Hearing Transcript on Senior Executive Service (SES) Bonuses: Ensuring VA’s Process Works.
SENIOR EXECUTIVE SERVICE BONUSES: ENSURING THE U.S. DEPARTMENT OF VETERANS AFFAIRS PROCESS WORKS
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
JUNE 12, 2007
SERIAL No. 110-26
Printed for the use of the Committee on Veterans' Affairs
U.S. GOVERNMENT PRINTING OFFICE
For sale by the Superintendent of Documents, U.S. Government Printing Office
CORRINE BROWN, Florida
STEVE BUYER, Indiana, Ranking
Malcom A. Shorter, Staff Director
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Veterans' Affairs are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.
C O N T E N T S
June 12, 2007
Senior Executive Service Bonuses: Ensuring the U.S. Department of Veterans Affairs Process Works
U.S. Government Accountability Office, J. Christopher Mihm, Managing Director, Strategic Issues
Prepared statement of Mr. Mihm
U.S. Department of Veterans Affairs, Hon. Gordon H. Mansfield, Deputy Secretary
Prepared statement of Mr. Mansfield
SUBMISSION FOR THE RECORD
Stearns, Hon. Cliff, a Representative in Congress from the State of Florida, statement
MATERIAL SUBMITTED FOR THE RECORD
Post-hearing Questions and Responses for the Record:
Hon. Harry E. Mitchell, Chairman, and Hon. Ginny Brown-Waite, Ranking Republican Member, Subcommittee on Oversight and Investigations, Committee on Veterans' Affairs, to Hon. Gordon H. Mansfield, Deputy Secretary, U.S. Department of Veterans Affairs, letter, dated October 29, 2007. [The response from VA included a letter, fact sheet and notebook of material. Only the letter and fact sheet are included in the record of the hearing. The notebook will be retained in the Subcommittee files.]
SENIOR EXECUTIVE SERVICE BONUSES: ENSURING THE U.S. DEPARTMENT OF VETERANS AFFAIRS PROCESS WORKS
Tuesday, June 12, 2007
U. S. House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Veterans' Affairs,
The Subcommittee met, pursuant to notice, at 2:12 p.m., in Room 334, Cannon House Office Building, Hon. Harry E. Mitchell [Chairman of the Subcommittee] presiding.
Present: Representatives Mitchell, Space, Walz, and Brown-Waite.
Also present: Representative Hall.
Mr. MITCHELL. Good afternoon. This hearing is about the process of awarding Senior Executive Service (SES) bonuses at the U.S. Department of Veterans Affairs (VA). This hearing will come to order.
I want to thank everyone for coming today. I am also pleased that so many folks could attend this oversight hearing on the process of awarding SES bonuses at the Department of Veterans Affairs.
Before we begin this hearing, I ask unanimous consent that Mr. Filner, Mr. Hall, Mr. Hare, and Ms. Berkley be invited to sit at the dais for the full Committee hearing today. Hearing no objection, so ordered.
The members will feel free to join us at the dais.
I know that the VA is full of hard-working, dedicated, and talented people. Nevertheless, there are reasons to be concerned that the VA bonus process is not doing what it should, matching pay to individual and organizational performance.
Consider the following: The VA pays the highest average bonuses among all cabinet agencies. In 2006, 87 percent of Senior Executive Service employees who were considered for bonuses received one.
Central office bonuses averaged $4,000 more than field bonuses. Particularly in the central office, there appears to be a case of exaggerated Lake Woebegone Syndrome. Not only is everyone above average, almost everyone is outstanding.
The VA does indeed do an outstanding job in many areas, but not all, and we hope that this oversight hearing will assist the VA in making sure that its bonuses are more closely matched to its performance.
Performance is not just individual. It is also organizational. The bonus system must allocate responsibility where it lies. When the backlog of claims has been increasing for the past few years, one would not expect the senior most officials of the Veterans Benefit Administration (VBA) to receive the maximum bonus.
When the VA is forced to return to Congress for additional money, which happened twice in 2006, because the budget submitted to Congress was inadequate and the VA failed to keep Congress informed, one would not expect the senior most officials of the VA responsible for the budget to receive the maximum bonus.
This is not a question of blame. It is a question of responsibility. We can be certain that if the senior leaders of VBA know in advance that their bonuses will depend at least in part on the reduction in the backlog of claims, those leaders would bring all of their creative energy to bear on this problem.
The Subcommittee is also concerned about the performance measures for central office employees. VA appears to be doing a commendable job at identifying objective, quantifiable criteria for evaluating its field personnel. The same is not true for the central office.
It appears that central office personnel are evaluated on the basis of justifications written by the employees themselves with no objective criteria factoring into the process.
For example, the extent of the backlog of claims by VBA would seem to be one of the most important metrics of performance, but this Subcommittee has seen nothing in the materials provided by the VA that this metric was even considered by the Secretary in deciding the bonuses for senior leaders of VBA.
Indeed, it appears that bonuses to the central office were awarded primarily on the basis of seniority and proximity to the Secretary.
We are also concerned about what appears to be a breakdown in the review process. VA is subject to oversight by the VA Inspector General (IG) and by the Office of Medical Investigations (OMI).
The Committee has found several examples of bonuses being awarded to employees responsible for VA operations that have been the subject of highly-critical IG or OMI reports in the same year the bonus was awarded. VA must ensure that the Secretary and the Personnel Review Boards are aware of and consider such reports when making bonus decisions.
