB issued Circular
No. A-135, entitled “Management of Federal Advisory Committees.” This circular
requires OMB and GSA to monitor agency compliance with E.O. 12838 to reduce
the number of advisory committees.
Selected Source Reading
CRS Report RL30260, Federal Advisory Committees: A Primer, by Stephanie Smith.
U.S. Congress, House Committee on Government Reform and Oversight,
Subcommittee on Government Management, Information, and Technology,th
Oversight of the Federal Advisory Committee Act, hearings, July 14, 1998, 105
Cong., 2nd sess. Washington: GPO, 1999.
U.S. General Accounting Office, Federal Advisory Committee Act: Views of
Committee Members and Agencies on Federal Advisory Committee Issues,
GAO Report GAO/GGD-98-147. Washington: GAO, 1998.
U.S. General Accounting Office, Federal Research: The National Academy of
Sciences and the Federal Advisory Committee Act, GAO Report GAO/RCED-

99-17. Washington: GAO, 1988.


Stephanie Smith


47 U.S. Office of the Vice President, “Memorandum for the Heads of Executive Departments
and Agencies on the Management of Federal Advisory Committees,” June 28, 1994, Annual
Report of the President on Federal Advisory Committees (Washington: GPO, 1995), p. A7.

H. Government in the Sunshine Act
Statutory Intent and History
The Government in the Sunshine Act (90 Stat. 1241; 5 U.S.C. § 552b) was
initially enacted in 1976. It requires collegially headed federal executive agencies
whose members are appointed by the President with the advice and consent of the
Senate to hold certain meetings in public. The act applies to meetings during which
deliberations determine, or result in the joint conduct or disposition of, official
agency business. The act applies to more than 45 federal collegial bodies, consisting
primarily of independent regulatory boards and commissions having from three to
seven members. The statute specifies 10 exceptions to its rule of openness that may
be invoked by the agencies. Any doubt as to whether a meeting should be open or
closed, however, is to be resolved in favor of an open meeting, according to the act’s
legislative history. Decisions to close a meeting are subject to judicial review.
Major Provisions
The major provisions of the Sunshine Act include (1) a presumption of open
meetings; (2) public notice of an agency meeting, indicating the time, location,
subject of the meeting, whether the meeting is open or closed, and the name and
telephone number of the official designated to respond to requests for information
about the meeting; (3) 10 exemptions by which an agency may close a portion or all
of a meeting and withhold information; (4) procedures an agency is to follow when
closing a meeting, which include a majority vote of the members and certification by
the general counsel that the meeting may properly be closed; and (5) judicial review
of an agency’s action to close a meeting.
A meeting may be closed if it involves: (1) national security matters that are
specifically authorized by an executive order to be protected and are properly
classified; (2) internal personnel rules and practices; (3) matters specifically
exempted from disclosure by statute; (4) trade secrets and commercial or financial
information obtained from a person and privileged or confidential; (5) formal censure
or accusation of a crime; (6) clearly unwarranted invasion of personal privacy; (7)
law enforcement investigatory records or information; (8) information contained in,
or related to, reports used by agencies responsible for the regulation or supervision
of financial institutions; (9) information whose premature disclosure would: (a) lead
to financial speculation or significantly endanger a financial institution; or (b)
significantly frustrate a proposed agency action; or (10) issuance of a subpoena or
other related judicial matter.
Discussion
The consensus of observers is that the act has been only partially successful in
opening bureaucratic decision making processes to public scrutiny. Although federal
agencies now routinely follow the Sunshine Act’s requirements, empirical research
suggests that, after the law was passed, agency practices changed in ways that may
have served to circumvent openness. The number of meetings, as well as the number
of open meetings or partly open meetings, declined steadily from 1979 to 1984 as
agencies resorted to wider use of the exemption provisions. In addition, some



agencies used notation voting, which permitted members to vote sequentially on
paper on the basis of circulated written materials, thereby making formal meetings
unnecessary. 48
The implementation of the Sunshine Act has been characterized by difficulties
in finding the proper balance between the value of unfettered public access, on one
hand, and candid agency deliberations, on the other.49 The resulting tension is
evident in the disagreements over two issues: (1) the definition of what constitutes
a “meeting,” for purposes of the act; and (2) whether the act has diminished the
collegial nature of decision making, thereby affecting the quality of agency decisions.
Under the act, a meeting is defined as “the deliberations of at least the number
of individual agency members required to take action on behalf of the agency where
such deliberations determine or result in the joint conduct or disposition of official
agency business.”50 Deciding when a deliberation determines or results in agency
action, however, has proven to be difficult.
Two opposing views have dominated the discussion regarding the definition of
a meeting. Adherents of a broad definition hold that a meeting encompasses every
stage of the decision making process, including the early collective inquiry stage
when members hold informal discussions and explore various positions. Supporters
of a narrower view, in contrast, hold that a meeting encompasses only the more
advanced stage of the decision making process, when members focus on a specific
proposal or proposals.51
The Supreme Court supported the narrower definition in 1984, when it held that
under the act, a meeting did not include preliminary discussions among agency
officials.52 The Court ruled that consultative process sessions need not be public,
because the “statutory language contemplates discussions that ‘effectively
predetermine official actions.’” It held that, in order to fall under the meeting
definition, such discussions must be “‘sufficiently focused on discrete proposals or
issues as to cause or be likely to cause the individual participating members to form
reasonably firm positions regarding matters pending or likely to arise before the
agency.’”


48 See U.S. Congress, Senate Committee on Governmental Affairs, Government in the
Sunshine Act: History and Recent Issues, committee print, 101st Cong., 1st sess.
(Washington: GPO, 1989), pp. 58-98.
49 Administrative Conference of the United States, “Report & Recommendation by the
Special Committee to Review the Government in the Sunshine Act,” Administrative Law
Review, vol. 49 (spring 1997), p. 422.
50 5 U.S.C. § 552b(a)(2).
51 For a further development of these views, see David A. Barrett, “Facilitating Government
Decision Making: Distinguishing Between Meetings and Nonmeetings Under the Federal
Sunshine Act,” Texas Law Review, vol. 66, May 1988, pp. 1195-1228.
52 Federal Communications Commission v. ITT World Communications, 466 U.S. 463
(1984).

In the second area of contention, some research has suggested that open
meeting requirements may have suppressed the spirit of candor in meeting
discussions and thereby reduced collegiality in organizations subject to the act’s
provisions. A study of this issue involving multi-member agency officials revealed
that many are reluctant to discuss substantive issues at open meetings.53 Those
seeking to amend the act believe that collegial decisions should lead to better, more
informed decision making. This goal, they argue, is defeated by the need to open
most meetings to the public, which they believe prevents the type of extensive and
consequential interaction among members that should be the end product of collegial
decision making. To support this view, they cite data consisting of members’
recollections of how decisions were made before the act was implemented. Their
proposed solution is to amend the act to provide for a limited pilot project that would
give agencies greater leeway to close a meeting, provided that within five days of the
meeting, a “detailed summary” would be made available to the public. If such a
project proved successful, Congress could then make permanent changes in the
st at ut e. 54
Several arguments against amending the act have also been advanced. Some
researchers question the view that collegial decision making prior to the
implementation of the act was more deliberative and meaningful than it has been
since then. They assert that the earlier collegial decision making model was only
partially realized. They maintain that decisions from this era “frequently reflected
more the influence of staff or of chairpersons in association with staff than a true
amalgamation of member views informed by staff expertise.”55 Furthermore, the
evidence suggests that “members are inclined to prepare more thoroughly for open
meetings than for closed ones.”56 Consequently, it could be argued that members are
better informed in their decision making than they were prior to the act. Finally,
opponents of amending the Sunshine Act have sometimes suggested that it is
incumbent upon members of the multi-member agencies to shed their reluctance to
deliberate more meaningfully in public meetings.57


53 David M. Welborn, William Lyons, and Larry W. Thomas, “Implementation and Effects
of the Federal Government in the Sunshine Act,” Administrative Conference of the United
States: Recommendations and Reports 1984 (Washington: GPO, 1985), pp. 199-261.
54 Administrative Conference of the United States, “Report & Recommendation by the
Special Committee to Review the Government in the Sunshine Act,” pp. 421-428.
55 David M. Welborn, William Lyons, and Larry W. Thomas, “The Federal Government in
the Sunshine Act and Agency Decision Making,” Administration and Society, vol. 20, Feb.

1989, p. 470.


56 Ibid., p. 472.
57 This position is ascribed to representatives of the press by Randolph May in “Reforming
the Sunshine Act,” Administrative Law Review, vol. 49 (spring 1997), p. 418.

Selected Source Reading
Barrett, David A. “Facilitating Government Decision Making: Distinguishing
Between Meetings and Nonmeetings Under the Federal Sunshine Act.” Texas
Law Review, vol. 66 (May 1988), pp. 1195-1228.
Berg, Richard K. and Stephen H. Klitzman. An Interpretive Guide to the
Government in the Sunshine Act. Washington: GPO, 1978. (New edition
expected 2004.)
May, Randolph. “Reforming the Sunshine Act.” Administrative Law Review, vol.

49 (spring 1997), pp. 415-428.


U.S. Congress. Senate. Committee on Governmental Affairs. Government in the
Sunshine Act: History and Recent Issues. Committee print. 101st Congress, 1st
session. S.Prt. 101-54. Washington: GPO, 1989.
U.S. Congress. Senate. Committee on Government Operations and House Committee
on Government Operations. Government in the Sunshine Act — S. 5 (Public
Law 94-409): Source Book: Legislative History, Texts, and Other Documents.
Joint committee print. 94th Congress, 2nd session. Washington: GPO, 1976.
Henry B. Hogue



I. Paperwork Reduction Act of 1995
Statutory Intent and History
Replacing the ineffective Federal Reports Act of 1942 (56 Stat. 1078), the
Paperwork Reduction Act of 1980 (94 Stat. 2812; 44 U.S.C. § 3501) was enacted
largely to relieve the public of the mounting information collection and reporting
requirements of the federal government. It also promoted coordinated information
management activities on a government-wide basis by the director of the Office of
Management and Budget (OMB), and prescribed information management
responsibilities for the executive agencies. Realizing that the provisions of the
Federal Reports Act were inadequate to control the proliferation of required
paperwork, Congress had established the Commission on Federal Paperwork, a
temporary national study panel, in 1974 (88 Stat. 1789). The 1980 statute
implemented many of the commission’s recommendations and reflected a
congressional desire to define more clearly the oversight responsibilities of OMB
regarding federal information collection and reporting requirements. To assist the
OMB Director, the statute established the Office of Information and Regulatory
Affairs (OIRA) within OMB, and authorized its administrator to develop and
administer uniform information policies in order to ensure the availability and
accuracy of agency data collection.
Although OIRA’s original authorization expired in 1983, the office was funded
on an annual basis from OMB’s general appropriations until passage of the
Paperwork Reduction Reauthorization Act in 1986 (100 Stat. 3341). This legislation
approved funding for OIRA through FY1989, and strengthened congressional
oversight of OIRA by requiring Senate confirmation of its administrator. Also, the
management focus of the act was sharpened with the 1986 amendments, which
refined the concept of “information resources management” (IRM), which is “the
planning, budgeting, organizing, directing, training, promoting, controlling, and
management activities associated with the burden, collection, creation, use, and
dissemination of information by agencies, and includes the management of
information and related resources such as automatic data processing equipment.”
This key term and its subset concepts would receive further definition and
explanation in 1995, making IRM a tool for managing the contribution of
information activities to program performance, and for managing related resources,
such as personnel, equipment, funds, and technology.
Largely due to continued failure to reach an agreement concerning OIRA’s
regulatory review role, legislative attempts to reauthorize OIRA during the 101st andndrd
the 102 Congresses were unsuccessful. During the 103 Congress, a
reauthorization measure was passed by the Senate by unanimous vote, but the House
did not have time to complete action on such legislation. In 1995, as part of the
House Republican Contract with America, a revised Paperwork Reduction Act
(PRA) was enacted to reauthorize OIRA for six years (109 Stat. 163; 44 U.S.C. §

3501).



Major Provisions
The PRA of 1995 reaffirms the principles of the original 1980 act by reducing
the information collection burden on the public, and providing more efficient
management of information resources by federal agencies. The statute set 10%
paperwork reduction goals for the first two years of OIRA’s authorization, and a 5%
reduction for the remaining four years. OIRA is required to develop and implement
government-wide guidelines for the collection, dissemination, and processing of
federal information. The objective of minimizing the paperwork burden for
individuals and small businesses is extended explicitly to educational and nonprofit
institutions, federal contractors, and tribal governments. The authority and functions
of OIRA are revised, specifying information dissemination and related agency
oversight responsibilities. Another provision strengthens the public’s rights if an
agency should require information requests that are not in compliance with the
provisions of the PRA.
The federal agencies are required to evaluate proposed collections of
information, manage information resources to reduce information collection burdens
on the public, and ensure that the public has timely and equitable access to
information products and services. Except where specifically authorized by statute,
the agencies are prohibited from establishing exclusive, restricted, or other
distribution arrangements that interfere with timely and equitable public availability
of public information; restricting or regulating the use, resale, or redissemination of
public information by the public; charging fees or royalties for resale or
redissemination of public information; or establishing user fees that exceed the cost
of dissemination. Actions that the agencies must take with respect to information
technology are specified, and the Federal Information Locator System is replaced
with an agency-based electronic Government Information Locator Service to identify
the major information systems, holdings, and dissemination products of each agency.
Discussion
Since 1980, OIRA’s implementation of the PRA has been criticized by
Congress, the General Accounting Office (GAO), and the business community. An
early controversy surrounded OMB’s decision to assign OIRA primary responsibility
for regulatory reforms and other regulatory functions not associated with OIRA’s
paperwork responsibilities. In 1983, GAO concluded that only limited progress had
been made by OMB in information resources management, and recommended that
Congress amend the statute to prohibit OIRA from performing nonrelated duties such
as regulatory review.58
The PRA gives OMB significant authority to conduct reviews of federal agency
paperwork requirements in proposed rules. Critics of OMB’s paperwork clearance
powers maintain that OMB has too much discretion in determining agency record-
keeping requirements, and has used its authority in a selective and political manner
to control the government’s information collection activities. Many also believe that


58 See U.S. General Accounting Office, Implementing the Paperwork Reduction Act: Some
Progress, But Many Problems Remain, GAO/GGD-83-35, Apr. 20, 1983.

its review of rules and reports provides OMB with excessive control of the entire
regulatory process.
Even though the PRA stresses the importance of a government-wide information
policy, congressional hearings and GAO studies have consistently faulted OMB for
neglecting this important issue, while concentrating on paperwork control and
regulatory review functions. As federal agencies have made greater use of electronic
information technology, criticism has arisen that OIRA focuses on the collection and
dissemination of paper documents, while failing to develop policies concerning the
use of electronic formats.
In response to the statutory requirement of the PRA that OMB develop and
implement uniform and consistent information resources management policy, OMB
issued Circular No. A-130, Management of Federal Information Resources, in 1985.
The circular set forth government-wide guidelines for the collection, dissemination,
and processing of federal information systems and technology. Subsequently, OMB
published a series of notices in the Federal Register inviting public comment on
proposed revisions of the circular. In July 1994, OMB issued a final revision of A-
130 to address agencies’ internal management practices for information systems and
information technology.59
Two major segments of the National Defense Authorization Act for FY1996
(110 Stat. 186) contained provisions either amending or glossing the PRA.
Subsequently denominated the Clinger-Cohen Act (110 Stat. 3009-393), these
segments transfer the authority for information technology acquisitions from the
General Services Administration to OMB. The Director of OMB is assigned new
duties for coordinating the purchase of information systems with OIRA and the
Office of Federal Procurement Policy. As part of the budget process, OMB is
required to analyze the costs and risks associated with capital investments for the
purchase of federal information acquisitions. The position of Chief Information
Officer (CIO) is established within each agency to coordinate and monitor the
implementation of information technology programs.
More recent amendments to the PRA were made by the Government Paperwork
Elimination Act of 1998 (112 Stat. 2681-749). This statute makes the Director of
OMB responsible for providing government-wide direction and oversight regarding
“the acquisition and use of information technology, including alternative information
technologies that provide for electronic submission, maintenance, or disclosure of
information as a substitute for paper and for the use and acceptance of electronic
signatures.” In fulfilling this responsibility, the director, in consultation with the
National Telecommunications and Information Administration (NTIA) of the
Department of Commerce, is tasked with developing, in accordance with prescribed
requirements, procedures for the use and acceptance of electronic signatures by the
executive departments and agencies. A five-year deadline is prescribed for the
agencies to implement these procedures.


59 U.S. Office of Management and Budget, “Management of Federal Information Resources,
OMB Circular No. A-130, July 25, 1994,” Federal Register, vol. 59, July 25, 1994, pp.

37906-37928.



The Director of OMB is also tasked by the statute to “develop procedures to
permit private employers to store and file electronically with Executive agencies
forms containing information pertaining to the employees of such employers.” In
addition, the director, in cooperation with NTIA, is to conduct an ongoing study of
the use of electronic signatures under the new law, with attention to paperwork
reduction and electronic commerce, individual privacy, and the security and
authenticity of transactions. The results of this study are to be reported periodically
to Congress.
Finally, electronic records submitted or maintained in accordance with the
statute’s procedures, “or electronic signatures or other forms of electronic
authentication used in accordance with such procedures, shall not be denied legal
effect, validity, or enforceability because such records are in electronic form.” The
act further specifies: “Except as provided by law, information collected in the
provision of electronic signature services for communications with an executive
agency ... shall only be used or disclosed by persons who obtain, collect, or maintain
such information as a business or government practice, for the purpose of facilitating
such communications, or with the prior affirmative consent of the person about
whom the information pertains.”
The PRA authorization of appropriations for OIRA expired at the end of
FY2001. When Congress returns to the PRA to reauthorize OIRA appropriations,
it will have an opportunity to consider several prevailing issues which may be
addressed through amendment or extension of the statute. For instance, critics
continue to assert that the act’s current provisions do not go far enough to minimize
costly reporting burdens for small businesses, educational institutions, and state and
local governments. Other issues of concern to some are agency website management
and accountability, as well as various aspects of government e-mail management.
Selected Source Reading
Cole, Roland J. and Paul Sommers. “Government Paperwork: Not an Easy Villain
After All.” Journal of Policy Analysis and Management, vol. 1 (summer 1982),
pp. 554-561.
Plocher, David. “The Paperwork Reduction Act of 1995: A Second Chance for
Information Resources Management.” Government Information Quarterly, vol.

13, 1996, pp. 35-50.


U.S. General Accounting Office. Paperwork Reduction Act: Burden Increases and
Violations Persist. GAO-02-598T. April 11, 2002.
——. Paperwork Reduction Act: Record Increase in Agencies’ Burden Estimates.
GAO-03-691T. April 11, 2003.
CRS Report RL30590, Paperwork Reduction Act Reauthorization and Government
Information Management Issues, by Harold C. Relyea.
Harold C. Relyea



J. Regulatory Flexibility Act of 1980
Statutory Intent and History
The Regulatory Flexibility Act (RFA) of 1980 (94 Stat. 1164; 5 U.S.C. §§ 601-
612) was enacted in response to concerns raised during a White House conference
on small business about the differential impact of federal regulations on small
business. The RFA requires federal agencies to assess the impact of their forthcoming
regulations on small entities, which the act defines as including small businesses,
small governmental jurisdictions, and certain small not-for-profit organizations.
Under the RFA, federal agencies must prepare a regulatory flexibility analysis at the
time that either proposed or certain final rules are issued. The act requires the
analysis to describe (1) the reasons why the regulatory action is being considered; (2)
the small entities to which the proposed rule will apply and, where feasible, an
estimate of their number; (3) the projected reporting, recordkeeping, and other
compliance requirements of the proposed rule; and (4) any significant alternatives to
the rule that would accomplish the statutory objectives while minimizing the impact
on small entities.
A regulatory flexibility analysis is not, however, required if the head of the
agency issuing the rule certifies that it will not have a “significant economic impact
on a substantial number of small entities.” The RFA does not define the terms
significant economic impact or substantial number of small entities, thereby giving
federal agencies substantial discretion regarding when the act’s analytical
requirements are triggered. Also, the RFA’s analytical requirements do not apply to
any final rule for which the agency is not required to publish a proposed rule.
Although the original RFA did not permit judicial review of agencies’ actions under
the act, amendments to the act in 1996, as part of the Small Business Regulatory
Enforcement Fairness Act (SBREFA; 110 Stat. 857), permitted judicial review
regarding, among other things, agencies’ regulatory flexibility analyses for final rules
and any certifications that their rules will not have a significant impact on small
entities.
In addition, the RFA requires agencies to publish a “regulatory flexibility
agenda” in the Federal Register each October and April listing regulations that the
agency expects to propose or promulgate and which are likely to have a significant
economic impact on a substantial number of small entities. The act also requires
agencies to review final rules with a significant impact within 10 years of their
promulgation to determine whether they should be amended or rescinded. Another
section of the statute requires the chief counsel of the Small Business
Administration’s (SBA’s) Office of Advocacy to monitor and report at least annually
on agencies’ compliance with the act.
The RFA also requires agencies to ensure that small entities have an opportunity
to participate in the rulemaking process, and the 1996 amendments to the act in
SBREFA put in place special requirements for proposed rules issued by the
Environmental Protection Agency (EPA) and the Occupational Safety and Health
Administration (OSHA). EPA and OSHA are required to convene “advocacy review
panels” before publishing a regulatory flexibility analysis for a proposed rule. The
review panel must consist of full-time federal employees from the rulemaking



agency, the Office of Management and Budget, and SBA’s chief counsel for
advocacy, and the panel must collect advice and recommendations from
representatives of affected small entities about the potential impact of the draft rule.
Major Provisions
The major provisions of the RFA, as amended: (1) require federal agencies to
publish in the Federal Register each October and April a list of forthcoming rules
that are likely to have a significant economic impact on a substantial number of small
entities; (2) require federal agencies to prepare a regulatory flexibility analysis for any
covered proposed or final rule that the agency concludes is likely to have a significant
economic impact on a substantial number of small entities; (3) require the regulatory
flexibility analyses to have certain elements; (4) require EPA and OSHA to convene
an advocacy review panel before publishing any proposed rule likely to have a
significant economic impact on a substantial number of small entities; (5) require the
chief counsel in the Advocacy Office in SBA to monitor agencies’ compliance with
the act and prepare an annual report; (6) require agencies to review their final rules
with a significant impact within 10 years of their promulgation to determine whether
they should be amended or rescinded; and (7) permit judicial review of agencies’
regulatory flexibility analyses and determinations that their rules do not have a
significant economic impact on a substantial number of small entities.
Discussion
The SBA chief counsel for advocacy’s reports on the RFA generally indicate
that compliance with the act has been uneven. GAO has also repeatedly examined
the implementation of the act, and a recurring theme in GAO’s reports is the varying
interpretation of the RFA’s requirements by federal agencies. Agencies differ
dramatically regarding what constitutes a “significant” economic impact and a
“substantial” number of small entities. They also differ on what rules they are
required to review within 10 years of their issuance — those that had a significant
impact at the time they were issued or those that currently have that impact. In 2001,
GAO testified that the promise of the RFA may never be realized until Congress or
some other entity defines what a significant economic impact and a substantial
number of small entities mean in a rulemaking setting.
The 1996 amendments to the act providing for judicial review and advocacy
review panels for EPA and OSHA rules have proven effective. The SBA chief
counsel for Advocacy’s annual report on the RFA for FY2003 said that judicial
review “has encouraged agencies to increase their compliance with the requirements
of the RFA.” Advocacy review panels have permitted small entities to participate
early in the rulemaking process — before proposed rules are written and agencies
positions become more fixed.
Selected Source Reading
Freedman, Doris S., Barney Singer, and Frank S. Swain. The Regulatory Flexibility
Act: Orienting Federal Regulation to Small Business. Dickinson Law Review,
vol. 93 (1989), pp. 439-478.



Lubbers, Jeffery S. A Guide to Federal Agency Rulemaking, 3rd ed. Chicago:
American Bar Association Publishing, 1998.
U.S. Administrative Conference of the United States. A Critical Guide to the
Regulatory Flexibility Act, Recommendations and Reports. [Paul R. Verkuil.]
Washington: GPO, 1981, pp. 203-302.
U.S. General Accounting Office. Regulatory Flexibility Act: Agencies’
Interpretations of Review Requirements Vary. GAO/GGD-99-55. April 1999.
——. Regulatory Flexibility Act: Key Terms Still Need to Be Clarified. GAO-01-

669T. April 24, 2001.


U.S. Small Business Administration, A Guide to the Regulatory Flexibility Act.
Washington: SBA, 1996.
Curtis W. Copeland



K. Negotiated Rulemaking Act
Statutory Intent and History
The Negotiated Rulemaking Act of 1990, as amended and permanently
authorized in 1996 (110 Stat. 3870; 5 U.S.C. §§ 561-570a), seeks to overcome what
some observers describe as an adversarial relationship between agencies and affected
interest groups that often accompanies the federal rulemaking process. The concept
of negotiated rulemaking (sometimes referred to as “regulatory negotiation” or “reg-
neg”) emerged in the 1980s as a supplement to the traditional procedure for
developing regulations. The act largely codified the practices of those agencies that
had previously used the negotiated rulemaking procedure and incorporated relevant
recommendations of the now defunct Administrative Conference of the United States
(ACUS). The act encourages (but does not require) agencies to consider convening
a negotiated rulemaking committee before developing and issuing a proposed
regulation under the Administrative Procedure Act (APA), described elsewhere in
this compendium. The committee, composed of representatives of the agency and
the various interest groups that would be affected by the proposed regulation,
addresses areas of concern in the hope that it can reach agreement on a proposed
regulation. The agency can (but, again, is not required to) then issue the agreed-upon
proposal as a proposed rule, and, if appropriate after public comment, as a final rule
under the APA. Since committee agreement is normally by unanimous consent, the
expectation is that any rule drafted through negotiated rulemaking would be easier
to implement and less likely to be the subject of subsequent litigation. In establishing
negotiating committees, agencies must comply with the Federal Advisory Committee
Act (described elsewhere in this compendium). Agency actions related to
establishing, ending, or supporting the committees are not judicially reviewable.
Following passage of the Negotiated Rulemaking Act, ACUS served as a
clearinghouse on regulatory negotiation matters and assisted agencies in establishing
procedures for the conduct of regulatory negotiations and the training of personnel.
When ACUS was abolished in 1995, some of its resources and responsibilities in the
area were assumed by the Federal Mediation and Conciliation Service (FMCS). The
Clinton Administration’s National Performance Review recommended increased use
of negotiated rulemaking, and Executive Order 12866 (September 1993) directed
agencies to consider the use of consensual mechanisms, such as negotiated
rulemaking, when developing regulations. Congress has sometimes required
agencies to use negotiated rulemaking in developing rules in certain areas.
Major Provisions
The major provisions of the act require that (1) a negotiated rulemaking
committee consist of at least one member of the agency and no more than 25
members, unless the head of the agency determines that more are needed; (2) the
agency select an impartial “facilitator” to chair meetings, subject to the approval of
the committee by consensus; (3) an agreement on any negotiated rulemaking must
be unanimous, unless the negotiated rulemaking committee agrees to other
conditions; (4) any proposal agreed to by the negotiated rulemaking committee is not
binding on the agency or other parties; and (5) the head of an agency, when deciding
whether to establish a negotiated rulemaking committee, assure that (a) there are a



limited number of identifiable interests that will be significantly affected by the rule;
(b) there is a reasonable likelihood that a committee can be convened with a balanced
representation of interested parties who are willing to negotiate in good faith; and (c)
there is a reasonable likelihood that a committee will reach a consensus on the
proposed rule within a fixed period of time. The act also allows agencies to pay
reasonable travel and per diem expenses, and reasonable compensation, to committee
members under certain conditions.
Discussion
Negotiated rulemaking is a possible supplement to, but not a replacement of,
the normal rulemaking procedures that agencies are required to follow under the
APA. For any proposal agreed to by a negotiated rulemaking committee to take
effect, the agency must still develop and issue it as a regulation under the provisions
of the APA. The use of negotiated rulemaking by federal agencies is strictly
voluntary. Also, negotiated rulemaking does not impair any rights otherwise retained
by agencies or private parties. Even if agreement is reached on a proposal by a
negotiated rulemaking committee, neither the agency nor the other members of the
committee are bound by the agreement. An agency need not issue the proposed
regulation drafted by the committee. If an agreed-upon proposal is issued by the
agency as a regulation under the APA, it may still be challenged in court by parties
who previously agreed to it in committee.
Agencies are encouraged to convene and use a negotiated rulemaking committee
only when certain conditions are expected to produce a successful or favorable result
(e.g., easy identification of those likely to be affected by the rule and, where
differences exist, the parties’ willingness to consider each others’ points of view).
Since agreement by the parties generally must be by unanimous consent, it is
essential that the parties involved be willing to compromise in order to reach
agreement. The fact that participants may change their minds and later challenge a
regulation they initially supported can increase their willingness to participate in the
process.
These factors can, however, also serve to limit the instances when agencies see
negotiated rulemaking as a viable option. In addition, agency experience with the
technique indicates that negotiated rulemaking can be more costly than conventional
rulemaking methods, particularly at the front end of the process. Finally, research
indicates that negotiated rulemaking does not appear to reduce the overall time taken
to issue a rule or to make rules more likely to avoid litigation. These findings are
particularly notable given that agencies are instructed to use negotiated rulemaking
only when they expect success. Other research, however, indicates that negotiated
rulemaking can increase satisfaction with the substance of the final rule and with the
overall process.
Selected Source Reading
Coglianese, Cary. “Assessing Consensus: The Promise and Performance of
Negotiated Rulemaking.” Duke University Law Journal, vol. 46 (1997), pp.

1255-1349.



Langbein, Laura I. and Cornelius M. Kerwin. “Regulatory Negotiation versus
Conventional Rule Making: Claims, Counterclaims, and Empirical Evidence.”
Journal of Public Administration Research and Theory, vol. 10 (2000), pp. 599-

632.


Lubbers, Jeffery S. A Guide to Federal Agency Rulemaking, 3rd ed. Chicago:
American Bar Association Publishing, 1998, pp. 127-131.
U.S. Administrative Conference of the United States, Negotiated Rulemaking
Sourcebook. Washington: GPO, 1995.
Curtis W. Copeland



L. National Environmental Policy Act
Statutory Intent and History
The National Environmental Policy Act of 1969 (NEPA) was enacted on
January 1, 1970 (83 Stat. 852; P.L. 91-190; 42 U.S.C. § 4321). The act is considered
to be landmark legislation which “set the Nation on a new course of environmental
management” (H.Rept. 92-316). The Preamble to the law states:
To declare a national policy which will encourage productive and enjoyable
harmony between man and his environment; to promote efforts which will
prevent or eliminate damage to the environment and biosphere and stimulate the
health and welfare of man; to enrich the understanding of the ecological systems
and natural resources important to the Nation; and to establish a Council on
Environmental Quality.
Its “action-forcing” directives are meant to ensure that environmental values are
given appropriate consideration in all programs of the federal government. Its policy
declaration and its procedures for environmental impact assessment have been
adopted in many similar state laws, and also by other nations.
The preparation of environmental impact statements (EISs) has heightened
awareness of, and attention to, the environmental effects of actions by federal
agencies while also increasing public participation. The requirements of the law have
played a limited role in what decisions are ultimately made because the law is
procedural, and does not establish environmental standards. It has spawned an
enormous amount of information-gathering and analysis activities, which have been
criticized by supporters as (substantively or scientifically) inadequate and by critics
as too burdensome.
The National Environmental Policy Act should be distinguished from the
substantive body of environmental protection laws, which attempt to correct
pollution and resource problems ranging from air and water quality and noise and
toxic substances control to the various statutes related to resource development, such
as surface mining regulation, coastal zone and offshore management, or various
public land programs. In contrast, NEPA is a relatively short policy declaration and
impact assessment law designed to avoid or prevent such problems by informing the
public about environmental consequences before a project is begun, and has been
more associated with “administrative reforms” within federal agencies than with any
particular aspect of (physical) environmental protection. NEPA compliance is
required in connection with many other laws, if the action is one that triggers the EIS
preparation criterion of “significantly affecting the quality of the human
environment.”
Government-wide rules of the Council on Environmental Quality (CEQ) require
impact statement preparation to be integrated as much as possible with studies,
surveys, and analyses under other federal environmental review laws — such as the
Endangered Species Act, the Fish and Wildlife Coordination Act, the National
Historic Preservation Act, and, for example, water quality permits, as well as
executive orders on floodplain management and wetlands protection. However, once



an agency complies with NEPA’s information-based procedures, the act’s effect on
ultimate decisions is limited by the agency’s other mandates.
While there now seems to be agreement about the utility of assessing the
environmental consequences of major federal actions, the long-term compliance
trends depend on whether individual agencies will continue to adapt their practices
to the streamlined, but rigorous, process in CEQ regulations for more fully
integrating the impact analyses with agency plans and programs. Otherwise, lessened
compliance could evolve and lead to new legal challenges.
Enforcing requirements for preparation of environmental impact statements is
partially achieved through public participation and judicial reviews. The role of the
courts in interpreting and enforcing compliance has been perhaps the most
controversial aspect of NEPA’s previous implementation. Some NEPA compliance
issues have been raised anew in court challenges — especially during a period when
program changes affect federal resource management of public lands. Typical of the
effects on NEPA compliance are the EIS “categorical exclusions,” issued by federal
agencies which permit additional activities on public lands that would now be
excluded from the NEPA process, unless considered as part of overall assessments
in broad, “areawide EISs.” An evaluation of the cumulative results of these excluded
actions is often not feasible. (See reference for 2003 NEPA Task Force, as well as
specific legislative provisions for streamlining compliance for grazing, P.L. 108-7
and 108-11; forest health, P.L. 108-148; and aviation projects, P.L. 168-176.)
Major Provisions
Title I.
Section 101: Policies and Goals. (a) Congress declared: “it is the
continuing policy of the federal government ... to create and maintain conditions
under which man and nature can exist in productive harmony, and fulfill the social,
economic, and other requirements of present and future generations of Americans.
(b) In order to carry out the policy ... it is the continuing responsibility of the federal
government ... to improve and coordinate federal plans, functions, programs, and
resources” to achieve six broadly stated goals that address future environmental
quality objectives, with the paramount concerns including “responsibilities ... as
trustee of the environment for succeeding generations,” attaining “beneficial uses of
the environment without degradation, or risk to health or safety”; preserving
“diversity” of natural, historic, and cultural heritages; achieving a “balance between
population and resource use”; and enhancing the “quality of renewable resources and
... maximum attainable recycling.”
Section 102: Administration. Congress directed that, to the fullest extent
possible, the laws of the United States shall be administered in accordance with these
policies, and further directed all federal agencies to incorporate the policies and goals
through information and methods for appropriate consideration of environmental
values by using “a systematic, interdisciplinary approach,” and by considering
“presently unquantified environmental amenities and values.”



Section 102(2)(C): Environmental Impact Statements. As an “action-
forcing” mechanism to carry out those policies and procedures, agency officials are
required to include a “detailed statement” of environmental impacts as part of “every
recommendation or report on proposals for legislation and other major federal actions
significantly affecting the quality of the human environment.” This statement of
environmental impact is to assess any “adverse environmental effects,” and
alternatives to the proposed action, local short-term uses of the environment in
relation to “long-term productivity,” and “any irreversible and irretrievable
commitments of resources” involved.
Prior to taking action, the responsible federal official is to consult any federal
agency with jurisdiction or special expertise on any environmental impacts and to
make the “statement and the comments and views of the appropriate Federal, State,
and local agencies...available to the President, the Council on Environmental Quality,
and to the public.”
Other provisions of Section 102 require federal agencies to (1) separately
develop alternative courses of actions for unresolved resource conflicts; (2) “support
... international cooperation in ... preventing ... a decline in the quality of mankind’s
world environment”; (3) provide advice and information to other units of
governments, institutions, and individuals; (4) develop ecological information on
resource-oriented projects; and (5) assist the CEQ.
Section 103: Review. Section 103 requires agencies to “review their present
statutory authority ... for ... any deficiencies ... which prohibit full compliance,” while
Sections 104 and 105 affirm existing environmental authorities, and supplement them
with NEPA.
Title II. Title II created in the Executive Office of the President a three-member
Council on Environmental Quality to oversee the administration of national
environmental policy and to assist in the President’s annual Environmental Quality
Report to Congress. This report is to examine (1) the status and condition of the
natural environment; (2) trends in the quality, management, and utilization of the
environment, and their effects; (3) the adequacy of natural resources; (4) a review of
environmental programs and activities; and (5) a program for remedying deficiencies,
along with legislative recommendations.
Another major duty of the council is to advise and recommend policies to the
President. (The council’s authority to guide the NEPA process — including its new
regulations — has been supplemented by Executive Orders 11514, 11991, and

12114.)


Highlights of Judicial Interpretation of NEPA. Major court decisions
involving the National Environmental Policy Act have:
!held it to be a “full disclosure” law — pertaining to federal agencies
administrative records and information concerning impacts — for
actions subject to the act;



!required “strict compliance” with the procedures — entailing a
unique balancing analysis of the environmental costs and benefits of
a proposed action;
!ruled that the consideration of alternatives to the proposed action
must be of a broad nature and not necessarily confined to an agency
area of statutory authority;
!further ruled that the alternatives and environmental consequences
must be given full consideration in decision making (and subject to
Administrative Procedure Act compliance);
!affirmed the long-standing practice of preparing regional or
programmatic impact statements for related federal actions (i.e.,
“comprehensive impact statements”);
!supplemented the public participation afforded through EIS
comment procedures by liberally construing standing requirements
applicable to persons seeking judicial review of agency NEPA
compliance; and
!upheld the provisions for obtaining access to relevant information
through the Freedom of Information Act.
The Council on Environmental Quality’s authority to issue its implementing
regulations — binding upon the federal agencies — has been broadly endorsed by the
Supreme Court, whose reviews of lower court opinions have held procedural
compliance with NEPA to be sufficient.
Discussion
A continuing issue for future NEPA implementation is its effect on the policy
level of decision making, given its early application — and some say its
overemphasis on procedural matters — at the project level. This “level of
assessment” issue, and its potential for “trivialization” of the act’s basic policy
purposes, seems to be of less concern as greater experience is gained in applying the
law, since site-specific, project level assessments generally serve real purposes in the
government’s decision making processes — i.e., public accountability for agency
actions; a framework for citizen participation in resolving controversies; and a more
systematic approach for generating environmental information. Furthermore,
numerous, but “properly scoped,” impact statements that are prepared efficiently can
conceivably minimize “on the ground” impacts at the present time, given the
limitations in the methodologies for assessing the broader scope and longer-term
environmental effects.
Another recurring question is whether NEPA’s clear requirement for
environmental assessments of agencies’ legislative proposals is being adequately
implemented or enforced — under the regulations’ new flexible criteria — to address
environmental concerns at the earliest stages of program initiatives originating in the
executive branch. While the impact assessment and interagency review process has



increasingly been used as an integral framework for structuring some decision
making activities — i.e., relating the NEPA analysis to project feasibility or federal
or state coordination activities — the longer-term question is whether these
advantages outweigh the procedural uncertainties that would be associated with
analyzing environmental impacts of more fundamental policy choices. For example,
in the 1990s, the President’s authority to negotiate new international trade
agreements (without the most formal level of NEPA compliance) was upheld.
The most basic policy issue regarding the viability of the overall NEPA process
is in maintaining a sufficiently neutral and flexible environmental information,
assessment, and review procedure to accommodate actions and decisions of the
utmost variety, complexity, and controversy to which the law applies — without the
mechanics of the procedures themselves becoming a part of the controversy. In part,
this is a matter of efficiency — of how usefully the process serves public decision
making by holding agencies accountable without undue regulatory-type burdens —
and partly a matter of equity, so that all reasonable alternatives, points of view, and
parties to a decision can (over time) benefit from informed debate about
environmental effects.
Selected Source Reading
Caldwell, Lynton K. The National Environmental Policy Act: An Agenda for the
Future. Bloomington, IN: Indiana University Press, 1998.
“Charting the Boundaries of NEPA’s Substantive Mandate: Stryker’s Bay
Neighborhood Council, Inc v. Karlen,” Environmental Law Reporter 10
(February 1980), pp. 10039-10044.
Raymond, James F. “A Vermont Yankee in King Burger’s Court: Constraints on
Judicial Review under NEPA.” Boston College Environmental Affairs Law
Review, vol. 7 (1979), pp. 629-664.
Taylor, Serge. Making Bureaucracies Think. Stanford, CA: Stanford University
Press, 1984.
U.S. Council on Environmental Quality. Environmental Quality — [the 27th] Annual
Report. Washington: GPO, 2000. (See Part I on NEPA.)
U.S. National Environmental Policy Act. “Implementation of Procedural Provisions;
Final Regulations.” Federal Register, vol. 43, no. 230 (November 29, 1978),
pp. 55978-56007. (Codified in the Code of Federal Regulations at 40 C.F.R.
Parts 1500-1508.)
U.S. Council on Environmental Quality. The National Environmental Policy Act:
A Study of Its Effectiveness. Washington: GPO, 1997.
The NEPA Task Force Report to the Council on Environmental Quality:
Modernizing NEPA Implementation. September 2003. (Online edition available
at [http://ceq.eh.doe.gov/ntf/report/index.html], visited January 27, 2003.)



CRS Report RL32024. Background on NEPA Implementation for Highway Project:
Streamlining the Process, by Linda G. Luther.
U.S. Congress. House. Committee on Resources. Problems and Issues with the
National Environmental Policy Act of 1969. Hearings. 105th Congress, 2nd
session. Washington: GPO, 1998.
U.S. Congress. Senate. Committee on Energy and Natural Resources. Application
of the National Environmental Policy Act. S.Hrg. 104-81. 104th Congress, 1st
session. Washington: GPO, 1995.
Harry Steven Hughes



M. E-Government Act of 2002
Statutory Intent and History
The E-Government Act of 2002 (116 Stat. 2899; P.L. 107-347) was enacted to
enhance access to government information and the delivery of information and
services to citizens, employees, and other agencies and entities. To meet this goal,
the statute authorizes $345 million over four years for e-government initiatives. It
also assigns considerable influence to the Office of Management and Budget (OMB)
to ensure that information technology (IT) investments throughout the federal
government embrace a citizen-centered, cross-agency, and performance-based
strategy.
As defined in the statute, e-government refers to “the use by Government of
web-based Internet applications and other information technologies, combined with
processes that implement these technologies, to (A) enhance the access to and
delivery of Government information and services to the public, other agencies, and
other Government entities; or (B) bring about improvements in Government
operations that may include effectiveness, efficiency, service quality, or
transformation” (116 Stat. 2902). Both the term and the concept of e-government are
relatively new in government parlance. The phrase appeared, without explanation,
in the initial September 7, 1993 report of the National Performance Review (NPR).60
A joint report of the NPR and the Government Information Technology Services
Board, issued on February 3, 1997, gave the term more prominence and substance.61
Almost three years later, in a December 17, 1999 memorandum to the heads of
executive departments and agencies, President William Clinton directed these62
officials to take certain actions in furtherance of “electronic government.”
President George W. Bush indicated his support for e-government initiatives
early in his Administration when he proposed the creation of an e-government fund.
In advance of his proposed budget for FY2002, the President released, on February
28, 2001, A Blueprint for New Beginnings: A Responsible Budget for America’s
Priorities. Introduced as a 10-year budget plan, the Blueprint, among other
innovations, proposed the establishment of an electronic government account, seeded
with “$10 million in 2002 as the first installment of a fund that will grow to a total
of $100 million over three years to support interagency electronic Government (e-
gov) initiatives.” Managed by OMB, the fund was foreseen as supporting “projects
that operate across agency boundaries,” facilitating “the development of a Public Key
Infrastructure to implement digital signatures that are accepted across agencies for


60 Office of the Vice President, From Red Tape to Results: Creating a GovernmentThat
Works Better & Costs Less, Report of the National Performance Review (Washington: GPO,

1993), p. 112.


61 Office of the Vice President, Access America: Reengineering Through Information
Technology, Report of the National Performance Review and the Government Information
Technology Services Board (Washington: GPO, 1997).
62 U.S. National Archives and Records Administration, Office of the Federal Register,
Public Papers of the Presidents of the United States: William J. Clinton, 1999 (Washington:
GPO, 2001), p. 2317.

secure online communications,” and furthering “the Administration’s ability to
implement the Government Paperwork Elimination Act of 1998, which calls upon
agencies to provide the public with optional use and acceptance of electronic
information, services and signatures, when practicable, by October 2003.”63 About
one month later, on March 22, OMB announced that the Bush Administration
recommended doubling the amount to be allocated to the e-government fund,
bringing it to $20 million. House appropriators, however, were particularly reluctant
to provide more than a quarter of the amount sought by the President. While
expressing general support for the purposes of the fund, they also recommended that
the Administration work with the House Committee on Government Reform and the
Senate Committee on Governmental Affairs to clarify the status of its authorization.
The E-Government Act establishes an E-Government Fund in the Treasury of the
United States with specific levels of appropriations authorized through FY2006 and
“such sums as are necessary for fiscal year 2007” (116 Stat. 2908).
Pursuant to an OMB Memorandum of July 18, 2001, an E-Government Task
Force was established to create a strategy for achieving the e-government goals of the
Bush Administration. It subsequently identified 23 interagency initiatives designed
to better integrate agency operations and IT investments. These initiatives,
sometimes referred to as the Quicksilver projects, were grouped into five categories:
government to citizen, government to government, government to business, internal
efficiency and effectiveness, and addressing cross-cutting barriers to e-government
success. Examples of these initiatives included an E-Authentication project, led by
the General Services Administration to increase the use of digital signatures; the
eligibility assistance online project (also referred to as GovBenefits.gov), led by the
Department of Labor to create a common access point for information regarding
government benefits available to citizens; and the Small Business Administration’s
One-Stop Business Compliance project (later renamed Business Gateway), designed
to help businesses navigate legal and regulatory requirements. An additional
initiative, a government-wide payroll process project, was subsequently added by the
President’s Management Council. In 2002, the E-Clearance initiative, originally
included as part of the Enterprise Human Resources Integration project, was
established as a separate project, for a total of 25 initiatives. These projects became
part of the President’s Management Agenda — FY2002, submitted to Congress in
August 2001 and featuring five interrelated government-wide initiatives: Strategic
Management of Human Capital, Competitive Sourcing, Improved Financial
Performance, Expanded Electronic Government, and Budget and Performance
Integration.64
After the Clinger-Cohen Act of 1996, the E-Government Act takes the next step
to improve IT investment and management, requiring OMB to provide a report to
Congress annually on the status of e-government. Rather than simply identifying and
reporting IT investment at each agency, the statute appears to have engendered a


63 U.S. Executive Office of the President, Office of Management and Budget, A Blueprint
for New Beginnings: A Responsible Budget for America’s Priorities (Washington: GPO,

2001), pp. 179-180.


64 U.S. Executive Office of the President, Office of Management and Budget, The
President’s Management Agenda — FY2002 (Washington: GPO, 2001).

cultural change in IT procurement, from consolidating and integrating IT investments
to encouraging performance-based, citizen-centered, cross-agency planning. The
statute designates OMB as the lead organization for all federal executive branch IT
purchasing and planning, and all federal executive branch agencies must comply with
OMB guidance to ensure implementation of e-government.
Major Provisions
The E-Government Act is organized in five titles containing sections which
amend various titles of the United States Code. Title I of the statute, denominated
Office of Management and Budget Electronic Government Services, amends Title
44, United States Code, with a new Chapter 36 on Management and Promotion of
Electronic Government Services. In addition to defining key terms, Title I
establishes an Office of Electronic Government within OMB, headed by an
administrator, who is appointed by the President without Senate confirmation. The
administrator assists the Director of OMB with all functions assigned in Chapter 36,
as well as those assigned to the director by Title II of the statute, and “other electronic
government initiatives.” The administrator is also responsible for assisting the OMB
Director, deputy director for management, and administrator of the Office of
Information and Regulatory Affairs “in setting strategic direction for implementing
electronic Government” relevant to certain specified statutory authorities.
Title I of the statute also establishes a Chief Information Officers Council,
chaired by the OMB deputy director for management and composed largely of
department and agency chief information officers. The council plays an advisory and
coordination role. Other features of Title I are creation of the E-Government Fund
to support e-government projects; establishment of a government-wide program “to
encourage contractor innovation and excellence in facilitating the development and
enhancement of electronic Government services and processes”; and mandating an
annual e-government status report by the OMB Director to Congress.
Title II of the statute, pertaining to Federal Management and Promotion of
Electronic Government Services, specifies the responsibilities of agency heads
regarding electronic government; mandates interoperable implementation of
electronic signatures for appropriately secure electronic transactions with
government; prescribes criteria for maintaining and promoting an integrated federal
Internet portal; promotes individual federal court websites and agency use of IT to
increase access, accountability, transparency, and public participation in the
development and issuance of regulations; fosters improvements in the methods by
which government information, including information on the Internet, is organized,
preserved, and made accessible to the public; establishes privacy impact assessments
for agencies when developing or procuring IT that collects, maintains, or
disseminates personally identifiable information or when initiating a new collection
of such information; and creates a federal workforce skills development program for
using IT to deliver government information and services.
Title II also amends Subpart B of Part III of Title 5, United States Code, with
a new Chapter 37 mandating an Information Technology Exchange Program,
facilitating temporary assignments of federal employees to private sector
organizations and of private sector employees to federal agencies to enhance IT



skills. Other provisions mandate studies and evaluations of (1) community
technology centers, public libraries, and other institutions providing computer and
Internet access to the public; (2) the use of IT to enhance crisis preparedness,
response, and consequence management of natural and man-made disasters; and (3)
disparities in Internet access for online government services. Another provision tasks
the Administrator of General Services with making a coordinated effort to “facilitate
the development of common protocols for the development, acquisition,
maintenance, distribution, and application of geographic information.”
Title III of the statute, denominated the Federal Information Security
Management Act of 2002 (discussed elsewhere in this compendium), amends
Chapter 35 of Title 44, United States Code, with a new Subchapter III on information
security. It supersedes similar provisions found in Subtitle C of Title II of the
Homeland Security Act of 2002 (116 Stat. 2135, at 2155). Excepting national
security systems, Subchapter III prescribes a comprehensive program, under the
direction of the OMB Director, for ensuring the effectiveness of information security
controls over information resources that support federal operations and assets.
Covered agencies are required to have performed annually an evaluation of the
effectiveness of their information security program and practices.
Title IV authorizes generally, unless otherwise specified elsewhere in the act,
“such sums as are necessary” to carry out Titles I and II for FY2003-FY2007.
Title V of the statute, denominated the Confidential Information Protection and
Statistical Efficiency Act of 2002, vests the OMB Director with responsibility for
coordinating and overseeing the confidentiality and disclosure policies established
by the title. Subtitle A prescribes limitations on the use and disclosure of statistical
data or information, and sets fines and penalties for violations of these limitations.
Subtitle B, after identifying the Bureau of the Census, Bureau of Economic Analysis,
and Bureau of Labor Statistics, as “designated statistical agencies,” prescribes the
responsibilities, as well as the business data sharing ground rules and limitations, of
these agencies.
Discussion
Building upon the Clinger-Cohen Act (described elsewhere in this
compendium), the E-Government Act serves as the primary legislative vehicle to
guide evolving federal information technology management practices and to promote
initiatives to make government information and services available online. In doing
so, it also represents a continuation of efforts to realize greater efficiencies and
reduce redundancies through improved intergovernmental coordination, and by
aligning information technology investments. In addition, while the Bush
Administration’s Quicksilver initiatives are separate from the E-Government Act,
some of the goals of the Quicksilver initiatives are reinforced by the act’s provisions.
For example, Section 216 addresses the development of common protocols for
geographic information systems, which is also one of the objectives of the Geospatial
One-Stop project ([http://www.geo-one-stop.gov/]). Section 203 directs agencies to
adopt electronic signature methods. Likewise, the E-Authentication initiative strives
to develop a government-wide approach to electronic identity systems
([http://www.cio.gov/eauthentication/]). In addition, some of the act’s broader



provisions, such as those related to the development of privacy guidelines,
information security standards, and the identification of means to bridge disparities
in Internet access among citizens, contribute to the technological and regulatory
infrastructure needed to support e-government generally.
However, while the law is still relatively new, the rapid pace of technological
change and the drive to implement initiatives in a timely manner have raised a
number of implementation issues that may arise during congressional oversight. One
of these issues involves the recruitment and retention of IT managers, at both the
chief information officer (CIO) and project manager levels. As IT projects have
become more integrated into the function of a department or agency, the role of CIOs
has evolved as well. CIOs are reportedly being called upon not only for their
technological expertise, but also to provide strategic leadership in the areas of policy,
budget, and contract oversight.65 The CIO’s relationship with top-level department
decision makers can also be critical to successfully implementing e-government
initiatives. This suggests that in selecting a department-level CIO, one needs to
consider the strengths and weaknesses of choosing a career employee, who may have
a deeper contextual understanding of the mission and functions of an organization,
and recruiting a candidate from the private sector who may bring a wider range of
experiences and perspectives to the position.66 Similarly, the increased size and
complexity of IT projects has further underscored the need for strong project
managers to carry out these initiatives. While it is not uncommon for IT project
management to be just one of several duties assigned to an individual, some
observers have suggested that IT projects with budgets of $5 million or larger should
have dedicated, full-time managers. The possibility of requiring federal IT project
managers to obtain some form of professional certification has also been raised.67
Another issue is information security. In a series of evaluations published since
1997, the General Accounting Office (GAO) has repeatedly reported that the largest
federal agencies have made only limited progress in addressing computer security
vulnerabilities, citing information security as a government-wide high risk issue.
Specifically, GAO has identified six areas of weaknesses: lack of senior management
attention to information security; inadequate accountability for job and program
performance related to IT security; limited security training for general users, IT
professionals, and security professionals; inadequate integration of security into the
capital planning and investment control process; poor security for contractor-
provided services; and limited capability to detect, report, and share information on


65 Cynthia L. Webb, “Providing the Technology Vision,” Washington Post, Mar. 6, 2003,
available at [http://www.washingtonpost.com/wp-dyn/articles/A47136-2003Mar5.html],
visited Dec. 3, 2003.
66 Sara Michael, “Insider Information,” Federal Computer Week, Apr. 14, 2003, p. 26.
67 Sara Michael, “Do Your Project Managers Measure Up?,” Federal Computer Week, Nov.
3, 2003, p. 28; Sara Michael, “Execs Call for Full-Time Project Managers,” Federal
Computer Week, Nov. 5, 2003, available at [http://www.fcw.com/fcw/articles/2003/1103/
web-egov-11-05-03.asp], visited Dec. 3, 2003.

vulnerabilities or to detect intrusions, suspected intrusions, or virus infections.68 For
e-government activities, service continuity is considered critical not only for the
availability and delivery of services, but also to build citizen confidence and trust.
The risks of fraud and misuse of sensitive data are concerns as well. Heightened
concerns about homeland security and critical infrastructure protection have also
drawn attention to the role of information security. The inclusion of Title III of the
E-Government Act (referred to as the Federal Information Security Management Act)
permanently re-authorizes and amends the Government Information Security Reform
Act (GISRA), providing additional means for congressional overseers to assess this
issue.
A third issue is the interoperability of technology. Interoperability refers to the
ability of a computer system or data to work with other systems or data using
common standards or processes. Interoperability is an important part of the larger
efforts to improve interagency collaboration and information sharing through e-
government and homeland security initiatives. It also represents a significant
challenge as the federal government implements cross-agency initiatives, such as the
E-Payroll and GovBenefits.gov projects, to eliminate redundant systems and facilitate
a “one-stop service delivery” approach to e-government.69 One means being used to
address this issue is the development of a federal enterprise architecture, at the
website [http://www.feapmo.gov/]. An enterprise architecture serves as a blueprint
of the business functions of an organization, and the technology used to carry out
these functions. While this blueprint is still in its early stages, federal agencies are
being required to justify their IT investments based partly on their ability to make a
strong business case to support each request, and based on how closely the project
aligns with the federal enterprise architecture. Decisions made early in the
development of the federal enterprise architecture can have significant implications
for future IT projects, suggesting that regular assessments of this process may be
necessary to help minimize any potential complications.
Other issues include, but are not limited to, balancing the sometimes competing
demands of e-government and homeland security, measuring e-government
performance, assessing and monitoring the quality of agency IT project “business
cases,” and balancing cross-agency funding approaches with oversight interests.
Selected Source Reading
U.S. Congress. House. Committee on Government Reform. E-Government Act of

2002. Report to accompany H.R. 2458. 107th Congress, 2nd session. H.Rept.


107-787, part 1. Washington: GPO, 2002.


68 U.S. General Accounting Office, Information Security: Continued Efforts Needed to Fully
Implement Statutory Requirements, GAO-03-852T, June 24, 2003, p. 8.
69 U.S. Executive Office of the President, Office of Management and Budget, Implementing
the President’s Management Agenda for E-Government - E-Government Strategy, Apr.

2003, p. 9, available at:


[http://www.whitehouse.gov/omb/egov/downloads/2003egov_strat.pdf], visited Dec. 3,

2003.



U.S. General Accounting Office. Electronic Government: Selection and
Implementation of the Office of Management and Budget’s 24 Initiatives. GAO-

03-229. November 2002.


——. Electronic Government: Success of the Office of Management and Budget’s 25
Initiatives Depends on Effective Management and Oversight. GAO-03-495T.
March 13, 2003.
——. Information Security: Continued Efforts Needed to Fully Implement Statutory
Requirements. GAO-03-852T. June 24, 2003.
Harold C. Relyea
Jeffrey W. Seifert



N. Federal Information Security Management Act of 2002
Statutory Intent and History
The Federal Information Security Management Act of 2002 (FISMA) replaced
what has been commonly referred to as the Government Information Security Reform70th
Act (GISRA), which expired at the end of the 107 Congress. Congress passed two
versions of FISMA at the end of the 107th Congress. The first version passed as part
of the Homeland Security Act of 2002 (P.L. 107-296, Title X; 116 Stat. 2135, at

2259). The second version passed as part of the E-Government Act of 2002 (P.L.


107-347, Title III; 116 Stat. 2946). The two versions differ slightly. The E-


Government Act version takes precedence.71 The act applies government-wide,
including to small and independent agencies of the federal government.
Both GISRA and FISMA represent an effort by Congress to improve federal
agency compliance with information security standards and guidelines. Congress put
into statute certain requirements, including the requirement that federal agencies
submit their information security programs to an annual independent review, and a
requirement that the Director of the Office of Management and Budget (OMB) shall
report the results of these reviews to Congress.
Congress has long been concerned with securing federal information systems.
This concern has grown as the federal government has increased the amount of
information it collects and maintains and as the information systems upon which that
information is kept become increasingly interconnected and vulnerable to
unauthorized access. Both GISRA and FISMA build upon the Computer Security
Act of 1987 (P.L.100-235) and the Paperwork Reduction Act of 1995 (P.L. 104-13).
The Computer Security Act required agencies to inventory their computer systems
and to develop computer security plans for each. The Paperwork Reduction Act
authorized the Director of OMB to oversee the development of information resource
management policies, including those related to information security. While FISMA
repeals or supercedes various provisions of the Computer Security Act from the
United States Code, it maintains many of the same roles and responsibilities.
Likewise, FISMA expands upon the roles and requirements originally cited in the
Paperwork Reduction Act.
Major Provisions
The Federal Information Security Management Act of 2002 has five major
provisions. Section 301 of the act amends Chapter 35 of Title 44 of the United States


70 GISRA was passed as part of the Floyd D. Spence National Defense Authorization Act
for FY2001 (P.L. 106-398, Title X, Subtitle G).
71 In its FY2002 Report to Congress on Federal Government Information Security Reform
(May 16, 2003), the Office of Management and Budget cites the E-Government Act version
as being applicable (see pp. 6 and 16). Also, the E-Government version contains language
that states that while its amendments to Chapter 35, Title 44 of the United States Code stay
in effect, the amendments made to Chapter 35, Title 44 by the Homeland Security Act
version do not apply. See 44 U.S.C. § 3549, as enacted by the E-Government Act.

Code by adding a new Subchapter III on Information Security. Section 302 amends
40 U.S.C. § 11331, which relates to the prescription of information security
standards. Section 303 of the act amends the National Institute of Standards and
Technology Act (NIST; 15 U.S.C. § 278g-3), which assigns to NIST the mission of
developing standards for information technology, including security standards for
federal information systems. Section 304 amends the National Institute of Standards
and Technology Act (15 U.S.C. § 278g-4), which establishes the Information
Security and Privacy Advisory Board. Section 305 makes technical changes and
conforming amendments, two of which are of some significance.
Chapter 35 of Title 44, United State Code, Subchapter III, on Information
Security expands upon the authorities and responsibilities for the development,
implementation, review, and oversight of policies and practices associated with
securing federal information systems. Specifically, it authorizes the Director of
OMB to oversee the development and implementation of information security
policies, standards, and guidelines across the federal government. The director’s
authority includes overseeing the development of policies, principles, standards and
guidelines; reviewing and approving or disapproving agency security programs; and,
taking actions as authorized by 40 U.S.C. §11303,72 including budgetary actions, to
ensure compliance with policies, standards, and guidelines. However, only the
director’s authorities under 40 U.S.C. § 11303 extend to national security systems.73
Development and oversight of standards and guidelines for national security systems
are prescribed by law or the President. In addition, FISMA grants to the Secretary
of Defense and the Director of Central Intelligence, the authority to oversee the
development of information security policies, principles, standards, and guidelines
for information systems operated by or for the Department of Defense and the Central
Intelligence Agency, if the compromise of information on these systems would have
a debilitating impact on the mission of these two agencies. It is not clear if this
provision includes systems that do not meet the definition of national security
systems.
In addition to assigning the authorities discussed above, Subchapter III also
requires each agency to develop and implement an information security program. It
prescribes what this program should include. It assigns each agency head the
responsibility for developing and ensuring the implementation of the program,


72 40 U.S.C. § 11303 details the director’s authority to evaluate agency performance-based
programs in acquiring information technology.
73 FISMA defines a national security system as “any information system (including
telecommunications system), the function or operation of which: involves intelligence
activities; involves cryptologic activities related to national security; involves command and
control of military forces; involves equipment that is an integral part of a weapon or weapon
system or is critical to the direct fulfillment of military or intelligence missions; or is
protected at all times by procedures established for information that have been specifically
authorized under criteria established by Executive Order or an Act of Congress to be kept
classified in the interest of nation security.” The definition notes that a system used for
routine administrative and business applications (e.g. payroll) shall not be considered a
national security system. President Reagan laid out the roles and responsibilities of federal
agencies for the protection of national security systems in National Security Decision
Directive 145 (NSDD-145). NSDD-145 remains in effect.

including designating a senior agency information security officer whose
responsibility is to ensure compliance with the agency’s program. It also requires
that agencies evaluate their security programs annually and include the results of
these reviews in a number of reports required by Congress, including performance
reports and financial reports.
Subchapter III also requires that each agency submit its information security
program to an annual independent review. The reviews are to be conducted by the
agency’s inspector general, if it has one, or an outside evaluator. The subchapter
requires that the results be submitted to the Director of OMB who is to summarize
them in a report to Congress. This perhaps is the major element of FISMA (and
GISRA before it) by which Congress intended to ensure adequate oversight and
compliance with federal information security requirements.
FISMA amends 40 U.S.C. § 11331 which authorizes the Secretary of Commerce
to prescribe standards and guidelines (developed by NIST, see below) pertaining to
federal information systems. Those pertaining to information security are to be made
mandatory. This section also authorizes the President to disapprove or modify the
Secretary’s prescriptions and also allows agencies to follow more strict standards, as
long as they contain the mandatory standards prescribed by the Secretary.
FISMA also amends 15 U.S.C. § 278g-3, which gives NIST the mission of
developing standards, guidelines, and associated methods and techniques for
information systems. These standards and guidelines include those for securing
federal information systems, except national security systems.74 FISMA primarily
amends this section by specifying that NIST shall, at the least, develop standards for
categorizing all agency information and information systems, recommending what
type of information or system should be included in each category, and developing
minimum security requirements for each category. FISMA also instructs NIST that
these standards should, to the most practicable extent possible, be technology neutral
and allow for the use of commercial-off-the-shelf products.
The amendments to 15 U.S.C. § 278g-4 rename the Computer System Security
and Privacy Advisory Board the Information Security and Privacy Advisory Board.
The board, which was originally established by the Computer Security Act, advises
the Secretary of Commerce and the Director of OMB on information security and
privacy issues and reports to the Secretary, the Director of OMB, the Director of the
National Security Agency, and Congress.
Finally, FISMA repeals 40 U.S.C. §11332, which included language originally
enacted as part of the Computer Security Act. This language required agencies to
develop security plans for their computer systems and to provide personnel training
in security awareness and practices. These requirements have been subsumed in
agency security program requirements mentioned above. FISMA also amends 44
U.S.C. § 3505 to include a requirement that agencies inventory their major
information systems and identify where these systems interface with other systems
and networks.


74 NSDD-145 assigns this authority to the National Security Agency.

Discussion
Throughout the 1990s, the General Accounting Office (GAO) reported on
fundamental problems associated with agency information security plans. In some
cases, GAO found that agencies did not have written policies and procedures. In
other cases, GAO found that policies and procedures were not enforced. In addition
to problems internal to the agencies, GAO cited a lack of oversight to ensure that
agencies met their obligations. GISRA addressed these problems by tightening
agency requirements in statute (essentially taking OMB’s guidelines and putting them
in statute). GISRA also addressed the oversight issue by requiring annual
independent evaluations of agency security programs, and requiring that the results
be reported directly to Congress. OMB’s FY2001 Report to Congress on Federal
Government Information Security Reform formed the baseline by which to better
measure agencies’ progress in securing their information systems.
In the FY2002 report, OMB cited both progress and remaining issues within the
federal government. For example, out of 7,957 federal systems evaluated, the
number of systems for which risk assessments have been done increased from 43%
to 65%. OMB cited similar increases for the number of systems with updated
security plans, and the number of systems with contingency plans. However, OMB
identified six areas in which problems persist: lack of management attention; non-
existent security performance measures; poor security education and awareness;
failure to fully fund and integrate security into capital planning; failure to ensure
contractors are secure; and lack of detecting, reporting, and sharing information on
vulnerabilities.
GAO’s evaluation of the FY2002 results75 was more critical of the progress
made. For example, while OMB noted that 11 of 24 agencies had assessed risk for
90% to 100% of their systems, GAO noted that 8 reported that they had assessed
fewer than 50%. The House Technology, Information Policy, Intergovernmental
Relations and the Census Subcommittee of the House Government Reform
Committee, which maintains a computer security report card, noted that while 14
agencies improved their grades, based on the subcommittee’s scoring, 14 agencies
remain with grades below C, and 8 have failed (again, according to the subcommittee
scoring). 76
Also, there remains some tension over the roles and responsibilities for national
security systems versus non-national security systems. Part of the reason Congress
passed the Computer Security Act was to ensure that the national security community
would not have too great a role in setting computer security standards for civilian


75 U.S. Government Accounting Office, Information Security: Continued Efforts Needed to
Fully Implement Statutory Requirements, GAO-03-852T, June 24, 2003.
76 Rep. Adam Putnam, Chairman, Subcommittee on Technology, Information Policy,
Intergovernmental Relations, and the Census, House Committee on Government Reform
(statement upon the release of the Federal Computer Security Report Card), Dec. 9, 2003.
Information regarding the Subcommittee’s report card can be found at [http://reform.house.
gov/TIPRC/News?DocumentSingle.aspx?DocumentID=2025], visited Dec. 19, 2003.

federal computer systems.77 There was a similar debate over the definition of
sensitive information which the act sought to protect. While Congress recognized
that, in addition to classified information, the government holds sensitive
information, the compromise of which could adversely affect the national interest or
conduct of federal programs, or the privacy of individuals, Congress did not intend
the term to constitute a formal new category of information.78 The act stipulated that
the designation of sensitive implies no determination as to whether it is subject to
public disclosure. However, as individual information systems become increasingly
interconnected, including the connection of national security systems to civilian and
public systems, some in the national security community are concerned about the
level of security of these non-national security systems. FISMA maintains the
distinction between roles and responsibilities for national security systems and all
other systems. Still, it does require NIST to develop guidelines by which agencies
can identify national security systems over which they may have control. Therefore,
the number of systems for which more stringent national security standards must be
applied may go up, or down.
Selected Source Reading
U.S. Office of Management and Budget. FY2002 Report to Congress on Federal
Government Information Security Reform. May 16, 2003.
U.S. General Accounting Office. Information Security: Continued Efforts Needed
to Fully Implement Statutory Requirements. GAO-03-852T. June 24, 2003.
John D. Moteff


77 NSDD-145 gave the National Security Agency authority to set technical computer
standards and guidelines for national security systems. Congressional concern is discussed
in H.Rept. 100-153 (parts I and II), House Science, Space, and Technology Committee, June

11, 1987.


78 U.S. Congress, House Committee on Science, Space, and Technology, Computer Security
Act of 1987, report to accompany H.R. 145, 100th Cong., 1st sess., H.Rept. 100-153, part 1
(Washington: GPO, 1987), p. 24.

O. Data Quality Act (Information Quality Act (IQA))
Statutory Intent and History
The Data Quality Act of 2001 (DQA) was enacted as Section 515 of the FY2001
Treasury and General Government Appropriations Act (P.L. 106-554, 44 U.S.C. §

3516 note; 114 Stat. 2763A-153). The DQA, enacted in December 2000 as a two-


paragraph last-minute addition to the consolidated appropriations bill, took effect on
October 1, 2002. There is no specific or explicit language on statutory intent or
legislative history.
Major Provisions
The DQA required the Office of Management and Budget (OMB) to issue
guidelines ensuring the “quality, objectivity, utility, and integrity” of information
disseminated by the government. In turn, the law instructed most federal agencies
to issue their own guidelines, following OMB’s, by October 1, 2002. The act also
required agencies to create an administrative process through which interested groups
could challenge agency information and seek corrections. OMB, in its guidelines,
further defined information quality, and required agencies to follow certain
procedures depending on the use, category, and significance of the information. The
resulting agency guidelines have varied depending on the area of agency
responsibility. The DQA also required each agency to report periodically to the
Director of OMB the number and nature of complaints received by the agency
regarding the accuracy of its information, and how such complaints were handled.
Discussion
While there is no specific or explicit documentation of statutory intent or
legislative history, the DQA amends the Paperwork Reduction Act (PRA) of 1995,
and can be seen as related to other government documents and general management
laws as well, such as OMB Circular No. A-110, OMB Circular No. A-130, the
Freedom of Information Act, the Privacy Act, and the Government in the Sunshine
Act. (The laws are described in detail elsewhere in this compendium.)
Under the PRA, the Office of Information and Regulatory Affairs (OIRA) was
created within OMB with oversight responsibilities for other federal agencies
regarding paperwork (44 U.S.C. § 3503(a) and (b)). OIRA, among other things, is
responsible for developing uniform policies for efficient processing, storage, and
transmission of information, within and among agencies. The PRA directed the
Director of OMB to foster greater sharing of, dissemination of, and access to public
information.
Agencies’ data acquisition and publishing rights were stated in OMB Circular
No. A-110, Subpart C. Unless specifically waived, federal agencies “have the right
... to obtain, reproduce, publish, or use the data first produced under an award.”
OMB Circular No. A-130 stated a federal policy of “maximizing the usefulness
of information disseminated to the public,” but did not provide details about or
definitions of quality, integrity, accuracy, or objectivity of information.



The Freedom of Information Act, the Privacy Act, and the Government in the
Sunshine Act all contain provisions regulating or generally relating to public access
to governmental information, and/or procedures to challenge or correct such
information.
The DQA provides more explicitly quality standards for information across the
federal government, and procedures to challenge or correct such information.
The DQA applies to all federal agencies that are subject to the PRA. Data
quality challenges have been filed with several agencies. Four agencies place all
their DQA challenges on their Web pages: the Environmental Protection Agency
(EPA); the Commodity Futures Trading Commission (CFTC); the Department of
Transportation; and the Forest Service. Discerning other agencies’ DQA challenges
is a more involved process.
DQA challenges have covered a wide range of complexity. A DQA challenge
to the CFTC in September 2003, for example, involved certain data fields missing
from a document; the data fields were determined to have resulted from a
programming error, and the error was corrected. On the other hand, a lawsuit
brought against the White House Office of Science and Technology Policy (OSTP),
challenging the data underlying the interagency “National Assessment of the
Potential Consequences of Climate Variability and Change” (NACC), was settled out
of court on November 6, 2003, with the OSTP posting a notice stating that the NACC
was not “subjected to OSTP’s Information Quality Act Guidelines.”
Proponents contend the law and guidelines will improve the quality of agency
science and regulations, and force agencies to regulate based on the best science
available. Some of these proponents maintain that the Data Quality Act will help
agencies defend their regulations against lawsuits, and reduce the number of lawsuits
filed. The U.S. Chamber of Commerce’s Vice President, William Kovacs, has
praised the act as fair to all groups; under it, the Chamber has challenged information
on the EPA website. Some opponents of the law and OMB’s guidelines contend the
act may have a chilling effect on agency distribution and use of scientific
information. These opponents foresee a flood of data quality challenges on a wide
range of scientific issues, which, they contend, may tie up agency resources and
significantly delay regulations. There is no evidence yet, however, that these
concerns have materialized.
Critics also argue that the DQA, and the implementing guidelines, strengthen
the position of industrial opponents to federal health and environmental policies and
regulations by allowing them an additional method to challenge the science on which
the regulations are based. Scientific groups sought to have the draft OMB guidance
revised to prevent “harassment” (through repeated data quality challenges) of
scientists working on controversial research, and to avoid imposing new obstacles to
the publication of research results. The final OMB guidelines address some of these
issues, but still allow challenges to the quality of research underlying official agency
policies or research results published on agency websites. The guidelines allow
challenges to peer-reviewed findings on a case-by-case basis.



The DQA lacks a judicial review provision allowing for a party to take a data
quality dispute to court.
Selected Source Reading
Ad Hoc Committee on Ensuring the Quality of Government Information. Ensuring
the Quality of Data Disseminated by the Federal Government. Washington:
The National Academies Press, 2003.
U.S. Office of Management and Budget. “Guidelines for Ensuring and Maximizing
the Quality, Objectivity, Utility, and Integrity of Information Disseminated by
Federal Agencies” Federal Register, vol. 67, no. 36 (February 22, 2003), pp.

8452-8460.


Michael Simpson



II. Strategic Planning, Performance Measurement,
and Program Evaluation
A. Inspector General Act of 1978
Statutory Intent and History
Statutory offices of inspector general (OIGs) consolidate responsibility for
auditing and investigations within a federal department, agency, or other
organization. Established by law as permanent, independent, nonpartisan, and
objective units, the OIGs are designed to combat waste, fraud, and abuse (5 U.S.C.
Appendix). The early establishments occurred in the wake of major financial and
management scandals, first in 1976 in the Department of Health, Education and
Welfare — now Health and Human Services (90 Stat. 2429) — and in 1978 in the
General Services Administration (GSA). This later episode paved the way for OIGs
in GSA and 11 other departments and agencies (92 Stat. 1101). Such offices now
exist in nearly 60 federal establishments and entities, including all cabinet
departments and the largest federal agencies, as well as many boards, commissions,
government corporations, and foundations.79
Statutory Underpinnings. Under two major enactments — the Inspector
General Act of 1978 (92 Stat. 1101-1109) and the Inspector General Act
Amendments of 1988 (102 Stat. 2515-2530) — IGs have been granted a substantial
amount of independence and authority to carry out their basic mandate. Each office
is headed by an inspector general who is appointed and removable in one of two
ways: (1) presidential appointment, subject to the advice and consent of the Senate,
and presidential removal in specified federal establishments, including all cabinet
departments and larger federal agencies; and (2) agency head appointment and
removal in designated federal entities (DFEs), usually smaller boards, foundations,
commissions, and corporations.
Coordination and Control. Statutory OIGs have also been affected by
several presidential orders designed to improve coordination among the offices and
to provide a means for investigating charges of wrongdoing among the IGs
themselves and other top echelon officers.
In 1981, President Ronald Reagan established the President’s Council on
Integrity and Efficiency (PCIE) as a mechanism to coordinate and enhance efforts to


79 Separate from the 56 offices directly under the Inspector General Act of 1978, as
amended, are three others, which, for the most part, are modeled after the provisions of the
basic IG Act. P.L. 101-193 (103 Stat. 1711-1715) created an OIG in the Central Intelligence
Agency, whose IG is appointed by the President by and with the consent of the Senate. P.L.
100-504 (102 Stat. 2530) established an office in the Government Printing Office, the only
legislative branch entity with such a statutory IG; in this case, the inspector general is
appointed by the head of the agency, the Public Printer. In addition, P.L. 108-106
established an office in the new Coalition Provisional Authority (in Iraq), whose IG is
appointed by the Secretary of State. For background information on the offices and their
evolution, see the citations in the “Selected Source Reading” at the end of this section.

promote integrity and efficiency in government programs and to detect and prevent
waste, fraud, and abuse.80 Chaired by the Deputy Director of the Office of
Management and Budget (OMB), PCIE was composed of the statutory IGs at the
time plus other appropriate officials from the Office of Personnel Management,
Federal Bureau of Investigation, and the Departments of Defense, Justice, and the
Treasury, among others. The membership has since been expanded to include the
Comptroller of the Office of Federal Financial Management (an officer in OMB), the
Director of the Office of Government Ethics, and the Special Counsel in the Office
of Special Counsel. In 1992, following the expansion of IGs to designated federal
entities, a parallel Executive Council on Integrity and Efficiency (ECIE) was created
for IGs in these entities along with other appropriate officials.81
Concerns about allegations of wrongdoing by IGs or other high-ranking OIG
officials themselves prompted the creation of a new mechanism to investigate such
charges. In 1996, President William Clinton established an Integrity Committee,
composed of PCIE and ECIE members and chaired by the FBI representative, to
receive such allegations; if deemed warranted, these would be referred for
investigation to an executive agency with appropriate jurisdiction, including the FBI,
or to a special investigative unit consisting of council members.82
Major Provisions
Purposes. Three principal purposes or missions guide the OIGs:
!conduct and supervise audits and investigations relating to the
programs and operations of the establishment;
!provide leadership and coordination and recommend policies for
activities designed to: (a) promote economy, efficiency, and
effectiveness in the administration of such programs and operations;
and (b) prevent and detect fraud and abuse in such programs and
operations; and
!provide a means for keeping the head of the establishment and
Congress fully and currently informed about problems and
deficiencies relating to the administration of such programs and
operations, as well as the necessity for and progress of corrective
action.


80 Executive Order 12301, issued Mar. 26, 1981.
81 Both PCIE and ECIE now operate under Executive Order 12805, issued by President
George H.W. Bush on May 11, 1992. A proposal to codify the two councils has arisen inth
the 108 Congress. H.R. 3457 would combine them in statute, creating a new Council of
the Inspectors General on Integrity and Efficiency. The General Accounting Office (GAO)
surveyed the IGs in 2002, about codification of the IG councils and other matters, and found
that a majority of IGs interviewed (34 of 53) “indicated that it was important for the PCIE
and ECIE to be established in statute.” See U.S. General Accounting Office, Inspectors
General: Office Consolidation and Related Issues, GAO-02-575, Aug. 2002, p. 44.
82 Executive Order 12993, issued by President William Clinton on Mar. 21, 1996.

Appointment, Removal, and General Supervision. Differences in the
appointment and removal procedures for IGs exist between those in federal
establishments versus those in designated federal entities (see the following section
for definitions), although with only a few exceptions, all IGs serve only under the
“general supervision” of the agency head.
IGs in Federal Establishments. The President appoints IGs in federal
establishments (i.e., cabinet departments and larger federal agencies) by and with the
advice and consent of the Senate. The statute also provides that the selection be done
without regard to political affiliation and solely on the basis of integrity and
demonstrated ability in accounting, auditing, financial analysis, law, management
analysis, public administration, or investigations.
The IG Act, as amended, provides that an inspector general may be removed
from office only by the President, who then must communicate the reasons for
removal to both houses of Congress. There are no explicit restrictions on the
President’s authority; removal may be with or without cause.
Each inspector general “must report to and be under the general supervision of”
the establishment head or, to the extent this authority is delegated, to the officer next
in rank below the head, and shall not report to, or be subject to supervision by, any
other officer. The restriction on supervision is reinforced by another provision:
“Neither the head of the establishment nor any other officer shall prevent or prohibit
the Inspector General from initiating, carrying out, or completing any audit or
investigation, or from issuing any subpoena.”
Exceptions to this prohibition are few and are spelled out with regard just to
certain departments and for specified reasons. Only the heads of the Departments of
Defense, Homeland Security, Justice, and the Treasury, along with the U.S. Postal
Service, are authorized to prohibit an IG audit, investigation, or issuance of a
subpoena which requires access to information concerning ongoing criminal
investigations, sensitive operational plans, intelligence matters, counterintelligence
matters, and other matters the disclosure of which would constitute a serious threat
to national security. (Under separate statutory authority, the Director of Central
Intelligence has similar power over the Central Intelligence Agency’s (CIA’s)
Inspector General.) Should the agency head exercise this power limiting the IG’s
discretion and activities, the reasons must be communicated to the IG and then by the
inspector general to specified committees of Congress.
The IG Act also provides for two assistant inspectors general within each IG
office in the specified federal establishments: i.e., an Assistant Inspector General for
Audits and an Assistant Inspector General for Investigations.
IGs in Designated Federal Entities. The 1988 Amendments to the IG Act
provide for appointment, removal, and supervision of inspectors general in
“Designated Federal Entities,” such as the Consumer Product Safety Commission,
Federal Communications Commission, Federal Labor Relations Authority, Securities
and Exchange Commission, and other usually smaller boards, commissions,



corporations, and foundations. The U.S. Postal Service, a public corporation and the
government’s largest civilian employer, is also a designated federal entity.
The appointment and removal powers over IGs in designated federal entities
differ from those governing their counterparts in federal establishments. The IGs in
designated entities are appointed by the agency head, who also may remove or
transfer the IG; when removing or transferring the IG, the head must promptly
communicate in writing the reasons for such action to both houses of Congress.
Several caveats to these usual procedures apply to the inspector general in the U.S.
Postal Service. This officer is appointed by the Board of Governors and is the only
IG with a specified term of office (i.e., seven years). He or she may be removed by
the written concurrence of at least seven governors and then only for cause, another
distinguishing characteristic from all other statutory inspectors general.
As with the presidentially appointed inspectors general, IGs in the designated
federal entities are required to report to and be under the “general supervision” of the
agency head. But neither the head nor any other officer is permitted to interfere with
an IG audit, investigation, or issuance of a subpoena.
Appropriations and Resources. The 1988 Amendments to the IG Act
granted each office of inspector general in a federal establishment a separate
appropriation account (31 U.S.C. § 1105(a)(25)), in order to protect its funding level
once it had been established by Congress. The OIGs in designated federal entities
lack the same appropriations protection.
All IGs have authority to call on other governmental entities for assistance and
to hire their own staff. Adequate facilities, equipment, supplies, and other basic
resources are to be provided by the host agency. In addition, IGs have access to a
Criminal Investigator Academy to train their personnel and an Inspector General
Forensic Laboratory (P.L. 106-422).
Duties. Following the act’s broad mandates, each inspector general is required
to perform specific duties in order to achieve the goals of detecting and preventing
waste, fraud, and abuse. These duties illustrate the IG’s unique role within the
agency and the broad grant of authority delegated by Congress. The IGs are expected
to:
!provide policy direction for, and conduct, supervise, and coordinate
audits and investigations;
!review existing and proposed legislation and regulations relating to
programs and operations;
!make recommendations in the reports concerning the impact of the
laws;
!recommend policies for, and conduct, supervise, or coordinate other
relevant activities of the establishment;



!recommend policies for, and conduct, supervise, or coordinate
relationships with federal agencies, with state and local agencies,
and with nongovernmental entities with regard to identifying and
prosecuting participants in fraud or abuse; and
!report expeditiously to the Attorney General whenever an inspector
general has reasonable grounds to believe that there has been a
violation of federal criminal law.
Reporting and Notification Requirements. Complementing the
obligation to keep the agency head and Congress “fully and currently informed,” IGs
are required to make two basic types of reports to the agency head and Congress and
to keep them informed through other means.
Semiannual Reports. Inspectors general are required to make semiannual
reports, summarizing the OIG’s activities for the previous six months, itemizing
waste, fraud, and abuse problems, and identifying proposals for corrective action.
The 1988 amendments refined and enhanced several of the semiannual reports’
ingredients. For example, reports must contain certain entries, some of which
include:
!a description of significant problems, abuses, and deficiencies
relating to programs and operations;
!a description of recommendations for corrective action;
!an identification of each significant recommendation contained in
the previous reports on which corrective action has not been
completed; and,
!statistical information relating to costs, management of funds, and
related matters.
The IG reports go directly to the agency head, who must transmit them unaltered
to appropriate congressional committees within 30 days. After another 60 days, such
reports are made available to the public. The agency head is authorized to append
comments and specific data and information to the IG reports; this additional
information includes statistical tables showing audit reports and dollar value of
recommendations of disallowed costs and projected savings of recommendations for
funds which could be put to a better use.
This periodic reporting requirement is affected by the Reports Consolidation Actth
(RCA) of 2000 (P.L. 106-531), approved at the end of the 106 Congress. The
enactment encourages the consolidation of financial and performance management
reports within departments and agencies into a single annual report, in order to
enhance coordination and efficiency within them; improve the quality of relevant
information; and provide it in a more meaningful and useful format for Congress, the
President, and the public. As part of this overall plan, RCA provides that the
consolidated annual report include a statement from the agency’s inspector general;
it is to describe the agency’s most serious management and performance challenges



— the so-called “top 10” challenges that IGs have been identifying over the previous
three years — and briefly assess the agency’s progress in addressing them. The IG’s
statement must be submitted to the agency head at least 30 days before it is due; he
or she may comment upon it but not change it.
Seven-Day Letter Reports. The Inspector General Act also requires the IG
to report immediately to the agency head whenever the inspector general becomes
aware of “particularly serious or flagrant problems, abuses, or deficiencies relating
to the administration of programs and operations.” Such communications must be
transmitted — unaltered but allowing for comments the head deems appropriate —
by the agency head to the appropriate congressional committees within seven days.
The Intelligence Community Whstleblower Protection Act, as amended,
reinforces such notifications.83 It covers all employees in the intelligence community
who want to bring an “urgent concern” based on classified information to the
attention of Congress. The process to accomplish this is elaborate and complex —
with the inspector general playing a key role in reviewing and transmitting the
information to the House and Senate Select Committees on Intelligence, the
exclusive recipients — to protect the material from unauthorized disclosure while
recognizing the right of Congress (and the agency head) to be notified of such urgent
concerns.
Other Notification Provisions. Additionally, the act requires an inspector
general to keep the agency head and Congress “fully and currently informed by
means of the reports [described above] and otherwise.” This concept of keeping the
head and Congress informed “otherwise” includes a variety of mechanisms:
testifying at congressional hearings, meeting with lawmakers and staff, and
responding to requests for information or reports from Congress or its committees.
Authority. In order to carry out the purposes of the law, Congress has granted
the inspectors general broad authority. Section 6 of the codified legislation
authorizes the IGs, among other things:
!to conduct audits and investigations and make reports relating to the
administration of programs and operations;
!to have access to all records, reports, audits, reviews, documents,
papers, recommendations, or other materials which relate to
programs and operations with respect to which the IG has
responsibilities under the enactment;
!to request assistance from other federal, state, and local government
agencies;


83 Codified at 5 U.S.C. Appendix 8H for all agencies directly under the Inspector General
Act of 1978 and at 50 U.S.C. § 403q(d)(5) for the CIA.

!to issue subpoenas for the production of all information, documents,
reports, answers, records, accounts, papers, and other data and
documentary evidence necessary to perform the IG’s functions;84
!to administer to or take from any person an oath, affirmation, or
affidavit;
!to have direct and prompt access to the agency head;
!to select, appoint, and employ officers and employees in order to
carry out the functions, powers, and duties of the office of the
inspector general;
!to obtain the services of experts and consultants on a temporary or
intermittent basis, as authorized by 5 U.S.C. § 3109; and
!to enter into contracts and other arrangements for audits, studies, and
other services with public agencies as well as private persons, and
to make such payments as may be necessary to carry out the law.
The scope of the IGs’ investigative authority is seen further in the range of
matters the IG may investigate stemming from an employee complaint or disclosure
of information. The inspector general is authorized to receive and investigate
complaints or information from an employee concerning the possible existence of an
activity constituting a violation of law, rules, or regulations, or mismanagement,
gross waste of funds, abuse of authority, or a substantial and specific danger to the
public health and safety. In such instances, the inspector general shall not disclose
the identity of the employee without the employee’s consent, unless the IG
determines that such disclosure is unavoidable during the course of the investigation.
The law also prohibits any reprisals against employees who properly make
complaints or disclose information to the IG.
Inspectors general in the federal establishments now have independent law
enforcement authority in law (P.L. 107-296). Previously, the criminal investigators
in these OIGs had acquired such powers in several different ways: through existing
offices that have been transferred to the OIG; through statutory grants affecting
specific agencies and jurisdictions; and through special deputation by the U.S.
Marshals Service in the Department of Justice. These grants and the attendant
processes, however, were seen as cumbersome and time-consuming as well as being
limited in scope and duration; the result was an unequal set of powers among OIGs.
Notwithstanding these broad powers, inspectors general are not authorized to
take corrective action or institute changes themselves. Indeed, the 1978 act
specifically prohibits the transfer “of program operating responsibilities” to an
inspector general.


84 This section does not permit the IG to use the subpoena power to obtain documents and
information from other federal agencies (5 U.S.C. App. 3, § 6).

Discussion
Statutory inspectors general have been granted a substantial amount of
independence, authority, and resources to combat waste, fraud, and abuse in federal
programs and operations. The IGs’ broad mandate allows them flexibility for the
responsibilities they emphasize and the roles they adopt. Their activities can focus
on investigations or audits, and increasingly inspections (or program evaluation),
depending upon their job orientation, their expertise and experience, the types of
programs and operations within the agency, and the problems they perceive. Their
roles, moreover, can cross a wide spectrum of possibilities. These can range from a
proactive, preventive role, in which the IG functions as an “insider,” working closely
with management to upgrade agency operations, to an ad hoc reactive, detection role,
in which the IG functions as an “outsider,” investigating and uncovering illegalities
and other misconduct.
Inquiries and concerns have existed about the IGs and their operations: whether
certain individual offices and particular IGs are effective, and how this effectiveness
is measured and compared. Calls for additional statutory authority — such as
testimonial subpoena power — and other enhancements have also been expressed.
Proposals relating to the IG community include prescribing a term of office (e.g.,
seven or 10 years) for IGs in designated federal entities, to help reduce their high
turnover rate; changing IG budget submission procedures; making the PCIE and
ECIE statutory or combining the two; extending offices to certain agencies which
lack one now; transforming some posts in which the IG is appointed by the agency
head to one appointed by the President (with Senate advice and consent); placing
offices in several designated federal entities under one inspector general or placing
one or more of the designated federal entities under the jurisdiction of an IG in a
federal establishment; and merging the two statutory offices in the Treasury
Department (the Treasury Inspector General for Tax Administration, who covers the
Internal Revenue Service, and the Treasury IG who handles the remainder of the
department). 85
Selected Source Reading
Duffy, Diane T. and Frederick M. Kaiser. “Into the Woods: Mapping New
Directions for OIGs.” Journal of Public Inquiry, vol. 1 (fall/winter 1999), pp.