Finally, I would note that Secretary Nicholson is responsible by law for the ultimate determination of who gets bonuses and at what amounts. The Committee invited Secretary Nicholson to attend today's hearing, but the VA has chosen to send his Deputy, Mr. Mansfield, even though Mr. Mansfield appears to have no role in the bonus process. The Committee would be pleased to hear from Mr. Mansfield that this is incorrect.
In addition, it appears that Secretary Nicholson has served as a rubber stamp for the recommendations made by his subordinates in sharp contrast to his predecessor. The Committee assumes that Mr. Mansfield will be able to address this issue as well.
In closing, I want to reiterate this Committee has no desire to denigrate the good work of the senior managers of the VA. This hearing is not intended to pressure the VA into eliminating bonuses or to target individual VA employees.
The VA, this Committee, and all Americans want what is best for our veterans. The SES bonus system can be an effective tool in improving the performance of the VA and Congressional oversight of that process will assist the VA in better matching performance to reward.
I look forward to today's testimony.
[The statement of Chairman Mitchell appears in the Appendix.]
Mr. MITCHELL. Before I recognize the Ranking Republican Member for her remarks, I would like to swear in our witnesses. And are the other panel members here? I would like all to stand, raise your right hand.
Mr. MITCHELL. Thank you.
I now recognize Ms. Brown-Waite for opening remarks.
Ms. BROWN-WAITE. Thank you, Mr. Chairman, and I thank you very much for yielding.
I would also like to thank the witnesses who are coming before us at this hearing. Your testimony is important to the oversight of this Committee in guaranteeing the process of assessing bonus reviews, whether it is fair, accurate, and appropriate.
During our Subcommittee hearing on April 19th discussing the care situation at the W.G. "Bill" Hefner VA Medical Center in Salisbury, North Carolina, I asked for a list of the people who were involved in the administration of care at the hospital and the bonuses they received over the period of time where there obviously was questionable quality of care rendered to veterans at that facility.
The Federal Government should not be in the practice of providing bonuses to individuals who permit failure in the system under their watch. I believe that government should be run as a business enterprise where bonuses are used for an appropriate reward. But it should be limited to only the very best and most deserving employees, especially during a time of war.
Several members on both sides of the aisle have expressed frustration over the bonus situation, particularly after many news articles describing who received certain bonuses and speculation as to whether these bonuses were justly and appropriately applied throughout the SES bonus process.
The news media linked bonuses to the 2005 budget shortfall issue, one that is very fresh on the minds of those who were here at the time. The media and several members have also linked the bonuses to the claims backlog that is prevalent at the VA.
I am concerned that we should not be too quick to judge the evaluation process, but rather give all the witnesses here a fair process to express their views.
It is my hope, though, that through the process of this hearing, we will learn how the VA determines the bonus awards are given out and whether the bonuses to members of SES at the VA were given an appropriate amount related to their actual performance, not their performance on paper.
I also look forward to hearing from the U.S. Government Accountability (GAO) to better understand how the Office of Personnel Management (OPM) certifies VA's bonus process and perhaps a better insight on VA's bonus justification process. I am sure many of the bonuses reflect hard work and professionalism of VA's senior management and that is what this hearing is all about, to determine whether or not that process actually works.
Again, I thank the Chairman for yielding and I yield back the balance of my time.
Mr. Chairman, as you know, I think they have called for a vote very soon.
[The statement of Congresswoman Brown-Waite appears in the Appendix.]
Mr. MITCHELL. Yes. Unfortunately, we are going to have to recess until we come back from a vote and it will be about an hour. The Committee is recessed until the sound of the gavel.
Mr. MITCHELL. The Subcommittee will come to order. We will now proceed to panel one. Mr. Christopher Mihm is the Managing Director of Strategic Issues for the U.S. Government Accountability Office. We look forward to hearing his unbiased view of the VA's process for awarding SES bonuses.
Mr. Mihm, you are recognized for five minutes.
Mr. MIHM. Thank you, Mr. Chairman.
Mr. Chairman, Members of the Subcommittee, it is indeed a great honor to be here today to discuss VA's process for awarding performance bonuses to members of the Senior Executive Service.
I must stress from the outset that while we have reviewed the structure of the Federal Government's SES pay and bonus system and its implementation at selected agencies, VA has not been one of the agencies, where in the past, we have been asked to do detailed work.
We would be happy obviously moving forward to do work on behalf of the Committee if you think it would be of value. However, my comments today are based on just a couple of weeks of work we have done at VA and, therefore, must necessarily speak to the design of the system at VA rather than its implementation which is, of course, is the key issue that you were talking about in your opening statement, Mr. Chairman.
Mr. Mitchell, as you and Ms. Brown-Waite were mentioning in your opening statements, high performing organizations understand that they need senior leaders who are accountable for results, drive continuous improvement in agency operations, and make sure that organizational goals and related transformation efforts are being achieved.
In that regard, we have identified a set of key practices of effective performance management for the SES which center on ensuring what we have called a "line of sight" or linkage between individual performance and organizational success.
My written statement covers a number of topics. But in the interest of time, I will hit on just three major points.
First, in terms of process. Broadly consistent with what we have seen at other agencies, VA requires that each SES member have an executive performance plan or contract in place for the appraisal year that reflects measures that balance organizational results with customer satisfaction, employee perspectives, and other appropriate measures.
At the end of the appraisal year, VA's Performance Review Boards (PRBs) review and make recommendations on SES members' ratings, awards, and pay adjustments based on those performance plans. Board members are appointed on the basis of positions held and consideration is given to those positions where the holder would have knowledge of the broadest group of executives.