27-32.


Hendricks, Michael, Michael F. Mangano, and William C. Moran, eds. Inspectors
General: A New Force in Evaluation. San Francisco: Jossey-Bass Inc., 1990.
Journal of Public Inquiry (A Publication of the Inspectors General of the United
States) Washington: GPO, serial publication.


85 H.R. 3457, 108th Congress, for instance, would set a term of office for the IGs; allow their
removal “for cause”, provide for the submission of the IG budget requested amount to OMB
and Congress, for comparative purposes; set up a combined Council of the Inspector
Generals on Integrity and Efficiency; and provide for personnel flexibilities in office of the
inspector general (OIG) hirings, pay, promotion, and reductions in force.

Kaiser, Frederick M. “The Watchers’ Watchdog: The CIA Inspector General.”
International Journal of Intelligence and Counterintelligence, vol. 3 (1989), pp.

55-75.


Light, Paul C. Monitoring Government: Inspectors General and the Search for
Accountability. Washington: The Brookings Institution, 1993.
Newcomer, Kathryn E. “The Changing Nature of Accountability: The Role of the
Inspector General in Federal Agencies.” Public Administration Review, vol. 58
(March/April 1998), pp. 129-136.
U.S. Congress. House. Committee on Government Operations. The Inspector
General Act of 1978: A Ten-Year Review. H.Rept. 100-1027. 100th Congress,

2nd session. Washington: GPO, 1988.


——. Subcommittee on Government Management, Information, and Technology.
The Inspector General Act of 1978: Twenty Years After Passage, Are the
Inspectors General Fulfilling Their Mission?. Hearings. 105th Congress, 2nd
session. Washington: GPO, 1999.
——. Subcommittee on Government Efficiency. 25th Anniversary of the Inspector
General Act. Hearings. 108th Congress, 2nd session. Washington: GPO, 2003.
U.S. Congress. Senate. Committee on Governmental Affairs. Oversight of the
Operation of the Inspector General Offices. Hearings. 101st Congress, 2nd
session. Washington: GPO, 1990.
——. The Integrity and Effectiveness of the Offices of Inspector General. Hearings.

102nd Congress, 2nd session. Washington: GPO, 1992.


——. The Inspector General Act: 20 Years Later. Hearings. 105th Congress, 2nd
session. Washington: GPO, 1998.
——. Inspector General Act Amendments of 1999. S.Rept. 106-510. 106th Congress,

2nd session. Washington: GPO, 2000.


——. Legislative Proposals and Issues Relevant to the Operations of the Inspector
General. Hearings. 106th Congress, 2nd session. Washington: GPO, 2000.
U.S. General Accounting Office. Inspectors General: Office Consolidation and
Related Issues. GAO-02-575. August 2002.
CRS Report 98-379 GOV. Statutory Offices of Inspector General: Establishment
and Evolution, by Frederick M. Kaiser.
CRS Rept. 98-141 GOV. Statutory Offices of Inspector General: A 20th Anniversary
Review, by Frederick M. Kaiser (1998).
Frederick M. Kaiser



B. Government Performance and Results Act of 1993
Statutory Intent and History
Congress’s stated intent in enacting the Government Performance and Results
Act of 1993 (GPRA or the “Results Act”; P.L. 103-62; 107 Stat. 285),86 was to direct
agencies to (1) clarify their program responsibilities and become more cost efficient;
(2) account for the performance and outcomes of their activities and programs; and
(3) improve management. The legislation reflected Congress’s desire to reduce
budget deficits and improve congressional decision making by using information
about whether statutory objectives are achieved, and about the effectiveness and
efficiency of federal programs and spending. The law requires agencies to move from
defining budgets in terms of inputs and program outputs, to focus on outcomes and
results.87 Agencies are required to set goals, generate information and reports needed
to measure program performance, and move toward performance budgeting. The
National Performance Review, state government experiences with performance
budgeting, and the “total quality management” (TQM) movement contributed to
congressional interest in performance management and budgeting.
The “Results Act” was one of several major pieces of legislation enacted in the
1990s that were intended to improve management and accountability in federal
agencies. The others, detailed elsewhere in this compendium, included the Chief
Financial Officers Act of 1990 (104 Stat. 2838) that provided for the establishment
of chief financial officers (CFOs) in the 24 largest federal departments and agencies,
which together control about 98% of the government’s gross budget authority. The
Government Management Reform Act of 1994 (110 Stat. 3410) required all CFO
agencies to prepare and have audited financial statements for their operations
beginning with FY1996. The Information Technology Management Reform Act of

1996 (110 Stat. 679, later renamed the Clinger-Cohen Act of 1996, 110 Stat. 3009-


393) requires agencies to establish performance measures to evaluate how their
information technology activities support agency program efforts.
Major Provisions
GPRA directs agencies with budgets over $20 million88 to develop, in
consultation with Congress and other stakeholders, long-term goals and six-year
strategic plans to be revised every three years; to set annual performance goals and
develop annual performance plans based on the strategic goals; and to report annually
on actual performance compared to the targets. Federal agencies started to submit


86 Codified at 5 U.S.C. prec. § 301, § 306; 31 U.S.C. § 1101 & nt, § 1105, §§ 1115-1119,
prec. § 9701, §§ 9703-9704; 39 U.S.C. prec. § 2001, §§ 2801-2805.
87 The statute defines output measure as “the tabulation, calculation, or recording of activity
or effort and can be expressed in a quantitative or qualitative manner.” Outcome measure
means “assessment of the results of a program activity compared to its intended purpose”
(Sec. 4(f)).
88 Except for the Central Intelligence Agency, General Accounting Office, Panama Canal
Commission, and the U.S. Postal Service (which is governed by separate, but similar,
provisions of the same law).

annual performance plans to Congress beginning with the FY1999 budget cycle. The
Office of Management and Budget (OMB) submitted the first annual government-
wide performance plan with the President’s FY1999 budget. The performance report
cycle began in 2000 with reports covering FY1999. Quantitative measures are
required except when OMB approves non-quantitative alternatives (as outlined in the
statute) for programs that cannot be expressed “in an objective, quantifiable, and
measurable form ....”
Anticipating bureaucratic obstacles and the need to alter traditional procedures,
budget, and reporting systems, Congress recognized that successful implementation
of GPRA would require major changes in agencies’ cultures and procedures. Thus,
Congress phased in GPRA over a seven-year period and authorized pilot projects.
Congress attempted to avoid top-down OMB control, and allowed each agency to
develop a performance measurement process that conforms to its unique functions.
Only federal employees may prepare strategic plans, performance plans, and reports,
since these activities are “inherently governmental functions.” In addition, guidance
issued by OMB admonishes agencies to keep costs down and not increase paperwork.
In statutorily required reports that used the results of the pilot projects, OMB did
not recommend changes to the law, and GAO reported that agency implementation
varied in quality, utility, and responsiveness, but that improvements could be made.89
In a letter to Congress, January 18, 2001, reporting as mandated by P.L. 103-62,
OMB declined to recommend to Congress that performance budgeting be required
statutorily.90
Major changes to GPRA have been accomplished both by statute and by
administrative directive. The Reports Consolidation Act of 200091 authorized
agencies to combine annual performance reports with financial reports required under
the CFO Act. The following year OMB made the consolidation mandatory and set
forth a schedule of accelerated deadlines.92 The performance and accountability
reports covering FY2003 were due by January 30, 2004, and beginning with FY2004,
the consolidated reports are due by November 15, 2004. The Federal Financial
Assistance Management Improvement Act of 199993 requires federal agencies and
non-federal entities that are recipients of federal financial assistance to set annual
goals and to measure compliance relating to efficiency and coordination, delivery of


89 U.S. Office of Management and Budget, The Government Performance and Results Act,
Report to the President and the Congress, May 1997; and U.S. General Accounting Office,
The Government Performance and Results Act, 1997 Government-wide Implementation Will
Be Uneven, GGD-97-109, June 1997.
90 U.S. Office of Management and Budget, Report to the Hon. J. Dennis Hastert, from Jacob
J. Lew, Jan. 18, 2001, and CRS Report RL32164, Performance Management and Budgeting
in the Federal Government: Brief History and Recent Developments, by Virginia A.
McMurtry.
91 P.L. 106-531, 114 Stat. 2537.
92 U.S. Office of Management and Budget, Form and Content of Agency Financial
Statements, Bulletin No. 01-09, Sept. 25, 2001.
93 P.L. 106-107, 113 Stat. 1486.

services, and simplification of processing as part of the agency’s compliance with
GPRA. Most recently, GPRA was amended by the Homeland Security Act of 2002.94
Agencies are required to augment desciptions in their annual performance plans
regarding how they will achieve their performance goals and objectives95 by also
describing the “strategies” and “training” that are required to meet those goals and
objectives. In addition, the agency chief human capital officers (CHCOs) established
by the Homeland Security Act are required to prepare this portion of agency annual
performance plans.96 The amendment to GPRA also requires agencies to review, in
their annual program performance reports, their performance relative to their strategic
human capital management.97
Significant changes relating to GPRA have also occurred through the annual
revisions to OMB Circular No. A-11, “The Preparation, Submission, and Execution
of the Budget.”98 In 1995 OMB for the first time issued Part 2, “Preparation and
Submission of Strategic Plans,” to OMB Circular No. A-11. By 1999, Part 2 covered
“Preparation and Submission of Strategic Plans, Annual Performance Plans, and
Annual Program Performance Reports.” Among the changes made in June 2002 (now
found in A-11, Part 6) were requirements that agency annual performance plans
include performance goals used in assessments of program effectiveness, that
agencies restructure their budget accounts and substitute outputs and outcomes for
the current lists of program activities in program and financing schedules, and that
agencies integrate performance and budget in performance plans. The revision of A-
11 in July 2003 requires agencies to prepare performance budgets for FY2005 and
to incorporate their GPRA performance plans into their budget requests.
Discussion
A number of congressional hearings and reports overseeing implementation of
the law have been produced since 1993.99 For instance, a committee report on
FY1999 performance plans concluded that the plans were “disappointing.” It noted
that the strategic plans did not lay a good foundation for performance plans; that
agencies did not deal with major management problems, lacked reliable data to verify
and validate performance, and often did not give results-oriented performance
measures; and that many performance measures were not linked to day-to-day
activities. The report found that a “culture change” was required to ensure


94 As provided by the Chief Human Capital Officers Act of 2002, enacted as Title XIII of
the Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2289).
95 As required by 31 U.S.C. § 1115(a)(3).
96 See the discussion of Title 5 U.S.C. Chapter 14, elsewhere in this compendium, for more
on the establishment and duties of agency CHCOs.
97 31 U.S.C. § 1116(d)(5).
98 A current version of Circular No. A-11 is available electronically at
[http://www.whitehouse.gov/omb/circulars/index.html], visited Jan. 22, 2004.
99 CRS Report RS20257, Government Performance and Results Act: Brief History and
Implementation Activities, by Genevieve J. Knezo.

implementation.100 A report by former Chairman Thompson of the Senate
Governmental Affairs Committee critiqued FY1999 performance reports and
observed that most do not “inform Congress and the public about what agencies are
doing and how well they are doing it.”101
GAO has published assessments of individual agency GPRA performance plans
and reports and has summarized its assessments in a variety of reports and
testimony.102 The House Subcommittee on Government Efficiency, Financial
Management and Intergovernmental Relations held a hearing on “The Results Act:
Has It Met Congressional Expectations?” (June 19, 2001). Compliance with GPRA
was identified as a major management challenge in Government at the Brink, Urgent
Federal Government Management Problems Facing the Bush Administration,
released by Senator Fred Thompson.103
To mark the 10-year anniversary of enactment of the law, hearings were held by
the Subcommittee on Government Efficiency and Financial Management of the
House Committee on Government Reform in April 2003,104 and by the full House
Committee on Government Reform in September 2003.105 Many of the themes
enunciated in the earlier reports have continued to resonate throughout the 10 years
since enactment. For instance, reporting on GPRA in the FY2004 budget request,
OMB said:


100 Rep. Dick Armey, Sen. Larry Craig, Rep. Dan Burton, Rep. Bob Livingston, and Rep.
John Kasich, The Results Act: It’s the Law; the November 1997 Report. (Document
available from CRS upon request.)
101 U.S. Congress, Senate Committee on Governmental Affairs, Management Challenges
Facing the New Administration, committee print, report of Senator Fred Thompson,thnd
Chairman, 106 Cong., 2 sess., Oct. 2000, S.Prt. 106-62 (Washington: GPO, 2000).
102 For individual plans, see “Reports on the Government Performance and Results Act,”
available at [http://www.gao.gov/], visited Jan. 22, 2004. See also U.S. General Accounting
Office, Managing for Results: Using GPRA to Help Congressional Decisionmaking and
Strengthen Oversight, T-GGD-00-95, Mar. 22, 2000; and David Walkier, statement of the
Comptroller General of the United States, “Results-oriented Government; Using GPRA tost
Address 21 Century Challenges,” in hearing on What Happened to GPRA? A Retrospective
Look at Government Performance and Results, Sept. 18, 2003, available at:
[http://reform.house.gov/GovReform/Hearings/EventSingle.aspx?EventID=408], visited
Dec. 18, 2003.
103 Sen. Fred Thompson, Committee on Governmental Affairs, Government at the Brink, 2
vol. (Washington: June 2001), available at [http://www.senate.gov/~gov_affairs/], visited
Jan. 22, 2004, from the “Committee Documents” menu, under “Reports.” See also Sen.
Fred Thompson, “Thompson Unveils Agency Performance Report Grades,” press release,
Oct. 30, 2000. (Document available from CRS upon request.)
104 U.S. Congress, House Committee on Government Reform, Subcommittee on Government
Efficiency and Financial Management, Performance, Results, and Budget Decisions, 108thst
Cong., 1 sess., Apr. 1, 2003, p.73.
105 U.S. Congress, House Committee on Government Reform, What Happened to GPRA?
A Retrospective Look at Government Performance and Results, available at:
[http://reform.house.gov/GovReform/Hearings/EventSingle.aspx?EventID=408], visited
Dec. 18, 2003.

Unfortunately, the implementation of this law has fallen far short of its authors’
hopes. Agency plans are plagued by performance measures that are meaningless,
vague, too numerous, and often compiled by people who have no direct
connection with budget decisions. Today, agencies produce over 13,000 pages106
of performance plans every year that are largely ignored in the budget process.
There is also criticism that Congress does not use performance and results
information in authorizing programs or appropriating funding for them.107 A January
2002 GAO report, Managing for Results: Agency Progress in Linking Performance
Plans with Budgets and Financial Statements, said that three-fourths of federal
agencies were connecting performance planning, budgeting and financial reporting
at aggregated goal levels, but that more links were required at specific program levels
to assist in internal management and congressional decision making.
President George W. Bush’s report, The President’s Management Agenda
(August 2001), stressed results-oriented management and included budget and108
performance integration as one of five government-wide initiatives. Performance
was an important theme in the FY2003 budget request when the Administration said
it used performance analyses to make funding decisions for over 100 federal
programs across all agencies. This represented the first time a President’s budget109
submission formally attempted to link budget requests with program performance.
The Bush Administration has developed a formal program assessment rating
tool (PART) that agencies must use to evaluate program performance. This is
intended to “...inform and improve agency GPRA plans and reports, and establish a
meaningful, systematic link between GPRA and the budget process.”110 Programs are
rated by agency managers and OMB staff according to questionnaires developed by
OMB. Circular No. A-11 now requires that agencies’ performance budgets include
information from the PART assessments. The President’s FY2004 budget included
a separate volume, Performance and Management Assessments, which arrayed PART
evaluations for 234 programs. Other parts of the budget contained information on
“Rating the Performance of Federal Programs” and “Budget and Performance
Integration.” OMB’s PART instructions for FY2005 subject an additional 20% of
all programs to PART evaluations, with 100% of federal programs to be evaluated
this way by FY2008. Critics of PART argue that the “subjectiveness” used in


106 U.S. Office of Management and Budget, Budget of the United States Government, Fiscal
Year 2004, p. 49.
107 This topic was discussed in statements by witnesses from OMB and GAO, and by the
committee chairman in U.S. Congress, What Happened to GPRA? A Retrospective Look at
Government Performance and Results.
108 For an overview of the President’s Management Agenda, see CRS Report RS21416, The
President’s Management Agenca: A Brief Introduction, by Virginia A. McMurtry.
109 “Rigorous OMB Performance Measures Will Be Used to Frame Agency Budget
Proposals for FY2004,” Washington Fax, Jan. 23, 2002; see the chapter on “Governing with
Accountability,” in U.S. Office of Management and Budget, Budget of the U.S. Government,
Fiscal Year 2003.
110 See OMB Memorandum M-02-10, July 16, 2002.

determining performance measures may lead to poor budget decision making
pract i ces. 111
Some agencies have not yet adequately defined their goals, program objectives,
expected outcomes, and results, and have not developed appropriate measures for
them. It is difficult to develop quantitative or alternative measures for some program
areas, for example, programs designed to support basic research or certain diffuse
policy objectives. Concerns have been stated about the costs and benefits of
developing new results-oriented performance measurement systems, about the lack
of interagency coordination to use similar measures for similar programs, and about
the need to link “Results Act” implementation to the everyday work of program
mangers. Some critics recommend that Congress set clear performance goals in
authorizing legislation,112 set clear performance standards in appropriations
legislation, and use PART to grade programs and help with funding decisions.
Other issues relate to the plausibility of achieving the intent of the statute, and
to its fundamental assumptions and purposes. Some say that GPRA is a wasteful
paperwork exercise since, typically, executive and legislative decisions about funding
priorities and program continuation are based more on political debate and objectives
and less on the kind of performance data that are intended to be generated from the
GPRA mandates. Others believe performance management and budgeting are
feasible, and assert that accountability and congressional control over the budget will
increase as Congress uses objective, results-oriented information to oversee agencies
and develop budget priorities.
Selected Source Reading
CRS Report RS20257. Government Performance and Results Act: Brief History and
Implementation Activities, by Genevieve J. Knezo.
CRS Report RL32164. Performance Management and Budgeting in the Federal
Government: Brief History and Recent Developments, by Virginia A.
McMurtry.
Genevieve J. Knezo


111 S. Haley, “OMB Performance Pressures May Divert Agencies from Important Priorities,
House Science Committee Minority Asserts,” Washington Fax, Mar. 7, 2003.
112 Philip Joyce, Linking Performance and Budgeting: Opportunities in the Federal Budget
Process, IBM Center for The Business of Government, Oct. 2003, available at
[http://www.businessofgovernment.org/pdfs/Joyce_Report.pdf], visited Dec. 18, 2003.

C. Clinger-Cohen Act of 1996
Statutory Intent and History
The Information Technology Management Reform Act (ITMRA; 110 Stat.
679;113 40 U.S.C. § 759) was incorporated as an amendment into the National
Defense Authorization Act for Fiscal Year 1996 (110 Stat. 186). In October 1996,
the name of this act was formally changed to the Clinger-Cohen Act (110 Stat. 3009;
31 U.S.C. § 3512) in recognition of its two principal sponsors. The law provides that
each federal agency buy the best and most cost effective information technology
available. Under the law, the General Services Administration’s (GSA’s) role as the
central agency for information technology acquisition policy is repealed. Each
federal agency is given responsibility for information technology acquisition and
management with a Chief Information Officer (CIO) to help achieve this goal.
Financial accounting and management responsibilities also are given to each federal
agency. The purpose of the law is to streamline and improve information technology
procurement policies at federal agencies, as well as give each federal agency the
flexibility to make information technology purchases relevant to its mission.
The Clinger-Cohen Act replaced the Automatic Data Processing Act (79 Stat.114
1127), the Brooks Act. The Brooks Act, passed in 1965, was intended to address
problems of “[p]assive, partial, or informal types of leadership” in the purchase,
lease, maintenance, operation, and utilization of automatic data processing (ADP) by
federal agencies. At that time ADP technology and its applications were still
relatively new although their use was becoming more widespread; however, federal
agencies were reporting that they were having greater difficulty complying with115
Bureau of the Budget regulations for annual agency-wide budget reviews. The
Brooks Act centralized and coordinated this process by giving the General Services
Administration “operational responsibility” for ADP management, utilization and
acquisition through a “revolving fund.” (79 Stat. 1126).
In the years following its passage, however, advances in information technology
and applications created problems for agencies operating under the Brooks Act.
Policymakers, in turn, sought to redress problems that had arisen from a centralized
federal acquisition, procurement, and financial accounting system. Increasingly,
many viewed the Brooks Act as causing procurement delays, imposing standardized
technology and application solutions, and mismatching technology solutions with
agency missions. The Information Technology Management Reform Act (S. 946),
introduced by Senator William S. Cohen, was considered by policymakers during the
104th Congress. S. 946 was intended to provide the executive branch with the
flexibility to acquire technologies and services incrementally, enter into modular
contracts with vendors rather than more costly longer-term contracts, and obtain


113 To be codified at 40 U.S.C. § 759 nt, § 1401 & nt, §§ 1411-1413, §§ 1421-1428, §§ 1441-

1442, §§ 1451-1452, § 1461, §§ 1471-1475, §§ 1491-1492, §§ 1501-1503; 41 U.S.C. § 434.


114 Named after its principal sponsor, former Rep. Jack Brooks.
115 The Bureau of the Budget was the predecessor agency to the Office of Management and
Budget (OMB), before OMB was established via Reorganization Plan No. 2 in 1970.

information technologies and services that fit agency needs. A companion bill,
identical to the Senate legislation, was introduced by Representative William Clinger
(H.R. 830) in the House of Representatives. H.R. 830 was passed by the House of
Representatives on February 22, 1995. After H.R. 830 was referred to the Senate,
S.946 was substituted for the House legislation.
Many congressional policymakers sought to implement information technology
acquisition and procurement management reform during the 104th Congress.
Advocates saw an opportunity for implementing the reforms in S. 946 by
incorporating the bill into the National Defense Authorization Act for Fiscal Year
1996 (S. 1124), as Division E of the legislation. Congressional policymakers had
been interested in reforming and streamlining all Department Defense (DOD)
acquisition and procurement processes. By incorporating S. 946 into the FY1996
DOD authorization bill, policymakers brought this reform to all federal agency
information technology acquisition and procurement management. The final version
of S. 1124 passed the House of Representatives on January 24, 1996, and the Senate
on January 26, 1996. It was approved by President Clinton on February 10, 1996.
(110 Stat. 679).
Major Provisions
The Clinger-Cohen Act contains extensive procedural, technical, and policy
revisions of federal information technology acquisition and procurement
management. These provisions can be summarized as (1) repeal of GSA’s primary
role in setting policy and regulations for federal information technology acquisition,
while giving most of this responsibility to individual federal agencies; (2) creation
of Chief Information Officers (CIOs) in federal agencies to provide advice to heads
of agencies on policies to develop, maintain and facilitate information systems as
well as help evaluate, assess, and report on these policies; (3) creation of a simplified,
clear, and understandable process of information technology acquisition by federal
agencies; and (4) initiation of two specific pilot programs which authorize federal
agencies to enter into competitive contracts with the private sector.
The provisions creating the CIOs and establishing the pilot programs have
received much attention. The creation of CIOs in federal agencies was based on a
perceived need to decentralize federal procurement, application, and evaluation of
information technologies, benefit overall government performance, and bring
expertise to the federal agencies. The two pilot programs are intended to reward cost
savings and performance. The first type of program is the Share-in-Savings pilot
program. This program provides acquisition and procurement incentives to the
private sector, in which a federal agency can pay private sector contractors an amount
equal to a portion of savings (the share-in-savings) achieved by the government. The
second pilot program was the Solutions-Based Contracting pilot program. Under this
program, executive branch acquisition of information technology must include
criteria that incorporate objectives defined by the federal government as well as a
streamlined contractor process. The private sector is allowed to provide solutions to
effectively achieve agency objectives. The law also requires that simple and clear
selection factors, communication, proposals, evaluation, and system implementation
be used by the executive branch.



Discussion
Early oversight of the implementation of the Clinger-Cohen Act immediately
following its passage and the departure of its sponsors from Congress was relatively
limited.116 However, as Congress has become increasingly interested in Internet,
information technology, and e-government issues, some provisions of the Clinger-
Cohen Act have received additional attention in the 107th and 108th Congresses.
One concern has been the recruitment and retention of CIOs. A shortage of
qualified CIOs, and regular turnover of personnel, compounded by salary and
compensation disparities between government and private sector opportunities, have
raised concerns about the government’s ability to maintain the momentum and
continuity of major e-government and IT initiatives.117 As IT projects have become
more integrated into the function of a department or agency, the role of CIOs has
evolved as well. CIOs are being called upon not only for their technological
expertise, but also to provide strategic leadership in certain areas of policy, budget,
and contract oversight.118 The CIO’s relationship with top-level department
decisionmakers can also be critical to successfully implementing e-government
initiatives. This suggests that in selecting a department-level CIO, one needs to
consider the strengths and weaknesses of choosing a career employee, who may have
a deeper contextual understanding of the mission and functions of an organization,
and recruiting a candidate from the private sector, who may bring a wider range of
experiences and perspectives to the position.119
Concerns have also been raised about organizational and budgetary obstacles
possibly hindering CIO performance. The Clinger-Cohen Act requires that the CIO
report directly to the agency head, and have information resource management as a
primary function. However, in many cases, these requirements have not been met.
Results from GAO studies of government CIOs within the first few years of the
enactment of the Clinger-Cohen Act showed that it was not uncommon for CIOs to
report to the Deputy Secretary or other agency head subordinates rather than directly
to the Secretary. In addition, CIOs frequently wore several hats within their
agencies.120 Due to the apparent lack of more current studies, it is unclear how this
situation has evolved in recent years.


116 Some observers suggest this may have been partly the result of the act’s principal
sponsors’ departure from Congress; in 1997, Senator William Cohen left Congress to
become the Secretary of Defense, and Representative William Clinger retired.
117 Diane Frank, “CIOs Find Crowded Agenda Wearing,” Federal Computer Week, June 30,

2003, p. 8.


118 Cynthia L. Webb, “Providing the Technology Vision,” Washington Post, Mar. 6, 2003,
available at [http://www.washingtonpost.com/wp-dyn/articles/A47136-2003Mar5.html],
visited Dec. 3, 2003.
119 Sara Michael, “Insider Information,” Federal Computer Week, Apr. 14, 2003, p. 26.
120 U.S. General Accounting Office, Chief Information Officers: Ensuring Strong Leadership
and an Effective Council, GAO-T-AIMD-98-22, Oct. 27, 1997; Information Technology:
Update on VA Actions to Implement Critical Reforms, GAO-T-AIMD-00-74, Sept. 21, 2000;
and Chief Information Officers: Implementing Effective CIO Organizations, GAO-T-AIMD-

00-128, Mar. 24, 2000.



The results of the two pilot programs have been mixed. In late 2002, the
Solutions-Based Contracting program was repealed by Section 825 of the Bob Stump
National Defense Authorization Act for Fiscal Year 2003 (P.L. 107-314). The reason
cited in the conference report (H.Rept. 107-772) was that the legislative authority for
the program “has never been used and is not likely to be needed.” Similar concerns
have been raised regarding the relative lack of use of the “share-in-savings” pilot
program.121 In a January 2003 report, GAO observed that “there are few documented
examples of SIS contracting in the federal government.”122 One such example is the
Department of Education’s Office of Student Financial Assistance (OFSA), which
has entered into a series of “share-in-savings” contracts with Accenture to modernize
its computer systems.123 While “share-in-savings”programs are considered by many
to be forward-thinking policies with the potential to reduce spending and improve the
quality of services, some experts contend that there are a number of obstacles to
successfully instituting such programs. These include being able to determine
baseline costs and an agency’s willingness to give the contractor more control over
the details (so the contractor will feel it has a chance to achieve the cost savings).
Some observers have asserted that agencies believe Congress will reduce their
appropriations once the cost-savings is verified which, while saving the federal
government money, will not provide any direct benefits to them (i.e., a reward).
Hence, they believe the agencies have limited incentive to actively pursue such
contracts. To help address some of these issues, Section 210 of the E-Government
Act, signed into law in December 2002, includes provisions that temporarily allow
an expanded use of “share-in-savings” contracts. The provision also provides
incentives for agencies, such as the ability to retain a portion of the savings realized
from the contract. However, at the time of this writing, implementing guidance from
OMB is still forthcoming, and the provision expires in 2005.
While the Clinger-Cohen Act remains in effect and its provisions are still
relevant to current agency IT management issues, the passage of the E-Government
Act (discussed elsewhere in this compendium) represents a shift in the primary
legislative vehicle being used to guide evolving federal information technology
management practices and to promote initiatives to make government information
and services available online. In doing so, it also represents a continuation of efforts
to realize greater efficiencies and reduce redundancies through improved
intergovernmental coordination, and by aligning information technology investments.
As Congress continues to exercise its oversight role over e-government initiatives,
it is anticipated that issues related to the intersection of these laws will also be raised.


121 Similar concerns were not a significant focus of attention regarding the Solutions-Based
Contracting pilot program.
122 U.S. General Accounting Office, Contract Management: Commercial Use of Sharing-in-
Savings Contracting, GAO-03-327, Jan. 2003, p. 3.
123 Diane Frank, “Education Expands Share-in-Savings,” Federal Computer Week, May 14,
2001, p. 44; Tanya N. Ballard, “Acquisition Officials Push Share-in-Savings IT
Contracting,” GovExec.com, Oct. 3, 2003, available at
[http://www.govexec.com/dailyfed/1003/100303t1.htm], visited Oct. 4, 2003.

Selected Source Reading
U.S. General Accounting Office. Government Reform: Using Reengineering and
Technology to Improve Government Performance. GAO-T-OCG-95-2.
February 2, 1995.
——. Information Technology Investment; A Governmentwide Overview.
GAO/AIMD-95-208. July 1995.
——. Chief Information Officers: Ensuring Strong Leadership and an Effective
Council. GAO-T-AIMD-98-22. October 27, 1997.
——. Contract Management: Commercial Use of Share-in-Savings Contracting.
GAO-03-327. January 2003.
Jeffrey W. Seifert



III. Financial Management, Budget, and Accounting
A. Antideficiency Act
Statutory Intent and History
The so-called Antideficiency Act (33 Stat. 1214, and 34 Stat. 27; 31 U.S.C. §§
1341-42) actually consists of a series of provisions and revisions incorporated into
appropriations laws over the years relating to matters such as prohibited activities,
the apportionment system, and budgetary reserves. These provisions, now codified
in two locations in Title 31 of the United States Code, continue to play a pivotal role
in the execution phase of the federal budget process, when the agencies actually
spend the funds provided in appropriations laws.
The origins of the Antideficiency Act date back to the 19th century. The initial
portion, enacted in 1870 as Section 7 of the General Appropriations Act for Fiscal
Year 1871 (16 Stat. 251), provided:
... that it shall not be lawful for any department of the government to expend in
any one fiscal year any sum in excess of appropriations made by Congress for
that fiscal year, or to involve the government in any contract for the future
payment of money in excess of such appropriations.
The intent was to prevent expenditures in excess of appropriations. Section 5 of the

1870 law also addressed the issue of congressional controls over budget execution,


though not the question of preventing deficiencies. Instead, it provided that
unexpended balances of appropriations accounts could only be applied to payment
of expenses or contracts incurred during that year.
Major legislative provisions, often referred to as the Antideficiency Acts of
1905 and 1906, sought to strengthen the prohibitions of the 1870 law by expanding
its provisions, adding restrictions on voluntary services for the government, and
imposing criminal penalties for violations. Most importantly, the laws established
a new administrative process for budget execution. This process, which remains in
use today, is termed “apportionment” and results in the distribution of the budget
authority provided in appropriations law to the agencies in installments, rather than
all at once.
In order to provide against disproportionate spending rates by agencies, the 1905
legislation mandated that appropriations be “so apportioned by monthly or other
allotments as to prevent undue expenditures in one portion of the year that may
require deficiency or additional appropriations to complete the service of the fiscal
year....” However, the fiscal discipline of this provision was weakened by language
allowing apportionments to be “waived or modified in specific cases by the written
order of the head of the Executive Department or other Government establishment
having control of the expenditure....” (33 Stat. 1257-1258).
This exemption from apportionments by written order provided a broad
loophole, widely used by department heads. The 1906 revision sought to tighten the
waiver language by stipulating that apportionments could not be waived or modified



“except upon the happening of some extraordinary emergency or unusual
circumstance which could not be anticipated at the time of making such
apportionment” (34 Stat. 48-49). Moreover, any waiver or modification of
apportionment was to be justified in writing and communicated to Congress “in
connection with estimates for any additional appropriations required on account
thereof.”
In 1933, with Executive Order 6166 issued pursuant to the Economy Act of
1933 (48 Stat. 16), authority for “making, waiving, and modifying apportionments
of appropriations” was transferred from agency heads to the Director of the Bureau
of the Budget (BOB).124 However, BOB had earlier exerted control by administrative
means, such as a circular directing each agency to estimate an indispensable level of
funding to carry out its activities. Following review by the Bureau and approval by
the President, the remainder of the appropriation, or estimated savings, was to be
designated a “General Reserve.” So, the apportionment process came to have two
objectives: to prevent deficiencies and to effect savings.
The continuing growth and complexity of the federal budget strained the
existing system of administrative controls over funds. Eventually, another substantial
revision of Antideficiency Act provisions occurred in 1950 (64 Stat. 595), largely
based on recommendations in a report to Congress from the Bureau of the Budget
and the General Accounting Office (GAO).125
The BOB/GAO report suggested that changing conditions during the fiscal year
would always require some readjustments, but such changes could be expected to
result in surpluses as well as deficiencies. The 1950 amendments incorporated this
view and, for the first time, provided a statutory basis for budgetary reserves. The
amendments also expanded upon the provisions of earlier regulations by stipulating
four justifications for establishing reserves: (1) to provide for contingencies; and to
effect savings whenever savings are made possible by or through: (2) changes in
requirements; (3) greater efficiency of operations; or (4) other developments
subsequent to the date on which such appropriation was made available. The 1950
amendments further spelled out more detailed instructions for the operations of the
apportionment process beyond the establishment of reserves, and for subdivision of
apportionments at the agency level.


124 Dating to the Budget and Accounting Act of 1921, the Bureau of the Budget was
originally located within the Department of the Treasury. The law authorized the President
to appoint the director and assistant director of the bureau, however, signifying that it was
essentially a presidential entity. When the Executive Office of the President was established
in 1939, BOB was the first unit designated as a component. In 1970, BOB was reconstituted
as the Office of Management and Budget (OMB).
125 Report and Recommendations by the Director of the Bureau of the Budget and the
Comptroller General of the United States with Respect to the Antideficiency Act and Related
Legislation and Procedures. Submitted to Senator Styles Bridges, Chairman of
Appropriations Committee, June 5, 1947. Typed manuscript. Cited by Louis Fisher in
Presidential Spending Power (Princeton, NJ: Princeton University Press, 1975), p. 155. The
provisions were enacted as a part of the general appropriations act for the fiscal year ending
June 30, 1951.

In the mid-1950s, Congress enacted a provision relating to the administration
of the apportionment system by the agencies. This 1956 amendment simplified
agency systems for subdividing funds by eliminating multiple pockets of funding
authority, known as “allowances,” so that administrative controls in the
apportionment system would consist solely of allotments (P.L. 84-863, 70 Stat. 782).
The following year, provisions relating to the apportionment system were further
revised. The effect of the changes was to prohibit the request for apportionments or
reapportionments necessitating a deficiency or supplemental estimate unless the
agency head determined that such action fell within the exceptions expressly set out
in the law (71 Stat. 440).
Major Provisions
Four main types of prohibitions are contained in the Antideficiency Act, as
amended: (1) making expenditures in excess of the appropriation; (2) making
expenditures in advance of the appropriation; (3) accepting voluntary service for the
United States, except in cases of emergency; and (4) making obligations or
expenditures in excess of an apportionment or reapportionment, or in excess of the
amount permitted by agency regulation.
The limitations on expending and obligating amounts (31 U.S.C. § 1341)
prohibit an officer or employee of the United States government or of the District of
Columbia government from:
!making or authorizing an expenditure from, or creating or
authorizing an obligation under, any appropriation or fund in excess
of the amount available in the appropriation or fund unless
authorized by law; and
!involving the government in any contract or other obligation for the
payment of money for any purpose in advance of appropriations
made for such purpose, unless the contract or obligation is
authorized by law.
The limitations on voluntary services (31 U.S.C. § 1342) prohibit an officer or
employee of the United States government or of the District of Columbia government
from accepting voluntary services for the United States, or employing personal
services in excess of those authorized by law, except in cases of emergency involving
the safety of human life or the protection of property.
An entire subchapter (31 U.S.C. §§ 1511-1519) deals with the apportionment
system. It contains provisions for definitions and application, for apportionment and
establishment of reserves, for officials controlling apportionments, for the
administrative division of apportionments, and for authorized apportionments
necessitating deficiency or supplemental appropriations. The subchapter further
provides for exemptions, prohibited obligations and expenditures, and sanctions
entailing adverse personnel actions and criminal penalties. The subchapter does not
apply to Congress (the Senate; the House of Representatives; congressional
committees; or a Member, officer, employee, or office of either house of Congress,
or of the Office of the Architect of the Capitol) (31 U.S.C. § 1511(b)(3)).



The central enforcement provision is found in Section 1517. An officer or
employee of an agency subject to apportionment is prohibited from making
obligations or expenditures in excess of an apportionment or reapportionment, or in
excess of the amount permitted by agency regulation. Violations are punishable by
appropriate administrative discipline, including possible suspension from duty
without pay or removal from office (Section 1518), and/or by criminal penalties,
including a fine of not more than $5,000, imprisonment for not more than two years,
or both (Section 1519).
Discussion
The framework for the apportionment process, as refined in the 1950
amendments, remains the basis for federal budget execution. However, evolution of
the process continues, occasionally being modified by statute or executive order, but
more frequently affected as a result of agency regulations, decisions of the
Comptroller General, and other legal opinions.
The Impoundment Control Act (Title X of the 1974 Congressional Budget and
Impoundment Control Act, 88 Stat. 297) amended the 1950 language regarding
budgetary reserves in an effort to tighten control over executive branch discretion.
The 1974 legislation served to delete the “other developments” justification
contained in the 1950 amendments. Henceforth, reserves were to be established
“solely to provide for contingencies, or to effect savings whenever savings are made
possible by or through changes in requirements or greater efficiency of operations”
(88 Stat. 332). Under the 1974 law, reserves were to be considered as a type of
deferral, or temporary postponement of spending, in contrast to a rescission, or
permanent cancellation.126
The prohibitions in the Antideficiency Act against spending monies in advance
or in excess of appropriations sometimes lead to “funding gap” situations — when
action on appropriations measures is not completed before the start of the new fiscal
year and interim continuing resolutions lapse or are themselves delayed. For many
years, agency officials generally maintained operations during periods of expired
funding, while attempting to cut or postpone all non-essential obligations. Such
action, while in technical violation of the Antideficiency Act prohibition on incurring
obligations from Congress, was usually redressed by passing continuing resolutions
effective retroactively to the beginning of the fiscal year.
The situation changed in the early 1980s with the issuance of two opinions by
Attorney General Benjamin Civiletti concerning implications of the Antideficiency
Act in instances of funding gaps.127 According to these opinions, when
appropriations lapse, federal managers are to act immediately to terminate the
agency’s normal operations in an orderly way; however, various exceptions in the


126 A restatement of deferral authority was provided in the Balanced Budget and Emergency
Deficit Reduction Reaffirmation Act of 1987 (101 Stat. 785-786).
127 “Applicability of the Antideficiency Act Upon a Lapse in an Agency’s Appropriations,”
4 A Op. O.L.C. 16 (1980); “Authority for the Continuance of Government Functions During
a Temporary Lapse in Appropriations,” 5 Op. O.L.C. 1 (1981).

Antideficiency Act allow some functions to continue. The Attorney General also
stated that the Department of Justice would strictly enforce the criminal provisions
of the act in cases of future violations.128
Selected Source Reading
Feld, Alan. “Shutting Down the Government.” Boston University Law Review, vol.

69 (November 1989), p. 971 ff.


Huyser, Kevin J. “Anti-Deficiency Act.” The Army Lawyer (January-February

2003), p. 218.


Sapp, David G. “Antideficiency Act Violations.” Air Force Comptroller, vol. 32
(January 1998), pp. 4-9.
U.S. General Accounting Office. Office of General Counsel. Principles of Federal
Appropriations Law, 2nd ed., vol. II. Washington: GAO, 1992, pp. 6.9 - 6.99.
Virginia McMurtry


128 See U.S. General Accounting Office, Funding Gaps Jeopardize Federal Government
Operations, PAD-81-31, Mar. 3, 1981. The 1980 and 1981 Opinions of the Attorney
General are included as appendices. The Budget Enforcement Act of 1990 (104 Stat. 1388-
573) amended Title 31 to further limit voluntary services allowable under the Antideficiency
Act.

B. Budget and Accounting Act of 1921
Statutory Intent and History
The Budget and Accounting Act of 1921 (42 Stat. 20) grew out of Progressive
Era views that saw legislatures as inherently corrupt, and sought to place more trust
and more authority in executive and administrative institutions. The most important
of several studies made on budgeting was that of President Taft’s Commission on
Economy and Efficiency (1910-1912). The commission’s report, however, was
virtually silent on the role of the legislature in the executive budget system it
recommended, and its proposal languished in Congress. In spite of this, it remained
on the national agenda, strongly supported by the Institute for Government Research
(later the Brookings Institution), and support for an executive budget was included
in presidential platforms by both Republicans and Democrats.129
During World War I, the administrative machinery of the federal government
was severely taxed, giving new impetus to administrative reform in its aftermath. In
1919, Congress took up the issue of a national budget system, establishing select
committees in both the House and Senate to hold hearings and make
recommendations. The House Select Committee held 11 days of hearings in
September and October 1919. The Senate Committee held four additional days of
hearings in December 1919 and January 1920. Legislation embodying these
recommendations was passed overwhelmingly in both chambers in 1920, but was
vetoed by President Wilson, who questioned the constitutionality of a provision
involving his removal power over the proposed office of Comptroller General. After
the election of Warren G. Harding to the presidency in 1920, the bill was passed with
only minor changes in the removal power provision, and signed into law as the
Budget and Accounting Act of 1921.
Characterized as “probably the greatest landmark of our administrative history130
except for the Constitution itself,” the Budget and Accounting Act established in
law the duty of the President to submit each year a single, consolidated budget
proposal for congressional consideration. The act stands as the foundation of the
modern presidency because it made the President the administrative, as well as
political, head of the executive branch. It meant that the President alone was
responsible for making budget requests, so that each department and agency would
no longer be able to act independently of presidential direction. The act also
established the Bureau of the Budget (predecessor of the current Office of
Management and Budget) to provide the President with the resources necessary to
produce such a proposal, and the General Accounting Office, to provide Congress
with the resources to ensure accountability.


129 It was included in the Republican platform in 1916 and 1920, and the Democratic
platform in 1920. In 1916 the Democrats had endorsed a return to consolidated control of
appropriations in Congress, but not a presidential budget. See Donald Bruce Johnson, ed.
National Party Platforms (rev. ed.), vol. 1, 1840-1956 (Urbana, IL: University of Illinois
Press, 1978).
130 Herbert Emmerich, Federal Organization and Administrative Management (Tuscaloosa,
AL: University of Alabama Press, 1971), p. 40.

Major Provisions
The Budget. Sections 201-206 of Title II of the Budget and Accounting Act
establishes the requirements for the President to submit a budget proposal to
Congress each year. Section 201 originally required the President to submit his
budget on “the first day of each regular session [of Congress].” This requirement has
been amended on several occasions (see below). Section 201 also lists requirements
for the budget’s contents, including estimates of expenditures “necessary in his
judgment for the support of the Government for the ensuing fiscal year,” except that
estimates prepared by the legislative branch and the Supreme Court for their own
expenditures should be included without revision. Other requirements include
estimates of receipts for the ensuing fiscal year; estimates of expenditures and
receipts for the fiscal year in progress, and expenditures and receipts of the last
completed fiscal year; all essential facts regarding federal debt; and “such other
financial statements and data as in his opinion are necessary or desirable.” Sections
202-204 establish other requirements for the budget submission — requiring that the
President make recommendations on managing any surplus or deficit (Section 202);
providing for the transmittal of necessary supplemental estimates (Section 203); and
specifying generally the form that estimates take (Section 204). Section 205 dealt
with the submission of the FY1923 budget, the first under the act. Finally, Section
206 prohibits departments and agencies from submitting independent budget requests
to Congress, as they had in the past, thus affirming the authority of the President as
the head of the executive branch.
There has been no fundamental change in this part of the act, although there
have been numerous modifications and additions. For example, the requirement in
Section 201 that the President’s budget be submitted “on the first day of each regular
session” was amended by the Budget and Accounting Procedures Act of 1950 (64
Stat. 2317) to read “during the first fifteen days of each regular session.” This was
subsequently amended to “on or before the first Monday after January 3 of each year
(or on or before February 5 in 1986)” by the Balanced Budget and Emergency Deficit
Control Act of 1985 (99 Stat. 1037), and finally to “on or after the first Monday in
January but not later than the first Monday in February of each year” by the Budget
Enforcement Act of 1990 (104 Stat. 1388).
Likewise, the requirements of Section 201 concerning contents of the budget
submission have been amended on several occasions, most notably by the Budget and
Accounting Procedures Act of 1950, the Legislative Reorganization Act of 1970, the
Congressional Budget and Impoundment Control Act of 1974, and the Balanced
Budget and Emergency Deficit Control Act of 1985. These are currently codified in
Section 1105 of Title 31, U.S.C.131
The general authority of the President over the preparation and submission of
the budget was reiterated and clarified in the Budget and Accounting Procedures Act
of 1950.


131 For a listing of the requirements see U.S. General Accounting Office. The President’s
Budget Submission, AFMD-90-35, 1990, pp. 13-18 (Appendix II: Budget Information
Required by Statute).

Section 201 was amended by Section 221 of the Legislative Reorganization Act
of 1970 to require a supplemental summary of the budget for the ensuing fiscal year
to be submitted by June 1 of each year. This was further amended by the
Congressional Budget Act to read “on or before July 15.”
Section 201 was amended by Section 603 of the Congressional Budget Act of
1974 to require that budget projections be extended from the ensuing fiscal year to
“the four fiscal years following the ensuing fiscal year.”
Section 201 was amended by Section 605 of the Congressional Budget Act of
1974 to require the President to submit to Congress by November 11 of each year an
estimate of budget outlays and proposed budget authority that would be included in
the budget for the following year “if programs and activities of the United States
Government were carried on during that year at the same level as the current fiscal
year without a change in policy.”
The Bureau of the Budget. Sections 207-217 of the Budget and Accounting
Act established the Bureau of the Budget and delineated its powers and duties.
Section 201 formally created the Bureau within the Treasury Department, provided
for a director and assistant director, and stated that the Bureau, “under such rules and
regulations as the President may prescribe, shall prepare for him the Budget, the
alternative Budget, and any supplemental or deficiency estimates, and to this end
shall have the authority to assemble, correlate, revise, reduce, or increase the
estimates of the several departments or establishments.” The newly created Bureau
of the Budget went beyond these limited duties under the activist vision of its first
director, Charles Dawes. In particular, it used the pre-existing apportionment process
as a mechanism to extend its control over agency spending levels by means of
administrative regulation.132 By taking a hand in overseeing the execution of
spending actions, as well as in the preparation of budget requests, the Bureau of the
Budget exercised management functions from the beginning, and gave the President
a strengthened capacity to administer the executive branch.
In 1939, the Bureau was made part of the newly created Executive Office of the
President,133 and in 1970 was reconstituted as the Office of Management and134
Budget. The Chief Financial Officers Act of 1990 (104 Stat. 2838) initiated
additional organizational changes within OMB. In particular, it created a new
structure within OMB for federal financial management, headed by a new deputy


132 The apportionment process was mandated under the Antideficiency Act of 1905 (P.L. 58-

217; 33 Stat. 1257-1258) to prevent deficiencies caused by disproportionate spending rates.


133 U.S. President (Franklin Roosevelt), “Reorganization of the Executive Office of the
President, Executive Order 8248, September 8, 1939,” Public Papers and Addresses of
Franklin Roosevelt, 1939 volume, War — and Neutrality, vol. 8, (New York: Macmillan,

1941), p. 490.


134 U.S. President (Nixon), “Prescribing the Duties of The Office of Management and
Budget and the Domestic Council in the Executive Office of the President,” Executive Order
11541, 3 C.F.R. 1966-1970 Comp. (Washington: GPO, 1971), p. 939. For an overview of
OMB, see CRS Report RS21665, Office of Management and Budget: A Brief Overview, by
Clinton T. Brass.

director for management to serve as the federal government’s chief financial officer.
In addition, it included provisions intended to improve financial management
practices generally.
The General Accounting Office. The third major provision of the Budget
and Accounting Act was the establishment of the General Accounting Office.135 The
Treasury Act of 1789 established the Treasury Department with a Secretary,
comptroller, auditor, treasurer, and register. Among his other duties, the comptroller
was responsible for examining the accounts settled by the auditor. As part of the
Budget and Accounting Act, Congress sought to establish an office to perform this
examination function independent of the Department of the Treasury or the President.
Title III abolished the office of comptroller of the Treasury and established the
positions of Comptroller General and assistant comptroller general in its place.
These new officers would be appointed by the President, with the advice and consent
of the Senate, for 15-year terms, and could be removed from office only by joint
resolution of Congress. The law transferred from the Treasury not only all powers
and duties of the comptroller, but also the auditors, and the Division of Bookkeeping
and Warrants, as well as their personnel, offices, and furniture.
In addition to independence, the act also granted substantial authority and
responsibility to the Comptroller General. Section 312 provided that he shall
investigate “all matters relating to the receipt, disbursement, and application of public
funds, and shall make ... recommendations concerning the legislation he may deem
necessary to facilitate the prompt and accurate rendition and settlement of accounts
and concerning such other matters relating to the receipt, disbursement, and
application of public funds as he may think advisable.” The Comptroller General
was further required to make such investigations and reports as ordered by either
chamber of Congress or any committee, and to report to Congress on expenditures
or contracts made in violation of law, and the adequacy and effectiveness of
executive department fiscal practices.
Significant additions were made to the duties and authority of the General
Accounting Office by the Legislative Reorganization Act of 1970 (84 Stat. 1140).
Section 204 provided that the Comptroller General’s responsibilities would include
review and analysis of the results of government programs “including the making of
cost benefit studies.” Section 231 requires the General Accounting Office to provide
any necessary assistance to congressional committees. Sections 232, 233, and 234
provide for the dissemination of reports to congressional committees and required
notice that reports have been prepared. Section 235 limits the availability of General
Accounting Office personnel to congressional committees. Section 236 requires that
whenever the General Accounting Office makes a report which contains
recommendations to the head of federal agency, the agency must respond to Congress
with respect to the recommendations.


135 For an overview of GAO, see CRS Report RL30349, General Accounting Office and
Comptroller General: A Brief Overview, by Frederick M. Kaiser.

Discussion
There has been a continuous stream of interest in reforming the budget process
in recent years, but the basic framework established by the Budget and Accounting
Act of 1921 has been largely excluded from this deliberation. The role of the
President and OMB in preparing budget requests, and the role of GAO in auditing
expenditures, have not been seriously questioned, although there have been
incremental changes and additions over the years. Rather, it has been in relation to
financial management and administration that the act has been part of debates about
reform. Notwithstanding the fact that the Chief Financial Officers Act of 1990
created a deputy director for management within OMB, the conflict between
management and budgeting responsibilities has given rise to further proposals to
divide these duties by creating an entirely new agency.
Selected Source Reading
Dawes, Charles G. The First Year of the Budget of the U.S. New York: Harper &
Brothers, 1923.
Fisher, Louis. Presidential Spending Power. Princeton: Princeton University Press,

1975.


Mosher, Frederick C. A Tale of Two Agencies. Baton Rouge, LA: Louisiana State
University Press, 1984.
U.S. Congress. House. Committee on Government Reform and Oversight. Making
Government Work: Fulfilling the Mandate for Change. H.Rept. 104-435. 104th
Congress, 1st session. Washington: GPO, 1995.
U.S. Congress. Senate. Committee on Governmental Affairs. Office of
Management and Budget: Evolving Roles and Future Issues. S.Prt. 99-134.

99th Congress, 2nd session. Washington: GPO, 1986.


Willoughby, William F. The Problem of a National Budget. New York: D.
Appleton and Co., 1918.
James Saturno



C. Budget and Accounting Procedures Act of 1950
Statutory Intent and History
The Budget and Accounting Procedures Act of 1950 (64 Stat. 2317) made
significant changes to budget procedures within the executive branch and to
government accounting and auditing processes. Presidential authority over budget
preparation and presentation was expanded (Part I of Title I), principally to allow for
performance-type budgeting, and both agency accounting systems and an integrated
system for the government as a whole were reformed (Part II of Title I). These
provisions are summarized below. The act also made various conforming
amendments and provided for the redistribution of appropriations in cases where
reorganization of the executive branch transferred authority between departments or
agencies (Titles II and III).
The act’s budget provisions amended the Budget and Accounting Act of 1921
(42 Stat. 20) and are consistent with the earlier law’s purpose. Some provisions were
then subsequently amended or otherwise affected by the Legislative Reorganization
Act of 1970 (84 Stat. 1140), the Congressional Budget and Impoundment Control
Act of 1974 (88 Stat. 297), and the Balanced Budget and Emergency Deficit Control
Act of 1985 (99 Stat. 1037).
The act’s accounting and audit provisions were enacted as new legislative
authority, the Accounting and Auditing Act of 1950. They began with policy
declarations that identified the purposes of government accounting — disclosing
results of financial operations, informing managers and budget processes, and
improving financial controls — in light of the needs and responsibilities of the
executive and legislative branches. General Accounting Office audits were to
determine the extent to which accounting and financial reporting fulfilled specified
purposes, financial transactions complied with legal requirements, and internal
control was adequate. Emphasis was placed on the importance of making continual
improvements.
The accounting and auditing provisions have been amended numerous times.
The most important changes required agencies to maintain accounts on an accrual
basis (70 Stat. 782), establish internal accounting and administrative controls (96
Stat. 2467), and perform or undertake audits of the financial statements as required
by the Chief Financial Officers Act (104 Stat. 2838). The Federal Financial
Management Improvement Act of 1996 (enacted as part of the Omnibus
Consolidated Appropriations for Fiscal Year 1997; P.L. 104-208; 110 Stat. 3009-
389) strengthened reporting and compliance requirements for financial management
systems.
In 1982, both the budget and the accounting and auditing provisions were
recodified in Title 31 of the United States Code (96 Stat. 877).
Major Provisions
Part I of Title I of the Budget and Accounting Procedures Act expanded the
President’s authority over budget preparation and presentation. It provided that the



budget must conform to requirements and contain estimates in the form and detail
that the President determines. When there is a basic change in budget format, the
President is to transmit to Congress explanatory notes and tables needed to show
where items included in prior budgets are contained in the current budget. The
Bureau of the Budget (since 1970, the Office of Management and Budget (OMB))
prepares the budget according to these rules and regulations. Department heads
prepare budget requests and submit them to the President. In addition, the President
develops programs and regulations for improving statistical information in the
executive branch and improved plans for the administration of executive branch
agencies. For the Department of Homeland Security, separate detailed analyses by
budget function, agency, and initiative area are required beginning with the FY2005
budget submission (Homeland Security Act of 2002, P.L. 107-296, Section 889).
Part II of Title I, the Accounting and Auditing Act, reformed government
accounting and auditing processes. Its provisions apply generally to departments and
independent establishments in the executive branch, with some exceptions.
The Accounting and Auditing Act specified new responsibilities for the
Comptroller General, the Secretary of the Treasury, and agency heads. The
Comptroller General prescribes accounting principles, standards, and related
requirements for each executive agency. They must enable agencies to meet their
responsibilities under the act while providing for (1) integration of agency and
Treasury Department accounting processes; (2) full disclosure of the results of
agency operations; and (3) financial information and controls needed by Congress
and the President. In addition, the Comptroller General helps agencies develop their
accounting systems. He approves systems that are adequate and conform to his
prescriptions, while continuing to review them from time to time.
The Secretary of the Treasury develops coordinated financial accounting and
reporting systems that enable integration of accounting results within the Treasury
Department and consolidation with the accounting results of other executive
agencies. To accomplish these ends, the Secretary is authorized to establish facilities,
reorganize accounting functions, and install, revise, or eliminate accounting
procedures and reporting. In addition, the Secretary prepares reports on the results
of financial operations of the government. The reports include financial data required
by OMB for budget preparation and other purposes.
Together, the Comptroller General and the Secretary of the Treasury may issue
regulations waiving requirements for warrants pertaining to public moneys and trust
funds and for the requisition and advancement of funds. Joint regulations may also
allow authorized disbursing agents to pay vouchers by means of checks issued
against the general account of the Treasury.
The head of each executive agency establishes and maintains accounting and
internal control systems designed to provide (1) full disclosure of financial results of
the agency’s activities; (2) adequate financial information for agency management;
(3) effective control over and accountability for all funds, property, and other assets;
(4) reliable accounting results to serve as the basis for agency budget requests and
execution; and (5) integration with the Department of the Treasury’s central
accounting and reporting system.



In addition, the Accounting and Auditing Act states that the General Accounting
Office (except as specifically provided by law) shall audit financial transactions of
each executive, legislative, and judicial agency in accordance with principles and
procedures prescribed by the Comptroller General. In determining these auditing
procedures, the Comptroller General must give due regard to generally accepted
principles of auditing, including consideration of the effectiveness of agencies’
accounting organizations and systems, internal audit and control, and related
administrative practices.
Discussion
The Budget and Accounting Procedures Act of 1950 formally increased
centralization of the budget process in the executive branch. It strengthened the
authority of the President to determine the methods for preparing budget estimates
and the way the budget would be presented to Congress. The principal goal was to
allow for the development of performance-type budgets, as had been recommended
by the Commission on Organization of the Executive Branch of the Government (the
first Hoover Commission). However, the legislation probably had greater effect in
furthering the development of budgets that are vehicles for expressing policy
priorities and influencing the economy.
The Accounting and Auditing Act also increased centralization in the executive
branch by directing that the results of agency accounting systems be integrated with
a consolidated system within the Department of the Treasury. Perhaps more
important, the act also required agency accounting systems to use standards that
served broader ends than simply tracking expenditures, such as providing better
information to Congress and the President. A further step was taken in this direction
in 1956 with the requirement that agencies maintain their accounts on an accrual
basis.
The most important legacy of the act may have been congressional
encouragement that the government’s top three financial managers — the
Comptroller General, the Secretary of the Treasury, and the Director of OMB —
work together in continually improving government accounting systems.
Cooperative steps toward accounting reform eventually led to enactment of the
Federal Managers’ Financial Integrity Act of 1982, the Chief Financial Officers
(CFO) Act, and the Federal Financial Management Improvement Act, all of which
are summarized elsewhere in this compendium.
In 1990, the Comptroller General, the Secretary of the Treasury, and the
Director of OMB jointly established the Federal Accounting Standards Advisory
Board (FASAB) to recommend comprehensive accounting principles specifically for
the federal government. A new memorandum of understanding was signed in May,
2003. By the end of 2003, the FASAB had issued 4 financial accounting concepts
(concerning the objectives of federal financial reporting, entity and display issues,
management discussion and analysis, and the intended audience and qualitative
characteristics of the government’s consolidated financial report) and 25 financial
accounting standards (concerning the treatment of particular assets and liabilities,
inventory, direct loans, etc.). In October 1999, the American Institute of Certified
Public Accountants (AICPA) recognized the FASAB as the designated entity for



establishing generally accepted accounting principles for the federal government.
The AICPA action raised the status of FASAB statements and other pronouncements,
though it has been criticized by some who question whether the FASAB is
sufficiently independent of the federal agencies for which it is developing standards.
Improvements in federal accounting have occurred, but more work remains.
GAO found that material weaknesses related to financial systems, fundamental
record-keeping and financial reporting, and incomplete documentation have
prevented it from expressing an opinion on the government’s consolidated financial
statements.136 While 21 of the 24 CFO Act agencies received unqualified opinions
for FY2002, GAO noted that most obtained clean audits only after extraordinary,
labor-intensive efforts. Major problems included the government’s inability to
properly account for and report property, plant, and equipment; reasonably estimate
and support amounts reported for environmental and other liabilities; support major
portions of determinations for the net cost of government operations; fully account
for and reconcile intragovernmental activities and balances; and properly prepare all
aspects of financial statements. The most notable of these problems were in the
Department of Defense. GAO also found material weaknesses in internal control,
including problems relating to loans and receivables, improper payments, tax
collection, and information security management.
Improved federal accounting systems likely result in savings from better cash
management, more effective control of property, and a wider recognition of future
obligations. However, improvements are not without cost. Continual progress in the
future will depend upon adequate funding and managerial initiative, both of which
could be diverted to other priorities. Greater use of expense budgeting, instead of (or
in addition to) the obligation accounting now used in the appropriations process,
might also help, though this would change long-standing practice.137 The extent to
which financial accounting reforms should be continued is an issue for Congress to
consider.
Selected Source Reading
Anthony, Robert M. “The FASAB’s Dilemma.” The Government Accountants
Journal, vol. 44 (spring 1996), pp. 32-39.
Comes, Wendy and Anne Curtin Riley. “Federal Financial Statements: The
Revolution Is Here!” Journal of Accountancy, vol. 187, no. 6 (June, 1999).
Cotton, David L. “Federal Accounting Standards: Close Enough for Government
Work?” The Armed Forces Comptroller, vol. 45, no. 2 (summer 2000), pp. 34-

41.


136 U.S. General Accounting Office, Fiscal Year 2002 U.S. Government Financial
Statements: Sustained Leadership and Oversight Needed for Effective Implementation of
Financial Management Reform, GAO-03-572T, Apr. 8, 2003.
137 Robert N. Anthony, “The Fatal Defect in the Federal Accounting System,” Public
Budgeting and Finance. vol. 20, no. 4 (winter 2000), pp. 1-10.

David, Irwin T. “Financial Information for Policy, Program, and Operating
Officials.” The Journal of Government Financial Management, vol. 51, no. 1
(spring 2002), p. 10.
Ewar, Sid R. “Managerial Cost Accounting: A Step toward Accountability and
Reliable Costing of Federal Programs.” The Government Accountants Journal,
vol. 48 (spring 1999), pp. 48-53.
Tierney, Cornelius E. Federal Accounting Handbook: Policies, Standards,
Procedures, Practices. New York, 2000.
Titard, Pierre L. and Dean W. DiGregorio. “The Changing Landscape of Accounting
Standards Setting.” The CPA Journal, vol. 73, no. 11 (November 2003), p. 18.
U.S. Congress. House. Committee on the Budget. Federal Budget Process
Structural Reform. Hearing. 107th Congress, 1st session, July 19, 2001.
Washington: GPO, 2002.
——. House. Committee on Government Reform. Subcommittee on Government
Efficiency, Financial Management and Intergovernmental Relations. The
Federal Financial Management Improvement Act of 1996: Are the Agencies
Meeting the Challenge? Hearing. 107th Congress, 2nd session, June 9, 2002.
Washington: GPO, 2003.
——. House. Committee on Government Reform. Subcommittee on Government
Efficiency, Financial Management and Intergovernmental Relations. H.R. 4685,
The Accountability of Tax Dollars Act of 2002. Hearing. 107th Congress, 2nd
session, May 14, 2002. Washington: GPO, 2003.
U.S. Executive Office of the President. Office of Management and Budget. Links to
OMB circulars and its Office of Federal Financial Management can be obtained
from the OMB website, at [http://www.omb.gov], visited January 8, 2004.
U.S. Federal Accounting Standards Advisory Board. Statements of Federal
Financial Accounting Concepts and Standards: Volume I, Original Statements.
Washington, 2002.
——. Links to other FASAB statements as well as reports, exposure drafts, and
newsletters can be obtained from the board’s website, at
[http://www.fasab.gov], visited January 8, 2004.
U.S. General Accounting Office. Accounting Principles. Standards, and
Requirements: Title 2 Standards not Superceded by FASAB Issuances. GAO-

02-248G. November 2001.


——. Fiscal Exposures: Improving the Budgetary Focus on Long-Term Costs and
Uncertainties. GAO-03-213. January 2003.



——. Fiscal Year 2002 U.S. Government Financial Statements: Sustained
Leadership and Oversight Needed for Effective Implementation of Financial
Management Reform. GAO-03-572T. April 8, 2003.
——. GAO/PCIE Financial Audit Manual.138 Links to current requirements and
related information and guidance can be obtained from the GAO website at
[http://www.gao.gov], visited January 8, 2004.
——. Government Auditing Standards (the Yellow Book). Links to current
standards and related information and guidance can be obtained from the GAO
website at [http://www.gao.gov], visited January 8, 2004.
——. Performance Budgeting: Current Developments and Future Prospects. GAO-

03-595T. April 1, 2003.


——. Process for Preparing the Consolidated Financial Statements of the U.S.
Government Needs Improvement. GAO-04-45. October, 2003.
Bob Lyke


138 PCIE is the President’s Council on Integrity and Efficiency.

D. Balanced Budget and Emergency Deficit Control Act
Statutory Intent and History
After a decade of experience with the Congressional Budget Act of 1974,
Congress and the President faced persistent high deficits and increasing budgetary
deadlock. In 1985, legislation aimed at bringing the federal budget into balance by
the early 1990s was enacted. That legislation, the Balanced Budget and Emergency
Deficit Control Act of 1985, was included as Title II in a measure raising the public
debt limit.139 President Reagan signed the measure into law on December 12 as P.L.
99-177 (2 U.S.C. § 901; 99 Stat. 1037-1101). It is commonly referred to as the 1985
Balanced Budget Act or as the Gramm-Rudman-Hollings (GRH) Act, after its three
primary sponsors in the Senate — Senators Phil Gramm, Warren Rudman, and Ernest
Hollings.
The 1985 Balanced Budget Act was the first of several major laws intended to
ensure that the deficit is reduced and spending is controlled, even if Congress and the
President fail to achieve these goals through the regular legislative process (see the
entry on the Budget Enforcement Acts of 1990 and 1997, elsewhere in this
compendium). The act established new procedures involving deficit targets and
sequestration to further these purposes. Under sequestration, across-the-board
spending cuts would be made automatically early in the fiscal year if needed to keep
the estimated deficit within allowed limits. Because implementation of a required
sequester was automatic under these procedures, and perceived to be drastic action,
many regarded it as providing a strong incentive for Congress and the President to
reach agreement through the regular process of legislation meeting the established
budgetary goals.
Specifically, the 1985 Balanced Budget Act required the federal budget to be in
balance by FY1991. In addition, the act also made extensive changes in the 1974
Congressional Budget Act, largely to incorporate informal changes in practice made
in prior years.
Several lawsuits contesting the constitutionality of the 1985 Balanced Budget
Act were filed immediately. On February 7, 1986, a special three-judge panel of the
U.S. District Court declared that the procedure for triggering sequestration under the
act was unconstitutional on the ground that it vested executive power in an officer
removable by Congress. (Sequestration would have been triggered pursuant to a
report prepared by the Comptroller General, head of the General Accounting Office.)
Further, the Court declared that a sequestration order for FY1986, issued on February
1, 1986, was “without legal force and effect,” but stayed its judgment (as required by
Section 274(e) of the act) pending appeal to the Supreme Court.


139 For a more detailed explanation of the 1985 Balanced Budget Act, see CRS Report 85-
1130 GOV, Explanation of the Balanced Budget and Emergency Deficit Control Act of 1985
— Public Law 99-177 (The Gramm-Rudman-Hollings Act), by Allen Schick (1985); and
CRS Report 86-713 GOV, Changes in the Congressional Budget Process Made by the 1985
Balanced Budget Act (P.L. 99-177), by Robert Keith (1986). (These reports are archived
and available from the author of this entry in the compendium.)

The Supreme Court heard arguments in the case, Bowsher v. Synar (478 U.S.
714), on April 23, 1986, and issued its ruling later that year on July 7. Affirming the
ruling of the District Court by a vote of 7 to 2, the Supreme Court noted:
To permit an officer controlled by Congress to execute the laws would be, in
essence, to permit a congressional veto. Congress could simply remove, or
threaten to remove, an officer for executing the laws in any fashion found to be
unsatisfactory to Congress. This kind of congressional control over the
execution of the laws, Chadha makes clear, is constitutionally impermissible....
It is clear that Congress has consistently viewed the Comptroller General as an
officer of the Legislative Branch.
Anticipating the possibility of invalidation by the courts, Congress had included
“fallback procedures” in the act, under which a presidential sequestration order could
be triggered upon the enactment of a joint resolution, reported by a Temporary Joint
Committee on Deficit Reduction, setting forth the contents of a joint report of the
directors of the Office of Management and Budget (OMB) and the Congressional
Budget Office (CBO). The Supreme Court stayed its judgment for 60 days in order
to allow Congress time to implement sequestration for FY1986 under the fallback
procedures, which Congress did.
Invalidation by the courts of the automatic triggering mechanism for
sequestration and the size of the estimated deficit excess for FY1988 (more than $50
billion above the deficit target of $108 billion, according to CBO) prompted calls in
1987 for revision of the 1985 Balanced Budget Act. Major revisions to the act were
enacted in 1987, again as a title in a measure raising the public debt limit. President
Reagan signed the measure into law on September 29 as P.L. 100-119 (101 Stat.
754-788). Title I of this law is referred to as the Balanced Budget and Emergency
Deficit Control Reaffirmation Act of 1987.140 The main purposes of the 1987
Balanced Budget Reaffirmation Act were to restore the automatic triggering feature
of sequestration in a constitutionally acceptable manner (which it did by vesting that
authority in the OMB Director) and to extend the time frame for achieving a balanced
budget by two years, until FY1993.
During the interim between the enactment of the 1985 Balanced Budget Act and
its significant revision in 1987, Congress enacted several measures that modified the
sequestration process, for the most part exempting programs from the reductions.
Most notably, the Omnibus Budget Reconciliation Act of 1986 (100 Stat. 1874)
exempted from sequestration the cost-of-living adjustments (COLAs) of all federal
civilian and military retirement and disability programs so that they would be treated
in the same manner as Social Security.
Following enactment of the 1987 Balanced Budget Reaffirmation Act (and
before significant changes made in 1990), Congress enacted several measures that
further modified the sequestration process. In particular, the Omnibus Budget


140 For a more detailed explanation of the 1987 Balanced Budget Reaffirmation Act, see
CRS Rept. 87-865 GOV, Debt-Limit Increase and 1985 Balanced Budget Act Reaffirmation:
Summary of Public Law 100-119 (H.J.Res. 324), by Edward Davis and Robert Keith (1987).
(This report is archived and is available from the author of this entry in the compendium.)

Reconciliation Act of 1987 (101 Stat. 1330) made several technical changes in the
1985 Balanced Budget Act, and the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (103 Stat. 183) exempted certain federal financial entities
from sequestration.
Major Provisions
Deficit Targets and Sequestration Procedures. In order to accomplish
the goal of balancing the budget, the act established a series of declining deficit141
targets, referred to in the act as “maximum deficit amounts.” The series began
with a deficit target of $171.9 billion for FY1986, which declined after the first year
by increments of $36 billion until reaching zero in FY1991.
The deficit targets were enforced by a new set of procedures, referred to as
“sequestration.” As originally framed, sequestration involved the issuance of a
presidential order to permanently cancel annual appropriations and other budgetary
resources (except for special funds and trust funds) for the purpose of achieving a
required amount of outlay savings in order to reduce the deficit. Any required
sequestration reductions would occur toward the beginning of the fiscal year, based
upon budget estimates made at that time.
As mentioned above, the Comptroller General was charged with responsibility
under the act for determining whether a sequester was necessary each year and, if so,
the amount of reductions that would have to be made in individual accounts and
programs. His findings regarding the estimated deficit, the amount of any required
sequester, the base levels for accounts from which reductions would be made, and
the reduction amounts to be presented in annual sequestration reports issued twice
each year. An interval of less than two months between the issuance of the two
reports in late August and early October provided Congress and the President an
opportunity to enact legislation preventing or minimizing a sequester. The
Comptroller General was required to take into consideration sequestration reports
issued jointly in August and October by the OMB and CBO directors.
If the Comptroller General found a sequester necessary, the President was
required to issue a sequestration order putting into effect the reductions determined
by the Comptroller General in his sequestration report. The President did not have
discretion under the act to alter the Comptroller General’s determinations.
In any year in which a deficit sequester occurred, the entire amount of the deficit
excess (the amount by which the estimated deficit exceeded the applicable deficit
target) would have to be eliminated. Sequestration could occur for FY1987-FY1990
only if the deficit excess for the year were greater than $10 billion. The $10 billion
margin-of-error amount did not apply to FY1986, in which sequestration was capped
at $11.7 billion, nor to FY1991, when the budget was required to be balanced.


141 Although they were used chiefly for purposes of sequestration, the deficit targets also
affected the budget resolution process, and therefore were made part of the 1974
Congressional Budget Act.

A formula set forth in the act mandated that half the required outlay reductions
be made in defense programs, programs in the National Defense (050) functional
category, and half in non-defense programs. In general, sequestration reductions
were made uniformly across the range of accounts covered by the process, and were
applied uniformly to programs, projects, and activities within these accounts.
Many accounts, involving roughly two-thirds of federal outlays, were exempt
from sequestration. For certain programs, the reductions were made under special
rules. Medicare, for example, could not be cut more than 2%.
The act provided that the sequestration procedures would not apply during time
of war and set forth a means to suspend them in the event of a recession. Finally, the
act included procedures by which the President could propose, or Congress could
initiate, modifications in a sequestration order.
The 1987 Balanced Budget Reaffirmation Act extended the timetable for
achieving a balanced budget by two fiscal years to FY1993, restored the automatic
triggering mechanism for sequestration, and made numerous adjustments to the
sequestration procedures.
The deficit targets, as revised in 1987, maintained the $36 billion year-to-year
decrease, except for FY1989 (when the target was reduced by $8 billion from the
prior year) and FY1993 (when the target was reduced by $28 billion from the prior
year). The $10 billion margin-of-error amount was retained for this period, except
that sequestration reductions were capped at $23 billion for FY1988 and $36 billion
for FY1989; no margin-of-error amount was allowed for FY1993, when the budget
was expected to be balanced.
The automatic procedure for triggering sequestration was restored by placing it
in the hands of the OMB Director. However, the director’s authority to estimate and
calculate sequestration amounts was carefully circumscribed by various provisions
in the act. In particular, the procedures for making baseline estimates were
delineated in the act. The new baseline-construction rules approximated more
closely the concepts used by OMB in making “current services estimates” and by
CBO in making “baseline budget projections.” The new rules had the effect of
minimizing differences in the estimates and projections of the two agencies,
compared to earlier years.
Under the restored automatic procedure, an initial or final sequestration order
would be triggered by an initial or revised sequestration report from the OMB
Director. The OMB Director was required to give due regard in his report to an
advisory sequestration report issued earlier by the CBO director. The Comptroller
General was not assigned a role in the triggering process.
The 1987 Balanced Budget Reaffirmation Act retained the basic formula for
determining sequestration reductions, but modified the procedures for crediting
reductions in programs covered by special rules, such as student loans, foster care,
and specified health programs. Additionally, the act authorized the President to
exempt all or some military personnel accounts from sequestration, provided timely



notice was given to Congress. (This authority previously had been given to the
President only for FY1986.)
With regard to the modification of a sequestration order, the 1987 Balanced
Budget Reaffirmation Act established two new mechanisms involving the enactment
of a joint resolution under expedited procedures. Under the first, the President was
authorized to submit to Congress a report proposing changes in the reductions in
defense programs so that some programs could be spared cuts if others were cut more
deeply (in order to retain the overall level of required reductions). Second, the
majority leaders of the House or Senate could initiate legislation that would modify
a sequestration order (even effectively canceling it). Both mechanisms would require
the enactment of legislation in order to be effective.
Other Budget Process Changes. In addition to establishing the
sequestration procedures, the 1985 Balanced Budget Act made other changes in the
federal budget process. These other changes mainly involved modifications of the
congressional budget process under the 1974 Congressional Budget Act (discussed
more fully elsewhere in this compendium).
First, the timetable for congressional budget actions was accelerated. Most
notably, the deadline for adoption of the annual budget resolution was advanced one
month to April 15. Second, certain practices used by Congress for several years were
formally incorporated into the 1974 Congressional Budget Act, including the
expansion of budget resolutions to cover three fiscal years and authority to initiate
reconciliation procedures in the April budget resolution. Third, enforcement
procedures were tightened, including new restrictions on legislation linked to
committee spending allocations under the budget resolution and a requirement that
the recommended deficit in the budget resolution not exceed the applicable deficit
target. Fourth, the reconciliation process was modified in several ways, including a
ban against using reconciliation to make changes in the Social Security program and
requirements in the House and Senate that amendments to reconciliation measures
be deficit neutral.
In addition to these and many other changes in congressional budgeting made
by the act, it also required the President to submit an annual budget consistent with
the deficit targets, placed existing off-budget entities on the budget, and placed the
Social Security program off budget (except for calculating the deficit for purposes of
sequestration).
The law which contained the 1987 Balanced Budget Reaffirmation Act (101
Stat. 754) also included related provisions (in Title II) that affected the congressional
budget process, the impoundment control process, and other matters. With respect
to the congressional budget process, the 1974 Congressional Budget Act was
amended to clarify the application of time limits for the consideration of conference
reports on budget resolutions and reconciliation measures, to require the House and
Senate to use common economic and technical assumptions, to extend CBO duties
under the State and Local Government Cost Estimate Act of 1981 indefinitely, and
for other purposes.



The Impoundment Control Act of 1974 was amended to codify the Appeals
Court decision in City of New Haven v. United States regarding restrictions on the
President’s deferral authority and to prohibit the resubmittal of rescission proposals
that had been previously rejected by Congress.
Finally, the 1987 Balanced Budget Reaffirmation Act encouraged Congress to
experiment with biennial budgeting and required CBO to prepare a report on federal
credit programs.
Discussion
The 1985 Balanced Budget Act, as amended, was critically viewed by some for
its failure to achieve its principal objective, deficit reduction. During the period
covering FY1986 through FY1990, the actual deficit exceeded the deficit target every
year. The overage ranged from about $5 billion to $205 billion and was greatest in
the later years, despite the revision of the targets in 1987. Further, the manner in
which the sequestration process operated and the stringency of the goals generally
were perceived as fostering budgetary gimmickry and disruption in the legislative
process.
As a result of these concerns, the sequestration process was fundamentally
restructured by the Budget Enforcement Act of 1990 (discussed elsewhere in this
compendium).
Selected Source Reading
Havens, Harry S. “Gramm-Rudman-Hollings: Origins and Implementation.” Public
Budgeting & Finance, vol. 6 (autumn 1986), pp. 4-24.
Schick, Allen. The Capacity to Budget. Washington: The Urban Institute Press,

1990.


Stith, Kate. “Rewriting the Fiscal Constitution: The Case of Gramm-Rudman-
Hollings.” California Law Review, vol. 76 (May 1988), pp. 593-668.
Robert Keith



E. Budget Enforcement Acts of 1990 and 1997
Statutory Intent and History
The Budget Enforcement Act (BEA) of 1990 made numerous and significant
changes in the federal budget process by amending several laws, primarily the
Balanced Budget and Emergency Deficit Control Act of 1985 (described elsewhere
in this compendium).142 (The BEA of 1990 also amended the 1974 Congressional
Budget Act; changes in the 1974 act are discussed in another section of this
compendium.) The chief focus of these changes was to revise fundamentally the
sequestration process established by the 1985 act, but other important facets of the
budget process were affected as well. With respect to sequestration, the BEA
changed the focus from deficit targets to limits on discretionary spending (i.e.,
spending controlled through the annual appropriations process) and a “pay-as-you-
go” (PAYGO) requirement on new legislative initiatives affecting revenues and
direct spending (i.e., spending controlled outside the annual appropriations process).
The main purpose of these changes was to ensure that the substantial deficit savings
of several measures enacted in 1990, particularly the Omnibus Budget Reconciliation
Act (OBRA) of 1990, were maintained over the five-year time frame of the
legislation (covering FY1991-FY1995).
The BEA was enacted as Title XIII of OBRA of 1990 (104 Stat. 1388, 1-630).
Although the BEA was formally developed as part of the 1990 reconciliation law, it
can be traced to the budget summit negotiations between congressional and
administration negotiators that began in early May of 1990 and concluded on
September 30 of that year. On June 26, 1990, President George H.W. Bush issued
a statement that he and congressional negotiators concurred that any bipartisan
budget agreement should include budget process reform “to assure that any
Bipartisan agreement is enforceable and that the deficit problem is brought under
responsible control.”
The sequestration procedures established under the 1985 act, as modified by the
BEA of 1990, have been further modified and extended by several other laws, mainly
to preserve budget savings made under agreements reached by Congress and the
President in 1993 and 1997 and to establish new program categories for enforcement.
In 1993, Congress and the President extended the procedures for three more fiscal
years, through FY1998. The extension was included as Title XIV of the Omnibus
Budget Reconciliation Act of 1993 (107 Stat. 312). In 1994, separate sequestration
procedures for programs funded by the Violent Crime Reduction Trust Fund were
added to the 1985 act by Title XXXI of the Violent Crime Control and Law
Enforcement Act of 1994 (108 Stat. 3009).
Significant modifications to the sequestration process were made by the Budget
Enforcement Act (BEA) of 1997, which was included as Title X of one of two
reconciliation measures enacted into law that year, the Balanced Budget Act of 1997


142 For a more detailed discussion of the BEA of 1990 and other budget process laws, see
CRS Report 98-720 GOV, Manual on the Federal Budget Process, by Robert Keith and
Allen Schick (1998).

(111 Stat. 251). The BEA of 1997 extended the discretionary spending limits and
pay-as-you-go requirement through FY2002, modified their application, and made
various “housekeeping” and technical changes. In 1998, the discretionary spending
limits and associated sequestration procedures were changed again, in this instance
by the Transportation Equity Act for the 21st Century (TEA-21; P.L. 105-178), in
order to establish separate discretionary spending limits for highway and mass transit
programs. In 2000, the Interior Appropriations Act for FY2001 (P.L. 106-291),
established separate discretionary spending limits for conservation spending.
Finally, in the last few years under the BEA, Congress and the President
modified the enforcement mechanisms in order to avoid a sequestration.143 In 2000
and 2001, the Foreign Operations Appropriations Act for FY2001, P.L. 106-429,
raised the FY2001 discretionary spending limits, and the Defense Appropriations Act
for FY2002, P.L. 107-117, raised the FY2002 discretionary spending limits. In 1999,
2000, 2001, and 2002, legislation enacted into law required the OMB Director to
change the balance on the PAYGO scorecard for certain years to zero. In particular,
in 2002, the PAYGO scorecard was set at zero for FY2003 and each year thereafter
through FY2006, thereby preventing any future PAYGO sequestration due to
legislation enacted before October 1, 2002.
In the absence of any action by Congress and the President to extend the
discretionary spending limits and the PAYGO requirement by the end of FY2002,
budget legislation is no longer subject to these budget mechanisms.
Major Provisions
Revised Sequestration Procedures. The BEA of 1990, and later laws,
changed the sequestration process substantially. While the BEA of 1990 extended
the deficit targets in the 1985 Balanced Budget Act through FY1995 (although the
budget was not expected to be in balance by this time), it made them adjustable rather
than fixed. More importantly, the BEA of 1990 effectively replaced the deficit
targets with two new budget enforcement procedures. First, adjustable limits were
established for separate categories of discretionary spending. Second, “pay-as-you-
go” (PAYGO) procedures were created to require that increases in direct spending
or decreases in revenues due to legislative action be offset so that there would be no
net increase in the deficit (or reduction of the surplus). Further, the BEA of 1990
retained the exemption of Social Security from cuts under sequestration, but removed
the trust fund surpluses from the deficit estimates and other calculations as well.
The revised deficit targets, as initially set by the BEA of 1990, were
substantially larger than earlier targets because they excluded the surpluses of the
Social Security trust funds and reflected revised economic and technical assumptions.
For example, the deficit target for FY1991 was set at $327 billion, and the deficit
target for FY1995 was set at $83 billion. The President was required to adjust the
deficit targets for FY1991-FY1995, to reflect updated economic and technical
assumptions and changes in budgetary concepts and definitions, as applicable, in his


143 For more detailed information on these modifications, see CRS Report RL31155,
Techniques for Preventing a Budget Sequester, by Robert Keith.

annual budget for FY1992 and FY1993. Further, he was authorized to adjust the
deficit targets for FY1994 and FY1995, to reflect updated economic and technical
assumptions, when he submitted his budget for these fiscal years. (President Clinton
chose to use this authority, and made such adjustments in the deficit targets.)
The BEA kept the procedures for a deficit sequester. As under the earlier
procedures, half of the required outlays savings would be from defense programs and
half from nondefense programs. The margin-of-error amount was set at zero for
FY1992 and FY1993 and at $15 billion for FY1994 and FY1995. Sequestration tied
to enforcement of the deficit targets would have occurred only if a deficit excess had
remained after the other two types of sequestration had been implemented. However,
the operation of the other two types of sequestration, together with the adjustability
of the deficit targets, effectively made a deficit sequester impossible.
The BEA of 1990 retained sequestration as the means of enforcing the
discretionary spending limits and the PAYGO requirement. Like the earlier deficit
sequestration procedures, the new sequestration procedures were automatic and were
triggered by a report from the OMB Director. For sequestration purposes generally,
only one triggering report was issued each year (just after the end of the
congressional session). However, OMB reports triggering a sequester in one or more
categories of discretionary spending might have been issued during the following
session if legislative developments so warranted (i.e., the enactment of a
supplemental appropriations measure that violated the limit for one or more
discretionary spending categories). The CBO director was required to provide
advisory sequestration reports several days before the OMB Director’s reports were
due.
The discretionary spending limits established by the BEA of 1990 varied in type
over the period covered. For FY1991 through FY1993, separate limits were set for
new budget authority and outlays for three different categories — defense,
international, and domestic. For FY1994-FY1995, the limits on new budget
authority and outlays were established for a single category — total discretionary
spending. The Omnibus Budget Reconciliation Act of 1993 retained the existing
limits for FY1994 and FY1995 without change, and added new limits on total
discretionary spending for FY1996-FY1998. In 1994, the Violent Crime Control Act
established separate sequestration procedures for spending from the Violent Crime
Reduction Trust Fund through FY2000.
The BEA of 1997 revised the discretionary spending limits again and extended
them through FY2002. New categories were established for defense and nondefense
spending for FY1998 and FY1999; for FY2000-FY2002, all discretionary spending
was merged into a single, general purpose category (except for the separate Violent
Crime Reduction category in effect through FY2000). In 1998, TEA-21 established
separate outlay limits for two new categories, highways and mass transit, through
FY2003. Finally, in 2000, Section 801(a) of the Interior Appropriations Act for
FY2001 established separate discretionary spending limits for FY2002-FY2006
under a new category for conservation spending and six related subcategories.
The discretionary spending limits were adjusted periodically — when the
President submitted his annual budget and when OMB issued sequestration reports



— for various factors, including changes in budgetary concepts and definitions,
emergency requirements, and special allowances. Factors upon which adjustments
were based changed from time to time. For example, the BEA of 1990 provided for
an adjustment due to changes in inflation, but this adjustment was removed by the
BEA of 1997.
A sequester under the discretionary spending limits would occur only within the
category in which a breach occurred, except that a breach of the highway or mass
transit limits would trigger a sequester in the nondefense or total discretionary
spending category, as appropriate. If a sequester under this process was required at
the end of a session, it was required to occur on the same day as any sequestration
tied to enforcement of the PAYGO procedures. During the following session, the
enactment of legislation causing a breach in the spending limits would trigger
sequestration after 15 days. However, any such enactment occurring during the last
quarter of the fiscal year (i.e., between July 1 and September 30) would instead cause
the appropriate discretionary spending limits for the next fiscal year to be reduced by
the amount of the breach.
Under the PAYGO process created by the BEA of 1990, the multi-year budget
effects of legislation proposing new direct spending, or legislation decreasing
revenues, were recorded on a rolling PAYGO “scorecard.” After the end of each
congressional session, any balance on the PAYGO scorecard for the new fiscal year
was required to be eliminated through a special sequestration procedure. If a
sequester under this process was required, it was required to occur within 15 calendar
days after Congress adjourned at the end of a session and on the same day as any
sequestration tied to enforcement of the discretionary spending limits (or, in earlier
years, the deficit targets). Emergency direct spending and revenue legislation, so
designated by the President and in statute, was not covered by the PAYGO
sequestration process.
The enforcement procedures for the PAYGO requirement, on the one hand, and
the discretionary spending limits, on the other, were separated by a “firewall.”
Savings made on one side of the firewall could not be used to the advantage of
programs on the other side. For example, the cost of tax-cut legislation could not be
offset by reductions in annual appropriations acts in order to avoid a PAYGO
sequester.
OMB and CBO were each required to prepare annually three different types of
sequestration reports, as discussed below. The CBO reports (which are advisory
only) preceded the OMB reports by several days, as was the case under prior
sequestration procedures. In all three types of reports, OMB was required to explain
any differences between its estimates and those of CBO.
If the President was required to issue a sequestration order in any year, the order
was to be issued on the same day that the final OMB sequestration report was issued
and the order was required to implement without change all of the reductions
identified in the OMB report. There was no initial order, unlike under earlier
procedures.