VA has four PRBs and they vary quite a bit in size, composition, and number of SES members considered for bonuses. Each PRB has within the scope of VA's policies developed its own procedures and criteria for making recommendations.
Second, in terms of the bonuses awarded. In 2005, according to OPM's most recent government-wide data, VA awarded a higher average bonus amount to its career SES than any other cabinet level department. On the other hand, OPM data also show that six other cabinet level departments awarded bonuses to a higher percentage of their career SES members.
More recently for fiscal year 2006, VA awarded an average of $16,600 in bonuses to 87 percent of its career SES. At headquarters, 82 percent of the SES received a bonus, and 90 percent received a bonus in the field.
Those in headquarters were awarded, as you mentioned in your opening statement, an average of about $4,000 more in bonuses than those in the field. And as I noted, 2006 data that would allow us to compare VA with the other agencies is not yet available.
My third point, and this was something that Ms. Brown-Waite raised on OPM and the Office of Management and Budget's (OMB's) role: OPM and OMB evaluate agencies' SES and senior level employee performance appraisal systems against nine certification criteria jointly developed by those two agencies.
OPM also issues guidance to help agencies improve their systems and reviews submissions to ensure that they meet the criteria.
OMB for its part primarily considers overall measures of agencies' program performance and the extent to which mission goals are being met.
Let me conclude by noting that today's hearing is both timely and important as interest grows in better linking Federal employee pay to the market, individual roles and responsibilities, and performance.
We at GAO strongly believe that SES need to lead by example in this area and be role models for how to properly, fairly, and effectively implement such changes.
Let me end there and I would obviously be pleased to take any questions that you or other members of the Subcommittee may have.
[The statement of Mr. Mihm appears in the Appendix.]
Mr. MITCHELL. Thank you. I just have one question.
You testified that high performing organizations understand that they need senior leaders who are held accountable, who drive continuous improvements, and stimulate support efforts to integrate human capital approaches.
What are key steps that agencies, including the VA, can take in that regard?
Mr. MIHM. There are several things, Mr. Chairman. I think most important is that organizations need to have a good set of performance plans and strategic plans in place. That is, they need to make sure that there is agreement between them, stakeholders, and the Congress on what is going to be achieved in terms of the programmatic outcomes and how progress will be measured.
The second thing, once they have that in place, they need to make sure that they create again what we have called the "line of sight," that is that they drill down those program goals into individual SES contracts so that we have clear accountability and assurance that if this senior executive achieves this level of performance, it will deliver meaningful results for clients and program customers and for the American people.
We find very often in agencies, even some of the agencies that will have nice, sound, well-thought-out strategic plans, that there is not that linkage down to individual activities. There is no "line of sight" in place. So that line of sight is the second very important point.
Third is that there needs to be meaningful distinctions in performance. We need to make sure that we are identifying performance based on program goals and rewarding our top performers with bonus and permanent pay increases, that we are giving others that are the majority in the middle categories opportunities to improve, and to the extent that there are people that just are not being successful, that we have the good information that we need to deal with unsuccessful performance.
Those are really three of the most key things that we think need to take place.
Mr. MITCHELL. Thank you.
And I yield my time. Ms. Brown-Waite.
Ms. BROWN-WAITE. I thank the Chairman.
Mr. Mihm, I apologize for not being here. I was over on the floor and then I had to go up to my office. And I will be leaving for an amendment on the floor when they actually get to the amendment process.
Your testimony indicates that the VA uses four Performance Review Boards. These boards review the Veterans Health Administration (VHA), VBA, VA Headquarters, and the VA IG. I understand that the functions are different for each of these distinct boards and the accompanying criteria for the business lines, but should not the review process reflect one VA departmental human resource system?
Mr. MIHM. That is an excellent point, ma'am. And at a minimum, to the extent that there are differences, and there are differences in the case of the VA, to the extent that there are differences in an agency among the various PRBs that are in place, they should be known and considered differences. That is, there should be a business case for those differences and not merely, "well, we do it this way and someone else does it another way."
In the case of VA, as you mentioned, they have the four PRBs. The one that covers VHA and the separate one that covers VBA do have to vet their procedures through the Veterans Affairs PRB which covers central staff offices as well as cemeteries.
We have not had the opportunity yet to get a good understanding that would really allow me to speak directly to your question about why are these differences and are they considered. What are the reasons? There may be excellent reasons. We do not know. But at a minimum, one would want to again make sure that those reasons are thoughtful and considered and not just idiosyncratic.
Ms. BROWN-WAITE. Do you know if other agencies' SES categories have more than one board?
Mr. MIHM. Many agencies will have one or more or several PRBs, yes, ma'am. In that case, VA is consistent with other agencies.
Ms. BROWN-WAITE. Okay. But is there one system or a different disparate system?
Mr. MIHM. I am sorry. I did not understand your question at first. I am not sure on that. Let me give you a more thoughtful answer if I could for the record rather than have to correct something.
Ms. BROWN-WAITE. Okay. Do you know what actually precipitated VA's decision to change its policies on SES performance plans?
Mr. MIHM. If I could ask for a clarification as to if there is a particular change that you have in mind because I guess the reason I ask that is that overall, VA's changes came about consistent with what other agencies did with congressional authorization in 2003 and 2004 that allowed agencies with certified, from OPM and OMB, performance management systems to raise their pay caps and provide additional bonuses.
Ms. BROWN-WAITE. Okay. So it was OPM directed?
Mr. MIHM. It was OPM and OMB.
Ms. BROWN-WAITE. For all agencies?