Early in the session, OMB and CBO issued sequestration preview reports. The
reports provided estimates of the discretionary spending limits, with the adjustments
prescribed by law. Also, the reports provided estimates of any net change in the
balances on the PAYGO scorecard caused by the enactment of direct spending or
revenue legislation subject to the PAYGO process. The OMB preview report
contained the same information as the CBO preview report and explained any
differences between its estimates and those of CBO.
In August, OMB and CBO issued sequestration update reports to reflect the
impact of legislation enacted in the interim. Finally, OMB and CBO issued final
sequestration reports shortly after Congress adjourned to end the session. Both
reports were required to reflect any pertinent legislation enacted since the update
reports were issued. The final reports were required to indicate the baseline amount
of budgetary resources and the amount and percentage of the reduction for each
account subject to sequestration.
In preparing its update and final sequestration reports, OMB was required to use
the economic and technical assumptions that were used in the earlier preview report.
(Previously, OMB could determine in late summer the economic and technical
assumptions that it would use for sequestration in October.)
During the course of the session, OMB was required to provide Congress with
cost estimates of budgetary legislation within seven days of its enactment, so that
compliance with the discretionary spending limits and PAYGO requirements could
be monitored. The cost estimates were required to be based on the economic and
technical assumptions used in the President’s most recent budget.
Several other special reports were associated with the sequestration process.
Other Budget Process Changes. The BEA of 1990 and 1997 made other
changes in the federal budget process, including (1) moving the deadline for
submission of the President’s annual budget from the first Monday after January 3
to the first Monday in February; (2) excluding Social Security trust funds from deficit
calculations made under the 1985 Balanced Budget Act (and reaffirming of their off-
budget status), coupled with establishing separate House and Senate procedures to
protect the trust fund balances; (3) enacting the Federal Credit Reform Act of 1990,
as a new Title V in the 1974 Congressional Budget Act; and (4) requiring that budget
resolutions cover, and be enforced for, at least five fiscal years. Additionally, the
BEA included provisions requiring studies and legislative recommendations
regarding government-sponsored enterprises, revising the Senate’s “Byrd Rule”
prohibiting extraneous matter in reconciliation legislation and incorporating it into
the 1974 Congressional Budget Act as Section 313, and dealing with various other
issues.
Discussion
The BEA of 1990, and the related laws that followed it, generally are regarded
as having been more successful than the 1985 Balanced Budget Act (as amended by
the 1987 Balanced Budget Reaffirmation Act) in controlling aggregate budget levels.
During the period that the discretionary spending limits and PAYGO requirement



were in effect, the status of the federal budget changed from the largest deficit
recorded in history ($290 billion in FY1992) to unprecedented surpluses ($237
billion in FY2000). Although this dramatic change was due to many factors, the
procedures under the BEA were regarded by many as important contributing factors
to this accomplishment.
During the 106th Congress, criticisms of the BEA procedures began to mount.
While the threat of sequestration was viewed initially as giving the President and
Congress a strong incentive to reach agreement on their budgetary goals, thereby
avoiding the legislative deadlock that characterized the early 1980s, some Members
began to regard the BEA procedures as an impediment to implementing desired
budget policy in an era of large surpluses. These Members argued that the BEA
procedures should be eliminated, or at least substantially modified, so that Congress
and the President could “use” part of the surplus for tax cuts and other actions that
otherwise would have been prohibited. Further, some Members asserted that
discretionary spending limits for FY2000-FY2002 were unrealistically low, thereby
promoting the use of budget “gimmicks,” such as the excessive designation of
emergency spending, to evade their constraints. More recently, during the 107th
Congress, the procedures under the BEA were set aside to respond to the terrorist
attacks on September 11, 2001, and the 2001 recession. Subsequently, as noted
above, the BEA procedures were allowed to expire on September 30, 2002.
For the foreseeable future, Congress faces an unfavorable budget outlook,
exacerbated by an uncertain economic and geopolitical environment. According to
OMB and CBO, current budget projections under existing law, without any
legislative changes, show annual deficits in the unified budget (i.e., including federal
funds and trust funds) in each of the next few fiscal years.144 When various proposed
spending increases and tax cuts are taken into account, the projections indicate
annual deficits for the foreseeable future. For example, OMB projects that if
President Bush’s FY2004 budget policy proposals are enacted into law, annual
unified budget deficits, ranging from $178 billion to $307 billion, will continue
through FY2008.
In addition, the economy continues to put a damper on federal revenues. Also,
the spending for the war on terrorism and homeland security, and for military and
reconstruction operations in Iraq and Afghanistan, could increase the scarcity of
current and future federal government resources. Such factors potentially could
worsen the already unfavorable budget outlook.145 Accordingly, the 108th Congress
is faced with the issue of whether the expired BEA procedures should be restored,


144 See U.S. Office of Management and Budget, Budget of the U.S. Government, Fiscal Year

2004 (Washington: GPO, 2003), table S-1, p. 311 (for projections with President George W.


Bush’s budget proposals included) and table S-13, p. 330 (for projections under existing
law); and U.S. Congressional Budget Office, The Budget and Economic Outlook: Fiscal
Years 2004-2013, Jan. 2003, table 1.1, p. 2 (for CBO’s budget baseline projections, under
existing law).
145 For more detailed information on the FY2004 budget throughout the year, see CRS
Report RL31784, The Budget for Fiscal Year 2004, by Philip D. Winters.

new budget constraints should be enacted, or the existing budget procedures
associated with the Congressional Budget Act are sufficient.
Selected Source Reading
Congressional Budget Office. “The Expiration of Budget Enforcement Procedures:
Issues and Options.” In The Budget and Economic Outlook: Fiscal Years 2004-

2013, pp. 109-121. Washington: CBO, 2003.


Philip, Joyce G. and Robert D. Reischauer. “Deficit Budgeting: The Federal Budget
Process and Budget Reform.” Harvard Journal on Legislation, vol. 29,
(summer 1992), pp. 429-453.
Oak, Dale P. “An Overview of Adjustments to the Budget Enforcement Act
Discretionary Spending Caps.” Public Budgeting & Finance, vol. 15 (fall

1995), pp. 35-53.


Thurber, James A. and Samantha L. Durst. “The 1990 Budget Enforcement Act: The
Decline of Congressional Accountability.” In Dodd, Lawrence C. and Bruce I.
Oppenheimer, Congress Reconsidered, pp. 375-397. Washington: CQ Press,

1993.


Robert Keith
Bill Heniff Jr.



F. Congressional Budget and Impoundment Control Act
Statutory Intent and History
The Congressional Budget and Impoundment Control Act of 1974 (88 Stat. 302)
established the basic framework which is used today for congressional consideration
of budget and fiscal policy. The concurrent resolution on the budget, the House and
Senate Budget Committees, and the Congressional Budget Office are all provided for
in this legislation. In addition, the President’s impoundment authority was codified
for the first time in Title X, also known as the Impoundment Control Act.
The Congressional Budget Act built upon the knowledge gained in earlier
attempts to create a legislative budget, but it chiefly grew out of the combination of
several separate movements for congressional reform in the 1960s and 1970s and a
series of confrontations with the President over the budget. There were various calls
for structural reforms within Congress, and concurrently a desire to make Congress,
as a whole, better able to assert its budget priorities more effectively vis-à-vis the
P resi d ent ’s.
The issue of federal spending approached a crisis in the late 1960s and early
1970s. Increased spending for programs initiated or expanded under the banner of
President Lyndon Johnson’s “Great Society,” combined with that to support military
efforts in Vietnam, accelerated concern over budget deficits. A series of spending
ceilings were enacted by Congress between 1967 and 1970, but these proved to be
largely ineffective. Even so, President Richard Nixon kept the controversy over such
ceilings alive during the 1972 presidential campaign by asking for authority to cut
federal spending at his own discretion to stay under a proposed $250 billion ceiling
in FY1973. Congress declined to approve such an open-ended grant of authority, and
while no further spending ceilings were enacted, the crisis over presidential authority
to withhold funds escalated.
In response to this battle with President Nixon, Congress established a Joint
Study Committee on Budget Control in 1973 which recommended a legislative
process to “improve the opportunity for the Congress to examine the budget from an
overall point of view, together with a congressional system of deciding priorities.”
These recommendations were reviewed by committees with legislative jurisdiction146
in the House and Senate, and eventually enacted as the Congressional Budget and
Impoundment Control Act of 1974 (88 Stat. 302).
The intent behind the 1974 Budget Act is still a subject for debate. The act
made a number of changes in the way Congress operated, but one thing it did not do
was to centralize budget decision making. The budget resolution was a mechanism
for deciding the broad outlines of budgetary decision making, but the details about
the composition of revenue and spending remained within the jurisdiction of the
same committees that had exercised jurisdiction prior to the act. The new budget


146 In the House, H.R. 7130 was referred to the Rules Committee; in the Senate, S. 1541 was
referred to the Government Operations Committee and subsequently to the Rules and
Administration Committee.

process built on existing congressional procedures, but did not supersede them. To
some, this indicated that the purpose of the Budget Act was merely to create a
mechanism for coordinating congressional decision making and for providing
budgetary information. Others, however, feel that the Budget Act was created to deal
with the problem of structural deficits that arose in the 1970s. One result was that
the Budget Act has been the focus of numerous reform proposals over the years, a
number of which have been enacted. The most extensive changes occurred as a
consequence of the Balanced Budget and Emergency Deficit Control Act of 1985,
and the Budget Enforcement Act of 1990 (discussed elsewhere in this compendium).
Major Provisions
Titles I through IX of the Budget Act are collectively known as the
Congressional Budget Act of 1974, and Title X is known as the Impoundment
Control Act of 1974. Title V, as amended in 1990, is now known as the Federal
Credit Reform Act of 1990.
The most salient aspect of the Congressional Budget Act is that it established
a congressional budget process. As originally enacted, the Budget Act provided for
two budget resolutions, the first to provide planning levels and to be adopted by May
15, and a second to provide binding levels (that is, subjecting legislation that
breached these totals to points of order) to be adopted by September 15. This
division proved to be impracticable, and for fiscal years 1983-1986, Congress did not
adopt a second budget resolution. Instead, the first budget resolution for each of
these years included a provision that made the spending and revenue totals in the first
resolution binding as of the beginning of the fiscal year (October 1). In 1985,
Congress amended the Budget Act to provide that, beginning with FY1987, the
spending and revenue totals in a single budget resolution (to be adopted by April 15)
would be immediately binding.
As enacted, the Budget Act also required that committees report all authorizing
legislation prior to May 15. This requirement tended to create a bottleneck of
legislation that made it difficult to complete floor action on authorizing measures
prior to consideration of appropriation bills, and was eliminated in 1985.
Currently, Title III requires that Congress approve a concurrent resolution on the
budget by April 15 (Section 300), that must be adopted before other budgetary
legislation can be considered (although the House may consider appropriation bills
after May 15 regardless of the status of the budget resolution) (Section 303).
Amounts agreed to in the budget resolution are “cross walked” to each committee
with jurisdiction over spending under Section 302.
Title III also contains provisions concerning special procedures for consideration
of budget resolutions and reconciliation bills. Debate in the Senate on budget
resolutions is limited to 50 hours (Section 305) and on reconciliation bills to 20 hours
(Section 310). The amending process is also limited. A germaneness requirement
is imposed in the Senate for amendments to both budget resolutions (Section 305)
and reconciliation bills (Section 310); amendments to reconciliation bills in either
chamber must be deficit neutral (Section 310); and amendments in the Senate to
reconciliations must not be extraneous (Section 313).



Section 306 specifically protects the jurisdiction of the Budget Committees. It
prohibits floor action on any bill or amendment dealing with matters within the
jurisdiction of the Budget Committee not reported by the Budget Committee (or an
amendment to a bill reported by the Budget Committee). In addition to jurisdiction
over budget resolutions and reconciliation bills, House Rule X, clauses (e)(1)(2) and
(3) grant the House Budget Committee jurisdiction over “the congressional budget
process, generally” and the “establishment, extension, and enforcement of special
controls over the Federal budget, including the budgetary treatment of off-budget
Federal agencies and measures providing exemption from reduction under any
[sequester order].” In the Senate, a standing order of August 4, 1977, provides that
jurisdiction over legislation concerning the budget process be jointly referred to the
Senate Budget and Governmental Affairs Committees.
Title IV establishes additional limits on the consideration of certain measures.
For example, although changes can be made in the formulae for entitlement
programs which can increase the projected level of expenditures, Section 401(b) of
the Congressional Budget Act is designed to limit such increases. Section 401(b)(1)
requires that increases in entitlement spending not become effective during the
current fiscal year. Section 401(b)(2) further provides that increases that will become
effective during a fiscal year be limited to the level allocated under Section 302(b)
in connection with the most recent budget resolution or be subject to referral to the
Appropriations Committee (for a period not to exceed 15 days).
Title IV also provides that contract authority and debt authority do not exist
outside the budget process as a means of financing federal programs. Section 401(a)
of the Congressional Budget Act requires that bills that provide authority “to enter
into contracts under which the United States is obligated to make outlays” or “to
incur indebtedness ... for the repayment of which the United States or new credit
authority be effective for any fiscal year only to the extent provided in appropriation
Acts.”
Finally, the Unfunded Mandates Reform Act of 1995 (discussed elsewhere in
this compendium) added Sections 421-428 to the Congressional Budget Act. These
sections limit the consideration of unfunded federal mandates to the states.
In addition to establishing the congressional budget process, the Budget Act
contains provisions dealing with numerous other aspects of federal fiscal
management. Title I established the House and Senate Budget Committees.
Title V, also known as the Federal Credit Reform Act of 1990 (discussed
elsewhere in this compendium), was added as a part of the Budget Enforcement
Act.147 The Federal Credit Reform Act specifies the budgetary treatment of federal


147 As originally enacted, Title V provided for a change in the fiscal year of the federal
government. Prior to the Congressional Budget Act, the fiscal year began on July 1 of the
preceding calendar year. Since FY1976, the fiscal year has begun on October 1 of the
preceding calendar year. This provision and several others in Titles V, VI, VII, and VIII
(continued...)

credit programs, and provides that only the cost to the government of such programs
should be on budget, other associated outlays being treated as a means of financing
the programs.
Title II created a new congressional agency and outlined its responsibilities. The
Congressional Budget Office (CBO) was charged with providing information to
Congress. This basic function has not changed, but the nature of the information
required by Congress has expanded over time.
These duties are further specified in Section 308 of the Budget Act, which
requires that reports for bills providing new spending authority, new budget
authority, new credit authority, or changing revenues or tax expenditures include a
cost estimate prepared “after consultation with the Director of the Congressional
Budget Office.” In addition, Section 403 of the act requires the Director of the
Congressional Budget Office “to the extent practicable, [to] prepare [a cost estimate]
for each bill or resolution of a public character reported by any committee”.
Section 424, added by the Unfunded Mandates Reform Act of 1995, placed
additional responsibilities on CBO by requiring that it prepare and submit an estimate
of the direct cost of all federal intergovernmental mandates contained in each bill
reported in the House and Senate.
Title X, the Impoundment Control Act, codifies presidential authority to
withhold federal funds which have been appropriated. The act defines such authority
as rescissions and deferrals.
Rescission authority established under the Impoundment Control Act allows the
President to propose cancellation of funds and to withhold those funds for a 45 day
period pending congressional action. If Congress does not approve the rescission
request (or takes no action), the funds must be released at the end of that period.
Section 207 of the Balanced Budget and Emergency Deficit Reaffirmation Act of
1987 further codified this authority to allow the President to submit a rescission
request only once.
Deferral authority allows the President to withhold funds temporarily, but
deferrals may not extend beyond the end of the fiscal year. The Impoundment
Control Act originally provided for a one-house veto of any proposed deferral, but
this power was negated by the Supreme Court in I.N.S. v. Chadha (103 S.Ct. 715,
(1983)). Subsequently, the U.S. Court of Appeals ruled in City of New Haven, Conn.
v. United States (809 F.2d 900 (D.C. Cir. 1987)) that the one-house veto provision
was not severable from the President’s expanded authority in the 1974 law for policy
based deferrals. Language clarifying this narrowed base for deferrals was
incorporated into the Impoundment Control Act by the Balanced Budget and
Emergency Deficit Reaffirmation Act of 1987.


147 (...continued)
were repealed in 1982 by P.L. 97-258 (96 Stat. 877), An Act to Revise, Codify, and Enact
Without Substantive Change Certain General and Permanent Laws, Related to Money and
Finance, as Title 31, United States Code, “Money and Finance.”

In 1996, Congress enacted provisions to grant the President enhanced rescission
authority. Known as the Line Item Veto Act of 1996 (110 Stat. 1200; Sections 1021-
1027 of the Impoundment Control Act; 2 U.S.C. §621), these provisions inverted the
existing relationship between Congress and the President regarding proposals for
rescissions. Rather than requiring congressional support for a resolution approving
the President’s proposal, the new law required the enactment of a bill or joint
resolution of disapproval to prevent a proposed rescission from becoming effective.
A resolution of disapproval would be subject to a presidential veto, so a two-thirds
vote in each House would be necessary to override and prevent a rescission. The
Line Item Veto Act also expanded the scope of rescission authority. The act
provided that in addition to discretionary spending, whenever the President signs a
bill into law, he may cancel any item of new direct spending (i.e. entitlements), or
certain limited tax benefits.148
In 1998, the Supreme Court struck down the act as unconstitutional (Clinton v.
City of New York, 524 U.S. 417). It ruled that the Item Veto Act effectively allowed
the President to repeal parts of a statute in violation of Article I of the Constitution.
Discussion
The Congressional Budget Act has been judged harshly by its critics despite
achieving a significant measure of success. Its enactment resulted in greater control
of impoundments, led to a resurgence of Congress’s role in setting budget priorities,
and increased the attention of Congress to the whole budget. It has not, however,
resulted in the orderly process that some had hoped for. Deadlines for adopting
budget resolutions and for enacting spending legislation have routinely been missed;
the Budget Committees have sometimes been the source of conflict, in part because
authority was not significantly redistributed by the act; there is also a perceived
redundancy in debating the outlines of budget priorities on the budget resolution and
then later debating the details in authorizations and appropriations.
Perhaps because of these shortcomings, Congress has continued to debate the
budget process and possible reforms virtually since the Budget Act was signed into
law. Reform proposals have generally focused on one of two areas: (1) spending or
deficit control mechanisms, as in the Balanced Budget and Emergency Deficit
Control Act of 1985, and the Budget Enforcement Act of 1990; and (2) streamlining
the decision making process, usually by eliminating one group of decision makers
from the process or reducing the frequency of decisions (as with biennial budgeting).
Selected Source Reading
Pfiffner, James P. The President, the Budget, and Congress: Impoundment and the

1974 Budget Act. Boulder, CO: Westview Press, 1979.


Schick, Allen. Congress and Money. Washington: The Urban Institute, 1980.


148 Defined as any revenue-losing provision that provides a federal tax deduction, credit,
exclusion, or preference to 100 or fewer beneficiaries and any federal tax provision to
provide temporary or permanent transitional relief for 10 or fewer beneficiaries.

U.S. Congress. Joint Study Committee on Budget Control. Recommendations for
Improving Congressional Control Over Budgetary Outlay and Receipt Totals.
H.Rept. 93-147. 93rd Congress, 1st session. Washington: GPO, 1973.
U.S. Congress. Senate. Committee on Government Operations. Congressional
Budget and Impoundment Control Act of 1974, Legislative History. Committee
print. 93rd Congress, 2nd session. Washington: GPO, 1974.
James Saturno



G. Chief Financial Officers Act of 1990
Statutory Intent and History
The Chief Financial Officers (CFO) Act of 1990 (104 Stat. 2838)149 constitutes
a significant legislative effort to improve financial management in the federalst
government. Its passage shortly before the adjournment of the 101 Congress
reflected a bipartisan effort stretching over a period of five years. The new CFO Act
was heralded by many persons as the most important financial management
legislation since the Budget and Accounting Procedures Act of 1950 (64 Stat. 832).
Title I of the CFO Act, “General Provisions,” offers congressional findings
regarding federal financial management, including identification of some existing
weaknesses. Three purposes of the act are set forth:
!improvement of financial management practices by creating a new
leadership structure for federal financial management (consisting of
two new positions within the Office of Management and Budget
(OMB)), and CFOs for the major executive departments and
agencies;
!improvement of agency systems of accounting, financial
management, and internal controls to assure the issuance of reliable
financial information and to deter fraud, waste, and abuse of
government resources; and
!production of complete, reliable, timely, and consistent financial
information for use by both the executive branch and Congress in the
financing, management, and evaluation of federal programs.
When the Social Security Independence and Program Improvements Act of
1994 (108 Stat. 1467) established the Social Security Administration (SSA) as an
independent agency and created a new CFO position, the original number of 23 CFO
agencies was increased to the current total of 24.150


149 Codified as amended at 31 U.S.C., Chapters 5, 9, 11, and 35; also 5 U.S.C. §§ 5313-5315,

38 U.S.C. § 201 nt, and 42 U.S.C. § 3533.


150 Of the 24 CFO positions, those in the 14 cabinet-level departments (the Department of
Homeland Security is not covered by the CFO Act), the Environmental Protection Agency,
and the National Aeronautics and Space Administration are filled by presidential appointees
confirmed by the Senate. The remaining eight CFO positions (for the Agency for
International Development, Federal Emergency Management Agency, General Services
Administration, National Science Foundation, Nuclear Regulatory Commission, Office of
Personnel Management, Small Business Administration, and Social Security
Administration), along with all 24 deputy CFO positions, are career slots, filled by agency
head appointment. See following “Discussion” section for more on creation of additional
CFO positions.

Major Provisions
Title II, “Establishment of Chief Financial Officers,” creates a new leadership
structure for federal financial management. A new deputy director for management
within OMB, appointed by the President and confirmed by the Senate, serves as the
federal government’s chief financial officer. His functions with respect to financial
management include leadership, policy setting, implementation, and operations, as
well as responsibility to carry out the full range of general management duties.
The deputy director for management also performs important coordinating
functions within the federal financial management structure, including links to both
agency personnel and operations in this area.
Title II also establishes an Office of Federal Financial Management (OFFM)
within OMB, funded by a separate line item in OMB’s budget and headed by a
controller appointed by the President, subject to Senate confirmation. The
incumbent, who must have “demonstrated ability” and “extensive practical
experience” in financial management, serves as the principal advisor on financial
management to the deputy director for management.
The act stipulates qualifications for both the agency CFOs and deputy CFOs.
Each of the 24 agency CFOs reports directly to the agency head and is responsible
for all agency financial management operations, activities, and personnel. Financial
management is broadly defined, with agency CFOs assigned a variety of functions,
including producing financial information, establishing an integrated financial
management system, developing cost information, and developing systems that
provide for systematic performance measurement. The Government Performance and
Results Act of 1993 (107 Stat. 285) augmented performance measurement
requirements, extending the initial language in the CFO Act regarding “systematic
measurement of performance” for selected activities.
The 24 CFOs also are responsible for preparing annual management reports for
their agencies, addressed to the agency head and to the OMB Director, within 60 days
after the audit report (described below). The OMB Director then transmits the reports
to the Senate Committee on Governmental Affairs and the House Committee on
Government Reform. Each report contains an analysis of the financial management
status of the agency, its financial statements and audit report, and a summary of
material weaknesses pursuant to the Federal Managers’ Financial Integrity Act of

1982 (96 Stat. 814), as well as other information.151


Title III, “Enhancement of Federal Financial Management Activities,” covers
a variety of subjects. One section requires the Director of OMB to prepare and
submit a financial management status report and a government-wide five-year
financial management plan to the appropriate committees of Congress. The report


151 In 2001 the OMB Director, pursuant to authority provided in the Reports Consolidation
Act of 2000 (P.L. 106-531), required that agencies combine their annual performance
reports with the financial statements and other materials required by the CFO Act, into a
consolidated Performance and Accountability Report.

details the activities the Director, the controller, and agency CFOs plan to undertake,
over the next five years, to improve financial management.152 Another section
establishes the Chief Financial Officers Council, chaired by OMB’s deputy director
for management; other members include the controller, the Fiscal Assistant Secretary
of Treasury, and the 24 agency CFOs.153 The Council meets periodically and serves
as an interagency coordinating body.
The original requirements in the CFO Act for audited financial statements were
substantially expanded by provisions in the Government Management Reform Act
of 1994 (GMRA; 108 Stat. 3410). Initially, Sections 303 and 304 of the CFO Act
provided that all covered agency heads would prepare and submit to OMB audited
financial statements for each revolving and trust fund and for accounts that
performed substantial commercial functions. In addition, a three-year pilot project
(eventually involving 10 of the original 23 agencies) commenced, requiring
preparation of audited financial statements for all agency accounts.
GMRA extended the requirement for audited financial statements covering all
accounts to include all 24 CFO agencies. Beginning on March 1, 1997, and in each
year thereafter, the agency head submits to the OMB Director “an audited financial
statement for the preceding fiscal year, covering all accounts and associated activities
of each office, bureau, and activity of the agency.” Further, not later than March 31,
1998, and in each succeeding year, the Secretary of the Treasury, in coordination with
OMB, is to submit to the President and Congress an audited financial statement
covering all federal executive branch agencies for the preceding fiscal year. Finally,
Sections 305 and 306 revised the mandate and general procedures for financial audits
and management reports of government corporations.
The Federal Financial Management Improvement Act (FFMIA) of 1996154
established a general requirement for CFO agencies to “implement and maintain
financial management systems that comply substantially with federal financial
management system requirements, applicable federal accounting standards, and the
United States Government Standard General Ledger at the transaction level” (FFMIA
is further discussed elsewhere in the compendium). The Accountability of Tax
Dollars Act of 2002155 further amended the CFO Act and extended the coverage of
the requirements for preparation of audited financial statements to most executive
branch agencies (see further discussion of this law elsewhere in this compendium).


152 The 2003 financial managemnt status report and five-year plan was issued in August

2003. See Office of Management and Budget, 2003 Federal Financial Management Report,


Washington, Aug. 2003, available at:
[http://www.whitehouse.gov/omb/financial/2003_report_final.pdf], visited Jan. 22, 2004.
153 The CFO Council charter also includes the statutory deputy CFOs as members.
154 The FFMIA was enacted as Title VIII in the Omnibus Consolidated Appropriations Act
for FY1997; 110 Stat. 3009-389; 31 U.S.C. § 3512 note.
155 P.L. 107-289, 116 Stat. 2049.

Discussion
The CFO Act provided a new framework for financial management in the
executive branch. However, implementation of the various requirements in the act
is an ongoing process. For example, the legislation requires that the 24 covered
agencies have two financial statements prepared and audited each year: a statement
of financial position, and a statement of results of operations. Described simply, the
statement of financial position is a balance sheet that shows assets, liabilities, and the
aggregate difference (or net position). The statement of results of operations shows
revenues and other financing sources, expenses, and the resulting change in net
position.
The financial statements are different from agency reports that are used to
monitor and control budgetary resources; thus, they provide supplementary
information that may be useful to the President, Congress, the Department of the
Treasury, GAO, agency managers, and other interested parties. The additional
information, however, may not be as important as the discipline that agencies must
develop in order to produce it. In order to obtain unqualified audit opinions, agencies
not only must improve and integrate their accounting systems, but must also
strengthen their managerial control over resources and activities at all levels.
The OMB Director prescribes the form and content of the financial statements.
In 2001, the OMB Director required that agencies combine annual performance
reports pursuant to the Government Performance and Results Act with the CFO Act
financial statements into a consolidated Performance and Accountability Report.156
At the same time, a schedule of accelerated deadlines was established, with the
reports covering FY2002 due February 1, 2003, and FY2003 due January 30, 2004;
and beginning with FY2004, the performance and accountability reports are due
November 15th.157
Evidence indicates steady improvement in compliance with the audited financial
statements requirements, as more agencies receive clean, or unqualified, opinions.
By FY2001,18 CFO Act agencies had received a clean opinion, but OMB noted that
agencies have achieved this record of unqualified opinions despite major problems
with their financial systems, “by expending significant resources and making158
extensive manual adjustments after the end of the fiscal year.” Some, including
GAO, have expressed concern about agencies’ capabilities to meet the accelerated159
deadlines. In August 2003, OMB offered a decidedly upbeat assessment of


156 Pursuant to authority provided in the Reports Consolidation Act of 2000 (P. L.106-531;

114 Stat. 2537).


157 U.S. Office of Management and Budget, Form and Content of Agency Financial
Statements, Bulletin No. 01-09, Sept. 25, 2001.
158 U.S. Office of Management and Budget, 2002 Federal Financial Management Report
(Washington, May 1, 2002), p. 11, available at:
[http://www.whitehouse.gov/omb/financial/2002_report.pdf, visited Dec. 18, 2003.
159 U.S. General Accounting Office, Financial Management: Sustained Efforts Needed to
(continued...)

experiences with the FY2002 financial statements, which were due February 1, 2003,
nearly a month earlier than previously:
Not only did all 24 agencies subject to the CFO Act meet this new, shorter
deadline, but a record 21 of 24 major departments and agencies received
unqualified, or clean, opinions on their 2002 audits. In addition, the agencies
combined their financial statements with their performance reports to provide
information about agency finances and program performance in one document.
Just two weeks later, all agencies met the February 15 deadline for producing for
the first time quarterly financial statements.160
The growing number of agency financial statements receiving clean opinions
may partially reflect increased attention in the executive branch. The Bush
Administration in 2001 designated improving financial performance as one of five
government-wide initiatives in the President’s Management Agenda. In 2002, OMB
devised a management scorecard to grade agencies on their progress; one of the core
criteria for financial performance is achieving unqualified and timely opinions of the161
annual financial statements. Obtaining an unqualified opinion on the government-
wide financial statements has yet to be achieved, however. In March 2003, the
General Accounting Office, for the sixth straight year, issued a disclaimer of opinion
following its audit of the government-wide consolidated statements for FY2002.162
Three new CFO positions have been created. These additions, however, are not163
identical to the other 24 CFO positions previously established. In 1993, the law
creating the Corporation for National and Community Service (CNCS) provided for
a chief financial officer, to be appointed by the President, with advice and consent
of the Senate; the listing of duties for the CFO includes some language identical to164
that found in 31 USC § 902, but other provisions are not the same. Another CFO
position came into being early in 2001. A provision in the Treasury and General
Government Appropriations Act, 2000, established a new CFO position within the


159 (...continued)
Achieve FFMIA Accountability, GAO-03-1062, Sept. 2003, p. 16.
160 U.S. Office of Management and Budget, 2003 Federal Financial Management Report
(Washington, Aug. 2003), p. 16, available at:
[http://www.whitehouse.gov/omb/financial/2003_report_final.pdf, visited Dec. 18, 2003.
161 See CRS Report RS21416, The President’s Management Agenda: A Brief Introduction,
by Virginia A. McMurtry; and U.S. Office of Management and Budget, Fiscal Year 2004
Budget of the U.S. Government, Performance and Management Assessments (Washington:
GPO, 2003), pp. 1-7.
162 U.S. General Accounting Office, Fiscal Year 2002 U.S. Government Financial
Statements: Sustained Leadership and Ovesight Needed for Effective Implementation of
Financial Management Reform, GAO-03-572T, Apr. 8, 2003.
163 For more detailed consideration of differences among CFO positions, see CRS Report
RL31965, Financial Management in the Federal Government: Efforts to Improve
Performance, by Virginia A. McMurtry, pp. 4-5.
164 P. L. 103-82; 107 Stat. 882, 42 U.S.C. § 12651f.

Executive Office of the President (EOP).165 The CFO for the EOP generally is to
“have the same authority and perform the same functions” as other agency CFOs.
However, the President may determine that certain statutory provisions applicable to
other agency CFOs shall not apply to the new position; Congress must be notified of
any such exemptions.
The Homeland Security Act of 2002 provided for a third new CFO position.166
The law makes no reference to the CFO Act or to Chapter 9 of Title 31. The CFO
in the Department of Homeland Security (DHS) is appointed by the President with
no Senate confirmation requirement. In addition, unlike all the other CFOs, who
report directly to the agency head, the CFO for DHS may report to the Secretary, or
to “another official of the Department, as the Secretary may direct.”167 Measures
received action in the first session of the 108th Congress to bring the CFO in DHS
directly under the CFO Act.168
Careful oversight of ongoing activities in the executive branch to improve
financial management in the federal government, particularly developments relating
to consolidated financial statements, remains an important concern for Congress.
With enactment of the Accountability of Tax Dollars Act of 2002, 78 more agencies
are required to prepare annual audited financial statements. The ultimate issue may
be whether or not the availability of such statements eventually contributes to
different and better decisions.
Selected Source Reading
Callahan, John J. “New Frontiers for Federal CFOs.” Public Manager, vol. 29
(summer 2000), pp. 13-16.
David, Irwin D. “Financial Information for Policy, Program, and Operating
Officials.” Journal of Government Financial Management, vol. 51 (spring

2002), pp. 10-17.


Peters, Katherine McIntire. “Fixing Finances” and “Making Changes.” Government
Executive, vol. 32 (June 2000), p. 68.
Peters, Katherine McIntire. “Making Change.” Government Executive, vol. 32 (June

2000), pp. 70-78.


165 P. L. 106-58, Sept. 29, 1999; 113 Stat. 430. The provisions relating to the new CFO
position are contained in Sec. 638; 113 Stat. 475.
166 P. L. 107-296, Sec. 103; 116 Stat. 2145.
167 Ibid., Sec. 702, 116 Stat. 2219.
168 On Nov. 21, 2003, S. 1567, as amended, passed the Senate by unanimous consent, and
on Nov. 25, 2003, S. 1567 was held at the desk in the House, in preparation for floor action.
Previously, two House committees ordered reported a companion measure, H.R. 2886. The
legislation also deletes the Federal Emergency Management Agency from the listing of CFO
agencies, so that FEMA, now moved to the Department of Homeland Security, is not
required to prepare separate financial statements.

Steinberg, Harold I. “The Chief Financial Officers Act: A Ten Year Progress
Report.” Government Accountants Journal, vol. 49 (winter 2000), pp. 44-52.
U.S. Congress. House. Committee on Government Reform. Subcommittee on
Government Efficiency and Financial Management. Consolidated Financial
Statements of the Federal Government for Fiscal Year 2002. Hearing. April

8, 2003, available at:


[http://reform.house.gov/ GEFM / H eari n gs / E vent S i ngl e.as p x ? Event ID=380] ,
visited December 18, 2003.
CRS Report RL31965. Financial Management in the Federal Government: Efforts
to Improve Performance, by Virginia A. McMurtry.
Virginia McMurtry



H. Government Management Reform Act of 1994
Statutory Intent and History
The Government Management Reform Act (GMRA) of 1994 (108 Stat. 3410)169
incorporated “reinventing government” principles from the National Performance170
Review (NPR) to pursue needed reforms, particularly with regard to federal
personnel and general and financial management. Based upon a six-month study, the
NPR Final Report offered over 380 major recommendations for creating “a
government that works better and costs less.”171 Several of the NPR
recommendations were implemented by executive action, but others required
statutory change. The Clinton Administration forwarded a wide-ranging draft
measure incorporating the needed legislative provisions, which was introduced in the
House on October 28, 1993, as the “Government Reform and Savings Act” (H.R.

3400). An amended version passed the House on November 23, 1993.


Although H.R. 3400 had been jointly referred to 17 House committees having
jurisdiction over particular provisions in the measure (11 of which took some action
on the measure and six of which were discharged of it), the situation was different
in the Senate. Under Senate rules, bill referral goes to the committee that has
jurisdiction over the subject matter that predominates in the text; multiple referrals
are less common than in the House, since they require unanimous consent of the
Senate. So, when the House-passed version of H.R. 3400 was submitted to the
Senate, it was referred only to the Governmental Affairs Committee because of its
scope as an omnibus government reform bill. Following action by this committee,
it was expected that other Senate committees would consider those sections falling
within their jurisdictions. Eventually, the Governmental Affairs Committee reported
a new bill, S. 2170, much narrower in scope than the original H.R. 3400, and
containing only those provisions falling under the committee’s jurisdiction, since no
other committee took up the House-passed measure.172 During floor consideration
in the Senate, additional provisions were dropped, including enhanced federal debt
collection procedures.
On October 13, 1994, President Clinton signed S. 2170 into law, “An Act to
provide a more effective, efficient, and responsive Government.” In his signing


169 Codified at 31 U.S.C. § 331, § 501nt, § 1113 nt, prec.§ 3301, § 3301 nt, § 3332, § 3515,
and § 3521. Also at 2 U.S.C. § 31, § 31 nt; 3 U.S.C. §104; 5 U.S.C. § 5318, § 6304 and nt;
and 28 U.S.C. § 461.
170 On March 3, 1993, President Bill Clinton announced a six-month performance review of
the federal government, under the leadership of Vice President Al Gore. The NPR focused
primarily on process, how to make the government function more efficiently and effectively.
171 U.S. Executive Office of the President, From Red Tape to Results: Creating a
Government That Works Better & Costs Less, National Performance Review (Washington:
GPO, 1993), pp. 134-153, 160-168.
172 See U.S. Congress, Senate Committee on Governmental Affairs, Government
Management Reform Act of 1994, S.Rept. 103-281, 103rd Cong., 2nd sess. (Washington:
GPO, 1993).

statement, the President noted that, in passing the measure, “[T]he Congress has
helped ensure that the Federal Government’s managers will have the financial
information and flexibility they need to make sound policy decisions and manage
resources.” He also praised provisions in the GMRA contributing to improved
federal financial accountability as well as cutting costs.173
Major Provisions
Title I of the Government Management Reform Act of 1994, “Limitation on
Pay,” requires that automatic cost of living raises for Members of Congress, the
Executive Schedule, and the judiciary not exceed those given to General Schedule
(GS) federal employees. Title II, “Human Resource Management,” limits the number
of annual leave days that Senior Executive Service (SES) employees may accrue.
Title III, “Streamlining Management Control,” strives to improve the efficiency
of federal agencies in meeting statutory requirements for reports to Congress. It
allows the Director of the Office of Management and Budget, in his annual budget
submission, to publish recommendations to eliminate or consolidate duplicative or
obsolete reporting requirements and to adjust deadlines to achieve a more efficient
workload distribution or improve the quality of reports.
Title IV contains the “Federal Financial Management Act of 1994,” covering a
variety of issues, including electronic funds transfer, franchise funds, reporting
requirements, and audited financial statements.
Section 402 aids federal agencies in the conversion to electronic delivery of
government payments. The section states that all federal wage, salary, and retirement
payments shall be paid to recipients by electronic funds transfer, starting on January
1, 1995, for new employees or recipients. Recipients may have the requirement
waived by written request. The Secretary of the Treasury may waive the requirement
for a group of recipients upon request by the head of an agency, based on standards
prescribed by Treasury.
Section 403 authorizes the establishment of franchise funds in six executive
agencies on a pilot program basis for five years. The franchising concept draws from
the reinventing government principles of competition and the injection of market
mechanisms into government operations. Franchise programs would offer
administrative support services, such as payroll operations and accounting services,
to the participating agency and to other federal agencies on a reimbursable basis. The
monopoly of internal service providers within federal agencies would be eliminated
because office managers would be free to buy from the best provider. Franchise
programs will expand or decline with the demand for their services.
Section 404 provided flexibility for the OMB Director in the timing and
presentation of statutorily required financial management reports from executive
branch agencies to OMB or the President, and from agencies or OMB to Congress.


173 U.S. Executive Office of the President, Weekly Compilation of Presidential Documents,
vol. 30 (Oct. 17, 1994), pp. 2006-2007.

Flexibility was provided to improve the efficiency of executive branch performance
in financial management reporting. This authority initially was limited, however, to
reports required by statute to be submitted between January 1, 1995, and September
30, 1997. Adjustments in reporting were made only after consultation with the
chairman of the Senate Committee on Governmental Affairs and the chairman of the
House Committee on Government Reform and Oversight; written notification to
Congress must follow.
Section 405 expands requirements for executive branch agency financial
statements contained in Section 303(a) of the Chief Financial Officers Act of 1990
(see discussion elsewhere in this compendium). Section 405(a) requires all 24
agencies covered under the CFO Act to have agency-wide audited financial
statements, beginning with FY1996. The annual statements, initially due February
28, 1997, must cover all accounts and associated activities. The requirement is
intended to contribute to cost-effective improvements in government operations. The
OMB Director is authorized to require additional audited financial statements for
components of CFO Act agencies. The OMB Director is also given authority to
prescribe the form and content of financial statements.
Section 405(b) provides that for each audited financial statement required from
the agency, the person who audits the statement (the inspector general or an
independent external auditor) must submit a report on the audit to the head of the
agency. This report is to be prepared in accordance with generally accepted
government auditing standards.
Section 405(c) of the GMRA further requires that a consolidated audited
financial statement for all accounts and associated activities in the executive branch
be prepared by the Secretary of the Treasury, in coordination with the OMB Director,
and be audited by the Comptroller General.174 The first such statement, covering
FY1997, was submitted to the President and Congress on March 31, 1998. This
financial statement is intended to reflect the overall financial position of the
executive branch, including assets, liabilities, and results of operations of the
executive branch. The specific form and contents of the financial statement are
determined by the OMB Director. This financial statement is intended to provide
Congress, the President, and the American public with more accurate and useful
financial information on the workings of the government.
Discussion
As mentioned previously, most of the provisions in the GMRA reflect
recommendations contained in the report of the National Performance Review. For
example, the NPR report endorsed the idea of “franchising” internal services; the
GMRA provides for a pilot program embracing the approach. Originally, it was


174 Although all accounts and activities of the executive branch were included in the
government-wide financial statement, only CFO Act-covered accounts were audited.
Because accounts not covered by the CFO Act constitute only a small portion of executive
branch activities, these accounts did not have a significant effect on the government-wide
financial statement.

anticipated that the pilots would be designated in the spring of 1995, operate for four
years and terminate on October 1, 1999. However, delays occurred, with the six
pilots not fully in operation until FY1997. In September of 1996, a provision was
included in P. L. 104-208, the Omnibus Consolidated Appropriations Act of 1997,
extending the pilot program through FY2001. The GMRA required that a report
evaluating the franchise funds in the pilot program was due to Congress “within 6
months after the end of fiscal year 1997.” A report, addressing the elements specified
in the law, was submitted on schedule in March 1998, but as an interim progress
report, rather than a final evaluation of the experiences with the six franchise funds
included in the pilot program.175
The NPR report also called for eliminating unnecessary reports and simplifying
the reporting process. The GMRA encouraged weeding out where possible and
otherwise consolidating existing reports in an ongoing effort to simplify reporting
requirements and to maximize the usefulness of executive branch reports to
Congress. Provisions in the Reports Consolidation Act of 2000 (P. L. 106-531; 114
Stat. 2537) restored and enhanced the consolidation authority for financial and
performance management reports initially given to the OMB Director in GMRA and,
moreover, made the authority permanent. In 2001, the OMB Director required that
agencies combine annual performance reports pursuant to the Government
Performance and Results Act with the CFO Act financial statements into a
consolidated Performance and Accountability Report. At the same time, a schedule
of accelerated deadlines was established, with the reports covering FY2003 due by
January 30, 2004; beginning with FY2004, the performance and accountability
reports are due by November 15th.176
Another major recommendation in the NPR report was to use the Chief
Financial Officers Act of 1990 to improve financial services. The provisions in
GMRA relating to annual audited financial statements for federal agencies embody
this approach, as discussed.177
Selected Source Reading
Peters, Katherine McIntire. “Dollars and Sense.” Government Executive, vol. 30
(June 1998), pp. 43-48.
U.S. Congress. Senate. Committee on Governmental Affairs. Government
Management Reform Act of 1994. Report to accompany S. 2170. S.Rept. 103-

281. 103rd Congress, 2nd session. Washington: GPO, 1994.


175 See The Franchise Fund Pilot Program: An Interim Progress Report. Report to
Congress [Washington, 1998]. This interim report was prepared jointly by the Office of
Management and Budget, the Entrepreneurial Government Committee of the Chief Financial
Officers Council, and the six franchise fund pilots.
176 OMB, Form and Content of Agency Financial Statements, Bulletin No. 01-09, Sept. 25,

2001.


177 See “Discussion” section relating to Chief Financial Officers Act elsewhere in this
compendium for perspective on the CFO Act amendments contained in GMRA providing
for the audited financial statements.

——. Reports Consolidation Act of 2000. Report to accompany S. 2712. S.Rept.

106-337. 106th Congress, 2nd session. Washington: GPO, 2000.


CRS Report RL31965, Financial Management in the Federal Government: Efforts
to Improve Performance, by Virginia A. McMurtry.
U.S. Office of the Vice President. Improving Financial Management.
Accompanying Report of the National Performance Review. Washington: GPO,

1993.


Virginia McMurtry



I. Accountability of Tax Dollars Act of 2002
Statutory Intent and History
The Accountability of Tax Dollars Act (ATDA) of 2002 (P.L. 107-289; 116
Stat. 2049) was intended “to expand the types of Federal agencies that are required
to prepare audited financial statements to all executive branch agencies in the federal
government.”178
Testifying in support of the legislation, Representative Pat Toomey stated thatth
he first introduced the measure in the 106 Congress (H.R. 5521) “as a good
government measure to combat waste, fraud, and abuse at Federal agencies.... I
decided to introduce legislation when I learned, to my surprise, that many Federal
agencies are simply not required by law to prepare audited financial statements, even179
though this is a fundamental part of good management and oversight.”
In the 107th Congress, H.R. 4685 was introduced on May 8, 2002, by
Representative Toomey, with bipartisan cosponsors, and referred to the House
Committee on Government Reform. On May 14, 2002, the Subcommittee on
Government Efficiency, Financial Management, and Intergovernmental Relations
held a hearing, and on June 18, 2002, approved the bill, as amended, by unanimous
consent. On October 7, 2002, H.R. 4685 was considered in the House under
suspension of the rules and passed, as amended, by voice vote.
A companion bill, S. 2644, was introduced in the Senate on June 19, 2002, and
referred to the Committee on Governmental Affairs. Markup was held on October
16, 2002, and S. 2644, with a substitute amendment, was reported favorably by a vote
of 9-0. On the following day, the Senate passed H.R. 4685 by unanimous consent.
The measure was signed into law on November 7, 2002, with the first audited
statements pursuant to the act due on March 1, 2003.
Major Provisions
The Accountability of Tax Dollars Act amends Title 31, United States Code, to
bring almost all executive branch agencies under the requirement for preparation of
annual audited financial statements that previously applied only to the 24 major
departments and agencies covered by the Chief Financial Officers (CFO) Act.180
Specifically, Section 2(a) changes the list of agencies covered by the audited annual
financial statements requirement in 31 U.S.C. § 3515 by deleting the cross-reference
to CFO Act agencies and inserting “each covered executive agency.” In addition, the


178 U.S. Congress, Senate Committee on Governmental Affairs, Accountability of Tax
Dollars Act of 2002, S.Rept. 107-331, 107th Cong., 2nd sess. (Washington: GPO, 2002), p.

1.


179 U.S. Congress, House Committee on Government Reform, Subcommittee on Government
Efficiency, Financial Management, and Intergovernmental Relations, H.R. 4865, thethnd
Accountability of Tax Dollars Act of 2002, hearing, 107 Cong., 2 sess. (Washington:
GPO, 2003), p. 8.
180 104 Stat. 2838. See discussion of the CFO Act elsewhere in this compendium.

new law changed the initial due date for the audited financial statements from March

1, 1997, to March 1, 2003.


The new law further amends Section 3515 by adding two new subsections.
Subsection 3515(e) allows the Director of OMB to exempt an agency from the
requirement to prepare an annual audited financial statement in a fiscal year under
certain circumstances. OMB discretion is possible when the agency budget does not
exceed $25 million, and the OMB Director determines the exercise is unwarranted
due to the absence of risks associated with the agency’s operations, the agency’s
demonstrated performance, or other relevant factors. If OMB grants such
exemptions, the director is to notify the House Committee on Government Reform
and the Senate Committee on Governmental Affairs annually of the agencies
involved and the reasons for each exemption. Subsection 3515(f) defines the term
“covered executive agency” to mean any other executive agency not required by
another provision of law to prepare and submit annually to Congress and OMB an
audited financial statement. Specifically excluded are bodies subject to Chapter 91
of Title 31 (mainly government corporations).
Section 2(b) of ADTA provides waiver authority for the OMB Director during
a transition period under the new law. Specifically, the OMB Director may waive the
application of the new law to any non-CFO Act agency for two years following
enactment.
Discussion
The Accountability of Tax Dollars Act amends Title 31, United States Code, to
expand the types of federal agencies that are required to prepare audited financial
statements each year. Prior to its enactment, the 24 major departments and agencies
covered by the CFO Act were required to prepare annual financial statements to be
audited by their Offices of Inspector General (IG) or outside contractors designated
by the IGs. A few agencies, such as the U.S. Postal Service, were required by agency-
specific legislation to prepare audited financial statements. Over 20 entities were
also previously required to prepare annual financial statements and have them audited
pursuant to the Government Corporation Control Act (Chapter 91 of Title 31,
described elsewhere in this compendium). Several independent agencies, such as the
Federal Communications Commission and the Federal Trade Commission,
voluntarily prepared audited financial statements.181
As noted, the ATDA was passed with virtually no opposition in the 107th
Congress, both in committee and during House and Senate floor consideration. The
language relating to coverage did evolve during the legislative process, however.
Both the House and Senate bills, as introduced, provided a blanket exemption for
agencies with budget authority for the fiscal year of less than $25 million. Testimony


181 U.S. General Accounting Office, “Survey Results of Selected Non-CFO Act Agencies’
Views on Having Audited Financial Statements,” briefing to the Honorable Patrick J.
Toomey, House of Representatives, Nov. 30, 2001, p. 15. Reprinted in hearing on H.R.

4685, p. 27.



received during a hearing on H.R. 4685 may have proved important in this regard,
when an official from the Federal Elections Commission suggested:
Agency operations and the types of programs administered by an agency should
be more important than the size of budget in determining the need for audited
financial statements. For example, an agency with a budget less than $25 million
that has fiduciary responsibility for a trust fund, administers a grant program, or
operates revenue-generating programs may be the type of agency that should182
prepare audited financial statements ...
As enacted, the ATDA allows the OMB Director to exempt agencies with budgets
under $25 million from the audited statements requirement under certain
circumstances, but the exemption is not automatic.
With respect to agencies subject to the new law, it is interesting to note that 49
agencies were included as coming under the expanded requirements (before any
possible OMB exemptions) in the Senate report accompanying S. 2644.183 A month
later, after the bill was signed into law, a memorandum from the OMB Director listed

78 agencies affected by ATDA.184


The OMB Director also exercised the provision in the law to waive the
requirement during an initial transition period, allowing agencies not having prepared
audited financial statements in the past to have an exemption for FY2002 for the
annual financial statements. In the same December 2002 memorandum, the director
noted that the newly covered agencies, along with the 24 CFO agencies, are all
subject to the provisions of OMB Bulletin 01-09, Form and Content of Agency
Financial Statements, beginning with FY2003.185 This bulletin requires agencies to
consolidate their audited financial statements and other financial and performance
reports into combined Performance and Accountability Reports and accelerates the186
deadlines for submission. OMB subsequently waived the requirement in Bulletin


182 Hearing on H.R. 4685, p. 85.
183 S. Rept. 107-331, pp. 3-4.
184 U.S. Office of Management and Budget, “Requirements of the Accountability of Tax
Dollars Act of 2002,” Memorandum for Heads of Selected Executive Agencies from
Mitchell E. Daniels Jr., Dec. 6, 2002. There may be further modifications to the list of
agencies coming under ATDA’s expanded requirement for financial statements, because of
possible uncertainty with the statutory definition of covered agency, as described above.
185 U.S. Office of Management and Budget, Form and Content of Agency Financial
Statements, Bulletin No. 01-09, Sept. 25, 2001.
186 Previously, CFO agencies had a deadline of 150 days after the end of the fiscal year (i.e.,
early March) to submit the reports, but the due date for the combined FY2002 reports was
moved up to February 1, 2003; for FY2003, to January 30, 2004; and beginning with
FY2004, to November 15, just six weeks after the close of the fiscal year. (See discussion
of the CFO Act elsewhere in this compendium.)

01-09 for preparation and submission to OMB of quarterly unaudited financial
statements for FY2003 for the agencies covered by ATDA.187
An issue that may be revisited is whether the ATDA agencies should be subject
to the additional requirements of the Federal Financial Management Act (FFMIA),
as are the 24 CFO Act agencies. The FFMIA requires covered agencies to implement
and maintain financial management systems that comply substantially with federal
financial management system requirements, applicable federal accounting standards,
and the United States General Ledger at the transaction level.188 H.R. 4685, as
reported out of subcommittee, apparently contained language bringing ATDA
agencies under the accounting standards provisions of FFMIA.189 Opposition from
the Bush Administration resulted in deletion of the FFMIA provisions prior to floor
consideration. As Representative Janice Schakowsky commented during House floor
debate:
Unfortunately, the bill we have on the floor today is not the bill we have passed
out of our subcommittee [House Subcommittee Government Efficiency,
Financial Management and Intergovernmental Relations]. The bill we have
passed included a section that required the agencies covered under this bill to
conform to the accounting standards set out in the Federal Financial Management
Improvement Act of 1996. The administration insisted that those [FFMIA]
provisions be stripped from the bill, or it would block the bill from coming
before the House today.... I am afraid that the administration’s opposition to the
accounting standards that were in this bill is just one more attempt to make sure190
that OMB, and not Congress, sets the standards by which agencies are judged.
As one of five government-wide initiatives under the rubric of the President’s
Management Agenda,191 improved financial performance in executive branch
agencies has received considerable attention and emphasis from OMB recently.
Improving financial management in the federal government remains an important
concern for Congress as well. With enactment of ATDA, 78 more agencies are
required to prepare annual audited financial statements. Congressional scrutiny of the
initial round of audited financial statements prepared by agencies subject to ATDA
might prove an informative focus for oversight. The ultimate question may be
whether the availability of audited financial statements improves the quality of


187 U.S. Office of Management and Budget, “Accountability of Tax Dollars Act of 2002 —
Implementation Guidance and Executive Forum March 31,” Memorandum to Heads of
Executive Agencies Subject to Provisions of the Accountability of Tax Dollars Act of 2002,
from Mark W. Everson, Mar. 20, 2003.
188 110 Stat. 3009-389; 31 U.S.C. § 3512 note. For further background on FFMIA, see
discussion elsewhere in this compendium.
189 There was no written report to accompany H.R. 4685.
190 Rep. Janice Schakowsky, remarks in the House, Congressional Record, daily edition, vol.

148, Oct. 7, 2002, p. H7043.


191 See U.S. Office of Management and Budget, The President’s Management Agenda —
FY2002 (Washington: OMB, 2001). For an overview of the PMA, see CRS Report
RS21416, The President’s Management Agenda: A Brief Introduction, by Virginia A.
McMurtry.

decisionmaking in the federal government and furthers accountability to the
American taxpayers, as envisaged in the ATDA.
Selected Source Reading
CRS Report RL31965. Financial Management in the Federal Government: Efforts
to Improve Performance, by Virginia A. McMurtry.
U.S. Congress. House. Committee on Government Reform. Subcommittee on
Government Efficiency, Financial Management, and Intergovernmental
Relations. H.R. 4865, the Accountability of Tax Dollars Act of 2002. Hearing.thnd

107 Congress, 2 session, May 14, 2002. Washington: GPO, 2003.


U.S. Congress. Senate. Committee on Governmental Affairs. Accountability of Tax
Dollars Act of 2002. Report to accompany S. 2644. 107th Congress, 2nd session.
S.Rept. 107-331. Washington: GPO, 2002.
Virginia McMurtry



J. Federal Managers’ Financial Integrity Act of 1982
Statutory Intent and History
The Federal Managers’ Financial Integrity Act (FMFIA) of 1982,192 which
amended the Accounting and Auditing Act of 1950, was designed to improve the
government’s ability to manage its programs. It emerged in the early 1980s and is
often seen as the opening to other attempts along this line, including the Chief
Financial Officers Act of 1990, the Federal Financial Management Improvement Act
of 1996, and the Accountability of Tax Dollars Act of 2002.193 Adoption of FMFIA
followed the conclusions of a number of studies — from congressional committees,
the General Accounting Office (GAO), inspectors general, and the executive agencies
themselves — that documented significant weaknesses in internal financial and
management controls, including inadequate and inaccurate accounting systems and
financial reports. These weaknesses, in turn, were seen as contributing to wasteful
spending, poor management, ineffective programs, fraud, and billions of dollars in
losses.
FMFIA recognized that strong internal controls and accounting systems would
help to ensure the proper use of funds and resources, compliance with statutes and
regulations, and preparation of reliable financial reports for oversight and
policymaking. The enactment, consequently, provides for ongoing evaluations of the
internal control and accounting systems that protect federal programs against fraud,
waste, abuse, and mismanagement. FMFIA further mandates that the heads of
federal agencies report annually to the President and Congress on the condition of
these systems and on their actions to correct any material weaknesses which the
reports identified. Regulations implementing FMFIA’s requirements for financial
management systems are contained in Office of Management and Budget (OMB)
Circular No. A-127, dealing with management accountability and control.
Major Provisions
Purposes and Objectives. The act requires the head of each executive
agency to establish internal accounting and administrative controls, consistent with
standards the Comptroller General prescribes, that reasonably ensure three principal
objectives:
!that obligations and costs comply with applicable law;
!that all assets are safeguarded against waste, loss, unauthorized use,
and misappropriation; and
!that revenues and expenditures applicable to agency operations are
recorded and accounted for properly, so that accounts and reliable


192 P.L. 97-255, 96 Stat. 814-815; codified at 31 U.S.C. § 3512.
193 For an overview of these and related efforts, see CRS Report RL31965, Financial
Management in the Federal Government: Efforts to Improve Performance, by Virginia A.
McMurtry.

financial and statistical reports can be prepared and accountability
of the assets maintained.
The standards prescribed by the Comptroller General specifically include those
designed to ensure the prompt resolution of all audit findings.
Guidelines. To meet these requirements, FMFIA instructed the Director of
OMB, in consultation with the Comptroller General, to establish guidelines that the
head of each agency must follow in evaluating the internal accounting and
administrative control system of the agency. The OMB Director, however, is
authorized to change a guideline when considered necessary.
Required Statements and Reports. By December 31 of each year
(beginning in 1983), the head of each executive agency, based on such evaluations,
prepares a statement on whether or not the systems of the agency comply with the
criteria cited above. If the systems do not comply, then the head issues a report
identifying any material weaknesses in the systems and describing the plans and
schedule for correcting the weaknesses. Section 4 of the act provides that a separate
report state whether the accounting system of the agency conforms to the principles,
standards, and requirements of the Comptroller General.
The reports and statements are signed by the head of the agency and submitted
to the President and Congress. These products in their entirety are also made
available to the public, with an exception, however, for certain sensitive or classified
information: i.e., information is deleted if it is specifically prohibited by law or
required by executive order to be kept secret in the interest of national security.
The Reports Consolidation Act (RCA) of 2000 (P.L. 106-531; 114 Stat. 2537),th
approved at the end of the 106 Congress, has implications for FMFIA reports. The
new statute is intended to overcome the duplication of effort and lack of coordination
among the multiple financial and performance management reporting requirements
within an agency. To do so, RCA authorizes the consolidation of such reports into
a single annual report from each agency to achieve several purposes: enhance
efficiency and coordination among the reporting entities; improve the quality of the
information; and provide it in a more meaningful and useful format for Congress, the
President, and the public.
Provisions Affecting Offices of Inspectors General. FMFIA also
affects offices of inspector general (OIGs), created earlier by the Inspector General
Act of 1978 (92 Stat. 1101). Section 3 of the act requires that the President include
in the supporting detail of his budget submission the amounts of appropriations he
requested for each OIG. Congressional committees are authorized to solicit from the
IG additional information concerning the amount of appropriations he or she
requested when the request was originally submitted to agency management or OMB.
This provision was designed to help protect the independence of IG offices and
ensure their adequate funding. Along these same lines, the Inspector General Act
Amendments of 1988 (102 Stat. 2529) provided for a separate appropriations account
for each office of inspector general in a federal establishment (i.e., all the cabinet
departments and the larger agencies).



Reference in the Chief Financial Officers Act. The Chief Financial
Officers (CFO) Act of 1990 (104 Stat. 2847) is connected to the Federal Managers’
Financial Integrity Act requirements. The CFO Act calls upon the Director of OMB
to submit a financial management status report to appropriate committees of
Congress. Part of this report is to be a summary of reports on internal accounting and
administrative control systems submitted to the President and Congress as required
by FMFIA.
Discussion
Passage of the Federal Managers’ Financial Integrity Act in 1982 built upon
some of the same concerns that had prompted enactment of the Inspector General Act
four years before. FMFIA was boosted at the time by its incorporation as a top
priority in Reform ‘88; these were the Reagan Administration initiatives begun in
1982, which were intended to strengthen management controls in the federal
government. The statute was later enhanced by provisions in the Chief Financial
Officers Act of 1990 and now plays a role in the President’s Management Agenda,194
initiated by President George W. Bush in 2001. FMFIA continues to provide a
framework for strengthening, standardizing, and evaluating internal control and
accounting systems as well as for reporting on relevant findings and corrective
action. These developments paved the way for high expectations for ferreting out the
root causes of waste, fraud, and mismanagement; providing federal managers with
specifics about what is wrong and how to correct it; and informing Congress and the
public about the underlying problems and their remedies.
FMFIA has received mixed reviews over the years. Initially, it was seen as not
reaching its high expectations, according to some commentators who asserted that
the law had been ignored or improperly and too narrowly implemented. This
occurred, critics contended, because of an over-concern with the process rather than
a focus on the objectives of the legislation, confusion or misunderstanding over the
law’s terminology, and restrictive interpretations of some of its provisions. FMFIA’s
failure to produce the results intended by Congress, in part, led to the later passage
of other laws (discussed elsewhere in this compendium) designed to improve the
general and financial management of the government. These included the Chief
Financial Officers Act of 1990, the Government Management Reform Act of 1994,
and the Federal Financial Management Improvement Act of 1996.
Since then, however, FMFIA and the related statutes have received more
favorable reviews and, evidently, have had a more beneficial impact on federal
agencies. According to an OMB study, for instance, “from 2001 to 2002, the number
of FMFIA material weaknesses and nonconformances [found] dropped by 22 percent


194 U.S. Office of Management and Budget, The President’s Management Agenda —
FY2002 (Washington: OMB, 2001); and Fiscal Year 2004 Budget of the U.S. Government,
Performance and Management Assessments (Washington: GPO, 2003), pp. 1-7. For an
overview and other citations, see CRS Report RS21416, The President’s Management
Agenda: A Brief Introduction, by Virginia A. McMurtry.

....”195 Nonetheless, FMFIA and its statutory partners have significant challenges to
meet in developing a healthy financial system for the U.S. government across the
board. 196
Selected Source Reading
Cottingham, Warren. “Assessing Implementation of the Financial Integrity Act:
GAO Assists OMB.” GAO Review, vol. 19 (winter 1984), pp. 20-24.
Dempsey, Charles L. “Federal Managers’ Financial Integrity Act: The Role of the
Inspector General.” Government Accountants Journal, vol. 32 (summer 1983),
pp. 15-17.
“Financial Management and Asset Protection.” The Journal of Public Inquiry, vol.

1 (spring/summer 2000), pp. 25-34.


Points, Ronald J. and Michelson, Bruce. “Internal Control Standards for the Federal
Government.” Government Accountants Journal, vol. 32 (1983), pp. 9-14.
Riso, Gerald R. “Reviving Management Controls.” Government Executive, vol. 28
(May 1996), pp. 67-68.
U.S. Congress. House. Committee on Government Operations. Subcommittee on
Legislation and National Security. Implementation of the Federal Managers’
Financial Integrity Act. Hearings. 99th Congress, 2nd session. Washington:
GPO, 1986.
U.S. Congress. Senate. Committee on Governmental Affairs. General Accounting
Office Response to Inadequate Management Controls. Hearings. 101stst
Congress, 1 session. Washington: GPO, 1990.
U.S. General Accounting Office. Financial Integrity Act: Inadequate Controls
Result in Ineffective Federal Programs and Billions in Losses. AFMD-90-10.
Washington: GAO, 1989.
——. Financial Management: Sustained Efforts Needed to Achieve FFMIA
Accountability. GAO-03-1062. September 2003.
——. Internal Control Management and Evaluation Tool. GAO-01-131G.
February 2001.
——. Standards for Internal Control in the Federal Government. AIMD-00-21.3.1
November 1999.


195 U.S. Office of Management and Budget, 2003 Federal Financial Management Report,
p. 12.
196 Ibid.

CRS Report RL31965. Financial Management: Efforts to Improve Performance,
by Virginia A. McMurty.
CRS Report RS21416. The President’s Management Agenda: A Brief Introduction,
by Virginia A. McMurtry.
U.S. Office of Management and Budget. Federal Financial Management Report
(2003). Washington: OMB, 2003.
Frederick M. Kaiser



K. Federal Financial Management Improvement Act of 1996
Statutory Intent and History
The Federal Financial Management Improvement Act of 1996 (110 Stat. 3009-
389; 31 U.S.C. § 3512 note) incorporates in statute certain financial management
system requirements already established as executive branch policy. The law also
requires auditors to report on agency compliance with these requirements, and agency
heads and management to correct deficiencies within certain time periods.
The act has seven purposes:
!provide for consistency in agency accounting from year to year, and
for uniform accounting standards throughout the federal
government;
!require federal financial management systems to support full
disclosure of financial data so that programs and activities can be
considered on their full costs and merit;
!increase accountability and credibility of federal financial
management;
!improve performance, productivity, and efficiency of federal
financial management;
!establish financial management systems that support controlling the
cost of the federal government;
!build upon and complement the Chief Financial Officers Act, the
Government Performance and Results Act, and the Government
Management Reform Act; and
!increase the capability of agencies to monitor budget execution
through reports that compare spending of resources to results of
activities.
Enactment of the Federal Financial Management Improvement Act of 1996
(FFMIA) reflects an ongoing effort to reform financial management in the federal
government. The 1996 law builds upon prior legislation, including the Chief
Financial Officers Act of 1990, the Government Performance and Results Act of
1993, and the Government Management Reform Act of 1994. (See separate entries
in this compendium for overviews of these laws.)
The FFMIA also follows up on the work of the Federal Accounting Standards
Advisory Board (FASAB). Created pursuant to a 1990 Memorandum of
Understanding among the Comptroller General of the United States (who heads the
General Accounting office, or GAO), the Director of the Office of Management and
Budget (OMB), and the Secretary of the Treasury, FASAB was charged with
developing and recommending accounting standards for the federal government.



Once reviewed and adopted by the three principals, the standards are published by
OMB and GAO and go into effect. According to the Senate report which
accompanied the measure, FFMIA seeks to shift the focus of reform efforts to
implementation of the agreed-upon federal accounting standards. The report further
noted: “While development of the accounting standards is an enormous
accomplishment, however, the Committee wishes to emphasize that the benefits of
good financial management will flow from the implementation of these standards and
not simply their promulgation.”197
After a rather complicated legislative history, the Federal Financial Management
Improvement Act was enacted as a part of the Omnibus Consolidated Appropriations
Act for FY1997 (P.L. 104-208; 110 Stat. 3009, at 3009-389). Originally introduced
as S. 1130 in the summer of 1995 by Senator Hank Brown, the bill was the subject
of a Senate Governmental Affairs Committee hearing in December of 1995; the
committee then favorably reported a substitute version offered by Senator Brown the
following May, and filed a written report on July 30, 1996 (S.Rept. 104-339). The
Senate passed S. 1130, as amended by the committee substitute, by unanimous
consent on August 2, 1996. Companion measures to S. 1130 were introduced in the
House in September (H.R. 4061 and H.R. 4319), but no further action occurred on
these bills. Ultimately, both the House and the Senate agreed to the FFMIA
provisions under the rubric of the conference agreement.198 President Clinton signed
H.R. 3610 into law on September 30, 1996.
Major Provisions
The Federal Financial Management Improvement Act requires federal agencies
to implement and maintain financial management systems that comply substantially
with federal financial management system requirements, applicable federal
accounting standards, and the United States Government Standard General Ledger
(SGL) at the transaction level.
The act requires auditors to report on compliance with these requirements in
their financial statement audits. When noncompliance is discovered, auditors shall
include in their report: (1) the entity or organization responsible for the financial
management systems; (2) facts pertaining to the failure to comply (including the


197 U.S. Congress, Senate Committee on Governmental Affairs, Federal Financial
Management Improvement Act of 1996, S.Rept. 104-339, 104th Cong., 2nd sess. (Washington:
GPO, 1996), p. 6.
198 Specifically, the text of S. 1130 was approved as Amendment No. 5255 to H.R 3756, the
Treasury Postal Service Appropriations, 1997, bill by the Senate on September 11, 1996. In
offering the floor amendment, Senator Brown explained that, given the shortness of time left
in the session, attaching the measure previously approved by the Senate (S. 1130) to the
appropriations measure provided the “best hope for enacting these important reforms into
law this year.” The following day, however, Senate Majority Leader Trent Lott pulled the
Treasury Postal Service bill from the Senate floor when it appeared hopelessly bogged down
with other add-ons. Subsequently, the conference report accompanying H.R. 3610, providing
for 1997 omnibus consolidated appropriations (H.Rept. 104-863), included the text of the
Federal Financial Management Improvement Act as a part of the Treasury Postal Service
Appropriations (as added during Senate floor consideration of H.R.3756).

nature and extent of noncompliance, the primary reason or cause of noncompliance,
the entity or organization responsible for the noncompliance, and relevant comments
from responsible officers and employees); and (3) a statement of recommended
remedial actions and time frames for implementing them.
The head of each agency is also required to determine whether agency financial
management systems are in compliance. The determination is based on the report on
the agency-wide audited financial statements and other information the head
considers relevant and appropriate. If the head agrees that the systems are not in
compliance, the head (in consultation with the Director of OMB) establishes a
remedial plan that includes resources, remedies, and intermediate target dates
necessary to bring about substantial compliance within three years after the auditor’s
determination. If the agency (with concurrence of the director) determines that more
than three years are needed, the remedial plan specifies the most feasible date and
designates an official responsible for bringing the systems into compliance. If the
head disagrees with the auditor’s findings, the Director of OMB shall review the
determinations and report on the findings to the appropriate committees of Congress.
The act also requires the Director of OMB and the Comptroller General to make
annual reports to Congress. The latter reports on compliance with the financial
management system requirements and on the adequacy of applicable accounting
standards for the federal government. In addition, inspectors general report to
Congress instances and reasons when an agency has not met the intermediate target
dates specified in remedial plans.
The act became effective for FY1997.
Discussion
The Federal Financial Management Improvement Act put into statutory law
financial management requirements that the executive branch by and large had
already established. Thus, its immediate effects were likely minimal, though the
requirements for expanded auditor reports and agency remedial plans, including
target dates, in cases of noncompliance ought not be underestimated. Supporters of
the legislation hoped that an explicit statutory basis for financial management
requirements might give them greater visibility and importance, and increase the
likelihood that remedial plans would receive higher priority within the agencies and
OMB, as well as in annual appropriations.
In its review of FFMIA for FY1997, GAO observed that “it will take time and
concerted effort to raise government financial management systems to the level of199
quality and reliability envisioned in FFMIA.” Two years later, in commenting on
the draft of the GAO report for FY1999, the Office of Management and Budget
agreed with the assessment of FFMIA’s compliance requirements, but contended
that the report “does not give credit for progress made or improvement efforts


199 U.S. General Accounting Office, Financial Management: Federal Financial
Management Improvement Act Results for Fiscal Year 1997, GAO/AIMD-98-268, Sept. 30,

1998, p. 2.



underway by agencies.” It also expressed concern that “as currently written in OMB
guidance, compliance requirements were black and white — meaning an agency was
either compliant or non compliant.” GAO agreed that it is important to measure
progress and acknowledged that “the agencies are moving in the right direction.”200
The number of CFO agencies receiving unqualified audit opinions on their
financial statements increased steadily, from 11 in FY1997 to 21 in FY2002.
Nonetheless, in reviewing the annual audit reports, GAO continued to find that most
of the 24 CFO agencies did not comply substantially with FFMIA requirements. In
FY2002, auditors reported that 17 agencies were noncompliant with FFMIA systems
requirements, 13 were noncompliant with applicable federal accounting standards,
and 9 were noncompliant with the Standard General Ledger. After six years of
reporting years under FFMIA, only 3 of the 24 CFO agencies complied substantially
with all FFMIA requirements, while 8 agencies were reported still not to be in
substantial compliance with any of the requirements.201
The matter of addressing fundamental problems with agency financial systems
has received increased attention in the executive branch. The Bush Administration
in 2001 designated improving financial performance as one of five government-wide
initiatives in the President’s Management Agenda (PMA). In 2002, OMB devised a
management scorecard to grade agencies on their progress; one of the core criteria
in the financial performance initiative is for agencies to have financial management
systems meeting federal financial systems requirements and applicable federal
accounting and transaction standards as reported by the agency head (i.e., be in
compliance with the FFMIA requirements).202
Despite steady agency improvement with the audited financial statements
requirements, serious problems remain. While praising the accomplishment of
agencies in earning unqualified audit opinions on their financial statements, OMB
offered this qualification in a 2002 report: agencies have achieved this record of
unqualified opinions despite major problems with their financial systems “only by
expending significant resources and making extensive manual adjustments after the
end of the fiscal year.”203 As a reflection of the depth of agency difficulties with


200 U.S. General Accounting Office, Financial Management: Federal Financial
Management Improvement Act Results for Fiscal Year 1999, GAO/AIMD-00-307, Sept.

2000, pp. 14, 43.


201 U.S. General Accounting Office, Financial Management: Sustained Efforts Needed to
Achieve FFMIA Accountability, GAO-03-1062, Sept. 2003, pp. 13-14.
202 See CRS Report RS21416, The President’s Management Agenda: A Brief Introduction,
by Virginia A. McMurtry; and U.S. Office of Management and Budget, Fiscal Year 2004
Budget of the U.S. Government, Performance and Management Assessments (Washington:
GPO, 2003), pp. 1-7. As of Sept. 30, 2003, three agencies have received a green mark on
the scorecard, indicating that they have met all the core criteria for success on the financial
management initiative.
203 U.S. Office of Management and Budget, 2002 Federal Financial Management Report
(Washington: May 1, 2002), p. 11, available at:
[http://www.whitehouse.gov/omb/financial/2002_report.pdf], visited Dec. 11, 2003.

FFMIA, as of September 30, 2002, 17 of the 24 agencies reported to GAO204 that they
were planning to or were in the process of implementing new core financial
systems.205
In its report on FFMIA compliance in 2003, GAO cautioned about an
“expectation gap,” given the improvements on the financial statements coupled with
the relative lack of success in achieving compliance with FFMIA: “When more
agencies receive clean opinions, expectations are raised that the government has
sound financial management and can produce reliable, useful, and timely information
on demand throughout the year, whereas FFMIA assessments offer a different
perspective.”206 On the other hand, the PMA, along with efforts of the Joint
Financial Management Improvement Program (JFMIP) Principals,207 provide impetus
for addressing the challenges of FFMIA. According to GAO, during FY2002, the
JFMIP Principals “continued the series of regular, deliberative meetings that focused
on key financial management reform issues.”208
Congressional oversight also remains an important prod for agencies to focus
on financial management reform. In his opening statement at an oversight hearing
on FFMIA in 2002, Subcommittee Chairman Stephen Horn observed, “We recognize
that there are long-standing problems with agency financial management systems.
We also recognize that correcting these deficiencies will take time. However, the
requirements of this Act must be taken seriously.”209 Since FFMIA does not impose
penalties for agencies that are noncompliant, as an early version of the legislation
would have authorized, its effectiveness may ultimately depend upon congressional
oversight and OMB insistence that agencies comply with relevant standards.
Selected Source Reading
U.S. Congress. House. House Committee on Government Reform. The Federal
Financial Management Improvement Act of 1996: Are the Agencies Meeting the
Challenge? Hearing before Subcommittee on Government Efficiency, Financial


204 U.S. General Accounting Office, Core Financial Systems at the 24 Chief Financial
Officers Act Agencies, GAO-03-903R, June 27, 2003, p. 5.
205 JFMIP defines “core financial systems” to include managing general ledger, funding,
payments, receivables, and certain basic cost functions. See Joint Financial Management
Improvement Program (JFMIP), Core Financial Systems Requirements, SR-02-01
(Washington: JFMIP, 2001).
206 U.S. General Accounting Office, GAO-03-1062, p. 16.
207 The JFMIP Principals are the Secretary of the Treasury, the Directors of OMB and the
Office of Personnel Management, and the Comptroller General of the United States.
Officially recognized in 1948, JFMIP is a cooperative effort of the principals, working with
federal agencies, to improve financial management practices throughout the government.
208 U.S. General Accounting Office, GAO-03-1062, p. 7.
209 U.S. Congress, House Committee on Government Reform, Subcommittee on Government
Efficiency, Financial Management, and Intergovernmental Relations, The Federal Financial
Management Improvement Act of 1996: Are Agencies Meeting the Challenge?, hearing,thnd

107 Cong., 2 sess., June 6, 2002 (Washington: GPO, 2003), p. 9.



Management and Intergovernmental Relations. 107th Congress, 2nd session,
June 9, 2002. Washington: GPO, 2003.
——. Senate. Governmental Affairs Committee. Federal Financial Management
Improvement Act of 1996. S.Rept. 104-339. Washington: GPO, 1996.
U.S. General Accounting Office. Financial Management: Sustained Efforts Needed
to Achieve FFMIA Accountability. GAO-03-1062. September 2003.
——. Other GAO reports on federal accounting and auditing are also available from
the agency’s website, [http://www.gao.gov], visited January 22, 2004, under the
terms financial management or government accounting and financial
management.
U.S. Joint Financial Management Improvement Program. Core Financial System
Requirements. JFMIP-SR-99-4. Washington: GPO, 1999.
U.S. Office of Management and Budget. Audit Requirements for Federal Financial
Statements. OMB Bulletin No. 01-02. October 16, 2000.
——. Revised Implementation Guidance for the Federal Financial Management
Improvement Act, Memorandum from Joshua Gotbaum to Heads of Executive
Departments and Establishments, Chief Financial Officers, and Inspectors
General, January 4, 2001. Available at [http://www.whitehouse.gov/omb/
financial/ffmia_implementation_guidance.pdf], visited December 11, 2003.
——. 2003 Federal Financial Management Report (Washington: OMB, Aug.

2003). Available at:


[ http://www.whitehouse.gov/omb/financial/2003_report_final.pdf] ,
visited December 11, 2003.
Bob Lyke
Virginia McMurtry



L. Federal Credit Reform Act of 1990
Statutory Intent and History
In March 1967, the President’s Commission on Budget Concepts was created
and instructed to make “a thorough and objective review of budgetary concepts.”210
In October 1967, the commission produced a comprehensive report with detailed
recommendations on implementing a unified budget. In its report, the commission
stated that the two basic functions of the federal budget are resource allocation and
macroeconomic stabilization. For resource allocation, the commission believed that
the budget should “provide the integrated framework for information and analyses
from which the best possible choices can be made in allocating the public’s money211
among competing claims.” This function of resource allocation should include
comparisons among government programs and between the public and private
sectors. For macroeconomic stabilization, the commission maintained that the
budget should contain detailed and accurate information in order to evaluate the
effects of federal fiscal activities. Furthermore, the budget should include data
necessary to undertake discretionary countercyclical fiscal policy. Thus, the
commission recommended a unified budget that would include all federal activities.
In the FY1969 budget, the Johnson Administration adopted the unified budget
concept, but with some structural differences from the proposal of the commission.
From FY1969 until the implementation of credit reform in FY1992, the federal
budget recorded federal credit activity on a cash flow basis. Federal credit consists
of federal direct loans and federal loan guarantees. In a given fiscal year, the
budgetary cost of a particular loan program was net cash flow, which equaled new
loans made plus any administrative expenses associated with these loans (rarely
recognized in the loan accounts) less any loan fees, repayments of principal, and
payments of interest. The federal acceptance of a contingent liability when a loan
guarantee was provided was not included in the federal budget, because no cash flow
occurred. Some guarantee programs charge fees to the recipient, and these fees were
considered offsetting collections. Federal outlays were necessary to compensate
lenders for any federal guaranteed loan defaults, but these outlays were not shown in
the budget until they were actually paid.
On November 5, 1990, the Omnibus Budget Reconciliation Act of 1990
(OBRA90; 88 Stat. 304) was signed into law. It added a new title, Title V, to the
Congressional Budget Act. Title V is also called “the Federal Credit Reform Act of
1990” (FCRA; 101 Stat. 1388; 2 U.S.C. § 621 note). Beginning with FY1992
(October 1, 1991), FCRA changed the budgetary treatment of federal direct loans and
federal loan guarantees by requiring that the budgetary cost of a credit program be the
subsidy cost at the time the credit is provided.


210 U.S. President’s Commission on Budget Concepts, Report (Washington: GPO, 1967),
p. 105.
211 Ibid., p.16.

Major Provisions
The four stated purposes of FCRA are to:
!measure more accurately the costs of federal programs;
!place the cost of credit programs on a budgetary basis equivalent to
other federal spending;
!encourage the delivery of benefits in the form most appropriate to
the needs of beneficiaries; and
!improve the allocation of resources among credit programs and other
spending (Section 501 of FCRA).
FCRA never uses the word subsidy; nevertheless, the true budgetary and
economic cost of a federal credit program is the subsidy value at the time the credit
is provided. FCRA defines the [subsidy] cost as “the estimated long-term cost to the
government of a direct loan or loan guarantee, calculated on net present value basis,
excluding administrative costs and any incidental effects on governmental receipts
or outlays” [Section 502(5A)]. The discount rate used to calculate subsidy costs in
terms of present value is the “average interest rate on marketable Treasury securities
of similar maturity” [Section 502(5E)].212 Hence, the subsidy cost of a program is
determined by the amount of credit provided and the discount rate used to calculate
the net present value of this credit.
Any government action that changes the estimated present value of an
outstanding federal credit program is counted in the budget in the year in which the
change occurs as a change in the subsidy cost of this program (Section 502(5D)). For
example, the federal government could partially forgive the repayment of principal
for low income borrowers from a particular credit program which would increase the
subsidy cost of the program.
The Director of the Office of Management and Budget (OMB) is responsible for
coordinating the estimation of subsidy costs. “The Director may delegate to agencies
authority to make estimates of costs” (Section 503(a)). But these agencies must use
written guidelines from the Director, which are developed after consultation with the
Director of the Congressional Budget Office (CBO). The Director of OMB and the
Director of CBO are responsible for developing more accurate historical data on
credit programs which are used to estimate subsidy costs (Section 503). The
President’s budget includes “the planned level of new direct loan obligations and new
loan guarantee commitments associated with each appropriations request” (Section

504).


Beginning in the FY1992 budget cycle, discretionary programs providing new
direct loan obligations and new loan guarantee commitments required appropriations
of budget authority equal to their estimated subsidy costs. Credit entitlements (for


212 The derivation of the discount rate was revised by the Balanced Budget Act of 1997.

example, guaranteed student loans) and existing credit programs of the Commodity
Credit Corporation have indefinite budget authority (Section 505(a-c)) and do not
need an annual appropriation.
Appropriations for the annual subsidy cost of each credit program go to a budget
account called a credit program account. Funding for the subsidy costs of
discretionary credit programs is provided in appropriations acts and must compete
with other discretionary programs for funding available under the constraints of the
budget resolution. Most mandatory credit programs receive automatic funding for
the amount of credit needed to meet the demand by beneficiaries. Mandatory
programs are generally entitlement programs for which the amount of funding
depends on eligibility and benefits rules contained in substantive law. The subsidy
cost of federal credit for both direct loans and guaranteed loans is scored as an outlay
in the fiscal year in which the credit is disbursed by either the federal government or
a private lender (504d). For mandatory credit programs, any additional cost from the
annual reestimates of subsidies for a credit program is covered by permanent
indefinite budget authority. This additional cost is displayed in a subaccount in the
credit program account.
Also, beginning in FY1992, a nonbudget financing account was created for each
credit program. These financing accounts receive an outlay at the time loans are
made in the amount of the subsidy value of new direct or guaranteed loans from their
associated credit programs. These accounts also record the government’s loan
programs’ actual cash transactions, both disbursements and receipts, to and from the
public. Each loan program gets funds for disbursement to the public by borrowing
from the Treasury (Section 502(5E6-7)). Because they are nonbudget, the cash flows
into and out of these accounts are not reflected in total outlay, receipts, or
surplus/deficit. The budget authority of a credit program provides the means for the
credit program account to pay to the financing account an amount equal to that
program’s estimated subsidy costs.
Another special account, the liquidating account, includes all ongoing cash
flows of each credit program resulting from credit advanced prior to October 1, 1991
(Section 502(5E8)). However, the new budgetary procedures under FCRA would
apply to modifications made by the U.S. government to credit terms on credit
provided before FY1992.213
FCRA does not apply to the credit activities of the Federal Deposit Insurance
Corporation, the National Credit Union Administration, the Resolution Trust
Corporation, national flood insurance, the National Insurance Development Fund,
crop insurance, or the Tennessee Valley Authority (Section 506).


213 U.S. Executive Office of the President, Office of Management and Budget, The Budget
System and Concepts, Budget of the United States Government, Fiscal Year 2003
(Washington: GPO, 2002), p. 15.

Discussion
The Federal Credit Reform Act of 1990 was brief; it covered only five and one-214
half pages of the U.S. Code and Administrative News. Numerous details necessary
to make the act completely operational were absent. Furthermore, many federal
agencies had inadequate financial and accounting systems to implement credit
reform. 215
On July 2, 1992, OMB issued a revised circular which improved and clarified216
instructions for credit budget formulation. Furthermore, OMB simplified its credit
subsidy model to make it easier for agencies to estimate direct loan and loan217
guarantee subsidies. On January 11, 1993, OMB updated Circular No. A-129
concerning the budgetary treatment of federal credit programs.218 OMB also revised
Circular No. A-11 to include federal credit reform procedures. In Circular No. A-11,
OMB explains to agencies how they should fill out credit schedules in preparing their219
budget requests. Federal agencies working with OMB have steadily improved their
compliance with credit reform standards.
Since the passage of the FCRA, OMB has continued to assist agencies in
upgrading the quality of subsidy estimates. Beginning with the FY1993 budget,
agencies have recorded reestimates of the cost of their credit programs. Aggregate
subsidy estimates were adjusted downward for FY1994, upward for FY1995 and
FY1996, downward for FY1997, upward for FY1998 and FY1999, and downward220
for FY2000, FY2001, FY2002, and FY2003. In the aggregate, downward subsidy
reestimates of $13.8 billion were largely offset by upward subsidy reestimates of221
$11.9 billion.
The trend for the subsidy reestimates has been for the magnitude, either up or
down, to increase. In May 2001, CBO stated that it lacked any methodology to


214 U.S. Code, Congressional and Administrative News, 101st Cong., 2nd sess., vol. 6 (St.
Paul, MN: West Publishing Co., 1991), pp. 610-615.
215 David B. Pariser, “Implementing Federal Credit Reform: Challenges Facing Public Sector
Financial Manager,” Public Budgeting & Finance, vol. 12, no. 4 (winter 1992), p. 28.
216 U.S. Executive Office of the President, Office of Management and Budget, Budget of the
United States Government, Fiscal Year 1994 (Washington: GPO, 1993), p. 49.
217 Ibid.
218 U.S. Executive Office of the President, Office of Management and Budget, Policies for
Federal Credit Programs and Non-Tax Receivables, Circular No. A-129 (Washington:
continually updated), p. 27.
219 OMB’s Circular Nos. A-11 and No. A-129 may be obtained from OMB’s website,
[http://www.whitehouse.gov/omb/index.html], visited Jan. 22, 2004.
220 U.S. Executive Office of the President, Office of Management and Budget, Analytical
Perspectives, Budget of the United States Government, Fiscal Year 2004 (Washington:
GPO, 2003), p. 217.
221 Ibid.

forecast the direction or size of future reestimates.222 FCRA provided for permanent
indefinite authority so that new appropriations are not needed to cover the cost of
reestimates. Agencies are required to incorporate improved knowledge into their
subsidy estimates for future direct loan obligations and loan guarantee
commitments.223
The General Accounting Office (GAO) examined subsidy estimates for 10 credit
programs in five agencies for the period of fiscal years 1992 through 1998. GAO
found problems with supporting documentation for subsidy estimates and the
reliability of subsidy rate estimates and reestimates in each agency.224 But GAO
concluded that agencies showed improvement over the period in documenting
estimates in each agency.225
CBO examined credit subsidy reestimates for the period of FY1993 through
FY1999. CBO concluded that
Projecting the losses and costs from federal credit assistance is difficult, and
errors are inevitable. Although various incentives may exist for agencies to
underestimate credit subsidies, the Congressional Budget Office’s analysis of
corrected reestimates does not reveal any pattern of bias in initial subsidy
estimates. However, another problem was uncovered: the reestimates reported
in the president’s budget are in such disorder that analysts cannot rely on them.
A few modest changes in current practice could reduce agencies’ errors in226
preparing, reporting, and accounting for estimates and reestimates.
OMB established on-budget credit program receipt accounts to receive
payments of earnings from the financing accounts in those unusual cases when
federal credit programs are estimated to produce net income, that is, have negative
subsidies.227 Usually payments into a program’s receipt account are recorded in the
Treasury’s general fund as offsetting receipts.228 “In a few cases, the receipts are


222 U.S. Congressional Budget Office, An Analysis of the President’s Budgetary Proposals
for Fiscal Year 2002 (Washington: May 2002), p. 4.
223 U.S. Executive Office of the President, Office of Management and Budget, Federal
Credit Supplement, Budget of the United States Government, Fiscal Year 1997
(Washington: GPO, 1996), pp. 48-49.
224 U.S. General Accounting Office, Credit Reform: Greater Effort Needed to Overcome
Persistent Cost Estimation Problems, GAO/AIMD-98-14, Mar. 1998, pp. 9-10.
225 Ibid., p. 11.
226 David Torregrosa, “Credit Subsidy Reestimates, 1993-99,” Public Budgeting & Finance,
vol. 21, no. 2 (summer 2001), p. 114.
227 Marvin Phaup, “Credit Reform, Negative Subsidies, and FHA,” Public Budgeting &
Finance, vol. 16, no. 1 (spring 1996), p. 24.
228 U.S. Executive Office of the President, Office of Management and Budget, The Budget
System and Concepts, Budget of the United States Government, Fiscal Year 2003, p. 14.

earmarked in a special fund established for the program and are available for
appropriation for the program.”229
In October 1990, the Secretary of the Treasury, the Director of OMB, and the
Comptroller General established the Federal Accounting Standards Advisory Board
(FASAB) to consider and recommend accounting principles for the federal
government. On September 15, 1992, the board issued an exposure draft
recommending accounting standards for federal credit programs on a basis consistent
with credit reform. The board received numerous substantive comments that were
considered in revising its exposure draft, and on August 23, 1993, OMB issued the
board’s revised report titled Accounting for Direct Loans and Loan Guarantees.230
This report provided extensive detail, including numerous arithmetic examples,
clarifying credit reform practices.231 It further required that federal agencies’ use of
present value accounting for federal credit programs be consistent with the Federal
Credit Reform Act of 1990.232 Thus, for their credit programs, agencies’ accounting
procedures are now required to be consistent with their budgetary procedures.
On August 5, 1997, the Balanced Budget Act of 1997 (P.L. 105-33) was
enacted.233 This law (BBA97) amended the Federal Credit Reform Act of 1990 to
make some technical changes, including codifying several OMB guidelines.
Important changes were:
First, agencies are required to use the same discount rate to calculate the subsidy
when they obligate budget authority for direct loans and loan guarantees and when
submitting the agency’s budget justification for the President’s budget.234 Thus, the
dollar value of loans for a specific credit program is known when Congress considers
subsidy appropriations for that program. Prior to this change, agencies had used


229 Ibid.
230 For a discussion of the board’s conclusions on issues raised by these comments, see U.S.
Executive Office of the President, Office of Management and Budget, Accounting for Direct
Loans and Loan Guarantees: Statement of the Federal Financial Accounting Standards, no.

2 (Washington: Aug. 23, 1993), pp. 21-42.


231 For a detailed example of the estimation of credit subsidies, see U.S. General Accounting
Office, Credit Subsidy Estimates for the Sections 7(a) and 504 Business Loan Programs,
GAO/T-RCED-97-197, July 16, 1997, p. 19.
232 U.S. Executive Office of the President, Office of Management and Budget, Accounting
for Direct Loans and Loan Guarantees: Statement of the Federal Financial Accounting
Standards (Washington: GPO, 1993), pp. 21-42.
233 For an explanation of the contents of the Budget Enforcement Act of 1997, see CRS
Report 97-931, Budget Enforcement Act of 1997: Summary and Legislative History, by
Robert Keith, p. 23 (1997).
234 U.S. Executive Office of the President, Office of Management and Budget, Analytical
Perspectives, Budget of the United States, Fiscal Year 1999 (Washington: GPO, 1998), p.

170.



interest rates from the preceding calendar quarter to calculate the subsidy at the time
a direct loan was advanced or a loan guarantee was obligated.235
Second, agencies are required to use the same forecast assumptions (for
example, default and recovery rates) to calculate subsidy rates when they obligate
credit and when preparing the President’s budget.236
Third, agencies are required to transfer end-of-year unobligated balances in
liquidating accounts (revolving funds for direct loans and loan guarantees made prior
to the effective date of FCRA) to the general fund as soon as practicable after the
close of the fiscal year.237
Fourth, the same interest rate must be used on financing account debt (which
generates interest payments to the Treasury), financing account balances, and the
discount rate used to calculate subsidy costs.238
Fifth, the definition of the term cost is modified so that the discount rate is based
on the timing of cash flows instead of on the term of the loan. Under this new
approach, in the President’s budget, a series of different rates would be used to
calculate the present value of cost flows over a multi-year period. For example, for
a 10-year direct loan (or loan guarantee), costs in the first year would be discounted
using the interest rate on a one-year Treasury bill, costs in the second year would be
discounted using the interest rate on a two-year Treasury note, etc. Under the prior
approach, the interest rate of a 10-year Treasury note would have been used as the
discount rate. This prior method proved to be inferior because the flow of
semiannual interest payments and the repayment of full principal on the last payment
date did not match up well with yearly cost flows.239
Selected Source Reading
Pariser, David B. “Implementing Federal Credit Reform: Challenges Facing Public
Sector Financial Managers.” Public Budgeting and Finance, vol. 12 (winter

1992), pp. 19-34.


U.S. Congress. “Conference Report on H.R. 5835, Omnibus Budget Reconciliation
Act of 1990, [Federal Credit Reform Act of 1990].” Congressional Record,
daily edition, vol. 136 (October 26, 1990), pp. H12599-H12605.
U.S. Congressional Budget Office. Credit Budget Reestimates, 1993-1999.
Washington: CBO, 2000.


235 Ibid.
236 Ibid.
237 Ibid.
238 Ibid.
239 U.S. Congress, Conference Committee, Balanced Budget Act of 1997, Conference Report
to Accompany H.R. 2015, H.Rept. 105-217, 105th Cong., 1st sess. (Washington: July 30,

1997), pp. 996-997.



U.S. Executive Office of the President. Office of Management and Budget. Federal
Credit Supplement, Budget of the United States Government, Fiscal Year 2004.
Washington: GPO, 2003.
——. Preparation and Submission of Budget Estimates. Circular No. A-11. Federal
Credit Data (sections 33.1-33.4). Washington: OMB, continually updated.
——. Policies for Federal Credit Programs and Non-Tax Receivables. Circular No.
A-129. Washington: OMB, revised periodically.
U.S. General Accounting Office. Credit Reform: Greater Effort Needed to
Overcome Persistent Cost Estimation Problems. AIMD-98-14. March 1998.
CRS Report RL30346. Federal Credit Reform: Legislative Background,
Implementation, and Proposed Modifications, by James M. Bickley.
James M. Bickley



M. Federal Claims Collection Act of 1966
Statutory Intent and History
The Federal Claims Collection Act of 1966 (P.L. 89-508; 80 Stat. 308; 31 §
3711(a)-(c)(1)) originated agency authority to collect claims. It was intended to
authorize agency heads to attempt collection of all claims of the United States, to
compromise certain claims, or to terminate collection action in certain circumstances.
Formerly, only a few agencies had been granted these authorities.
Major Provisions
The act defines agency as any department, office, commission, board, service,
government corporation, instrumentality, or other establishment in either the
executive or legislative branch of the federal government. It defines head of an
agency to include, where applicable, commission, board, or other group of
individuals having the decisionmaking responsibility of an agency.
The act directs the head of an agency or designee, pursuant to regulations
prescribed and in conformity with such standards as may be promulgated jointly by
the Attorney General and the Comptroller General, to attempt collection of all claims
of the United States for money or property arising out of the activities of, or referred
to, the agency.
For such claims of the United States that have not been referred to another
agency, including the General Accounting Office (GAO), for further collection action
that do not exceed $20,000, exclusive of interest, the head of an agency or designee,
pursuant to regulations prescribed by him and in conformity with such standards as
may be promulgated jointly by the Attorney General and the Comptroller General,
may (1) compromise any such claim, or (2) terminate or suspend collection action on
any such claim where it appears that no person liable on the claim has the present or
prospective financial ability to pay any significant sum thereon or that the cost of
collecting the claim is likely to exceed the amount of recovery.
The Comptroller General or his designee has the same authority for claims
referred to GAO by another agency for further collection action. The head of an
agency or designee shall not exercise authority over claims as to which there is an
indication of fraud. The presentation of a false claim, or misrepresentation on the part
of the debtor or any other party having an interest in the claim, shall be considered
a violation of the antitrust laws. The head of an agency, other than the Comptroller
General, does not have authority to compromise a claim that arises from an exception
made by GAO in the account of an accountable officer.
A compromise effected under the act is final and conclusive on the debtor and
on all officials, agencies, and courts of the United States, unless procured by fraud,
misrepresentation, the presentation of a false claim, or mutual mistake of fact. No
accountable officer is liable for any amount paid or for the value of property lost,
damaged, or destroyed, where the recovery of such amount or value may not be had
because of a compromise with a person primarily responsible under the act.



Nothing in the act increases or diminishes existing authority of the head of an
agency to litigate claims or diminish existing authority to settle, compromise, or close
claims.
Discussion
When Congress enacted the Federal Claims Collection Act of 1966, it removed
inflexibility in the law and responded to recurrent agency appeals to Congress for
relief. If they could not collect amounts they believed due the federal government,
agencies that formerly did not have authorities that the act granted had to refer claims
to the General Accounting Office for collection. Only a few agencies had authority
to compromise claims, i.e., accept a lesser amount in full settlement. Similarly, few
agencies could terminate or suspend efforts to collect a claim even when the effort
was futile. A compromise settlement was not possible until the matter was referred
to the Department of Justice. The $20,000 limit on the amount of a claim that the
Federal Claims Collection Act of 1966 granted agency heads to compromise and to
terminate collecting subsequently was raised to $100,000. Authority of the
Comptroller General to exercise the same authority as an agency head for claims
referred to the General Accounting Office subsequently was repealed.
In 1997, GAO published the results of an evaluation of debt collection in some
agencies with programs covering about two-thirds of the federal government’s
delinquent debt. GAO found that each agency it reviewed had a high percentage of
debt in bankruptcy, foreclosure, or adjudication, and did not have a uniform method
of documenting debt collection. GAO recommended, among other things, improved
and standardized reporting requirements to collect debt. A subcommittee of the
House Committee on Government Reform (the Subcommittee on Government
Management, Information, and Technology, now renamed as the Subcommittee on
Government Efficiency and Financial Management) held several oversight hearings
on implementing improved debt collection practices. (See the entry for the Debt
Collection Improvement Act of 1996, elsewhere in this compendium, which amended
the Federal Claims Collection Act of 1966, for subsequent developments and selected
source readings relating to collection of claims.)
Selected Source Reading
U.S. Congress. House. Committee on the Judiciary. Federal Claims Collection Act
of 1966. S.Rept. 89-1533. 89th Congress, 2nd session. Washington: GPO, 1966.
.U.S. Congress. Senate. Committee on the Judiciary. Federal Claims Collection Act
of 1966. S.Rept. 89-1331. 89th Congress, 2nd session. Washington: GPO, 1966.
U.S. General Accounting Office. Principles of Federal Appropriations Law, Chapter

13 (Debt Collection) vol. III (2nd ed.). OGC-94-33. November 1994.


——. Debt Collection: Improved Reporting Needed on Billions of Dollars in
Delinquent Debt and Agency Collection Performance. GAO/AIMD-97-48. June

1997.


Thomas Nicola



N. Debt Collection Act of 1982
Statutory Intent and History
The Debt Collection Act of 1982 (P.L. 97-365; 96 Stat. 1749; 31 § 3711 et seq.)
amended the Federal Claims Collection Act of 1966. The intent was to enable
agencies to disclose information to consumer reporting agencies, authorize
administrative offsets, charge minimum annual rates of interest and penalties on
indebtedness to the United States, require annual agency reports summarizing the
status of loans and accounts receivable, and permit contracts for collection services.
In addition, the act amended the Privacy Act (described elsewhere in this
compendium) to clarify the status of consumer collection agencies. It also amended
the Internal Revenue Code to authorize certain disclosures of information, Title 5 of
the United States Code to authorize salary offsets, Title 18 of the United States Code
to protect federal debt collectors, and Title 28 of the United States Code to change
the statute of limitations for administrative offsets.
Major Provisions
Amendments to the Federal Claims Collection Act of 1966.
Disclosure of Information. The act authorizes the head of an agency,
whenever attempting to collect a claim, to disclose to a consumer reporting agency
information from a system of records under certain circumstances. It defines
consumer reporting agency, system of records, and head of an agency.
Administrative Offset. The act authorizes the head of an agency, after
attempting to collect a claim, to collect it by means of administrative offset, i.e.,
withholding money payable to or held by the United States, except that such authority
may not be exercised against claims that have been outstanding for more than 10
years. It describes claims eligible for administrative offset and prescribes procedures
for it.
Interest and Penalty on Indebtedness. The act requires the head of an
agency or designee to charge a minimum annual interest rate on outstanding debts
that is equal to the average investment rate for the Department of the Treasury tax
and loan accounts for the 12-month period ending on September 30 of each year.
The Secretary or designee is required to publish the rate annually by October 31 and
may revise it quarterly if the average investment for the 12-month period ending that
quarter is greater or less than the existing published rate by 2%.
With some exceptions, the act requires the head of an agency or designee to
assess charges to cover costs of processing and handling delinquent claims and to
assess a penalty charge, not to exceed 6%, for failure to pay any portion of a debt
more than 90 days past due.
Report on Agency Debt Collection Activities. The Director of the Office of
Management and Budget, in consultation with the Secretary of the Treasury and
Comptroller General of the United States, is directed to establish regulations



requiring each agency with outstanding debts annually to prepare and transmit to the
Director and the Secretary a report summarizing the status of loans and accounts
receivable managed by each agency. The act specifies information that the report
must contain. The Director is required to analyze the reports received and report
annually to Congress on the management of agency debt collection activities.
Contracts for Collection Services. The act authorizes the head of an agency
or designee to enter into a contract with any person or organization, under terms
considered appropriate for collection services, to recover indebtedness owed the
United States. Any such contract must include provisions specifying that the agency
head or designee retains authority to resolve disputes, compromise claims, terminate
collection action, and refer the matter to the Attorney General to initiate legal action,
and that the contractor is subject to the Privacy Act (5 U.S.C. § 552a), to the extent
provided in Subsection (m) of the act, and subject to federal and state laws that
pertain to debt collection practices.
Claim for purposes of the Debt Collection Act is defined to include amounts
owing on account of loans insured or guaranteed by the United States and all other
amounts due the United States from such things as fees, leases, rents, royalties, sales
of real or personal property, fines, penalties, taxes, and other sources.
Amendments to Title 5 of the United States Code.
Privacy Act. The act permits disclosure of any record in an agency system of
records to a consumer reporting agency without consent of the individual to whom
the record pertains, thereby exempting such disclosure from the Privacy Act
requirement of prior consent. It exempts a consumer reporting agency from the
Privacy Act provision that directs an agency to apply the Debt Collection Act’s
requirements to a system of records operated by contractors on behalf of an agency.
Salary Offset. The act authorizes the head of an agency or designee to deduct
from the current pay account of an employee, member of the Armed Services or
Reserve of the Armed Forces the amount of indebtedness owed to the United States,
not to exceed 15% of disposable pay. The deductions may be made in monthly
installments, or at established intervals, when the agency head or designee determines
that the individual is indebted to the United States for debts to which the United
States is entitled to be repaid or is notified by the head of another or designee. It
grants an individual procedural protections, such as at least 30 days written notice,
and opportunities to establish a repayment schedule and receive a hearing if timely
requested.
The collection of any amount must be in accordance with standards in the
Federal Claims Collection Act of 1966 or with any other statutory authority for
collection of claims under any other statutory authority.
Amendments to the Internal Revenue Code.
Requirement That Applicant Furnish Taxpayer Identification Number.
The act directs each agency administering an included loan program to require any



person applying for a loan under such program to furnish the person’s taxpayer
identification number.
Screening Potential Debtors. The Secretary of the Treasury is authorized,
upon written request, to disclose to the head of any included federal loan program
whether an applicant for a loan under such program has a tax delinquent account.
The disclosure shall be made only for the purpose of, and to the extent necessary in,
determining the creditworthiness of the applicant.
Included federal program for purposes of the paragraph means any program for
which the United States makes, guarantees, or insures loans, and with respect to
which there is in effect a determination made by the Director of the Office of
Management and Budget (which has been published in the Federal Register) that
applying this requirement to such program substantially would prevent or reduce
future delinquencies in it.
Disclosure of Mailing Address to Third Parties for Purposes of Collecting
Federal Claims. The act generally authorizes the Secretary of the Treasury, upon
written request, to disclose the mailing address of a taxpayer for use by officers,
employees, or agents of a federal agency for purposes of locating such taxpayer to
collect or compromise a claim against the taxpayer.
In the case of an agent of a federal agency which is a consumer reporting agency
(within the meaning of the Fair Credit Reporting Act), the mailing address may be
disclosed only for the purpose of allowing the agent to prepare a commercial credit
report. Statutory safeguards apply to these disclosures.
Protection of Federal Debt Collectors. The Debt Collection Act includes
any officer or employee of the United States or any agency thereof designated to
collect or compromise a federal claim in accordance with the act in the statute that
prescribes punishments for killing or attempting to kill certain officials.
Discussion
Authorities granted by the Debt Collection Act of 1982 enhanced the ability of
the government to collect delinquent debts by providing some tools that were
available to the private sector.
In June 1997, the General Accounting Office (GAO) published results of an
evaluation of debt collection at some agencies whose programs accounted for about
two-thirds of delinquent debt owed to the federal government. GAO found that each
agency had a high percentage of bankruptcy, foreclosure, or adjudication and did not
have a standard method of documenting debt collection. (See the entry for the Debt
Collection Improvement Act of 1966, elsewhere in this compendium, which amended
the Federal Debt Collection Act of 1982, for subsequent developments and selected
source reading on debt collection.)



Selected Source Reading
U.S. Congress. House. Committee on Ways and Means. The Debt Collection Actthnd
of 1982. H.Rept. 97-496. 97 Congress, 2 session. Washington: GPO, 1982.
U.S. Congress. Senate. Committee on Governmental Affairs. The Debt Collection
Act of 1982. S.Rept. 97-378. 97th Congress, 2nd session. Washington: GPO,

1982.


——. Committee on Finance. The Debt Collection Act of 1981. S.Rept. 97-287.

97th Congress, 1st session. Washington: GPO, 1982.


U.S. General Accounting Office. Debt Collection, Improved Reporting Needed on
Billions of Dollars in Delinquent Debt and Agency Collection Performance.
GAO/AIMD-97-48. June 1997.
U.S. General Accounting Office. Principles of Federal Appropriations Law, Chapternd

13 (Debt Collection) vol. III (2 ed.). OGC-94-33. November 1994.


Thomas Nicola



O. Federal Debt Collection Procedures Act of 1990
Statutory Intent and History
The Federal Debt Collection Procedures Act, (P.L. 101-647; 104 Stat. 4789; 28
U.S.C. § 3001), Title XXXVI of the Crime Control Act of 1990, amends Title 28 of
the United States Code to provide general civil procedures for collecting debts. The
intent is to provide the exclusive civil procedures to recover a judgment on a debt or
to obtain, before judgment on a claim for a debt, a remedy in connection with the
claim, except where other federal law specifies procedures for recovering on a claim.
Subchapters include general provisions, prejudgment and postjudgment remedies,
fraudulent transfers involving debt, and amendments to other provisions of law.
Major Provisions
General Provisions. The act prescribes procedures for service of process,
enforcement, and notice to the debtor and any person whom the United States, after
due diligence, believes has possession, custody, or control of property. The act does
not apply with respect to a judgment on a debt if the judgment was entered more than

10 years before the effective date of the act.


Remedies available to the United States may be enforced against property which
is co-owned by a debtor and any other person only to the extent allowed by the law
of the state where the property is located. Any right or interest of a debt or co-owner
in a retirement for federal military or civilian personnel established by the United
States or any agency thereof or in a qualified retirement arrangement, however, is not
so limited.
A court may modify enforcement procedures. In an action or proceeding under
the act, an individual debtor may elect to exempt certain property. The United States
or a debtor may request a hearing on the applicability of any exemption claimed by
the debtor. Asserting an exemption prevents the United States from selling or
otherwise disposing of the property for which the exemption is claimed until a court
determines that the debtor has a substantial nonexempt interest in the property.
Prejudgment Remedies. The act authorizes prejudgment remedies of
attachment of property (except earnings), appointment of a receiver, garnishment
against property (excluding earnings), and sequestration of income from property.
It specifies procedures for the United States to apply for such a remedy, the grounds
on which one may be sought, the content of an affidavit supporting the application
and notice to the debtor, and hearing requirements.
A court may grant a prejudgment remedy if the United States shows reasonable
cause to believe, among other things, that a debtor, with the effect of hindering the
United States in its effort to recover a debt (1) is about to leave the jurisdiction of the
United States; (2) has or is about to assign, dispose of, remove, conceal, ill treat,
waste, or destroy property; (3) has or is about to convert the debtor’s property into
money, securities, or evidence of debt in a manner prejudicial to the United States;
or (4) has evaded service of process by concealing himself, or has temporarily
withdrawn from the jurisdiction of the United States. A prejudgment remedy also



may be granted if required to obtain jurisdiction within the United States and the
remedy would result in obtaining such jurisdiction.
Any property in the possession, custody, or control of a debtor and in which a
debtor has a substantial nonexempt interest, except earnings, may be attached
pursuant to a writ of attachment. The act authorizes a court to appoint a receiver for
property in which a debtor has a substantial interest if procedural requirements are
met and the United States shows reasonable cause to believe that there is a substantial
danger that property will be removed from the jurisdiction of the court, lost,
concealed, materially injured or damaged, or mismanaged. The act specifies the
duration, reporting requirements, priority, and compensation of receivers.
The act describes procedures for issuing a writ of garnishment against property
(excluding earnings) in which a debtor has a substantial nonexempt interest and
which is in the possession, custody, or control of a person other than the debtor to
satisfy a claim for a debt. Co-owned property is subject to garnishment to the same
extent as it is subject to garnishment under the law of the state where the property is
located.
The act provides procedures for issuing a writ of sequestration of income from
property in which the debtor has a nonexempt interest as security (and interest and
costs) as the United States may recover on a claim for a debt. Such a writ may be
issued in an action on a contract in certain circumstances, in an action against the
debtor for damages in tort, if the debtor resides outside the jurisdiction of the United
States, or in an action to recover a fine, penalty, or tax.
Postjudgment Remedies. The act also addresses postjudgment remedies
including judgment lien, enforcement of judgment, execution, installation payment
order, garnishment, and discharge.
A judgment in a civil action creates a lien on all real property of a judgment
debtor on filing a certified copy of an abstract of a judgment in the manner in which
a notice of tax lien would be filed under paragraphs (1) and (2) of Section 6323(f) of
the Internal Revenue Code of 1986. A lien is effective, unless satisfied, for a period
of 20 years, but, if a renewal request is filed before that period expires, may be
renewed for an additional 20 years with court approval.
A debtor who has a judgment lien against his property is not eligible to receive
any grant or loan which is made, insured, guaranteed, or financed directly or
indirectly by the United States government. Such a debtor also is not eligible to
receive funds directly from the federal government in any program, except funds to
which the debtor is entitled as beneficiary, until the judgment is paid in full. The
agency responsible for such grants and loans may promulgate regulations to allow for
a waiver of eligibility.
On proper application, a court may order the United States to sell, in accordance
with sections 2001 and 2002 of Title 28 of the United States Code, any real property
subject to a judgment lien. This authorization, however, does not preclude the
United States from using an execution sale pursuant to Section 3203(g) to sell real
property subject to a judgment lien.



A judgment may be enforced by any remedy set forth in the subchapter relating
to postjudgment remedies, as well as any other writ pursuant to Section 1651 of Title
28, as necessary to support such remedies, subject to rule 81(b) of the Federal Rules
of Civil Procedure.
The act prescribes procedures for execution. All property in which a judgment
debtor has a substantial nonexempt interest is subject to levy pursuant to a writ of
execution. A debtor’s earnings are not subject to execution while in the possession,
custody, or control of the debtor’s employer. Co-owned property is subject to
execution to the same extent that it is so subject under the law of the state where the
property is located.
The act authorizes a court to order a judgment debtor to make specified
installment payments to the United States if it is shown that he is receiving or will
receive substantial nonexempt disposable earnings from self employment that are not
subject to garnishment or is diverting or concealing substantial earnings from any
source or property received in lieu of earnings.
A court may issue a writ of garnishment against property (including nonexempt
disposable earnings) in which a debtor has a substantial nonexempt interest and
which is in the possession, custody, or control of a person other than the debtor to
satisfy a judgment against a debtor. Co-owned property is subject to garnishment
under the law of the state where the property is located. The act also prescribes the
general requirements for a writ of garnishment and procedures applicable to it.
Fraudulent Transfers Involving Debts and Miscellaneous. The act
defines various terms including asset, creditor, and lien, and describes insolvency,
value for transfer or obligation, and fraudulent transfers. It also sets out remedies of
the United States and defenses, liability, and protection of transfers.
Discussion
By creating a uniform federal framework for collecting federal debts in the
federal courts, the act improved efficiency and expedited collections. The uniform
framework overcame obstacles presented by differences and conflicts in various
provisions of state law which formerly determined the nature, availability, and timing
of executing various collection remedies.
Selected Source Reading
U.S. Congress. House of Representatives. Committee on the Judiciary. Federal
Debt Collection Procedures Act of 1990. H.Rept. 101-736. 101st Congress, 2nd
session. Washington: GPO, 1990.
U.S. Congress. House. Committee on Government Reform and Oversight,
Subcommittee on Government Management, Information, and Technology.thst
Federal Debt Collection Practices. Hearing. 105 Congress, 1 session.
Washington: GPO, 1998.



____. Brooks, Representative Jack. “Federal Debt Collection Procedures Act of
1990.” Remarks in the House. Congressional Record, daily edition, vol. 136
(September 27, 1990), pp. 26231-26254.
Thomas Nicola



P. Debt Collection Improvement Act of 1996
Statutory Intent and History
The Debt Collection Improvement Act of 1996 (DCIA; P.L. 104-134; 110 Stat.
1321-358; 31 U.S.C. §§ 3711 et seq.), Section 31001 of the Omnibus Appropriations
Act, FY1996, amends several sections of Title 31 that were enacted in the Federal
Claims Collection Act of 1966 and the Federal Debt Collection Act of 1982, as well240
as some sections of Titles 5, 26, 28, and 42 of the United States Code. It is
intended to enhance authorities for administrative, salary, and tax refund offsets and
collections, as well as to increase delinquent debt collections, limit costs of collecting
debts, and reduce losses from debt management activities.
Major Provisions
Coverage. The act extends authorities relating to claims of the United States
and claims against the United States to judicial agencies and instrumentalities, to
make the judicial branch consistent with the executive and legislative branches. It
also adds administrative offset authority and requirements for charging interest and
penalties to debts owed to the United States by states and units of local governments.
Administrative Offset Authority. The act enhances administrative offset
authority by requiring its use except when a statute explicitly prohibits using it. With
some exceptions, a disbursing official of the Department of the Treasury, Department
of Defense, the United States Postal Service, or any other government corporation,
or any disbursing official of the United States designated by the Secretary of the
Treasury, is required to offset at least annually the amount of a payment that a that
certifying agency has certified to an official for disbursement, by an amount equal to
the amount of a claim which a creditor agency has certified to the Secretary.
The act gives the Secretary of the Treasury discretion to apply administrative
offset authority to any past-due, legally enforceable debt owed to a state if the
appropriate state disbursing official requests an offset and there is a reciprocal
agreement with a state that meets certain requirements.
Salary Offset Authority. The act requires agencies to which debts are owed
and which have outstanding delinquent debts to participate at least annually in a
computer match of their delinquent debt records with records of federal employees
to identify those employees who are delinquent in repaying these debts. The
computer match requirement does not apply to debts under the Internal Revenue
Code.


240 The act was originally introduced in H.R. 2234 in 1995. An earlier version passed the
House in the Seven Year Balanced Budget Reconciliation Act of 1995, H.R. 2491, as
amended by the substitute of the House Committee on the Budget, H.R. 2517.
(Congressional Record, daily edition, vol. 141 (Oct. 26, 1995), part II, pp. H10995, H11031-
H11040). The act did not appear in the conference report on the Reconciliation Act, H.Rept.thst

347, 104 Cong., 1 sess., 1995 (Congressional Record, daily edition, vol. 141 (Nov. 15,


1995), part II, p. 12509.



Taxpayer Identifying Numbers. The act directs the head of each federal
agency to require each person doing business with the agency to furnish it with the
person’s taxpayer identifying number. It defines doing business with a federal
agency and requires each agency to disclose its intent to use the identifying number
for purposes of collecting and reporting on any delinquent amounts arising out of the
person’s relationship with the government. Creditor agencies are authorized to match
their debtor records with records of the Department of Health and Human Services
and Department of Labor records. Taxpayer identifying records may be disclosed
only if disclosure is not otherwise prohibited by the Internal Revenue Code. It
amends the definition of included federal program in the Internal Revenue Code.
Barring Delinquent Federal Debtors from Federal Loans, Loan
Insurance, or Loan Guarantees. Unless the head of an agency or delegatee, i.e.
the chief financial officer or deputy chief financial officer, waives this authority, a
person who has an outstanding debt (other than a debt under the Internal Revenue
Code) in delinquent status with any federal agency may not obtain a loan (other than
a disaster loan) or loan insurance or loan guarantee administered by the agency. Such
person may obtain additional loans or loan guarantees only after the delinquency is
resolved. At the request of an agency, the Secretary of the Treasury may exempt any
class of claims. An amendment excludes, in addition to disaster loans, a marketing
assistance loan or loan deficiency payment under Subtitle C of the Agricultural
Market Transition Act (7 U.S.C. §§ 7231 et seq.).
Disclosures to Consumer Reporting Agencies and Commercial
Reporting Agencies. The head of an agency must require, as a condition for
insuring or guaranteeing any loan, financing, or other extension of credit under any
law to a person, that the lender provide information relating to the extension of credit
to consumer reporting agencies and commercial reporting agencies, as appropriate.
Under certain circumstances, the head of an agency may provide information that a
claim is current in payment, i.e., not delinquent, to a consumer reporting agency or
a commercial reporting agency.
Contracts for Collection Service. Under appropriate conditions, an agency
head may enter into a contract with a person for collection service to recover
indebtedness owed, or to locate or recover assets, of the United States government.
This authority may not be used to locate or recover assets of the United States held
by a state government or financial institution unless an agency has established
procedures approved by the Secretary of the Treasury to identify and recover such
assets.
Cross-Servicing Agreements and Centralization of Debt Collection
Activities in the Department of the Treasury. If a nontax debt or claim owed
to the United States has been delinquent for 180 days, the head of the agency that
administers the program giving rise to the debt or claim is required to transfer it to
the Secretary of the Treasury. Upon such transfer, the Secretary is required to take
appropriate action to collect or terminate collection actions on the debt or claim.
These authorities do not apply to certain categories of debts or claims. The Secretary
may designate and withdraw designations of debt collection centers operated by other
federal agencies.



Garnishment. The act authorizes the head of an agency, notwithstanding any
provision of state law, to garnish the disposable pay of an individual to collect the
amount owed, if the individual is not currently making required payment in
accordance with an agreement between the agency head and the individual.
Adjustment of Administrative Debt and Dissemination of
Information Regarding Identity of Delinquent Debtors. The head of any
agency is authorized to increase an administrative claim by a cost of living
adjustment instead of charging interest and penalties.
The act authorizes any agency head, with the review of the Secretary of the
Treasury, for the purpose of collecting any delinquent nontax debt owed by any
person, to publish or otherwise disseminate information regarding the identity of the
person and the existence of the nontax debt.
Federal Civil Monetary Penalties Inflation Adjustments and
Electronic Funds Transfer. The act amends the Federal Civil Penalties Inflation
Adjustment Act of 1990 (P.L. 101-410; 104 Stat. 890; 28 U.S.C. § 2461 nt) to direct
the head of each agency, not later than 180 days after the enactment of the Debt
Collection Improvement Act, and at least once every four years thereafter, to adjust
by regulation each monetary civil penalty provided by law within the jurisdiction of
the agency (with some exceptions). The initial increase could not exceed 10%.
The Federal Financial Management Act of 1994 (P.L. 103-356; 108 Stat. 3410,
3412; 31 U.S.C. § 3301 nt) is amended to mandate electronic funds transfer for all
payments to a recipient who becomes eligible to receive them more than 90 days after
enactment of the Debt Collection Improvement Act of 1996. This requirement may
be waived for any individual who does not have an account with a financial
institution. All payments made after January 1, 1999, must be made by electronic
funds transfer.
Expanding Use of Private Attorneys. The act expands use of private
attorneys by amending requirements relating to the number of contracts in each
district and repealing termination dates for the pilot program.
Discussion
The Debt Collection Improvement Act of 1996 is intended to improve federal
debt collection by, among other things, adding a new administrative offset authority,
revising salary offset authority, permitting non-delinquent consumer debt to be
reported to credit bureaus, allowing agencies to retain a portion of annual collections
of delinquent debts, expanding tax refund offset authority, and requiring electronic
disbursements.
Two bills to amend federal debt collection procedures passed the House and one
was introduced in the Senate in the 105th Congress. No further action occurred on
any of the bills. Among other provisions, H.R. 4243 and H.R. 4857 would have (1)
permitted a private collection contractor to verify information about an individual’s
employer and compensation; (2) denied to individuals with delinquent debt eligibility
for the award or renewal of a federal benefit, including access to federal loans;



required agency heads to establish programs to sell nontax debt; and (3) authorized
agency heads to accept electronic payments, including debit and credit cards, to
satisfy nontax debts. S. 2571 would have permitted agencies administering benefit
programs to verify the information provided to them by applicants for these benefits
and would have authorized the Secretary of Health and Human Services to disclose
information to another agency from the National Directory of New Hires. (Similar
provisions were in H.R. 2347 and H.R. 2063 and were discussed during the
consideration of H.R. 4243.) Additionally, S. 2571 would have authorized the
administrator of the General Services Administration, on behalf of federal agencies,
to acquire commercial services to accept electronic payments for grants or loans and
electronic claims submissions from the general public.
In the 106th Congress, H.R. 436 and H.R. 1441 passed the House and were
referred to the Senate Committee on Governmental Affairs, but no further action
occurred. H.R. 436 was identical to H.R. 4857 (105th Congress) and H.R. 1441 was
similar to it. During the 106th Congress, H.R. 4181, a bill to prohibit delinquent
federal debtors from being able to enter into federal contracts and to amend the
Internal Revenue Code to provide for disclosure to federal agencies of certain
information to relating to delinquent taxpayers, was considered in committee.
A subcommittee of the House Committee on Government Reform (the
Subcommittee on Government Management, Information, and Technology, now
renamed the Subcommittee on Government Efficiency and Financial Management)
has conducted regular oversight hearings on DCIA since its enactment. Generally,
those hearings have found that the DCIA provisions (especially those on
administrative offset and cross-servicing) have not been fully implemented in
executive agencies, that the amounts of delinquent nontax debts and debts written off
remain significant, and that agencies have experienced difficulties in identifying and
referring eligible debt to the Department of the Treasury’s Financial Management
Service (FMS) and in identifying debt that is collectible. Agencies were encouraged
to include debt collection as a performance goal for purposes of the Government
Performance and Results Act of 1993 (P.L. 103-62; 107 Stat. 285).
General Accounting Office (GAO) evaluations of the implementation of DCIA
have focused on many of the issues stated above and have frequently been featured
at the House hearings. In its October 2003 evaluation of the cross-servicing program,
GAO recommended that the Department of the Treasury help to ensure that debts
returned from private collection agencies be examined to make sure that all
appropriate collection action has been taken and that the Office of Management and
Budget work to improve agency compliance with the standards and policies for
writing off and closing out debts. In a December 2001 evaluation, GAO found that
the Department of Agriculture (USDA) had not yet fully implemented key provisions
of DCIA. An increased commitment by USDA to implement DCIA was reported by
GAO in November 2002, but GAO cautioned that a sustained commitment would be
necessary to address problems, including those relating to identifying and referring
eligible debts to FMS.
The FMS’ Fiscal Year 2003 Report to Congress showed that $70.061 billion of
nontax debt was delinquent as of September 30, 2003. Of this total, $7.780 billion
was debt written off, $55.273 billion was delinquent debt greater than 180 days old



and $14.916 billion was delinquent debt determined to be currently not collectible.
The report also showed that $18.2 billion of nontax debt has been collected through
the Treasury Offset Program and Cross-Servicing Program since the enactment of
DCIA; $3.1 billion was collected through these programs in FY2003. The
Departments of Education ($32.166 billion) and Agriculture ($6.613 billion) have the
most delinquent debt. As of September 30, 2003, private collection agencies under
contract with the Departments of Education, Health and Human Services, and
Treasury had been referred $14.375 billion in debt and collected $546.8 million.
Selected Source Reading
Davis, Representative Thomas III, et al. “Government Waste, Fraud, and Error
Reduction Act of 1998.” Remarks in the House. Congressional Record, daily
edition, vol. 144 (October 20, 1998), pp. H11672-H11679.
Horn, Representative Stephen. “Government Waste, Fraud, and Error Reduction Act
of 1998.” Remarks in the House. Congressional Record, daily edition, vol. 144
(October 14, 1998), pp. H10850-H10855.
Horn, Representative Stephen. “Government Waste, Fraud, and Error Reduction Act
of 1999.” Remarks in the House. Congressional Record, daily edition, vol. 145
(August 2, 1999), pp. H6780-H6784.
Horn, Representative Stephen. Remarks in the House. Congressional Record, daily
edition, vol. 142 (April 25, 1996), pp. H4087-H4091.
Lieberman, Senator Joseph I. “Federal Benefit Verification and Integrity Act.”
Remarks in the Senate. Congressional Record, daily edition, vol. 144 (October

7, 1998), pp. S11708-S11711.


Sessions, Representative Pet, et al. “Government Waste, Fraud, and Error Reduction
Act of 1999.” Remarks in the House. Congressional Record, daily edition, vol.

145 (February 24, 1999), pp. H743-H749.


U.S. Congress. House. Committee on Government Reform. Government Waste,
Fraud, and Error Reduction Act of 1999. Report to Accompany H.R. 436.
H.Rept. 106-9, Part 1. 106th Congress, 1st session. Washington: GPO, 1999.
——. Subcommittee on Government Management, Information, and Technology.thst
Federal Debt Collection Practices. Hearing. 105 Congress, 1 session.
Washington: GPO, 1998.
——. H.R. 4243, Government Waste, Fraud, and Error Reduction Act of 1998; H.R.
2347, The Federal Benefit Verification and Integrity Act; and H.R. 2063, The
Debt Collection Wage Information Act of 1997. Hearing. 105th Congress, 2nd
session. Washington: GPO, 1998.
——. Oversight Hearing on Improving Federal Debt Collection Practices at the
Department of Agriculture. Hearing. 105th Congress, 2nd session, March 20,

1998. Unpublished [available from author].



——. Oversight of the Implementation of the Debt Collection Improvement Act.
Hearing. 106th Cong., 2nd session. Washington: GPO, 2001.
——. What Is the Federal Government Doing to Collect the Billions of Dollars in
Delinquent Debts It Is Owed? Hearing. 106th Congress, 1st session.
Washington: GPO, 2000.
——. Subcommittee on Government Efficiency, Financial Management, and
Intergovernmental Relations. The Debt Collection Improvement Act of 1996:
How Well Is It Working? Hearing. 107th Congress, 1st session, October 10,

2001, and December 5, 2001. Washington: GPO, 2002.


——. Federal Debt Collection: Is the Government Making Progress? Hearing.

107th Congress, 2nd session. Washington: GPO, 2003.


——. Federal Debt Management — Are Agencies Using Collection Tools
Effectively? Hearing. 108th Congress, 1st session. Washington: GPO, 2003.
U.S. Department of Justice and U.S. Department of the Treasury. Federal Claims
Collection Standards, 4 C.F.R. Parts 900-904. Washington: GPO, 2003.
U.S. Department of the Treasury. Financial Management Service. Fiscal Year 2003
Report to the Congress. U.S. Government Receivables and Debt Collection
Activities of Federal Agencies. Washington: FMS, no date.
U.S. General Accounting Office. Debt Collection, Improved Reporting Needed on
Billions of Dollars in Delinquent Debt and Agency Collection Performance.
GAO/AIMD-97-48. June 1997.
——. Major Management Challenges and Program Risks: Department of the
Treasury. GAO/OGC-99-14. November 1998.
——. Debt Collection; Opportunities Exist for Improving FMS’s Cross-Servicing
Program. GAO-04-47. October 2003.
——. Debt Collection; Treasury Faces Challenges in Implementing Its Cross-
Servicing Initiative. GAO/AIMD-00-234. August 2000.
——. Debt Collection Improvement Act of 1996; Agencies Face Challenges
Implementing Certain Key Provisions. GAO-02-61T. October 10, 2001.
——. Debt Collection Improvement Act of 1996: Major Data Sources Inadequate
for Implementing the Debtor Bar Provisions. GAO-02-462. March 2002.
——. Debt Collection; Agriculture Making Progress in Addressing Key Challenges.
GAO-03-202T. November 13, 2002.
Thomas Nicola
Barbara L. Schwemle



Q. Improper Payments Information Act of 2002
Statutory Intent and History
Toward the end of the 107th Congress, the Improper Payments Information Act
(IPIA) of 2002 was enacted as P.L. 107-300.241 The intent of the law is to increase
financial accountability in the federal government, and thereby reduce wasteful
spending, thus augmenting previous financial management reform laws. The law
requires agencies each year to identify programs that are vulnerable to improper
payments and to estimate the amount of overpayments or underpayments. As
explained in the next section, improper payments generally include any payments by
the federal government that should not have been made or were made in an incorrect
amount.
Previously, there was no government-wide requirement for agencies to estimate
or report in any systematic way on improper payments, although it is generally
acknowledged that billions of dollars are involved. For example, after reviewing
audited financial statements for the 24 Chief Financial Officers (CFO) Act agencies,
GAO concluded that improper payments voluntarily reported by the agencies
declined slightly, from $ 20.7 billion in FY1999 to $19.6 billion in FY2001.242 In
2003, the Office of Management and Budget (OMB) testified that overpayments for
major benefit programs alone were approaching $35 billion each year.243
H.R. 4878, to provide for estimates and reports of improper payments by federal
agencies, was introduced on June 6, 2002, by Representative Stephen Horn, with a
group of bipartisan cosponsors, and referred to the House Committee on Government
Reform. The Subcommittee on Government Efficiency, Financial Management, and
Intergovernmental Relations held markup on the measure on June 18, 2002, and
approved the bill, as amended, by unanimous voice vote. On July 9, 2002, H.R. 4878
was considered under suspension of the rules and passed the House, as amended, by
voice vote. On October 9, 2002, the Senate Committee on Governmental Affairs
ordered H.R. 4878 to be reported favorably, with a substitute amendment. On
October 17, 2002, the bill, as amended, passed the Senate by unanimous consent, and
on November 12, under suspension of the rules, the House agreed to the Senate
amendment by voice vote. The President signed H.R. 4868 into law on November 26,

2002 (P.L. 107-300).


The problem of improper payments received attention in previous Congresses.
During House floor debate on H.R. 4878, Representative Horn noted that hearings
held in the past “clearly demonstrated the need” for such legislation:


241 116 Stat. 2350; 31 U.S.C. § 3321 note.
242 U.S. General Accounting Office, Financial Management: Coordinated Approach Needed
to Address the Government’s Improper Payments Problems, GAO-02-749, Aug. 2002, p.

11.


243 Cited in U.S. General Accounting Office, Financial Management: Challenges Remain
in Addressing the Government’s Improper Payments, GAO-03-750T, May 13, 2003, p. 1.

Since the 104th Congress, the subcommittees I have chaired have held
approximately 100 hearings on wasteful spending within the Federal
Government. Time and again witnesses from the General Accounting Office and
agency inspectors general have told the subcommittee that poor accounting
systems and procedures have contributed to the government’s serious and long-244
term problems involving improper payments.
In the written report of the Senate Committee on Governmental Affairs to
accompany H.R. 4878, the measure was also specifically linked to GAO
recommendations offered in a best practices guide for agencies in managing improper
payments, prepared at the request of the committee chairman, Senator Joseph
Lieberman. The guide suggested that determining the nature and extent of risks for
improper payments was a key step in the process, and H.R. 4868 would address this
by requiring agencies to estimate total improper payments made each year in their
programs and also to consider ways to reduce these amounts.245 In August 2002
GAO also provided an update of previous reports on improper payments at the
request of the ranking minority member, Senator Fred Thompson.246
Major Provisions
The act directs each executive branch agency, in accordance with OMB
guidance, to review all of its programs and activities each year, identify those that
may be susceptible to significant improper payments, estimate the amount of
improper payments, and report this information to Congress by March 31 of the
following applicable year. OMB determines the method of reporting, which is to be
used by all agencies.
With respect to any program or activity with estimated annual improper
payments exceeding $10 million, the agency is required to provide along with the
estimate a report on agency actions to reduce such improper payments. The report
is to discuss the causes of the improper payments and the results of the actions taken
to address them, to state whether the agency has information systems and other
necessary infrastructure to reduce such payments to minimal cost-effective levels, to
describe budgetary resources requested by the agency to accomplish any needed
changes in information systems and infrastructure, and to identify steps the agency
has taken to ensure that managers are held accountable for reducing improper
payments.
Improper payment is defined as any payment that should not have been made
or that was made in an incorrect amount. The definition includes payments to
ineligible recipients or for ineligible services, duplicate payments, and payments for


244 Rep. Stephen Horn, remarks in the House, Congressional Record, daily edition, vol. 148,
July 9, 2002, p. H4379.
245 See GAO Report GAO-02-749, issued initially as GAO Report GAO-01-703G [exposure
draft] (Washington: May 2001). Cited in U.S. Congress, Senate Committee on
Governmental Affairs, Improper Payments Information Act of 2002, report to accompanythnd
H.R. 4878, 107 Cong., 2 sess., S.Rept. 107-333 (Washington: GPO, 2002), p. 2.
246 See GAO Report GAO-02-749, Aug. 2002.

services not received or that do not reflect applicable discounts. The act covers
payments made by a federal agency, a federal contractor, or a governmental or other
organization administering a federal program.
Discussion
IPIA. The IPIA codified and expanded efforts underway in the executive branch
to reduce improper payments. The Bush Administration in 2001 designated
improving financial performance as one of five government-wide initiatives in the247
President’s Management Agenda. The establishment of a baseline on the extent
of erroneous (improper) payments in major federal benefit programs was a key248
component of the financial management initiative. Agencies were to include
available information on erroneous payment rates for benefit and assistance programs
over $2 billion as a part of their FY2003 budget submissions. In July 2001, revisions
to OMB Circular No. A-11 in Section 57, implemented this objective, requiring 15
federal agencies to include improper payment information, covering nearly 50
programs, with initial FY2003 budget materials to OMB.249 Enactment of the IPIA
extended and augmented the erroneous payment reporting requirements, originally
contained in OMB Circular No. A-11 for the 15 agencies designated therein, to all
executive branch departments and agencies.
In May of 2003, OMB distributed a guide to instruct agencies on the
implementation of the IPIA.250 The guide provides a detailed definition of improper
or erroneous payments and of program and activity and then outlines four action
steps to be followed by the agencies. First, agencies must systematically review all
their programs and activities and identify those which are susceptible to significant
erroneous payments, defined as “annual erroneous payments in the program
exceeding both 2.5 percent of the program payments and $10 million.” Second,
agencies shall determine an annual estimated amount of erroneous payments made
in those programs and activities found susceptible to significant errors; this
calculation is based on a statistical random sample sufficiently large “to yield an
estimate with a 90 percent confidence interval” within 5% precision. The third step
is to determine why the particular programs are at risk, and then put in place a plan
to reduce the erroneous payments. The last step in implementation for the agency is
reporting to the President (via OMB) and Congress on the estimates of the annual
amount of erroneous payments in its programs and activities and on progress in
reducing them.


247 See U.S. Office of Management and Budget, The President’s Management Agenda —
FY2002 (Washington: OMB, 2001), pp. 19-21. For an overview of the PMA, see CRS
Report RS21416, The President’s Management Agenda: A Brief Introduction, by Virginia
A. McMurtry.
248 Ibid.
249 GAO Report GAO-02-749, pp. 7, 56.
250 OMB, “Improper Payments Information Act of 2002 (Public Law No: 107-300),”
Memorandum for Heads of Executive Departments and Agencies from Mitchell E. Daniels
Jr., May 21, 2003, M-03-13., available at:
[http://www.whitehouse.gov/omb/memoranda/print/m03-13.html], visited Jan. 22, 2004.

The House Subcommittee on Government Efficiency and Financial
Management held oversight hearings on improper payments in May and July 2003.251
A GAO report to the subcommittee on the initial implementation under the IPIA
followed in October 2003.252 There has been some criticism about the OMB
guidance to the agencies in implementing the IPIA, particularly about defining
“significant [emphasis added] improper payments” to include at least 2.5 % of
payments, in addition to the estimated improper spending over $10 million.
According to a recent news article, the chairman and ranking minority member of
the Senate Finance Committee, in a January 9, 2004, letter to OMB Director Joshua
Bolten, stated:
...OMB should not have established the 2.5 percent threshold and should have
simply required agencies to report all programs generating estimated improper
payments of more than $10 million. Because of the 2.5 percent threshold, some
programs wasting more than $10 million could slip through the cracks, the
senators explained. ‘The improper payments figures that will eventually be
reported to the public will look better and feel better than they really are...’253
Grassley and Baucus said.
Likewise, the chairman and ranking minority member of the House Subcommittee
on Government Efficiency and Financial Management, Representative Todd Platts,
and Representative Marsha Blackburn, sent a letter to OMB in August 2003,
questioning the 2.5 % minimum threshold. OMB’s Controller of the Office of
Federal Financial Management, Linda Springer, has defended the guidelines as
stringent enough, noting, “We’re [at OMB] certainly not trying to take any steam out254
of the effort.”
New estimates from the agencies of improper payments, and of possible ways
to reduce them, are due to Congress each year, providing useful oversight
information. If dissatisfaction with OMB’s guidelines should linger or increase,
language in the IPIA might be revisited. Meanwhile, the control of improper
payments remains a priority for OMB as a part of the President’s Management
Agenda.


251 U.S. Congress, House Committee on Government Reform., Subcommittee on
Government Efficiency and Financial Management, Show Me the Tax Dollars — How Muchthst
Is Lost to Improper Payments Each Year?, hearing, 108 Cong., 1 sess., May 13, 2003,
available at [http://reform.house.gov/GEFM/Hearings/EventSingle.aspx?EventID=385],
visited Jan. 22, 2004; and Show Me the Tax Dollars Part II — Improper Payments and the
Tenncare Program, July 14, 2003, available at:
[http://reform.house.gov/GEFM/Hearings/EventSingle.aspx?EventID=401], visited Jan. 22,

2004.


252 U.S. General Accounting Office, Financial Management: Status of the Governmentwide
Efforts to Address Improper Payment Problems, GAO-04-99, Oct. 2003.
253 Amelia Gruber, “OMB Defends Actions on Improper Payments,” GovExec.com, Jan. 14,

2004.


254 Cited ibid.

Recovery Auditing. Another provision related to improper payments,
enacted in the 107th Congress as Section 831 of the National Defense Authorization255
Act for FY2002, provides a statutory mandate for agencies to identify and recover
contract overpayments (one type of improper payments) by using recovery auditing.
Recovery auditing is designed to identify and then recoup inadvertent overpayments
by reviewing large volumes of purchase and contract records using ongoing,
systematic procedures. Originating in the private sector around 1970, recovery
auditing came to the federal government via a demonstration program first mandated
in the National Defense Authorization Act for FY1996 (P.L. 104-106). The FY1998
Defense Authorization Act (P.L. 105-85) provided for continuation and expansion
of the pilot program, and also called for a review of its results by the General
Accounting Office (GAO). The GAO report reviewing the demonstration program
in recovery auditing undertaken by the Department of Defense at the Defense Supply
Center in Philadelphia was issued at the end of 1998256 and provided an impetus forth
additional legislative attention to recovery auditing in the 106 Congress.
H. R. 1827 (106th Congress) was introduced by Representative Dan Burton on
May 17, 1999, and was referred to the Committee on Government Reform. On June

29, 1999, hearings were held by the Subcommittee on Government Management,


Information, and Technology.257 On July 21, 1999, subcommittee consideration and
markup of the measure occurred, with approval by voice vote, after which the bill,
with an amendment in the nature of a substitute, was forwarded to the full committee.
On November 10, 1999, the Government Reform Committee considered the measure
and, by voice vote, approved the amendment in the nature of a substitute from the
subcommittee, as further amended, and ordered that H.R. 1827 be favorably reported.
It was reported on November 17, 1999, and placed on the House Calendar.258 On
March 8, 2000, H.R. 1827 passed the House by a vote of 375-0. On September 12,
2000, Senator Fred Thompson introduced S. 3030 (106th Congress) as a companion
measure to H.R. 1827; the bill was referred to the Committee on Governmental
Affairs. On September 27, 2000, the committee, by voice vote ordered S. 3030259
reported favorably to the Senate, and the report was filed on October 12, 2000. The
Senate took no further action on S. 3030 or H.R. 1827 before the 106th Congress
ended.


255 P.L. 107-107, Dec. 28, 2001; 115 Stat. 1186.
256 U.S. General Accounting Office, Contract Management: Recovery Auditing Offers
Potential to Identify Overpayments, GAO/NSIAD-99-12, Dec. 1998.
257 U.S. Congress, House Committee on Government Reform, Subcommittee on
Government Management, Information, and Technology, H.R. 1827, the Government Wastethst
Corrections Act of 1999, hearing, 106 Cong., 1 sess., June 29, 1999 (Washington: GPO,

2000).


258 U.S. Congress, House Committee on Government Reform, Government Waste
Corrections Act of 1999, report to accompany H.R. 1827, 106th Cong., 1st sess., H.Rept. 106-

474 (Washington: GPO, 1999).


259 U.S. Congress, Senate Committee on Governmental Affairs, To Amend Title 31, United
States Code, to Provide for Executive Agencies to Conduct Annual Recovery Audits andthnd
Recovery Activities, and for Other Purposes, report to accompany S. 3030, 106 Cong., 2
sess., S.Rept. 106-502 (Washington: GPO, 2000).

In the 107th Congress, Representative Burton introduced H.R. 2547, the
Erroneous Payments Recovery Act, “To require certain executive agencies to carry
out a cost-effective program for identifying any errors made in paying contractors and
for recovering any amounts paid to contractors.” This measure, similar to H.R. 1827
in the 106th Congress, was referred to the House Committee on Government Reform,
but no further action occurred on the bill. Provisions relating to recovery auditing,
however, were included in H.R. 2586, the National Defense Authorization Act for
FY2002, as reported and passed by the House.260 There were no similar provisions
in the Senate bill, but the conference version contained the recovery auditing
provisions from the House version, with modifications,261 as Section 831. The
measure was signed into law on December 28, 2001, becoming P.L. 107-107.
Section 831 of P.L. 107-107 amends Chapter 35 of Title 31, United States Code,
by adding a new Subchapter VI, “Recovery Audits.” Section 3561 directs the head
of each executive agency that enters into contracts in excess of $500 million in a
fiscal year to carry out a cost-effective program for identifying any errors made in
paying contractors and for recovering amounts erroneously paid. The OMB Director
is required to issue guidelines for conducting the recovery audit programs, with
specified protections and policies. Section 3562 provides for the disposition of
recovered funds. Funds collected under the program may be used to reimburse the
actual expenses incurred by the agency in administering the program or to pay
contractors for recovery auditing services. Beyond funds needed for these purposes,
amounts recovered may be credited to the appropriations from which the erroneous
payments were made, or otherwise be deposited in the Treasury as miscellaneous
receipts. Section 3563, sources of recovery services, requires each agency head to
consider all available resources to carry out the program, including the agency itself,
other departments and agencies, or private sector contractors. Section 3564
authorizes each agency head to carry out a program for improving contract payment
management processes aimed at reducing payment errors and improving recovery of
overpayments. Section 3565 clarifies the relationship of the subchapter to authority
of inspectors general. Section 3566 deals with privacy protections. Section 3567
requires the OMB Director to report to the House Committee on Government Reform
and the Senate Governmental Affairs Committee on implementation of the recovery
auditing program.
In January 2003,OMB issued guidance to the agencies intended to assist them
“to successfully implement recovery auditing and recovery activity as part of an
overall program of effective internal control over contract payments.” The guidance
reiterates that the agencies required by statute to undertake recovery audit programs


260 U.S. Congress, House Committee on Armed Services, National Defense Authorization
Act for Fiscal Year 2002, H.Rept. 107-195, 107th Cong., 1st sess. (Washington: GPO, 2001),
pp. 342-343.
261 See U.S. Congress, Conference Committee, National Defense Authorization Act for
Fiscal Year 2002, H.Rept. 107-333, report to accompany S. 1438, 107th Cong., 1st sess.
(Washington: GPO, 2001), p. 691.

must report to OMB by December 31, 2004, on their activities during FY2003 and,
likewise, for FY2004 and FY2005.262
Selected Source Reading
U.S. Congress. House. Committee on Government Reform. Subcommittee on
Government Management, Information, and Technology. H.R. 1827, thethst
Government Waste Corrections Act of 1999. Hearing. 106 Congress, 1
session, June 29, 1999. Washington: GPO, 2000.
U.S. Congress. Senate. Committee on Governmental Affairs. Improper Paymentsthnd
Information Act of 2002. Report to accompany H.R. 4878. 107 Congress, 2
session. S.Rept. 107-333. Washington: GPO, 2002.
——. To Amend Title 31, United States Code, to Provide for Executive Agencies to
Conduct Annual Recovery Audits and Recovery Activities, and for Other
Purposes. Report to accompany S. 3030. 106th Congress, 2nd session. S.Rept.

106-502. Washington: GPO, 2000.


U.S. General Accounting Office. Financial Management: Challenges Remain in
Addressing the Government’s Improper Payments. GAO-03-750T. May 13,

2003.


——. Financial Management: Effective Implementation of the Improper Payments
Information Act of 2002 Is Key to Reducing the Government’s Improper
Payments. GAO-03-991T. July 14, 2003.
U.S. Office of Management and Budget. 2003 Federal Financial Management
Report. Washington, Aug. 2003, pp. 7-9. At
[http://www.whitehouse.gov/omb/financial/2003_report_final.pdf, visited
January 22, 2004.
Virginia McMurtry


262 U.S. Office of Management and Budget, Programs to Identify and Recover Erroneous
Payments to Contractors, Memorandum to Heads of Executive Departments and Agencies,
from Mitchell E. Daniels Jr., Jan. 16, 2003, M-03-07, available at:
[http://www.whitehouse.gov/omb/memoranda/print/m03-07.html], visited Jan. 22, 2004.

R. Cash Management Improvement Act (CMIA) of 1990
Statutory Intent and History
The Cash Management Improvement Act of 1990 (CMIA; 104 Stat. 1058; 31
U.S.C. § 3335) is intended to ensure greater efficiency, effectiveness, and equity in
the exchange of funds between the federal government and the states. Its objective
is to minimize the ability of the federal or a state government to engage in cash
management practices that allow it to earn interest on cash reserves at the expense
of the other.
Passage of the act was preceded by seven years of joint study by federal and
state management officials of how federally funded programs were being managed
in terms of the actual receipt and expenditure of program funds. The early
deliberations of this group resulted in a June 1983 Memorandum of Understanding
that stated the intention of each group to find an equitable approach to
intergovernmental cash management. Pilot tests of new procedures were conducted
in 1984-1985.
Major Provisions
The major provisions of the act mandate (1) that each head of a federal
executive agency implement procedures designed to disburse federal funds in a
timely manner through cash, checks, electronic funds transfer, or any other means
identified by the agency head and that each state establish procedures for minimizing
the elapsed time between transfer of funds from the United States Treasury and state
expenditure of these funds for the intended federal purpose; (2) a method to calculate
the interest owed — to a state when the federal government fails to disburse federal
funds in a timely manner, and to the federal government when a state fails to spend
federal funds in a timely manner; (3) procedures to net the interest charges each level
of government owes to the other and to transfer the net interest owed; and (4) the
source of the interest payment when a federal agency must pay interest to a state.
Discussion
This act is a response to both levels of government experiencing instances in
which one level of government was perceived to be manipulating cash management
practices in a manner designed to hold on to money for a longer period of time than
necessary. Such behavior earns interest income on the cash being held, but in effect
this interest income is being paid by the other level of government.
The issue is illustrated here with an example about Medicaid payments. A
delayed federal Medicaid payment might require a state to utilize its own funds to
pay the vendor, thereby causing the state to lose the interest income it could have
earned had it been able to hold on to its own cash. The state perceives that the
federal government’s delay in making the cash payment is motivated by the federal
government’s desire to earn interest income on its cash (or, equivalently, to delay
borrowing the money to make the Medicaid payment, thereby avoiding interest
expenses).



A state’s drawing cash from a federal account prior to the date the state pays a
Medicaid vendor’s bill has the effect of reducing the interest income the federal
government can earn on this cash. The federal government perceives that the state’s
early drawdown is motivated by the state’s desire to earn interest income on this cash
between the date of the drawdown and the date the Medicaid vendor must be paid
(or, equivalently, to delay borrowing money for other state expenses, thereby
avoiding interest expenses).
In May 2002, the Financial Management Service (FMS), the Bureau within the
Department of the Treasury charged with implementing the CMIA, issued new
clarifying regulations in the Federal Register (31 C.F.R. § 205). The regulations
define the federal assistance programs covered by the CMIA and provide guidance
on the mechanics of CMIA implementation.263
Selected Source Reading
Bruebaker, Gary and Jack Kiley. “Cash Management Improvement Act of 1990.”
Government Finance Review, vol. 8 (October 1992), pp. 29-31.
U.S. General Accounting Office. Financial Management: Implementation of the
Cash Management Improvement Act. GAO/AIMD-96-4. January 1996.
Steven B. Maguire


263 FMS’s website provides more background information on the CMIA at
[http://fms.treas.gov/cmia/index.html], visited Dec. 29, 2003.

S. User Fee Act of 1951
Statutory Intent and History
User fees — charges to recipients of goods and services provided by the
government — have existed since the earliest days of the republic and, indeed, extend
to the colonial period. Payment for mail delivery, use of toll roads, and certain
customs services were among the first fees. In the contemporary era, there are
several hundred such charges at the federal level, amassing nearly $158 billion in
revenue in FY2002 alone.264 These are authorized under a general user fee statute or,
in most cases, agency-specific legislation. Such fees are usually defended as serving
one or more purposes: (1) to help make a service or good self-sustaining; (2) to shift
the burden of payment from the general taxpayer to an identifiable beneficiary; (3)
to enhance revenue for the government; and (4) to regulate access to or determine265
availability of a good or service.
Congressional Action. Despite the long heritage of such charges, a general
user fee statute was not enacted until August 31, 1951: i.e., Title V of the266
Independent Offices Appropriations Act (IOAA) for Fiscal Year 1952. This short
provision, which was slightly modified in its 1982 codification, grants federal
agencies the authority to levy charges on identifiable beneficiaries for government-
provided goods and services. The law also establishes criteria to be followed in its
implementation. Prior to this, an agency could impose fees only if it had specific
statutory authority to do so.
In the early 1950s, several congressional panels advanced user fees on a broad
scale. In 1950, the Senate Committee on Expenditures in the Executive Departments
endorsed user charges for agencies under its jurisdiction and called for the “equitable
transfer of many financial burdens from the shoulders of the taxpaying general public
to the direct and special beneficiaries.”267 The next year, the House Appropriations


264 U.S. Office of Management and Budget, Budget of the United States: Analytical
Perspectives, Fiscal Year 2004 (Washington: GPO, 2003), p. 93.
265 For background on the general user fee statute and a detailed survey of user charges
under various public laws, see U.S. Congressional Budget Office, The Growth of Federal
User Charges: An Update (Washington: CBO, 1995), along with the initial CBO study: The
Growth of Federal User Charges (Washington: CBO, 1993). This effort was reinforced by
a recommendation from the Representatives on the Joint Committee on the Organization of
the Congress, calling upon CBO “to conduct a study of all Federal user fees and the effects
of inflation on any user fees since such fees were last adjusted.” U.S. Joint Committee on
the Organization of the Congress, Organization of the Congress: Final Report of the Houserdst
Members, H.Rept. 103-413, 103 Cong., 1 sess. (Washington: GPO, 1993), p. 19. Further
information on user charges and their implementation is available in U.S. General
Accounting Office, Federal User Fees: Some Agencies Do Not Comply with Review
Requirements, GGD-98-161, June 30, 1998.
266 65 Stat. 290. The original language and format of the statute were modified in 1982,
when the authority was codified at 31 U.S.C. § 9701, by 96 Stat. 1051-1052.
267 U.S. Congress, Senate Committee on Expenditures in the Executive Departments, Fees
(continued...)

Subcommittee on Independent Offices followed suit. Representative Yates, a
member of the subcommittee, introduced its new legislation:
For the first time, our subcommittee went into a new question, the question as to
whether or not there should be charges and fees made by regulatory agencies of
the Government for many of the services which they render to those who come268
within their jurisdiction.
The subcommittee emphasized that regulatory agencies, such as the Interstate
Commerce Commission (ICC) and the Federal Communications Commission (FCC),
must meet the expense of hearings, inspections, and other activities related to
granting franchises, construction and other permits, and licenses. Continuing,
Representative Yates stated:
The taxpayers pay every dollar of the charges and costs that go into that hearing.
The companies pay nothing, other than taxes, and I think it is only fair that in
exchange for the franchise that the Government gives the broadcasting company
and the protection which the Government affords to such broadcasting company
to assure its freedom from interference in the operation of its broadcasting269
facilities ... that it should pay some of the costs of the hearings.
The subcommittee agreed and extended the doctrine to all federal agencies, not
just the ones under its jurisdiction. To do this, the panel added an amendment to the
appropriations bill that would permit each federal agency “to appraise its own
operations to see whether or not it would be possible to recapture for the Government
some of the costs that the Government incurs in connection with this regulation
through the establishment of a schedule of fees.”270 In addition to this goal,
Representative Yates noted that one agency official “expressed the viewpoint that
such a practice would not only be feasible, but would deter and do away with
superfluous applications.”271
Executive Guidance. In 1959, the Bureau of the Budget, predecessor to the
Office of Management and Budget (OMB), issued guidelines for implementing the
user fee statute.272 Circular No. A-25 emphasized that such charges should be
assessed only for special benefits provided to identifiable recipients. The circular has
been revised in the interim, most recently in 1993.273 The newest version, which
rescinded the original, extended guidance to agencies operating under other statutory


267 (...continued)
for Special Services, S.Rept. 2120, 81st Cong., 2nd sess. (Washington: GPO, 1950), p. 15.
268 See statement by Rep. Sidney Yates, Congressional Record, vol. 97, May 3, 1951, p.

4809.


269 Ibid.
270 Ibid.
271 Ibid.
272 U.S. Bureau of the Budget, “User Charges,” OMB Circular No. A-25, Sept. 23, 1959.
273 U.S. Office of Management and Budget, “User Charges,” OMB Circular No. A-25,
Revised, July 8, 1993.

authority, not just the 1951 user fee statute, and made more explicit the factors that
agencies should consider when assessing the government’s costs in providing the
good or service.
Judicial Interpretation. Federal courts have been involved in interpreting
user fee legislation, both the general user fee statute as well as agency-specific274
authorizations. The Supreme Court has determined that such charges are
constitutional when they impose a true fee, which must meet certain criteria and
standards for fairness and equity, among other things, and when they are an
appropriate legislative delegation of authority to the executive (i.e., levying a fee for
services rendered, rather than imposing a tax).
According to several Supreme Court decisions,275 user fees are allowable under
the 1951 IOAA if they recoup appropriate costs for goods or services rendered to
individual beneficiaries; the charges must be based only on the costs of services or
goods provided to the individual recipient, as opposed to being based on all costs of
goods or services that also benefit the general public. IOAA-authorized user fees
must also meet the standards of fairness and equity under the law and must not be
arbitrary. Finally, such charges are acceptable if they are consistent with
congressional policy and if the agency has not exceeded its authority and has not
disregarded the statute’s guidelines.
Major Provisions
Purposes. Current general user fee legislation directs that “each service or
thing of value provided by an agency ... shall be self-sustaining to the extent
possible.” By comparison, the original 1951 version had provided an elaborate list
of goods and services for which charges could be levied — “any work, service,
publication, document, benefit, privilege, authority, use, franchise, license, permit,
certificate, registration or similar thing of value or utility” — while the 1982
codification reduced it to the generic concept of “each service or thing of value.”
Also, the original enactment called for such services to be “self-sustaining to the
full extent possible,” while the codified version omitted the word full. No other


274 See CBO, The Growth of Federal User Charges, pp. 26-30; and Clayton P. Gillette and
Thomas D. Hopkins, “Federal User Fees: A Legal and Economic Analysis,” Boston
University Law Review, vol. 67 (Nov. 1987), pp. 822-835.
275 See, especially, Aeronautical Radio, Inc. v. United States, 379 U.S. 933 (1965). This
ruling upheld the FCC fees as a constitutional delegation of authority to the executive. The
Court found that they were fair and equitable; they were not arbitrary; they were consistent
with congressional policy; and the agency had not exceeded its authority or disregarded the
statutory guidelines. A later ruling, National Cable Television Association v. United States,
415 U.S. 336 (1974), however, struck down new and higher FCC fees; these charges were
based on all costs, both direct and indirect, and were for services that benefitted the general
public, not just recipients of certain services. A similar ruling resulted from a companion
case, based on annual charges that the Federal Power Commission levied on natural gas
companies and electric utilities. Here, the Supreme Court held that the IOAA authorized
only specific charges for specific services to identifiable recipients. Federal Power
Commission v. New England Power Company, 415 U.S. 345 (1974).

purpose — such as redirecting costs away from the general taxpayer and to the
beneficiary — is specified in the legislation.
Eligible Agencies. The original 1951 enactment, when granting user fee
authority to federal agencies, specifically included “wholly owned government
corporations as defined in the Government Corporation Control Act of 1945.” By
comparison, the 1982 codification struck this language and instead specifically
excluded mixed-ownership government corporations from federal agencies having
authority to impose user fees.
Authority. The general user fee statute grants powers to both the head of the
agency as well as to the President with regard to “executive agencies.” The head of
each eligible agency is authorized to issue regulations establishing the charge for a
service or thing of value. The law adds that regulations issued “by the heads of
executive agencies are subject to policies prescribed by the President and shall be as
uniform as practicable.”
Criteria and Standards. The law requires user fees to meet certain criteria
and standards. Each charge, importantly, is to be “fair.” The original language read
“fair and equitable,” but “equitable” was omitted in the codified version as being
redundant and otherwise included in “fair.” In addition to this requirement, the
charges are to be based on:
!the costs to the government (with the original version specifying
“direct and indirect” costs);
!the value of the service or thing to the recipient;
!public policy or interest served; and
!other relevant facts (with the original version reading “pertinent”
facts).
Disposition of the Revenue. Revenue collected under the general user fee
statute is paid into the U.S. Treasury as miscellaneous receipts. This is in contrast
to some agency-specific user fee statutes, in which the revenue is deposited in
dedicated accounts and earmarked to reimburse the collecting agency for certain
expenses and activities.
Effect on Other Statutes. The 1951 general user fee statute and its codified
current version leave intact other legislation that either proscribes or prescribes user
charges. The law insists that nothing contained in it repeals or modifies other statutes
prohibiting the collection or fixing of any fee, charge, or price. The enactment also
states that the user fee legislation does not affect any law “prescribing bases for
determining charges, but a charge may be redetermined under this section consistent
with its prescribed bases.”



Discussion
The general user fee statute, enacted in 1951 and modified in 1982, provides a
means for standardizing user charges and specifying the basic criteria which should
be met. The statute delegates broad authority and substantial discretion and
flexibility to agencies to establish fees for goods and services, in order to make them
self-sustaining. This legislative initiative, in turn, has been endorsed and supported
by the Bureau of the Budget and its successor, the Office of Management and
Budget, through regulations, most recently in 1993. Contributing to the 1993
revision of OMB Circular No. A-25, moreover, was an earlier recommendation from
the Administrative Conference on the United States (ACUS). Based on a major
study of user fees that it had commissioned, in 1987, ACUS recommended general
principles to guide the setting and implementation of user fees.276
The general user fee statute, however, has failed to standardize user fees and
most of these charges result from specialized grants of authority to particular
agencies. Several reasons explain this situation.
One is that the language of the general user fee law is vague, and its provisions
have been viewed as inconsistent. Most open-ended, for instance, is the allowance
that “other relevant facts” be considered when establishing a charge. In addition,
charges that are set to make a service “self-sustaining” may not be “fair” to the
parties who must pay. Furthermore, the requirement to consider public policy or
other interests might result in costs that differ from the actual costs of providing a
good or service. Regulating or reducing the volume of traffic at congested national
parks, if that were a public policy goal, for instance, might require higher prices for
parking and admission than would otherwise be justified in terms of the actual costs
to the government and the value of the service to the recipient.
Other reasons help to explain a reluctance to use the across-the-board authority
and instead rely on specific legislation to establish particular charges for goods or
services. Operating under the general user fee statute requires an agency to act alone,
without the immediate support of Congress for the specific charge. This means that
the agency incurs the objections directly and solely from adversely affected parties,
that is, the individuals and industries who must pay a new or higher price (for a good
or service that they had received previously for free or at a lower price). This
development may result in public criticism of the agency’s planned charges, intense
opposition to them before Congress as well as other parts of the executive, or in
potentially costly court challenges to the fees.277


276 U.S. Administrative Conference of the United States, “User Fees,” Recommendation 87-

4, adopted June 12, 1987.


277 See CBO, The Growth of Federal User Charges, pp. 15-31; Gillette and Hopkins,
“Federal User Fees,” pp. 869-873; Frederick M. Kaiser, “U.S. Customs Service User Fees:
A Variety of Charges and Countercharges,” Public Budgeting & Finance, vol. 8 (autumn

1988), pp. 78-95; and Roger L. Sperry, “Gold Rush,” Government Executive , vol. 30 (Mar.


1998), pp. 13-17.



Besides these disincentives to using the general user fee statute, agencies lack
a financial or budgetary incentive to impose fees under the IOAA: its revenue is
deposited in the general treasury and is not dedicated for use by the agency itself. In
short, the agency would have to do the work (e.g., argue on behalf of a charge,
establish the proper fee amount, and collect the revenue) but receive no direct budget
benefit. In contrast, some agency-specific user fee statutes establish special accounts
in the treasury and earmark the revenue for the agency’s own use, for instance, to
reimburse it for collection expenses and/or to support certain operations and
activities. In addition to determining the disposition of the revenue, specialized user
fee statutes, by comparison to the general authority, allow Congress to control
virtually all other aspects of such charges. Legislation can be used to erect a fee
structure, set the fees themselves, identify and charge particular beneficiaries or
recipients of a service, and provide for exemptions among specific recipients and
exceptions to certain fees.
Selected Source Reading
Gillette, Clayton P. and Thomas D. Hopkins. “Federal User Fees: A Legal and
Economic Analysis.” Boston University Law Review, vol. 67 (November 1987),
pp. 795-874.
Kaiser, Frederick M. “U.S. Customs Service User Fees: A Variety of Charges and
Countercharges.” Public Budgeting and Finance, vol. 8 (autumn 1988), pp. 78-

95.


Sperry, Roger L. “Gold Rush.” Government Executive, vol. 30 (March 1998), pp.

13-17.


U.S. Administrative Conference of the United States. Federal User Fees: Data
Compilation with Addendum. Washington: ACUS, 1988.
——. Federal User Fees: Proceedings of a Symposium, edited by Thomas D.
Hopkins. Washington: GPO, 1988.
U.S. Congressional Budget Office. The Growth of Federal User Charges.
Washington: CBO, 1993.
——. The Growth of Federal User Charges: An Update. Washington: CBO, 1995.
U.S. General Accounting Office. Federal User Fees: Budgetary Treatment, Status,
and Emerging Management Issues, GAO/AIMD-98-11. December 1997.
——. Federal User Fees: Some Agencies Do Not Comply with Review
Requirements. GAO/GGD-98-161. June 1998.
CRS Report 89-625E. Federal User Fees: An Overview, by Julius Allen (1989).
(This CRS report is archived and available from the author of this entry in the
compendium.)



U.S. President’s Council on Integrity and Efficiency, Audit Committee. Audit of the
Establishment and Collection of User Charges. Washington: OMB, 1989.
Frederick M. Kaiser



IV. Organization
A. Government Corporation Control Act
Statutory Intent and History
In 1945, partly in response to the proliferation of corporate bodies created
during the Depression and World War II, Congress enacted the Government
Corporation Control Act (59 Stat. 841; 31 U.S.C. §§ 9101-9110).278 The intent of the
act was (1) to establish consistent treatment and appropriate accountability and
control of revenue producing business enterprises organized as corporate bodies; and
(2) to assure reasonable financial autonomy and flexibility in carrying out authorized
programs. 279
The Control Act does not define what constitutes a government corporation or
how corporations may or may not differ from other categories of agencies. The
charter for each federal government corporation is the separate enabling legislation
passed by Congress. The Control Act simply lists corporate organizations covered
by the act, a list that is subject to occasional additions and deletions.280 The act
provides for two types of government corporations: “wholly owned government
corporations,” and “mixed-ownership government corporations.” In the absence of
a criteria-based definition, the number of government corporations may differ from
one source to another. The most commonly used estimates suggest a figure between281

22 and 44, both figures derived from General Accounting Office (GAO) reports.


Despite the Control Act’s silence on the matter, a working definition of
government corporation has emerged.282 The distinguishing characteristics of a
federal government corporation are that it is an agency of government, established
by Congress to perform a public purpose, which provides a market-oriented service
that produces revenue that meets or approximates its expenditures. Corporations
cover the spectrum in size and function from large, well-known corporations, such
as the Federal Deposit Insurance Corporation, to small, low-visibility corporate
bodies, such as the Federal Prison Industries in the Department of Justice. The
absence of a statutory definition has led to some agencies being designated


278 Hereafter, “the Control Act.”
279 In 1982, P.L. 97-258 codified the 1945 act’s provisions as 31 U.S.C. §§ 9101-9110 and
technically repealed the 1945 act. These sections of the United States Code constitute the
basic corporate control law.
280 For example, in 1945 the Control Act listed the Reconstruction Finance Corporation.
After this corporation was abolished in 1957, it was removed from the list.
281 In a 1988 report, GAO profiled some 44 government corporations. See U.S. General
Accounting Office, Profiles in Existing Government Corporations, GAO/AFMD-89-43FS,
Dec. 1988. In 1995, using a more precise and narrow definition, GAO concluded that there
were actually 22 government corporations. U.S. General Accounting Office, Government
Corporations: Profiles of Existing Corporations, GAO/GGD-96-14, Dec. 1995.
282 National Academy of Public Administration, Report on Government Corporations
(Washington: NAPA, 1981).

“corporations” although they perform no commercial function (e.g., Legal Services
Corporation), and to confusion with “government-sponsored enterprises” (e.g.,
Federal National Mortgage Association, “Fannie Mae”) that are instrumentalities, not
agencies of the United States.
The courts have deemed government corporations to be agencies of the United
States (Cherry Cotton Mills v. United States, 327 U.S. 536 (1946)) and, therefore,
subject to laws generally applicable to agencies, unless otherwise exempted by a
general statute or a statute applicable to the individual corporation. In practice,
application of government-wide statutes tends to vary widely among the
corporations, and it is necessary to review the status of each corporation to appreciate
the full scope of the exceptions.
Major Provisions
The major provisions of the Control Act provide for (1) establishing and
acquiring of corporations; (2) business type budgeting; (3) audits and management
reports; and (4) accounts and obligations, and standards for depository institutions
holding government corporation securities.
Some agencies (such as the Department of Agriculture, the National Credit
Union Administration, and the Department of Housing and Urban Development, to
name a few) have established or acquired government corporations.283 However,
under the Control Act an agency may only do so if specifically authorized by
Congress.
Once established, a government corporation annually must prepare and submit
to the President a business-type budget. The budget, which contains estimates and
statements of financial condition, income, and expenses, is then submitted to
Congress in the President’s budget proposal. Although government corporations are
usually expected to earn sufficient revenues to cover costs, Congress may supplement
the government corporation’s budget and provide for its debts.
The inspector general of every government corporation must annually audit the
corporation’s financial statements and submit audit reports to the head of the
corporation, the Chairman of the House Committee on Government Reform and the
Chairman of the Senate Committee on Governmental Affairs.284 The Comptroller
General of the United States may review the audit and report his findings to the
Director of the Office of Management and Budget (OMB) and the head of the
corporation. The Control Act also requires a government corporation to provide
management reports each year to the President, the Director of OMB, the
Comptroller General, and Congress. Management reports must include statements
of financial position, operations, cash flows, the results of the inspector general’s
audit, and other items as required in the corporation’s charter.


283 Most government corporations, though, are established independent of federal
departments.
284 The inspector general may also assign this responsibility to an independent external
auditor or the head of the corporation.

Government corporations, unlike most government agencies, are permitted to
issue obligations. However, a corporation must first seek the approval of Secretary
of the Treasury, who may decide many particulars of the obligation (e.g., interest rate,
maturity). The Control Act also empowers a government corporation to consolidate
its cash into an account kept by the Secretary of the Treasury at a Federal Reserve
bank or other bank or fiscal agent as designated by the Secretary.
Discussion
The government corporation is an attractive option to policymakers for three
reasons. First, government corporations possess significant revenue streams not
available to other government agencies: commercial activities and government
obligation issuance. Second, government corporations are largely exempted from
government management laws (including personnel and compensation ceilings).
Finally, government corporations can be used as transition organizations toward
eventual privatization of some government agency or program (e.g., U.S. Enrichment
Corporation). On the whole, then, the government corporation option offers
policymakers some of the attractions of a private entity without sacrificing
governmental control.285
Selected Source Reading
Mitchell, Jerry. The American Experiment with Government Corporations.
Armonk, NY: M.E. Sharpe, 1999.
National Academy of Public Administration, Report on Government Corporations,
vol. 2. Washington: National Academy of Public Administration, 1981.
U.S. Congress. Senate. Committee on Governmental Affairs. Managing the
Public’s Business: Federal Government Corporations, by Ronald C. Moe.
S.Prt. 104-18. 104th Congress, 1st session. Washington: GPO, 1995.
U.S. General Accounting Office. Government Corporations: Profiles of Existing
Government Corporations. GAO/GGD-96-14. December 1995.


285 Government corporations, no matter what function they perform or how “private” they
may appear to the public or to themselves, are agents of the state subject to constitutional
limitations. As the Supreme Court concluded in the 1995 Lebron case involving the status
of AMTRAK, a government corporation has certain inherent legal characteristics that cannot
be shed simply by legislative language or by corporate fiat. In the Lebron case, the Supreme
Court decided that, while Congress can determine AMTRAK’s governmental status for
purposes within Congress’s control (e.g., whether it is subject to general management laws,
such as the Administrative Procedure Act), Congress cannot make the final determination
of AMTRAK’s status as a governmental entity for purposes of determining constitutional
rights of citizens affected by its actions. To do so, in the Court’s view, would mean that the
government could evade its most solemn constitutional obligations by simply resorting to
the corporate form of organization. (Michael A. Lebron v. National Railroad Passenger
Corporation, 513 U.S. 374 (1995).)

CRS Report RL30365. Federal Government Corporations: An Overview, by Ronald
C. Moe.
Kevin R. Kosar



B. Reorganization Act of 1977, as Amended
Statutory Intent and History
Although reorganization authority expired in 1984 and has not been renewed
since, it is still part of the United States Code.286 The authority to reorganize federal
agencies has been delegated by Congress to the President from time to time since
1932. In 1949, the President submitted to Congress the reorganization bill that would
form the basis of reorganization authority through 1977. The Reorganization Act of
1949 provided that the President could submit a reorganization plan involving any
agency. This plan would go into effect as law after 60 days unless a resolution of
disapproval was passed by a majority in either House (a one-house veto). Over time,
Congress periodically renewed the President’s reorganization authority, although the
length of extensions varied and on occasion the authority was allowed to lapse.
As renewals were sought and debated, amendments were adopted altering the
original law. For the most part, these amendments limited the President’s authority.
In most instances, specific incidents led to the limitations on presidential authority.
For example, after failing to obtain a Department of Housing and Urban
Development through legislation, President Kennedy employed the reorganization
plan process. The plan was approved and the department established. Congress,
however, found fault with the reorganization authority, and when it came up for
renewal in 1963, Congress let the authority lapse. In 1965, when President Johnson
once more requested the authority, Congress granted it but inserted a provision
prohibiting the use of the reorganization authority to create new executive
departments.
One of President Carter’s first legislative proposals was a request that Congress
renew the President’s authority to submit reorganization plans. The Reorganization
Act of 1977, as finally enacted, represented a procedural compromise. The approval
process remained the same as in the 1949 Reorganization Act, except that a
resolution of disapproval, subject to certain expedited procedures, was automatically
introduced in both chambers. This ensured a congressional up-or-down vote. In
addition, the President was permitted to amend a plan within 30 days after its
submission, thus allowing for modifications in response to congressional concerns.
A major blow was struck against the reorganization plan procedure in 1983,
when the Supreme Court ruled in INS v. Chadha that the legislative veto process was287
unconstitutional. The Court held that exercises of legislative power must fulfill the
constitutional requirement of consideration by both houses of Congress and
“presentment” to the President. Inasmuch as legislative vetoes frequently provided
for consideration by only one house and, by definition, did not involve the President,
the mechanism was found to be constitutionally deficient. One consequence of the
Chadha ruling was that Congress passed legislation in 1984 that had the effect of
ratifying reorganization plans previously approved (P.L. 98-532; 98 Stat. 2705).


286 5 U.S.C. §§ 901-912.
287 462 U.S. 919 (1983).

Congress approved the Reorganization Act Amendments of 1984, which
extended the reorganization plan authority from November 1984 to December 31,
1984. Although it was never used and has expired, this version of reorganization
authority remains “on the books,” and maybe found in Chapter 9 of Title 5 of the
United States Code. The 1984 amendments, an effort to address the constitutional
issues raised by the Chadha decision, required that a joint, rather than concurrent,
resolution be introduced in both the House and Senate upon receipt of a
reorganization plan. Another significant innovation in the 1984 amendments was the
requirement that an implementation section be included in the President’s message
accompanying the reorganization plan.
In the absence of presidential reorganization authority, reorganizations of federal
agencies are accomplished through the regular legislative process.288 Prominent
examples of such reorganizations include the creation of the Department of Veterans
Affairs289 in 1988 and the creation of the Department of Homeland Security in

2002.290


Major Provisions
Under provisions of the Reorganization Act of 1977, as amended through 1984,
the President could submit to Congress a reorganization plan providing for the
transfer, in whole or in part, of an agency or its functions to another agency, “except
that no enforcement or statutory program shall be abolished by the plan.”291 A plan
could not “create a new department,” continue an agency or function beyond the
period authorized by law, or authorize an agency to perform a function not expressly292
provided in law.
Once the President submitted a reorganization plan, Congress had 90 days to act
upon the following joint resolution: “That the Congress approves the reorganization
plan numbered ______ transmitted to the Congress by the President on _____,
19___.”293 The President had to provide an “implementation plan” meeting the
requirements of the law when submitting a plan. As a joint resolution, this vehicle
had to be approved by the President to have the force of law.


288 Certain agency heads are statutorily vested with the authority to conduct limited
reorganizations within their own organizations. For example, such authority is vested in the
Secretary of Defense in Title 10, Section 125, of the United States Code.
289 P.L. 100-527, 102 Stat. 2635.
290 P.L. 107-296, 116 Stat. 2135.
291 5 U.S.C. § 903(a)(2).
292 5 U.S.C. § 905(a). The statute includes several other limitations on what can be achieved
by a reorganization plan.
293 The quotation is taken from the statute, which has not been updated to reflect the new
century.

Discussion
The original rationale for delegating to the President broad authority to propose
executive reorganization plans was the widely held view that the President, as chief
manager of the executive branch, ought to have powers to make organizational and
management changes without having them subject to so-called “political pressures”
from Congress. Reorganization was viewed in large measure as a technical exercise
best left to the experts in the executive branch.
Reorganization is now not usually regarded as merely a technical exercise.
Reorganizations may lead to increased organizational efficiency, economy, and
effectiveness, but they also often have significant institutional and political
consequences. From the early 1960s on, questions were raised in congressional
deliberations as to both the constitutional bases for reorganization authority and
processes and the political wisdom of assigning this broad authority to the White
House. The successive reorganization acts were founded upon the concept of
permitting the President to submit to Congress what were, in fact, laws that would
go into effect unless either house prevented activation by passing a motion of
disapproval. Despite modifications of the process, this “legislative veto” was
increasingly criticized as the years passed.
The reorganization process began to be questioned in terms of both its utility
and its potential for increasing conflict and distrust between the branches. Congress,
in successive reorganization acts, gave the President authority to circumvent the
regular legislative process. Yet, when Presidents invoked the authority, they opened
themselves to the accusation of violating the established system. Plans were
sometimes submitted that probably would not have been accepted using the regular
legislative process, thus increasing tension between the branches. After each
presidential “misuse,” Congress responded by adding restrictions and exemptions,
gradually circumscribing the power until the reorganization plan process (provided
in the 1977 act, as amended) was a mere shadow of the original Reorganization Act
of 1949. With the 1983 Chadha decision striking down the legislative veto, the
utility and desirability of using the reorganization act, compared to following the
regular legislative process, came into question.
Nonetheless, the drawbacks of reorganization authority might be outweighed,
for some, by the perceived difficulty of reforming government organization through
the conventional legislative process. It could be argued that the need for
modernization of the federal bureaucracy warrants the renewal of the President’s
reorganization authority, with appropriate modifications and safeguards for
congressional prerogatives.
Selected Source Reading
Arnold, Peri E. Making the Managerial Presidency: Comprehensive Reorganization
Planning, 1905-1996, 2nd ed. Lawrence, KS: University Press of Kansas, 1998.
CRS Report RL30876. The President’s Reorganization Authority: Review and
Analysis, by Ronald C. Moe.



Emmerich, Herbert. Federal Organization and Administrative Management.
Tuscaloosa, AL: University of Alabama Press, 1971.
Fisher, Louis and Ronald C. Moe. “Presidential Reorganization Authority: Is It
Worth the Cost?” Political Science Quarterly, vol. 96 (summer 1981), pp. 301-

318.


U.S. Congress. House. Committee on Government Operations. Reorganization Act
Amendments of 1983. H.Rept. 93-128. 98th Congress, 1st session. Washington:
GPO, 1984.
Henry B. Hogue



C. Federal Vacancies Reform Act of 1998
Statutory Intent and History
The Federal Vacancies Reform Act of 1998294 (Vacancies Reform Act) replaces
the Vacancies Act of 1868,295 as amended (5 U.S.C. §§ 3345-3349d). The purpose
of the 1868 act and the 1998 act is the same: to provide for the temporary filling of
certain positions in the executive branch to which the President makes appointments,
subject to the advice and consent of the Senate.
The 1868 act, which applied only to executive departments — no independent
agencies existed at the time — provided that when an incumbent in an advice and
consent position died or resigned, or was absent or sick, the first assistant thereof was
to perform the duties of the office, unless the President designated someone else who
was occupying a position for which he or she had been confirmed by the Senate.
Whoever assumed the duties of the position could do so for no longer than 10 days
when the vacancy was caused by death or resignation. An 1891 amendment extended
the time period to no more than 30 days.296 In 1988, the act was amended once again,
extending the time period to no more than 120 days. In addition, several new
provisions were added to the act. The 120-day time period was suspended if a first
or second nomination to fill the vacancy was before the Senate, but would begin to
run again if the nomination was rejected or withdrawn. For the first time, the heads
of executive agencies were brought under the act. Finally, a temporary appointment
or designation could be made only under provisions of the act, except for recess297
appointments.
The Vacancies Reform Act addresses a number of issues raised in the
administration of the prior act. These include, but are not limited to, (1) extending
the act’s coverage to all advice and consent positions in single-headed executive
independent agencies; (2) extending the President’s authority to make temporary
appointments to include officials who are not in positions for which they were
confirmed by the Senate; (3) lengthening the time a first assistant or acting or
designated officer may serve; (4) stipulating that the act is the exclusive means for
temporarily filling vacant positions, except for recess appointments and instances in
which express statutory authority provides otherwise; (4) providing for the
Comptroller General to report to Congress regarding agency adherence to the act; (5)
temporarily suspending the now 210-day time period during a presidential inaugural
transition; and (6) specifying that positions in independent multi-headed regulatory
boards and commissions, as well as certain other positions, are not covered by the
act.


294 The act is found in P.L. 105-277 (Omnibus Consolidated and Emergency Supplemental
Appropriations for FY1999) under Division C, Title 1, Sec. 151.
295 Act of July 23, 1868, Ch. 227, 15 Stat. 168.
296 Act of Feb. 6, 1891, Ch. 113, 26 Stat. 733.
297 P.L. 100-398, Sec. 7; 102 Stat. 988.

Major Provisions
Section 3345. Acting Officer. Provides that if an officer in an advice and
consent position dies, resigns, or is unable to perform his or her duties, the office may
be filled temporarily in one of two ways: (1) the first assistant to the office assumes
the duties of the office, unless he or she has been nominated for the vacant position
and has served as first assistant for fewer than 90 of the preceding 365 days; or (2)
the President selects either (a) an official from another position to which he or she
has been confirmed, or (b) an official from the affected agency, whose pay rate is at
least equal to GS-15, and who has been at the agency for at least 90 of the preceding

365 days.


Section 3346. Time Limitation. Establishes a 210-day time period after a
vacancy occurs during which an acting officer may serve. If the vacancy occurs
during an adjournment sine die, the time period begins when the Senate first
reconvenes. If on the last day of the 210-day period the Senate is not in session, the
second day the Senate is next in session shall be deemed to be the last day of such
period (Section 3348). The 210-day restriction is suspended if a nomination is
pending, but begins anew if the nomination is rejected, returned, or withdrawn. A
second nomination again suspends the time restriction, which does not begin again
unless the second nomination is rejected, returned, or withdrawn. (See also Section

3349a for additional time limitation provisions.)