Mr. MIHM. Yes, ma'am. What happens is that agencies have to independently apply to OPM and OMB. They have to provide OPM and OMB with a variety of information based on the nine criteria that OPM and OMB have jointly developed, and they get either full certification for their performance management system or provisional certification.
Each year since 2004, VA has had provisional certification. They have additional paperwork that is due to OMB for the current year by the end of June, and they tell us they expect to submit that paperwork to them.
Most executive agencies have received provisional certification, that is they are allowed to raise their pay cap, but they are still not consistent with all the OPM/OMB criteria.
Ms. BROWN-WAITE. Are they as consistent or less consistent as other agencies?
Mr. MIHM. Well, one of the things that tripped VA in the past has been a sticking point with a number of agencies. It gets back to one of the things I was discussing with the Chairman and that is that the targets that are in SES performance contracts. OPM was asking VA to make sure that they were results oriented, that there was a sizeable percentage of those targets that had quantitative measures on those.
It is exactly, ma'am, the point that you were making in your opening statement: If we have hard data that something is not happening, that health outcomes are not happening, for example, we need to know both from an improvement opportunity how can we get better, but also who is responsible for that.
The way you do that is making sure that you have SES contracts that have those requirements, quantitative requirements in there.
Ms. BROWN-WAITE. I thank the gentleman, and I yield back.
Mr. MITCHELL. Thank you.
Mr. SPACE. Pass for questions, Mr. Chairman. Thank you.
Mr. MITCHELL. Mr. Walz?
Mr. WALZ. Thank you, Mr. Chairman and Ranking Member.
Thank you, Mr. Mihm, for taking your time to be here. I just had a couple of questions.
First of all, to put this into context, the last three positions I have held over the last few years is high school teacher, Command Sergeant Major in the Army National Guard, and member of Congress, not necessarily in order of importance. None had performance bonuses.
My question to you would be is, is there any quantitative data that shows we are losing people in the SES because we are not providing them with bonus pay because this program was set up for performance bonus not as a means of offsetting the difference between public and private sector?
If it is being used to do that, do we not need to go back and reevaluate the pay system in general then and alleviate this misperception that if the agency is underperforming, we are still going to get bonuses because we are under threat of losing these people?
Mr. MIHM. You are raising an excellent point, sir, in that we have issued some work to some of your colleagues on the House Government Reform and Oversight Committee that asked us to look at both executive pay, judicial pay, and SES pay.
And one of the things that we came up with or developed as part of that is some principles for Federal pay. You want it to be market sensitive. You want it to be flexible. You want it to be sustainable over time and that it is affordable.
There is a natural but unfortunate tendency to conflate the performance award process with the pay process. If we are not paying market pay, and in some cases, I am certain we are not, in many cases, we are probably fine and in some cases, we may be over market, but if we are not paying to market, then Congress and all of us need to address that.
The performance appraisal and the bonus system was not intended to really be the vehicle to address those types of issues. Those should be on a separate track.
Mr. WALZ. All right. Very good. And I just had one more and I am not sure on this one, Mr. Mihm, if you can help me with this.
I know the nine criteria that we are measuring here on the performance. The one that I guess strikes and steps out at me is the accountability one. That is the one that I would say we are very concerned with.
And, again, is there any correlation that we can prove between individual performance and individual performance bonuses and agency performance because our ultimate goal here is across the spectrum agency performance to delivering better care to our veterans?
So I could see 39 out of 42 highly performing individuals and if the agency is not performing to that level, is it fair to say that that should be almost an overriding criteria of these nine in your opinion?
Mr. MIHM. It should certainly be, sir, a very compelling one. I am not trying to parse words there. But certainly over time, it is a reasonable expectation on behalf of the American people, on behalf of the Congress and the American people that senior executives, that those of us that have been entrusted with senior executive positions in government that are doing right well paid by the standards of most Americans are able to demonstrate that we are giving meaningful results to our fellow citizens.
And if we are, then there should be a bonus system that appropriately recognizes and rewards that. But if not, we need to be able to address those problems as well. We are only in the first couple years of meaningful pay for performance for senior executives.
It is over time, and I am not talking decades. We are talking relatively soon, we should be able to start seeing pretty strong lines of sight and linkages between organizational success and the individual awards that accompany those.
Mr. WALZ. Thanks, Mr. Mihm.
I yield back my time, Mr. Chairman.
Mr. MITCHELL. Thank you.
Mr. HALL. Thank you, Chairman Mitchell and Ranking Member Brown-Waite, for including us from other subcommittees in this hearing.
Mr. Mihm, thank you for your testimony. I want to follow-up Mr. Walz's questions by asking, there is a media report stating that the average VA bonus in 2002 was $8,120 and the current average is $16,606. Has there been any change in Federal law that you know of that would explain this rapid increase?
Mr. MIHM. The big changes were beginning with 2004. There were two separate pieces of statute. But in 2004 was when it kicked in that agencies with certified performance management systems were authorized to raise both their pay limits and their total compensation limits. And so that would allow for authorizing an increase.
Mr. HALL. So other departments would have been doing the same kind of thing?
Mr. MIHM. You will see that there were increases in many cases across agencies.
Mr. HALL. Can you explain in greater detail why the VA received only provisional certification from OPM rather than full certification? It appears that OPM had some concerns about the VA bonus review system but granted it provisional certification for three years.
Mr. MIHM. Yes, sir. The provisional certification from OPM, and this was fairly consistent with what other agencies were getting, similar types of feedback, turned on large measure the degree to which the performance contracts for SESers at VA had results oriented, quantitative targets in them that appropriately balanced organizational results, outcomes, an employee perspective or business perspective, and customer satisfaction, customer response categories.