Section 3347. Exclusivity. Provides that Sections 3345 and 3346 are the
exclusive means for temporarily filling a vacant advice and consent position in an
executive department or agency, unless (1) a statutory provision specifically
authorizes the President, a court, or the head of an executive department to
temporarily fill a specific position, or designates an officer or employee to
temporarily fill a specific position; or (2) the President makes a recess appointment.
The section specifically nullifies the previously held position of the Justice
Department that the statutory vesting of general agency authority in the head of an
agency, and allowing this authority to be delegated, provides an alternative way to
fill vacant advice and consent positions.
Section 3348. Vacant Office. Provides that a vacant advice and consent
position may not be filled temporarily except in conformity with the Vacancies
Reform Act, and that an action taken by any person who is not acting under the
provisions of the act shall have no force or effect and may not be ratified. Provides
further that the head of a department or agency may perform the functions and duties
of a vacant, subordinate, advice and consent position. The head of the agency may
not perform these functions and duties, however, for the following positions: General
Counsel of the National Labor Relations Board, General Counsel of the Federal
Labor Relations Authority, any inspector general or chief financial officer in an
advice and consent position, or any executive agency position, if a statutory provision
expressly prohibits the head of the agency from performing the functions and duties
of such office.
Section 3349. Reporting of Vacancies. Directs each agency head to notify
the Comptroller General and each house of Congress when a covered vacancy occurs,
including the name of the acting officer, the name of the nominee for the position,



and the date a nomination is rejected, withdrawn, or returned. If the Comptroller
General determines that an acting officer is serving longer than the 210-day period,
including the applicable exceptions, he is to report this fact to specified committees
of Congress, to the President, and to the Office of Personnel Management.
Section 3349a. Presidential Inaugural Transitions. Provides that for
any vacancy that exists during the first 60 days after a new President assumes office,
the 210-day time period does not begin until 90 days after the inauguration date, or

90 days after the vacancy occurs, whichever is later.


Section 3349b. Holdover Provision. The act does not affect any statute
that authorizes a person to continue serving in a fixed-term position after a term
expires, until a successor is appointed or a specified period of time has expired.
Section 3349c. Exclusion of Certain Officers. The act does not cover
any advice and consent officer on a board, commission, or similar entity that is
composed of multiple members and governs an independent establishment or
government corporation; or any member of the Federal Energy Regulatory
Commission or the Surface Transportation Board; or any judge on an Article I court.
Section 3349d. Notification of Intent to Nominate. Provides that if,
during a recess or adjournment of the Senate of at least 15 days, the President sends
a written notification of intent to nominate a specific individual to a specific office,
this notice shall be considered a nomination for purposes of the act. If the President
does not submit the nomination within two days after the end of the recess or
adjournment, the nomination shall be treated as a withdrawn nomination for purposes
of the act.
The Vacancies Reform Act became effective on November 20, 1998, and
applies to any vacancy occurring after that date. The 210-day limitation applies to
any office that was vacant on the effective day as if the vacancy had occurred on that
date.
Discussion
The Vacancies Reform Act was largely inspired by evidence that, by early 1998,
as many as 25% of the 320 advice and consent positions in executive departments
were being filled by temporary designees, most of whom had served beyond the 120-
day limitation period of the old act and had not been nominated by the President. In
addition, it was found that this evasion of the Senate’s constitutional confirmation
prerogative was being supported by the Department of Justice (DOJ). The
department had developed a legal construction of the enabling legislation of the 14
departments that effectively superceded the requirements of the old act. The
Attorney General was interpreting general housekeeping provisions found in the
enabling statutes of all the departments as authority for the head of the department
to designate an acting official to occupy, for an indefinite term, a vacant position



requiring Senate confirmation. These provisions298 vest department heads with the
powers and functions of their agencies, and with authority to delegate some of their
authority to their subordinates.299 The Comptroller General had rejected Justice’s
interpretation and issued a series of opinions on the matter.300 The Vacancies Reform
Act makes clear that its requirements are exclusive and specifically rejects the DOJ
position. To assure that the executive branch will comply with the act, the
Comptroller General is now required to report to Congress if any acting officer is
serving longer than the 210-day period (including the applicable extensions). In
addition, the statute now stipulates that the acts of any person who is not acting under
its provisions have no force or effect and may not be ratified.
The Vacancies Reform Act also addresses some of the President’s concerns,
particularly regarding the amount of time taken to fill positions through the regular
advice and consent appointment process. Aware of the problem, Congress extended
the time limit for a temporary appointment from 120 to 210 days. In addition, the
210-day time limit is suspended for a specific period during the inaugural transition
period of a new President. Finally, the President now has wider choice when
designating an acting official.
The Vacancies Reform Act vests the Comptroller General with the task of
monitoring agency compliance, by establishing requirements for reporting, to the
Congress and the Comptroller General, action related to vacancies in advice and
consent positions, as well as setting standards for who can be named to act in these
positions when they are vacant and how long they can remain. In performance of this
duty, since 1999, the General Accounting Office (GAO) has issued a series of reports
that examined agencies’ performance in implementing the act. It found substantial
lags between the time a reportable event, such as the naming of an acting officer,
occurred and the time it was reported, as well as instances that were not reported at
all. It also identified instances in which an acting officer exceeded the legally
allowed maximum period for service in this capacity.301 In 2003, GAO issued a


298 See, e.g., such provisions for DOJ at 28 U.S.C. §§ 509-510.
299 The assertion of DOJ’s position at that time is found in two letters to Senator Strom
Thurmond from Andrew Fois, Assistant Attorney General, Office of Legislative Affairs,
dated May 2, and July 10, 1997.
300 See, e.g., 65 Comp. Gen. 626-635, issued on June 9, 1986. An analysis of the issue,
which supports the Comptroller General’s position, is found in CRS Congressional
Distribution Memorandum, Validity of Bill Lann Lee as Acting Assistant Attorney General
for Civil Rights, by Morton Rosenberg, in U.S. Congress, Senate Committee on
Governmental Affairs, Oversight of the Implementation of the Vacancies Act, hearing on S.

1764, 105th Cong., 2nd sess., Mar. 18, 1998, S.Hrg. 105-495 (Washington: GPO, 1998), pp.


62-100.


301 For example, see U.S. General Accounting Office, Violations of the 210-Day Limit
Imposed by the Vacancies Reform Act, B-286265, Sept. 15, 2000; Implementation of the
Federal Vacancies Reform Act of 1998, GAO/GGD-00-210R, Sept. 29, 2000; Eligibility
Criteria for Individuals to Temporarily Fill Vacant Positions Under the Federal Vacancies
Reform Act of 1998, GAO-01-468R, Feb. 23, 2001; and Presidential Appointments:
Agencies’ Compliance with Provisions of the Federal Vacancies Reform Act of 1998, GAO-
(continued...)

report identifying approaches that would facilitate prompt and accurate compliance
with the act’s provisions that could be applied throughout the executive branch. The
report identified five critical elements essential to agency compliance with the act:
(1) clear identification of the agency components responsible for each requirement
under the act; (2) frequent communication between the responsible agency
components; (3) maintaining up-to-date lists of the first assistants to each covered
advice and consent position; (4) documentation of an agency’s Vacancy Reform Act
procedures to guide responsible persons when a triggering vacancy occurs; and (5)
assigning Vacancy Reform Act responsibilities to career employees so as to assure
continuity of an agency’s compliance activities. (See the GAO report listed under
“Selected Source Reading” below.)
Selected Source Reading
U.S. General Accounting Office. Federal Vacancies Reform Act: Key Elements for
Agency Procedures for Complying with the Act. GAO-03-806. July 2000.
CRS Report 98-892A. The New Vacancies Act: Congress Acts to Protect the
Senate’s Confirmation Prerogative, by Morton Rosenberg (1998).
CRS Congressional Distribution Memorandum. Validity of Bill Lann Lee as Acting
Assistant Attorney General for Civil Rights, by Morton Rosenberg. In U.S.
Congress. Senate. Committee on Governmental Affairs. Oversight of thethnd
Implementation of the Vacancies Act. Hearing on S. 1764. 105 Congress, 2
session, March 18, 1998. S.Hrg. 105-495, pp. 62-100.. Washington: GPO,

1998.


Morton Rosenberg
Henry B. Hogue


301 (...continued)

01-701, May 31, 2001.



V. Procurement and Real Property Management
A. Public Buildings Act of 1959
Statutory Intent and History
Until 1926, each federal building was approved and funded in separate
legislation. With exceptions, this remained the practice until enactment of the Public
Buildings Act of 1926 (44 Stat. 630). This act provided the basic authority for
construction of federal buildings by congressional authorizations and appropriations.
Congress later enacted the Public Buildings Act of 1949 (63 Stat. 176) to authorize
the acquisition of sites and design plans for federal buildings located outside
Washington, DC, and for improvement to existing federal buildings. The same year,
Congress enacted the Federal Property and Administrative Services Act of 1949 (63
Stat. 377). This act established the General Services Administration (GSA) and gave
the GSA Administrator responsibility for administering federal real property. In
1954, Congress amended the Public Buildings Act of 1949 to authorize the GSA
Administrator to acquire titles to real property and to construct federal buildings
through lease-purchase contracts (68 Stat. 518). Under this procedure, a building was
financed by private capital, and the federal government made installment payments
on the purchase price in lieu of rent payments. Title to the property vested in the
federal government at the end of the contract period, generally between 10 and not
more than 30 years. When authority for lease-purchase contracts expired in 1957,
Congress approved a successor statute, the Public Buildings Act of 1959 (40 U.S.C.
§ 3301 et seq.). The 1959 act re-established earlier requirements to provide for direct
federal construction of public buildings through the congressional appropriations and
authorizations process. This act, as amended and re-codified over the years, remains
the basic statute authorizing the construction and renovation of federal civilian
facilities.
The Public Buildings Act Amendments (86 Stat. 216) were enacted in 1972 to
address a backlog of congressionally authorized building projects which had not
received appropriations since 1959. The legislation authorized the GSA
Administrator to use lease-purchase contracts for a three-year period to construct 68
federal buildings in an attempt to reconcile the urgent need for new federal facilities
with budgetary constraints. The Federal Buildings Fund (FBF) was also established
within GSA to be used for acquisition and maintenance of real property. Revenue
to the FBF was supplied from rent payments charged to federal agencies occupying
GSA’s office space.
The Public Buildings Act Amendments of 1988 (102 Stat. 4049) were enacted
to permit the GSA Administrator to enter into five-year contracts to realize greater
savings in the operations and maintenance of federal facilities. The 1988 act
increased to $1.5 million the threshold for projects not requiring approval of the
congressional authorizing committees.



Major Provisions
The Public Buildings Act, as amended, codifies existing law and establishes a
uniform method for meeting the building needs of the federal government. The act
vests with the Administrator of General Services sole authority to acquire, construct,
alter, repair, remodel, improve, or extend most federal buildings, and to acquire the
sites or additions to sites for such buildings It also requires GSA to submit to the
congressional authorizing committees a detailed prospectus of all proposed building
projects costing over $1.5 million prior to the appropriation of funds, and requires
GSA to submit an annual report to Congress on all projects and conduct an ongoing
survey of federal building needs.
Discussion
Since 1972, the FBF has financed GSA’s real property activities through
reimbursements for purchases of goods and services or as rent paid for space in
GSA-owned and leased buildings. While revenue to the FBF is the principal source
of funding, Congress annually authorizes how GSA may allocate its FBF revenues
as new obligational authority in appropriations funding. In its early years, the
revenues from the FBF proved inadequate to provide operating capital for federal
buildings. As a result of insufficient revenues, GSA turned increasingly to the
leasing of space to meet federal agency needs, which totaled nearly $1.2 billion in
FY1988.
In response, Congress authorized a total of $2.8 billion in new appropriations
to the FBF for construction of new federal facilities between 1990 and 1997. The
following year, Congress authorized $450 million to be deposited into the FBF from
GSA’s rent revenues, and also authorized a new appropriation of $492 million for the
acquisition and construction of new federal facilities. Since that time, Congress has
generally remained supportive in its funding of new construction projects, while
requiring GSA to justify and monitor all proposed building costs.
Most recently, the December 2003 conference report (H.Rept. 108-401) to
accompany the FY2004 omnibus appropriations bill (H.R. 2673) recommended that
an additional $446 million be deposited into the FBF, for a total of $6,758 million.
Of this total, $708 million is to be used for new construction, and an additional $991
million is to remain available until expended for repairs and alterations.
GSA’s Public Buildings Service (PBS) provides property and asset
management, as well as acquisition and property disposal services. GSA has
constructed nearly 1,800 buildings, and leases space in approximately 6,500
privately-owned buildings. Adequate funding for repairs and alterations continues
to be of major concern for the PBS, so that it can maintain and improve these
properties that are in the government’s inventory. A June 2003 General Accounting
Office report noted that more than $10 billion would be needed for repairs and
renovations to the federal facilities constructed over 50 years ago.302


302 U.S. General Accounting Office, Federal Real Property: Executive and Legislative
(continued...)

In both the 106th and 107th Congresses, legislation was introduced to reform
property management by providing greater flexibility to GSA and executive branch
agencies to manage their personal property assets more effectively. Past legislative
proposals included the transfer and exchange of property with other agencies and
qualifying private-sector entities, the use of subleases on unexpired portions of
government leases, and the leasing of certain federal assets to the private sector. In
the 108th Congress, two bills have been introduced in the House to revise federal
property management policies (H.R. 2548 and H.R. 2573). If enacted, the proposed
legislation would authorize the GSA Administrator to enter into agreements with
non-federal entities to sell or sublease real property that is no longer needed by the
federal government. These proposed changes to existing law are intended to give
greater flexibility to GSA and federal agencies to manage more effectively and
oversee federal property assets based on changing mission requirements.
Selected Source Reading
U.S. Congress. House. Committee on Government Reform and Oversight.
Subcommittee on Government Management, Information, and Technology.
Oversight of Federal Real Property Policy. Hearings. May 4, 1998. 105thnd
Congress, 2 session. Washington: GPO, 1999.
U.S. Congress. House. Committee on the Judiciary. Revision of Title 40, United
States Code, “Public Buildings, Property, and Works.” S.Rept. 107-479. 107thnd
Congress, 2 session. Washington: June 2002.
U.S. General Accounting Office. Federal Real Property: Executive and Legislative
Actions Needed to Address Long-standing and Complex Problems. GAO-03-

839T. June 5, 2003.


Stephanie Smith


302 (...continued)
Actions Needed to Address Long-standing and Complex Problems, GAO-03-839T,
Washington: June 5, 2003, p. 1.

B. Federal Acquisition Streamlining Act of 1994
Statutory Intent and History
The 103rd Congress enacted the Federal Acquisition Streamlining Act of 1994
(FASA; 108 Stat. 3243), a comprehensive procurement reform effort designed to
streamline the civilian and military acquisition process, which totaled $234.9 billion
in FY2002. The new law was based in large part on recommendations contained in303
the 1993 National Performance Review (NPR) report. These reforms included the
revision and consolidation of existing procurement statutes, increased use of
commercially available items, and adoption of a simplified acquisition purchase
threshold of $100,000. Immediately after signing FASA into law, President William
Clinton issued E.O. 12931, requiring executive branch agencies to make their
administrative procurement procedures more effective and innovative “over and304
above those required by statute.”
By way of background, the Federal Property and Administrative Services Act
of 1949 (41 U.S.C. § 251 et seq.) established a statutory basis for the postwar
procurement procedures of civilian agencies. The legislation created the General
Services Administration (GSA) to procure supplies and services, including federal
buildings as well as their management, and to set records management standards.
Since 1949, the enabling law’s original provisions have been frequently and
substantially amended. Enactment of FASA was a comprehensive attempt to revise
and consolidate duplicative federal regulations that often hindered an agency’s ability
to procure the highest quality goods at the lowest cost. Potential vendors also
complained of the frustrating complexity of federal specifications that controlled the
design and production of goods.
The Federal Acquisition Regulation (FAR) is the codification of uniform
policies and procedures for executive branch acquisitions, and is the primary
regulation used in the acquisition of supplies and services. The FAR is maintained
and revised by the Federal Acquisition Regulatory Council, which is composed of
the GSA Administrator, the Secretary of Defense, and the Administrator of the
National Aeronautics and Space Administration. The FAR is published as Chapter
One of Title 48 of the Code of Federal Regulations. It can also be accessed online
at [http://www.arnet.gov/far]. The Office of Federal Procurement Policy (OFPP),
established within the Office of Management and Budget (OMB) in 1974, provides
oversight of federal procurement policies for executive branch agencies (41 U.S.C.
§ 404). The OFPP Administrator is responsible for oversight of the council, and
provides the final approval on revisions to the FAR, in the event the three member
agencies fail to agree in a timely manner.
Until 1996, GSA also had responsibility for technology procurement. The
Information Technology Management Reform Act (110 Stat. 679), which was


303 U.S. Office of the Vice President, National Performance Review, From Red Tape to
Results: Creating a Government That Works Better & Costs Less (Washington: GPO, 1993),
pp. 26-31.
304 3 C.F.R., 1995 Comp., pp. 925-926.

incorporated as an amendment into the National Defense Authorization Act for
FY1996, transferred authority for information technology acquisitions from GSA to
OMB (40 U.S.C. § 1401). Later retitled the Clinger-Cohen Act (110 Stat. 3009-393),
this comprehensive legislation provided federal agency procurement officials greater
flexibility to acquire information technology systems through the use of multi-agency
contracts.
Major Provisions
Enactment of FASA revised existing procurement law in an effort to simplify
the government’s 55-year-old acquisition system that had become cumbersome and
duplicative. New FASA requirements authorize the use of multiple award contracts
for goods and services, thus minimizing the burden on contracting officials to
negotiate and administer contracts. Encouraging a more active relationship between
the federal government and suppliers, FASA authorizes procurement officials to buy
goods quickly and economically through the simplified acquisition purchase
threshold of $100,000, and through greater reliance on commercially available items.
Micro-purchases, under $2,500, are authorized by FASA to be made with the use of
purchase cards. Procurement officials are also encouraged to conduct bid requests,
quote specifications, and award contracts electronically, whenever possible.
Generally, federal agencies acquire their goods and services through contracts
that mandate specific requirements. An agency can now consider a contractor’s past
performance, management skills, and workmanship in its decision to award supply
and services contracts based on best-value procurement, instead of lowest price. In
addition, the use of fixed-price performance-based contracting is also encouraged to
eliminate audits and cost overruns often associated with cost-reimbursement
contracts.
Discussion
FASA contained 204 sections that amended procurement law, and established
September 1995 as the deadline for final implementing regulations. Two years later,
the General Accounting Office (GAO) reported that the actual implementation of
FASA requirements was a “complex process,” involving major revisions of the FAR,
as well as individual agency directives and FAR supplements.305 The Federal
Acquisition Regulatory Council, in conjunction with 11 interagency drafting groups,
initially proposed 29 FAR revisions to implement the act. While only 13 regulations
were published in final form by the FASA deadline, an additional 11 regulations
were published the following month. GAO found that the FAR drafting groups
emphasized crafting language that would be useful to contracting officers, and
addressing public comments on the more complex or controversial regulations.306
In the decade following enactment of FASA, federal procurement officials have
been able to emphasize performance-based requirements in proposed contracts, and


305 U.S. General Accounting Office, Acquisition Reform: Regulatory Implementation of the
Federal Acquisition Streamlining Act of 1994, GAO/NSIAD-96-139, June 1996, p. 1.
306 Ibid., pp. 2-3.

to allow greater flexibility to potential vendors on the methods used to accomplish
their work more effectively. Agency procurement officials have also been authorized
to negotiate procurements with the use of time-and-materials contracts. In this type
of contract, the vendor assumes the full burden of performing and completing the
entire scope of work, within the contract’s maximum not-to-exceed price for wages
and materials. Title XIV of the FY2004 National Defense Authorization Act (P.L.
108-136), the Services Acquisition Reform Act of 2003 (described in more detail
elsewhere in this compendium), amends FASA to provide that contracts may be used
by federal agencies for the acquisition of commercial services. Agency procurement
officials are required to make a determination that a time-and-materials contract is
more appropriate than a traditional fixed-price contract, and include in the proposed
contract a maximum, not-to-exceed price that the contractor exceeds at his own risk.
Procurement officials also have the flexibility to authorize any subsequent change in
the cost of the contract, if it is determined to be in the best interest of the procuring
agency.
The significance of procurement in the federal government is reflected in the
$234.9 billion that civilian and defense agencies spent on goods and services in
FY2002. Growth in procurement spending is likely to continue as the President and
Congress address homeland security and defense issues, as well as the need to
acquire updated information and technology systems within the federal government.
Selected Source Reading
U.S. Congress. House. Committee on Government Reform and Oversight.
Subcommittee on Government Management, Information, and Technology.
Simplifying and Streamlining the Federal Procurement Process. Hearings. 104thst
Congress, 1 session. Washington: GPO, 1996.
U.S. General Accounting Office. Acquisition Reform: Implementation of Title V of
the Federal Acquisition Streamlining Act of 1994. GAO/NSIAD-97-22BR,
October 1996.
——. Acquisition Reform: Regulatory Implementation of the Federal Acquisition
Streamlining Act of 1994. GAO/NSIAD-96-139. June 1996.
Stephanie Smith



C. Federal Activities Inventory Reform (FAIR) Act of 1998
Statutory Intent and History
Office of Management and Budget (OMB) Circular No. A-76, which was first
issued in 1966, provides guidance for federal agencies to use in determining who —307
a government agency or a private business — will perform commercial activities.
A commercial activity is defined as “a recurring service that could be performed by308
the private sector.” The circular does not require agencies in the executive branch
to conduct cost comparison studies. The voluntary nature of the A-76 program is
manifested by varying levels of participation by executive agencies.
Concerned that civilian executive agencies infrequently consulted Circular No.
A-76,309 and supportive of the federal government’s stated policy of relying on the310th
private sector for commercial activities, the 105 Congress responded with new
legislation. As introduced in the Senate, S. 314 would have required executive
agencies to procure “from sources in the private sector all goods and services that are
necessary for or beneficial to the accomplishment of authorized functions of the311
agency,” except for inherently governmental goods and services. The version of
the bill passed by Congress and signed by the President differed substantially from
the original bill. The Federal Activities Inventory Reform Act of 1998 (FAIR; P.L.
105-270)312 requires agencies to compile and submit lists of their commercial
activities to OMB, but does not require them to conduct cost comparison studies.
Major Provisions
This statute requires the compilation of lists of commercial activities performed
by executive agencies, establishes an appeals process, and defines what is an
inherently governmental function. FAIR requires executive agencies to compile an
inventory of commercial activities and submit the list to OMB annually. After OMB
review and consultation, the agency head sends a copy of the list to Congress and
makes the list available to the public. Interested parties, such as a contractor or


307 The circular is available at [http://www.whitehouse.gov/omb/circulars/a076/a76_ incl_
tech_correction.pdf], visited Dec. 4, 2003.
308 U.S. Office of Management and Budget, Circular A-76 (Revised), May 29, 2003, p. D-2.
309 U.S. Congress, Senate Committee on Governmental Affairs, Federal Activities Inventory
Reform Act of 1998, report to accompany S. 314, 105th Cong., 2nd sess., S.Rept. 105-269
(Washington: GPO, 1998), pp. 5-6, 11.
310 In acknowledgment of the Administration’s emphasis on public-private competition, the
2003 revision to the circular restated the policy: “The longstanding policy of the federal
government has been to rely on the private sector for needed commercial services. To
ensure that the American people receive maximum value for their tax dollars, commercial
activities should be subject to the forces of competition” (U.S. Office of Management and
Budget, Circular No. A-76 (Revised), p. 1).
311 This version of S. 314, and all other versions, are available at the Legislative Information
System website, [http://www.congress.gov], visited Dec. 18, 2003.
312 112 Stat. 2382, 31 U.S.C. § 501 note.

federal employee labor union, may appeal the omission or inclusion of certain
activities. If appeals or challenges occur, they are handled by the agency. In lieu of
defining commercial activity, the legislation defines inherently governmental
function(s). An inherently governmental function is one “that is so intimately related
to the public interest as to require performance by Federal Government employees.”
Because this definition is included in the FAIR Act, an inherently governmental
function now is statutorily defined.313
Discussion
Agencies first compiled FAIR inventories and submitted them to OMB in 1999.314
Agencies identified approximately 850,000 full-time equivalents (FTEs) as
commercial on the 2000 inventories. Figures have changed only slightly since then.
Competitive sourcing is a component of the President’s Management Agenda
(PMA), and OMB has led the effort to promote competitive sourcing among federal
agencies. The agency released a revision to Circular No. A-76 in May 2003 and has
issued guidance on inventories and related competitive sourcing activities. The
definition of inherently governmental included in the circular differs from the
definition found in FAIR. It is unclear whether the differences possibly could lead
to different results when agencies classify activities as inherently governmental.
Since 2001, OMB has required agencies to submit inventories of their inherently
governmental activities. The 2003 revision of Circular No. A-76 permits interested
parties to challenge the classification of an activity as inherently governmental and
the application of reason codes to commercial activities.315 Neither type of inventory
challenge is included in FAIR.
Beginning in 2001, OMB issued competitive sourcing targets for agencies. For
example, agencies were required to compete 5% of their commercial activities by the316
end of FY2002. However, in July 2003, OMB abandoned government-wide
targets in favor of goals tailored to each agency.317


313 Beginning with the 2003 revision of the circular, Circular No. A-76 includes criteria for
an inherently governmental function (U.S. Office of Management and Budget, Circular No.
A-76 (Revised), pp. A-2-A-3).
314 A full-time equivalent represents the “staffing of Federal civilian employee positions,
expressed in terms of annual productive work hours (1,776) rather than annual available
hours that includes non-productive hours (2,080 hours)” (U.S. Office of Management and
Budget, Circular No. A-76 (Revised), p. D-5).
315 Reason codes apply only to commercial activities. Each function listed in a FAIR
inventory is assigned a reason code, which indicates whether the function is eligible for
public-private competition. OMB’s 2003 inventory guidance is available at
[http://www.whitehouse.gov/omb/memoranda/m03-09.html], visited Dec. 16, 2003.
316 U.S. Office of Management and Budget, “Performance Goals and Management Initiatives
for the FY2002 Budget,” Memorandum M-01-15, Mar. 9, 2001, p. 1, available at
[http://www.whitehouse.gov/omb/memoranda/2001.html], visited Dec. 15, 2003.
317 U.S. Office of Management and Budget, Competitive Sourcing: Conducting Public-
Private Competition in a Reasoned and Responsible Manner, July 2003, available at
(continued...)

Selected Source Reading
CRS Report RL32017. Circular A-76 Revision 2003: Selected Issues, by L. Elaine
Halchin.
CRS Report RL31024. The Federal Activities Inventory Reform Act and Circular
A-76, by L. Elaine Halchin.
CRS Report RL32079. Federal Contracting of Commercial Activities: Competitive
Sourcing Targets, by L. Elaine Halchin.
U.S. Congress. House. Committee on Government Reform. Subcommittee on
Government Management, Information, and Technology. The Implementationthnd
of the Federal Activities Inventory Reform Act. Hearing. 106 Congress, 2
session, October 28, 1999. Washington: GPO, 2000.
U.S. Congress. Senate. Committee on Governmental Affairs. Federal Activitiesthnd
Inventory Reform Act of 1998. Report to accompany S. 314. 105 Congress, 2
session. S.Rept. 105-269. Washington: GPO, 1998.
U.S. General Accounting Office. Competitive Contracting: Agencies Upheld Few
Challenges and Appeals under the FAIR Act. GAO/GGD/NSIAD-00-244.
September 2000.
U.S. General Accounting Office. Competitive Contracting: The Understandability
of FAIR Act Inventories Was Limited. GAO/GGD-00-68. April 2000.
U.S. Office of Management and Budget. The Federal Activities Inventory Reform
Act (FAIR), P.L. 105-270. Available at [http://www.whitehouse.gov/omb/
procurement/fair-index.html], visited December 16, 2003. (This website
includes resources and guidance involving FAIR, and information on where to
find agency inventories.)
L. Elaine Halchin


317 (...continued)
[http://www.whitehouse.gov/omb/procurement/comp_sourcing_072403.pdf], visited Dec.

15, 2003.



D. Services Acquisition Reform Act (SARA) of 2003
Statutory Intent and History
The Services Acquisition Reform Act of 2003 (SARA),318 enacted as Title XIV
of the National Defense Authorization Act for Fiscal Year 2004, joins two other
major pieces of legislation enacted within the past 20 years aimed at reforming the
federal government’s procurement policies and processes — the Competition in
Contracting Act of 1984 and the Federal Acquisition Streamlining Act of 1994 —
which are discussed in this compendium.
Major Provisions
SARA focuses on the federal government’s acquisition workforce; the use of
business acquisition practices by the federal government; the procurement of
commercial items; measures related to the American occupation of Iraq; and
preparing for, or responding to, terrorist attacks.
A provision in SARA directs the Administrator of General Services to establish,
and manage through the Federal Acquisition Institute, an acquisition workforce
training fund. Five percent of the fees collected by federal agencies under certain
contracts (e.g., government-wide contracts for the acquisition of information
technology, popularly known as “GWACs”) is to be credited to the training fund.
Among the business management practices instituted by SARA are the
requirement for agency heads to appoint or designate chief acquisition officers
(CAOs) and the creation of a chief acquisition officers council. This step follows the
establishment of agency-level chief financial officers by the Chief Financial Officers
Act of 1990,319 and agency-level chief information officers by the Information
Technology Reform Act of 1996 (National Defense Authorization Act for Fiscal
Year 1996).320 Other major provisions require the administrator of the Office of
Federal Procurement Policy (OFPP), an official in the office of Management and
Budget, to establish an advisory panel to review all acquisition laws and regulations,
which is to report, no later than one year after its creation, on findings, conclusions,
and recommendations; extend the authority for franchise funds from October 1, 2003,
to December 31, 2004; and authorize telecommuting for employees of federal
contractors.
With regard to the acquisition of commercial items, a provision in SARA
permits federal agencies to treat the procurement of services under a performance-
based contract as a procurement of commercial items. Certain conditions apply; for
example, the value of the contract cannot exceed $25 million. This provision also


318 117 Stat. 1663; P.L. 108-136; H.R. 1588. The initial version of the Services Acquisition
Reform Act in the 108th Congress was a separate piece of legislation, H.R. 1837.
319 31 U.S.C. §§ 901-903; P.L. 101-576, §§ 205-207; 104 Stat. 2838.
320 40 U.S.C. § 1425; P.L. 104-106, Div. E, § 5125; 110 Stat. 186, at 679. This law was later
renamed the Clinger-Cohen Act of 1996 by P.L. 104-208 (110 Stat. 3009-393).

allows agencies to use, under certain conditions, a time-and-materials contract or a
labor-hour contract for the purchase of commercial services.
The final portion of SARA responds to circumstances in the aftermath of the
September 11, 2001, terrorist attacks. The heads of civilian agencies may exercise
the same authority, under the same conditions and limitations, that the Secretary of
Defense has to enter into certain transactions (popularly referred to as “other
transactions” because they do not involve, for example, contracts or grants) for
research and development projects.321 In civilian agencies, eligible projects are those
related to helping defend against, or recover from, biological, nuclear, chemical, or
radiological attack. Congressional interest in the use of other than full and open
competition procedures by federal agencies awarding contracts for the reconstruction
of Iraq led to a disclosure provision on these contracts. Information about
noncompetitive contracts must be published in the Federal Register. For
procurements in support of a contingency operation, or used to facilitate preparation
for, or recovery from, nuclear, biological, chemical, radiological attack, the
simplified acquisition threshold was increased; the threshold for simplified
acquisition procedures was increased; and agencies may treat such items or services
as commercial items.
Discussion
This statute represents an effort to continue streamlining federal procurement
processes. As such, it is consistent with efforts over the past 20 years to enhance the
efficiency of procurement activities while giving agency personnel greater flexibility
in making procurements. However, some parties are concerned that greater
flexibility could lead to problems. It is too early to tell how agency personnel will
use procurement flexibilities, whether these statutory changes will enhance
procurement of goods and services, and whether unintended consequences will occur.
Selected Source Reading
U.S. Congress. House. Committee on Government Reform. Better Training,
Efficiency and Accountability: Services Acquisition Reform for the 21st Century.
Hearing on H.R. 1837. 108th Congress, 1st session, April 30, 2003. Washington:
GPO, 2003.
U.S. Office of Management and Budget. Office of Federal Procurement Policy.
Emergency Procurement Flexibilities, A Framework for Responsive
Contracting and Guidelines for Using Simplified Acquisition Procedures, May

2003. Available at [http://www.whitehouse.gov/omb/procurement/emergency_


procurement_flexibilities.pdf], visited December 16, 2003.
L. Elaine Halchin


321 Authority for the Secretary of Defense to enter into other transactions is found in Sec.
845 of the National Defense Authorization Act for Fiscal Year 1994 (P.L. 103-160; 10
U.S.C. § 2371 note).

E. Competition in Contracting Act
Statutory Intent and History
The last full-scale statutory changes made to the competitive contracting
procedures concerning federal procurement occurred in 1984. The Competition in
Contracting Act of 1984 (CICA or the Competition Act; 98 Stat. 1175; 41 U.S.C. §

251 et seq.), enacted as Title VII of the Deficit Reduction Act of 1984 (98 Stat. 494),


made broad changes in the two major procurement statutes that had served as basic
authority for federal government purchases of supplies and services since the late
1940s. Specifically, CICA changed the Federal Property and Administrative Services
Act (40 U.S.C. § 475 et seq.), the major civilian agency procurement statute, and the
Armed Services Procurement Act (10 U.S.C.§ 2301 et seq.), the major military
procurement statute. Additional statutory provisions to increase competition were
included in the Small Business and Federal Procurement Competition Enhancement
Act of 1984 (41 U.S.C. § 251 note), which is applicable to civilian agencies, and the
Defense Procurement Reform Act of 1984 (98 Stat. 2588), which is applicable to the
Defense Department.
Major Provisions
Before CICA, the procedures involving federal contracting were based on
“formal advertising” or “competitive negotiation.” After passage of CICA,
competitive procedures became defined as “procedures under which an executive
agency enters into a contract pursuant to full and open competition.”322 The Office
of Federal Procurement Policy Act states that “full and open competition means that
all responsible sources are permitted to submit sealed bids or competitive
proposals.”323 The two most important competitive procedures set forth in CICA are
sealed bids, corresponding to the former competitive procedure of formal advertising,
and competitive proposals,324 corresponding to the former competitive procedure of
negotiation. CICA also states that “competitive procedures means procedures under
which an executive agency enters into a contract pursuant to full and open
competition” and defines what the term includes.325
When selecting a competitive procedure, the major question concerns whether
to use sealed bids or competitive proposals. Before CICA, all contracts over $10,000
required formal advertising unless one of the exemptions allowed negotiation and
advertising was not feasible and practicable. Under CICA, however, an executive
agency which is conducting a procurement for property or services is required to “use


322 41 U.S.C. § 259(b) and 10 U.S.C. § 2302(2).
323 41 U.S.C. § 403(6).
324 41 U.S.C. § 253(a)(2)(B) and 10 U.S.C. § 2304(a)(2)(B).
325 41 U.S.C. § 259(b) and 10 U.S.C. § 2302(2).

the competitive procedure or combination of competitive procedures that is best
suited under the circumstances of the procurement.”326
“Procedures other than competitive,” known as “sole-source” or “limited
competition,” depending upon the circumstances, may be used only if meeting one
of the enumerated seven exceptions. These exceptions are as follow: (1) when “the
property or services needed by the executive agency are available from only one
responsible source and no other type of property or services will satisfy the needs of
the executive agency”; (2) when “the executive agency’s need for the property or
services is of such an unusual and compelling urgency that the government would be
seriously injured unless the executive agency is permitted to limit the number of
sources from which it solicits bids or proposals”; (3) when “it is necessary to award
the contract to a particular source or sources in order (A) to maintain a facility,
producer, manufacturer, or other supplier available for furnishing property or services
in case of a national emergency or to achieve industrial mobilization, or (B) to
establish or maintain an essential engineering, research, or development capability
to be provided by an educational or other nonprofit institution or a federally funded
research and development center”; (4) when “the terms of an international agreement
or treaty between the United States Government and a foreign government or
international organization, or the written directions of a foreign government
reimbursing the executive agency for the cost of the procurement of the property or
services for such government have the effect of requiring the use of procedures other
than competitive procedures”;327 (5) when “a statute expressly authorizes or requires
that the procurement be made through another executive agency or from a specified
source, or the agency’s need is for a brand-name commercial item for authorized
resale”; (6) when “the disclosure of the executive agency’s needs would compromise
the national security unless the agency is permitted to limit the number of sources
from which it solicits bids or proposals”; and (7) when “the head of the executive
agency — (A) determines that it is necessary in the public interest to use procedures
other than competitive procedures in the particular procurement concerned, and (B)
notifies the Congress in writing of such determination not less than 30 days before
the award of the contract.”
Discussion
Since passage of the Competition in Contracting Act, Congress has continued
to examine the procurement process. Perhaps the most significant changes since328
1984 occurred in the Federal Acquisition Reform Act of 1996. Although the
provisions are not a full-scale revamping of the procurement requirements, the
changes are significant. The general effect of the act is to eliminate or to simplify
certain of the contracting procedures. It is likely that Congress will continue to
examine whether additional changes to the procurement laws are warranted.


326 41 U.S.C. § 253(a)(1)(B) and 10 U.S.C. § 2304(a)(1)(B). All remaining quotations are
from 41 U.S.C. § 235 et seq. and 10 U.S.C. § 2304 et seq.).
327 41 U.S.C. § 253(c)(4) and 10 U.S.C. § 2304(c)(4).
328 Division D of the 1996 Defense Authorization Act, P.L. 104-106 (110 Stat. 642).

Selected Source Reading
U.S. Congress. House. Conference Report No. 104-450. 104th Congress, 2nd session.
Washington: GPO, 1996.
——. House. Conference Report No. 98-861. 98th Congress, 2nd session.
Washington: GPO, 1996.
——. House. Committee on Ways and Means. Report No. 98-432. 98th Congress,nd

2 session. Washington: GPO, 1983 and 1984.


Michael Seitzinger



F. Federal Contract Labor Standards Statutes
Statutory Intent and History
Through the early decades of the 20th century, federal procurement law required
the government to accept the lowest responsible bid for federal contract work. Since
contracts normally specified the type, style, and quality of the construction or goods
to be purchased, economies were often achieved through reduced labor costs as firms
engaged in competitive bidding. The result, many policymakers believed, was a
system that undercut the local market to the disadvantage of contractors and workers
alike. It was argued that the system also disadvantaged the government. Low-wage
workers often lacked first-rate skills and allegedly produced substandard work which
resulted in increased cost to the taxpayer over the long term. And, it made
government, at least indirectly, a party to adverse (and often sweatshop) working
conditions.
After several tentative proposals during the late 1920s, Congress adopted the
Davis-Bacon Act (40 U.S.C. §§ 3141-3148) in 1931. Enacted at the urging of the
Hoover Administration, in part as an effort to bring stability to the construction
industry and to cope with the collapsing national economy, the act required that
persons employed on federal contract work must be paid not less than the locally
prevailing wage for comparable work in the locality of the project. In 1935, the
scope of the act was broadened to include both public buildings and public works,
together with painting and decorating. In 1964, Congress expanded the concept of
prevailing wage to include the value of fringe benefits (other than those mandated by
law) paid to workers employed in comparable work in the locality. Through the
years, Davis-Bacon provisions have been added to more than 50 federal program
statutes.
In 1936, following roughly the pattern set by the Davis-Bacon Act, Congress
adopted the Walsh-Healey Act (41 U.S.C. §§ 35-45), which set basic standards with
respect to goods produced under contract for the federal government. Nearly three
decades later, in 1965, Congress adopted the McNamara-O’Hara (Service Contract)
Act (41 U.S.C. §§ 351-358), similarly setting basic labor standards for services
provided, under contract, to the federal government. These three primary federal
contract labor standards statutes are supplemented, inter alia, by the Fair Labor
Standards Act of 1938 (FLSA, 29 U.S.C. §§ 201-219), the Contract Work Hours and
Safety Standards Act of 1969 (40 U.S.C. §§ 327-333), and the Occupational Safety
and Health Act of 1970 (29 U.S.C. §§ 651-678), among others.
Major Provisions
The three statutes deal only with federal contract procurement: respectively,
construction (Davis-Bacon), goods (Walsh-Healey), and services (McNamara-
O’Hara). Although similar in purpose, they differ in certain details. For Davis-
Bacon, the coverage threshold is $2,000; for Walsh-Healey, $10,000; and for
McNamara-O’Hara, $2,500. For Davis-Bacon and McNamara-O’Hara, the basic
wage rate is that prevailing for the same type of work in the locality. For Walsh-
Healey, the wage floor is, in practice, the minimum wage under the FLSA. Work
under each of the contract labor standards statutes is subject to the overtime pay



requirements of the FLSA (or reflects a comparable standard): that is, 1½ times a
worker’s regular rate of pay for hours worked in excess of 40 per week. Child labor
is restricted under Walsh-Healey — but also restricted in many forms under the more
comprehensive FLSA. Through not addressed in Davis-Bacon, industrial homework
is restricted under Walsh-Healey, McNamara-O’Hara and the FLSA — as is convict
labor under Walsh-Healey. For Davis-Bacon and McNamara-O’Hara, wage rate
calculations are locality based. For Walsh-Healey, in practice, they are the same
national rates as those of the FLSA.
Discussion
Of the contract labor standards statutes, the Davis-Bacon Act has been the most
visible — and the most controversial. Some view the act as a vital protection for
contractors, workers and the public alike — as important now as when it was
originally enacted. They assert that the act ensures fairness and equity for workers,
that it encourages higher standards in construction, saving the government money in
the long run, and that it encourages the training of construction industry professionals
through recognized apprenticeship programs. Others argue that the act inflates the
cost of public construction, that it is difficult and cumbersome to enforce and perhaps
impossible equitably to enforce, and that its complexity works to the disadvantage
of small contractors. The Davis-Bacon literature appears to be inconclusive with
respect to the act’s impact.
Concerning the McNamara-O’Hara Act, proponents hold that it protects workers
from what would otherwise be a cycle of wage/benefit reductions as one service
provider after another sought government contracts based upon the lowest possible
labor costs. It also provides stability for industry and for government (as a
consumer), it is argued, preventing a revolving movement of contractors as an award
is made first to a low bidder and then to a still lower bidder — each competing upon
the basis of ever lower wages and, often, with nonunion labor. Conversely, critics
argue that the market, unrestrained, would produce a less expensive service bill for
government. The statute is, they argue, difficult to administer, cumbersome, and
needlessly inflates wages above market levels. The Walsh-Healey Act, perhaps
because its standards are largely the same as those of the national FLSA, has been,
at least through recent decades, less subject to controversy.
Historically, each of these statutes was adopted as a means of dealing with
specific abuses that had arisen in the workplace and in federal procurement. There
is nothing to suggest, some argue, that these abuses would not reappear were the
statutes substantially modified or repealed. Conversely, others question whether, at
a minimum, some consolidation of the federal contract labor standards statutes and
the more general FLSA might not be appropriate.
Selected Source Reading
CRS Report RL32086. Federal Contract Labor Standards Statutes: An Overview,
by William G. Whittaker.
CRS Report 94-408. The Davis-Bacon Act: Institutional Evolution and Public
Policy, by William G. Whittaker.



CRS Report 94-908. Davis-Bacon: The Act and the Literature, by William G.
Whittaker.
William Whittaker



G. Prompt Payment Act
Statutory Intent and History
The Prompt Payment Act (PPA) was originally enacted in 1982 (96 Stat. 85; 31
U.S.C. § 3901) in response to what was perceived as a pervasive problem of federal329
agencies not paying their bills on time. While this act did lead to improvement in
the timeliness of government bill paying, the 100th Congress saw the need for
amendment, revision, and general tightening up of the PPA to bring about more
uniform compliance with its purposes. Congress responded by enacting the PPA
amendments of 1988 (102 Stat. 2455). The basic structure of the PPA is relatively
simple and straightforward. If a bill is not paid on time, interest must be paid on the
delinquency. The funds for the interest must come from funds already appropriated
for the program which has incurred the interest.
Major Provisions
The PPA applies to all types of federal contracts, including leases (31 U.S.C. §
3901(a)(6)) for the procurement of property or services by agencies covered by the
act (OMB Circular No. A-125, § 2(a); see also: 48 C.F.R. § 32.901). Agency is
defined to include each authority of the government of the United States, whether or
not it is within or subject to review by another agency, but it does not include
Congress, the United States courts, governments of territories or possessions, the
government of the District of Columbia, courts martial, military commissions, and
military authority exercised in the field in time of war or in occupied territory (31
U.S.C. § 3901(a)(1) which incorporates by reference 5 U.S.C. § 551(1)). Agency also
includes any entity that is operated exclusively as an instrumentality of such an
agency for the purpose of administering one or more programs of that agency, and
that is so identified for this purpose by the head of such agency (OMB Cir. A-125,
§ 1(b)). The PPA specifically applies to the Tennessee Valley Authority and the
United States Postal Service.330
The head of an agency acquiring property or service from a business concern,
who does not pay the concern for such complete delivered item of property or service
by the required payment date, shall pay an interest penalty to the concern on the
amount of the payment due. The interest rate to be used is the interest rate
established by the Secretary of the Treasury under the Contracts Disputes Act (41
U.S.C. § 611), which is in effect when the obligation to pay PPA interest arises (31
U.S.C. § 3902(d)). The temporary unavailability of funds to make timely payment
does not relieve the agency of the obligation to pay such penalty (31 U.S.C. §

3902(d)). The PPA interest penalty is to be paid automatically, whether or not it has


329 U.S. Congress, House, H.Rept. 97-461, 97th Cong., 2nd sess. (Washington: GPO, 1982).
See also U.S. General Accounting Office, “The Federal Government’s Bill Paying
Performance Is Good but Should Be Better,” FGMSD-78-16, 1978, in which GAO found
that 30% of the federal government’s bills, covering 18% of the dollar total, were paid late.
330 31 U.S.C. § 3901(b) and (c). The United States Postal Service was not included under the
1982 PPA. Coverage was added by the 1988 amendment, P.L. 100-496, § 2(c)(1), and is
applicable to all obligations incurred on or after Jan. 1, 1989.

been requested by the contractor. Failure to pay such interest may result in an
additional penalty. This additional penalty is equal to 100% of the original penalty
and is limited to $5,000, but cannot be less than $25. These limitations apply to each
invoice (OMB Circular No. A-125, § 8(b) and (c)). In the case of construction
contracts, the regulations shall provide for the payment of interest on late progress
payments and retainages (31 U.S.C. § 3903(a)(6)(A)).331 The regulations are also
required to include provision for prompt review of invoices submitted to agencies.
Agencies are to have seven days to return invoices found to be not proper.332
Every construction contract awarded by an agency must include a clause which
requires the contractor to include two clauses, a payment clause and an interest
penalty clause, in each of its subcontracts. The payment clause must specify that the
prime contractor is obligated to pay the subcontractor for satisfactory performance
under its subcontract out of payments received from the agency, within seven days
of such receipt. The interest penalty clause is to require that the contractor will pay
an interest penalty, computed at the same rate as applied to the government under the
PPA, to the subcontractor if the seven day deadline is not met (31 U.S.C. § 3905(b)).
These protections are extended to all tiers of subcontractors by requiring the prime
contractor to require all subcontractors to include these same two clauses in their sub-
subcontracts (31 U.S.C. § 3905(c)). A contractor’s obligation to pay an interest
penalty to a subcontractor under any of these required clauses may not be passed
along to the federal government by any means, including contract modifications or
cost reimbursement claims (31 U.S.C. § 3905(k)).
Discussion
The PPA greatly reduced the problem of federal agencies not paying their bills
in a timely fashion. While the problem has not been entirely eradicated, the PPA has
not generally been the subject of proposed legislation since its amendment in 1988.
Selected Source Reading
Donnaly, Robert A. and Mark W. Stone. “The Prompt Payment Act in 1987:
Collecting from Uncle Sam.” National Contract Management Journal, vol. 21
(1987), pp. 45-55.
Renner, Michael J. “Prompt Payment Act: An Interesting Remedy for Government
Late Payment.” Public Contract Law Journal, vol. 21 (1992), pp. 177-278.
John R. Luckey


331 A period longer than 14 days may be included in the solicitation only if required to afford
the agency a practicable opportunity to inspect the work adequately and to determine the
adequacy of the contractor’s performance under the contract (see A-125, § 10(a)(1)).
332 The limit is shorter for meat and meat product contracts (three days), and for perishable
agricultural commodities (dairy products, edible fats or oils, and food products prepared
from edible fats or oils, five days) (A-125, § 7(a)(7)).

VI. Intergovernmental Relations Management
A. Intergovernmental Cooperation Act
Statutory Intent and History
Congress approved the Intergovernmental Cooperation Act of 1968 (ICA)333 to
improve administrative relationships among federal, state, and local governments,
particularly with regard to the grant-in-aid system. The legislation, as enacted, was
a composite of government reform proposals that had been considered over a number
of years. Recommendations from a variety of organizations, including the
Kestnbaum Commission of 1955, the Advisory Commission on Intergovernmental
Relations (ACIR),334 as well as public interest groups representative of state and local
governments, were incorporated in the legislation.
Proponents argued for the legislation out of concern with the duplication of
effort and lack of coordination in the federal domestic assistance system, in part335
because of the rapid expansion of categorical grant-in-aid programs in the 1960s.
While few, if any, spoke against the intent of the legislation, some debate occurred
over the proposed inclusion of a uniform relocation assistance provision in the
legislation (the language was ultimately deleted from the bill) and the proposed336
“sunset” language (also ultimately not included).
Major Provisions
As originally enacted, the Intergovernmental Cooperation Act consisted of six
titles. Title I set out definitions. Title II established administrative requirements for
grants-in-aid, and Title III authorized federal agency heads to provide technical
assistance to state or local governments. Title IV required that the President issue
program regulations to help state and local governments attain urban and rural
community development objectives regarding land use, transportation systems,
environmental protection, and other related areas. Also, Title IV required that federal
aid be consistent “to the maximum extent possible” with non-federal comprehensive
planning, and that units of general local government be favored to received federal


333 P.L. 90-577, 82 Stat. 1098, et seq.
334 The Advisory Commission on Intergovernmental Relations (ACIR) was established by
Congress in 1959 (5 U.S.C. § 2372) for continuing study of the American federal system.
The commission ceased operations when Congress no longer appropriated funds after
FY1996.
335 Categorical grants provide aid for specified activities and generally require adherence to
rigorous guidelines and regulations.
336 Sunset provisions specify that program authority must terminate by a date certain.
Advocates of sunset provisions argued that the inclusion of such language in legislation
would ensure that committees of jurisdiction would conduct oversight hearings on programs
and evaluate their usefulness on a regular basis. Instead of sunset language, Congress
required quadrennial review by committees of jurisdiction of program administration and
implementation.

aid over special purpose governments. Title V amended the Federal Property and
Administrative Services Act337 to ensure that federal acquisition, use, or disposal of
land in urban areas did not conflict with local zoning, land use, and planning
practices. Finally, Title VI required that congressional committees with jurisdiction
evaluate programs not scheduled to terminate every four years. Also, Title VI
required that the Comptroller General and the ACIR conduct studies of grant-in-aid
programs.
The ICA has been amended several times, most notably in 1982, when it was
recodified.338 In its current form, the act sets out definitions339 and enables state
officials to obtain information on the purpose and amount of grants received in the
states.340 Concerning fund transfers and associated requirements, the act requires that
federal officials make funds available to the states in an expedited fashion;
establishes requirements concerning interest payments received on deposited federal
funds; and requires state officials to make reports on the funds.341 Provisions have
been retained from the original statute that authorize federal agency heads to waive
statutory requirements concerning designation of a single state contact342 and to make
specialized or technical services available to state and local governments.343 Also,
the provisions of Title IV that require coordination between federal expenditures and
state and local community development objectives remain in force,344 as do those
concerning quadrennial congressional committee review.345
Discussion
Intergovernmental relations have undergone considerable change in recent years.
Some of these changes resulted from actions required by the ICA. For example, the
authority of federal agency heads to waive federal requirements concerning a single
state contact, at the request of state officials, first appeared in the ICA. In recent
years, such waivers have been used in a number of policy areas to improve
intergovernmental relations as well as the administration of federal grant-in-aid
funding. Another significant effect of the ICA was the assignment of increased
responsibilities to the Office of Management and Budget (OMB). Implementation


337 63 Stat. 377; 40 U.S.C. § 475 et seq.
338 In 1982, the ICA was technically repealed, reenacted, and recodified at 31 U.S.C. § 6501
et seq. (see P.L. 97-258, 96 Stat. 1005-1010). Previously, it had been codified at 42 U.S.C.
§ 4201-4243.
339 31 U.S.C. § 6501.
340 31 U.S.C. § 6502.
341 31 U.S.C. § 6503.
342 31 U.S.C. § 6504.
343 31 U.S.C. § 6505.
344 31 U.S.C. § 6506. E.O. 12372, signed by President Reagan July 14, 1982, and amended
by E.O. 12416 on April 8, 1983, allowed states to design their own procedures for reviewing
federal financial assistance and directing federal development.
345 31 U.S.C. § 6507.

of the ICA was included in OMB’s Federal Assistance Review efforts during the
Nixon Administration.
During the Reagan Administration, officials sought to modify past patterns of
federal involvement in domestic assistance programs. Although provisions of the
ICA were modified, the act was not repealed. At present, though most provisions of
the 1968 act remain in effect, they are largely dormant.
Selected Source Reading
U.S. Congress. Senate. Committee on Governmental Affairs. Office of Managementth
and Budget: Evolving Roles and Future Issues. Committee print. 99
Congress, 2nd session. Washington: GPO, 1986, pp. 335-358.
Keith Bea



B. Intergovernmental Personnel Act of 1970
Statutory Intent and History
The Intergovernmental Personnel Act of 1970 (IPA)346 authorized programs to
improve state and local government personnel management operations and
procedures. Congress approved the IPA at the urging of federal managers, Members
of Congress, and others who voiced concern over a perceived need to strengthen the
core management capabilities of state and local general purpose governments. In the
late 1960s, when Congress first debated the legislation, federal agencies were
expanding to meet new federal policy objectives, and agency heads were competing
with state and local governments to attract employees at upper management levels.
Congress viewed enactment of the IPA has a means of improving the pool of public
management candidates in the nation.
Two types of management needs figured in the enactment of the IPA:347
Policy Management — identification of needs, analysis of options, and
selection of programs throughout non-federal units of government.
Resource Management — establishment of basic administrative support
systems such as budgeting, financial management, procurement and
supply, and personnel administration.
Major Provisions
The congressional declaration of findings and policy in the act notes that the
effective management of federal funds by state and local governments is in the
national interest. The IPA identified state and local manpower issues that required
attention and additional resources. The issues include the interchange and retention
of government employees, training, quality of public service, merit system
requirements, and personnel management. Sponsors of the act sought to address
these issues by authorizing the following types of assistance:
!grants-in-aid to help states and localities meet the costs of
strengthening such personnel management activities as recruitment,
selection, pay administration, training and employee development,
and labor-management relations;
!invitations to state and local government employees to participate in
federal training courses;
!technical assistance in personnel management on a reimbursable,
non-reimbursable, or partly reimbursable basis;


346 P.L. 91-648, 84 Stat. 1909, et seq.
347 U.S. Executive Office of the President, Strengthening Public Management in the
Intergovernmental System (Washington: GPO, 1975), p. vii.

!cooperative recruiting efforts;
!temporary exchange of personnel between different levels of
governments and institutions of higher education (the “mobility
program”); and
!transfer of responsibility for prescribing and maintaining merit
system standards required under various federal assistance programs
to a single agency.
The mobility program and the merit systems administration program were
amended by Section 602 of the Civil Service Reform Act of 1978 (92 Stat. 1188-
1189). In 1996, the 104th Congress approved technical amendments to the provision
authorizing reimbursement for employees and families in transit (110 Stat. 2758).
Since 1996, Congress has taken no further action on the IPA.
Discussion
The statutory authority for IPA remains on the books. Most of the IPA
programs, however, have not been implemented for years. Funding for the grant
program ended in FY1981. Currently, the only IPA program in existence is the348
Intergovernmental Mobility Program, discussed below.
Congressional approval of the IPA was based on three assumptions: effective
state and local governments are essential in the federal system of governance; a
national interest in state and local management practices exists, since federal funds
are involved; and public service at all levels of governance can be improved through349
better personnel administration. These assumptions remained unchallenged until
1981, when the Reagan Administration proposed termination of the grant program
and all the act’s other provisions, except for its merit system principles, declarations
of policy concerning public service, and provisions on interstate compacts.350 To
support this proposal, the Administration contended that the IPA had achieved its
objectives as a demonstration program and could be eliminated. The proposed
abolition of much of the IPA statutory authority paralleled other Reagan
Administration efforts to reduce federal involvement in “what should be primarily351
a state and local government responsibility.”
The administration proposal came at a time when many domestic assistance
programs were being cut or eliminated. General management assistance usually does


348 The mobility program is codified at 5 U.S.C. §§ 3371-3376.
349 U.S. Advisory Council on Intergovernmental Personnel Policy, More Effective Public
Service (Washington: GPO, 1973), p. 1.
350 U.S.Congress, Senate Committee on Governmental Affairs, Amending the
Intergovernmental Personnel Act of 1970, hearings, 97th Cong., 1st sess. (Washington: GPO,

1981), p. 136.


351 Donald J. Devine, Letter Transmitting Legislation to Abolish the Intergovernmental
Personnel Act, Congressional Record, daily edition, vol. 127, Apr. 29, 1981, p. S 4141.

not have a large or effective constituency, and federal programs with such a focus
were largely repealed or allowed to lapse during this period. In FY1981, the IPA
grant assistance program was terminated.352 In November 1981, the Office of
Intergovernmental Personnel Programs in OPM, which had administered the
programs, was abolished. The merit system provisions, which had been administered
by this office, no longer received budgetary support from OPM, thus bringing the
IPA grant assistance program to an end.
As noted above, the Intergovernmental Mobility Program is the only statutory
provision that continues to be implemented, largely to facilitate temporary details of
scientific and technical staff. The program allows federal, state, and local
government employees to be voluntarily assigned to a public agency or to an
organization oriented toward public service for no more than two years. Federal
employees may be assigned to state, local, or tribal agencies, public or private
institutions of higher education, or nonprofit or professional government
associations. The reverse holds as well: employees of these entities may volunteer
to be temporarily assigned to federal agencies. Through such assignments, scarce or
technical expertise may be shared; program operational experience may be gained,
or the management of federal grant programs improved. Assignments generally
cannot exceed two years, although extensions might be approved. Assignment costs,
including the salary of the employee, may be shared by the agencies or borne entirely
by one entity, subject to agreement between the organizations. Since 1981, the IPA
authority and the mobility program have been given little attention or publicity.
Selected Source Reading
U.S. Congress. House Committee on Post Office and Civil Service. Subcommittee
on Human Resources. Intergovernmental Personnel Act Mobility Program.
Hearings. 101st Congress, 1st session. Washington: GPO, 1989.
U.S. General Accounting Office. An Evaluation of the Intergovernmental Personnel
Act of 1970. FPCD-80-11. December 19, 1979.
——. Intergovernmental Personnel Act of 1970: Intergovernmental Purpose no
Longer Emphasized. GAO/GGD-89 — 95. June 19, 1989.
Keith Bea


352 U.S. Office of Management and Budget, Budget of the United States Government, Fiscal
Year 1983 (Washington: GPO, 1982), p. I-V127.

C. Unfunded Mandates Reform Act of 1995
Statutory Intent and History
After considerable debate and some legislative action in the 103rd Congress, the
Unfunded Mandates Reform Act (P.L. 104-4; 109 Stat. 48-71; 2 U.S.C. §§ 1501-th
1571) was enacted early in the 104 Congress. Generally, unfunded
intergovernmental mandates include responsibilities or duties that federal programs,
standards, or requirements impose on governments at other levels without providing
for the payment of the costs of carrying out these responsibilities or duties. The
intent of the mandate legislation was to limit the ability of the federal government to
impose costs on state and local governments through unfunded mandates.
Legislation to restrain unfunded mandates was proposed regularly from 1984thst
through 1990 (98-101 Congresses), but none of the proposals received action.
During the 102nd and 103rd Congresses (1991-1994), increased pressure developed
as state and local interest groups united in an effort to bring about mandate reform.
Although some of this effort was concentrated on specific laws considered to impose
mandates (e.g., safe drinking water, motorcycle helmet requirements, national
education standards), much attention focused on overall unfunded mandate reform
legislation. The Clinton Administration supported the concept of mandate reform,
though not necessarily the specifics of all reform legislation.
Thirty-four mandate reform bills were introduced in the 103rd Congress, and a
bipartisan compromise bill (S. 993/H.R. 5128) came close to floor action. Unfunded
mandate reform was a component of the House Republican “Contract with America”
in the 1994 election, and election of a Republican majority in both houses ensured
early action in the 104th Congress. Mandate reform legislation was introduced as S.
1 and H.R 5 on January 4, 1995, and the Unfunded Mandates Reform Act was signed
into law on March 22, 1995.
Major Provisions
The Unfunded Mandates Reform Act has three components: revised
congressional procedures regarding future mandates; new requirements for federal
agency regulatory actions; and authorization for a study of existing mandates to
evaluate their current usefulness. The primary objective was to create procedures
that would retard and spotlight, if not stop, congressional authorization of new
unfunded mandates on state and local governments.
Point of Order in Congress. The act amended Title IV of the
Congressional Budget and Impoundment Control Act of 1974 (P.L. 93-344; 88 Stat.
297-339), as amended, to require the Congressional Budget Office (CBO) to estimate
the costs to state, local, and tribal governments and the private sector of the unfunded
intergovernmental mandates established by each reported bill exceeding $58 million
(in calendar year 2002, the latest year available; the threshold is adjusted for
inflation). The act requires that the cost information be printed and available before
a vote is taken. If the information is not available, or if the bill does not provide that
all mandates it establishes will be funded, a point of order may be raised against
considering the bill. For this purpose, a mandate is considered unfunded unless the



bill establishes a mechanism to ensure that, if in any year funding is not provided, the
mandate will be reviewed or abolished. An affirmative vote by a majority of those
present is necessary to override the point of order.
These requirements do not apply to provisions that are a condition of federal
assistance or a duty arising from voluntary participation in a federal program (except
that certain large entitlement programs are subject to the special procedures). Other
provisions exempt from the requirements are:
!provisions affecting constitutional rights of individuals;
!statutory rights that prohibit discrimination;
!accounting and auditing requirements attached to federal assistance;
and
!emergency assistance, national security, and emergency legislation.
Federal Agency Regulations. The second component affects federal
agencies. The act requires agencies to develop a process through which state, local,
and tribal governments and the private sector can participate in the development of
regulations. In addition, agencies must identify the federal law that authorizes the
regulation; estimate the costs and benefits, including whether federal assistance is
available to pay the costs; and describe consultation with state, local, or tribal
officials. Finally, the agencies must establish plans to involve local governments in
the development of regulations affecting them, as well as pilot programs on local
government flexibility.
Study of Existing Mandates. While the first two components of the act
address proposed new mandates, the third relates to those that existed before its
enactment. The act required the Advisory Commission on Intergovernmental
Relations (ACIR) to study a number of things, including existing unfunded mandates.
ACIR was directed to make recommendations reflecting flexibility in compliance;
reconciling conflicting mandates; terminating duplicative, obsolete, or impractical
mandates; suspending certain mandates not vital to public health and safety;
consolidating and simplifying reporting and planning requirements; and establishing
common federal definitions and standards.
Discussion
Origins. The term unfunded federal mandates refers to a host of flaws in the
operation of the federal system perceived by some observers from the late 1970s into
the 1990s. It summarized the concerns of those who asserted that there was
excessive federal intrusion into state and local affairs, too much regulation, too many
direct orders, too little respect for the role of state and local governments, and too
little control by states and localities of their own affairs. Federal demands on state
and local resources were sometimes established as conditions of federal aid, but
increasingly took the form of direct requirements, although no federal funds were
made available to help carry out these directives. All of this came at a time when
federal funds to state and local governments were being cut back.



The Unfunded Mandates Reform Act represented a response to a coordinated
campaign by state and local officials and their supporters who had protested for years
against these perceived federal demands at a time when federal assistance was
diminishing. The exact magnitude of the costs to state and local governments of
complying with federal mandates is not clear. Various estimates were made during
debate on the legislation, ranging from a high of $500 billion to a low of $8.9 billion.
Use of Congressional Procedures. To some extent, the focus on
unfunded mandates diminished after the legislation was enacted. Many of the
individual grievances and criticisms that had fueled the mandate issue wereth
separately addressed by the 104 Congress, which enacted the Unfunded Mandates
Reform Act. Many Members of the new majorities had been elected with an agenda
paralleling that of the mandate opponents; consequently, a number of issues were
addressed directly and, in some cases, favorably. For example, the National Highway
System Designation Act of 1995 (P.L. 104-59; 109 Stat. 568-634) repealed several
items that regularly appeared on mandate reform agendas, including the national
speed limit, the requirement that motorcyclists wear helmets, and requirements that
crumb rubber be used in highway construction.
Since the point-of-order procedures took effect, the record on their usefulness
as an anti-mandate tool could be described as mixed. On the one hand, state and
local organizations used the process successfully to promote or secure changes in
telecommunications legislation mandates, but on the other, the new procedures were
not successful in preventing enactment of immigration legislation containing a
number of provisions described as unfunded mandates. From 1996 through 2003, 13
points of order under the Unfunded Mandates Reform Act were raised in the House,
and none in the Senate. The first time the procedure was invoked, the House voted
against considering a proposal to amend a bill to include an increase in the minimum
wage. Otherwise, the House has always voted to consider the measures against
which the points of order were raised, dealing with the minimum wage as well as
bankruptcy, nuclear waste, internet taxation, prescription drugs, and several welfare
issues.
Advisory Commission Report. In January 1996, ACIR released a
preliminary version of the report on federal mandates directed by the act. After
considerable opposition was expressed to these preliminary findings, a revised report
was presented to the commission for final action. This final version of the report
included recommendations for modifying each of 13 mandates studied in detail and
six recommendations common to all mandates. On July 23, 1996, a majority of the
ACIR rejected these revised recommendations on the grounds that they proposed too
great a reduction in the federal role. Congress terminated funding for the ACIR in
FY1996.
Private Sector Mandates. As attention to federal intergovernmental
mandates grew in the 1980s and 1990s, supporters of regulatory reform began to
assert a parallel between these mandates and federal laws regulating the private
sector, on grounds that such laws also impose enforceable duties that entail costs of
compliance. As a result, the Unfunded Mandates Reform Act includes a requirement
that CBO provide information on the costs of these private sector mandates in
proposed legislation, where the costs exceed $116 million (adjusted for inflation in



calendar year 2002). The act does not, however, extend the points of order against
consideration to private sector mandates. Subsequently, in both the 105th and 106th
Congresses, legislation to apply to private sector mandates procedural protections
similar to those now in effect for unfunded intergovernmental mandates passed the
House, but it received only committee consideration in the Senate. In some versions,
this Mandates Information Act would have established points of order against
consideration of all private sector mandates, whether funded or not, including taxes.
Selected Source Reading
Ray, Maracella Ridlen and Timothy J. Conlan. “At What Price: Costs of Federal
Mandates Since the 1980s.” State and Local Government Review, vol. 28
(winter 1996), pp. 7-16.
U.S. Advisory Commission on Intergovernmental Relations. The Role of Federal
Mandates in Intergovernmental Relations: A Preliminary ACIR Report for
Public Review and Comment. Washington: GPO, 1996.
U.S. Congressional Budget Office. A Review of CBO’s Activities in 2002 Under the
Unfunded Mandates Reform Act. Washington: GPO, 2003.
U.S. Congress. House Committee on Government Reform, Subcommittee on Energy
Policy, Natural Resources and Regulatory Affairs, and House Committee on
Rules, Subcommittee on Technology and the House. Unfunded Mandates —
A Five-Year Review and Recommendations for Change. Joint Hearing. 107thst
Congress, 1 session. Serial No. 107-19. Washington: GPO, 2001.
Keith Bea
Richard S. Beth



D. Single Audit Act
Statutory Intent and History
The Single Audit Act of 1984 (98 Stat. 2327; 31 U.S.C. §§ 7501-7507)
established uniform audit requirements for state and local governments receiving
federal financial assistance. It generally requires entity-wide audits instead of the
previous program-by-program audits that had been criticized as an inefficient use of
audit resources and an ineffective means of assuring accountability for federal funds.
The Single Audit Act Amendments of 1996 (110 Stat. 1391) extended the act’s
coverage to nonprofit agencies.353 The amendments also raised the thresholds that
require compliance under the act, focused audits on riskier programs, improved audit
reporting, and allowed more administrative flexibility. The only other amendments
have been technical in nature (108 Stat. 1363 and 111 Stat. 2634).
As amended, the Single Audit Act has five purposes:
!to promote sound financial management (including effective internal
controls) with respect to federal awards administered by non-federal
entities;
!to establish uniform requirements for audits of federal awards
administered by these entities;
!to promote the efficient and effective use of audit resources;
!to reduce burdens on state and local governments, Indian tribes, and
nonprofit organizations; and
!to ensure that federal departments and agencies, to the maximum
extent practicable, rely upon and use the audit work.
Regulatory guidance on single audits is contained in Office of Management and
Budget (OMB) Circular No. A-133, Audits of States, Local Governments, and Non-
Profit Organizations.
Major Provisions
The Single Audit Act generally requires each non-federal entity that expends
$300,000 or more in federal awards during a fiscal year to have a single audit made
for that year. A “single audit” covers both the entity’s financial statements and a
schedule of its federal awards. An entity subject to this provision may elect to have
a program-specific audit if it has only one federal program and is not otherwise
required to have a financial statement audit. An entity with federal award


353 Nonprofit organizations receiving federal financial assistance were previously subject to
similar single-audit requirements in earlier versions of OMB Circular No. A-133, at that
time named Audits of Institutions of Higher Education and Other Non-Profit Organizations.

expenditures less than the threshold is exempt from the act’s audit requirements as
well as from financial audit requirements of other federal laws, but must comply with
federal requirements to maintain and allow access to records. These provisions do
not preclude federal agencies from conducting or arranging for other audits as
needed. Every two years, the Director of OMB may adjust the threshold amount,
though not below $300,000. (For fiscal years ending after December 31, 2003, the
Director has determined that the threshold should be raised to $500,000.)
Prior to the 1996 amendments, the act required single audits for state and local
governmental entities that received (rather than expended) $100,000 or more of
federal assistance a year; entities that received $25,000 or more but less than
$100,000 could choose to have either a single audit or the financial and compliance
audit required for particular programs. Only if entities received less than $25,000 in
federal assistance were they exempt from the act. The 1996 amendments extended
coverage to federal awards, which include cost-reimbursement contracts as well as
financial assistance.
Entities subject to the act generally must conduct annual audits, although in
some cases biennial audits are allowed. Audits must be conducted by independent
auditors in accord with generally accepted government auditing standards, except that
performance audits need not be included unless authorized by the Director of OMB.
(Prior to the 1996 amendments, performance audits were expressly excluded.)
Auditors must determine whether the financial statements are fairly presented in all
material aspects in conformity with generally accepted accounting principles and
whether the schedule of expenditures for federal awards is fairly presented in all
material respects in relation to these statements.354
For each major program, the act requires auditors to obtain an understanding of
internal controls relating to compliance requirements, assess control risk, and
perform tests of controls (unless they are deemed ineffective). The auditors must
also determine whether the entity has complied with provisions of laws, regulations,
and other requirements that have a direct and material effect on the program.
Selection of major programs is based upon risk-based selection criteria developed
by the Director of OMB. (Prior to the 1996 amendments, the act defined major
programs simply by dollar thresholds.) The number of programs selected for audit
testing using risk-based criteria is generally limited to the number of programs that
exceed certain dollar thresholds for the non-federal entity; however, auditors must
test programs that represent at least 50% of the entity’s federal expenditures, or
whatever lower percentage the Director determines.
The Single Audit Act specifies various responsibilities for the Director of OMB,
including (1) designating a clearinghouse to receive copies of audit reports,
identifying recipients that failed to have audits required by the act, and undertaking
analyses that assist the Director; (2) developing criteria to determine appropriate
charges to federal awards for audit costs; (3) developing implementation guidance;


354 In auditing, materiality is determined by whether the magnitude of an omission or
misstatement is such that a reasonable person relying on the assertion would be influenced
by its inclusion or correction.

and (4) developing criteria to determine which federal agency is to provide technical
and other assistance for a given non-federal entity. The Director may also authorize
pilot projects to test alternative methods of achieving the purposes of the act.
Under OMB Circular No. A-133, recipients expending more than $25 million
a year ($50 million for fiscal years ending after December 31, 2003) shall have a
“cognizant agency for audit responsibilities” that shall provide technical advice and
liaison to auditees and auditors, consider requests for extensions, obtain or conduct
quality control reviews, inform other federal agencies and law enforcement officials
of irregularities and illegal acts, advise auditors and auditees of audit deficiencies
requiring corrective action, coordinate other audits or reviews made by or for federal
agencies, coordinate management decisions for audit findings, coordinate audit work
and reporting responsibilities among auditors to achieve cost-effective audits, and
consider auditee requests to qualify as low-risk. The cognizant agency for audit shall
be the federal awarding agency that provides the predominant amount of direct
funding for a recipient, determined every fifth year. Recipients that do not expend
more than the threshold amounts just identified shall instead have an “oversight
agency for audit responsibilities” that shall provide technical assistance and may, at
its option, assume some of the other responsibilities of the cognizant agencies.
In addition, the act assigns monitoring responsibilities to the Comptroller
General and establishes reporting and other requirements for federal agencies that
provide financial assistance, for non-federal entities that receive the assistance (or
pass it through to other entities), and for auditors. For example, if there are audit
findings or reports of internal control weaknesses, the non-federal entity must submit
plans for corrective action or describe why they are not needed.
Discussion
The Single Audit Act has improved the amount and quality of information that
is available about federal financial assistance to state and local governments. By
requiring entity-wide audits conducted in accordance with generally accepted
government auditing standards and employing generally accepted accounting
principles, the act has led to more comprehensive and reliable audit reports. More
important, it has encouraged financial management reforms: new accounting systems
have been installed; new ways of tracking federal funds have been devised; and
stronger administrative controls have been adopted. Federal agency oversight has
improved.
The 1996 amendments were aimed at making the Single Audit Act more
effective and less burdensome. Their most important change may be increased
attention to federal award programs that pose the greatest financial risk — not only
those with the largest expenditures but also those with ill-defined objectives,
complicated administrative procedures, and minimal political review and oversight.
As is true of any audit, the effectiveness of single audits depends on timely
completion and on the ability and willingness of decision makers to act on
information made available. One study has shown that single audit reports have not
always been received in accordance with OMB’s reporting requirements and that the
agency in question did not effectively use the reports to oversee and monitor program



recipients.355 Another study showed that some agencies did not issue required written
management decisions or have documentary evidence of their evaluations and
conclusions on recipient actions to correct audit findings.356 For some issues, the
effectiveness of single audits may also be limited because they do not as a rule
include performance measures.
Selected Source Reading
Foelster, Mary McKnight and George A. Scott. “Single Audit Overhaul.” Journal
of Accountancy, vol. 185 (May 1998), pp. 75-79.
Miller, Gerald J. and Relmond P. VanDaniker. “Impact of the Single Audit Act on
the Financial Management of State and Local Governments.” The Government
Accountants Journal, vol. 44 (spring 1995), pp. 55-63.
Melton, Robert W. “Optimizing Audit and Monitoring Effectiveness under Changes
to OMB Circular A-133” Government Finance Review, vol. 14 (August 1998),
pp. 29-32.
U.S. Bureau of the Census. Federal Audit Clearinghouse. Information about single
audits can be obtained through the Federal Audit Clearinghouse at
[http://harvester.census.gov/sac], visited December 18, 2003.
U.S. Congress. House. Committee on Government Reform and Oversight. Single
Audit Act Amendments of 1996. H.Rept. 104-607. 104th Congress, 2nd session.
Washington: GPO, 1996.
U.S. Congress. Senate. Committee on Governmental Affairs. Single Audit Act
Amendments of 1996. S.Rept. 104-266. 104th Congress, 2nd session.
Washington: GPO, 1996.
U.S. Executive Office of the President. Council on Integrity and Efficiency.
Standards Subcommittee. Improving the Single Audit Process. Washington:
GPO, 1993.
U.S. Executive Office of the President. Office of Management and Budget. Audits
of States, Local Governments, and Non-Profit Organizations. Circular No. A-

133. Washington: GPO, 2003.


——. OMB Circular A-133 Compliance Supplement March 2003. Washington:
GPO, 2003.
U.S. General Accounting Office. Single Audit — Actions Needed to Ensure That
Findings Are Corrected. GAO-02-705. June 2002.


355 U. S. General Accounting Office, NIH Research — Improvements Needed in Monitoring
Extramural Grants, GAO/HEHS/AIMD-00-139, May 2000.
356 U.S. General Accounting Office, Actions Needed to Ensure That Findings Are Corrected,
GAO-02-705, June 2002.

——. Single Audit — Single Audit Act Effectiveness Issues. GAO-02-877T. June

26, 2002.


——. Single Audit — Survey of CFO Act Agencies. GAO-02-376. March 2002.
——. Single Audit — Update on the Implementation of the Single Audit Act
Amendments of 1966. GAO/AIMD-00-293. September 2000.
——. Government Auditing Standards (the Yellow Book). Links to current audit
standards and related information are available through the GAO website at
[http://www.gao.gov], visited December 18, 2003.
Bob Lyke



VII. Human Resources Management and Ethics
A. Title 5: The Federal Civil Service
Title 5 of the United States Code is the codification of laws on government
organization and employees.357 It is divided into three parts. Part I, entitled “The
Agencies Generally,” includes seven chapters that cover the organization of
departments, agencies, independent establishments, and government corporations;
the powers of departments and agencies; administrative procedure; regulatory
functions; judicial review; congressional review of agency rulemaking; and executive
reorganization. “Civil Service Functions and Responsibilities” are the subject of
Title 5’s Part II, which includes four chapters on the Office of Personnel
Management; the Merit Systems Protection Board, and the Office of Special
Counsel; special authorities (rules, regulations, and investigations); and political
activities of certain state and local employees.
Part III, entitled “Employees,” presents the various policies related to
management of the federal workforce. It is divided into nine subparts: Subpart A,
“General Provisions,” includes chapters on definitions for terms used in Title 5 and
merit system principles; Subpart B, “Employment and Retention,” includes chapters
on examination, selection, and placement and retention and reemployment; Subpart
C, “Employee Performance,” includes chapters on training and performance
appraisal; Subpart D, “Pay and Allowances,” includes chapters on classification and
pay rates and systems; Subpart E, “Attendance and Leave,” includes chapters on
hours of work and leave; Subpart F, “Labor-Management and Employee Relations,”
includes chapters on labor-management relations and adverse actions; Subpart G,
“Insurance and Annuities,” includes chapters on retirement and health insurance;
Subpart H, “Access to Criminal History Record Information,” covers access to
criminal history records for national security and other purposes; and Subpart I,
“Miscellaneous,” includes chapters on personnel flexibilities for the Internal Revenue
Service, a human resources management system for the Department of Homeland
Security, and the National Security Personnel System for the Department of Defense.
The laws codified in Title 5 encompass policies related to how the federal
government manages the executive branch workforce. Over the last several years,
that process has been referred to as the management of human capital. Other terms
that have frequently been used to describe the process are personnel administration
and personnel management and human resources management. Each of these terms
is discussed briefly below.
The terms personnel administration and personnel management relate to “that
aspect of management concerned with the recruitment, selection, development,
utilization, and compensation of the members of an organization.... The former is
mainly concerned with the technical aspects of maintaining a full complement of
employees within an organization, while the latter concerns itself as well with the


357 This compendium does not address personnel laws in other titles of the United States
Code, including the United States military (Title 10), the Foreign Service (Title 22), the
Veterans Health Administration (Title 38), and the Postal Service (Title 39).

larger problems of the viability of an organization’s human resources.”358 Personnel
management evolved from personnel administration. Human resources management
(HRM) is a term that “although often used synonymously with personnel
management ... transcends traditional personnel concerns, taking the most expansive
view of the personnel department’s mandate. Instead of viewing the personnel
function as simply that collection of disparate duties necessary to recruit, pay, and
discharge employees, a[n] HRM approach assumes that personnel’s appropriate
mission is the maximum utilization of its organization’s human resources.”359 In the
late 1970s and early 1980s, textbooks on the federal workforce began to emphasize
HRM. The term has been especially used in discussing federal workforce
management since the publication in September 1993 of the reports prepared under
Vice President Albert Gore’s National Performance Review (NPR).
The term human capital management refers to “a concept that views employees
as assets in the same sense as financial capital. It presupposes that an investment in
human potential will yield significant returns for the organization.”360 Human capital
also “describe[s] what an organization gains from the loyalty, creativity, effort,
accomplishments, and productivity of its employees.”361 The economist Lester C.
Thurow further defined human capital as:
an individual’s productive skills, talents, and knowledge. It is measured in terms
of the value (price multiplied by quantity) of goods and services produced. Since
consumption is the ultimate goal of our economic system, the value of a man’s
capital is the same as the value of the consumption goods and services which he
directly or indirectly produces. When the value of goods and services rises, the
value of human capital rises. When the value of goods and services falls, the362
value of human capital falls.
On September 6, 1966, Title 5 was recodified with the enactment of P.L. 89-554
(80 Stat. 378). Information on the derivation of laws in the title is provided in the
United States Code Annotated under the “Historical and Revision Notes”
accompanying each section. Among the laws codified in the title are the Pendleton
Act of 1883; the Retirement Acts of 1920, 1930, and 1956; the Classification Acts
of 1923 and 1949; the Hatch Acts of 1939 and 1940; the Ramspeck Act of 1940; the
Veterans’ Preference Acts of 1944 and 1953; the Federal Employees’ Pay Acts of

1945 and 1946; the Annual and Sick Leave Act of 1951; the Federal Employees’


Group Life Insurance Act of 1954; the Fringe Benefits Act of 1954; the Federal
Employees Salary Increase Act of 1958; the Government Employees Training Act
of 1958; the Federal Employees Health Benefits Act of 1959; and the Federal Salary
Reform Act of 1962.


358 Facts on File Dictionary of Personnel Management and Labor Relations (New York:
Facts on File, Inc., 2nd ed., 1985).
359 Ibid.
360 Ibid.
361 The Human Resources Glossary (New York: American Management Association, 1991).
362 Lester C. Thurow, Investment in Human Capital (Belmont, CA: Wadsworth Publishing
Co., Inc., 1970).

Other laws codified in Title 5 include the Intergovernmental Personnel Act of
1970; the Job Evaluation Policy Act of 1970; the Federal Pay Comparability Act of
1970; the Equal Employment Opportunity Act of 1972; the Federal Wage System Act
of 1972; the Civil Service Reform Act of 1978; the Alternative Work Schedule Act
of 1978; the Spouse Equity Act of 1984; the Federal Employees’ Retirement System
Act of 1987; the Federal Employees Leave Sharing Acts of 1988 and 1993; the
Whistleblower Protection Act of 1989; the Federal Employees Pay Comparability
Act (FEPCA) of 1990; the Hatch Act Reform Amendments of 1993; and the Federal
Workforce Restructuring Act (FWRA) of 1994.
This compendium’s treatment of civil service issues is organized by chapters as
they appear in Title 5. The chapter entries include discussion of selected laws on
managing the federal executive branch workforce and their major amendments.363
Twenty years of effort to establish a civil service for the executive branch of the
federal government that was based on law and featured competitive examinations,
relative security of tenure, and political neutrality culminated with enactment of the
Pendleton Act of 1883.364 The act established the Civil Service Commission, which
continued with largely the same mandate until 1978, when the Office of Personnel
Management (OPM) was created in its stead. Although over the years many statutes
(including those listed above) have been enacted to, among other things, expand the
civil service, regulate political activities, classify and grade federal jobs, and set pay
rates or establish mechanisms for pay setting, none so changed the original character
of the civil service as did the Civil Service Reform Act (CSRA) of 1978 (92 Stat.

1111). 365


In addition to creating OPM, the CSRA of 1978 established the Office of
Special Counsel (OSC), the Merit Systems Protection Board (MSPB), and the
Federal Labor Relations Authority (FLRA) as independent organizations charged
with protecting the merit system and adjudicating disputes between agencies and
employees. The law also created a Senior Executive Service (SES) to enable
department and agency heads to be assisted by experienced managers, some of whom
were career civil servants and others of whom were political appointees, who could
be moved to fill positions as assignments required. For the first time, authority for
labor-management relations within the federal government was established in statute.
Finally, personnel research programs and demonstration projects were authorized as
a means for experimenting with various HRM policies, including pay and
classification of jobs.


363 Several chapters of in Parts II and III of Title 5 are not included in this edition of the
compendium. The omitted chapters include Chapter 29 (“Commissions, Oaths, Records,
and Reports”); Chapter 81 (“Compensation for Work Injuries”); Chapter 85
(“Unemployment Compensation”); and Chapter 91 (“Access to Criminal History Records
for National Security and Other Purposes”).
364 Paul P. Van Riper, History of the United States Civil Service (Evanston, IL: Row,
Peterson, and Company, 1958). Although dated, this work is still widely considered the best
history of the federal civil service.
365 Patricia W. Ingraham and Carolyn Ban, eds., Legislating Bureaucratic Change, The Civil
Service Reform Act of 1978 (Albany, NY: State University of New York Press, 1984).

Implementation of the provisions of the CSRA of 1978 (particularly those on
pay for performance and personnel research programs and demonstration projects)
and FEPCA of 1990 were among the issues focused on during the Administrations
of Presidents Ronald Reagan and George H.W. Bush. Among the concerns of
President William J. Clinton’s Administration was implementation of the
recommendations presented by the NPR of 1993366 (particularly those on creating a
family-friendly workplace) and the FWRA of 1994, which sought to reduce the size
and scope of government. During the 1990s, OPM downsized considerably and
contracted out traditionally centralized functions such as training and investigations.
Executive branch agencies used voluntary separation incentives (commonly referred
to as buyouts) instead of reductions-in-force to reduce their workforces. Departments
and agencies developed in-house HRM capacities or contracted with OPM or other
vendors for administrative services such as review and rating of job applications,
classification of federal jobs, training, payroll administration, implementation of
affirmative action policies, and counseling services. During this period as well, OPM
publicized the various HRM flexibilities provided government-wide under Title 5
and encouraged departments and agencies to use them. Congress authorized separate
authorities for personnel management at the Federal Aviation Administration and the
Internal Revenue Service that provide for greater HRM flexibilities than Title 5
generally permits.367
Policies on federal workforce management in the Administration of President
George W. Bush have been influenced significantly by the September 11, 2001
terrorist attacks on the World Trade Center and the Pentagon, and the discovery of
anthrax in Washington, DC, and other cities. The President’s term began with
OPM’s continued emphasis on the full use of already existing government-wide
personnel flexibilities by departments and agencies and the incorporation of the
management of human capital into agency strategic plans and processes (currently
being implemented through the establishment of agency chief human capital officers
(CHCOs) and a CHCO Council). In the wake of 9-11, however, new requirements
for the federal government’s HRM system have been stated by the White House and
OPM. According to the President, the nation’s efforts to fight terrorism require a
system that is modern and flexible and puts the right people in the right place at the
right time. In practice, this has been translated into law as authority for separate
HRM systems for the Transportation Security Administration and the Departments
of Homeland Security (DHS) and Defense (DOD) that provide the respective
department heads with considerable discretion to establish their particular systems


366 U.S. Office of the Vice President, From Red Tape to Results: Creating a Government
That Works Better & Costs Less. Report of the National Performance Review (Washington:
GPO, 1993).
367 For the Federal Aviation Administration (FAA), see P.L. 104-50, 109 Stat. 436 and
subsequent amendments in P.L. 104-122, 110 Stat. 876; P.L. 104-264, 110 Stat. 3213; P.L.
105-339, 112 Stat. 3182; and P.L. 106-181, 114 Stat. 61. For the Internal Revenue Service
(IRS), see P.L. 105-206, 112 Stat. 711. The FAA authority is codified in Title 49 of the
United States Code. The IRS authority is codified in Title 5 of the United States Code as
Chapter 95.

outside of many of the current Title 5 policies.368 Depending on how they are
implemented, the DHS and DOD changes arguably could rival the CSRA of 1978 for
impact on the civil service.
Both of the newly created systems at DHS and DOD have been described by the
White House and some Members of Congress as demonstration projects whose
various features could ultimately be applied to executive branch employees
government-wide. Currently, the systems are authorized in separate chapters of Title
5 (Chapter 97 covers DHS and Chapter 99 covers DOD), and their implementation
is expected to occur over several years. Whether the features of one or both of the
new systems are determined to be applicable to other federal agencies, or whether
individual agencies continue to seek congressional approval for their own personnel
flexibilities (a National Aeronautics and Space Administration proposal is currently
pending in the 108th Congress), it seems likely that Congress will need to reconsider
Title 5 (and the accompanying Title 5 Code of Federal Regulations that compiles the
implementing regulations) as the Chapters 97 and 99 provisions are fully
implemented.
Approaches that might be examined include recodification of the title into
chapters that reflect HRM policies that apply government-wide; recodification of the
title into chapters arranged by the general principles governing a particular policy,
followed by all the exceptions to the policy; or continuation of the current
amendment process that establishes separate chapters in Title 5 or other titles of the
United States Code for individual departments granted separate authority. Issues that
could be considered include which approach would provide for the administration of
policies on government organization and employees in an efficient, understandable,
coordinated, and fair manner; which approach would facilitate ongoing oversight of
agency systems to ensure conformance with merit system principles and avoidance
of prohibited personnel practices; and whether OPM or another organization or
organizations would centrally administer HRM policies and exercise the authority for
overseeing these policies.
Barbara L. Schwemle


368 For the Transportation Security Administration (TSA), see P.L. 107-71, 115 Stat. 597;
for the Department of Homeland Security (DHS), see P.L. 107-296, 116 Stat. 2229; and for
the Department of Defense (DOD), see P.L. 108-136, 117 Stat. 1621. The TSA authority
is codified in Title 49 of the United States Code. The DHS authority is codified as Chapter

97, and the DOD authority is codified as Chapter 99 in Title 5 of the United States Code.



(1) Office of Personnel Management (Chapter 11; in Part II).
Statutory Intent and History
The Office of Personnel Management (OPM), established pursuant to the Civil
Service Reform Act of 1978 (92 Stat. 1119) succeeded the Civil Service Commission
(CSC) established in 1883. The original objective in creating the CSC was to remove
the selection and management of federal personnel from partisan political influence.
With the passage of time, the leadership provided by the CSC, a multi-headed
agency, was judged critically by some in the executive branch and in Congress. It
was hoped that a new single-headed agency would provide more effective leadership.
By giving OPM the leadership role in federal personnel management, it was believed
that the agency would be able to concentrate on planning and administering an
effective government-wide program of personnel management. “Without the
demands generated by a heavy day-to-day workload of individual personnel actions,
OPM should provide the President, the civil service, and the Nation with imaginative
public personnel administration.”369
In a 1993 assessment of the agency, the Clinton Administration’s National
Performance Review (NPR) identified OPM as a leader and source of expert advice
concerning a broad range of human resources management matters. For the
immediate future, the NPR envisioned OPM advising the President on issues
affecting the management of federal employees; demonstrating commitment to
diversity; planning for development of the workforce of the future; identifying
strategies for providing the training essential to achieve a cultural shift toward more
entrepreneurial management; conducting research, providing consulting services, and
advising agencies on best practices; coordinating and sponsoring interagency
cooperation on common issues; influencing government-wide change; and leading
by example. The NPR indicated that achievement of this role would require OPM
to overhaul its structure and change its internal culture. OPM privatized its
investigations function, while training programs were transferred to the U.S.
Department of Agriculture Graduate School. The OPM Director assured Congress
that the agency would retain government-wide training policy and leadership
responsibilities.
Significant reorganization of the agency, based on OPM’s strategic plan,
occurred in December 2002 when OPM’s 12 departments were combined into 4
central divisions: Strategic Human Resources Policy, Human Resources Products
and Services, Management and Chief Financial Officer, and Human Capital
Leadership and Merit Systems Accountability. In the Homeland Security Act of

2002 (116 Stat. 1229) and the National Defense Authorization Act for FY2004 (P.L.