The VA, we have looked at their 2006 or a sample of their 2006 contracts and begun to look at their 2007 contracts. We have seen that they have been making changes in response to OPM and OMB, and OPM has indicated that they have been making changes.
As I mentioned to an earlier question, they are up for recertification. They have to submit information to OPM by the end of June of this year and so all of us will have a better feel as to whether or not they have made sufficient progress.
Mr. HALL. So we might expect that they will provide information on or evidence of the outstanding performance that merits these bonuses?
Mr. MIHM. I am sorry, sir?
Mr. HALL. We might expect or you might expect to see by the end of this month, this June—
Mr. MIHM. What we will see, what we should see, all of us, is by the end of this month, VA's package to OPM in which there will be attempt to show against the nine criteria including organizational results how they have improved their performance management system.
Mr. HALL. That will be something to look forward to.
Mr. MIHM. Yes, sir.
Mr. HALL. And have you seen any information that would suggest that the VA has provided bonus awards to hospital directors for holding down costs by not replacing senior staff?
Mr. MIHM. We have not seen that, but we have not looked. I want to be clear on that. We would be happy to undertake that work if that is something that the Committee would be interested in.
Mr. HALL. Just a thought. And how does the 87 percent of SES officials at VA who received bonuses compare with the percentage of bonuses paid at other departments?
Mr. MIHM. It is among the highest in government. There are six other agencies that had higher percentages of that. VA gives the highest dollar amount in average bonuses. There are six other agencies that gave bonuses to a higher percentage of their SES. We would all like to work there, the Lake Woebegone factor, Mr. Chairman. There are some agencies where 95 percent of the SESers received bonuses. Great work if you can get it.
Mr. HALL. Thank you very much, sir. No further questions.
I yield back. Thank you, Mr. Chairman.
Mr. MITCHELL. Thank you.
Are there any other questions of Mr. Mihm?
Mr. MITCHELL. Thank you very much.
Mr. MIHM. A pleasure.
Mr. MITCHELL. Thank you.
I welcome panel two to the witness table. We are pleased to have Deputy Secretary Gordon Mansfield as the principal presenter for this panel.
This Committee has a long and professional working relationship with Mr. Mansfield in all of his roles at VA from his time serving as Assistant Secretary for Congressional Legislative Affairs to his present position as Deputy Secretary.
Mr. Mansfield is a highly decorated military combat veteran having served two tours of duty in Vietnam. His military awards include the Distinguished Service Cross, the Bronze Star, two Purple Hearts, and the Combat Infantryman's Badge.
Mr. Secretary, would you please introduce your team when you get them all settled there. And you are recognized for five minutes after you introduce your team.
STATEMENT OF HON. GORDON H. MANSFIELD, DEPUTY SECRETARY, U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY SHARON K. BARNES, DEPUTY CHIEF OF STAFF; GERALDINE V. BREAKFIELD, ASSOCIATE DEPUTY UNDER SECRETARY FOR MANAGEMENT, VETERANS BENEFITS ADMINISTRATION; THOMAS HOGAN, SPECIAL ASSISTANT TO THE ASSISTANT SECRETARY FOR HUMAN RESOURCES AND ADMINISTRATION, OFFICE OF HUMAN RESOURCES AND ADMINISTRATION; GERALD M. CROSS, M.D., FAAFP, ACTING PRINCIPAL DEPUTY UNDER SECRETARY FOR HEALTH, VETERANS HEALTH ADMINISTRATION; WILLIAM F. FEELEY, MSW, FACHE, DEPUTY UNDER SECRETARY FOR HEALTH FOR OPERATIONS AND MANAGEMENT, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS
Mr. MANSFIELD. Thank you, Mr. Chairman.
I am accompanied today by Sharon Barnes, the Deputy Chief of Staff; Dr. Cross, the Acting Principal Deputy Under Secretary for Health; William Feeley, the Deputy Under Secretary for Health; and Geraldine Breakfield, who is our Associate Deputy Under Secretary for Management in VBA; and Mr. Thomas Hogan.
I request that my full testimony be accepted for the record.
Mr. Chairman, Members of the Subcommittee, I am pleased to come before you to provide an overview of the performance management system governing VA's career Senior Executive Service Performance Bonus Program.
Federal law and Office of Personnel Management policies guide the Executive Branch in matters relating to compensation of Federal employees. Those policies acknowledge that performance awards are integral to the government's ability to attract, retain, and reward experienced, high-quality career executives.
The statute also establishes the procedure for appointing PRBs, stipulating the majority of members are to be career appointees. And lastly, the statute assigns to the Secretary of Veterans Affairs final approval of awards recommended by each PRB for the Department.
The Office of Personnel Management regulations further amplify the statutory framework. OPM regulations set procedures for establishing PRBs and state the criteria for determining performance standards and related metrics. And OPM annually reviews and certifies the results of PRB activities to ensure compliance with its rules and regulations.
In keeping with the statute and adhering to OPM regulations, VA's four PRBs direct a rigorous and transparent performance management process. They establish performance standards that are objective, measurable, and to the maximum extent possible, quantifiable.
Our executives report on their specific levels of achievement measured against these standards and their supervisors subsequently recommend performance ratings, pay adjustments, and bonuses. These bonus recommendations are reviewed by the governing PRB to ensure equitable and consistent interpretation and application throughout the Department. The board then forwards its recommendations to the Secretary for his final review and approval as per the statute.