108-136; 117 Stat. 1621), Congress authorized the OPM Director, along with the
Secretaries of the Departments of Homeland Security (DHS) and Defense (DOD),
respectively, to jointly prescribe regulations to establish new human resources


369 U.S. Congress, House Committee on Post Office and Civil Service, Legislative History
of the Civil Service Reform Act of 1978, committee print, 96th Cong., 1st sess., Committee
Print 96-2 (Washington: GPO, 1979), vol. II, p. 1470.

management (HRM) systems at DHS and DOD. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Established as an independent agency in the executive branch, OPM’s
management structure comprises a director, deputy director, and the four associate
directors mentioned above. The director executes, administers, and enforces civil
service laws, rules, and regulations and oversees other OPM activities, including
retirement and classification, except functions for which the Merit Systems
Protection Board or the Special Counsel (the agency head for the Office of Special
Counsel) are primarily responsible. The director aids the President as requested in
preparing civil service rules, and otherwise advises the President on actions which
may be taken to promote an efficient civil service and a systematic application of the
merit system principles, including recommending policies relating to the selection,
promotion, transfer, performance, pay, conditions of service, tenure, and separation
of employees. The director also conducts or provides studies and research on
improvements in personnel management. The director’s duties may be delegated,
except those regarding competitive examinations for positions with requirements
common to all federal agencies. OPM maintains an oversight program to ensure that
delegated authorities are in accordance with merit system principles and standards.
The Homeland Security Act of 2002 (116 Stat. 2289) at Section 1304 amended
the director’s functions to mandate that OPM design a set of systems, including
appropriate metrics, for assessing the management of human capital by federal
agencies. The systems must be defined in OPM regulations and include standards
for (A) aligning agency human capital strategies with their missions, goals, and
organizational objectives and integrating those strategies into agency budget and
strategic plans; (B) closing skill gaps in mission critical occupations; (C) ensuring
continuity of effective leadership through implementation of recruitment,
development, and succession plans; (D) sustaining a culture that cultivates and
develops a high-performing workforce; (E) developing and implementing a
knowledge management strategy supported by appropriate investment in training and
technology; and (F) holding managers and human resources officers accountable for
efficient and effective human resources management in support of agency missions
in accordance with merit system principles. The provision became effective on May

24, 2003.


In January 1999, the director was designated as the Chair of the President’s Task
Force on Federal Training Technology, established to encourage the use of
technology in training. The director also chairs the Chief Human Capital Officers
Council. (See the discussion of the 5 U.S.C. Chapter 14 provision in this
compendium.)
Discussion
In the 104th Congress, legislation (H.R. 3483) was considered, but not enacted,
which would have substantially altered the OPM Director’s responsibilities. The
thrust of the legislation, and the recent internal management activities of OPM,
supported by the NPR, have been to delegate to the departments and agencies as



many personnel functions as possible. OPM has been envisioned as a catalytic and
overseer agency, not as an agency performing personnel functions of an executive-
branch-wide nature. Concerns have been raised by a number of organizations, such
as the Senior Executives Association, that the downsizing of OPM and dispersal of
its authorities and operations have placed OPM’s capacity to carry out its statutory
responsibilities at risk.
OPM’s human resources management initiatives for 1998 and 1999 emphasized
its expertise and leadership and sought to amend the agency’s authorization to
reorganize and clarify the responsibilities of the OPM Director. Vice President Gore
announced in January 1999 that OPM would be proposing new hiring options to
permit alternative selection procedures, to authorize agencies to make direct job
offers in critical areas like information technology, to establish additional means for
recruiting a diverse workforce, and to use non-permanent employees, with
appropriate benefits, but a legislative proposal was not submitted to the 106th
Congress.
Since enactment of P.L. 103-62, the Government Performance and Results Act
(GPRA), oversight of OPM’s role has especially focused on its administration of the
civil service merit system and its human resources management leadership. The
President’s budget during the last three fiscal years of the Clinton Administration
emphasized OPM’s role as the administrator of the merit systems and designated it
as a high impact agency. OPM announced an ambitious plan in its GPRA-mandated
strategic plan for FY2000-FY2005. The strategic plan was revised in December

2002 and now covers the period 2002-2007. The plan has three strategic goals: (1)


to have federal agencies adopt human resources management systems that improve
their ability to build successful, high performance organizations; (2) to have federal
agencies use effective merit-based human capital strategies to create a rewarding
work environment that accomplishes the mission; and (3) to meet the needs of federal
agencies, employees, and annuitants through the delivery of efficient and effective
products and services. Various objectives accompany each goal. An annual
performance plan accompanies the strategic plan. GAO concerns surrounding the
agency’s performance plans have been the inclusion of cost-based performance
measures to provide an indication of how efficiently OPM is performing various
activities and the credibility of agency performance information. OPM’s FY2004
performance plan includes various instruments intended to permit program
evaluation.
As part of the President’s Management Agenda, OPM is leading the federal
government’s Strategic Management of Human Capital Initiative. (See
[http://www.opm.gov], and choose “Strategic Management of Human Capital” on the
home page menu.) OPM staff have been engaged in a joint effort with DHS and
DOD to write the regulations creating new HRM systems at these departments since
late 2002.
Significant workforce reductions have occurred at the agency. Especially
troubling to some practitioners was the downsizing of the agency’s library, which
resulted in the loss of much of its well-regarded collection of materials on the Civil
Service and all aspects of HRM. Questions about the agency’s ability to carry out its
statutory responsibilities despite the loss of staff persist. The Merit Systems



Protection Board’s (MSPB’s) statutorily mandated evaluation of OPM’s
administration of the merit system found much improvement, but recommended
increased leadership and coordination with the agencies. MSPB’s December 2001
report included recommendations that OPM actively influence “broad-based
regulatory or statutory changes where feasible” and “be an active participant in
decisionmaking regarding HR [human resources] policies and programs.” In a
January 2003 report on OPM, GAO identified OPM’s management challenges as:
(1) leading strategic human capital management government-wide; (2) overseeing
agency human capital management systems; (3) transforming OPM and managing
its internal operations; and (4) administering the retirement and health insurance
programs. A May 2003 GAO report suggested that OPM compile, analyze, and share
information about personnel flexibilities that are being and should be used and “more
vigorously identify new flexibilities that would help agencies better manage their
human capital and then work to build consensus for the legislative action needed.”
Selected Source Reading
Lane, Larry M. “The Office of Personnel Management: Values, Policies, and
Consequences.” In Patricia W. Ingraham and David H. Rosenbloom, eds. The
Promise and Paradox of Civil Service Reform. Pittsburgh, PA: University of
Pittsburgh Press, 1992.
Pfiffner, James P. and Douglas A. Brook, eds., The Future of Merit: Twenty Years
After the Civil Service Reform Act. Washington: Woodrow Wilson Center
Press, 2000.
U.S. Congress. Senate. Committee on Governmental Affairs. Major Managementthnd
Challenges Facing Federal Departments and Agencies. 106 Congress, 2
session. Washington: 2000.
U.S. Congress. House. Committee on Post Office and Civil Service. Legislativeth
History of the Civil Service Reform Act of 1978. Committee print. 96
Congress, 1st session. Committee Print 96-2. Washington: GPO, 1979.
U.S. General Accounting Office. Human Capital; OPM Can Better Assist Agencies
in Using Personnel Flexibilities. GAO-03-428. May 2003.
——. Major Management Challenges and Program Risks; Office of Personnel
Management. GAO-03-115. January 2003.
——. Observations on the Office of Personnel Management’s Fiscal Year 1999
Performance Report and Fiscal Year 2001 Performance Plan. GAO/GGD-00-

156R. June 30, 2000.


——. Results Act, Observations on the Office of Personnel Management’s Annual
Performance Plan. GAO/GGD-98-130. July 1998.
——. Results Act, Observations on the Office of Personnel Management’s Fiscal
Year 2000 Annual Performance Plan. GAO/GGD-99-125. July 1999.



U.S. Merit Systems Protection Board. Civil Service Evaluation, The Evolving Role
of the U.S. Office of Personnel Management, A Report Concerning Significant
Actions of the U.S. Office of Personnel Management. Washington: GPO, 1998.
——. The U.S. Office of Personnel Management in Retrospect; Achievements and
Challenges After Two Decades. Washington: MSPB, 2001.
U.S. Office of Personnel Management. Congressional Budget Justification; Annual
Performance Plan Fiscal Year 2004. Washington: OPM, 2003.
——. Fiscal Year 2002 Performance and Accountability Report. Washington:
OPM [2003].
——. Strategic Plan 2002-2007. Washington: OPM [2002].
U.S. Office of the Vice President. National Performance Review. From Red Tape
to Results: Creating a Government That Works Better & Costs Less. Office of
Personnel Management: Accompanying Report of the National Performance
Review. Washington: GPO, 1993.
Barbara L. Schwemle



(2) Merit Systems Protection Board; Office of Special Counsel; and
Employee Right of Action (Chapter 12; in Part II).
Statutory Intent and History
The underlying statute for the Merit Systems Protection Board (MSPB) is the
Civil Service Reform Act (CSRA) of 1978 (92 Stat. 1121). This same statute and the
Whistleblower Protection Act of 1989 (103 Stat. 17) also established the Office of
Special Counsel (OSC) and Employee Right of Action. These laws sought to create
separate entities to perform personnel appellate and adjudicatory functions. The
OSC, initially part of MSPB, became an independent agency with enactment of the
whistleblower law, an action largely prompted by disputes over budget resources. In
stating the need for reform, the CSRA legislative history noted that, “There is little
doubt that a vigorous protector of the merit system is needed. The lack of adequate
protection was painfully obvious during the civil service abuses only a few years ago.
Establishment of a strong and independent Board and Special Counsel will
discourage subversions of merit principles.” MSPB and OSC were reauthorized
through 2007 in P.L. 107-304 (116 Stat. 2364), enacted on November 27, 2002.
Major Provisions
The Merit Systems Protection Board was established with three members. The
functions of the board are to (1) hear, adjudicate, or provide for the hearing or
adjudication of personnel matters and take final action on such matters; (2) order any
federal agency or employee to comply with any decision of the board and enforce
compliance; (3) conduct special studies on the civil service and executive branch
merit systems, and report to the President on protection of the merit system; and (4)
review OPM rules and regulations.
The Office of Special Counsel was established to (1) protect employees, former
employees, and applicants for employment from prohibited personnel practices; (2)
receive and investigate allegations of prohibited personnel practices and bring
petitions for stays and corrective actions, and file complaints or recommend
disciplinary actions; (3) receive, review, and forward to the Attorney General (where
necessary) disclosures of violations of any law, rule, or regulation, or gross
mismanagement, a gross waste of funds, an abuse of authority, or a substantial and
specific danger to public health or safety; (4) review OPM rules and regulations; and
(5) investigate and bring actions concerning allegations of violations of laws.
An employee may seek corrective action from MSPB for a prohibited personnel
action taken against him or her; MSPB may issue a stay of the personnel action
involved.
If the Special Counsel does not transmit the information to the agency head, the
Special Counsel shall inform the individual of the reasons why the disclosure may
not be further acted on and other offices available for receiving disclosures, should
the individual wish to pursue the matter further (added by P.L. 107-304, 116 Stat.

2364).



Discussion
As originally established by Congress, MSPB was granted a permanent
authorization. Seeking “to maintain close scrutiny” of the agency, Congress changed
this to a term authorization in 1989. Among the issues which have arisen in
discussions of MSPB’s mission are these: the agency’s role in enforcing the
Whistleblower Protection Act provisions; whether it has a bias toward management;
the board’s use, or lack thereof, of employee stays; its actions to hold agencies
accountable; and the agency’s interpretation of concepts such as burden of proof,
reasonable belief, and eligibility.
An issue that has concerned both the authorizing and the appropriating
committees is the process by which an employee appeals a personnel action. In a
September 1995 issue paper, the Vice President’s National Performance Review and
MSPB recommended streamlining of the process. A draft version of H.R. 3841, anth
original bill offered during the 104 Congress, included language that would have
provided for employee appeal rights to either MSPB or the Equal Employment
Opportunity Commission, but not both. Lacking bipartisan agreement, this provision
was removed during subcommittee markup of H.R. 3841. A similar provision, but
one providing that MSPB would have the jurisdiction, was included in draft
legislation, prepared but not introduced, in the 105th Congress, by the House Civil
Service Subcommittee chair, Representative Mica. A National Academy of Public
Administration study of the issue found that “MSPB is generally viewed in a positive
light due to its timely and consistent decisions.” A January 1999 symposium
marking the 20th anniversary of MSPB heard renewed calls for improvement to the
appeals process.
Other issues involving MSPB concern caseload, use of alternative dispute
resolution procedures, and administrative judge pay. With regard to the latter, an
agreement between the MSPB chair and the MSPB professional association would
have amended Title 5 to establish an administrative judge pay system with four levels
of pay referenced to Senior Executive Service pay and the application of locality pay.
In the 106th Congress, Representative George Gekas introduced H.R. 2946, which
included the provisions found in the agreement, but no further action was taken.
Similar legislation (H.R. 1965) was introduced in the 107th Congress.
Congress changed the Office of Special Counsel from a permanent to a term
authorization for the same reason as MSPB’s authorization was changed. Much of
the discussion about the OSC has focused on its alleged ineffectiveness and
employee bypassing of the agency to seek relief in other forums. H.R. 5512,
introduced in the 106th Congress, would have provided that “except as provided in
Section 518 of Title 28, relating to litigation before the Supreme Court, attorneys
designated by the Special Counsel may appear for the Special Counsel and represent
the Special Counsel in any civil action brought in connection with Section 2302(b)(8)
[relating to prohibited personnel practices] or Subchapter III of Chapter 73 [relating
to prohibitions on political activity], or as otherwise authorized by law.” The bill also
would have authorized the Special Counsel to obtain review of any final order or
decision of the Merit Systems Protection Board by filing a petition for judicial review
in the United State Court of Appeals for the Federal Circuit under certain
circumstances. No further action occurred on H.R. 5512.



The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136; 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws amend appellate procedures for these employees. (See the discussions of the

5 U.S.C. Chapter 77, Chapter 97, and Chapter 99 provisions in this compendium.)


In a December 5, 2003 memorandum to employees, MSPB announced that as
part of a consolidation of agency operations, its Boston and Seattle field offices
would be closed by March 31, 2004. The agency anticipates closing the Denver field
office in 2005 and may close the New York City field office no earlier than 2005.
Changes to the appellate procedures made by the Homeland Security and DOD
Authorization Acts are reportedly part of the impetus for consolidation.
Selected Source Reading
CRS Report 97-787 A. Whistleblower Protections for Federal Employees, by L.
Paige Whitaker and Michael Schmerling (1998).
National Academy of Public Administration. Facilitating Solutions to Multiple
Appellate Processes: Alternatives for Change. Washington: NAPA, 1997.
Pfiffner, James P. and Douglas A. Brook, eds. The Future of Merit: Twenty Years
After the Civil Service Reform Act. Washington: Woodrow Wilson Center
Press, 2000.
“Symposium on the Civil Service Reform Act of 1978: An Evaluation.” Policy
Studies Journal, vol. 17 (winter 1988-1989), pp. 311-447.
U.S. Congress. House. Committee on Government Reform and Oversight. H.R.

3841, Omnibus Civil Service Reform Bill. Hearing. 104th Congress, 2nd session.


Washington: GPO, 1996.
U.S. Congress. House. Committee on Government Reform and Oversight.
Subcommittee on the Civil Service. Civil Service Reform IV: Streamliningthst
Appeals Procedures. Hearing. 104 Congress, 1 session. Washington: GPO,

1995.


U.S. Congress. House. Committee on Post Office and Civil Service. Legislativeth
History of the Civil Service Reform Act of 1978. Committee print. 96
Congress, 1st session. Committee Print 96-2. Washington: GPO, 1979.
U.S. General Accounting Office. Merit Systems Protection Board: Mission
Performance, Employee Protections, and Working Environment. GGD-95-213.

1995.


U.S. Merit Systems Protection Board. Merit Systems Protection Board Annual
Report Fiscal Year 2002. Washington: MSPB, no date.



——. Merit Systems Protection Board Performance and Accountability Report for
FY2003. Washington: MSPB [2003].
——. Merit Systems Protection Board Performance Plan Fiscal Year 2003 (Revised
Final) and Fiscal Year 2004 (Final). Washington: MSPB [2003].
——. Merit Systems Protection Board Strategic Plan FY2001-FY2006.
Washington: MSPB [2002].
——. Removing Poor Performers in the Federal Service. Issue Paper. Washington:
MSPB, 1995.
U.S. Office of Special Counsel. Annual Performance Plan FY2002. Washington:
OSC, no date.
——. Annual Performance Report of the U.S. Office of Special Counsel for Fiscal
Year 2002. Washington: OSC, no date.
——. OSC Strategic Plan FY2001-2006. Washington: OSC [2001].
——. A Report to Congress from the U.S. Office of Special Counsel for Fiscal Year

2002. Washington: OSC, no date.


Barbara L. Schwemle



(3) Special Authority (Chapter 13; in Part II).
Statutory Intent and History
The system of special authority i.e., drafting and issuing personnel rules and
regulations, and controlling, supervising, and retaining records of and examinations
for the competitive service, as well as investigating personnel security matters and
issuing reports generally, was established by the Civil Service Act of 1883
(Pendleton Act; 22 Stat. 404) and the Veterans Preference Act of 1944 (P.L. 78-359;
58 Stat. 387). The intent was to remove partisan political influences from the
selection and retention of civil servants, protect veterans’ preference with respect to
employment and retention, and authorize security investigations.
Major Provisions
The Office of Personnel Management (OPM), formerly the Civil Service
Commission, is directed to aid the President, at his request, in preparing the rules he
prescribes under Title 5 of the United States Code for administering the competitive
service. OPM is required to prescribe regulations, control, supervise, and preserve
records of and examinations for the competitive service. The agency is charged also
with issuing and enforcing regulations to implement provisions of Title 5 of the
United States Code and relevant executive orders that set forth the policy giving
preference to eligibles (i.e., certain veterans) in the competitive service and the
excepted service in the executive agencies and the government of the District of
Columbia.
OPM is authorized to investigate and report on matters concerning enforcement
and the effect of rules the President and the OPM prescribe under Title 5 of the
United States Code for administering the competitive service.
OPM is directed to conduct investigations and issue reports required by cited
sections of Titles 22 and 42 of the United States Code relating to security status of
United States representatives appointed to some international organizations and
individuals involved with the National Science Foundation. This investigative
authority may be exercised by the Federal Bureau of Investigation (FBI), rather than
OPM, under certain circumstances. A revolving fund is available to OPM without
fiscal year limitation for financing investigations, training, and other functions the
office is authorized or required to perform on a reimbursable basis. An agency may
use available appropriations to reimburse OPM or the FBI for the cost of
investigations, training, and functions performed for the agency or to make advances
for their cost.
For the purposes of certain sections of Title 5 of the United States Code that
relate to administrative law judges, OPM may and, for purposes of 5 U.S.C. § 7521
relating to administrative law judges, the Merit Systems Protection Board may
investigate, require reports of agencies, prescribe regulations, appoint advisory
committees as necessary, recommend legislation, subpoena witnesses and records,
and pay witness fees as established for the courts of the United States.



OPM is required to keep minutes of its proceedings and to publish annual
reports on Chapter 83 (retirement), including the status of the Civil Service
Retirement and Disability Fund, and to report annually to Congress on the operation
of Chapters 87 (life insurance) and 89 (health insurance) of Title 5 of the United
States Code.
Discussion
This chapter, which generally originated in the Civil Service Act of 1883,
centralizes federal personnel functions in OPM. Some have argued that some
functions granted herein should be exercised by agencies to permit them to design
regulations and procedures suitable to their individual needs, while others believe
that continuing the current centralized system is more effective.
Selected Source Reading
Bussey, Ellen M. Federal Civil Service Law and Procedures: A Basic Guide.
Washington: Bureau of National Affairs, 1990.
U.S. Office of the Vice President. National Performance Review. From Red Tape
to Results: Creating a Government That Works Better & Costs Less.
Accompanying Report of the National Performance Review “Office of
Personnel Management.” Washington: GPO, 1993.
Thomas J. Nicola



(4) Agency Chief Human Capital Officers (Chapter 14, in Part II).
Statutory Intent and History
Title XIII, Subtitle A of The Homeland Security Act of 2002 (116 Stat. 2287;
P.L. 107-296) authorizes the establishment of chief human capital officer (CHCO)
positions in federal executive branch agencies. The purpose of the provision is to
raise the institutional profile of strategic human capital management within federal
agencies.
Major Provisions
Section 1301 of the Homeland Security Act is entitled the Chief Human Capital
Officers Act of 2002. Section 1302, amends Part II of Title 5 United States Code by
adding a new Chapter 14 — Agency Chief Human Capital Officers. The new
Section 1401 of Title 5 United States Code provides that the agency head must
appoint or designate a CHCO who must advise and assist the agency head and other
agency officials in carrying out the agency’s responsibilities for selecting,
developing, training, and managing a high-quality, productive workforce in
accordance with merit system principles; implement the rules and regulations of the
President and OPM and the laws governing the civil service within the agency; and
carry out such functions as his or her primary duty.
The agencies covered by the CHCO provision are enumerated at 31 U.S.C. §

901(b)(1) and (2), which lists agencies subject to the Chief Financial Officers (CFO)


Act, and include the Departments of Agriculture, Commerce, Defense, Education,
Energy, Health and Human Services, Housing and Urban Development, the Interior,
Justice, Labor, State, Transportation, the Treasury, Veterans Affairs, the
Environmental Protection Agency, and the National Aeronautics and Space
Administration. Other agencies covered are the Agency for International
Development, the Federal Emergency Management Agency, the General Services
Administration, the National Science Foundation, the Nuclear Regulatory
Commission, the Office of Personnel Management, the Small Business
Administration, and the Social Security Administration.
The Department of Homeland Security (DHS) is not covered by Chapter 14,
although Section 103 of the Homeland Security Act (116 Stat. 2145) established a
CHCO for DHS with responsibilities enumerated in Section 704 (116 Stat. 2219).
The 108th Congress is considering legislation (H.R. 2886, S. 1567) that would, if
enacted, include DHS among the CFO Act agencies and therefore make DHS subject
to Chapter 14.
Under the new Section 1402, CHCOs have six functions, including (1) setting
the workforce development strategy of the agency; (2) assessing workforce
characteristics and future needs based on the agency’s mission and strategic plan; (3)
aligning the agency’s human resources policies and programs with organization
mission, strategic goals, and performance outcomes; (4) developing and advocating
a culture of continuous learning to attract and retain employees with superior
abilities; (5) identifying best practices and benchmarking studies; and (6) applying
methods for measuring intellectual capital and identifying links of this capital to



organizational performance and growth. CHCOs must have access to all records,
reports, audits, reviews, documents, papers, recommendations, or other materials that
are the property of the agency or are available to the agency; and relate to programs
and operations with respect to which the CHCO has responsibilities. The CHCO
may request such information or assistance as may be necessary for carrying out the
duties and responsibilities provided by Chapter 14 from any federal, state, or local
governmental entity.
Section 1303 of the law establishes a CHCO Council consisting of the OPM
Director who acts as chairperson; the OMB deputy director for management who acts
as vice chairperson; and CHCOs of executive departments and any other members
designated by the OPM Director. The council must meet periodically to advise and
coordinate the activities of the member agencies on such matters as modernization
of human resources systems, improved quality of human resources information, and
legislation affecting human resources operations and organizations. The CHCO
Council must ensure that representatives of federal employee labor organizations are
present at a minimum of one meeting of the council each year. The representatives
are not members of the council. Each year the CHCO Council must submit a report
to Congress on its activities.
Section 1304 of the law amends 5 U.S.C. § 1103 by adding a subsection (c)
which provides that OPM must design a set of systems, including appropriate
metrics, for assessing the management of human capital by federal agencies. (See the
discussion under 5 U.S.C. Chapter 11 in this compendium.) The CHCO provisions
became effective on May 24, 2003, under Section 1305 of the law.
Discussion
The provisions on CHCOs are intended to facilitate communication among
executive branch departments and agencies and enhance the coordination of human
resources management in the federal government. At two days of hearings in March
2002 on the federal workforce, conducted by the Senate Subcommittee on
International Security, Proliferation, and Federal Services, Members took testimony
on the positive role that councils play in developing and implementing initiatives to
address federal management issues and serving as communities of interest that share
best practices. They also received testimony as to the intent of the provisions that
CHCOs be senior managers who are charged with deploying human resources
management authorities efficiently and strategically.
On May 24, 2003, OPM Director Kay Coles James announced the names of
those who will serve on the CHCO Council. The Council conducted its first meeting
on June 11, 2003. Council meetings have included, among other issues, discussions
on encouraging federal agencies to use the personnel flexibilities that have already
been authorized, career development in the federal government, and emergency
procedures for federal agencies.



Selected Source Reading
Armey, Representative Dick. “Homeland Security Act of 2002.” Remarks in the
House. Congressional Record, daily edition, vol. 148 (November 13, 2002), pp.
H8595-H8645.
U.S. Congress. Senate. Committee on Governmental Affairs. Subcommittee on
International Security, Proliferation, and Federal Services. The Federal
Workforce: Legislative Proposals for Change. Hearing. 107th Congress, 2nd
session. Washington: GPO, 2003.
Barbara L. Schwemle



(5) Political Activity of Certain State and Local Employees (Chapter

15; in Part II).


Statutory Intent and History
Chapter 15, commonly referred to as the Hatch Act covering state or local
government officers and employees, addresses the extent to which such workers can
be politically active. The underlying statutes for the Chapter 15 provisions are the
Federal Election Campaign Act Amendments of 1974 (88 Stat. 1290) and the Civil
Service Reform Act of 1978 (92 Stat. 1225). The 1974 law removed all but three of
the prohibitions on political activities of certain state and local employees.
Enforcement provisions that provide penalties for violations were added in 1978.
Major Provisions
Chapter 15 covers state or local government officers or employees who are
“employed by a State or local agency [and] whose principal employment is in
connection with an activity which is financed in whole or in part by loans or grants
made by the United States or a Federal agency.” An individual who exercises no
functions in connection with such activity is not covered. District of Columbia (DC)
government officers or employees, other than the mayor, members of the City
Council, or the Recorder of Deeds, are covered by Chapter 73 provisions of the Hatch
Act Reform Amendments of 1993 (107 Stat. 1001).
A covered state or local officer or employee may not:
!use official authority or influence for the purpose of interfering with
or affecting the result of an election or a nomination for office;
!directly or indirectly coerce, attempt to coerce, command, or advise
a state or local officer or employee to pay, lend, or contribute
anything of value to a party, committee, organization, agency, or
person for political purposes; or
!be a candidate for elective office.
A state or local officer or employee retains the right to vote and express
opinions on political subjects and candidates. The prohibition on candidacy for
elective office applies to only a limited number of state and local elections. A state
or local officer or employee is not prohibited from being a candidate in any election
if none of the candidates being nominated or elected represents a party whose
candidates for presidential elector received votes in the last preceding election at
which presidential electors were selected. Office of Personnel Management (OPM)
regulations define this as a nonpartisan election.
Any federal agency making a loan or grant of U.S. funds to a state or local
officer or employee for an activity must report to the Special Counsel (who heads the
Office of Special Counsel, a federal agency) if it reasonably believes that the
individual has violated the prohibitions against influencing elections or taking part
in political campaigns. If warranted, the Special Counsel then investigates and



presents its findings and any resulting charges to the Merit Systems Protection Board
(MSPB). MSPB fixes the time and place for a hearing and notifies the officer or
employee being charged and the employing agency of the alleged violation. The
hearing may not be held earlier than 10 days after the notice is mailed.
The state or local officer or employee and the agency may appear with counsel
at the hearing. After the hearing, MSPB determines whether a violation has
occurred; if so, the board determines whether the violation warrants removal from
the office or job and notifies the individual and the agency by mail. MSPB imposes
a penalty when it finds that (1) a state or local officer or employee has not been
removed from office or employment within 30 days of receiving its notice that the
individual has violated the law and must be removed; or (2) a removed state or local
officer or employee has been appointed within 18 months to an office or employment
in the same state in a state or local agency which does not receive loans or grants
from a federal agency. In such cases, MSPB orders the federal agency to withhold
from its loans or grants to the state or local agency an amount equal to two years’ pay
at the rate the individual was receiving when the violation occurred. If the
appointment has been made within 18 months to a state or local agency that receives
federal loans or grants, MSPB directs that the withholding be made from the agency.
The order becomes effective 30 days after it has been mailed to the agency. MSPB
may not require an amount to be withheld from a loan or grant pledged by a state or
local agency as security for its bonds or notes if such withholding jeopardizes
payment of the principal or interest.
MSPB may subpena witnesses to attend and testify and produce documentary
evidence relating to any matter concerning political activity of covered state and local
employees. When a subpena is disobeyed, a U.S. court may require the attendance
and testimony of witnesses and the production of documentary evidence. In case of
contumacy or refusal to obey a subpena, the United States District Court within
whose jurisdiction the inquiry is proceeding may order the person to appear before
MSPB, or to produce documentary evidence if so ordered, or to give evidence
concerning the matter in question. Any failure to obey the court order may be
punished as contempt. MSPB may order testimony to be taken by deposition at any
stage of its proceeding or investigation. A person subpoenaed by MSPB may not be
excused from attending, testifying, or producing documentary evidence because to
do so could incriminate or subject him to a penalty or forfeiture. A person who
falsely testifies may be prosecuted for perjury.
A party aggrieved by an MSPB action may, within 30 days, petition for a review
in the United States District Court for the district in which he or she resides. The
start of proceedings does not stay the order or determination unless the court so
orders, and the officer or employee is suspended from his office or employment while
proceedings are pending. The court reviews the entire record, including questions
of fact and law. It may direct that additional evidence be taken. MSPB may modify
its findings or determination or order because of additional evidence. The
modification is filed with the court if conclusive. The court affirms the
determination or order, or the modified action if it is in accord with law. If it is not,
the court remands the proceeding to MSPB with directions to comply with the law.
The court’s actions are final, subject to review by the appropriate United States Court



of Appeals, as are those of the court of appeals subject to review by the United States
Supreme Court on certiorari or certification.
Discussion
Legislation (H.R. 308) which sought to repeal the prohibition on state or local
government officers or employees seeking elected office was introduced in the 105th
Congress, but no further action occurred. Similar legislation had been introduced in
both the 103rd and 104th Congresses. Also in the 104th Congress, legislation (H.R.
3918) which would have treated DC government employees the same as state and
local government employees for purposes of 5 U.S.C. Chapter 15 was introduced, butth
no further action occurred. Similar legislation also was introduced in the 107
Congress (H.R. 4617).
Discussions to amend the Hatch Act covering state or local government officers
and employees might focus on issues including these: whether the availability of
federal funds mandates political activity restrictions; whether coercion and patronage
would result from a liberalized political activity law; and whether state laws, known
as the “little” Hatch Acts, are sufficiently strong to prevent the misuse of government
authority.
Selected Source Reading
Boyle, Louis Lawrence. “Reforming Civil Service Reform: Should the Federal
Government Continue to Regulate State and Local Government Employees?”
Journal of Law and Politics, vol. 7 (winter 1991), pp. 243-288.
CRS Report 97-624 GOV. Federal Restrictions on State or Local Government
Officer or Employee Political Activities, by Barbara L. Schwemle (1997). (This
CRS report is archived and available from the author of this entry in the
compendium.)
Rosenbloom, David H. Federal Service and the Constitution: Development of the
Public Employee Relationship. Ithaca: Cornell University Press, 1971.
Snead, John David. “An Inquiry Into the Chilling Effects of Stringent Little Hatch
Act Prohibitions,” Review of Public Personnel Administration vol. 21 (winter

2001), pp. 259-283.


U.S. Commission on Political Activity of Government Personnel. Findings and
Recommendations (vol. 1), Research (vol. 2), Hearings (vol. 3). Washington:
GPO, 1968.
U.S. Office of Special Counsel. Political Activity and the State and Local Employee.
Washington: OSC, 2000. (Advisory opinions on application of the law to state
and local employees are available at [http://www.osc.gov], visited December

11, 2003.)


Barbara L. Schwemle



(6) Definitions (Chapter 21; in Part III, Subpart A — General
Provisions).
Statutory Intent and History
The Pendleton Act of 1883 (22 Stat. 403-407) provides the basis for the
definitions of the civil and competitive service terminology still in use today. The
act provided that the civil service would be comprised of individuals who had
successfully passed competitive examinations. It also provided for specific
exceptions and established the President as the officer with the authority to regulate
admissions to the civil service. The Homeland Security Act of 2002 (P.L. 107-296;

116 Stat. 2229) and the National Defense Authorization Act for FY2004 (P.L. 108-


136; 117 Stat. 1621) authorize the creation of new human resources management
(HRM) systems for civilian employees of the Departments of Homeland Security and
Defense. Both laws stipulate that the Chapter 21 provisions cannot be waived,
modified, or otherwise affected by the new HRM systems. (See the discussions of
the 5 U.S.C. Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Sections 2101 through 2109 provide definitions for civil service, armed forces,
uniformed services, Senior Executive Service, competitive and excepted services,
officer, employee, Member of Congress, congressional employee, veteran, preference
eligible, and air traffic controller.
Discussion
Throughout Title 5 there are sections that provide definitions of some of these
same categories, particularly of employee and agency. The definitions specifically
associated with provisions would govern. However, throughout Title 5, there are
cross references to definitions elsewhere in the title. The definition of employee
(Section 2105) is probably the most common reference. At other points in Title 5
different definitions are used, and in some instances, it is necessary to follow several
references until the specific definition, and its exceptions, become clear. For
example, Section 5302 defines employee for the pay comparability system. Statutory
pay system is defined, in part, as a pay system under “Subchapter III, relating to the
General Schedule.” Section 5331 (definitions under Subchapter III) leads the reader
to a cross-reference to the definitions under Section 5102, which is the definitional
section for the position classification system. Section 5102 defines employee as “an
individual employed in or under an agency,” defines agency, and provides a
substantial listing of exceptions.
Selected Source Reading
U.S. General Accounting Office. The Excepted Service: A Research Profile.
GAO/GGD-97-72. May 1997.
Mitchel A. Sollenberger



(7) Merit System Principles (Chapter 23; in Part III, Subpart A —
General Provisions).
Statutory Intent and History
The Civil Service Reform Act (CSRA) of 1978 (92 Stat. 1113) is the underlying
statute for Chapter 23. The law codifies merit principles and prohibits personnel
practices that had previously been expressed in rules, regulations, and executive
orders. The legislative history of the CSRA indicates that the statute codified merit
system principles for the first time, and required agencies and employees to adhere
to them.
Major Provisions
Each agency head is responsible for preventing prohibited personnel practices,
for complying with, and enforcing, applicable civil service laws, rules, and
regulations, and other aspects of personnel management, and for ensuring that agency
employees are informed of the rights and remedies available to them. The law
defines personnel actions as: appointments; promotions; adverse actions or other
disciplinary or corrective actions; details, transfers, or reassignments; reinstatements;
restorations; reemployment; performance evaluations; decisions concerning pay,
benefits, or awards, concerning education or training, if such may reasonably be
expected to lead to a personnel action; decisions to order psychiatric testing or
examination; and any other significant changes in duties, responsibilities, or working
conditions. Nine merit system principles and 12 prohibited personnel practices are
codified in law and summarized below.
Merit System Principles.
!recruit from qualified individuals to achieve a workforce from all
segments of society; selection and advancement solely on the basis
of relative ability, knowledge, and skills; assure equal opportunity
through fair and open competition;
!fair and equitable treatment of employees and applicants for
employment in all aspects of personnel management without regard
to political affiliation, race, color, religion, national origin, sex,
marital status, age, or handicapping condition, and with proper
regard for their privacy and constitutional rights;
!equal pay for work of equal value, with appropriate consideration of
both national and local rates paid by employers in the private sector,
and appropriate incentives and recognition for excellence in
performance;
!employee adherence to high standards of integrity, conduct, and
concern for the public interest;
!efficient and effective use of the federal workforce;



!retain employees on the basis of the adequacy of their performance;
correct inadequate performance; and separate those who cannot or
will not improve performance to meet required standards;
!provide employees effective education and training to improve
organizational and individual performance;
!protect employees against arbitrary action, personal favoritism, or
coercion for partisan political purposes, and prohibit the use of
official authority or influence to interfere with or affect the result of
an election or a nomination for election;
!protect employees against reprisal for the lawful disclosure of
information reasonably believed to evidence a violation of any law,
rule, or regulation, or mismanagement, a gross waste of funds, an
abuse of authority, or a substantial and specific danger to public
health or safety.
Prohibited Personnel Practices.
!discriminating for or against any employee or applicant for
employment on the basis of race, color, religion, sex, national origin,
age, handicapping condition, marital status, or political affiliation;
!soliciting or considering any recommendation or statement, oral or
written, with respect to any individual who requests, or is under
consideration for, any personnel action unless such recommendation
or statement is based on the personal knowledge or records of the
person furnishing it, and consists of an evaluation of the work
performance, ability, aptitude, or general qualifications of such
individual, or an evaluation of the character, loyalty, or suitability of
such individual;
!coercing the political activity of any person (including the providing
of any political contribution or service) or taking any action against
any employee or applicant for employment as a reprisal for the
refusal of any person to engage in such political activity;
!deceiving or willfully obstructing any person with respect to such
person’s right to compete for employment;
!influencing any person to withdraw from competition for any
position for the purpose of improving or injuring the prospects of
any other person for employment;
!granting any preference or advantage not authorized by law, rule, or
regulation to any employee or applicant for employment (including
defining the scope or manner of competition or the requirements for
any position) for the purpose of improving or injuring the prospects
of any particular person for employment;



!appointing, employing, promoting, advancing — or advocating such
— in or to a civilian position any individual who is a relative of such
employee if such position is in the agency in which such employee
is serving as a public official or over which such employee exercises
jurisdiction or control as an official;
!taking or failing to take, or threatening such, a personnel action with
respect to any employee or applicant for employment because of any
disclosure of information, including to the Special Counsel370 or an
agency Inspector General, by the individual which he or she
reasonably believes evidences a violation of any law, rule, or
regulation, or gross mismanagement, a gross waste of funds, an
abuse of authority, or a substantial and specific danger to public
health or safety; provided the disclosure is not specifically prohibited
by law and if such information is not specifically required by
executive order to be kept secret in the interest of national defense
or the conduct of foreign affairs;
!taking or failing to take, or threatening such, any personnel action
against any employee or applicant for employment because of the
exercise of any appeal, complaint, or grievance right granted by any
law, rule, or regulation; testifying for, or otherwise lawfully
assisting, any individual in the exercise of any right referred to
above; cooperating with or disclosing information to, the Inspector
General of an agency, or the Special Counsel, in accordance with the
law; or for refusing to obey an order that would require the
individual to violate a law;
!discriminating for or against any employee or applicant for
employment on the basis of conduct which does not adversely affect
the performance of the individual or the performance of others;
except this shall not prohibit an agency from taking into account, in
determining suitability or fitness, any conviction of the employee or
applicant for any crime under federal, state, or District of Columbia
law;
!knowingly taking, recommending, or approving, or failing to do
such, any personnel action if the taking of, or failing to take, such
action would violate a veterans’ preference requirement;
!taking or failing to take any other personnel action if such would
violate any law, rule, or regulation implementing, or directly
concerning, the merit system principles.


370 The Special Counsel heads the Office of Special Counsel (OSC), a federal agency. See
the discussion of 5 U.S.C. Chapter 12 for more information on the OSC.

Discussion
No substantive amendments have been made to the merit system principles
since their codification in 1978. Concerning the prohibited personnel practices,
however, significant amendments have been made. In 1993, the Hatch Act Reform
Amendments (107 Stat. 1001) expressly prohibited a Member of Congress from
making a recommendation on behalf of an applicant for federal employment, except
as to character and the residence of the individual. In 1996, this prohibition was
ended by restoring the language first enacted in 1978 (110 Stat. 2395). There is
currently no specific prohibition on Members’ recommending or referring applicants
for federal positions or federal personnel actions. In 1998, the prohibition relating to
violation of the veterans’ preference requirement was added in the Veterans
Employment Opportunities Act of 1998 (112 Stat. 3187).
H.R. 5512, introduced in the 106th Congress, would have added a 13th prohibited
personnel practice related to the implementation or enforcement of any nondisclosure
policy, form, or agreement. The bill also would have amended the eighth prohibited
personnel practice to clarify the disclosures covered. No further action occurred on
the bill. Similar legislation (H.R. 2588 and S. 995) was introduced in the 107thth
Congress and is pending in the 108 Congress (H.R. 3281, Whistleblower Protection
Enforcement Act; and S. 1229 and S. 1358, Federal Employee Protection of
Disclosures Act).
At the request of the Administration, legislation (S. 1495) was introduced in the
105th Congress to require the federal appeals court to hear every appeal from a Merit
Systems Protection Board (MSPB) decision brought by OPM (currently the court has
discretion to decide whether or not to hear OPM petitions). Additionally, the
legislation would have granted OPM 60 days to file a petition for review rather than
the current 30 days. In a hearing on the bill, OPM justified its request for the
amendments by saying that it was in a better position than the court to judge the
impact of erroneous MSPB and arbitration decisions and that the 60-day time frame
was the same as that for government appeals from the Federal Labor Relations
Authority. The Justice Department and the National Academy of Public
Administration supported OPM’s views. Representatives of the National Treasury
Employees Union, the American Federation of Government Employees, and the
National Federation of Federal Employees opposed the amendments. Among their
comments were these: that the federal circuit should retain its discretion (a system
of checks and balances) as appeals were only to be granted in exceptional
circumstances; that the other parties to a case have only 30 days to appeal; that
arbitration decisions are nonprecedential cases; and that courts make and are
qualified to make decisions about whether an appeal should be heard in every case.
No further action occurred on the bill.
In the 108th Congress, legislation (H.R. 2867 and S. 1440, Federal Bureau of
Investigation (FBI) Reform Act of 2003) is pending to amend 5 U.S.C. § 2303 to
increase the protection for FBI whistleblowers. Similar legislation (S. 1974) was
introduced in the 107th Congress.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136; 117 Stat. 1621)



authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 23 merit system principles and prohibited personnel
practices cannot be waived, modified, or otherwise affected by the new HRM
systems. (See the discussions of the 5 U.S.C. Chapter 97 and Chapter 99 provisions
in this compendium.)
By law, the Office of Personnel Management is to execute, administer, and
enforce the civil service laws and rules and regulations and conduct oversight of any
personnel management authorities which it delegates to agency heads. Under its
strategic plan, mandated by P.L. 103-62, the Government Performance and Results
Act, one of OPM’s FY2004 goals is to “monitor and assess agencies’ effectiveness
in implementing merit-based strategies that support their mission.” OPM’s FY2004
budget request allocated $16,070,000 (out of a total of $120,246,000) and 136 (out
of a total of 796) full-time equivalent employees to carrying out this goal.
MSPB, by law, is required to submit an annual report to the President and
Congress which includes an analysis of “whether the actions of OPM are in accord
with merit system principles and free from prohibited practices.” Its July 1998 report
found that OPM’s reorganized oversight program had improved; it enjoyed a high
degree of top-management support within OPM and was seen as having value to the
agencies. Among MSPB’s recommendations for further improvement were that
evaluation needs to be more consistent in the field divisions, information obtained
through oversight needs to be better used and disseminated, and oversight of line
managers needs to occur. Recommendations focused on OPM’s leadership and
coordination in developing human resource management evaluation standards.
MSPB’s December 2001 report found that OPM’s oversight program “seems to have
been given the appropriate amount of attention and support,” is funded entirely by
appropriated funds, and “is sound.” The report included recommendations that OPM
actively influence “broad-based regulatory or statutory changes where feasible” and
“be an active participant in decisionmaking regarding HR [human resources] policies
and programs.”
Selected Source Reading
Ingraham, Patricia Wallace. The Foundation of Merit: Public Service in American
Democracy. Baltimore, MD: Johns Hopkins University Press, 1995.
Pfiffner, James P. and Douglas A. Brook, eds. The Future of Merit: Twenty Years
After the Civil Service Reform Act. Washington: Woodrow Wilson Center
Press, 2000.
Van Riper, Paul P. History of the United States Civil Service. Evanston, IL: Row,
Peterson and Company, 1958.
U.S. Congress. House. Committee on Post Office and Civil Service. Subcommittee
on Manpower and Civil Service. History of Civil Service Merit Systems of the
United States and Selected Foreign Countries Together with Executive
Reorganization Studies and Personnel Recommendations. Committee print 94-thnd

29. 94 Congress, 2 session. Washington: GPO, 1976.



U.S. Congress. House. Committee on Post Office and Civil Service. Legislative
History of the Civil Service Reform Act of 1978. Commitment print. 96th
Congress, 1st session. Committee Print 96-2. Washington: GPO, 1979.
U.S. Congress. Senate. Committee on Governmental Affairs. Subcommittee on
International Security, Proliferation, and Federal Services. Merit System
Protection Act of 1997. Hearing. 105th Congress, 2nd session. Washington:
GPO, 1998.
CRS Report 96-913A. Recommendations by Members of Congress on Behalf of
Applicants for Federal Employment, by Jack H. Maskell (1996). (This CRS
report is archived and available from the author of this entry in the
compendium.)
U.S. Merit Systems Protection Board. Civil Service Evaluation, The Evolving Role
of the U.S. Office of Personnel Management, A Report Concerning Significant
Actions of the U.S. Office of Personnel Management. Washington: MSPB,

1998.


——. The U.S. Office of Personnel Management in Retrospect; Achievements and
Challenges After Two Decades. Washington: MSPB, 2001.
Barbara L. Schwemle



(8) Authority for Employment (Chapter 31; in Part III, Subpart B —
Employment and Retention).
Statutory Intent and History
In addition to the 1966 Title 5 codification statute (P.L. 89-554; 80 Stat. 378),
the basic statutes for Chapter 31, “Authority for Employment,” include the Postal
Revenue and Federal Salary Act of 1967 (P.L. 90-206; 81 Stat. 613), the Civil
Service Reform Act of 1978 (P.L. 95-454; 92 Stat. 1111), the Federal Employees Pay
Comparability Act (FEPCA) of 1990 (P.L. 101-509; 104 Stat. 1427), and a 1988
amendment to Title 5 authorizing the establishment of the Federal Bureau of
Investigation (FBI) and the Drug Enforcement Administration (DEA) Senior
Executive Service (P.L. 100-325; 102 Stat. 579). The Homeland Security Act of
2002 (P.L. 107-296; 116 Stat. 2229) and the National Defense Authorization Act for
FY2004 (P.L. 108-136; 117 Stat. 1621) authorize the creation of new human
resources management (HRM) systems for civilian employees of the Departments of
Homeland Security and Defense. Both laws stipulate that the Chapter 31 provisions
cannot be waived, modified, or otherwise affected by the new HRM systems. (See
the discussions of the 5 U.S.C. Chapter 97 and Chapter 99 provisions elsewhere in
this compendium.)
Most recently, Congress amended Chapter 31 to streamline the hiring process
for the Securities and Exchange Commission (SEC) with the Accountant,
Compliance, and Enforcement Staffing Act of 2003 (P.L. 108-44; 117 Stat. 842) in
the wake of unfolding financial market scandals. Following a series of corporate
accounting scandals that began with Enron in late 2001, Congress moved to increase
the size and budget of the SEC, the federal agency that regulates corporate securities
markets. From $438 million in FY2002, the SEC’s annual appropriation was
increased to $716.3 million for FY2003, and then to $811.5 million for FY2004. The
increases were to fund about 900 new professional staff positions, including a
substantial number of accountants, examiners, and economists, in addition to the
hiring made necessary by staff turnover. The SEC estimated that the FY2003 budget
would result in the hiring of 200 lawyers, 250 accountants, 300 examiners, 10
economists, and some other specialists. As FY2003 came to a close, however, the
SEC reported that it had been unable to fill many of these jobs and, as a result, $103
million of its appropriation was unspent. Time-consuming hiring procedures and
rules that apply to the federal competitive service were considered a major reason for
the delay.
Major Provisions
The chapter generally mandates agency hiring of personnel, and also enumerates
specific hiring authorizations, restrictions, and prohibitions affecting federal
employment. For instance, there are provisions to assist blind and deaf federal
employees in the performance of their duties, as well as restrictions on hiring and
using attorneys; hiring publicity experts; accepting student volunteers; and using
experts and consultants. The employment of private detectives and the appointment
of relatives by public officials are prohibited.



The Accountant, Compliance, and Enforcement Staffing Act of 2003 added a
new Section 3114 to Subchapter I of Chapter 31. The SEC is authorized to appoint
accountants, economists, and securities compliance examiners to competitive service
positions by following the procedures that apply to the excepted service. Positions
thus filled are not to be considered excepted service positions. The statute directs the
SEC to submit two reports to congressional committees describing its exercise of this
authority. The initial report is due 90 days after the end of FY2003; the second, 90
days after the end of FY2005.
The purpose and composition of the Senior Executive Service (SES) is
specified. Creation of the SES was a key component of the Civil Service Reform Act
of 1978. The SES is a corps of top managers and administrators in the federal
service encompassing approximately 7,000 positions formerly in General Schedule
grades 16-18 and certain positions formerly in Executive Schedule levels IV and V.
The SES includes career and political civil servants, with a limit of 10% on noncareer
members. It emphasizes mobility, managerial discretion in assignments,
accountability and performance of a very high order, and a reward system based on
managerial excellence, risk-taking, and initiative.
The chapter also authorizes a separate Senior Executive Service for the FBI and
the DEA within the Department of Justice, independent of the government-wide SES,
but closely paralleling its pay, performance, and removal provisions. Requirements
for an annual report to Congress on the FBI-DEA Senior Executive Service are also
set forth.
Discussion
The chapter reflects both evolving trends in the federal workforce and enduring
precepts. Provisions concerning work station access for the disabled as well as
assistance for handicapped federal employees are recent chapter additions intended
to prevent discrimination based on employee disability, and closely parallel similar
protections found in the Americans with Disabilities Act (104 Stat. 327, as amended,

105 Stat. 1077, at 1095) applying to the private sector. In both instances,


unencumbered entrances, walkways, ramps, and the like are required, along with
specially adapted office machinery to assist employees in fulfilling their work
potential.
The specified employment prohibitions, on the other hand, are long-standing.
The anti-nepotism provision, together with prohibitions on employment of publicity
experts and private detectives, reflect rather permanent attitudes about certain public
proprieties in federal employment not necessarily paramount in the private sector.
With regard to the SEC provisions, the persistence of corporate and financial
scandals in the headlines created a sense of urgency in Congress for reinforcing
federal securities regulation. The bill that became P.L. 108-44 (H.R. 658) passed the
House by a vote of 423-0 on June 17, 2003, and was approved without amendment
by unanimous consent in the Senate two days later. The legislative history contains
no arguments against the concept of streamlined appointment authority for the SEC.
However, in the report accompanying H.R. 658 (H.Rept. 108-63), 24 minority
members of the House Financial Services Committee expressed the view that the



authority should be temporary and supported a sunset date at the end of FY2008. The
final version of the legislation makes the expedited hiring authority permanent. The
Office of Personnel Management (OPM) did not comment on similar language in
hearings on H.R. 1836 in May 2003 before the House Committee on Government
Reform. On June 20, 2003, one day after the Senate passed H.R. 658, OPM Director
Kay Coles James issued a memorandum stating, among other things, that direct-hire
authority371 would be available to the SEC for two years to appoint accountants,
economists, and securities compliance examiners “to respond to Congressional
interest and to help the agency meet its mandate to fill in excess of 800 positions.”372
The Senior Executive Service provisions of the Civil Service Reform Act of

1978 were, originally, the most important contribution of this landmark legislation.


Since its creation, the SES has continued to be challenged by several major issues.
The National Commission on the Public Service took note, in its 2003 report, of
problems affecting the SES, such as the inclusion of scientists, other professionals,
and technical specialists in the SES, and a compensation and reward system that has
failed to function properly. The commission recommended dividing the SES into a
Professional and Technical Corps (PTC) and an Executive Management Corps
(EMC), and advised that more attention should be paid to developing strong
management talent within the federal government. Another issue is the lack of
diversity found within the senior executive ranks. A comprehensive report by the
General Accounting Office (GAO) documenting the extent of diversity within the
SES noted that workforce planning, notably succession planning, could be used by
agencies to enhance diversity. In 2003, OPM launched an SES candidate
development program, which was presented as an initiative to aid in the development
of a high-quality SES that reflects the diversity of America.
The 20th anniversary of the SES in 1998 prompted an examination of the service
by OPM and other interested parties. OPM issued, in April 1998, “An Outline of
OPM’s Proposed Framework for Improving the Senior Executive Service.” The
Senior Executives Association (SEA) responded to this document in June 1998, and
an OPM- and SEA-sponsored survey of SES members was completed in 1999.
These efforts sought to reinforce the concept of a senior executive corps and
improve the recruitment and retention of senior executives. Major problems and
issues currently facing the Senior Executive Service are pay compression, retirement
and succession planning, the proliferation of separate cadres of senior executives at
selected agencies, mobility, restructuring, and performance management.
Selected Source Reading
Huddleston, Mark W. Whither the SES? Toward a Higher Civil Service for
America: Background Paper for the Twentieth Century Fund New York:
Twentieth Century Fund, 1986.


371 See the discussion of 5 U.S.C. Chapter 33 in this compendium for more about direct-hire
authority, which was enacted by the Homeland Security Act of 2002.
372 U.S. Office of Personnel Management, Memorandum for Heads of Executive
Departments and Agencies, and Chief Human Capital Officers, “New Human Resources
Flexibilities — Direct Hire Authority,” June 20, 2003.

Laurent, Anne. “SES: New/Improved! Concentrated!: Executives in Lather over
Plans to Change Senior Executive Service.” Government Executive, vol. 30
(June 1998), pp. 18-26.
National Academy of Public Administration, Paths to Leadership: Executive
Succession Planning in the Federal Government. A Report by a Panel of the
National Academy of Public Administration. Washington: NAPA, 1992.
National Commission on the Public Service, Rebuilding the Public Service
Washington: National Commission on the Public Service, 1989.
——. Urgent Business for America. Revitalizing the Federal Government for the 21st
Century. Washington: Brookings Institution, 2003.
U.S. Congress. House. Committee on Financial Services. Accountant, Compliance,
and Enforcement Staffing Act. Report to accompany H.R. 658. 108th Congress,

1st session. H.Rept. 108-63. Washington: GPO, 2003.


U.S. Congress. House. Committee on Financial Services. Subcommittee on Capital
Markets, Insurance, and Government-Sponsored Enterprises. H.R. 658 — The
Accountant, Compliance, and Enforcement Staffing Act of 2003, and H.R. 957
— The Broker Accountability Through Enhanced Transparency Act of 2003.
Hearing. 108th Congress, 1st session, March 6, 2003. Washington: GPO, 2003.
U.S. Congress. House. Committee on Government Reform. Instilling Agility,
Flexibility and a Culture of Achievement in Critical Federal Agencies: A
Review of H.R. 1836, The Civil Service and National Security Personnel
Improvement Act of 2003. Hearing. 108th Congress, 1st session, May 6, 2003.
Washington: GPO, 2003.
U.S. General Accounting Office. Senior Executive Service: Enhanced Agency
Efforts Needed to Improve Diversity as the Senior Corps Turns Over. GAO-03-

34. January 2003.


U.S. Office of Personnel Management. Office of Executive and Management Policy,
Human Resources Development Group. Executive Succession Planning
Conference Report. Washington: GPO, 1992.
L. Elaine Halchin
Mark Jickling (SEC-related history)
Clinton T. Brass (SEC personnel provisions)



(9) Examination, Selection, and Placement (Chapter 33; in Part III,
Subpart B — Employment and Retention).
Statutory Intent and History
The basic statutory authorities contributing to the provisions of Chapter 33,
“Examination, Selection, and Placement,” are the 1966 Title 5 codification statute
(80 Stat. 378) and the Civil Service Reform Act of 1978 (92 Stat. 1111). Additional
provisions derive from a 1967 law providing for the acquisition of career status by
certain temporary federal employees (81 Stat. 273); the Intergovernmental Personnel
Act of 1970 (84 Stat. 1920); a 1972 amendment to Title 5 providing a career program
for and greater flexibility in the management of air traffic controllers (86 Stat. 141
at 142); the Department of Defense Authorization Act, 1986 (99 Stat. 777); the
Whistleblower Protection Act of 1989 (103 Stat. 32); the Ethics Reform Act of 1989
(103 Stat. 1756); and the Homeland Security Act of 2002 (P.L. 107-296; 116 Stat.
2229). In recent years, there have been statutes which removed groups of employees
from hiring processes managed by the Office of Personnel Management.
Policymakers in the Internal Revenue Service, Federal Aviation Administration, and
Federal Bureau of Investigation have been granted specific authority to design and
implement new systems for selected groups of staff. The Homeland Security Act of
2002 and the National Defense Authorization Act for FY2004 (P.L. 108-136; 117
Stat. 1621) authorize the creation of new human resources management (HRM)
systems for civilian employees of the Departments of Homeland Security and
Defense. Both laws stipulate that the Chapter 33 provisions cannot be waived,
modified, or otherwise affected by the new HRM systems. (See the discussions of
the 5 U.S.C. Chapter 97 and Chapter 99 provisions in this compendium.)
The chapter provides certain general conditions for federal employment and also
outlines the basic elements of a merit-based civil service system. It includes
provisions dealing with competitive and noncompetitive examinations; probationary
employment periods; and prohibitions on political influence and offering any
recommendation regarding merit system employment, advocacy of the overthrow of
the government, and participating in a strike or asserting the right to strike.
Major Provisions
Chapter 33 provides general authority to the President for examination,
certification, and appointment in the federal civil service. The President is mandated
to prescribe rules for entry into competitive service, for competitive and
noncompetitive examinations, and for the probationary period before the appointment
becomes final. Political recommendations from Members of Congress and others are
prohibited, although competitive appointment based on service in the legislative and
judicial branches is allowed under certain conditions.
In addition to general conditions of federal employment, specific conditions of
employment governing certain classes of federal employees are given, including
those for air traffic controllers, law-enforcement officers, public safety personnel,
reemployed annuitants, retired military personnel, and members of the Senior
Executive Service (SES). Aspects of employment affecting these classes, such as age



limits, veterans’ preference, credit for prior military service, promotion policy, and
disability credits and preference, are enumerated.
The responsibilities of the Office of Personnel Management (OPM), as the
central personnel agency, are detailed, including conducting examinations for the
competitive service, maintaining and certifying from a competitive service register
of eligibles, prescribing rules governing appointment to positions classified above
GS-15, and keeping and making public a government-wide list of vacant positions
in the competitive service.
Key provisions of the chapter relate to the inter- and intra-agency detailing of
federal employees, as well as detailing to state and local government entities,
including limitations on length of details; responsibilities and obligations of detailees
accruing special benefits from certain assignments; protection of pay, benefits, and
seniority while on detail; and provisions governing injury and death while on detail.
On September 9, 2003, OPM published proposed regulations relating to the detail of
executive branch employees to the legislative branch (68 FR 53054). The regulations
propose to limit such details to 180 days with one additional period of up to 180 days
and to limit the activities in which executive branch employees could engage.
During consideration of the Transportation and Treasury Appropriation Bill FY2004
(H.R. 2989), the Senate agreed by voice vote to an amendment (No. 1949) offered
by Senator Charles Grassley that would prohibit any funds appropriated or made
available under the act from being used to implement the regulations. In a March 12,
2003, memorandum to human resources directors, OPM’s Associate Director for
Human Capital Leadership and Merit Systems Accountability requested that
executive branch agencies provide OPM with information about the use of
interagency details as part of their workforce strategies.373
Provisions governing the SES are elaborated, including the creation and mission
of executive resource, qualification review, and performance review boards within
the SES. Specific attention is devoted to aspects of SES employment such as
assignment and reassignments and appropriate notice pertaining thereto, career
development, and sabbaticals. S. 2651, introduced in the 107th Congress, would have
amended 5 U.S.C. § 3132 to establish a new appointment in the SES, simply known
as “limited,” which would have replaced limited term and limited emergency
appointments and to allow limited appointees who meet certain conditions to fill
career-reserved positions. Sections 3394 and 3395 would have been amended to vary
the duration of appointments, extensions, and reassignments and transfers for limited
appointees according to the type of SES position a limited appointee filled. Any
limited appointee would not have been allowed to serve more than seven consecutive
years in any combination of limited appointments. No further action occurred on the
bill. In the 108th Congress, the NASA Flexibility Act of 2003, as passed by the
Senate (S. 610) and as reported to the House of Representatives (H.R. 1085),
includes similar provisions.


373 U.S. Office of Personnel Management, Memorandum for Human Resources Directors,
“Number of Agency Details,” Mar. 12, 2003.

Section 1321 of the Homeland Security Act of 2002 repealed the Title 5, United
States Code, recertification requirement for senior executives (for agencies that are
subject to this chapter of the title; i.e., much of the executive branch) and struck from
5 U.S.C. § 3393 the reference to a senior executive being removed for failure to be
recertified.
The Homeland Security Act also amended the Title 5, United States Code,
process for hiring in the competitive service (again, for much of the executive
branch). Section 1312 of the law amended 5 U.S.C. § 3304(a) by adding a new
paragraph (3) providing authority for agencies to appoint, without regard to 5 U.S.C.
§§ 3309-3318, candidates directly to positions for which public notice has been given
and OPM has determined that there exists a severe shortage of candidates or there is
a critical hiring need. (This authority is often called “direct-hire” authority.) OPM
regulations must prescribe criteria for identifying such positions and may delegate
authority to make determinations under such criteria.374 Section 1312 of the law also
added a new Section 3319 — Alternative Ranking and Selection Procedures to Title
5, United States Code. OPM, or an agency which has been delegated examining
authority, may establish category rating systems for evaluating applicants for
positions in the competitive service. Applicants may be evaluated under two or more
quality categories based on merit, consistent with OPM regulations, rather than be
assigned individual numerical ratings. Within each quality category, applicants who
are eligible for veterans’ preference must be listed ahead of applicants who are not
eligible for preference. Except for applicants for scientific and professional positions
at GS-9 (equivalent or higher), each applicant who is a veteran with a compensable
service-connected disability of 10% or more must be listed in the highest quality
category.
An appointing official may select any applicant in the highest quality category,
or, if fewer than three candidates have been assigned to the highest quality category,
in a merged category consisting of the highest and the second highest quality
categories. The appointing official may not pass over a preference eligible in the
same category from which selection is made, unless the requirements of 5 U.S.C. §
3317(b) or § 3318(b), as applicable, are satisfied. Each agency that establishes a
category rating system must submit, in each of the three years following this
establishment, a report to Congress on the system that must include information on
the number of employees hired under the system; the system’s impact on the hiring
of veterans and minorities, including those who are American Indian or Alaska
Native, Asian, Black or African American, and native Hawaiian or other Pacific
Islander; and the way in which managers were trained in the administration of the
system. OPM published regulations to implement the provisions on June 13, 2003
(68 FR 35265).


374 U.S. Office of Personnel Management, Memorandum for Heads of Executive
Departments and Agencies, and Chief Human Capital Officers, “New Human Resources
Flexibilities — Direct Hire Authority,” June 20, 2003.

Discussion
Examination, selection, and placement provisions in federal civil service law
illuminate many key elements and potentially critical stress points in the operation
of the personnel system. These include probation, anti-politicization, age limits for
certain classes of employment, temporary duty assignments, detailing of employees,
veterans preference, loyalty provisions, and prohibitions on the right to strike.
The one-year probationary period for new federal employees has engendered
controversy over the years, as have legislative proposals to modify it. Proposals to
grant appellate rights to those denied tenure after one year, raise probationary
employee benefits, and increase the probationary time from one to three years have
all been proposed, but not accepted into law.
Although the statutory limitation on temporary service is three years, abuses of
this provision have long been reported, with many instances of individuals
complaining of far longer periods of service in temporary status.
The practice of detailing federal employees, notably those from executive
branch agencies to the White House, has been a recurring problem for many years.
Critics allege that detailed employees have been used to enhance the President’s
political agenda, and that the number of detailees at work in the White House at any
given time is difficult to ascertain because of incomplete or inaccurate reporting.375
Maximum age requirements for federal law enforcement officers and air traffic
controllers have raised questions regarding the utility, equity, and possible adverse
effects of these limits. The arbitrary loss of highly skilled professionals, for
instance, may be more costly to the agency than any benefits resulting from a reduced
workforce.
Appointment, reassignment, transfer, and development in the SES have been
repeatedly criticized over the years. Entry into the SES has long been viewed as
unduly restricted and haphazard by many career SES candidates. Reassignment,
transfer, and mobility programs, regarded as key elements in the reform legislation
creating the SES, have been considered a signal failure, since the overwhelming
proportion of career SES begin and end their careers in the same agency.
Performance appraisal programs have also been found wanting, since only a small
number of SES members have ever been faulted for inadequate performance. SES
members themselves have long criticized the service for perceived deficiencies in
compensation and management, political interference, and low morale.


375 See, for example, U.S. General Accounting Office, Personnel Practices: Federal
Employees Detailed from DOD to the White House, GAO/GGD-88-33, 1988; U.S. General
Accounting Office, Personnel Practices: Schedule C and Other Details to the Executive
Office of the President, GAO/GGD-93-14, Nov. 1992.

Selected Source Reading
U.S. General Accounting Office. The Excepted Service: A Research Profile.
GAO/GGD-97-72. May 1997.
——. Human Capital: Opportunities to Improve Executive Agencies’ Hiring
Processes. GAO-03-450. May 2003.
——. IRS Personnel Flexibilities: An Opportunity to Test New Approaches.
GAO/T-GGD-98-78. May 12, 1998.
——. Review of Veterans’ Preference and the ‘Rule of 3.’ GAO-03-966R. August

22, 2003.


U.S. Merit Systems Protection Board. Office of Policy and Evaluation. Assessing
Federal Job-Seekers in a Delegated Examining Environment. Washington:
MSPB, 2001.
——. Competing for Federal Jobs; Job Search Experiences of New Hires.
Washington: MSPB [2000].
——. Entering Professional Positions in the Federal Government. Washington:
MSPB, 1994.
——. The Federal Selection Interview; Unrealized Potential. Washington: MSPB,

2003.


——. Help Wanted; A Review of Federal Vacancy Announcements. Washington:
MSPB, 2003.
——. The 1984 Report on the Senior Executive Service. Washington: MSPB, 1984.
——. The Rule of Three in Federal Hiring: Boon or Bane? Washington: MSPB,

1995.


——. The Senior Executive Service, Views of Former Federal Executives.
Washington: GPO, 1989.
Sharon S. Gressle
Barbara L. Schwemle



(10) Part-Time Career Employment Opportunities (Chapter 34; in
Part III, Subpart B — Employment and Retention).
Statutory Intent and History
The Federal Employees Part-Time Career Employment Act of 1978 (92 Stat.
1055; 5 U.S.C. §§ 3401-3408) is intended to encourage the use of part-time career
employment by requiring all agencies to establish programs for increased part-time
career employment opportunities. Proponents of the legislation argued that it would
benefit the federal government, and therefore the country at large, as well as a
substantial segment of the potential workforce. The federal government would
benefit from a system of permanent part-time employment that could tap the talents
of many citizens who were not seeking employment because they were either
unwilling or unable to work full-time schedules. It was also contended that part-time
schedules would benefit several pools of potential employees. These would include
women whose family commitments made them unable to work full time;
handicapped individuals with the potential for making considerable contributions but
who were physically unable to work a 40-hour week; and senior citizens who could
bring broad experience to the workplace during a transitional period leading to
retirement.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136; 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 34 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Part-time career employment is defined as part-time employment of 16 to 32
hours a week under a schedule consisting of an equal or varied number of hours per
day, whether in a position which would be part-time without regard to the statute or
one established to allow job-sharing or comparable arrangements. The provisions of
the statute do not apply to persons paid at rates equal to the minimum rate of pay for
senior-level personnel (5 U.S.C. § 3405(b)). The provisions do not include
employment on a temporary or intermittent basis. Federal agencies and the Office of
Personnel Management (OPM) are required to establish, maintain, and periodically
review the part-time employment program. Representation by employee
organizations is allowed.
Discussion
For a period of at least one year prior to enactment of the 1978 statute, federal
agencies had been actively exploring the possibilities of increased part-time
employment programs. President Carter, in 1977, had instructed the agencies to
establish innovative programs for the purpose of expanding part-time opportunities.
During the year before enactment, the number of part-time permanent workers in the
federal system increased by about 20%, from 43,000 to 51,000. At the time of



enactment, permanent part-time employment constituted over 2.7% of the permanent
federal workforce. According to OPM, as of March 2003, permanent part-time
employees made up 5.74% of the federal civilian workforce.
Selected Source Reading
Employee Benefits Research Institute. Characteristics of the Part-Time Work Force:
Analysis of the March 1993 Current Population Survey. Issue Brief 149.
Washington: EBRI, 1994.
U.S. Congress. Senate. Committee on Governmental Affairs. Subcommittee on
Governmental Efficiency and the District of Columbia. Status of
Implementation of the Part-Time Career Employment Act of 1978. Hearings.thnd

96 Congress, 2 session. Washington: GPO, 1980.


Kevin R. Kosar



(11) Retention Preference, Voluntary Separation Incentive
Payments, Restoration, and Reemployment (Chapter 35; in Part III,
Subpart B — Employment and Retention).
Statutory Intent and History
The Veterans’ Preference Act of 1944 (58 Stat. 388) and the Civil Service
Reform Act of 1978 (92 Stat. 1149) are the underlying statutes for employee
retention during reduction in force (RIF). Senior Executive Service (SES) provisions
are authorized by the Civil Service Reform Act of 1978 (92 Stat. 1165), except for
those on RIFs in the SES, which are authorized by provisions of the Omnibus Budget
Reconciliation Act of 1981 (95 Stat. 756); furloughs in the SES, which are authorized
by the Civil Service Retirement Spouse Equity Act of 1984 (98 Stat. 3220); and
repeal of the SES recertification process, which is provided by the Homeland
Security Act of 2002 (P.L. 107-296; 116 Stat. 2229). Voluntary separation incentive
payments also are authorized for executive branch agencies by the Homeland
Security Act of 2002, and for the Smithsonian Institution by the Smithsonian
Facilities Authorization Act (117 Stat. 889). The authority for reemployment after
service with an international organization derives from the Foreign Assistance Act
of 1969 (83 Stat. 825). Reemployment following limited appointment in the Foreign
Service is authorized by the Foreign Service Act of 1980 (94 Stat. 2164). The intent
of the laws, with regard to reduction in force, was to codify retention practices. The
laws confirmed the regulations and practices in effect at the time.
Major Provisions
Retention during reduction in force is based on tenure, military preference,
length of service, and efficiency or performance ratings. Sixty days notice of
impending RIF action must be given to the affected employee and his or her labor
representative.
Chapter 35 includes several provisions relating to the SES. A career appointee
to the SES can be removed during the one-year probationary period or at any time for
less than fully successful executive performance. A former career appointee may be
reinstated in the SES if the probationary period has been successfully completed, and
if the appointee left the SES for reasons other than misconduct, neglect of duty,
malfeasance, or less than fully successful executive performance. A career appointee
who was appointed from a civil service position to the SES and who is removed from
the SES during the probationary period for reasons other than misconduct, neglect
of duty, or malfeasance may be placed in a civil service position in any agency.
Agencies provide competitive procedures for removing employees from the SES
during a RIF of career appointees. Determinations are based primarily on
performance. Employees in the SES may be furloughed for reasons of insufficient
work, or funds or for other nondisciplinary reasons. Final Office of Personnel
Management (OPM) regulations, which became effective on November 13, 2000,
detail the SES performance appraisal process (5 CFR Part 430, Subpart C).
The Homeland Security Act of 2002 delegated to OPM authority to review and
approve requests from federal executive branch agencies (as defined at 5 U.S.C. §

105) to offer voluntary separation incentive payments of up to $25,000 to employees



in particular occupational groups, organizational units, or geographic locations who
retire or resign. OPM is to do this in consultation with the Office of Management
and Budget (OMB). The authority to offer separation payments (“buyouts”) applies
across all executive agencies. Buyouts can be used by agencies seeking to reduce
their total employment or to reshape their workforce to meet critical agency needs.
Agencies seeking approval from OPM must submit a plan that describes the intended
use of the buyouts. Payments are to be made from the agencies’ regular
appropriations for salaries and are subject to all applicable federal, state, and local
income taxes. They are not included in the employee’s basic pay for purposes of
calculating the amount of his or her retirement annuity.
The Smithsonian Facilities Authorization Act allows the Secretary of the
Smithsonian Institution to establish a program “substantially similar” to the program
established by the Homeland Security Act. However, the law leaves unclear what
approval role, if any, OPM or OMB have under this authority.
Provisions on transfer of functions, waiver of physical qualifications for
veterans’ preference employees, reinstatement or restoration of individuals suspended
or removed for national security, and reemployment after service with an
international organization or following limited appointment in the foreign service are
also included in Chapter 35.
Discussion
In the 104th Congress, H.R. 3841 would have amended the RIF regulations to
increase the weight given to performance appraisal in a RIF. The bill would have
codified language on granting additional years of service credit. The additional
service credit an employee received for performance would have consisted of the sum
of the employee’s three most recent annual performance ratings — those received
during the four-year period prior to the issuance of RIF notices, or the four-year
period prior to the agency-established cutoff date. This would have been an
important change. Under the current RIF regulations, the additional years of service
credit are totaled, averaged, and then added to seniority to determine retention
standing. Under H.R. 3841, employees were to receive five, seven, or 10 additional
years of service depending on the number of rating levels in their performance
appraisal system. H.R. 3841 passed the House of Representatives after the RIF
language was struck, but no further action occurred in the 104th Congress. However,
during subcommittee hearings on the measure, federal manager and employee
organizations testified that the RIF changes would adversely affect employees who
were outstanding performers and politicize the retention system by allowing
managers to give high performance ratings to favored employees.
Draft legislation, prepared but not introduced in the 105th Congress, by the
House Civil Service Subcommittee chair, Representative Mica, would have
authorized employees in agencies facing workforce reductions to volunteer for RIFs.
Additionally, the legislation proposed a separate retention register for federal
employees with less than “fully successful” performance ratings. According to the
draft, this was to ensure that the poor performers would receive less retention
consideration in a RIF than good performers with less seniority.



The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136; 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 35 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.) Section 1321 of the
Homeland Security Act repealed the recertification requirement for senior executives.
A September 1998 OPM report assessing recertification found that more than 99%
of executives were recertified; the average cost of recertifying one executive ranged
from $34 to $3,400; and 50 reporting agencies spent about 12,600 work hours on
recertification, costing them almost $750,000. The Homeland Security Act delegated
to OPM authority to review and approve requests from federal agencies to offer
voluntary separation incentive payments of up to $25,000 to employees in particular
occupational groups, organizational units, or geographic locations who retire or
resign.
In an August 1998 report on downsizing in the federal government during the
years 1994 to 1996, OPM found that agencies reduced their workforces without
massive reductions in force by using such tools as buyouts (79% of the time) and
early retirement (72% of the time). RIFs in all executive branch agencies totaled

2,092 (FY2000), 1,586 (FY2001), 1,360 (FY2002), and 286 (1st quarter of FY2003).


OPM published final revised regulations on the use of performance appraisal
ratings to determine retention during a RIF in November 1997 (5 CFR § 351.504).
The regulations provide for additional years of service credit ranging from 12 to 20
years and specify that only actual performance ratings can be used to determine
retention credit. (Under the previous regulations, an employee received 12, 16, or 20
additional years of service credit for “fully successful,” “exceeds fully successful,”
or “outstanding” performance, and a rating of “fully successful” could have been
assumed for missing ratings.) Interim regulations, effective on October 20, 2000
clarified the “longstanding policy that an agency determines the grade or grade-
interval range of a released employee’s potential retreat rights [to another position]
solely on the basis of the official position of record held by the employee on the
effective date of the reduction in force” (5 CFR § 351.701(f)).
Selected Source Reading
Glennon, Thomas A. “RIF Procedures — How They Got Here from There.”
Management, vol. 3 (spring 1982), pp. 14-16.
White, Shelya. “Reduction in Force — Benefit or Detriment? A Look at Some
Tangible and Intangible Results of Federal Sector Reductions in Force (RIF).”
International Journal of Public Administration, vol. 26, nos. 10 and 11 (2003),
pp. 1145-1165.
U.S. Congress. House. Committee on Government Reform and Oversight.thnd
Omnibus Civil Service Reform Act of 1996. 104 Congress, 2 session.
H.Rept. 104-831. Washington: GPO, 1996.



U.S. Office of Personnel Management. An Assessment of Recertification in the
Senior Executive Service. Washington: GPO, 1998.
——. Office of Merit Systems Oversight and Effectiveness. Downsizing in the
Federal Government, Report of an Oversight Special Study. Washington:
OPM, 1998.
——. Workforce Restructuring Office. Restructuring Information Handbook
Module 3: Reduction in Force. Washington: OPM, 1998.
——. Workforce Restructuring Office. The Employee’s Guide to Reduction in Force
(RIF). Washington: OPM, 1999.
——. Workforce Restructuring Office. The Employee’s Guide to Benefits for Those
Affected by Reduction in Force. Washington: OPM, 1999.
Barbara L. Schwemle
Patrick J. Purcell (buyout authority)



(12) Information Technology Exchange Program (Chapter 37; in
Part III, Subpart B — Employment and Retention).
Statutory Intent and History
Chapter 37, which was established by the E-Government Act of 2002 (P.L. 107-

347), provides for the exchange of information technology (IT) professionals between376


the public and private sectors.
The Intergovernmental Personnel Act, P.L. 91-648 (5 U.S.C. §§ 3371-3375),
gives agencies authority to exchange personnel with state and local governments, as
well as certain nongovernmental organizations, such as institutions of higher
education.377 The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and
the National Defense Authorization Act for FY2004 (P.L. 108-136; 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 37 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
This chapter authorizes the exchange of information technology personnel
between federal government agencies and private sector organizations. Chapter
provisions outline eligibility criteria for federal employees and private sector
employees, establish the duration of assignments, require an agency to provide a
written agreement between the agency and an employee who participates in an
exchange, address the employment and benefits status of federal employees and
private sector employees who participate in an exchange assignment, and establish
the terms and conditions under which an employee of a private sector organization
would be employed by a federal agency. This chapter also authorizes the chief
technology officer of the District of Columbia to arrange for public-private
exchanges of information technology personnel between his or her office and private
sector organizations. Any references in Chapter 37 to federal law or regulations are
deemed to be a reference to applicable provisions of the District’s laws and
regulations.
The Office of Personnel Management (OPM) is responsible for prescribing
regulations for administering this chapter, and is required to prepare and submit
semiannual reports to the Senate Committee on Governmental Affairs and the House
Committee on Government Reform. OPM also is required to provide a report on all
existing public-private exchange programs. Additionally, the General Accounting
Office (GAO) is required to prepare and submit a report on information technology
training programs.


376 116 Stat. 2899, at 2925; H.R. 2458.
377 U.S. Office of Personnel Management, “Intergovernmental Personnel Act Mobility
Program,” available at [http://www.opm.gov/programs/ipa/], visited Dec. 3, 2003.

Discussion
This chapter reflects an interest in recruiting and retaining federal government
information technology personnel. In a 2001 report, GAO estimated that the demand
for IT workers was high in all sectors, and concluded that the federal government and
other employers were having trouble getting enough “highly skilled IT workers” to
meet the demand.378 Additionally, a comparison of federal compensation with
compensation offered by state and local governments, non-profit organizations,
private business, and academic institutions showed that the federal government was
low on salary levels, rewards and recognition, advancement and training, and the use
of recruiting tools.379 It is anticipated that the exchange program will help meet the
training needs of government employees, while offering private sector employees the
opportunity for public service.
It is too early to tell the extent to which federal agencies and their employees,
as well as private sector organizations and their personnel, will make use of Chapter

37. OPM issued proposed regulations early in 2004 for implementation of this380


chapter.
Selected Source Reading
Mervis, Jeffrey. “A Way Out.” Government Executive, vol. 35 (February 2003), pp.

54-57.


National Academy of Public Administration. Comparative Study of Information
Technology Pay Systems, Executive Summary. Washington: National Academy
of Public Administration, 2001.
U.S. Congress. House. House Committee on Government Reform. E-Government
Act of 2002. Report to accompany H.R. 2458. 107th Congress, 2nd session.
H.Rept. 107-787, part 1. Washington: GPO, 2002.
U.S. General Accounting Office. Human Capital: Attracting and Retaining a High-
Quality Information Technology Workforce. GAO-02-113T. October 4, 2001.
U.S. General Accounting Office. National Science Foundation: External
Assignments under the Intergovernmental Personnel Act’s Mobility Program.
GAO-01-1016. September 2001.
L. Elaine Halchin


378 U.S. General Accounting Office, Human Capital: Attracting and Retaining a High-
Quality Information Technology Workforce, GAO-02-113T, Oct. 4, 2001, p. 3.
379 National Academy of Public Administration, Comparative Study of Information
Technology Pay Systems, Executive Summary (Washington: National Academy of Public
Administration, 2001), p. 10.
380 U.S. Office of Personnel Management, “Information Technology Exchange Program,”

69 Federal Register 2308, Jan. 15, 2004.



(13) Training (Chapter 41; in Part III, Subpart C — Employee
Performance).
Statutory Intent and History
The 1966 Title 5 codification statute (80 Stat. 378) and the Civil Service Reform
Act of 1978 (92 Stat. 1111) are the basic authorities for Chapter 41. Additional
authority is provided by a 1982 amendment to Title 5 providing training
opportunities for employees under the Office of the Architect of the Capitol and the
Botanic Garden (96 Stat. 1647). The Federal Workforce Restructuring Act of 1994
(108 Stat. 1111) added language which served to emphasize the need for training so
that it benefits not only the individual, but also the organization and assists in
achieving agency mission and goals. The Homeland Security Act of 2002 (P.L. 107-

296; 116 Stat. 2229) and the National Defense Authorization Act for FY2004 (P.L.


108-136; 117 Stat. 1621) authorize the creation of new human resources management
(HRM) systems for civilian employees of the Departments of Homeland Security and
Defense. Both laws stipulate that the Chapter 41 provisions cannot be waived,
modified, or otherwise affected by the new HRM systems. (See the discussions of
the 5 U.S.C. Chapter 97 and Chapter 99 provisions in this compendium.)
Federal employee training programs are designed to insure that federal
employees maintain and improve their basic job skills and knowledge in order to
render maximum service to their agency’s mission and to the public at large. To
attain this goal, both government-wide and agency-specific instruction programs are
offered to keep federal personnel informed and up to date on professional, scientific,
and technical developments related to their fields of expertise. Off-site training
programs at colleges and universities are also available, provided that the instruction
received relates to and enhances employees’ performance in their respective
occupations. The ultimate objective of government training is to build and retain a
workforce of skilled and efficient employees.
Major Provisions
Chapter 41 consists of provisions governing the availability and use of federal
training options for federal employees in both government and nongovernment
facilities. The costs of training, employee agreements, and federal assistance to
defray costs are also addressed.
Federal training is defined as providing for instruction or education options for
federal employees or the placement of employees in instruction or education
programs to assist in achieving agency mission and performance goals. Certain
agencies are excepted from the provisions of the chapter, and the President is
authorized to delete or add exceptions, but may not alter the role of the Office of
Personnel Management (OPM) in administering training programs.
Agency heads also are granted authority to establish training programs for their
employees. They also may contract-out training programs where considered
appropriate and cost-effective. According to OPM, information on the extent of
government-wide training programs is not available because of the widespread
dispersal of individual in-house and off-site training programs. Government facilities



under agency control are to be used for training when practicable, but other
government facilities may be utilized on a cost-reimbursable basis.
Section 1331 of the Homeland Security Act (P.L. 107-296) amended Chapter
41 to permit agencies to select and assign employees to academic training and pay
or reimburse the costs thereof. Consistent with the merit system principles at 5
U.S.C. §§ 2301 (b)(2) and (7), an agency that exercises this authority must “provide
employees effective education and training to improve organizational performance”
while taking into consideration “the need to maintain a balanced and integrated
federal workforce.” Furthermore, 5 U.S.C. § 4107(b)(2) requires agencies to assure
that “the training is not for the sole purpose of providing an employee an opportunity
to obtain an academic degree or qualify for appointment to a particular position for
which the academic degree is a basic requirement.” This training may not be made
available to members of or those seeking a position in the Senior Executive Service.
Agencies are encouraged, “to the greatest extent practicable, [to] facilitate the use of
online degree training.”
Federal employees availing themselves of training incur certain obligations,
including a requirement to serve an appropriate time with the agency after training,
and reimburse the cost of training if there is failure to comply. The government is
entitled to pursue costs of training as a debt owed to the United States. Specific costs
of training payable by the agency are enumerated, including the cost of the training
program, travel and per diem costs, transportation of family and household goods,
library and laboratory services, and other services.
Discussion
Allegations of waste and mismanagement have appeared in the media against
the government-wide federal employee training system. In past years, the system,
costing an estimated $25 billion annually, has been criticized for fragmentation,
duplication, confusing eligibility criteria, and inadequate reporting. OPM retains an
administrative role in training policy development. However, since 1995, the U.S.
Department of Agriculture Graduate School has operated several of the training
offices and programs that were formerly the responsibility of OPM.
Selected Source Reading
U.S. Congress. House. Committee on Government Operations. Simplifying the
Maze of Federal Employment Training Programs. Hearing. 103rd Congress, 2nd
session. Washington: GPO, 1994.
U.S. General Accounting Office. OPM Sets New Tuition Pricing Policy.
GAO/GGD-94-120. 1994.
U.S. Office of the Vice President. National Performance Review. From Red Tape
to Results: Creating a Government That Works Better & Costs Less.
Accompanying Report: Giving Federal Workers the Tools They Need to Do
Their Jobs: Federal Training. Washington: GPO, 1993.
Kevin R. Kosar



(14) Performance Appraisal (Chapter 43; in Part III, Subpart C —
Employee Performance).
Statutory Intent and History
The underlying statute for Chapter 43, “Performance Appraisal,” is the Civil
Service Reform Act of 1978 (92 Stat. 1131). The law’s intent was to mandate agency
establishment of performance appraisal systems so that appraisals of employee
performance would be made within a single, interrelated system.
Major Provisions
Agency performance appraisal systems are required to (1) provide for periodic
appraisals of job performance; (2) encourage employee participation in establishing
performance standards; and (3) use performance appraisal results as the basis for
training, rewarding, reassigning, promoting, reducing in grade, retaining, and
removing employees. Each agency performance appraisal system must include
performance standards permitting the accurate evaluation of job performance on the
basis of objective criteria. An employee may be reduced in grade or removed
because of unacceptable performance. The law provides 30 days’ advance written
notice to the employee of the proposed action, a “reasonable” time for the employee
to answer orally and in writing, and a written decision of the action recommended.
The decision to retain, reduce in grade, or remove an employee must be made within

30 days of the notice period’s expiration.


Chapter 43 also authorizes agencies to establish performance appraisal systems
for the Senior Executive Service (SES). The systems are designed to permit the
accurate evaluation of performance, provide for systematic appraisals, encourage
excellence in performance, and provide a basis for making eligibility determinations
for retention and performance awards. Appraisals in the SES are based on individual
and organizational performance. Performance factors include improvements in
efficiency, productivity, and quality of work or service, including any significant
reduction in paperwork; cost efficiency; timeliness of performance; other indications
of the effectiveness, productivity, and performance quality of the employees for
whom the senior executive is responsible; and meeting affirmative action goals,
achievement of equal employment opportunity requirements, and compliance with
merit system principles. SES performance appraisal systems provide annual
summary ratings of performance with one or more fully successful levels, a
minimally satisfactory level, and an unsatisfactory level.
Discussion
H.R. 3841, proposed in the 104th Congress, but not enacted, would have required
that performance appraisal systems assist employees in improving unacceptable
performance and provide for reassignment, reduction in grade, removal, or other
appropriate action against employees whose performance was unacceptable. Upon
notification of unacceptable performance, an employee would have been afforded a
one-time opportunity to demonstrate acceptable performance before a reduction in
grade or removal. H.R. 3841 passed the House of Representatives, but no further
action occurred. Another measure, H.R. 3483, would have authorized an agency to



remove or take other appropriate action against employees whose performance was
unacceptable. It also sought to repeal the procedures on reducing the grade of or
removing an employee for unacceptable performance. If this latter provision had
been enacted, agencies would have had to use the Chapter 75 adverse action
procedures to remove poor performers. H.R. 3483 was referred to committee, but no
further action occurred.
Draft legislation, prepared but not introduced in the 105th Congress, by the
House Civil Service Subcommittee chair, Representative Mica, would have
prohibited the appeal of a denied within grade increase to the Merit Systems
Protection Board, delayed the establishment of any new “pass/fail” performance
management systems until the Office of Personnel Management (OPM) provided an
evaluation of the current ones, and allowed for the removal of a problem employee
after one performance improvement plan.
Among the comments expressed about performance appraisal during House
hearings conducted in the 104th and 105th Congresses were statements that employees
should have an opportunity to improve their performance before being separated; that
a fundamental problem is the inability to identify sub-par performance in terms of
expected contributions; and that the administrative process surrounding performance
appraisal is litigious, complex, time-consuming, and provides excessive due process.
Differing opinions were expressed on whether pass/fail performance appraisal
systems strengthen or degrade performance, whether the weight of performance
ratings should be increased in reduction in force, and whether strong enforcement of
the current performance appraisal system is required, rather than amendments to the
current system.
OPM’s human resource management initiatives for 1998 and 1999 included a
recommendation that pay and performance systems be aligned with agency missions.
Vice President Gore, in an address before a January 1999 international conference
on reinventing government, said that the Administration would begin drafting civil
service legislation that would establish a set of standards providing for flexible pay-
for-performance systems which each agency could use to create its own system. He
said the legislation would also allow agencies to evaluate their managers, including
those in the SES, on a balanced set of results, including the GPRA [Government
Performance and Results Act] goals, customer satisfaction rates, and the outcome of
employee satisfaction surveys, and that these evaluations would guide in setting
salaries and paying bonuses for these managers.381 The president of the National
Treasury Employees union, in a news release on the Vice President’s announcement,
stated that fair performance evaluations mandate federal employee involvement in
setting and implementing performance measures, while a news release from the
Senior Executives Association president expressed concern about evaluating and
paying managers on the basis of surveys “address[ing] issues over which career
managers and executives have little impact.” A legislative proposal was not
submitted to the 106th Congress.


381 National Partnership for Reinventing Government, Vice President Gore Announces Three
Reinvention Initiatives at International REGO Forum, Jan. 14, 1999, available at
[http://govinfo.library.unt.edu/npr/library/news/011499.html], visited Dec. 23, 2003.

The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security (DHS) and Defense
(DOD). Both laws permit changes to the Chapter 43 provisions and specify
requirements for performance management systems at DHS and DOD. (See the
discussions of the 5 U.S.C. Chapter 97 and Chapter 99 provisions in this
compendium.) The National Defense Authorization Act for FY2004 also creates a
Human Capital Performance Fund to reward the highest performing and most
valuable employees in an agency and offer federal managers a new tool for
recognizing employee performance that is critical to an agency’s achieving its
mission. (See the discussion of the 5 U.S.C. Chapter 54 provision in this
compendium.)
A September 1995 MSPB issue paper recommended that Chapter 43 authority
on performance-based actions be repealed and that RIF laws be amended to permit
RIF procedures to be used to remove poor performers. The same month, OPM
published regulations providing agencies with increased flexibility to develop their
performance appraisal systems. Eight patterns of summary levels of performance
may be used. These patterns range from a pass/fail system with two summary levels
(unacceptable and fully successful) to a system with five summary levels
(unacceptable, less than fully successful, fully successful, exceeds fully successful,
and outstanding).
In a draft framework for the Senior Executive Service (SES) published in April
1998, OPM proposed a three-year performance agreement with annual progress
reviews. OPM published a status report on the draft framework in December 1998
and proposed administrative rule changes in July 1999 (64 FR 41334). Final OPM
regulations on managing senior executive performance, which became effective on
November 13, 2000, “will help agencies hold senior executives accountable by:
Reinforcing the link between performance management and strategic planning;
requiring agencies to use balanced measures in evaluating executive performance;
and giving agencies more flexibility to tailor performance management systems to
their unique mission requirements and organizational climates”382 [5 CFR Part 430,
Subpart C]. Some agency performance appraisal systems might change as a result
of provisions at Section 1125 of the National Defense Authorization Act for FY2004.
This statute shifted the cap on basic pay for the SES from Level IV of the Executive
Schedule to Level III. However, the cap will be Level II for any agency that is
certified as having a performance appraisal system which makes meaningful
distinctions based on relative performance. Agencies might have to modify their
performance appraisal systems to achieve certification.
Selected Source Reading
CRS Report RS20303. The Senior Executive Service: Overview and Current
Issues, by L. Elaine Halchin.


382 U.S. Office of Personnel Management, “Managing Senior Executive Performance,”
Federal Register, vol. 65, no. 199, Oct. 13, 2000, pp. 60837-60845.

National Academy of Public Administration. Strengthening Senior Leadership in the
Government. Washington: NAPA, 2002.
U.S. Congress. House. Committee on Post Office and Civil Service. Legislative
History of the Civil Service Reform Act of 1978. Committee print. 96th
Congress, 1st session. Committee Print 96-2. Washington: GPO, 1979.
U.S. Congress. House. Committee on Government Reform and Oversight.
Omnibus Civil Service Reform Act of 1996. H.Rept. 104-831. 104th Congress,

2nd session. Washington: GPO, 1996.


U.S. Merit Systems Protection Board. Federal Supervisors and Poor Performers.
Washington: MSPB, 1999.
——. Removing Poor Performers in the Federal Service. Issue Paper. Washington:
MSPB, 1995.
U.S. Office of Personnel Management. An Outline of OPM’s Proposed Framework
for Improving the Senior Executive Service. Washington: OPM, 1998.
——. Status Report Draft Framework, Status Report as of December 1998.
Washington: OPM, 1998.
——. Office of Merit Systems Oversight and Effectiveness. Report of a Special
Study. Poor Performers in Government: A Quest for the True Story.
Washington: OPM, 1999.
U.S. Office of the Vice President. National Performance Review. From Red Tape
to Results: Creating a Government That Works Better & Costs Less.
Accompanying Report: Reinventing Human Resource Management.
Washington: GPO, 1993.
Barbara L. Schwemle



(15) Incentive Awards (Chapter 45; in Part III, Subpart C —
Employee Performance).
Statutory Intent and History
The basic statutory authorities contributing to the provisions of Chapter 45,
“Incentive Awards,” are the 1966 Title 5 codification statute (P.L. 89-554; 80 Stat.

378) and the Civil Service Reform Act of 1978 (P.L. 95-454; 92 Stat. 1111).


Additional provisions derive from the Omnibus Budget Reconciliation Act of 1981
(P.L. 97-35, Title XVII, Subchapter II; 95 Stat. 755); Treasury, Postal Service, and
General Government Appropriations Act of 1991 (P.L. 101-509, § 529; 104 Stat.
1427); the Treasury, Postal Service, General Government appropriation as found in
the Omnibus Consolidated and Emergency Supplemental Appropriations for FY1999
(P.L. 105-277, Division A, § 101(h), § 631); and the Treasury and General
Government Appropriations Act of 2002 (P.L. 107-67, Title VI, § 641(d); 115 Stat.
554). The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 45 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
The chapter sets forth provisions governing the range and scope of contributions
and services for which federal employees are eligible to receive monetary and non-
monetary awards, including suggestions, inventions, performance, and acts of
heroism.
Cash incentive awards are available to federal employees, except for those paid
under the Executive Schedule, for suggestions, inventions, superior performance,
heroism, or ideas to reduce paperwork. Awards are limited to $10,000, except in
cases where accomplishment is unusually outstanding, when awards not to exceed
$25,000 are authorized with the approval of the Office of Personnel Management
(OPM). Cash awards are in addition to regular pay, and acceptance by the employee
absolves the government of any further claims involving use of ideas or devices, etc.
The President may grant an incentive award, which may be in addition to an agency
award. Subject to limitations, the President may grant rank awards to members of
the Senior Executive Service (SES) and individuals serving in certain senior-level
positions.383 Meritorious Executive awards are to equal 20% of annual basic pay, and
Distinguished Executive awards are to equal 35% of annual basic pay. Cash awards
of up to 5% of basic pay are authorized for selected federal law enforcement officers,
including those of the U.S. Park Police, the Diplomatic Security Service, and
probation officers who possess and make use of one or more foreign languages in the
performance of official duties.


383 Senior-level positions include positions classified above GS-15 pursuant to 5 U.S.C. §

5108 and scientific or professional positions established under 5 U.S.C. § 3104.



Federal employees may receive awards for cost savings disclosures, including
those to combat fraud, waste, or mismanagement. The amount of these awards may
be $10,000 or an amount that equals 1% of agency cost savings attributable to the
award, whichever amount is less. Presidential awards of $20,000 for cost savings
disclosures are also allowed, but are limited to 50 in a fiscal year.
Discussion
The federal awards program has recognized many outstanding federal
employees by granting monetary and non-monetary awards. Each year, OPM
publishes an awards brochure providing statistics on the distribution of the awards,
as well as their scope and extent.
Over the years, this program, when compared with awards programs in the
private sector, has generally been found to be inadequate. Although legislation has
been introduced from time to time to expand the scope of the federal awards
program, it actually has changed very little.
Probably the greatest criticisms have been that the amounts of the monetary
awards are too small; too few awards are given; and they are too concentrated in
certain agencies — notably the defense establishment. Cost-savings awards, for
instance, are said to be so small in proportion to cost savings generated for agencies
that they are minuscule vis-à-vis those considered appropriate in the private sector.
The SES rank awards had remained for 20 years at the same established dollar rates
until the 1998 legislation, which keyed the awards to a percentage of basic pay. The
minimum award increased from $10,000 to $20,460 in 1999.
Certain agency abuses in the granting of awards have also occurred, with some
agencies granting none, others granting too many. In addition, questions have arisen
periodically about whether agencies have granted awards in lieu of pay raises,
particularly during times of pay freezes or budget austerity, thereby circumventing
the rationale of the awards program itself.
Selected Source Reading
U.S. Office of Personnel Management. Good Ideas. A Users’ Guide to Successful
Suggestions Programs. Washington: GPO, 1995.
U.S. Office of Personnel Management. Incentive Awards: The Changing Face of
Performance Recognition. Washington: OPM, March 2000.
U.S. Office of Personnel Management. Review of the Granting of Monetary Awards.
Washington: GPO, 1993.
U.S. Office of the Vice President. National Performance Review. From Red Tape
to Results: Creating a Government That Works Better & Costs Less.
Washington: GPO, 1993.
L. Elaine Halchin



(16) Personnel Research Programs and Demonstration Projects
(Chapter 47; in Part III, Subpart C — Employee Performance).
Statutory Intent and History
The underlying statute for Chapter 47, “Personnel Research Programs and
Demonstration Projects,” is the Civil Service Reform Act of 1978 (92 Stat. 1185).
The law’s intent was to provide agencies with authority to experiment with different
personnel management methods through demonstration projects.
Major Provisions
The Office of Personnel Management (OPM) is authorized to:
!establish and maintain (and assist in the establishment and
maintenance of) research programs to study improved methods and
technologies in federal personnel management;
!evaluate the research programs and establish and maintain a program
to collect and disseminate to the public information relating to
personnel management research and to facilitate the exchange of
information among interested persons and entities; and
!provide for an evaluation of demonstration project results and their
impact on improving public management.
Prior to OPM’s establishment of a personnel management experiment, a project
plan must be developed. Contained within this plan are the project’s purpose, the
types and numbers of employees to be covered, methodology, duration, training
program, anticipated costs, and the evaluation methodology and criteria. Aspects of
the project which lack specific authority and current laws, rules, or regulations which
must be waived in order for the project to be conducted must be specifically
described in the plan as well. Once the demonstration project plan is finalized by
OPM, it is published in the Federal Register and is the subject of a public hearing.
Employees likely to be affected by the experiment, and both the Senate and the
House of Representatives, are notified about the proposed project 180 days in
advance of its implementation date. Each agency involved must approve the final
version of the plan which must also be submitted by OPM to both houses of
Congress at least 90 days in advance of the project’s effective date.
By statute, the number of active demonstration projects that can be operating
simultaneously is limited to 10, and the total number of employees covered is capped
at 50,000. An individual demonstration project cannot cover more than 5,000
workers. Each demonstration project runs for five years and terminates before the
end of this period. A project may, however, continue beyond this date to the extent
necessary to validate the project results.
If OPM or the agency determine that a project imposes substantial hardship on,
or is not in the best interests of, the public, federal government, employees, or
eligibles, either or both may terminate it.



OPM’s annual report to Congress includes a summary of research programs and
demonstration projects conducted during the year, the effect of the programs and
projects on improving public management and increasing government efficiency, and
recommendations of policies and procedures which will improve management and
efficiency.
Discussion
In the 104th Congress, H.R. 3841 sought to amend Chapter 47 to make several
changes: coverage of a government corporation under a demonstration project; OPM
development or approval of a demonstration project plan; solicitation of comments
on the project plan, 30-days’ notice to affected employees; projects lasting five years;
project extensions for up to two years, up to 15 projects; up to five projects covering
5,000 or more individuals, including collective bargaining unit employees in a
project, evaluation of the projects, terminating a project, and obtaining congressional
approval for making a project permanent. Another bill, H.R. 3483, was similar to
H.R. 3841, but would have deleted the requirement for a public hearing, provided
150 days’ notice, and included expedited congressional procedures for making a
project permanent. H.R. 3841 passed the House of Representatives and H.R. 3483
was referred to committee, but no further action occurred on either bill.
Among the comments on the demonstration project proposals expressed during
House hearings were the following views:
!demonstrations projects should help determine whether one system
should apply to all employees or each agency should have a system
tailored to its needs;
!the number of individuals covered by a demonstration project and
the number of demonstration projects should be limited, because
they place some federal employees in the precarious position of
being test subjects for untried personnel practices;
!consultations should include both managers and supervisors; and
!public hearings on proposed demonstration projects, independent
evaluations of demonstration projects and their impact on public
management, and OPM annual reports on research and
demonstration projects and their effect on improving public
management and increasing government effectiveness should be
continued.
Discussions about the issue continued in the 105th Congress. Draft legislation,
prepared but not introduced by the House Civil Service Subcommittee chair,
Representative Mica, would have amended the demonstration project authority to
increase the number of demonstration projects authorized at any time from 10 to 15,
and to eliminate the restriction of 5,000 employees per demonstration. Additionally,
bargaining over wages and benefits would have been prohibited, and “impact and
implementation” bargaining would have been limited. During a June 1998 hearing
on the draft bill, OPM testified in favor of making demonstration projects permanent



after testing and evaluation. (OPM’s 1998 and 1999 human resources management
initiatives proposed that it be granted this authority.) Two federal employee unions
opposed limiting the subjects that could be negotiated between labor and
management. The Senior Executives Association supported such bargaining limits
and favored limiting to 25,000 the number of employees in an agency who could
participate in a demonstration project. The General Accounting Office noted that use
of the demonstration project authority has been limited.
Vice President Gore, in an address before a January 1999 international
conference on reinventing government, said that the Administration would begin
drafting civil service legislation that would establish a set of standards for flexibility
in pay, hiring, and retention which each agency could use to create agency-specific
systems. Labor and management would mutually agree upon any plan before its
implementation. A legislative proposal was not submitted to the 106th Congress.
In the 108th Congress, S. 129, the Federal Workforce Flexibility Act of 2003, as
introduced, included amendments to several major features of current law on
demonstration projects. The requirements that a public hearing be conducted, that
a demonstration project be limited to 5,000 employees, that the number of projects
in effect at any one time be limited to 10, and that Congress receive a report on a
project’s final plan 90 days before a project’s effective date would have been
removed. The time period required for advance notification of affected employees
would have been shortened, and the requirement for advance notification of Congress
would have been removed. The provisions were removed from S. 129 during
markup by the Senate Committee on Governmental Affairs. (Similar provisions were
included in S. 2651 introduced in the 107th Congress.)
In the 108th Congress as well, H.R. 1085, the NASA Flexibility Act of 2003,
would amend current law to allow a demonstration project at NASA to cover 8,000
employees rather than 5,000 employees.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 47 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Three demonstration projects have been made permanent, and four have been
completed. One at the Department of Commerce, testing pay-for-performance using
broad pay bands, was implemented in March 1998 and modified in September 1999.
Another one, covering the civilian acquisition workforce at the Department of
Defense and testing streamlined hiring processes and broad pay bands, among other
features, had a phased implementation which was completed in October 1999.
Demonstration projects are in progress at eight DOD laboratories. Congress
authorized a demonstration project for the Internal Revenue Service in the Internal
Revenue Service Restructuring and Reform Act of 1998 (112 Stat. 715).



In a 2001 report on lessons learned from the demonstration projects, OPM
determined, among other findings, that successfully tested alternative systems and
flexibilities should be able to be converted to permanent programs without separate
legislation; that agencies need to have an executive champion who will promote,
defend, and support an alternative system; that if alternative systems are extended
government-wide, there should be flexibility to customize programs; and that the
effectiveness of alternative systems needs to be continuously evaluated.
Selected Source Reading
U.S. Congress. House. Committee on Government Reform and Oversight. th
Omnibus Civil Service Reform Act of 1996. H.Rept. 104-831. 104 Congress,

2nd session. Washington: GPO, 1996.


U.S. Congress. House. Committee on Post Office and Civil Service. Legislativeth
History of the Civil Service Reform Act of 1978. Commitment print. 96
Congress, 1st session. Committee Print 96-2. Washington: GPO, 1979.
U.S. Merit Systems Protection Board. Federal Personnel Research Programs
and Demonstration Projects: Catalysts for Change. Washington: GPO, 1992.
U.S. Office of Personnel Management. Demonstration Projects and Alternative
Personnel Systems; HR Flexibilities and Lessons Learned. Available at
[http://www.opm.gov/demos/index.htm], visited December 11, 2003.
——. Demonstration Projects; Beyond Current Flexibilities. Available at
[http://www.opm.gov/demos/index.htm], visited December 11, 2003.
——. Demonstration Projects Evaluation Handbook. Available at
[http://www.opm.gov/demos/index.htm], visited December 11, 2003.
——. Demonstration Project Fact Sheets. Available at
[http://www.opm.gov/demos/index.htm], visited December 11, 2003.
U.S. Office of the Vice President. National Performance Review. From Red Tape
to Results: Creating a Government That Works Better & Costs Less.
Accompanying Reports: Reinventing Human Resource Management.
Washington: GPO, 1993.
Barbara L. Schwemle



(17) Agency Personnel Demonstration Project (Chapter 48; in Part
III, Subpart C — Employee Performance).
Statutory Intent and History
The Investor and Capital Markets Fee Relief Act (P.L. 107-123; January 16,
2002; 115 Stat. 2390) included “pay parity” provisions that allowed the Securities
and Exchange Commission (SEC) to raise the salaries of certain employees to levels
comparable to those of federal bank examiners, whose pay ranges from $180,000 to
$250,000, depending on the agency. These provisions appear in Section 8 of the
legislation, which created a new Chapter 48 in Subpart C of Part III of Title 5, United
States Code.
Congress’s intent was to address the SEC’s difficulty in attracting qualified
employees and unusually high staff turnover. The basic problem was that the skills
required by the SEC — mastery of securities law and regulation, or detailed
knowledge of financial markets — are in high demand on Wall Street, where some
of the highest salaries in the world are offered.
The Office of Personnel Management (OPM) opposed the pay parity provisions
because of concerns about the fragmentation of personnel systems and adverse effects
on the ability of federal employees to move from one agency to another. In a May
15, 2001 letter to Chairman Dan Burton of the House Government Reform
Committee, OPM noted that it had approved special pay rates for SEC lawyers,
accountants, and examiners in March 2001. The letter recommended that the pay
parity provisions not be enacted until the effectiveness of these special pay rates
could be assessed, and also called for more study of the SEC pay situation. Chairman
Burton also stated that the SEC pay raises should not be enacted without a broad
review of the effects on the civil service system.
Estimates of the cost of granting pay parity raises to SEC employees were in the
range of $60-$80 million. The Senate version of the FY2002 Commerce-State-
Justice appropriations legislation provided $60 million for this purpose, but this
provision was not adopted in conference. (The SEC’s FY2002 budget was set at
$437.9 million.)
The Administration’s FY2003 budget requested $466.9 million for the SEC, still
not enough to fund pay parity fully. In the wake of the Enron scandal, Congress
passed the Sarbanes-Oxley accounting reform legislation (P.L. 107-204; 116 Stat.
745), which included a provision authorizing appropriations of $775 million for the
SEC in FY2003. The FY2003 appropriation was finally set at $716.3 million. For
FY2004, the conference report provides $811.5 million for the SEC.
Major Provisions
Chapter 48 authorizes the SEC to appoint and fix the compensation of officers,
attorneys, economists, examiners, and other employees “as may be necessary” for
carrying out its functions. The SEC may set and adjust basic rates of pay for all
employees without regard to the provisions of Chapter 51 or Subchapter III of
Chapter 53 of Title 5, United States Code. The SEC may provide additional



compensation or benefits to employees if the same types of compensation or benefits
are provided by federal bank regulators (agencies referred to under Section 1206 of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12
U.S.C. § 1833 b)). In setting the total amount of compensation for these employees,
the SEC is required to consult with the banking agencies and to maintain
comparability of pay and benefits.
The SEC is also directed to implement the pay parity provisions in consultation
with OPM and in a manner consistent with merit system principles.
Discussion
After Enron and the succeeding wave of corporate accounting scandals, and the
revelations of abuses by stock analysts and others in the securities industry, there was
little controversy about the need to increase the size and resources of the SEC. In
budget terms, the cost of pay parity was rather small compared to the overall
increases in SEC appropriations that were enacted post-Enron. On the other side of
the issue, arguments in favor of a uniform civil service pay system remained, as did
uneasiness about rank-and-file SEC staffers earning more than the President or Vice
President. However, with the scandals still fixed in recent memory (and with new
investigations, such as those involving mutual funds, continuing to develop), there
has been no move to reverse the SEC’s pay parity authority. There has been some
interest in extending the pay parity provisions to the Commodity Futures Trading
Commission (CFTC), which regulates the futures exchanges, but no authorizing
legislation has yet advanced in Congress.
Selected Source Reading
U.S. Congress. House. Committee on Financial Services. Investor and Capital
Markets Fee Relief Act. Report to accompany H. 1088. 107th Congress, 1st
session. H.Rept. 107-52, part 1. Washington: GPO, 2001.
U.S. Congress. Senate. Committee on Banking, Housing, and Urban Affairs.
Saving Investors Money and Strengthening the SEC. Hearing on S. 143. 107th
Congress, 1st session, February 14, 2001. S.Hrg. 107-266. Washington: GPO,

2002.


U.S. General Accounting Office. Securities and Exchange Commission: Human
Capital Challenges Require Management Attention. GAO-01-947. September

2001.


Mark Jickling (SEC-related history)
Clinton T. Brass (personnel provisions)



(18) Classification (Chapter 51; in Part III, Subpart D — Pay and
Allowances).
Statutory Intent and History
The current system for classifying and grading most positions in the federal civil
service was established under the Classification Act of 1923 (42 Stat. 1488). This
statute was the initial systematic attempt to achieve a uniform alignment of jobs and
salaries among various federal departments and agencies. The act established the
following principles:
!positions covered by the act were to be classified and graded
according to their duties and responsibilities;
!the same pay scale was to apply to all positions falling into the same
class and grade, regardless of agency;
!the different pay scales and the various classes and grades were to be
logically associated so that pay was properly related to work; and
!one agency would be responsible for equalizing and coordinating the
classification and grading of positions for all agencies.
The Classification Act of 1949 (63 Stat. 954) maintained the principles set out
in 1923, adding that there should be equal pay for equal work, and that the positions
be grouped, or classified, in such a way that the position classification system could
be used in all phases of personnel administration.
The Internal Revenue Service Restructuring and Reform Act of 1998 (112 Stat.
711), the Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229), and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
allow the Internal Revenue Service (IRS), Department of Homeland Security (DHS),
and Department of Defense (DOD) to establish classification systems independent
of Chapter 51. (See the discussions of the 5 U.S.C. Chapter 95, Chapter 97, and
Chapter 99 provisions, respectively, in this compendium.)
Major Provisions
Four services had been established in 1923: Professional and Scientific;
Clerical, Administrative, and Fiscal; Subprofessional; and Crafts, Protective, and
Custodial. Under the 1949 act, the newly established General Schedule comprised
positions classified under the first three of these services. No similar schedule was
established for the fourth service. The 1949 act also added the GS-16, -17, and -18
grades, which became known as the “supergrades” and were later the foundation for
the Senior Executive Service under provisions of the Civil Service Reform Act of
1978 (P.L. 95-454; 92 Stat. 1111). These grades were abolished by the Federal
Employees Pay Comparability Act of 1990 (FEPCA; P.L. 101-509; 104 Stat. 1427,
at 1443).



Discussion
Government-wide classification of positions is an issue that has generated
substantial controversy over the course of the last several years. Critics point out the
problems of managing an enormous system which is both rigid and cumbersome. On
the other hand, if the system is administered consistently, the uniformity of position
classification, occupational definition, and grading provide a framework within
which staff and positions can transfer from one agency to another. The controversy
led to the enactment of statutes allowing the Department of Homeland Security,
Department of Defense, and Internal Revenue Service to design classification
systems outside of Chapter 51, potentially affecting approximately 30% of the federal
civilian workforce.
Even before the Office of Personnel Management (OPM) was dramatically
downsized in 1994, there was an effort to vest the responsibility for position
classification in the agencies. Among the favorable arguments was that each agency
has its own culture, and that human resources managers should be allowed to classify
and grade positions according to these cultures. The National Academy of Public
Administration was a proponent of this philosophy. Soon after the Academy issued
a report to this effect, the Director of OPM held extensive discussions with several
leading personnel administrators in federal agencies. It was determined that while
the classification system has substantial problems, they are not so dire that a
complete overhaul should be undertaken.
Selected Source Reading
U.S. Congressional Budget Office. Changing the Classification of Federal White-
Collar Jobs: Potential Management and Budgetary Impacts. CBO Papers, July

1991. Washington: CBO, 1991.


U.S. General Accounting Office. High-Risk Series: Strategic Human Capital
Management. GAO-03-120. January 2003.
Mitchel A. Sollenberger



(19) Pay Rates and Systems (Chapter 53; in Part III, Subpart D —
Pay and Allowances).
Chapter 53, “Pay Rates and Systems,” provides the statutory basis for several
major pay systems within the federal service. This profile of Chapter 53 departs from
the compendium’s usual format for profiling Title 5 chapters. Rather than present
each system’s statutory intent, summary of major provisions, and discussion under
separate headings, this profile combines these topics under one heading for each pay
system. Among the pay systems discussed are the pay comparability system, the
General Schedule, the Senior Executive Service, the Executive Schedule, and the
prevailing rate (blue collar) system. Systems covered in other titles of the United
States Code, but related to the General Schedule, such as those in the foreign service
and veterans hospitals, are not discussed.
In addition, the Internal Revenue Service Restructuring and Reform Act of 1998
(112 Stat. 711), the Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229),
and the National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat.
1621) allow the Internal Revenue Service (IRS), Department of Homeland Security
(DHS), and Department of Defense (DOD), respectively, to establish classification
and pay systems independent of Chapter 53. (See the discussions of the 5 U.S.C.
Chapter 95, Chapter 97, and Chapter 99 provisions, respectively, in this
compendium.) The DHS and DOD systems are currently being designed, and it
remains to be seen how the pay comparability system and the prevailing rate system
will be changed for these agencies.
Pay Comparability System (5 U.S.C. §§ 5301-5307). Prior to 1962, the
system of classification of jobs followed the principle of equal pay for equal work
within a pay system, but there was no method of equating pay for equal work among
the various systems. P.L. 87-793 (76 Stat. 832, at 841), provided that federal salary
schedules be based on equal pay for substantially equal work, and on comparability
of federal salary rates with those in private industry for the same levels of work.
While the comparability principle was in place, Congress continued to legislate the
rates of adjustment, perpetuating a salary lag between federal and private sector pay.
The Pay Comparability Act of 1970 (84 Stat. 1946) was considered to be the most
important pay legislation subsequent to the 1962 statute. The act established a
mechanism under which the Bureau of Labor Statistics conducted a survey of private
sector salaries, and the President, his agent, and two advisory groups determined the
appropriate rate of adjustment for the General Schedule. This rate of adjustment
went into effect automatically unless Congress acted to disapprove it, or the President
determined that another rate or schedule of implementation was appropriate. The
system established under this statute was utilized for almost 20 years. By the time
it was amended, the gap between private and federal white collar salaries had
widened to over 30%. During the conference on the Treasury, Postal Service, and
General Government Appropriations Act for FY1991, a new pay setting mechanism
was crafted. The Federal Employees Pay Comparability Act (FEPCA; 104 Stat.

1429) currently governs the pay policy for most of the federal civilian workforce.


FEPCA continued, with some changes, the mechanism under which rates are to
be adjusted for the General Schedule and related systems. The key difference is that
the rate of adjustment is to be equal to one-half percent less than the rate of change



in the private sector wages and salaries element of the Employment Cost Index for
a given period of time. The second principal innovation under FEPCA was the
establishment of a system of locality-based payments. Recognizing that the
incomparabilities in salaries ranged from a large gap between private and federal
salaries in some localities to no gap at all in other localities, Congress determined
that there would be an identification of localities and that the rate of adjustment (in
addition to the annual national General Schedule adjustment) would be based on
salary surveys conducted within these localities. The plan was to bring federal
salaries across the country to within 5% of the private sector salaries for comparable
occupations in each locality at the end of 10 years.
Because of a wide range of circumstances, the pay setting provisions of FEPCA
have never been fully implemented. The mechanisms have been utilized, but
policymakers in the executive and legislative branches have determined that the rates
of adjustment should be reduced. The result is that there has not been a systematic
reduction in the gap between federal and private sector salaries. In a tight job market,
and while the government is downsizing, this gap may not have a negative effect on
the potential for the government to recruit and retain the personnel needed to reach
mission goals. On the other hand, selectively within certain occupations, a hiring
crisis could result. The locality pay provisions in FEPCA are written in a manner
which requires that if, in any given year, no locality-based payments were allowed,
the salary of the individual would fall back to the base rate of the General Schedule.
If Congress or the President determined that a locality-based payment were not
appropriate, it is assumed that a saved-pay provision would be enacted to protect the
current payable rates.
General Schedule (5 U.S.C. §§ 5331-5338). These sections provide the
housekeeping elements for the General Schedule. The language relates to defining
the scope of positions and agencies to which the pay schedule applies, establishes
Office of Personnel Management (OPM) authority for setting minimum pay rates for
new appointees and rates of basic pay, and sets out the rules for periodic and special
within-grade (or “step”) increases. Although these provisions are not controversial
in and of themselves, the within-grade provisions could be affected by various
proposals to change the pay-for-performance policies within the human resources
management arena.
Senior Executive Service (5 U.S.C.§§ 5381-5385). The structure and
appointment policies for the Senior Executive Service (SES), established by the Civil
Service Reform Act of 1978, are codified in Chapter 33, Subchapter VIII, of Title 5.
The National Defense Authorization Act for FY2004 significantly changed the
compensation system for the SES. The SES remains essentially a rank-in-person
compensation system, with the general guidelines set forth in the law. SES base
compensation ranges from 120% of the minimum pay of a GS-15 to Level II of the
Executive Schedule. There is also a system of monetary performance awards which
may be accorded to members of the SES. OPM will promulgate regulations under
which the range of rates of pay and a rigorous performance management system will
be established. Under the new statute, locality pay is no longer available to the SES.
Executive Schedule (5 U.S.C. §§ 5312-5318). The Executive Schedule
is a series of five pay levels for officers of the executive branch, most of whom are



political appointees subject to the confirmation process. Level I salaries are primarily
for the heads of departments, and Level V salaries apply, generally, to positions such
as general counsels and assistant administrators in independent agencies. Generally,
when Congress establishes an agency or realigns agency responsibilities, these
sections of Title 5 will be amended to reflect the change in salary level for specific
positions.
The salary levels are applied to several positions that do not appear on the
Executive Schedule. For example, several legislative branch agency officials, such
as the Comptroller General and the Librarian of Congress, are paid at rates equal to
specified levels of the Executive Schedule.
The Executive Schedule was established under the provisions of the
Government Employees Salary Reform Act of 1964 (P.L. 88-426; 78 Stat. 400).
Previously, Congress had been setting salaries for positions as they were created.
The statute brought salaries into alignment for the various officers of the executive
branch. Congress continued to legislate salary increases for these positions. From
1975 until 1990, salaries were adjusted under the Executive Cost of Living
Adjustment Act of 1975 (89 Stat. 419). Salaries for Members of Congress and
judges were also adjusted under the same provisions. Although the salaries were to
be adjusted at the same rate and time as the General Schedule, Congress usually
voted to deny the increases. Under the Ethics Reform Act of 1989 (103 Stat. 1716),
as amended, there is to be an annual adjustment based on the increase in private
sector wages and salaries, minus one-half percent. The adjustment cannot be more
than 5%, and it cannot exceed the rate of adjustment for the base pay of General
Schedule salaries. Since 1993, there have been five adjustments, with 2.2%
scheduled as an adjustment in January 2004.
Under statute (81 Stat. 613, at 642, as amended by 78 Stat. 400), there is to be
a quadrennial review of federal officials’ salaries, with subsequent recommendations
by the President to Congress. However, the Citizens’ Commission on Public Service
and Compensation has not been activated since the most recent review in FY1988.
Prevailing Rate System (5 U.S.C. §§ 5341-5349). Since the late 19th
century, skilled (blue-collar) federal employees have been paid on the basis of the
prevailing wage rates for similar occupations in specific geographic areas. While
there existed a general statutory authority for the Civil Service Commission (now
Office of Personnel Management) to set blue-collar salaries, there was no specific
statutory language covering wage administration. The Federal Wage System was
established in 1972 (86 Stat. 564).
A wage survey is conducted in each of the 135 wage areas in the United States
by the agency in the area which is the lead federal blue-collar employer, usually the
Department of Defense. Adjustments in wage rates are staggered throughout the
year, depending on the timing of the surveys. Historically, it was administratively
possible to maintain consistent and equitable salary relationships between the federal
and private sector skilled labor forces.
However, since 1978, Congress has limited federal blue-collar salaries to a
maximum adjustment rate equal to the General Schedule rate of adjustment. The



result is that, while federal wages in some areas have kept pace with those in the
private sector, federal wages in high cost areas have not done so. One of the reasons
Congress found it necessary to place caps on these wages is that many of the
supervisors are General Schedule employees. Allowing blue-collar wages to advance
while white-collar salaries were limited would result in line employees being paid
more than supervisory staff. Most interested parties have long acknowledged that
there are significant flaws in the Federal Wage System, but remedial proposals have
not been forthcoming.
Miscellaneous. The other sections of this chapter of Title 5 apply to grade
retention policy (generally under a reduction in force), pay policy related to student
employees, and special occupational pay systems established by OPM. The 1990
FEPCA statute also established pay systems for administrative law judges, contract
appeals board members, and senior-level positions (those graded above GS-15, but
not in the Senior Executive Service). The act also provided a means of identifying
critical positions and of setting salary levels for these positions. Under the Homeland
Security Act of 2002 (P.L. 107-296; 116 Stat. 2229), the limitation of total aggregate
annual compensation was increased from Level I of the Executive Schedule to the
salary of the Vice President. Agencies may apply these provisions only after OPM
has certified that the agency has an appropriate appraisal system in place.
Selected Source Reading
U.S. Advisory Committee on Federal Pay. The Bottom Line on Federal Pay — The
Gap Became a Canyon. Washington: 1989.
U.S. Congressional Budget Office. Comparing the Pay of Federal and Nonfederal
Executives: An Update. Washington: CBO, 2003.
——. Measuring Differences Between Federal and Private Pay. Washington: CBO,

2002.


U.S. General Accounting Office. Federal Pay: Private Sector Salary Differences
by Locality. GGD-91-63FS, B-236949. May 1991.
U.S. President’s Panel on Federal Compensation. Staff Report of the President’s
Panel on Federal Compensation. Washington: GPO, 1976.
Mitchel A. Sollenberger



(20) Human Capital Performance Fund (Chapter 54; in Part III,
Subpart D — Pay and Allowances).
Statutory Intent and History
Title XI, Subtitle C of the National Defense Authorization Act for Fiscal Year
2004 (117 Stat. 1641; P.L. 108-136, Section 1129) amends Part III, Subpart D of
Title 5, United States Code by adding a new Chapter 54 entitled “Human Capital
Performance Fund.” (The provisions were also included in H.R. 1836, 108th
Congress, as reported.) The legislation states that the purpose of the provisions is to
promote better performance in the federal government. The fund is to reward the
highest performing and most valuable employees in an agency and offer federal
managers a new tool for recognizing employee performance that is critical to an
agency’s achieving its mission. A $500 million Human Capital Performance Fund
was proposed by President George W. Bush in his FY2004 budget to create and
reinforce the value of pay systems based on performance. The Consolidated
Appropriations Act, 2004 (P.L. 108-199; 118 Stat. 3, at 339), provided a $1 million
appropriation for the fund, with several provisos.
Major Provisions
Organizations eligible for consideration to participate in the fund are executive
departments, government corporations, and independent agencies. The General
Accounting Office is not covered by the chapter. The fund may be used to reward
General Schedule, Foreign Service, and Veterans Health Administration employees;
prevailing rate employees; and employees included by OPM following review of
plans submitted by agencies seeking to participate in the fund. However, Executive
Schedule (or comparable rate) employees; SES members; administrative law judges;
contract appeals board members; administrative appeals judges; and individuals in
positions which are excepted from the competitive service because of their
confidential, policy-determining, policy-making, or policy-advocating character are
not eligible to receive payments from the fund.
OPM will administer the fund, which is authorized a $500,000,000
appropriation for FY2004. Such sums as may be necessary to carry out the provision
shall be authorized for each subsequent fiscal year. In the first year of
implementation, $50,000,000 (up to 10% of the appropriation) is authorized to be
available to participating agencies to train supervisors, managers, and other
individuals involved in the appraisal process on using performance management
systems to make meaningful distinctions in employee performance and on using the
fund.
Agencies seeking to participate in the fund must submit plans to OPM for
approval. The plans must incorporate the following elements:
!adherence to merit principles under 5 U.S.C. § 2301;
!a fair, credible, and transparent performance appraisal system;
!a link between the pay-for-performance system, the employee
performance appraisal system, and the agency’s strategic plan;



!a means for ensuring employee involvement in the design and
implementation of the pay-for-performance system;
!adequate training and retraining for supervisors, managers, and
employees in the implementation and operation of the pay-for-
performance system;
!a process for ensuring ongoing performance feedback and dialogue
among supervisors, managers, and employees throughout the
appraisal period, and setting timetables for review;
!effective safeguards to ensure that the management of the pay-for-
performance system is fair and equitable and based on employee
performance; and
!a means for ensuring that adequate agency resources are allocated
for the design, implementation, and administration of the pay-for-
performance system.
An agency will receive an allocation of monies from the fund once OPM, in
consultation with the Chief Human Capital Officers (CHCO) Council, reviews and
approves its plan. (The CHCO Council will include an evaluation of the formulation
and implementation of agency performance management systems in its annual report
to Congress.) Ninety percent of the remaining amount appropriated to the fund
($405,000,000, monies not yet appropriated) may be allocated to the agencies. An
agency’s prorated distribution may not exceed its prorated share of executive branch
payroll. (Agencies must provide OPM with necessary payroll information.) If OPM
were not to allocate an agency’s full prorated share, the remaining amount would be
available for distribution to other agencies.
Ten percent of the remaining amount appropriated to the fund ($45,000,000,
monies not yet appropriated), as well as the amount of an agency’s prorated share not
distributed because of the agency’s failure to submit a satisfactory plan, will be
allocated among agencies with exceptionally high-quality plans. Such agencies will
be eligible to receive a distribution in addition to their full prorated distribution.
Agencies, in accordance with their approved plans, may make human capital
performance payments to employees based on exceptional performance contributing
to the achievement of the agency mission. In any year, the number of employees in
an agency receiving payments may not be more than the number equal to 15% of the
agency’s average total civilian full-time and part-time permanent employment for the
previous fiscal year. A payment may not exceed 10% of the employee’s basic pay
rate. The employee’s aggregate pay (basic, locality pay, human capital performance
pay) may not exceed Executive Level IV ($134,000 in 2003).
A human capital performance payment is in addition to annual pay adjustments
and locality-based comparability payments. Such payments are considered basic pay
for purposes of Civil Service Retirement System, Federal Employees’ Retirement
System, life insurance, and for such other purposes (other than adverse actions)
which OPM determines by regulation. Information on payments made and the use
of monies from the fund must be provided by the agencies to OPM as specified.
Initially, agencies shall use monies from the fund to make the human capital
performance payments. In subsequent years, continued financing of previously



awarded payments shall be derived from other agency funds available for salaries and
expenses. Under current law at 5 U.S.C. § 5335, agencies pay periodic within-grade
increases to employees performing at an acceptable level of competence.
Presumably, funds currently used to pay within-grade increases could be used to
make human capital performance payments instead. Monies from the fund may not
be used for new positions, for other performance-related payments, or for recruitment
or retention incentives.
OPM shall issue regulations to implement the new Chapter 54 provisions.
Those regulations must include criteria governing:
!an agency’s plan;
!allocation of monies from the fund to the agencies;
!the nature, extent, duration, and adjustment of, and approval
processes for, payments to employees;
!the relationship of agency performance management systems to the
Human Capital Performance Fund;
!training of supervisors, managers, and other individuals involved in
the process of making performance distinctions; and
!the circumstances under which funds could be allocated by OPM to
an agency in amounts below or in excess of the agency’s pro rata
share.
Discussion
The effectiveness of agency performance management systems and whether the
performance ratings would be determined according to preconceived ideas of how
the ratings would be arrayed across the particular rating categories are among the
concerns expressed by federal employees and their unions and representatives about
the fund. Other concerns are that the fund could take monies away from the already
reduced locality-based comparability payments and that the performance award
amounts would be so small as not to serve as an incentive (this may be of particular
concern given the FY2004 appropriation of $1 million).
Selected Source Reading
U.S. Congress. Conference Committees, 2003. Making Appropriations for
Agriculture, Rural Development, Food and Drug Administration, and Related
Agencies for the Fiscal Year Ending September 30, 2004, and for Other
Purposes. Conference Report to Accompany H.R. 2673. H.Rept. 108-401.

108th Congress, 1st session. Washington: GPO, 2003, pp. 253, 763.


U.S. Congress. Conference Committees, 2003. National Defense Authorization Act
for Fiscal Year 2004. Conference Report to Accompany H.R. 1588. H.Rept.

108-354. 108th Congress, 1st session. Washington: GPO, 2003, pp. 339, 1026.


Barbara L. Schwemle



(21) Pay Administration (Chapter 55; in Part III, Subpart D — Pay
and Allowances).
Statutory Intent and History
For the most part, the pay administration provisions in Title 5 reflect practices
put in place in the early to mid-20th century through various statutes. The practices
authorized in these sections, such as the bi-weekly pay period, enable the federal
government to administer the various pay systems. The Homeland Security Act of
2002 (P.L. 107-296; 116 Stat. 2229) and the National Defense Authorization Act for
FY2004 (P.L. 108-136, 117 Stat. 1621) authorize the creation of new human
resources management (HRM) systems for civilian employees of the Departments of
Homeland Security and Defense. Both laws stipulate that the Chapter 55 provisions
cannot be waived, modified, or otherwise affected by the new HRM systems, except
that, for the Department of Defense, Subchapter V of the chapter, “Premium Pay,”
may be waived, modified, or otherwise affected by the new HRM system, apart from
Section 5545b (“Pay for firefighters”).
Major Provisions
Many of the sections in this chapter focus on the managerial details of pay
administration. These include the identification of bi-weekly and monthly pay
periods, the various bases for withholding pay, payment for accumulated and accrued
leave, payments to missing employees, and settlement of accounts. Also included
in this chapter are premium pay provisions and the policy for dual pay and dual
employment. Statutes enacted to provide civilian agencies with buyout authority are
found as notes to 5 U.S.C. § 5597, “Separation Pay.”
Discussion
Chapter 55 comprises provisions that define the “bread and butter”
administrative processes through which federal employees are compensated.
Recently the overtime cap was raised and flexible spending accounts were
established. Dual pay and dual employment provisions set out the rules under which
a retired member of the armed forces working as a federal civilian employee receives
reduced retirement pay.
Overtime Cap. The National Defense Authorization Act of FY2004 amended

5 U.S.C. § 5542 to provide that an employee whose basic pay rate exceeds GS-10,


Step 1, will receive overtime at a rate which is the greater of one-and-one-half times
the hourly rate for GS-10, Step 1, or his or her hourly rate of basic pay. Overtime
compensation has been limited to GS-10, Step 1, to the disadvantage of personnel
whose hourly rate of basic pay exceeded this limit.
Pre-tax Employee Benefits. The federal government, like many other
public and private employers, offers its employees a choice of pre-tax benefits
through a cafeteria plan (defined in 26 U.S.C. § 125). To provide pre-tax benefits,
a cafeteria plan must offer employees the choice of cash or one or more qualified
benefits, and cannot discriminate among employees on the basis of compensation.



The benefits are pre-tax in that they reduce income for calculation of income and
employment taxes.
Although there is no specific authority for federal agencies to offer a flexible
benefits plan to employees, under 5 U.S.C. § 5525, agency heads may make
allotments from employee pay as they think appropriate. The Office of Personnel
Management operates the federal program, known as FedFlex, and currently offers
employees384 a choice of one (or more) of three pre-tax benefits: payment of health
insurance premiums (premium conversion); a health care flexible spending
arrangement; and a dependent care flexible spending arrangement.
Federal retirees are not eligible to participate in the flexible benefit program or
to have their health insurance premiums paid on a pre-tax basis. Legislation has been
introduced in each session of Congress, since premium conversion began, to permit
federal retirees to pay health insurance premiums on a pre-tax basis.
Premium Conversion. Beginning in October 2000, federal employees
automatically have health insurance premiums (paid by the employees) taken from
their income on a pre-tax basis. That is, for calculation of income and employment
taxes, an employee’s income is reduced by the value of the insurance premiums.
This has been called “premium conversion” because the health insurance premiums
were converted from a post-tax to a pre-tax basis, saving the employee the income
and employment taxes that previously would have been imposed on the value of the
health insurance premium. Employees do have the option of electing out of the
premium conversion.
Flexible Spending Arrangements. Beginning in 2003, federal employees
are able to set aside funds for health and dependent care expenses on a pre-tax basis
through a program of flexible spending arrangements known as FSAFEDS. A
flexible spending arrangement for health (or dependent) care reimburses an employee
for eligible expenses not covered by health insurance (or for dependent care
expenses). Dependent care expenses reimbursed through a flexible spending
arrangement are not eligible expenses for the dependent care tax credit, and for tax
purposes there is a maximum of $5,000 in dependent care expenses that can be paid
through an employer-provided reimbursement arrangement. The limitations on the
amount of income an employee can set aside in a health care reimbursement account
are determined by the employer. For federal employees, in 2004, the maximum that
can be set aside in a health reimbursement account is $4,000. P.L. 108-126 provided
that any administrative fees associated with the flexible spending arrangements are
paid by the federal agency and not the employee. In addition, any unused FSA funds
revert to the plan administrator and not to the employee.


384 Agencies that are not part of the executive branch may choose to offer the FedFlex
program. Therefore, not all federal employees are eligible for participation in FedFlex, and
some employees are not eligible for all the FedFlex benefits.

Selected Source Reading
U.S. General Accounting Office. Sunday Premium Pay: Millions of Dollars in
Sunday Premium Pay Are Paid to Employees on Leave. GAO/GGD-95-144.
May 1995.
U.S. President’s Panel on Federal Compensation. Staff Report of the President’s
Panel on Federal Compensation, “Chapter VII Premium Pay.” Washington:
GPO, 1976.
U.S. Office of Personnel Management, The Federal Flexible Benefits Plan
(“FedFlex”), available at the OPM website,
[http://www.opm.gov/insure/health/pretaxfehb/fedflex.pdf], visited January 6,

2004.


U.S. Office of Personnel Management, The Flexible Spending Account Program
Overview 2004, OPM-FSA-OVTF-10-03, available at the FSAFEDS
administrators website:
[https://www.fsafeds.com/forms/OPM-FSA-OVTF-10-031.pdf], visited January

6, 2004.


Mitchel A. Sollenberger (general pay administration)
Christine Scott (pre-tax benefits)



(22) Travel, Transportation, and Subsistence (Chapter 57; in Part III,
Subpart D — Pay and Allowances).
Statutory Intent and History
Chapter 57, “Travel, Transportation, and Subsistence,” provides for the payment
of various travel, transportation, and subsistence expenses, including those for new
and transferring employees; overseas travel; and transportation of family, household
goods, personal effects, and privately owned vehicles. Reiterating policy set by thest
Travel Expense Act of 1949 (P.L. 81- 92, 81 Congress; 63 Stat. 166) and codified
in 1966 (P.L. 89-554; 80 Stat. 378), only actual and necessary travel expenses are
allowed. The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 57 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Provisions of Chapter 57 provide details regarding allowances permitted for
travel, transportation, and subsistence expenses. Typical of the provisions are those
governing the transportation of an employee’s immediate family and household
goods and personal effects when the employee is transferred to a post to which the
family is not permitted to accompany him or her for military or other reasons. Per
diem allowances, travel expenses, and storage allotments are authorized in this
chapter as well.
Other policies established by Chapter 57 include provision for the traveling
expenses of the President and mileage allowances for Members of Congress.
Relocation allowances for employees, including the conditions to be met by agencies
entering into contracts with private firms in support of these allowances, and payment
of expenses to obtain professional credentials are included.
Discussion
Most of Chapter 57 has not been amended for more than a decade. The Joint
Financial Management Improvement Project (JFMIP), in a 1995 report, made a
number of recommendations on travel management. One such recommendation was
that a government-issued charge card should be used for all travel-related expenses.
Cost savings of $62 million were anticipated. P.L. 105-264, enacted on October 19,
1998, address this recommendation by requiring the use of the federal travel charge
card for payment of all official government travel expenses to the maximum extent
practicable. Other provisions of the law include authorizing the government to
collect financial information needed to verify that charges on the card are business
related, and providing that employees whose charge payments are overdue will have
the delinquent amounts deducted from their paychecks. Concerns about fraud, waste,
and abuse in the use of travel cards by federal employees prompted Congress to act.
Two statutes that apply only to Department of Defense (DOD) personnel include



provisions dealing with travel card management. Section 1008 of P.L. 107-314385
amends 10 U.S.C. § 2784 by inserting a section on the disbursement of travel
allowances and offsets for delinquent travel card charges. Provisions in Section 1009
of P.L. 108-136 also address the disbursement of travel allowances, determinations
of creditworthiness, and penalties for misusing travel cards.
The JFMIP also recommended improvements in automating and auditing travel
data. P.L. 105-264 establishes requirements for prepayment audits of federal agency
transportation expenses to verify that charges are correct. The General Services
Administration (GSA) estimates that this will save $50 million per year. Efforts to
further automate and audit travel will likely continue.
With the passage of P.L. 107-107,386 the National Defense Authorization Act for
FY2002, federal employees who receive promotional items, such as frequent flier
miles, as a result of official government travel may keep and use the promotional
items. Section 1116 of P.L. 107-107 applies to any items received before, on, or after
the date of enactment (December 28, 2001).
Through the use of contractors, GSA is establishing an online travel system, the
eTravel Service (eTS). The Web-based system will include all aspects of travel,
including authorizing travel, making reservations, filing travel claims, and
reconciling vouchers. A proposed rule requires federal agencies to begin
implementing eTS no later than December 31, 2004. GSA’s system is separate from
DOD’s online travel management system, the Defense Travel System (DTS), which
began operating in 2003.
GSA annually adjusts per diem rates for payment of lodging and meals during
official government travel within the continental United States. Effective October
1, 2000, changes in the per diem rates occur at the start of the fiscal year. Effective
January 1, 1999, federal employees are reimbursed for all local taxes on hotel room
charges (in the past, taxes were not always reimbursed). Incidental expenses for
laundry and dry cleaning will not be reimbursed for short-term travel of less than four
days.
Following the Internal Revenue Service’s increase in its standard mileage
reimbursement rate, from 36 cents to 37.5 cents per mile for 2004, the Administrator
of General Services, who sets the reimbursement rate for all federal employees, also
increased the GSA rate to 37.5 cents per mile.387
Selected Source Reading
U.S. Congress. House. Committee on Government Reform and Oversight.
Subcommittee on Government Management, Information and, Technology.


385 116 Stat. 2458, at 2634.
386 5 U.S.C. § 5702 note; 115 Stat. 1012, at 1241.
387 The mileage reimbursement rate established by the General Services Administration
cannot exceed the rate established by the Internal Revenue Service (5 U.S.C. § 5704).

H.R. 3637, Travel Reform and Savings Act of 1996. Hearing on H.R. 3637. 104th
Congress, 2nd session, July 9, 1996. Washington: GPO, 1997.
U.S. Congress. Senate. Committee on Governmental Affairs. Travel and
Transportation Reform Act of 1997. 105th Congress, 2nd session. S.Rept. 105-

295. Washington: GPO, 1998.


U.S. General Services Administration. “Federal Travel Regulation: eTravel Service
(eTS).” Federal Register, vol. 68, no. 125 (June 30, 2003), pp. 38661-38665.
U.S. Joint Financial Management Improvement Program, Improving Travel
Management Governmentwide. Washington: GPO, 1995.
L. Elaine Halchin



(23) Allowances (Chapter 59; in Part III, Subpart D — Pay and
Allowances).
Statutory Intent and History
This chapter, with a few subsequent modifications, derives from the statute
codifying Title 5 in 1966 (80 Stat. 378). It provides for payment of various
allowances to cover the costs of specific expenses outside of those normally expected
or to enhance recruitment and retention.
Major Provisions
General allowance provisions include those for living quarters for personnel
stationed in foreign countries; differential cost-of-living allowances (COLAs) for
personnel living in high-cost areas such as Alaska; “danger pay” to be given to
personnel assigned to areas where war conditions or other threatening elements are
present; incentive allowances for physicians; and other cost-of-living and uniform
allowances.
Discussion
Non-foreign area cost-of-living allowances and physicians’ comparability
allowances are frequently examined by executive branch administrators, Members
of Congress, and federal employees to ensure that the intent of the authorizing
statutes is carried out.
The Office of Personnel Management’s (OPM) Special COLA Research
Announcement (see “Selected Source Reading,” below) in July 2000 provided the
following information:
The Government pays nonforeign area COLAs to approximately 44,000 Federal
white-collar and U.S. Postal Service employees in Alaska, Hawaii, Guam, the
Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S.
Virgin Islands. COLA rates reflect differences in living costs between the
allowance areas and the Washington, DC, area. OPM conducts surveys in the
COLA areas and in the Washington, DC, area to determine COLA rates. The
law limits COLAs to no more than 25 percent of basic pay .... Since 1991,
OPM’s surveys conducted using the existing methodology have indicated that,
using this methodology, COLA rates would have been reduced in several
allowance areas. This has raised concerns relating to the COLA methodology.
Since 1991, Congress has barred COLA rate reductions. The bar is in effect
through December 31, 2000. Congress also required OPM to study and submit
a report on the COLA program and the compensation of Federal employees in
the COLA areas. Since 1996, the Government and the plaintiffs have engaged
in a cooperative effort under [a memorandum of understanding]. This
cooperative effort led to a proposed settlement of Caraballo, et al. v. United
States, No. 1997-0027 (D.V.I.), a case brought in the District Court of the Virgin
Islands.
The settlement, which the court approved on August 17, 2000, formed the basis
for new regulations for the COLA program. OPM published proposed regulations



to significantly modify the COLA methodology consistent with the court agreement
on November 9, 2001 (66 FR 56741). The final regulations were published on May

3, 2002 (67 FR 22339). Current COLA rates are: in Alaska, 25% (Anchorage,


Fairbanks, Juneau, and rest of the state); in Hawaii, 25% (Honolulu), 16.5% (Hawaii
County), 23.25% (Kauai County), and 23.75% (Kalawao and Maui Counties); in
Guam and the Commonwealth of the Northern Mariana Islands, 25%; in Puerto Rico,

11.5%; and in the U.S. Virgin Islands, 22.5%.


Federal physicians may receive up to $30,000 per year as a physicians’
comparability allowance (PCA). The allowance had been reauthorized every three
years. In the 106th Congress, the Federal Physicians Comparability Allowance
Amendments of 2000 (114 Stat. 3054) permanently authorized the comparability
allowance and treated it as part of basic pay for retirement purposes. In FY2000
(actual data), 47% of all eligible physicians, or 1,521 physicians, received a PCA and
the average PCA paid was $17,889. For FY2001, approximately 1630 physicians
(48% of all those eligible) received a PCA.
In the 107th Congress, the National Defense Authorization Act FY2002 (115
Stat. 1238) amended current law to provide hostile fire pay of $150 per month in
certain circumstances. During the same Congress, the Foreign Relations
Authorization Act FY2003 (116 Stat. 1380) amended current law with regard to the
baggage allowance and to provide an allowance to Foreign Service employees who
are outside their countries of employment and require medical treatment in specific
circumstances.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 59 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Selected Source Reading
Federal Physicians Association. 2001 Presidential Report on the Physicians’
Comparability Allowance Program, available at
[http://www.fedphy.org/pay_reports.htm], visited December 11, 2003.
U.S. Office of Personnel Management, “Nonforeign Area Cost-of-Living
Allowances,” Special COLA Research Announcement, available at
[http://www.opm.gov/oca/cola/html/cola-n.htm], visited December 11, 2003.
See also the COLA Settlement Litigation website at [http://www.colasettlement.
com/], visited December 11, 2003.
Barbara L. Schwemle



(24) Hours of Work (Chapter 61; in Part III, Subpart E — Attendance
and Leave).
Statutory Intent and History
The 1966 Title 5 codification statute (80 Stat. 378), the Civil Service Reform
Act of 1978 (92 Stat. 1111), and the Federal Employees Flexible and Compressed
Work Schedules Act of 1982 (96 Stat. 227) are the basic authorities contributing to
the hours of work provisions of Chapter 61. The Homeland Security Act of 2002
(P.L. 107-296; 116 Stat. 2229) and the National Defense Authorization Act FY2004
(P.L. 108-136, 117 Stat. 1621) authorize the creation of new human resources
management (HRM) systems for civilian employees of the Departments of Homeland
Security and Defense. Both laws stipulate that the Chapter 61 provisions cannot be
waived, modified, or otherwise affected by the new HRM systems. (See the
discussions of the 5 U.S.C. Chapter 97 and Chapter 99 provisions in this
compendium.)
The impetus for revamping federal employee hours of work into flexible and
compressed schedules stems from the reality that variations on the standard eight-
hour work day can oftentimes lead to greater efficiency, productivity, and employee
morale. Studies in both the federal and private sector appear to support the
conclusion that alternative work-hour options benefit both employees and
management.
Major Provisions
In general, the hours of work provisions of Chapter 61 establish the basic work
week for federal employees, list official federal holidays, and define the availability
of flexible and compressed work schedule options. Pursuant to this chapter, agency
heads are responsible for establishing the basic 40-hour workweek, hours and days
of duty, telecommuting policy, approval of scheduling academic programs for
improving job-centered skills, and approval of premium pay provisions.
Provisions governing compensation for 11 federal holidays are set forth.
Federal compensable holidays identified in the chapter include New Year’s Day, the
birthday of Martin Luther King Jr., Washington’s Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day,
Christmas Day, and Inauguration Day (the last reserved for employees in
Washington, DC and the immediate vicinity, and observed only quadrennially).
Flexible and compressed work schedules are defined. Consistent with certain
mandatory hours of attendance, and provided that agency operations are not disrupted
as a result, agencies may authorize employees to vary the length of a workweek or
workday and schedule the 80 hours biweekly work requirement in less than 10
workdays, including a four-day workweek and variation in reporting and departure
times. Provisions affecting compensatory time, premium pay provisions, night
differential pay, and leave and retirement provisions interactive with flexible and
compressed work schedules are described. Collective bargaining is authorized for
determining flexible and compressed work schedules.



Federal employees may not coerce fellow employees with respect to
participation or non-participation in flexible and compressed work schedules; the
Office of Personnel Management (OPM) has responsibility for administering the
program.
Discussion
The transformation of the federal workplace in terms of wide-ranging work
schedule variation, including flexible sign-in-sign-out and compressed schedules, is
a revolutionary change from the generations-old “nine to five/Monday through
Friday” workweek pattern. The responsibility of the agency head for determining the
efficiency of the system and managing workload accomplishment remains in place,
subject to the challenges posed by flexible work schedules. Aside from a few
complaints that certain core hours are sometimes inadequately covered, the system
appears to work well.
Selected Source Reading
U.S. Congress. House. Committee on Post Office and Civil Service. Federal
Employees Leave Sharing Amendments Act of 1993. Committee Rept. 103-246.

103rd Congress, 1st session. Washington: GPO, 1993.


U.S. General Accounting Office. Alternative Work Schedules: Many Agencies Do
Not Allow Employees the Full Flexibility Permitted by Law. Washington: GPO,

1994.


Kevin R. Kosar



(25) Leave (Chapter 63; in Part III, Subpart E — Attendance and
Leave).
Statutory Intent and History
The 1966 Title 5 codification statute (80 Stat. 378) and the Civil Service Reform
Act of 1978 (92 Stat. 1111) are the basic authorities underlying Chapter 63.
Additional authorities contributing to its provisions include a 1968 statute
authorizing federal employee leaves of absence to attend funerals of immediate
relatives who died while serving as members of the armed forces in combat zones or
for those employees called to duty as members of the National Guard or armed forces
reserves (82 Stat. 1151, as amended by P.L. 108-136, Sections 1113 and 1114); the
Treasury, Postal Service, and General Government Appropriations Act of 1995 (108
Stat. 2423); the Federal Employees Leave Sharing Act of 1988 (102 Stat. 2834); the
Family and Medical Leave Act of 1993 (107 Stat 19); and provisions for leave
transfers in major disasters and emergencies (111 Stat. 196). The Homeland Security
Act of 2002 (116 Stat. 2229) and the National Defense Authorization Act for FY2004
(P.L. 108-136, 117 Stat. 1621) authorize the creation of new human resources
management (HRM) systems for civilian employees of the Departments of Homeland
Security and Defense. Both laws stipulate that the Chapter 63 provisions cannot be
waived, modified, or otherwise affected by the new HRM systems. (See the
discussions of the 5 U.S.C. Chapter 97 and Chapter 99 provisions in this
compendium.)
Federal employee annual, sick, holiday, and other leave options are among the
most important and expensive elements of the basic federal benefits package. Insofar
as total federal compensation comparability is concerned, leave benefits, along with
health and retirement, are considered to be key components in comparing federal and
private sector employment.
Major Provisions
Federal employee leave benefits are defined as regular workdays, for which
employees are compensated, exclusive of holidays. Provisions detail categories of
leave, the leave accrual process, and federal leave bank programs.
Federal leave benefits accrue to full-time and part-time employees, and are
authorized during any part of the work year, subject to approval of agency heads.
Annual leave is accrued on the basis of length of service and ranges from four hours
to eight hours per biweekly pay period. Applicable federal service in another agency
is creditable for annual leave purposes. Accumulation of annual leave, with certain
exceptions, is limited to 30 days in a calendar year. Payment for unused annual
leave, upon separation from the federal service, is authorized for up to 30 days,
except for members of the Senior Executive Service and Senior Foreign Service, who
may accumulate and be compensated for annual leave up to 90 days.
Federal employee sick leave accrues at the rate of four hours per biweekly pay
period. There is no limit on sick leave accrual and, under the Civil Service
Retirement System (CSRS), but not the Federal Employees Retirement System
(FERS), unused sick leave may be credited for retirement purposes upon separation



of the employee. Sick leave may be used in connection with child adoption, and up
to 30 days of sick leave may be advanced in the case of serious illness. Sick leave
is not charged to certain federal law enforcement officers for injury or illness
resulting from performance of duty.
The Office of Personnel Management (OPM) is authorized to establish a
program by which federal employees may transfer accumulated annual leave, subject
to certain limitations, to other employees in cases of medical emergencies.
Provisions for restoring unused transferred leave are provided. Federal employees
are prohibited from exercising any coercion, intimidation, or promises in connection
with receipt or donation of annual leave.
Agencies are authorized to establish their own voluntary leave banks for use by
federal employees. Agencies in the excepted service may establish separate leave
bank programs. An employee’s accrued annual leave, up to 50% of his or her annual
entitlement, may be contributed to the leave bank and made available to another
employee needing leave for a medical emergency. No coerciveness may be involved
in the granting or utilization of annual leave for this purpose. Leave Bank Boards
review and administer the leave banks.
Discussion
Federal leave benefits — annual, sick, holiday, and other — at an estimated cost
of 15% of the federal payroll, are a prime and costly part of the benefits package to
federal employees. One indication of cost is that a prime inducement for entry and
retention in the Senior Executive Service was the entitlement to unlimited accrual of
annual leave benefits and the subsequent curtailment thereof to a maximum of 90
days. Other federal employees may accrue a maximum annual carryover of 30 days
of annual leave. All unused annual leave from the current year is computed,
considered compensable income, and granted to the federal employee upon
separation from the federal service, either through normal retirement or other means.
Federal sick leave, accrued at the rate of 13 days per calendar year for all full-
time employees, and proportionally less, according to work schedules, for part-time
employees, may be accumulated without limit. Payouts for unused sick leave are not
permitted.
The federal leave bank program has been a dramatic new departure in allocating
additional annual leave to federal employees requiring it for medical emergencies.
Pursuant to the program, federal employees may donate or borrow annual leave. An
individual’s donation of annual leave may not exceed 50% of his or her annual
entitlement. Intra-agency, a federal employee may designate a co-worker as
beneficiary of donated annual leave because of medical emergency.
Selected Source Reading
U.S. Office of the Vice President. National Performance Review. Creating a
Government That Works Better & Costs Less. Accompanying report:
Enhancing the Quality of Worklife. Washington: GPO, 1993.



U.S. Congress. House. Committee on Post Office and Civil Service. Study of Total
Compensation in the Federal, State and Private Sectors. Committee print 98-16.

98th Congress, 2nd session. Washington: GPO, 1984.


Kevin R. Kosar



(26) Labor-Management Relations (Chapter 71; in Part III, Subpart
F — Labor-Management and Employee Relations).
Statutory Intent and History
Title VII of the Civil Service Reform Act of 1978 (92 Stat. 1191; P.L. 95-454)
gives federal employees the statutory right to form labor unions and bargain388
collectively over the terms and conditions of employment. The statute excludes
specific agencies and gives the President the authority to exclude other agencies for
reasons of national security.
The Civil Service Reform Act of 1883 (commonly called the Pendleton Act,
after its sponsor, Senator George Pendleton) established the Civil Service
Commission (CSC). The act was an attempt to reform the political patronage system.
It provided for merit hiring and promotion of federal employees, but did not give
federal workers the right to unionize.
After President John Kennedy issued Executive Order 10988 in January 1962,
union membership among federal employees increased significantly. The order gave
employees of the executive branch the right to form unions and bargain collectively.
Federal employees were allowed to bargain over the conditions of employment but
not over work assignments. The authority to set wages and fringe benefits remained
with Congress. Agencies could require union representatives to bargain during
nonwork hours. Federal workers were not allowed to strike. Collective bargaining
agreements could include negotiated procedures for resolving grievances. The CSC
and the Department of Labor were required to develop a code of fair labor practices.
The executive order did not apply to the Federal Bureau of Investigation (FBI), the
Central Intelligence Agency (CIA), or other agencies or subagencies primarily
performing investigative, intelligence, or security functions, if the head of the agency
determined that union representation was not in the interests of national security.
Executive Order 11491, issued by President Richard Nixon in October 1969,
replaced Executive Order 10988. President Nixon’s order created a more
independent administrative structure for federal labor-management relations. The
Federal Labor Relations Council (FLRC) was created to administer and interpret the
executive order, and the Federal Services Impasses Panel was created to resolve
bargaining impasses. Members of the FLRC included the Chairman of the CSC, the
Secretary of Labor, and an appointee from the Executive Office of the President. The
Assistant Secretary of Labor for Labor-Management Relations was given
responsibility for determining the appropriateness of bargaining units, supervising
union elections, and settling complaints of unfair labor practices. The executive
order listed specific actions for both labor and management that would be considered
unfair labor practices. Union representatives were required to bargain during
nonwork hours. The executive order did not require bargaining unit members to pay
dues. The order required unions to make regular financial reports available to
members. The order did not cover the FBI, CIA, or the General Accounting Office


388 5 U.S.C. §§ 7101-7135.

(GAO). The language giving agency heads the authority to exclude unions was
similar to the language in Executive Order 10988.
Executive Order 11491 was amended by other executive orders. Executive
Order 11616, issued by President Nixon in August 1971, required collective
bargaining agreements to include negotiated procedures for resolving grievances and
designated the Director of the Office of Management and Budget as the presidential
appointee to the FLRC.
Major Provisions
Executive orders may be amended or withdrawn. Title VII of the Civil Service
Reform Act of 1978 (CSRA) established in statute the right of federal employees to
organize and bargain collectively. The law applies to executive branch agencies, the
Library of Congress, and the Government Printing Office. The CSRA excludes from
coverage members of the armed forces, Foreign Service employees, the FBI, CIA,
GAO, National Security Agency, Tennessee Valley Authority, the Federal Services
Impasses Panel, and the newly created Federal Labor Relations Authority (FLRA).
The CSRA also gives the President the authority to exclude, in the interests of
national security, any agency or subagency whose primary function involves
investigative, intelligence, counterintelligence, or security work.
Under the CSRA, federal employees can bargain over the conditions of
employment, but not over wages, benefits, or other matters set in law. Federal
employees cannot strike. The CSRA lists both labor and management unfair labor
practices. The CSRA requires unions to make regular financial reports available to
members. Bargaining agreements must include negotiated procedures for resolving
grievances. Grievance procedures must provide for binding arbitration. Union
representatives are allowed official time for contract negotiations. Official time for
other matters can be negotiated. The CSRA does not require bargaining unit
members to pay dues.
The CSRA changed the administrative structure of federal labor-management
relations. The CSRA replaced the CSC with the Office of Personnel Management
(OPM) to administer and enforce civil service law and the Merit Systems Protection
Board to hear and decide employee appeals of adverse personnel actions and other
matters. The CSRA created the FLRA and retained the Federal Services Impasses
Panel. The FLRA determines appropriate bargaining units, supervises union
elections, and resolves complaints of unfair labor practices. To make the agency
independent of other federal agencies, the three members of the FLRA are appointed
by the President and confirmed by the Senate. No more than two members of the
FLRA may belong to the same political party. The Office of General Counsel of the
FLRA investigates and prosecutes charges of unfair labor practices.
Discussion
Recent legislation has given federal agencies greater flexibility in personnel
matters. Legislation creating the Transportation Security Administration (TSA) gave
the agency head the authority to exclude airport screeners from collective bargaining.
Legislation creating the Department of Homeland Security (DHS) gave the President



different authority to exclude DHS agencies from collective bargaining. The
Secretaries of DHS and the Department of Defense (DOD) have been given the
authority to establish personnel systems for all or parts of their departments.
The Aviation and Transportation Security Act of 2001 (P.L. 107-71) created the
TSA and shifted the responsibility for airport screening to the federal government.
The act gave the head of the TSA, which was later transferred to DHS, the authority
to determine the terms and conditions of employment for federally employed airport
screeners. In January 2003, the head of the TSA announced that the agency would
not bargain with airport screeners.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) gave the
Secretary of DHS, in regulations issued jointly with the Director of OPM, the
authority to establish a human resources management system for all or parts of the
department. Any such system must allow employees to organize and bargain
collectively. An agency or subagency transferred to the department can be excluded
from collective bargaining if the agency was previously excluded by executive order
or, if employees were not previously organized, the agency’s primary function
involves investigative, intelligence, counterintelligence, or security work, and the
President determines that union representation is not in the national interest. An
agency or subagency whose employees were previously represented by a union (or
unions) can be excluded from collective bargaining if (a) the responsibilities of the
agency change and a majority of the employees have as their primary duty
intelligence, counterintelligence, or investigative work directly related to terrorism;
or (b) the President determines that union representation would have a substantial
adverse impact on the ability of the department to protect homeland security and
Congress is given a written explanation 10 days before the President takes action.
An employee may be excluded from a bargaining unit if the employee’s
responsibilities change (or the individual is a new employee) and the employee’s
primary duty consists of intelligence, counterintelligence, or investigative work
directly related to terrorism. The act also gave the Secretary of DHS the authority to
create an internal process for hearing employee appeals of adverse personnel actions.
The Department of Defense Authorization Act of 2004 (P.L. 108-136, 117 Stat.
1621) gave the Secretary of Defense the authority, in collaboration with the Director
of OPM, to create a human resources management system for all or parts of the
department. The system must ensure that civilian employees have the right to
organize and bargain collectively. The President retains the authority to exclude
from collective bargaining any agency whose primary function involves investigative,
intelligence, counterintelligence, or security work, if the President determines that
union representation is not in the national interest. The act gives DOD the authority
to establish, together with OPM, a labor-management relations system. The act
allows DOD to bargain at a national level with employee unions (i.e., rather than
bargaining with each local). The act gave the Secretary of Defense the authority to
create an internal process for hearing employee appeals of adverse personnel actions.
Selected Source Reading
CRS Report RL31500. Homeland Security: Human Resources Management, by
Barbara L. Schwemle.



CRS Report RL31954. Civil Service Reform: Analysis of the National Defense
Authorization Act of 2004, coordinated by Barbara L. Schwemle.
U.S. Federal Labor Relations Authority. A Guide to the Federal Service Labor-
Management Relations Program. Washington: GPO, 2001.
Gerald Mayer



(27) Antidiscrimination in Employment and Employees’ Right to
Petition Congress (Chapter 72; in Part III, Subpart F — Labor
Management and Employee Relations).
Statutory Intent and History
The Civil Service Reform Act of 1978 (CRSA; 92 Stat. 1111), President
Carter’s plan for revamping the civil service system, included provisions to shift
authorities between federal agencies with respect to enforcement of laws to eliminate
employment discrimination. The intent of the act was to separate the conflicting
roles of the Civil Service Commission (CSC) as both federal personnel manager and
protector of employee rights and assign these tasks to two new agencies, the Office
for Personnel Management (OPM) and Merit Systems Protection Board (MSPB),
respectively. But principal responsibility for implementing equal employment
opportunity (EEO) policy in the federal government was placed with the Equal
Employment Opportunity Commission (EEOC). The act also created a minority
recruitment program to insure that groups previously underrepresented in federal
agencies would be actively encouraged to apply.
Historically, the concept of merit selection of employees began with a 19th
century statute, the Civil Service Act of 1883 (the Pendleton Act), that required open,
competitive examinations for public service jobs in which both men and women were
eligible to compete, although categories of work were usually designated by sex.
Civil service employment, like employment generally, remained largely sex (and
race) segregated for many years. Federal concern with equal employment
opportunity for government workers began incrementally in 1941, when President
Franklin Roosevelt barred discrimination in federal programs concerned with defense
production and set up a Committee on Fair Employment Practice. From this narrow
base, in the decades following World War II, additional steps were taken by
Congress, the courts, and the executive branch to extend equal employment
opportunity more widely in both the public and private sectors.
When Congress enacted Title VII of the Civil Rights Act of 1964, prohibiting
employment discrimination on the basis of race, color, religion, sex, or national
origin, the federal government was specifically excluded from the definition of
employer covered by the act (42 U.S.C. § 2000e et seq.). Section 701 of the act did
provide, however, that federal sector employment decisions were to be free from
discrimination, and authorized the President to enforce this policy. The CSC was
thereafter directed by Executive Orders 11246 and 11478 to protect federal employee
rights by establishing comprehensive procedures for investigation and resolution of
EEO charges. Doubts as to the efficacy of the CSC regulatory program, however,
compounded by lack of a viable judicial remedy, eventually led Congress to adopt
the Equal Employment Opportunity Act of 1972, adding section 717 to Title VII (42
U.S.C. § 2000e-16). Section 717 created a private right of action for executive
branch employees to challenge discriminatory practices in federal court. It also
strengthened CSC authority to devise “necessary and appropriate” remedies to
enforce Title VII, “including reinstatement or hiring of employees with or without
back pay.” Authority for enforcing Title VII in federal employment was transferred
to the EEOC by Reorganization Plan No. 1 of 1978 and the CSRA.



In later years, Congress expanded federal employee rights with passage of the
Rehabilitation Act of 1973 (29 U.S.C. § 791), and amendments to the Equal Pay Act
(1974; 20 U.S.C. § 206(d)) and the Age Discrimination in Employment Act (1978;

29 U.S.C. §§ 631, 633a), prohibiting, respectively, discrimination based on age,


physical or mental impairment, and sex-based wage inequality. These statutes, in
turn, define the kinds of discrimination forbidden by the CSRA (5 U.S.C. §§ 7201-
7204). And to assure that equal employment opportunity was extended in fact, as
well as in word, to certain groups whose options for federal employment had
previously been limited, the CSRA mandated a recruitment program to eliminate
underrepresentation of minorities within the various departments and agencies.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 72 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Section 7201 states that it is the policy of the United States to ensure equal
employment opportunities for employees without discrimination because of race,
color, religion, sex, or national origin. This section also requires OPM to develop a
continuing program for the recruitment of minorities for employment in federal
agencies. Under this program, each executive agency is required to administer the
antidiscrimination policy in a manner designed to eliminate underrepresentation of
minorities in the various categories of civil service employment within the federal
service, with special efforts directed at recruiting in minority communities, in
educational institutions, and from other sources. OPM is further required to conduct
a continuing program of assistance to agencies in carrying out the program, as well
as evaluation and oversight to determine the program’s effectiveness in eliminating
minority underrepresentation. The EEOC is charged with establishing guidelines for
carrying out the program. OPM reports to Congress annually with data regarding the
minority recruitment program in order to evaluate its effectiveness.
Section 7202 requires that the same benefits be provided in an executive agency
or in the competitive service for a married female employee and her spouse and
children as are provided for a married male employee and his spouse and children,
and vice versa.
Section 7203 prohibits discrimination because of a handicapping condition in
an executive agency or in the competitive service if OPM believes the job can be
performed by an individual with such a condition. An exception is made for any
employment situation that might endanger the health or safety of the employee or
others.
Section 7204 bans discrimination because of race, color, creed, sex, or marital
status with respect to general schedule pay rates, prevailing rate systems, or
appointments to positions classified above GS-15.



Subchapter II, Section 7211, “Employees’ Right to Petition Congress,” protects
the right of employees, individually or collectively, to petition Congress, or a
Member of Congress, or to furnish information to either house of Congress, to a
committee or Member.
Discussion
Although the Civil Service Act of 1883 inaugurated the idea of a merit system
for appointing federal employees, the principle of equal employment opportunity was
expanded considerably by the great social and political changes of the second half of
the 20th century. Current protections for federal workers are an amalgam of merit
system principles and nondiscrimination requirements administered jointly by
employing federal agencies, MSPB, and the EEOC. The first line of defense against
federal workplace discrimination is an internal administrative process established by
each federal agency to receive, investigate, and adjudicate employee complaints of
unlawful discrimination. These internal agency rules have been much criticized both
for perpetuating an inherent conflict of interest — by making the agency the judge
of its own actions — and for encouraging large numbers of baseless complaints due
to lack of substantive standards. The CSRA gave the EEOC exclusive jurisdiction
to review agency decisions involving federal employees where only discrimination
issues are alleged or no appeal rights to MSPB exist. Complicating the relationship
between the MPSB and the EEOC is an election of remedies requirement in the
CSRA, designed to avoid duplicative processing of complaints, though the agencies
are required to work together. In “mixed cases,” involving a discrimination claim
stemming from an adverse personnel action appealable to the MSPB, the board has
concurrent jurisdiction, subject to EEOC review of the equal employment
opportunity portion of the employee’s case. Thus, an MSPB decision adverse to the
employee may be reviewed by the EEOC. Any difference of opinion between the
agencies must be submitted to a statutory special panel for resolution.
A significant incentive for the federal employee EEO claims was provided by
the Civil Rights Act of 1991 (42 U.S.C. §1981a(b)). Formerly, remedies for
discrimination were limited to back pay, reinstatement, and injunctive relief. Under
the 1991 act, the EEOC (and the federal courts) may award up to $300,000 in
compensatory damages to federal employees who prove “intentional” discrimination
by their agencies violative of Title VII or the Rehabilitation Act of 1973. The
damage award is meant to compensate for “future pecuniary losses, emotional pain,
suffering, inconvenience, mental anguish, loss of enjoyment of life, and other
nonpecuniary losses.” Jury trials may be had by federal employees seeking judicial
relief in damages under the 1991 act.
A new law approved by Congress, effective October 1, 2003, may encourage
earlier settlement of employment discrimination claims against federal agencies.
Under prior law, agencies were responsible for paying out of their own funds
settlements reached during the administrative stage of a discrimination or
whistleblowing retaliation complaint. Once the complaint went to court, however,
the judgment or settlement was paid from the government-wide judgment fund.
Section 201 of the Notification and Federal Employee Anti-Discrimination and
Retaliation Act (No FEAR Act; P.L. 107-174) holds the particular agency — rather
than the government as a whole — fiscally accountable by requiring that



discrimination awards, judgments, and settlements be paid from the budget of the
agency wrongdoer. The law also requires that applicants, employees, and former
employees be given written notice and training about their rights, and that the
information and statistics be posted on the agencies’ Internet sites.
Selected Source Reading
U.S. Congress. Senate. Committee on Governmental Affairs. Reorganization Plan
No. 1 of 1978: To Make the Equal Employment Opportunity Commission theth
Principal Federal Agency in Fair Employment Enforcement. Hearing. 95
Congress, 2nd session. Washington: GPO, 1978.
U.S. Congress. House. Committee on Post Office and Civil Service. Subcommitteeth
on Investigations. Discrimination in the Federal Government. Hearing. 95
Congress, 2nd session. Washington: GPO, 1978.
U.S. General Accounting Office. Equal Employment Opportunity: Rising Trends in
EEO Complaint Caseloads in the Federal Sector. GAO/GGD-98-157BR. July

1998.


Charles Dale



(28) Suitability, Security, and Conduct (Chapter 73; in Part III,
Subpart F — Labor-Management and Employee Relations).
Statutory Intent and History
The 1966 Title 5 codification statute (80 Stat. 378) is the basic authority for
Chapter 73, Suitability, Security, and Conduct. Additional authorities include
provisions of a 1967 statute amending Title 5 and codifying recent law (81 Stat. 195
at 208) and the Omnibus Crime Control and Safe Streets Act of 1968 (82 Stat. 197
at 235). The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 73 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
The chapter enumerates basic standards for conduct and behavior of federal
employees. As such, its content relates essentially to law enforcement. Prohibitions
against disloyalty, strikes against the government, advocating overthrow of the
government, and improper gift-giving or acceptance, are admonitions to avoid
activities that could lead not only to dismissal, but to prosecution as well.
Major Provisions
The President is authorized to promulgate standards governing federal employee
conduct. Included are provisions related to loyalty and striking, security clearance,
political activities (for a discussion of the provision relating to employee political
activities, see this compendium’s discussion of 5 U.S.C. Chapter 73, Subchapter III),
and receipt of foreign gifts and decorations. Employee misconduct is also covered,
including prohibition on gifts to superiors, drug abuse, and alcohol abuse and
alcoholism.
The chapter sets forth employment limitations in the federal service, including
prohibitions against those advocating overthrow of the government, participation in
or advocacy of striking against the government, or inciting a riot or civil disorder.
Regulations concerning those removed for national security reasons, including
appointments elsewhere in the government for such individuals, are authorized.
The President, Vice President, Members of Congress, and federal employees are
prohibited from accepting foreign gifts and decorations, except those of minimal
value, certain travel expenses, an educational scholarship, or medical treatment.
Gifts of more than minimal value become the property of the United States, and
violation of these provisions subjects the individual to civil action by the
government.
Federal employee misconduct provisions include solicitation of gifts for
superiors or acceptance by superiors of gifts from subordinates. Excessive use of
intoxicants is a bar to federal employment. The Office of Personnel Management



(OPM) is responsible for developing treatment programs for federal employees
suffering from drug abuse and alcoholism.
Discussion
Chapter 73 is the major civil enforcement authority insofar as federal employee
conduct and behavior are concerned. Its prohibitions on the right to strike or
advocate a strike, gift acceptance restrictions, and misconduct proscriptions, ranging
from engaging in riots and disorder to alcohol and drug abuse, are accompanied by
prescribed penalties — the maximum being removal from the service — and
rehabilitation options, such as treatment programs for drug and alcohol abuse. With
the exception of national security breaches, little attempt has been made of late to
modify this enforcement authority.
Selected Source Reading
Rosenbloom, David H. Federal Service and the Constitution: Development of the
Public Employee Relationship. Ithaca: Cornell University Press, 1971.
U.S. General Accounting Office. The Public Service: Issues Affecting Its Quality,
Effectiveness, Integrity, and Stewardship. Washington: GPO, 1990.
U.S. President’s Council on Integrity and Efficiency. A Progress Report to the
President. Fiscal Year 1993. Washington: GPO, 1993.
Mitchel A. Sollenberger



(29) Political Activities (Chapter 73, Subchapter III; in Part III,
Subpart F — Labor-Management and Employee Relations).
Statutory Intent and History
Chapter 73 political activities provisions derive from the Hatch Act, initially
adopted in 1939 (53 Stat. 1147) and subsequently amended several times, the most
recent major modifications being the Hatch Act Reform Amendments of 1993 (107
Stat. 1001). The intent of these laws is to regulate the political activities of certain
federal employees and to provide penalties for violations.
Major Provisions
The Hatch Act and its amendments cover employees or officeholders in
executive agencies or in positions within the competitive service that are not in
executive agencies, as well as the U.S. Postal Service and Postal Rate Commission
employees. District of Columbia government employees or office holders, other than
the mayor, city council members, and the recorder of deeds, are also covered. The
President, Vice President, General Accounting Office employees, and members of
the uniformed services are not covered by this law.
Subchapter III of Chapter 73 provides that employees may take an active part
in political management or in political campaigns, except as prohibited, and retain
the right to vote as they choose and express their opinions on political subjects and
candidates. Exceptions are noted, such as employees of the Criminal Division of the
Department of Justice, Federal Bureau of Investigation, and administrative law
judges.
The Office of Personnel Management (OPM) may prescribe regulations
permitting employees, with certain exceptions, to take an active part in political
management and political campaigns involving the municipality or other political
jurisdictions in which they reside. However, employees are prohibited from being
candidates for partisan political office. Restrictions are present regarding the
solicitation and acceptance of political contributions.
The law provides that, if the Special Counsel (who heads a separate federal
agency, the Office of Special Counsel) receives an allegation concerning any matter
relating to prohibited political activities, withholding of information, political
intrusion into personnel decisionmaking, and discrimination, the Special Counsel can
investigate and seek corrective action under 5 U.S.C. § 1214 and disciplinary action
under 5 U.S.C. § 1215 in the same way as if a prohibited personnel practice were
involved. An employee or individual who violates Section 7323 or 7324, relating to
prohibitions on the use of official influence or official information and solicitation,
shall be removed from his or her position, and funds appropriated for the position
from which the individual was removed thereafter may not be used to pay him or her.
However, if the Merit System Protection Board finds by unanimous vote that the
violation does not warrant removal, a penalty of not less than 30 days’ suspension
without pay shall be imposed by direction of the Board.



Discussion
The modifications effected by the Hatch Act Reform Amendments of 1993 were
adjusted slightly by the Legislative Branch Appropriations Act, 1997 (110 Stat.
2416), which modified 5 U.S.C. § 3303 with a provision stating: “An individual
concerned in examining an applicant for or appointing him in the competitive service
may not receive or consider a recommendation of the applicant by a Senator or
Representative, except as to the character or residence of the applicant.”
In January 1998, OPM published final regulations on political activities of
federal employees residing in designated localities. Spotsylvania County, Virginia,
and St. Mary’s County, Maryland, were added as designated localities, thereby
qualifying federal employees who reside in these counties to a partial exemption from
the prohibition at 5 U.S.C. § 7323(a)(2)(3) on political contributions and running for
election to a partisan political office.
In the 105th Congress, draft legislation prepared but not introduced by the House
Civil Service Subcommittee chair, Representative Mica, would have authorized civil
monetary penalties and debarment from employment for former federal employees
convicted of Hatch Act violations during their federal employment.
In the 108th Congress, a provision at Section 1109 of H.R. 1588, the National
Defense Authorization Act for FY2004, as passed by the House of Representatives,
on clarification of the Hatch Act was dropped in conference. (A similar provision
also was included in H.R. 1836, which was marked up by the House Committee on
Government Reform, but has not seen further action.) It would have exempted a
federal employee or individual who was employed by the Department of Defense
Inspector General’s office before the act’s enactment date and transferred to a Special
Court sponsored by the United Nations from the provisions of 5 U.S.C. § 7326.
Section 7326 authorizes an employee’s removal from his or her position or 30 days’
suspension without pay for violating the prohibitions on federal employee political
activities. The exemption would have no longer applied if the employee or individual
subsequently became reemployed in the civil service. The provision would have
provided that once employees in this specific category leave government service, they
would no longer by covered by the Hatch Act restrictions on political activities by
federal employees. H.R. 1509, which would have applied this provision to a broader
category of employees, was referred to the House Committee on Government
Reform, but has not seen further action as of this writing.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 73 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Questions about application of the Hatch Act to campaign activity by executive
branch personnel and to soliciting campaign contributions in federal buildings are



especially raised during presidential election years. The Office of Special Counsel
reiterates the law’s provisions in providing guidance to federal employees.389
Selected Source Reading
Aberbach, Joel D. and Bert A. Rockman. In the Web of Politics; Three Decades of
the U.S. Federal Executive. Washington: Brookings Institution Press, 2000.
Rosenbloom, David H. Federal Service and the Constitution: Development of the
Public Employee Relationship. Ithaca, New York: Cornell University Press,

1971.


U.S. Commission on Political Activity of Government Personnel. Findings and
Recommendations (vol. 1), Research (vol. 2), Hearings (vol.3). Washington:
GPO, 1968.
U.S. Congress. House. Committee on Post Office and Civil Service. Federalrd
Employees Political Activities Act of 1993. H.Rept. 103-16. 103 Congress,

1st session. Washington: GPO, 1993.


U.S. Congress. Senate. Committee on Governmental Affairs. Hatch Act Reformrdst
Amendments of 1993. S.Rept. 103-57. 103 Congress, 1 session.
Washington: GPO, 1993.
U.S. General Accounting Office. U.S. Attorneys; Laws, Rules, and Policies
Governing Political Activities. GAO/GGD-00-171. July 2000.
CRS Report 98-885 A. “Hatch Act” and Other Restrictions in Federal Law on
Political Activities of Government Employees, by Jack Maskell. (1998).
CRS Report 96-913 A. Recommendations by Members of Congress on Behalf of
Applicants for Federal Employment, by Jack H. Maskell (1996). (This CRS
report is archived and available from the author of this entry in the
compendium.)
U.S. Office of Special Counsel. Political Activity and the Federal Employee.
Washington: OSC, 2000.
Barbara L. Schwemle


389 See OSC’s Hatch Act website at [http://www.osc.gov/hatchact.html], visited Dec. 22,

2003.