VA has 321 career SES positions. This represents a ratio of senior executives to the general employee population of approximately 750 to one. This ratio represents one of the broadest spans of control in the Federal Government.
Our SES corps provides oversight to a staff of nearly 240,000 employees and a budget of more than $80 billion. In point, we operate the Nation's largest integrated healthcare system with 153 hospitals, 882 outpatient clinics, 46 domiciliaries, and 207 vet centers. Fully 198,000 employees staff those broad-based programs and services of VHA.
Our $40 billion benefit system supported by over 13,000 employees disburses disability payments each month to 2.7 million recipients and pensions to more than 324,000 beneficiaries.
We operate the country's largest burial and cemetery system. This year, more 103,000 veterans will be laid to rest in one of our 125 national cemeteries whose operations are supported by a staff of 1,527 individuals. Since 2005, we have established five new national cemeteries and will open six more by early 2009.
VA's central office is the nexus for an array of programs and services that reach from Maine to Manila. Central office sets VA-wide policy and procedures, prepares the Department's budget, oversees financial operations, and manages our information technology infrastructure.
Working for the second largest agency in the Federal Government, each VA senior executive has responsibility for far-reaching and complex programs, significant financial resources and major capital assets, and a large number of reporting staff.
Over the past three years, the average VA SES bonus amount is in the range of $16,000. This compares to a government-wide average of approximately $14,000. A number of agencies report a mean SES bonus figure that falls well within the $2,000 window between VA and government-wide averages.
For example, fiscal year 2005 data show that the average SES bonus was 15,900 plus dollars at the Department of Agriculture, 15,800 plus dollars at NASA, and $15,173 at the Treasury Department.
In response to recent congressional inquiries about SES bonuses, Secretary Nicholson requested an OPM review of VA's SES performance-based pay system. I am including the OPM report as an attachment and will briefly provide a summary of its findings and request that it be included in the record, if I may.
OPM found that, number one, the design and implementation of VA's SES performance management system meets all statutory and regulatory requirements.
Number two, executives who are members of PRBs do not make recommendations regarding their own pay adjustments and awards or the pay adjustments and awards of other executives in their chain of command.
Number three, VA is making distinction in performance as evidenced in its ratings, pay, and awards decisions.
Number four, VA executives are rated and rewarded primarily based on organizational results balanced against customer and employee perspectives and additional executive competencies.
I would especially recommend to the staff and the members of the Committee that you look at attachment three to the report. It gives much broader detail to some of the questions that have been raised.
Secretary Nicholson has agreed to implement the recommendations made as a result of the OPM analysis.
Mr. Chairman and members of the Committee, I am extremely proud of the senior executives with whom I work. They are a highly competent and committed group of leaders who excel in managing an organization that if in the private sector would rank as a Fortune 50 company.
Most of our SESs have dedicated their entire careers to the welfare of America's veterans. Many are retirement eligible and were they to retire, they could quickly be hired at considerably higher salaries.
While the bonus dollar amounts under discussion are sizeable and we recognize that, they are paid to seasoned and successful executives in recognition of solid and significant contributions to public service and they pale in comparison with compensation and bonuses common to executives with similar credentials working in the private sector.
Good government is a reflection of the people who make it that way and their competency, their dedication, their leadership are essential to the Department of Veterans Affairs as they are to the government at large.
VA remains committed to the statutory imperative of executive bonuses to both reward and to encourage continued excellence in performance.
Mr. Chairman, before I conclude my remarks, I would make the point that I understand some of the issues raised and I look forward to the discussion. But I would recognize as my full statement submitted for the record points out that we are serving this year 5.8 million veterans in our healthcare system, a record, more than ever before 5.8 million veterans are being seen at what is touted in many publications as the best healthcare system in the United States, the best healthcare system in the United States.
As indicated in my testimony, there are millions of people, millions of veterans and their survivors and dependents who are receiving compensation and pension checks each and every month. There are hundreds of thousands of individuals, active duty and veterans who are getting new houses, a place to live through the VA Housing Program. There is an insurance program that would make us the sixth largest insurance company standing on itself. And, again, I would just make the point that these are good, honest, dedicated, hard-working leaders who have been able to be identified and that takes a special process itself as Senior Executive Service members, members of the Senior Executive Service—
Mr. MITCHELL. Thank you.
Mr. MANSFIELD. —have a special place in our workforce. And, Mr. Chairman, that concludes my prepared remarks and I will attempt to answer any questions you may have.
[The statement of Mr. Mansfield appears in the Appendix.]
Mr. MITCHELL. Thank you. Your testimony was a good overview of what your department does.
And all the things you said towards the end of the people that are serving and so on, I just assume you do that because that is your job, that is your responsibility. And that is the charge that Congress has given the Veterans Department.
I have got a series of questions which will take very simple answers. In the documents that the VA has provided this Subcommittee, it does not appear you had any role in reviewing the bonuses; is that correct?
Mr. MANSFIELD. No, that is not correct. As the Deputy Secretary and as the Chief Operating Officer, I accept responsibility for what operates in the Department. The process is set up so that an Assistant Secretary who is an expert and has experts to work with him in this area get the information, do the process work before that final document goes to the Secretary—
Mr. MITCHELL. So you reviewed all of the recommendations for the bonuses; is that correct?
Mr. MANSFIELD. I review the initial submission that goes to the Secretary for his decision and I review what goes to the Chief of Staff for his discussion with the Secretary of what the final answers are.
Mr. MITCHELL. Did you serve on any of the PRB boards, review boards?
Mr. MANSFIELD. No, sir, I did not.
Mr. MITCHELL. Then did you read the recommendation memo that you sent?
Mr. MANSFIELD. Sir, I am having a little trouble hearing.
Mr. MITCHELL. Did you read the bonus recommendation memo that evidently you sent to the Secretary? Did you advise the Secretary on all the bonuses? Did you advise the Secretary on these bonuses?
Mr. MANSFIELD. In the fact that I forwarded the final document, yes, sir.
Mr. MITCHELL. And did you recommend any changes?
Mr. MANSFIELD. The question is again, sir, to the operation of the statute and the regulations and the VA setup where the Secretary makes the final decision.
Mr. MITCHELL. Correct. And he makes the final decisions on all SES bonuses. And, you know, the Subcommittee did invite the Secretary to come to this hearing. Do you know why he is not here?
Mr. MANSFIELD. Not available to make it, sir.
Mr. MITCHELL. Pardon?
Mr. MANSFIELD. Not able according to his schedule to make it, sir.
Mr. MITCHELL. We mailed out the invitation May 24th.
Mr. MANSFIELD. I do not have a specific, you know—
Mr. MITCHELL. All right.
Mr. MANSFIELD. I will go back and ask him and come back and give you an answer.
Mr. MITCHELL. Very good. So the Secretary was provided a memo with all the recommended bonuses? He has it all?
Mr. MANSFIELD. Again, sir, I—
Mr. MITCHELL. The Secretary has provided a memo of all the recommended bonuses; is that correct?
Mr. MANSFIELD. Yes.
Mr. MITCHELL. Does the Secretary of Veterans Affairs have a memo of all the recommended bonuses?
Mr. MANSFIELD. All the recommended bonuses went to the Secretary and were finalized by him.
Mr. MITCHELL. Okay. And that memo includes the ratings outstanding, excellent, fully satisfactory, but, otherwise, no information about the PRB recommendation in any particular bonus is listed; is that correct? Is there any information listed besides outstanding, excellent, fully satisfactory? Is there any justification for these?
Mr. MANSFIELD. In the final decision memo that goes to him, as you indicated, that is the clear memo. The information from any of the PRBs is available if requested or if needed.
Mr. MITCHELL. But what he receives is only outstanding, excellent, or fully satisfactory; is that correct?
Mr. MANSFIELD. Yes, to the best of my knowledge.
Mr. MITCHELL. That is all? So there is no particular follow-up that he has with his recommendation?
Mr. MANSFIELD. Well, he has his knowledge of the Department and what has happened in different parts of it and who is doing what type of a job and any recommendations that may be presented to him.
Mr. MITCHELL. Okay. Did you actually read the write-ups for the individual justification for each bonus?
Mr. MANSFIELD. No, sir, I did not read all of them.
Mr. MITCHELL. Did the Secretary read them?
Mr. MANSFIELD. That I do not know, sir.
Mr. MITCHELL. Let me ask this then. How is the Secretary supposed to meet his legal obligation to decide on bonuses if he knows nothing about the justifications for the bonuses?
Mr. MANSFIELD. Well, again, sir, these bonuses are performance driven and depend on a combination of what the Department has done in total and how that is measured. And that is handled through a monthly performance review which measures across the Department on what we are doing in specific areas and where we are having problems and any corrections that need to be made over the course of the year.
It deals with the strategic plan which the Secretary signs off on and it is his direction for the total direction of the organization. It depends in some cases on employee satisfaction and there are reports from OPM that come in that—
Mr. MITCHELL. I understand that. But those justifications are not listed.
Mr. MANSFIELD. It depends on patient or customer reviews—
Mr. MITCHELL. Right.
Mr. MANSFIELD. —that come in.
Mr. MITCHELL. But all those justifications are not listed with the recommendation, are they? There are just three categories.
Mr. MANSFIELD. Not all in one package, but they are—
Mr. MITCHELL. Okay.
Mr. MANSFIELD. —a part of the leadership of the Department's knowledge about what is going on in the Department.
Mr. MITCHELL. Are you aware that in the two years that Secretary Nicholson has been approving bonuses he has changed only one out of hundreds of recommendations? He has changed one. By contrast, in 2003, Secretary Principi changed over 30 of the recommendations.
Mr. MANSFIELD. Well, part of it as mentioned by the previous testifier, we are in a different system now since 2004. I do not have an exact knowledge about how many that Secretary Nicholson has changed, but I believe it is more than one.
Mr. MITCHELL. Go back and check.
Mr. MITCHELL. I will yield my time to Ms. Brown-Waite.
Ms. BROWN-WAITE. Thank you.
I do not think you actually answered the question of did you make any recommendations to the Secretary? Did you make any recommendations to the Secretary when the list came down for the bonuses? I listened very carefully and I did not hear a yes or a no answer.
Mr. MANSFIELD. The list went forward with some verbal recommendations from me as to some people on that list.
Ms. BROWN-WAITE. And is this the normal practice? Did you do this with the previous Secretary?
Mr. MANSFIELD. Yes.
Ms. BROWN-WAITE. So you made a few. Define a few for me.
Mr. MANSFIELD. One of the issues of concern is, for example, conformance with IG issues or other reports on performance throughout the Department. And in some cases, there may be IG issues that are under investigation, under review that are not, for example, what we call public knowledge that I would be briefed on.
Ms. BROWN-WAITE. Well, with respect to the bonuses given to senior staff at the Asheville Medical Center during the 2004 to 2005 time frame, given that the Office of Medical Inspector was notified and began an investigation on November 30th, 2004, why were allegations of possible patient care issues not made known prior to the final senior executive bonus approval decision in December and again in December of 2005 after the final OMI report was issued? Is there some reason why, for example, this was not part and parcel of that process? We are talking about quality of care which certainly should be part of the criteria.