(30) Adverse Actions (Chapter 75; in Part III, Subpart F — Labor-
Management and Employee Relations).
Statutory Intent and History
The current system for adverse actions in the federal civil service generally was
established under the Civil Service Reform Act of 1978 (P.L. 95-45; 92 Stat. 1134).
The intent was to streamline and codify disciplinary procedures. The subchapter
relating to national security was established under P.L. 81-733 (64 Stat. 476).
Major Provisions
This chapter prescribes the cause and procedure for suspension for 14 days or
less; removal, suspension for more than 14 days, reduction in grade or pay, or
furlough for 30 days or less; actions against administrative law judges; actions
involving national security; and actions involving the Senior Executive Service. It
authorizes an agency, under regulations promulgated by the Office of Personnel
Management (OPM), to take these actions for such cause as will promote the
efficiency of the service. An employee against whom an action has been proposed
is entitled to certain procedures such as advance written notice, a reasonable time to
answer orally or in writing and to furnish affidavits and other documentary evidence,
representation by an attorney or other representative, and a written decision and
specific reasons therefor.
An agency may remove, suspend, reduce in grade, reduce in pay, or furlough an
administrative law judge only for good cause established and determined by the Merit
Systems Protection Board on the record after an opportunity for a hearing before the
board.
Notwithstanding other statutes, the head of certain defined agencies may
suspend without pay an employee when the agency head considers suspension
necessary in the interest of national security. Subject to certain procedural
requirements, an agency head may remove such a suspended employee when, after
such investigation and review as the head considers necessary, the head determines
that removal is necessary in the interests of national security. After suspension and
before removal, an employee who has a permanent and indefinite appointment, has
completed a probationary period, and is a citizen of the United States, is entitled to
a written statement of the charges against him; an opportunity to answer the charges
and submit affidavits; a hearing, at the request of the employee, by an agency
authority duly constituted for this purpose; a review of his case by the agency head
or designee, before a decision adverse to the employee is made final; and a written
statement of the decision by the agency head.
Under regulations prescribed by OPM, an agency is authorized to remove from
the civil service or suspend for more than 14 days certain career appointees of the
Senior Executive Service only for misconduct, neglect of duty, malfeasance, or
failure to accept a directed reassignment or to accompany a position in a transfer of
function. An employee against whom such an action is proposed is entitled to certain
procedures, including advance written notice, a reasonable time to answer orally and
in writing and to furnish affidavits and other documentary evidence, representation



by an attorney or other representative, and a written decision and specific reasons
therefor. An employee against whom an action is taken also is entitled to appeal to
the Merit System Protection Board.
Discussion
This chapter establishes the cause and procedural protections for various
disciplinary actions in the civil service and specifies the individuals who are entitled
to protection. It attempts to strike a balance between management rights and
employee protection.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security (DHS) and Defense
(DOD). Both laws permit changes from the Chapter 75 provisions for DHS and
DOD. (See the discussions of the 5 U.S.C. Chapter 97 and Chapter 99 provisions in
this compendium.)
Selected Source Reading
Bussey, Ellen M., ed. Civil Service Law and Procedure: A Basic Guide, 2nd ed.
Washington: Bureau of National Affairs, Inc., 1990.
U.S. Congress. House of Representatives. Committee on Reform and Oversight.
Subcommittee on Civil Service. Civil Service Reform Issues. Hearing. 105th
Congress, 2nd session. Washington: GPO, 1998.
U.S. Merit Systems Protection Board. Removing Poor Performers in the Federal
Service. Issue Paper. Washington: MSPB, 1995.
Thomas Nicola



(31) Appeals (Chapter 77; in Part III, Subpart F — Labor-
Management and Employee Relations).
Statutory Intent and History
The current system for appeals in the federal civil service was established under
the Veterans Preference Act of 1944 (P.L. 78-359; 58 Stat. 390) and the Civil Service
Reform Act of 1978 (P.L. 95-454; 92 Stat. 1138). The intent was to uphold the merit
system by ensuring protection of federal employees from arbitrary agency actions.
Major Provisions
An employee or applicant for employment may submit an appeal to the Merit
Systems Protection Board (MSPB) from any action appealable to the board under any
law, rule, or regulation. An appellant has a right to a hearing for which a transcript
will be kept, and to be represented by an attorney or another representative.
MSPB may hear any case appealed to it, or may refer the case to an
administrative law judge or other employee of MSPB designated by the board to hear
cases. A decision must be made after receipt of written representations of the parties
to an appeal and after an opportunity for a hearing. If an employee or applicant
prevails in an appeal, the employee or applicant is granted the relief provided in the
decision when it is made. The decision remains in effect pending the outcome of any
petition for review unless certain circumstances are met.
An agency’s decision is sustained only if it is supported by substantial evidence
in the case of an action based on unacceptable performance or by a preponderance
of evidence in any other case. Nonetheless, an agency’s decision may not be
sustained if the employee or applicant for employment shows harmful error in
applying the agency’s procedures, or shows that the decision was based on any
prohibited personnel practice, or that the decision was not in accordance with law.
The law provides for procedures to be followed by the Office of Personnel
Management (OPM), if it decides to intervene, as well as those conditions whereby
the Equal Employment Opportunity Commission (EEOC) becomes involved when
discrimination (so-called mixed cases) has been alleged. Procedures to be followed
for judicial review of MSPB decisions when they are appealed are prescribed.
Discussion
Jurisdiction by both MSPB and EEOC over mixed cases has been controversial.
Critics assert that dual jurisdiction is inefficient, expensive, and time-consuming;
supporters argue that it is necessary to ensure adequate review. Proposals to
streamline appeals by authorizing only the board or the commission (but not both),
to hear them have been considered.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security (DHS) and Defense



(DOD). Both laws permit changes from the Chapter 77 provisions DHS and DOD.
(See the discussions of the 5 U.S.C. Chapter 97 and Chapter 99 provisions in this
compendium.)
Selected Source Reading
Broida, Peter. A Guide to Merit Systems Protection Board Law and Practice, 15th ed.
Arlington, VA: Dewey Publications, Inc., 2003.
Council on Excellence in Government, U.S. Chamber of Commerce, Reason Public
Policy Institute, ASPA, The George Washington University, and Government
Executive. Transitioning to Performance-based Government: A Report to the

43rd President and the 107th Congress on the Transition. Dialogue Series 16.


Washington: 2000.
“Symposium on the Civil Service Reform Act of 1978: An Evaluation.” Policy
Studies Journal, vol. 17 (winter 1988-1989), pp. 311-447.
Vaughn, Robert G. Merit Systems Protection Board: Rights and Remedies (rev. ed.).
New York: Law Journal Seminars-Press, 1995.
U.S. Congress. House of Representatives. Committee on Government Reform and
Oversight. Subcommittee on General Oversight and Investigations. Omnibus
Civil Service Reform Act of 1996, Report to Accompany H.R. 3841. H.Rept.

104-831. 104th Congress, 2nd session. Washington: GPO, 1996.


U.S. Congress. House of Representatives. Committee on Post Office and Civil
Service. Legislative History of the Civil Service Reform Act of 1978.
Committee print. 96th Congress, 1st session. Committee Print 96-2.
Washington: GPO, 1978.
U.S. Congress. Senate. Committee on Governmental Affairs. Subcommittee on
Oversight of Government Management, Restructuring and District of Columbia.
Report of George V. Voinovich, Chairman, Report to the President: The Crisis
in Human Capital. 106th Congress, 2nd session. Washington: GPO, 2000, pp.

54-55.


U.S. General Accounting Office. Merit Systems Protection Board: Mission
Performance, Employee Protections, and Working Environment. GAO/GGD-

95-213. 1995.


U.S. Merit Systems Protection Board. Removing Poor Performers in the Federal
Service. Issue Paper. Washington: MSPB, 1995.
U. S. Office of the Vice President. National Performance Review. From Red Tape
to Results: Creating a Government That Works Better & Costs Less:
Accompanying Report: Reinventing Human Resource Management.
Washington: GPO, 1993.
Thomas Nicola



(32) Services to Employees (Chapter 79; in Part III, Subpart F —
Labor-Management and Employee Relations).
Statutory Intent and History
The 1966 Title 5 codification statute (80 Stat. 378) is the basic statutory
authority for Chapter 79, “Services to Employees.” Additional authorities include
the Anti-Drug Abuse Act of 1986 (100 Stat. 3207) and the Federal Employees Clean
Air Incentives Act (107 Stat. 1995). The Homeland Security Act of 2002 (P.L. 107-

296; 116 Stat. 2229) and the National Defense Authorization Act for FY2004 (P.L.


108-136, 117 Stat. 1621) authorize the creation of new human resources management
(HRM) systems for civilian employees of the Departments of Homeland Security and
Defense. Both laws stipulate that Chapter 79 provisions cannot be waived, modified,
or otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
The chapter addresses federal employee health, safety, and commuting concerns.
In addition to prescribing treatment programs for federal employees with alcohol and
drug-related illness, provisions are set forth encouraging and mandating creation of
proactive health and safety measures to prevent employee illness and disability.
Major Provisions
The provisions of Chapter 79 govern the establishment of agency health, safety,
drug abuse, and alcohol abuse programs. They regulate the issuance of protective
clothing and equipment for federal employees, and the creation of programs intended
to encourage alternative means of commuting to the workplace, other than “single-
occupancy motor vehicles.”
Agency heads are authorized to establish health service programs to promote
and maintain the physical and mental fitness of their employees. Programs are
limited to treatment of on-the-job illness and dental conditions requiring emergency
treatment, pre-employment and other examinations, referral to private physicians and
dentists, and preventive health programs.
The Secretary of Labor is responsible for creating safety programs covering
federal employees within the agencies. The President may establish a safety council
to advise the Secretary in administering the safety programs and to prevent injuries
and accidents. Agency heads are responsible for the promotion of organized
programs to reduce accidents, illness, and injuries, and to encourage safe practices
and eliminate workplace hazards. Available appropriations may be used for purchase
and maintenance of special equipment for protection of employees in performing
assigned tasks.
Agency heads, in cooperation and consultation with the Office of Personnel
Management (OPM) and the Secretary of Health and Human Services, are required
to establish prevention, treatment, and rehabilitation programs for drug and alcohol
abuse affecting employees within their agencies.



Agency heads are authorized to create programs to encourage employees and
student volunteers to commute to and from work by means other than motor vehicles.
In furtherance of such programs, options may include public transit passes or
reimbursement therefor; furnishing space, facilities, and services to bicyclists; and
offering other non-monetary incentives for alternative commuting options by
employees. The President is required to designate one or more agencies to prescribe
guidelines for alternative commuting programs, and such designees submit to the
President and to Congress biannual reports on the number and type of agency
programs, the extent of employee participation, and the costs to the government, and
an assessment of environmental or other benefits resulting from such programs.
Discussion
Public health and safety programs have assumed increasing importance within
the federal service in recognition of rapidly escalating costs of health care and the
burdens placed on federal employee health insurance programs. A more proactive
approach has long been advocated by federal agencies responsible for health and
safety, notably the Department of Labor’s Occupational Safety and Health
Administration (OSHA), including strong emphasis on workplace safety, prevention
of illness, influenza inoculation programs, and the like. Although the chapter cites
the need for limited health care facilities within the agencies, emphasis still remains
on referral to private sector practitioners, except in cases of medical emergency.
Encouragement of mass transit and other options, other than privately owned
motor vehicles, for commuting to and from the workplace has long been advocated,
but with modest results. In recent years, Congress has authorized agencies to use
appropriated funds to provide monetary subsidies to employees in order to offset, at
least partially, the cost of using mass transit for commuting.
Selected Source Reading
U.S. Congress. House. Committee on Post Office and Civil Service. Federal and
Postal Service Employees Occupational Safety and Health Act of 1994. H.Rept.

103-858. 103rd Congress, 2nd session. Washington: GPO, 1994.


U.S. General Accounting Office. Federal Personnel: Employment Policy
Challenges Created by an Aging Workforce. GAO/GGD-93-138. September

1993.


Mitchel A. Sollenberger



(33) Retirement (Chapter 83; in Part III, Subpart G — Insurance and
Annuities).
Statutory Intent and History
The Civil Service Retirement System (CSRS) was established in 1920 (42 Stat.
1047). The law had a dual purpose; to provide for an adequate retirement income for
individuals who had devoted much of their work lives to government service, and to
provide an efficient and humane method to remove from duty older employees whose
productivity was diminishing due to age. The original CSRS law included a
provision for mandatory retirement at age 70, a requirement eliminated in 1978,
except for certain public safety occupations. The CSRS retirement system is a
defined benefit system in that employees contribute a defined percentage of their
income to the system, and receive in turn a defined percentage of their top three years
of compensation annually upon retirement.
From 1920 to 1984, CSRS was the retirement plan covering most civilian
federal employees. Coverage was extended to Members of Congress and
congressional employees in 1946. In 1935, Congress enacted the Social Security
system for private sector workers, and the Social Security Amendments of 1983 (97
Stat. 65) mandated that all workers hired into permanent federal positions on or after
January 1, 1984, be covered by Social Security. Since Social Security duplicated
some existing CSRS benefits, and because the combined employee contribution rates
for Social Security and CSRS would have reached more than 13% of pay, it was
necessary to design an entirely new retirement system for federal employment, using
Social Security as the base. Congress enacted the Federal Employees’ Retirement
System Act of 1986 (FERS) (100 Stat. 514). CSRS was closed to new entrants at the
end of 1983, and all new federal employees hired since then are covered by FERS.
As turnover in the workforce occurs, the number of workers in CSRS will decline,
and eventually it will cease to exist. Less than one-third of the federal workforce is
currently covered by CSRS.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 83 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Subchapter II of Chapter 83 requires forfeiture of a civil service or military
annuity by individuals convicted of crimes against the national security.
Subchapter III of Chapter 83 provides a CSRS annuity to “vested” employees.
Vesting requires five years of federal civilian service. Most CSRS participants must
pay 7% of their salary into the retirement system throughout their federal
employment (certain occupational groups pay slightly more and receive higher
benefits). An immediate annuity is provided for federal employees retiring at age 55



with 30 years of service, age 60 with 20 years of service, or age 62 with 5 years of
service. Vested employees separating before retirement eligibility may draw a
deferred annuity at age 62. In certain situations, including job abolishment or
reductions-in-force, a reduced early retirement benefit is payable to workers retiring
at any age with 25 years of service or at age 50 with 20 years. Different age and
service criteria for retirement pertain to certain occupational groups. If the individual
retires before age 55, his or her annuity is permanently reduced by 2% for each year
of difference between the worker’s actual age at retirement and 55.
Chapter 83 sets out the formulas for computing CSRS annuities. Special higher
benefit formulas apply to Members of Congress and congressional employees, federal
law enforcement officers, firefighters, and air traffic controllers. Regular federal
employees retiring with 30 years of service receive an annuity of 56.25% of their
average annual pay of their highest-paid 3 consecutive years (“high-3”). Members
of Congress receive 75% of high-3 pay after 30 years; federal law enforcement
officers, firefighters and air traffic controllers receive 50% of high-3 pay with 20
years of service.
Disabled workers who are unable to perform their federal jobs due to physical
or mental impairment are provided disability retirement. Disability retirement
benefits are calculated according to the same rules applicable to regular retirement,
but there is a minimum benefit of 40% of high-3 pay.
Chapter 83 provides survivor benefits to spouses and dependent children of
deceased CSRS workers and retirees. Retirees electing survivor coverage contribute
up to 10% of their annuities in order to provide a spouse survivor benefit of up to

55% of the retiree’s annuity.


CSRS annuities are adjusted annually by the rate of increase in the Consumer
Price Index (CPI) over a one-year period.
Discussion
CSRS came under criticism in the 1970s for a number of reasons. Some argued
that the system locked employees in the federal workforce, because the retirement
benefits built up by employees were not portable. (The FERS program, by contrast,
was designed to be portable.) Another criticism was that the automatic post-
retirement cost-of-living adjustments (COLAs) were too generous and skewed
federal pay benefits towards the retired workforce. Congress first enacted COLAs
for CSRS in 1962. The purpose of COLAs is to protect the purchasing power of
retirement income from erosion due to inflation. Critics indicated that few private
pension plans offered COLAs. Additionally, COLAs are subject to congressional
intervention, whereby Congress may eliminate, reduce, or delay COLAs for federal
retirees.
Selected Source Reading
CRS Report 98-810 EPW. Federal Employees’ Retirement System: Benefits and
Financing, by Patrick J. Purcell.



CRS Report RL30631. Retirement Benefits for Members of Congress, by Patrick J.
Purcell.
Patrick J. Purcell



(34) Federal Employees’ Retirement System (Chapter 84; in Part III,
Subpart G — Insurance and Annuities).
Statutory Intent and History
From 1920 to 1984, the Civil Service Retirement System (CSRS) was the
retirement plan covering most civilian federal employees. Coverage of CSRS was
extended to Members of Congress and congressional employees in 1946. In 1935,
Congress enacted the Social Security system for private sector workers, and the 1983
amendments to the Social Security Amendments Act (97 Stat. 65) mandated that all
workers hired into permanent federal positions on or after January 1, 1984, be
covered by Social Security. Because Social Security duplicated some existing CSRS
benefits, and because the combined employee contribution rates for Social Security
and CSRS would have reached more than 13% of pay, it was necessary to design an
entirely new retirement system for federal employment, using Social Security as the
base. Congress enacted the Federal Employees Retirement System (FERS) in 1986
(100 Stat. 514). CSRS was closed to new entrants at the end of 1983, and all new
federal employees hired since then are covered by FERS. FERS now covers more
than two-thirds of civilian federal employees.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 84 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Subchapter II of Chapter 84 provides a basic annuity for Federal Employees’
Retirement System (FERS) participants. Employees are vested after five years of
service. Most FERS participants contribute 0.8% of pay into the pension plan.
Federal law-enforcement officers, firefighters, air traffic controllers, and
congressional employees contribute 1.3% of pay. FERS participants may retire at
age 55 with 30 years of service. The minimum retirement age is increasing to age 57
as the Social Security normal retirement age rises to 67. FERS participants may
retire with a reduced annuity at age 55 (rising to 57) with 10 through 29 years of
service. The annuity is permanently reduced 5% for each year between the
individual’s age at retirement and 62. FERS also provides disability retirement and
survivor benefits. Post-retirement cost-of-living adjustments are paid to retirees age
62 or over (and to disability and survivor annuitants of any age). If the increase in
the Consumer Price Index (CPI) is 3% or more, increases are limited to one
percentage point less than the rate of increase in the CPI.
Subchapter III of Chapter 84 provides a Thrift Savings Plan (TSP). The
government contributes to the TSP 1% of the pay of all FERS participants and
matches up to 5% of pay voluntarily contributed by FERS workers. The maximum
FERS employee contribution in 2004 is 14% of pay up to a maximum of $13,000.
The maximum employee salary deferral will increase by $1,000 per year until it



reaches $15,000 in 2006, after which it will be indexed to the CPI. At retirement,
TSP accounts may be withdrawn as a lifetime annuity, as a lump sum, or in equal
payments over a specific time period. Separating employees may withdraw their TSP
account balance (subject to possible tax penalties) or roll it over to an individual
retirement arrangement or another employer’s qualified retirement plan.
Discussion
FERS was designed by Congress in the mid-1980s to be comparable to
retirement plans offered by large employers in the private sector. As recently as
1988, 70% of employees in medium and large establishments in the private sector
were covered under a defined benefit retirement plan, according to the Department
of Labor. By 1997, however, only 50% of employees in medium and large
establishments in the private sector were covered by a defined benefit plan.
Moreover, in recent years, many large employers have converted their traditional
defined benefit plans to “cash balance” plans that mimic the benefit accumulation
patterns of a defined contribution plan, and typically pay a smaller benefit to career
employees than they would have accumulated under a traditional defined benefit
pension. As traditional defined benefit plans become less common in the private
sector, Congress may decide to examine the structure of the Federal Employees’
Retirement System to determine whether or not the retirement benefits offered to
federal employees are still comparable to those offered in the private sector.
The Thrift Savings Plan (TSP) has proven to be a popular plan for savings by
FERS participants. About four-fifths of eligible employees make voluntary
contributions to the TSP. The FERS plan permits portability of retirement monies
from the government to qualifying private plans.
Selected Source Reading
CRS Report 98-810 EPW. Federal Employees’ Retirement System: Benefits and
Financing, by Patrick J. Purcell.
CRS Report RL30387. Federal Employees’ Retirement System: The Role of the
Thrift Savings Plan, by Patrick J. Purcell.
Patrick J. Purcell



(35) Health Insurance (Chapter 89; in Part III, Subpart G —
Insurance and Annuities).
Statutory Intent and History
Before 1959, the federal government did not provide health benefits to its
civilian employees or retirees. The need for a government-wide health benefits
program was recognized when Congress passed the Federal Employees Health
Benefits Act of 1959 (P.L. 86-382; 73 Stat. 708) authorizing the Federal Employees
Health Benefit Program (FEHBP). The program went into operation on July 1, 1960.
The act and its subsequent amendments established eligibility for benefits and
election of coverage by participants; the types of health benefit plans that may be
offered; the types of benefits that may be provided; the role of the U.S. Office of
Personnel Management (OPM); the level of government contributions; the
establishment of an Employees Health Benefits Fund to pay for program expenses;
the creation of an advisory committee; and provisions for studies, reports, and audits.
While the law was periodically amended to extend eligibility for coverage to
additional employee groups, the basic structure of FEHBP has undergone relatively
few changes since the program began operation. However, the Health Benefits
Insurance — Federal Contribution Act (P.L. 91-418; 84 Stat. 869) completely altered
the way the government contribution toward employees health plan premiums was
determined in an effort to “provide automatic indexing of the Government
contribution to reflect increases in medical price inflation.” Beginning in 1971, the
act established the formula for computing the government’s premium share as the
average premium of the six largest plans. Subsequently, the government’s
contribution increased from 40% to 50% of the average of the “Big Six” plan
premiums in 1974, and to 60% in 1975 and thereafter. In 1997, the Balanced Budget
Act (P.L. 105-33; 111 Stat. 251) replaced the Big Six formula with a formula setting
the government’s share of premiums at 72% of the weighted average premium of all
plans in the program, not to exceed 75% of any given plan’s premium. The new
formula was effective in 1999.
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) and the
National Defense Authorization Act for FY2004 (P.L. 108-136, 117 Stat. 1621)
authorize the creation of new human resources management (HRM) systems for
civilian employees of the Departments of Homeland Security and Defense. Both
laws stipulate that the Chapter 89 provisions cannot be waived, modified, or
otherwise affected by the new HRM systems. (See the discussions of the 5 U.S.C.
Chapter 97 and Chapter 99 provisions in this compendium.)
Major Provisions
Participation in FEHBP is voluntary, and enrollees may change from one plan
to another during designated “open season” periods. Active and retired Members of
Congress may participate under the same rules as other federal employees. At the
time of retirement, enrollees have a one-time election to continue to participate in
FEHBP as retirees, provided they have been enrolled for at least five years
immediately before retirement and are eligible for an immediate annuity.



FEHBP offers enrollees a choice of 6 fee-for-service (FFS) plans available
government-wide, one consumer-driven option plan390 also offered government-wide,
another 6 available to employees of certain small federal agencies, and about 240
health maintenance organizations (HMOs) serving limited geographic areas. Some
plans are offering a “high” benefit and cost option and a “standard” option.
Although there is no core or standard benefit package required for FEHBP
plans, all plans cover basic hospital, surgical, physician, and emergency care. Plans
are required to cover certain special benefits including prescription drugs (which may
have separate deductibles and coinsurance); mental health care with parity of
coverage for mental health and general medical care coverage; child immunizations;
and protection of enrollee out-of-pocket costs for “catastrophic” health care costs.
Plans must include certain cost containment provisions, such as offering preferred
provider organization (PPOs) networks as a component of the FFS plans, and
hospital preadmission certification. There are variations in the amounts plans pay for
benefits (as reflected in coinsurance provisions and deductibles), the availability of
ancillary benefits (such as dental care or coverage of chiropractors), and the
catastrophic cost protections.
OPM interprets the health insurance laws, writes regulations, and administers
FEHBP. It approves qualified plans for participation in the program, negotiates
yearly with plans to determine benefits and premiums for the following year,
manages premium payments, and publishes information concerning plan options.
Discussion
FEHBP is the largest employer-sponsored health insurance program in the
United States. Total annual cost of the program in FY2002 was about $22.7 billion,
including $11.2 billion in enrollee and U.S. Postal Service payments. An issue
sometimes raised regarding the design of the program is that the plans are not
selected through competitive bidding, and, except for HMOs, most of the FFS plans
in the program today have participated in the program for many years. Some plans
have participated continuously since the start of the program. One concern about
design of the programs is that enrollees must choose among several plans, which may
be confusing. Others say choice helps ensure competition among plans, thus keeping
premiums down. Still others say choice has no effect on costs, either to increase or
decrease them. In recent years, fewer that 3% of enrollees changed plans during the
annual open season. Another concern is that FEHBP plans compete for enrollees
who are good risks (i.e., those who are less likely to experience health care costs in
excess of the plan’s premium), potentially causing some plans to enroll a larger
proportion of high-cost enrollees. However, OPM monitors enrollment trends and
seeks to minimize adverse risk selection.


390 Beginning in 2003, a consumer-driven option plan was added to the FEHB program. This
option provides beneficiaries with greater flexibility in health care spending through a
personal care account (PCA) of $1,000 for a self-only plan and $2,000 for a family plan.
Once the PCA has been exhausted, beneficiaries are responsible for paying for their own
benefits, up to a prescribed amount. Traditional health care coverage begins after covered
eligible expenses (paid out by the PCA and the member) total $1,600 for self-only plans and
$3,200 for family plans.

Selected Source Reading
CRS Report RL31231. Health Insurance for Federal Employees and Retirees, by
Carolyn L. Merck.
CRS Report RS20818. Federal Employees Health Benefits Program: Brief Facts,
by Carolyn L. Merck.
Hinda Ripps Chaikind



(36) Long-Term Care Insurance (Chapter 90; in Part III, Subpart G
— Insurance and Annuities).
Statutory Intent and History
The Long-Term Care Security Act (114 Stat. 762; P.L. 106-265) authorizes a
long-term care insurance program for federal workers and their families. The
resulting program, sponsored by the Office of Personnel Management (OPM), is
administered by Long Term Care Partners, a joint venture created for this purpose by
the John Hancock Life Insurance Company and the Metropolitan Life Insurance
Company. Long Term Care Partners offers insurance policies that can be
individually modified with respect to amount of coverage (e.g., $100 or $150 a day),
years of coverage, length of the elimination period (the period of time before benefits
begin to be paid), inflation protection, and other features. Participation is voluntary,
with premium costs paid by those who are enrolled, not the government. During an
initial open season from July 1 through December 31, 2002, current employees and
their spouse could enroll in the program with minimal underwriting (medical
screening); retirees and other eligible people had to go through more extensive
underwriting.391 Since that time, all applicants aside from newly hired employees
must complete the more extensive underwriting.
The federal employee long-term care insurance program has several objectives.
The first is to encourage federal workers to consider purchasing long-term care
insurance by making them aware of the cost of nursing home and community-based
services and the limited assistance that most families can expect from Medicare,
Medicaid, and private health insurance. Second, the program is designed to help
participants choose coverage that is suitable for their needs and interests. Long-term
care insurance is a complicated product for which it is useful to have an intermediary
select an insurance carrier, choose a reasonable range of policy options, and prepare
and distribute educational material. Finally, the federal program is intended to serve
as a model for other employers to offer similar coverage. Compared to individual
market policies, employment-based plans can have lower premiums due to
administrative cost savings. The federal program was one of several proposals
President Clinton made in January 1999 to help families with their long-term care
needs.
The Long-Term Care Security Act has been amended four times through the end
of 2003 to clarify and expand the list of eligible participants. P.L. 107-104 prohibits
states from imposing taxes (other than general business taxes) on policy premiums.
Major Provisions
The Long-Term Care Security Act requires OPM to establish a program under
which eligible individuals may obtain long-term care insurance. As amended, the act


391 The earliest effective date for people enrolling during the open season was October 1,
2002. A short early-enrollment period was held in the spring of 2002; it was intended for
people able to choose coverage without the educational material being prepared for the open
season.

defines eligible individuals to include most federal and U.S. Postal Service
employees,392 active members of the uniformed services, employees of the Tennessee
Valley Authority, District of Columbia government employees who were first
employed before October 1, 1987, and employees of the District of Columbia courts.
Also eligible are annuitants of those groups and surviving spouses who are receiving
a federal survivor annuity. Eligible relatives include current spouses of employees
and annuitants, adult children, parents, parents-in-law, and some step-parents.
The long-term care insurance contracts must be tax-qualified (i.e., comply with
the conditions specified in Section 7702B of the Internal Revenue Code), fully
insured (perhaps through reinsurance), and issued by a carrier that is licensed to issue
long-term care insurance in all states. There is no guaranteed issue (i.e., policies do
not have to be issued to all who apply), and it is explicitly provided that coverage
need not be made available to individuals who would immediately qualify for
benefits. As nearly as practicable, underwriting standards for a spouse must be like
those for the eligible individual. More stringent underwriting may apply to
individuals who declined coverage when they first had an opportunity to enroll.
Contracts must be guaranteed renewable so long as premiums are paid. Coverage
must be fully portable.
The act authorizes OPM to contract with qualified carriers without competitive
bidding. It sets out terms and conditions for this master contract, which normally
shall be for seven years. One requirement is that premiums should reasonably and
equitably reflect the benefits provided, as determined by OPM, and not be adjusted
during the term of the contract unless adjustment is mutually agreed to by OPM and
the carrier.
Individuals obtaining coverage are responsible for 100% of the premiums.
Withholding from pay or annuities is authorized. Administrative start-up costs may
be paid out of the Employees’ Life Insurance Fund, with reimbursement from the
carriers within the first year. Subsequently, carriers are to make periodic
contributions to a Long-Term Care Administrative Account within this fund to defray
OPM expenses in administering the program.
Contract terms relating to the nature, provision, and extent of coverage or
benefits supersede and preempt state or local laws or regulations. Cost accounting
standards issued pursuant to Section 26(f) of the Office of Federal Procurement
Policy Act do not apply.
The act provides for various reports and record keeping, including evaluations
by the General Accounting Office (GAO) before the end of the third and fifth years
of the program. Within 180 days after receiving the second GAO report, the
President shall submit to Congress written recommendations as to whether the
program should be continued without modification, terminated, or restructured.


392 Federal and Postal Service employees generally may participate in the long-term care
insurance program if they are eligible to participate in the Federal Employees Health Benefit
(FEHB) program, whether or not they actually do.

OPM has authority to prescribe necessary regulations for the program. In
consultation with the carriers, it is to provide periodic coordinated enrollment,
promotion, and education efforts. In addition, OPM is to ensure that applicants are
furnished information needed to evaluate the advantages and disadvantages of
obtaining long-term care insurance, including information about costs and benefits,
the effects of inflation, circumstances when premiums may be raised, and other
matters.
Discussion
Long-term insurance can help protect the income and assets of people who need
daily assistance due to frailty or chronic medical conditions. Coverage can also help
people gain access to better-quality or additional services, either in nursing homes or
in the community or at home. While there has been a steady increase in the number
of long-term care policies sold over the last decade, only a small proportion of the
generation nearing retirement has obtained coverage. One reason is cost: typically,
long-term care insurance is purchased by people in their 50s or 60s, when the annual
cost is higher than if bought earlier. Another reason is complexity: long-term care
insurance is difficult even for financially astute people to understand. In addition,
some people are concerned that premiums will increase at some point in the future
and that they will be forced to drop their policies.393
The federal long-term care insurance program is designed to avoid some of these
problems. By offering coverage to all federal employees and their families, not just
those approaching retirement, the program attempts to enroll participants when
annual costs are lower. There are also cost savings from reduced administrative
costs, though these might be partially offset by cost increases from different
underwriting standards. The program’s educational material and clear information
about costs are aimed at helping people make prudent choices about benefits. While
there is no guarantee that premiums will not be raised in the future, OPM oversight
(and the possibility of congressional review) may make this less likely than for
insurance sold in the private market.
As of the end of 2003, a little over 200,000 policies had been obtained through
the program.
Selected Source Reading
American Academy of Actuaries. Long-Term Care: Actuarial Issues in Designing
Voluntary Federal-Private LTC Insurance Programs. Washington: 1999.
Coronel, Susan A. Long-Term Care Insurance in 2000-2003. Health Insurance
Association of America. Washington: 2003.


393 Long-term care insurance usually is sold for premiums that stay the same in subsequent
years (unless the policy-holder later elects to purchase inflation protection); however, this
is not guaranteed.

Long Term Care Partners. Information about the long-term care insurance program
for federal workers is available through the company’s website, at
[http://www.ltcfeds.com], visited January 26, 2004.
National Association of Insurance Commissioners. A Shopper’s Guide to Long-term
Care Insurance. Kansas City, MO: 2003.
U.S. Congress. House. Committee on Government Reform. Long-Term Care
Security Act. Part 1, to accompany H.R. 4040. H.Rept. 106-610. Washington:
GPO, 2000.
——. Senate. Committee on Governmental Affairs. Long-Term Care Security Act.
Report to accompany S. 2420. S.Rept. 106-344. Washington: GPO, 2000.
U.S. Office of Personnel Management. Information about the long-term care
insurance program for federal workers is available through the OPM website,
at [http://www.opm.gov/insure/ltc], visited January 26, 2004.
Bob Lyke



(37) Personnel Flexibilities Relating to the Internal Revenue Service
(Chapter 95; in Part III, Subpart I — Miscellaneous).
Statutory Intent and History
Subtitle C of the Internal Revenue Service (IRS) Restructuring and Reform Act
of 1998 (112 Stat. 711) at Section 1201 amended Part III of Title 5, United States
Code, by adding a new Subpart I — “Miscellaneous,” and Chapter 95 — “Personnel
Flexibilities Relating to the IRS.” The legislation was based on the report of the
National Commission on Restructuring the IRS, which recommended that the IRS
and the Department of the Treasury be given more flexibility to hire qualified
personnel needed to implement modernization. The intent of the law was to make
various personnel rules and procedures on hiring, evaluating, promoting, and firing
employees more flexible; to foster creativity, innovation, and quick problem
resolution among employees; and to increase the accountability of IRS managers and
employees and their focus on the mission, goals, and objectives of the agency. The
law also was designed to revitalize the IRS workforce and change the culture of the
agency so that it would be an efficient, modern, and responsive organization designed
to meet the needs of taxpayers.
Major Provisions
A summary of some of the major provisions follows.
Under Section 9501, the personnel flexibilities are to be exercised in a manner
consistent with Title 5, United States Code, provisions on merit system principles;
prohibited personnel practices; veterans’ preference; and, except as otherwise
specifically provided, labor-management relations. Employees within a unit to which
a labor organization is accorded exclusive recognition shall not be subject to various
flexibilities unless the IRS and the labor organization enter into a written agreement
which specifically provides for the exercise of the flexibility. The written agreement
may be imposed by the Federal Services Impasses Panel.
When the Secretary of the Treasury seeks a grant of critical pay authority for one
or more positions at the IRS, the Office of Management and Budget, under Section
9502, may fix the basic pay rate at any rate up to the Vice President’s salary
($198,600 as of January 2003). The Secretary of the Treasury is authorized, under
Section 9503, to establish, fix the compensation of, and appoint individuals to,
designated critical administrative, technical, and professional positions in the IRS
until July 22, 2008 (10 years after enactment of the law). The positions are those that
require expertise of an extremely high level in an administrative, technical, or
professional field and are critical to the IRS’s successful accomplishment of its
mission. Exercise of the authority is necessary to recruit or retain an individual
exceptionally well qualified for the position. The number of critical positions may
not exceed 40 at any one time. The terms of such appointments may not exceed four
years. Total annual compensation for critical positions may not exceed the highest
total annual compensation payable to the Vice President.
The Secretary of the Treasury is authorized, under Section 9504, subject to
approval by the Office of Personnel Management (OPM), to provide for variations



from current law on recruitment, relocation, and retention incentives until July 22,
2008 (10 years after enactment of the law). IRS senior executives with program
management responsibility over significant IRS functions may be paid a performance
bonus if the Secretary of the Treasury, under Section 9505, finds the award warranted
by the executive’s performance. This authority continues until July 22, 2008 (10
years after enactment of the law). The bonus is not subject to 5 U.S.C. § 5384(b)(2),
which limits Senior Executive Service performance awards to no less than 5% or
more than 20% of basic pay. The executive’s performance will be evaluated by the
Secretary’s taking into account contributions toward the successful accomplishment
of goals and objectives specified in certain laws and by performance metrics or plans.
Any award that exceeds 20% of an executive’s basic pay rate must be approved by
the Secretary. A performance bonus award may not be paid to an executive in a
calendar year if, or to the extent that, the executive’s total annual compensation will
exceed the maximum amount of total annual compensation payable to the Vice
President.
In applying 5 U.S.C. § 3132, career reserved position in the IRS means a
position which may be filled only by a career appointee; or a limited emergency
appointee or a limited term appointee who, immediately upon entering the career-
reserved position, was serving under a career or career-conditional appointment
outside the Senior Executive Service (SES); or whose limited emergency or limited
term appointment is approved in advance by OPM (Section 9506). The number of
positions filled by limited emergency or limited term appointees may not exceed 10%
of the total number of SES positions in the IRS. The term of a limited emergency or
limited term appointee may not exceed three years.
The exercise of any of the flexibilities under Sections 9502 through 9510 shall
not affect the Secretary of the Treasury’s authority, under Section 9507, to implement
a demonstration project for the IRS, subject to 5 U.S.C. Chapter 47. The law
specifies various requirements for a demonstration project.
Under Section 9508, the Secretary of the Treasury established a performance
management system for the IRS in lieu of a system established under 5 U.S.C. §
4302. The system will maintain individual accountability by establishing one or
more retention standards for each employee related to his or her work and expressed
in terms of individual performance. The standards will be communicated to
employees. Periodic determinations of whether each employee does or does not meet
his or her established retention standards will be made. With respect to any
employee whose performance does not meet established retention standards, actions
could be taken including denying basic pay increases, promotions, and credit for
performance during a reduction in force. The performance system will establish
goals or objectives for individual, group, or organizational performance (or any
combination thereof) that are consistent with IRS performance planning procedures
and also will provide for communicating goals or objectives to employees and will
use such goals and objectives to make performance distinctions among employees
or groups of employees. An employee’s performance will be considered
“unacceptable” if it fails to meet a retention standard.
The Secretary of the Treasury may establish an awards program designed to
provide incentives for and recognition of organizational, group, and individual



achievements. It will provide for awards to employees who, as individuals or
members of a group, contribute to meeting performance goals and objectives by such
means as superior individual or group accomplishment, a documented productivity
gain, or sustained superior performance.
The notice period for actions based on unacceptable performance or adverse
actions is 15 days. An IRS employee may not appeal the denial of a periodic step
increase to the Merit Systems Protection Board.
The Secretary of the Treasury, under Section 9509, may, subject to OPM
criteria, establish one or more broad-banded systems covering all or any portion of
the IRS workforce. Such a system has been established for IRS managers and
supervisors. Broad-banded system means a system for grouping positions for pay,
job evaluation, and other purposes that differs from the General Schedule
classification system as a result of combining grades and related ranges of rates of
pay in one or more occupational series. The law specifies requirements for the OPM
criteria.
An IRS employee may be selected for a permanent appointment in the
competitive service in the IRS through internal competitive promotion procedures,
under Section 9510, subject to meeting certain conditions stated in the law. The
Secretary of the Treasury may establish category rating systems for evaluating
applicants for IRS positions in the competitive service. Qualified candidates will be
divided into two or more quality categories on the basis of relative degrees of merit,
rather than assigned individual numerical ratings. Each applicant who meets the
minimum qualification requirements for the position to be filled shall be assigned to
an appropriate category based on an evaluation of his or her knowledge, skills, and
abilities relative to those needed for successful performance in the job to be filled.
Within each quality category, preference eligibles shall be listed ahead of other
individuals. For other than scientific and professional positions at or higher than GS-
9 (or equivalent), preference eligibles with a compensable service-connected
disability of 10% or more, and who meet the minimum qualification standards, will
be listed in the highest quality category. An appointing authority may select any
applicant from the highest quality category. If fewer than three candidates have been
assigned to the highest quality category, the individual may be selected from a
merged category consisting of the highest and second highest quality categories. The
appointing authority may not pass over a preference eligible in the same or a higher
category from which the selection is made, unless the requirements of 5 U.S.C. §

3317(b) or § 3318(b) are satisfied.


The Secretary of the Treasury may detail employees among IRS offices without
regard to current law, which limits details and renewals of details to 120 days. A
probationary period of up to three years may be established by the Secretary of the
Treasury for IRS positions that require a longer period for the incumbent to
demonstrate complete proficiency. The IRS Commissioner was authorized to pay
voluntary separation incentive payments (VSIP) up to $25,000 to any employee who
voluntarily separated (whether by retirement or resignation) before January 1, 2003
(Section 1202).



Section 1203 of the act authorizes the IRS Commissioner to terminate any IRS
employee if there is a final administrative or judicial determination that the employee
committed any act or omission in performing his or her official duties. The
termination shall be a removal for cause on charges of misconduct. The acts or
omissions which could result in termination are the following.
!willful failure to obtain the required approval signatures on
documents authorizing the seizure of a taxpayer’s home, personal
belongings, or business assets;
!providing a false statement under oath with respect to a material
matter involving a taxpayer or taxpayer representative;
!with respect to a taxpayer, taxpayer representative, or other
employee of the Internal Revenue Service, the violation of — (A)
any right under the Constitution of the United States; or (B) any civil
right established under — (i) Title VI or VII of the Civil Rights Act
of 1964; (ii) Title IX of the Education Amendments of 1972; (iii) the
Age Discrimination in Employment Act of 1967; (iv) the Age
Discrimination Act of 1975; (v) Section 501 or 504 of the
Rehabilitation Act of 1973; or (vi) Title I of the Americans with
Disabilities Act of 1990;
!falsifying or destroying documents to conceal mistakes made by any
employee with respect to a matter involving a taxpayer or taxpayer
representative;
!assault or battery on a taxpayer, taxpayer representative, or other IRS
employee, but only if there is a criminal conviction, or a final
judgment by a court in a civil case, with respect to the assault or
battery;
!violations of the Internal Revenue Code of 1986, Department of the
Treasury regulations, or IRS policies (including the Internal Revenue
Manual) for the purpose of retaliating against, or harassing, a
taxpayer, taxpayer representative, or other IRS employee;
!willful misuse of the provisions of Section 6103 of the Internal
Revenue Code of 1986 for the purpose of concealing information
from a congressional inquiry;
!willful failure to file any return of tax required under the Internal
Revenue Code of 1986 on or before the date prescribed therefor
(including any extensions), unless such failure is due to reasonable
cause and not to willful neglect;
!willful understatement of federal tax liability, unless such
understatement is due to reasonable cause and not to willful neglect;
and
!threatening to audit a taxpayer for the purpose of extracting personal
gain or benefit.
The IRS Commissioner, at his or her sole discretion, may take a personnel
action other than termination for an act or omission and may establish a procedure
which will be used to determine whether an individual should be referred to the
Commissioner for a determination on a personnel action. Any determination of the
Commissioner may not be appealed in any administrative or judicial proceeding.



Under Section 1204 of the act, the IRS shall not use records of tax enforcement
results to evaluate employees or to impose or suggest production quotas or goals with
respect to such employees. The IRS shall use the fair and equitable treatment of
taxpayers by employees as one of the standards for evaluating employee
performance. Each appropriate supervisor shall certify quarterly by letter to the IRS
Commissioner whether or not tax enforcement results are being used in a manner
prohibited by this section. The IRS Commissioner implemented an employee
training program under Section 1205 of the act. The law specified requirements for
the training plan.
Discussion
Among issues related to implementation of the law, those on employee
misconduct, training, and critical pay authority have been closely followed. Recent
audits conducted by the Treasury Inspector General for Tax Administration (TIGTA)
found that allegations of employee misconduct were accurately reported; training
data are not adequate or reliable enough for the IRS Oversight Board to perform an
assessment (costs of training courses and allocation of training resources cannot be
determined); and the Secretary of the Treasury and the board need to exercise
additional scrutiny to ensure that the critical pay authority is used appropriately. In
its 2003 review of the IRS, the Joint Committee on Taxation determined that serious
employee misconduct remains at low levels (more than 90% of the Section 1203
violations involve employee tax compliance), and anxiety about Section 1203
contributes to a decline in enforcement activity. The IRS reported to the Joint
Committee that the streamlined critical pay authority has resulted in the recruitment
of talented executives with wide-ranging skills.
Various bills were introduced in the 106th and 107th Congresses to amend the
Section 1203 provisions on termination of employment for misconduct. In the 108th
Congress, the following bills are pending: H.R. 1528, Taxpayer Protection and IRS
Accountability Act of 2003, as passed by the House, and H.R. 1661, Taxpayer and
Fairness Protection Act of 2003, both to amend Section 1203 with regard to
disciplinary actions and to add a reporting requirement that misconduct allegations
be summarized by category; S. 1637, Jumpstart Our Business Strength (JOBS) Act,
as reported to the Senate, to prohibit an individual who violates Section 1203 from
receiving a tax collection contract; S. 882, Tax Administration Good Government
Act, to amend Section 1203 and to provide that the use of critical pay authority be
approved by the IRS Oversight Board; and H.R. 3625, Department of the Treasury
Inspector General Consolidation Act of 2003, to add a requirement that the Inspector
General’s report include misconduct cases.
Selected Source Reading
U.S. Congress. Conference Committee. Internal Revenue Service Restructuring
and Reform Act of 1998, Conference Report to Accompany H.R. 2676. 105th
Congress, 2nd session. H.Rept. 105-599. Washington: GPO, 1998.
U.S. Congress. House. Committee on Ways and Means. Internal Revenue Service
Restructuring and Reform Act of 1997, Report to Accompany H.R. 2676. 105th
Congress, 1st session. H.Rept. 105-364, part 1. Washington: GPO, 1997.



U.S. Congress. Joint Committee on Taxation. Report of the Joint Committee on
Taxation Relating to the Internal Revenue Service As Required by the IRS
Reform and Restructuring Act of 1998. JCX-53-03. Washington: GPO, 2003,
pp. 42-50.
U.S. Congress. National Commission on Restructuring the Internal Revenue
Service. A Vision for a New IRS. Washington: GPO, 1997.
U.S. Congress. Senate. Committee on Finance. Internal Revenue Service
Restructuring and Reform Act of 1998, Report to Accompany H.R. 2676.
S.Rept. 105-174. 105th Congress, 1st session. Washington: GPO, 1998.
U.S. Department of the Treasury. Treasury Inspector General for Tax
Administration. Employee Misconduct Allegations Were Accurately Reported.

2003-10-184. Washington: TIGTA, 2003.


——. Information on Employee Training Is Not Adequate to Determine Training
Cost or Effectiveness. 2003-10-212. Washington: TIGTA, 2003.
——. Oversight of Streamlined Critical Pay Authority Could Be Improved. 2003-

10-116. Washington: TIGTA, 2003.


U.S. General Accounting Office. IRS and TIGTA Should Evaluate Their Processing
of Employee Misconduct Under Section 1203. GAO-03-394. February 2003.
——. Tax Administration; IRS’ Implementation of the Restructuring Act’s Personnel
Flexibility Provisions. GAO/GGD-00-81. April 2000.
Barbara L. Schwemle



(38) Department of Homeland Security (Chapter 97; in Part III,
Subpart I — Miscellaneous).
Statutory Intent and History
The Homeland Security Act of 2002 (P.L. 107-296; 116 Stat. 2229) authorized
the creation of a new human resources management (HRM) system for employees
of the Department of Homeland Security (DHS). In the aftermath of the September
11, 2001 terrorist attacks on the World Trade Center and the Pentagon, and the
discovery of anthrax in Washington, DC, and other cities, Congress and the
Administration determined that a new Cabinet-level department was needed to
coordinate efforts to protect the nation from terrorist attacks. As part of creating that
new department, the Administration believed strongly that, to meet the exigencies of
national security and emergency situations, a flexible and modern HRM system for
DHS was mandated. The President frequently referred to the requirements of that
system as putting the right people in the right place at the right time. (See the
discussion at 5 U.S.C. Chapter 99 for information on the new HRM system at the
Department of Defense.)
Major Provisions
Title VIII, Subtitle E, Section 841 of the Homeland Security Act amends Title
5 United States Code by adding a new Chapter 97 — “Department of Homeland
Security” to Part III, Subpart I. The new Section 9701(a) of Title 5 United States
Code provides that, notwithstanding any other provision of Part III, the Secretary of
Homeland Security may, in regulations prescribed jointly with the Director of the
Office of Personnel Management, establish, and from time to time adjust, an HRM
system for some or all of the organizational units of DHS.
The HRM system must be flexible and contemporary. It cannot waive, modify,
or otherwise affect:
!the public employment principles of merit and fitness at 5 U.S.C. §
2301, including the principles of hiring based on merit, fair
treatment without regard to political affiliation or other non-merit
considerations, equal pay for equal work, and protection of
employees against reprisal for whistleblowing;
!any provision of 5 § 2302 relating to prohibited personnel practices;
!any provision of law referred to in 5 U.S.C. § 2302(b)(1), (8), and
(9); or any provision of law implementing any provision of law
referred to in 5 U.S.C. § 2302(b)(1), (8), and (9) by providing for
equal employment opportunity through affirmative action; or
providing any right or remedy available to any employee or applicant
for employment in the civil service;
!Subparts A (General Provisions), B (Employment and Retention), E
(Attendance and Leave), G (Insurance and Annuities), and H
(Access to Criminal History Record Information) of Part III of Title
5, United States Code; and Chapters 41 (Training), 45 (Incentive
Awards), 47 (Personnel Research Programs and Demonstration
Projects), 55 (Pay Administration), 57 (Travel, Transportation, and



Subsistence), 59 (Allowances), 72 (Antidiscrimination, Right to
Petition Congress), 73 (Suitability, Security, and Conduct), and 79
(Services to Employees) of Title 5; or
!any rule or regulation prescribed under any provision of law referred
to in any of the statements in bullets immediately above.
The use of a category rating system for evaluating applicants for positions in the
competitive service is permitted under the new system.
Nothing in the new Section 9701 constitutes authority to:
!modify the pay of any employee who serves in an Executive
Schedule position or a position for which the rate of basic pay is
fixed in statute by reference to the Executive Schedule;
!fix pay for any employee or position at an annual rate greater than
the maximum amount of cash compensation allowable under 5
U.S.C. § 5307 in a year; or
!exempt any employee from the application of 5 U.S.C. § 5307.
It is the sense of the Congress that employees of DHS are entitled to fair
treatment in any appeals that they bring in decisions relating to their employment.
In prescribing regulations for any such appeals procedures, the Secretary of
Homeland Security and the Director of OPM should ensure that employees of the
department are afforded the protections of due process and, toward this end, should
be required to consult with the Merit Systems Protection Board (MSPB) before
issuing any such regulations. Any regulations which relate to any matters within the
purview of Chapter 77 (on appeals) must be issued only after consultation with the
MSPB and must ensure the availability of procedures which must be consistent with
requirements of due process and provide, to the maximum extent practicable, for the
expeditious handling of any matters involving DHS. Any regulations must modify
procedures under Chapter 77 only insofar as such modifications are designed to
further the fair, efficient, and expeditious resolution of matters involving the
employees of DHS.
The law also includes provisions related to labor management relations and
collective bargaining. (See 5 U.S.C. Chapter 71 in this compendium.)
Effective five years after the conclusion of the transition period defined under
Section 1501 of the act (a 12-month period beginning 60 days after the act’s
enactment date of November 25, 2002), all authority to issue regulations under the
section (including regulations which would modify, supersede, or terminate any
regulations previously issued under the section) must cease to be available.
Except as otherwise provided in the Homeland Security Act, the transfer, under
this act, of full-time personnel (except special government employees) and part-time
personnel holding permanent positions must not cause any such employee to be
separated or reduced in grade or compensation for one year after the date of transfer
to DHS. A person who, on the day preceding his or her date of transfer to the new
department, held a position compensated on the Executive Schedule, and who,
without a break in service, is appointed in DHS to a position having duties



comparable to the duties performed immediately preceding such appointment, must
continue to be compensated in the new position at not less than the rate provided for
the previous position, for the duration of service in the new position. Any exercise
of authority under the new Chapter 97, including under any system established under
the chapter, must be in conformance with these requirements.
In authorizing the establishment of an HRM system for the new department,
Congress stated that —
[I]t is extremely important that employees of the Department be allowed to
participate in a meaningful way in the creation of any human resources
management system affecting them;
[S]uch employees have the most direct knowledge of the demands of their jobs
and have a direct interest in ensuring that their human resources management
system is conducive to achieving optimal operational efficiencies;st
[T]he 21 century human resources management system envisioned for the
Department should be one that benefits from the input of its employees; and
[T]his collaborative effort will help secure our homeland.
Discussion
On April 1, 2003, Secretary of Homeland Security Tom Ridge and OPM
Director Kay Coles James announced that they were launching the process for
designing a new HRM system for DHS. The following process is being used to create
the system:
!A Design Team conducted research and outreach to provide a full
range of options for a Senior Review Committee to consider. The
team included DHS program managers from all directorates and
disciplines, union and employee representatives, and human resource
specialists from DHS and OPM. Expert consultants from the private
sector also supported the team.
!A Senior Review Committee (SRC) is developing personnel system
options to be considered by the Secretary and the Director and their
senior staff. The committee included, among others, the Under
Secretary for Management, department program leaders, officials
from OPM, and major union leaders. A small number of academics
and policy experts served as ex officio members who advised the
committee on specific issues.
The design team began work on April 1, 2003, and conducted field meetings in
several cities, including New York City, Miami, Detroit, El Paso, Atlanta, Seattle,
and Salt Lake City, locales with the largest concentrations of DHS employees.
Testimony was received from more than 2,000 DHS employees, including 44
employee focus groups and 10 manager focus groups. The field meetings concluded
in late June 2003. On July 25, 2003, the design team reported to the SRC on these
field meetings. Pay, performance management, and labor-management relations
were among the issues discussed.



On October 3, 2003, the design team presented its final report with 52 options
for the new HRM to the SRC.394 None of the options represents the consensus of the
design team and none covers the Senior Executive Service (SES). Modifications to
Title 5 United States Code pay and performance management provisions for the SES
will be addressed through a separate process. The options are grouped into two
categories: (1) Pay, Performance Management, and Classification and (2) Labor
Relations, Adverse Actions, and Appeals. Among the options in the first category
are those which would continue or amend the current General Schedule pay system;
establish a compensation system based on pay bands; create a system based on
longevity, competency, and performance; and continue or amend the existing
performance management system. Options under the second category include
continuing the current labor relations procedures, providing for national level
bargaining, continuing or amending the current adverse actions and appeals
procedures, creating an Ombudsman Office, and establishing procedures for
alternative dispute resolution. The SRC examined and deliberated the options at a
public meeting conducted October 20 through October 22, 2003. A summary of the
proceedings was published on December 5, 2003.395 The committee will “present a
refined range of options to the Secretary and the Director,” who will then issue
proposed rules. Employee representatives and Congress will be notified, and any
differences will be reconciled. The Secretary and the OPM Director jointly issued
proposed regulations for the new human resources management system on February

20, 2004.396


While there is consensus on the broad principles that should govern a new HRM
system, DHS employees, some Members of Congress, and knowledgeable HRM
observers are beginning discussions about the rules that will implement the new
system. To this point, discussions have focused only on the design team process.
Selected Source Reading
Armey, Representative Dick. “Homeland Security Act of 2002.” Remarks in the
House. Congressional Record, daily edition, vol. 148 (November 13, 2002), pp.
H8595-H8645.
Daalder, Ivo H., et al. Protecting the American Homeland: One Year On.
Washington: The Brookings Institution, 2003.
Partnership for Public Service. Homeland Security: Winning the War for Talent to
Win the War on Terror. Washington: The Partnership, 2002.


394 See [http://www.opm.gov/Strategic_Management_of_Human_Capital/HC_Systems/
DHS/index.asp], visited Dec. 16, 2003.
395 See [http://www.opm.gov/Strategic_Management_of_Human_Capital/HC_
Systems/DHS/SeniorReview CommitteeMeeting.asp], visited Dec. 16, 2003.
396 For more information, see CRS Report RL32261, Homeland Security: Proposed
Regulations on Job Evaluation, Pay, and Performance Management Compared with
Current Law, by Barbara L. Schwemle.

U.S. Congress. House. Committee on Government Reform. Subcommittee on
Civil Service and Agency Reorganization. Decision Time: A New Human
Resources Management System at the Department of Homeland Security.
Hearing. 108th Congress, 1st session, October 29, 2003. Unpublished.
U.S. General Accounting Office. Human Capital; DHS Personnel System Design
Effort Provides for Collaboration and Employee Participation. GAO-03-1099.
September 2003.
CRS Report RL31520. Collective Bargaining and Homeland Security, by Jon O.
Shimabukuro.
CRS Report RL31548. Homeland Security Department Proposals: Scope of
Personnel Flexibilities, by Thomas J. Nicola.
CRS Report RL31500. Homeland Security: Human Resources Management, by
Barbara L. Schwemle.
Barbara L. Schwemle



(39) Department of Defense National Security Personnel System
(Chapter 99; in Part III, Subpart I — Miscellaneous).
Statutory Intent and History
The National Defense Authorization Act for FY2004 (P.L. 108-136, Section
1101; 117 Stat. 1621) authorizes the creation of a new human resources management
(HRM) system, to be called the National Security Personnel System (NSPS), for
civilian employees (some 735,000) of the Department of Defense (DOD). The NSPS
provisions were included in a DOD proposal entitled “The Defense Transformation
for the 21st Century Act” that was submitted to Congress in April 2003.397 According
to the proposal, DOD’s responsibility to defend the security of the nation requires
that the department’s HRM system incorporate enhanced flexibilities to recruit,
develop, assess, compensate, assign, and separate employees. With the new authority
under the NSPS, DOD stated that it will be able to fold innovations from its ongoing
demonstration projects as well as best practices from throughout the federal
government into its strategic plan for civilian human resources management.
Major Provisions
Section 1101(a)(1) of the National Defense Authorization Act amends Part III,
Subpart I, of Title 5, United States Code, by adding a new Chapter 99 entitled
“Department of Defense National Security Personnel System.” The new Section
9902(a) provides that notwithstanding any other provision of Part III, the Secretary
of Defense may, in regulations prescribed jointly with the OPM director, establish,
and from time to time adjust, an HRM system for some or all of the organizational
or functional units of DOD. The system must be flexible and contemporary and,
under the new Section 9902(b), cannot waive, modify, or otherwise affect:
!the public employment principles of merit and fitness at 5 U.S.C. §
2301, including the principles of hiring based on merit, fair
treatment without regard to political affiliation or other non-merit
considerations, equal pay for equal work, and protection of
employees against reprisal for whistleblowing;
!any provision of 5 U.S.C. § 2302, relating to prohibited personnel
practices;
!any provision of law referred to in 5 U.S.C. § 2302(b)(1), (8), and
(9); or any provision of law implementing any provision of law
referred to in 5 U.S.C. § 2302(b)(1), (8), and (9) by providing for
equal employment opportunity through affirmative action; or
providing any right or remedy available to any employee or applicant
for employment in the public service.
The new Section 9902(d) lists various subparts and chapters of Part III of Title
5, United States Code (including applicable rules and regulations) which cannot be
waived, modified, or otherwise affected in the new HRM system as follow:


397 See [http://www.defenselink.mil/dodgc/lrs/docs/Transformation.pdf], visited Dec. 18,

2003.



Subpart A — General Provisions, including Chapter 21, Definitions; Chapter

23, Merit System Principles; Chapter 29, Commissions, Oaths, Records,


and Reports;
Subpart B — Employment and Retention, including Chapter 31, Authority for
Employment; Chapter 33, Examination, Selection, and Placement; Chapter
34, Part-time Career Employment Opportunities; Chapter 35, Retention
Preference (RIF), Restoration, and Reemployment;
Subpart E — Attendance and Leave, including Chapter 61, Hours of Work;
Chapter 63, Leave;
Subpart G — Insurance and Annuities, including Chapter 81, Compensation for
Work Injuries; Chapters 83 and 84, Retirement; Chapter 85,
Unemployment Compensation; Chapter 87, Life Insurance; Chapter 89,
Health Insurance; Chapter 90, Long Term Care Insurance;
Subpart H — Access to Criminal History Record Information, including
Chapter 91 for individuals under investigation;
Chapter 41 — Training;
Chapter 45 — Incentive Awards;
Chapter 47 — Personnel Research Programs and Demonstration Projects;
Chapter 55 — Pay Administration, including biweekly and monthly pay periods
and computation of pay, advanced pay, and withholding of taxes from pay,
except that Subchapter V of Chapter 55 on premium pay (overtime, night,
Sunday pay), apart from Section 5545b, may be waived or modified;
Chapter 57 — Travel, Transportation, and Subsistence;
Chapter 59 — Allowances, which includes uniforms, quarters, overseas
differentials;
Chapter 71 — Labor Management and Employee Relations;
Chapter 72 — Antidiscrimination, Right to Petition Congress, including
minority recruitment, antidiscrimination on the basis of marital status and
handicapping condition, furnishing information to Congress;
Chapter 73 — Suitability, Security, and Conduct, including security clearance,
political activities (Hatch Act), misconduct (gifts, drugs, alcohol);
Chapter 79 — Services to Employees, including safety program, protective
clothing and equipment; or
Other requirements for the HRM system include that it shall:
!ensure that employees could organize, bargain collectively as
provided for in the proposed Chapter 99, and participate through
labor organizations of their own choosing in decisions that affect
them, subject to the provisions of the proposed Chapter 99 and any
exclusion from coverage or limitation on negotiability established
pursuant to law; and
!include a performance management system. Requirements for the
system are specified in the law.
The NSPS shall not apply with respect to various DOD laboratories before
October 1, 2008, and shall apply on or after October 1, 2008, only to the extent that
the Secretary determines that the flexibilities provided by the NSPS are greater than
the flexibilities already provided to these laboratories.



Nothing in Section 9902 shall constitute authority to modify the pay of any
employee who serves in an Executive Schedule position. Except for this provision,
the total amount of allowances, differentials, bonuses, awards, or other similar cash
payments paid under Title 5 in a calendar year to various senior executives may not
exceed the total annual compensation payable to the Vice President ($198,600 as of
January 2003).
To the maximum extent practicable, the rates of compensation for civilian DOD
employees shall be adjusted at the same rate, and in the same proportion, as are rates
of compensation for members of the uniformed services. In addition, to the
maximum extent practicable, for FY2004 through FY2008, the overall amount
allocated for compensation of the civilian employees of an organizational or
functional unit of DOD that is included in the NSPS shall not be less than the amount
of civilian pay that would have been allocated for compensation of such employees
for such fiscal year if they had not been converted to the NSPS.
The law requires the Secretary of Defense and the Director of the OPM to
provide a written description of the proposed personnel system or any adjustments
to such system to the labor organizations representing employees in the department.
The measure identifies a collaboration procedure that must be followed by the
Secretary, Director, and employee representatives. The Secretary is authorized to
engage in any collaboration activities at an organizational level above the level of
exclusive recognition. The Secretary is given similar authority to engage in
collective bargaining with employee representatives at a level above the level of
exclusive recognition. Finally, the Secretary and Director are authorized to establish
and adjust a labor relations system for the department. Collaboration with employee
representatives on the development of the system is required.
The new Section 9902(h) authorizes the Secretary of Defense to establish an
appeals process that provides fair treatment for DOD employees who will be covered
by the NSPS. Regulations for the appeals process, applicable to employee
misconduct or performance that fails to meet expectations, may not be prescribed
until after the Secretary consults with the Merit Systems Protections Board (MSPB)
and must afford due process protections and conform to public employment
principles of merit and fitness set forth in 5 U.S.C. § 2301. A qualifying employee
subject to some severe disciplinary actions shall have a right to petition the MSPB
for review of the record of the department’s decision. The board is authorized to
dismiss any petition that does not raise a substantial question of fact or law and to
order corrective action only if the board finds that the department’s personnel
decision did not meet some prescribed standards. An employee adversely affected
by a final decision or order of the board shall be able to obtain judicial review.
A new Section 9902(i) authorizes the Secretary of Defense, without review by
OPM, to offer (1) early retirement to employees who are age 50 or older with 20
years of service or any age with 25 years of service and (2) separation incentive pay
of up to $25,000 to DOD employees who retire or resign. The law also includes
provisions on re-employment within DOD without loss of annuity.
The Secretary may apply the NSPS (1) to an organizational or functional unit
that includes up to 300,000 civilian DOD employees and (2) to more than 300,000



DOD civilian employees, if the Secretary determines that the department has in place
a performance management system that meets the criteria specified in the law.
The law also allows the Secretary to appoint personnel from outside the civil
service and uniformed services to positions in DOD without regard to any Title 5
provisions governing such. The Secretary may provide allowances and benefits that
would be comparable to those provided to members of the Foreign Service or to
personnel of the Central Intelligence Agency to certain civilian DOD employees who
are engaged in hazardous activities or specialized functions and assigned to activities
outside the United States.
Discussion
During testimony before the House Committee on Government Reform and the
Senate Committee on Governmental Affairs and their relevant subcommittees, DOD
officials discussed the department’s Best Practices Initiative and referred Members
of Congress to an April 2, 2003, Federal Register notice for additional details on the
types of HRM flexibilities the department is implementing at its science and
technology reinvention laboratories and would seek to implement under the NSPS.
Authority for streamlined recruitment and candidate ranking, universal pay banding
for five career groups, merit-based pay, and simplified appointment procedures were
among the flexibilities DOD requested.
The General Accounting Office (GAO) testified about the NSPS proposal before
the House Committee on Government Reform’s Subcommittee on Civil Service and
Agency Organization and the Senate Committee on Governmental Affairs’
Subcommittee on Oversight of Government Management, the Federal Workforce,
and the District of Columbia. GAO emphasized that DOD’s performance appraisal
system, as currently designed, does not support meaningful performance-based pay;
that personnel management flexibilities currently available should be used fully as
appropriate; that many of the features of the NSPS, including pay banding and pay
for performance, should be considered for application government-wide; and that
DOD should work together with labor representatives and stakeholders in
implementing the new HRM system (something that was not done as the NSPS
proposal was developed and submitted to Congress).
The conference agreement on H.R. 1588 incorporated some of the provisions
of S. 1166, the National Security Personnel System Act, as reported (without written
report). These provisions, among others, related to requirements for a performance
management system, appellate procedures, and labor management relations and
collective bargaining. All of these features were in contention and widely debated
before agreement was reached. Another contentious provision that would have
authorized the Secretary to waive the requirement that the HRM regulations be
jointly prescribed by DOD and OPM for reasons of national security was dropped in
conference. (Earlier, provisions included in H.R. 1836, the Civil Service and
National Security Personnel Improvement Act, as reported, were added to H.R. 1588
during House Committee on Armed Services markup.) The conference agreement
directs the Secretary to implement an evaluation system that better links individual
pay to performance and provides an equitable method for appraising and
compensating employees. Regulations to implement the system are, among other



features, to provide for grouping employees into pay bands and establishing
performance factors to be used to evaluate whether performance objectives are
accomplished. The conference agreement also states that the provisions on collective
bargaining should not be construed as expanding the scope of bargaining under 5
U.S.C. Chapter 71.
In a November 2003 briefing document, DOD announced that the NSPS will be
built through coordination with OPM and collaboration with employee
representatives. There will be a minimum 90-day period of discussion, mediation,
and notification to Congress of differences. Discussions began in January 2004, and
they continue. Implementation of the NSPS will begin in FY2005 and will continue
for at least a two-year period.398
Selected Source Reading
U.S. Congress. Conference Committees, 2003. National Defense Authorization Act
for Fiscal Year 2004. Conference report to accompany H.R. 1588. 108thst
Congress, 1 session. H.Rept. 108-354. Washington: GPO, 2003.
——. House. Committee on Armed Services. National Defense Authorization Act
for Fiscal Year 2004. Report to accompany H.R. 1588. 108th Congress, 1st
session. H.Rept. 108-106. Washington: GPO, 2003.
——. Committee on Government Reform. Instilling Agility, Flexibility, and a
Culture of Achievement in Critical Federal Agencies; A Review of H.R. 1836,
the Civil Service and National Security Personnel Improvement Act of 2003.
Hearing. 108th Congress, 1st session, May 6, 2003. Unpublished.
——. Subcommittee on Civil Service and Agency Reorganization. Transforming
the Defense Department; Exploring the Merits of the Proposed National
Security Personnel System. Hearing. 108th Congress, 1st session, April 29, 2003.
Unpublished.
——. Senate. Committee on Governmental Affairs. Transforming the Department
of Defense Personnel System: Finding the Right Approach. Hearing. 108thst
Congress, 1 session, June 4, 2003. Unpublished.
——. Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia. An Overlooked Asset: The Defensethst
Civilian Workforce. Hearing. 108 Congress, 1 session, May 12, 2003.
Unpublished.
U.S. Department of Defense. “Science and Technology (S&T) Reinvention
Laboratory Personnel Management Demonstration Project; Notice of
Amendment of Demonstration Project Plans.” Federal Register, vol. 68, no. 63
(April 2, 2003), pp. 16119-16142.


398 See [http://www.cpms.osd.mil/nsps/index.html], visited Dec. 18, 2003.

U.S. General Accounting Office. Defense Transformation; Preliminary
Observations on DOD’s Proposed Civilian Personnel Reforms. GAO-03-717T.
April 29, 2003.
——. Human Capital; DOD’s Civilian Personnel Strategic Management and the
Proposed National Security Personnel System. GAO-03-493T. May 12, 2003.
——. Posthearing Questions Related to Proposed Department of Defense (DOD)
Human Capital Reform. GAO-03-965R. July 3, 2003.
CRS Report RL31954. DOD’s National Security Personnel System: Provisions of
Law and Implementation Plans, coordinated by Barbara L. Schwemle.
CRS Congressional Distribution Memorandum. Department of Defense
Transformation Proposal (Title I, Subtitle A, Section 101) and H.R. 1588
Conference Report (Title XI, Subtitles A,B,C): A Side-by-Side Comparison,
coordinated by Barbara L. Schwemle.
Barbara L. Schwemle



B. Ethics in Government Act
Statutory Intent and History
Passage of the Ethics in Government Act of 1978 (92 Stat. 1824; 5 U.S.C. App.)
culminated years of efforts to provide uniform financial disclosure requirements for
key officers of the federal government. These efforts gathered momentum in the
1970s, following the Watergate scandal; revelations of impropriety by a number of
government officials; polls showing a lack of confidence in public officials; and
publication in 1976 of the recommendations of the President’s Commission on
Executive, Legislative, and Judicial Salaries, which recommended salary increases
for top government officials, as well as ethical reforms, including annual public
financial disclosure reports.
Major provisions of the act established (1) annual public financial disclosure
requirements, (2) an Office of Special Prosecutor (subsequently called the
Independent Counsel) to investigate allegations of wrongdoing by top officials in the
executive branch, (3) the Office of Government Ethics to monitor executive branch
financial disclosure reports and potential conflicts of interest, and (4) the Office of
Senate Legal Counsel.
Major Provisions
Titles I through III of the act contain the financial disclosure requirements for
the three branches of government, including which officers and employees are
covered, contents of the reports (including provisions for reporting the income from
trusts), accessibility of reports, review procedures in each branch of government, and
penalties for failure to file.399 Though the provisions were almost uniform, their
interpretation was left to designated officials in each branch.
Title IV originally established the Office of Government Ethics (OGE) within
the Office of Personnel Management. OGE became an independent agency in 1989
(102 Stat. 3031). OGE is charged with enforcement of standards of conduct,
assisting in the confirmation of presidential appointees, providing guidance to
agencies on procedures for monitoring financial disclosure reports, the issuance of
standards of conduct and advisory opinions, and developing ongoing ethics programs
to educate employees.
Title V revised 18 U.S.C. § 207 to broaden the major conflict of interest
provisions governing restrictions on post-service activities by officers and employees
of the executive branch by extending existing prohibitions and establishing additional
ones for matters on which former employees worked. The purpose is to prevent
former officers and employees from using information gathered during their
government service, or exercising undue influence on former colleagues.


399 In the Ethics Reform Act of 1989, discussed elsewhere in this compendium, the
disclosure provisions for the three branches of government were combined into one title.

Title VI amended 18 U.S.C. § 28 (now expired) by adding provisions for the
appointment and duties of a special prosecutor when the Justice Department had a
conflict of interest in investigating wrongdoing by the President, Vice President,
Cabinet-level officials, or senior White House or Justice Department officials. This
provision was the result of the recommendations of the Senate Watergate Committee,
and expired in 1999. It has not been reauthorized by Congress since that time.
Title VII established the Office of Senate Legal Counsel to defend the
constitutional powers of the Senate in proceedings before the courts and conferred
jurisdiction on the courts to enforce Senate subpoenas.
Discussion
Although the Ethics in Government Act was the product of long-term efforts to
reform government ethics laws, and OGE has been an integral part of the executive
branch ethics program, several provisions in the act have been problematic over the
years. There was continuing debate over the wisdom and efficacy of the special
proscecutor/independent counsel provisions. In addition, the financial disclosure
provisions of the act, particularly as applied to the executive branch, have been
viewed by some as making the presidential appointment process unnecessarily long,
burdensome, and complex. A number of studies have shown that, in some cases, the
ethics laws have been a deterrent to the recruitment of qualified appointees, and
there is concern over the increasing amount of time taken to nominate and confirm400
high-level executive branch appointees.
Several bills have been introduced in Congress to streamline the financial
disclosure requirements for high-level nominees and employees and to require new
appointed officials who have not complied with an ethics agreement within the
original specified time to file monthly progress reports until all terms of theth
agreements have been met. These include S. 1811 in the 107 Congress, and S. 765
and H.R. 1603 in the 108th Congress.
Selected Source Reading
Carroll, James D. and Roberts, Robert N. “If Men Were Angels: Assessing the
Ethics in Government Act of 1978.” Policy Studies Journal, vol. 17 (winter

1988-1989), pp. 435-447.


“Congressional Process Symposium.” Administrative Law Review, vol. 48 (winter

1996), pp. 31-137.


Thompson, Dennis F. Ethics in Congress: From Individual to Institutional
Corruption. Washington: Brookings Institution, 1995.


400 U.S. Congress, Senate Committee on Governmental Affairs, Presidential Appointments
Improvement Act of 2002, report to accompany S. 1811, 107th Cong., 2nd sess., S.Rept. 107-

152 (Washington, GPO, 2002), pp. 2-3.



U.S. Congress. Conference Committees. Ethics in Government Act of 1978.
Conference report to accompany S. 555. 95th Congress, 2nd session. H.Rept.

95-1756. Washington: GPO, 1978.


U.S. Congress. Senate. Senate Committee on Governmental Affairs. Presidential
Appointments Improvement Act of 2002. Report to accompany S. 1811. 107th
Congress, 2nd session. S.Rept. 107-152. Washington: GPO, 2002.
U.S. Congress. Senate Committee on Governmental Affairs. Public Officials
Integrity Act of 1977. Report to accompany S. 555. 95th Congress, 2nd session.
S.Rept. 95-170. Washington: GPO, 1977.
Mildred Amer



C. Ethics Reform Act of 1989
Statutory Intent and History
The Ethics Reform Act of 1989 (103 Stat. 1716) expanded the coverage of the
earlier Ethics in Government Act (1978; 92 Stat. 1824). At the time of passage of the
Ethics Reform Act, national attention was directed at what were perceived to be large
honoraria earnings by some Members of Congress and the need to clarify existing
ethics rules and regulations.
The impetus for the Ethics Reform Act (ERA89) was widely shared. In
Congress, task forces in both the Senate and the House offered ethics
recommendations. In the 1988 presidential election, candidate George H.W. Bush
had promised to make ethics a top priority of his Administration. Soon after his
inauguration, President Bush appointed the President’s Commission on Federal
Ethics Law Reform. Many of its 27 recommendations, including uniformity in ethics
regulations in the three branches of government, found their way into the ERA89.
Also, a number of recommendations of the private National Commission on the
Public Service, established in 1987 and chaired by Paul Volcker, were considered
and included. The Volcker Commission was especially concerned about provisions
to develop a capable executive talent base in government.
The bill was intended to provide for automatic pay increases for Members of
Congress and senior officials in the executive and judicial branches. Previously,
annual congressional approval of compensation was often delayed, and compensation
was often frozen due to political considerations.
Major Provisions
Major provisions of the ERA89 included:
!pay increases for Members of Congress and senior officials of the
other two branches of government and provisions for a 25%
adjustment in 1991, as well as annual pay adjustments for these
individuals, based on Employment Cost Index (ECI);
!post-employment (“revolving door”) lobbying restrictions on
Members of Congress, officers, and designated employees of the
legislative branch;
!elimination of the so-called “grandfather clause” in federal election
law that allowed Members of Congress in office prior to 1980 to
convert excess campaign contributions to personal use;
!limitations on outside earned income for Members of Congress and
noncareer officers and employees in the three branches of
government compensated above a GS-15 level;



!prohibition on honoraria for Members, officers, and employees of
the House of Representatives, as well as officers and employees of
the executive and judicial branches;401 and
!establishment of a Citizen’s Committee on Executive, Legislative,
and Judicial Salaries to make recommendations to the President for
salary rates for top government officials in the three branches.
Discussion
ERA89 is probably best known for its provision on government salaries and its
total prohibition on honoraria. The honoraria prohibitions applied to income from
speeches and writings, even if unrelated to an official’s and employee’s government
work. Although the provisions applied to all officers and employees in the three
branches of government, the initial target was Members of Congress. They were
criticized because earning honoraria was viewed as diverting Members’ attention
from official duties, and was perceived as a way for special interests to gain access
to Members.
The automatic annual pay adjustments provided in the act for Members of
Congress and other senior officials in the three branches of government were seen as
a means for Members to avoid what was considered to be the “painful” act of having
to vote on their own salaries. However, Congress has denied itself the annual pay
adjustments five times since 1993, denials that also placed a “cap” on top executive
branch officials.
Immediately after the ERA89 was enacted, several executive branch employees
filed suit against the Justice Department, alleging that the honoraria ban violated the
First Amendment right of free speech. In 1995, the Supreme Court overturned the
provisions prohibiting honoraria for government employees (National Treasury
Employees Union v. United States, 115 S.Ct. 1003 (1995)). The Senate, however,
still has an honoraria ban for its officers and employees.
Selected Source Reading
“Are They More Virtuous Today? A Focus On Government Ethics.” Federal Bar
News and Journal, vol. 37 (September 1990), pp. 378-418.
Biskupic, Joan. “Court Allows Honoraria for Federal Rank and File.” The
Washington Post, February 23, 1995, p. A1.


401 The Senate initially exempted itself from the honoraria and compensation prohibitions.
Subsequently, with the enactment of the Legislative Branch Appropriations Act of 1992
(105 Stat. 447), Members, officers, and employees of the Senate could no longer earn
honoraria and were subject to the same outside earned income restrictions as the rest of theth
government. Note: when the House adopted the rules for the 106 Congress, it voted to
permit designated employees to earn honoraria for activities not related to their official
duties (House Rule XXVI).

“Congressional Process Symposium on Ethics,” Administrative Law Review, vol. 48
(winter 1996), pp. 31-138.
Dunbar, Elizabeth. “Congress’ Raise Not So Automatic.” Minneapolis Star Tribune,
September 28, 2003, p. 4A.
Lin, Judy M. “United States v. National Treasury Employees Union and the
Constitutionality of the Honoraria Ban: Protecting the First Amendment Rights
of Public Employees.” University of Richmond Law Review, vol. 29, no. 5
(December 1995), pp. 1555-1590.
Thompson, Dennis F. Ethics in Congress: From Individual to Institutional
Corruption. Washington: Brookings Institution, 1995.
U.S. Congress. House. Bipartisan Task Force on Ethics. Report of the Bipartisan
Task Force on Ethics on H.R. 3660. 101st Congress, 2nd session. Washington:
GPO, 1989.
U.S. President’s Commission on Federal Ethics Law Reform. To Serve with Honor.
Washington: The Commission, 1989.
Mildred Amer



D. Lobbying with Appropriated Monies Act
Statutory Intent and History
Many Members of Congress have long been concerned about the practice of
federal agencies using appropriated funds to stimulate public support for or
opposition to pending legislation. Legislators do not want to be on the receiving end
of constituent pressures manufactured by agency telephone calls, telegrams,
departmental threats and coercion, and other stimuli originating from within an
administration.
To prohibit this practice, Congress passed legislation in 1919, and this statutory
restriction (known as the Lobbying with Appropriated Moneys Act) remains part of
permanent law. Debate in the House of Representatives reveals that some Members
were offended by bureau chiefs and departmental heads “writing letters throughout
the country, sending telegrams throughout the country, for this organization, for this
man, for that company to write his Congressman, to wire his Congressman, in behalf
of this or that legislation.” Statutory language was drafted to “absolutely put a stop402
to that sort of thing.”
Major Provisions
As currently codified (18 U.S.C. § 1913), the Lobbying with Appropriated
Moneys Act provides that “No part of the money appropriated by any enactment of
Congress shall, in the absence of express authorization by Congress, be used directly
or indirectly to pay for any personal service, advertisement, telegram, telephone,
letter, printed or written matter, or other device, intended or designed to influence in
any manner a Member of Congress, to favor or oppose, by vote or otherwise, any
legislation or appropriation by Congress, whether before or after the introduction of
any bill or resolution proposing such legislation or appropriation.” Section 1913
does not prevent officers or employees from communicating to Members of Congress
“on the request of any Member or to Congress, through the proper official channels,
requests for legislation or appropriations which they deem necessary for the efficient
conduct of the public business.” If an officer or employee violates or attempts to
violate Section 1913, this person “shall be fined under this title or imprisoned not
more than one year, or both; and after notice and hearing by the superior officer
vested with the power of removing him, shall be removed from office or
employment.”
Discussion
The Justice Department has never prosecuted anyone for violating the Lobbying
with Appropriated Moneys Act. However, the Justice Department has pointed out
that the right of citizens to lobby Congress does not mean a right to federal funds for
this purpose: “Although private persons and organizations have a right to petition
Congress and to disseminate their views freely, they can be expected, within the


402 Rep. James Good, remarks in the House, Congressional Record, vol. 58 (May 29, 1919),
p. 403.

framework established by the Constitution, to do their lobbying at their own expense.
They have no inherent or implicit right to use federal funds for that purpose unless
Congress has given them that right.” (5 Op. Off. Legal Counsel 180, 185 (1981)).
Statutory sanctions against executive lobbying have had limited effect because
of uncertainty about the law and Justice Department interpretations. Due to
conflicting statutes, the General Accounting Office (GAO) has at times hesitated to
find a violation of agency activity. Former Comptroller General Elmer B. Staats once
explained, “The reason for this is that agencies are authorized and, in some cases,
specifically directed to keep the public informed concerning their programs. Where
such authorized activities involve, incidentally, reference to legislation pending
before Congress, it is extremely difficult to draw a dividing line between the
permissible and the prohibited.”403
Since Section 1913 is a criminal statute, GAO regards its enforcement as “the
responsibility of the Department of Justice and the courts. Therefore, GAO will not
‘decide’ whether a given action constitutes a violation. GAO will, however,
determine whether appropriated funds were used in a given instance, and refer
matters to the Justice Department in appropriate cases.”404 Because a violation of
Section 1913 constitutes an improper use of appropriated funds, such a violation
“could form the basis of a GAO exception or disallowance. However, GAO can take
no action unless the Justice Department or the courts first determine that there has
been a violation.”405
Although the Justice Department has never prosecuted anyone for violating
Section 1913, it has indicated the type of executive activity that would be
impermissible. A memorandum in 1977 stated that “a campaign to contact a large
group of citizens by means of a form letter prepared and signed by a federal official
would be improper.”406 In 1989, the Justice Department restricted Section 1913 to
“a significant expenditure of appropriated funds to solicit pressure on Congress” and
a “substantial” grassroots lobbying campaign.407
Judging from the few judicial decisions that have been handed down, it is
apparent that the courts are reluctant to adjudicate in the area of executive lobbying.


403 Letter from Comptroller General Elmer Staats to Congressman Thomas B. Curtis,
September 7, 1967, cited in Richard L. Engstrom and Thomas G. Walker, “Statutory
Restraints on Administrative Lobbying — ‘Legal Fiction’,” Journal of Public Law, vol. 19
(1970), p. 98.
404 U.S. General Accounting Office, Principles of Federal Appropriations Law, 2nd ed., vol.

1 (Washington: GAO, 1991), p. 4-158.


405 Ibid.
406 Memorandum from John M. Harmon, Assistant Attorney General, Office of Legal
Counsel, to Robert J. Lipshutz, Counsel to the President, “Statutory Restraints on Lobbying
Activities by Federal Officials,” Nov. 29, 1977, p. 10, note 21.
407 Memorandum for Dick Thornburgh, Attorney General, from William P. Barr, Assistant
Attorney General, Office of Legal Counsel, “Constraints Imposed by 18 U.S.C. § 1913, on
Lobbying Efforts,” Sept. 28, 1989; 13 Op. Off. Legal Counsel 362 (prelim. print).

They seem inclined to defer to Congress and the executive branch on actions to be
taken against improper lobbying by executive officials.408
Selected Source Reading
Engstrom, Richard L. and Thomas G. Walker. “Statutory Restraints on
Administration Lobbying — ‘Legal Fiction’.” Journal of Public Law, vol. 19
(1970), pp. 89-103.
Fisher, Louis. The Politics of Shared Power: Congress and the Executive, 4th ed.
College Station, TX: Texas A&M University Press, 1998.
Nelsen, Ancher. “Lobbying by the Administration.” In Mary McInnis, ed., We
Propose: A Modern Congress, pp. 143-159. New York: McGraw-Hill, 1966.
U.S. General Accounting Office. Principles of Federal Appropriations Law, 2nd ed.,
vol. I, pp. 4-156 to 4-191. Washington: GAO, 1991.
Louis Fisher


408 Grassley v. Legal Service Corporation, 535 F.Supp. 818 (D.D.C. 1982); National
Treasury Employees Union v. Campbell, 654 F.2d 784 (D.C.C. 1980); American Trucking
Etc. v. Department of Transportation, 492 F.Supp. 566 (D.D.C. 1980); American Public Gas
Association v. Federal Energy Administration, 408 F.Supp. 640 (D.D.C. 1976); National
Association for Community Development v. Hodgson, 356 F.Supp. 1399 (D.D.C. 1973).

E. Federal Tort Claims Act
Statutory Intent and History
Until the Federal Tort Claims Act (FTCA) was enacted in 1946,409 a person who
suffered personal injury or property damage as the result of a federal employee’s
negligence or misconduct had no judicial remedy. Such a person’s only remedy was
to seek to have a private claim bill introduced in Congress. This situation existed
because of the common law doctrine of sovereign immunity, under which the United
States may not be sued without its consent. Congress alone has the power to give
this consent, and, by enacting the FTCA, Congress waived sovereign immunity for
some tort suits. With exceptions, it made the United States liable for the torts of its
employees committed in the scope of employment, just as private employers are
liable for the torts of their employees committed in the scope of employment
The FTCA makes the United States liable for the torts of its employees (but not
of government contractors) in accordance with the law of the state where the
employee’s act or omission occurred. Thus, for example, state laws placing caps on
non-economic damages apply in cases brought under the FTCA. However, the
FTCA contains exceptions under which the United States may not be held liable even
though a private employer could be held liable under state law. And punitive
damages are not permitted under the FTCA, regardless of state law.
One of these exceptions is known as the intentional tort exception; it prohibits
suits “arising out of assault, battery, false imprisonment, false arrest, malicious
prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference
with contract rights.” In 1974, in response to controversial “no-knock raids” by
federal narcotics agents, Congress amended the FTCA to allow suits against the
United States for the first six torts on the list of intentional torts just quoted, if they
are committed by an “investigative or law enforcement officer of the United States
Government.”
In 1950, in Feres v. United States (340 U.S. 135), the Supreme Court held that
military personnel may not sue under the FTCA for injuries sustained incident to
service. Federal civilian employees also may not sue under the FTCA for on-the-job
injuries, because they are covered by the Federal Employees’ Compensation Act.
In 1988, the FTCA was amended to make federal employees acting within the
scope of their employment immune from suit under state tort law — even in cases
in which the United States may not be sued either (28 U.S.C. § 2679(b)(1)).
The most recent amendments to the FTCA provide that no person convicted of
a felony who is incarcerated may sue the United States “for mental or emotional
injury suffered while in custody without a prior showing of physical injury” (P.L.
104-134, § 806 (1996)), and that suits may be brought under the FTCA to recover
damages to property seized under a federal forfeiture statute if the claimant is not
convicted and is entitled to return of the property (P.L. 106-185, § 3 (2000)).


409 60 Stat. 842; 28 U.S.C. §§ 1346(b), 2671-2680.

Major Provisions
United States district courts “shall have exclusive jurisdiction of civil actions
on claims against the United States...for injury or loss of property, or personal injury
or death caused by the negligent or wrongful act or omission of any employee of the
government while acting within the scope of his office or employment, under
circumstances where the United States, if a private person, would be liable to the
claimant in accordance with the law of the place where the act or omission occurred”
(28 U.S.C. § 1346).
Prior to filing suit under the FTCA, a claimant must present his claim to the
federal agency out of whose activities the claim arises (28 U.S.C. § 2675). This must
be done within two years after the claim accrues (28 U.S.C. § 2401). If, within six
months after receiving a claim, the agency mails a denial of the claim to the claimant,
then the claimant has six months to file suit in federal district court (28 U.S.C.
§§ 2401, 2675). No period of limitations applies to a plaintiff if the agency fails to
act within six months after receiving his claim. Suits under the FTCA are tried
without a jury (28 U.S.C. § 2402).
Attorneys may not charge more than 20% of a settlement agreed to by a federal
agency, or more than 25% of the amount of a court judgment or a settlement agreed
to by the Attorney General (28 U.S.C. § 2678). The United States shall not be liable
under the FTCA, regardless of state law, “for interest prior to judgment or for
punitive damages” (28 U.S.C. § 2673).
The United States may not be held liable under the FTCA solely because the
statute or regulation under which a federal employee acted was invalid. The United
States may not be held liable under the FTCA, even if a federal employee engaged
in a negligent or wrongful act or omission in the scope of employment, if the act or
omission involved a “discretionary function,” which means essentially the exercise
of a policy judgment. The United States may not be held liable under the FTCA for
claims that arise in a foreign country. The United States also may not be held liable
for claims arising out of, among other things, “the loss, miscarriage, or negligent
transmission of letters or postal matter”; “the assessment or collection of any tax or
customs duty”; “the fiscal operations of the Treasury or ... the regulation of the
monetary system”; or “combatant activities of the military or naval forces, or the
Coast Guard, during time of war.” All the exceptions to the FTCA noted in this
paragraph appear at 28 U.S.C. § 2680.
Discussion
One aspect of the FTCA that has been controversial is the application of the
Feres doctrine — prohibiting military personnel from suing for injuries sustained
incident to service — to medical malpractice cases. One reason for the Feres
doctrine is to prevent civilian courts from second-guessing military decisions, and
some have argued that this rationale does not apply in medical malpractice cases, as
when a military doctor is negligent in delivering a servicewoman’s baby. The
Supreme Court held, however, in United States v. Johnson (481 U.S. 681 (1987)),
that the Feres doctrine applies even to suits brought by military personnel for injuries
caused by employees of civilian federal agencies; this suggests that the “second-



guessing” rationale is not crucial. More significant may be the potential effects of
suits by military personnel on military discipline, and the alternative compensation
system available to military personnel. Nevertheless, four dissenting justices in
United States v. Johnson favored overturning Feres altogether as not mandated by
Congress in the FTCA.
As noted, the FTCA, since 1988, has made federal employees immune from
suits under state law for torts committed within the scope of their employment. (They
may be sued for violating the Constitution or for violating a federal statute that
authorizes suit against an individual.) This immunity has been extended to various
volunteers in federal programs; more than fifty statutes, including those establishing
VISTA and the Peace Corps, provide that volunteers in programs the statutes
establish shall be considered federal employees for purposes of the FTCA.
Selected Source Reading
CRS Report 95-717A. Federal Tort Claims Act: Current Legislative and Judicial
Issues, by Henry Cohen.
CRS Report 97-579A. Making Private Entities and Individuals Immune from Tort
Liability by Declaring Them Federal Employees, by Henry Cohen.
Davis, Kenneth Culp, and Richard J. Pierce Jr., III. Administrative Law Treatise, 3rd
ed. Boston: Little, Brown and Co., 1994.
Harper, Fowler V., James Fleming Jr., and Oscar S. Gray. The Law of Torts, 2nd ed.
Boston: Little, Brown and Co., 1986; 2003 Cum. Supp. No. 2.
Jayson, Lester S. Handling Federal Tort Claims: Administrative and Judicial
Remedies. New York: Matthew Bender, 2000.
Henry Cohen