Mr. MANSFIELD. I agree with you a hundred percent. I am sorry. I would agree with you a hundred percent that quality of care is one of the issues we are concerned about, one of the biggest things we are concerned about. I am sorry. I do not have all the facts and figures for Asheville in front of me, but I would be prepared to go look at that and come back and report to the Committee or to you, however you should like that handled.
Ms. BROWN-WAITE. I believe that there were already letters written by individuals as well as members of Congress about the quality of care at that facility. And, yet, the Director got a very sizeable bonus.
Mr. MANSFIELD. I do not have all the facts in front of me, Madam Congresswoman. I would, as I said, go back and look at that and answer the question for the record or if you wish for me to come and speak to you, I would do that.
Ms. BROWN-WAITE. No. I would like you to submit subsequent testimony on that very situation in North Carolina.
[The following was subsequently received from Mr. Mansfield:]
In August and December, 2004, the Office of the Medical Inspector (OMI) conducted site visits in the Asheville VA Medical Center (VAMC) Nursing Home Care Unit (NHCU) also known as the Extended Care Rehabilitation Center (ECRC). The purpose of the visits was to review the quality of care in the ECRC. That reports made several recommendations for improvements which were implemented (some of which were implemented within hours of the OMI notification of the issue). In addition, a third OMI report was conducted in July 2005 which revealed clinical leadership issues. These were addressed immediately and the clinical managers who were involved eventually left the VA.
The nursing home was closed for admissions from December 17, 2004 - January 28, 2005. One of the recommendations from the OMI was to detail an Associate Chief Nursing Service (ACNS) and Geriatrician to the facility to work with the facility as they addressed other recommendations. On January 23, 2005, VHA detailed the ACNS for Geriatrics from Durham VAMC and a Geriatrician from the Detroit VAMC to the facility to provide temporary clinical leadership. On January 28, 2005, this team provided an exit report to Asheville VAMC Leadership and conducted weekly calls to monitor the implementation of their recommendations for improvement. One of the recommendations included approval for limited admissions (no more than one per week per month) beginning with admissions to the ECRC rehab program starting on January 28, 2005. On March 10, 2005, additional admissions were approved for ECRC skilled nursing, restorative and maintenance programs. On May 31, 2005, admissions were opened to the ECRC respite program and admissions were increased to four residents per floor per week. On August 3, 200,5 admissions were opened to the ECRC hospice program. Nursing Leadership monitors ECRC staffing levels on a daily basis.
While the OMI review and results were taken into consideration when rating the Director's FY-2005 performance, other factors were also considered. For example, among other accomplishments under his leadership that year, the Medical Center successfully received full Joint Commission on the Accreditation of Healthcare Organizations (JCAHO) accreditation in all programs, achieved Level 1 scores (highest level) in clinical performance levels, reduced waiting lists, scored among the highest medical centers in patient satisfaction and held pharmacy costs to just a 1.27% increase while providing over 50,000 more prescribed drugs than in previous years. The Director also led the medical center through flood disasters that resulted from hurricanes, where the hospital was without water and power for extended periods of time.
This time frame encompassed the FY-2005 rating period and the Director in charge of Asheville VAMC during this period received a performance rating of Excellent.
This rating decision included consideration of the OMI reviews. His prior performance ratings had been Outstanding in FY-04 and Excellent in the two preceding years.
The VHA did not diminish the importance of the OMI findings when considering the rating and performance bonus for the Medical Center Director, however it did consider all of the other positive accomplishments that occurred during that same time period. The bonus he was granted was comparable to other medical center directors in Veterans Integrated Service Network (VISN) 6 who also received a final rating of Excellent.
That Director is no longer with the Asheville VAMC having retired on March 3, 2006.
Ms. BROWN-WAITE. The other thing I want to know is, do you think that the IG should review the list of bonuses prior to the approval of the Secretary to set up some sort of an early warning system that there is an ongoing investigative issue?
Mr. MANSFIELD. That does happen.
Ms. BROWN-WAITE. So that does happen now. Could you tell me what the process is.
Mr. MANSFIELD. The Assistant Secretary for Human Resources Administration who in effect is the Secretary or the person in charge of the process, the paperwork, contacts the IG, shares that information with him, and gets a report back or I get a report back on any issues that may be of concern.
Ms. BROWN-WAITE. So is this actually taken into consideration?
Mr. MANSFIELD. Yes, ma'am.
Ms. BROWN-WAITE. So have bonuses actually been reduced as a result of an ongoing investigation or the conclusion of an investigation which was not very favorable?
Mr. MANSFIELD. Yes.
Ms. BROWN-WAITE. Could you also tell us how many SES employees in your agency have been reduced in rank and/or salary and/or fired? And if it involved a transfer, which I know that the VA is known for transferring people, was it under adverse conditions?
Mr. MANSFIELD. Obviously I do not have that information—
Ms. BROWN-WAITE. I know you do not, sir.
Mr. MANSFIELD. —right in front of me, but I can tell you that some of each of those categories have taken place and that I will get the information for you.
Ms. BROWN-WAITE. Okay. I would appreciate it.
Mr. MANSFIELD. Let me just make a point, though, that it is awful hard to terminate anybody in the Federal Government.
Mr. MITCHELL. Even SES?
Ms. BROWN-WAITE. Even SES, the Chairman asked.
Mr. MANSFIELD. Incl