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Witness Testimony of Hon. Gordon H. Mansfield, U.S. Department of Veterans Affairs, Deputy Secretary

Mr. Chairman and members of the Committee:

Recently, questions have surfaced about the integrity of the performance award process for Senior Executives serving within the Department of Veterans Affairs (VA). 

I am pleased to come before you to address this issue and to provide an overview of the performance management system governing VA’s career Senior Executive Service (SES) corps.  But most important, I am happy to dispel any and all misrepresentations surrounding the issues of SES performance ratings, pay increases, and performance bonuses within my Department. 

I would like to note that, by statute, Senior Executive noncareer appointees are not eligible for performance bonuses. 

Federal law and Office of Personnel Management (OPM) 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.

United States Code specifically states that “to encourage excellence in performance by career appointees, performance awards shall be paid.”  (Title 5, sec. 5384, ‘Performance awards in the Senior Executive Service)

It further specifies the way payment is to be made (“in a lump sum and in addition to basic pay”).  The way a bonus pool is to be established (“an amount not to exceed 10 percent of the aggregate amount of basic pay paid”).  And the parameters governing an award’s payment amount (“a performance award … may not be less than 5 percent nor more than 20 percent of the rate of basic pay”).

The statute also establishes the procedure for appointing Performance Review Boards (PRBs), stipulating that the majority of members are to be career appointees.  And, lastly, statute assigns to the Secretary of Veterans Affairs final approval of awards recommended by each PRB for the Department.

Office of Personnel Management regulations further amplify this 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 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.

Senior Executive Service personnel, by definition, hold leadership positions of great responsibility and trust.  And VA approves bonuses for these men and women based on one and only one criteria—demonstrated performance.  Greater amounts are awarded to career executives who receive higher performance ratings for successfully carrying out complex responsibilities in positions with broad spans of control.

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, through me, to the Secretary for his final review and approval.

VA has 321 career SES positions.  This represents a ratio of senior executives to the general employee population of approximately 750:1.  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 $87 billion. 

VA provides direct services, such as health care, pensions, compensation, home and education loans, and burials to millions of veterans annually. 

In point, we operate the nation’s largest integrated health care system, with 153 hospitals, 882 outpatient clinics, 46 domiciliary residences, and 207 Vet Centers.  Fully 198,000 employees staff the broad-based programs and services of our Veterans Health Administration. 

VA manages a $34.5 billion health care system with 7.6 million enrollees.  We treat 5.8 million patients, and have over 57 million outpatient visits annually.  That’s more than one million patients each and every week. 

VA has been widely acknowledged in the health care industry and by the media as the best health care system in America today.  Business Week … the Washington Monthly … US News and World Report … the New York Times … and NBC Nightly News, among many others, have all applauded our state-of-the-art medical care.

Our $40 billion benefits 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 on our rolls.  Payments made on time, every time.

This year, we will pay out more than $2.7 billion in educational benefits to over one-half million active duty service members, veterans, and their beneficiaries. 

Last year, VA helped over 142,000 veterans purchase homes worth $25 billion through our home loan guaranty program. 

VA administers $1.3 trillion in insurance coverage for 4.3 million veterans and service members, plus 3 million spouses and children. 

For calendar year 2006, our insurance programs paid claims totaling $2.1 billion to 110,000 veterans, service members, and their families.  This includes the newly-enacted Traumatic Servicemembers’ Group Life Insurance program, which provides payments to seriously injured service members and their families at a time when they are most in need of our support.

If operating in the private sector, VA’s insurance component, alone, would rank as the sixth largest life insurance company in the country. 

We operate the country’s largest burial and cemetery system.  This year, more than 103,000 veterans will be laid to rest in one of 125 national cemeteries whose operations are supported by a staff of 1,527.  Since 2005, we have established five new national cemeteries, and will open six more by late 2008 and early 2009. 

In the midst of our historic expansion, VA remains committed to ensuring that each of our cemeteries is maintained as a pristine, respectful National Shrine to those who served.  This fiscal year, we will expend $16.6 million to support our commitment. 

Our cemetery operations have elicited customer satisfaction ratings that are second to none.  Surveys have consistently confirmed that VA provides an unmatched level of excellence in honoring our nation’s departed heroes.   

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 large numbers of reporting staff.

Within VA, the bonus pool is 9 percent of aggregate SES salaries, or about $3.8 million.  That is in the context of an overall 2006 VA salary budget of approximately $18.4 billion.  This amount translates to .02% of 2006 salaries.  Or expressed another way, for every one million dollars in salaries, VA awarded just over $200 in bonuses.

Over the past three years, the average SES bonus amount is in the range of $16,000.  This compares to a government-wide average of approximately $14,000.  I would like to take this opportunity to note that a number of agencies report a mean SES bonus figure that falls well within the $2,000 window between the VA and government-wide averages. 

For example, FY 2005 data shows that the average SES bonus was $15,945 at the Department of Agriculture; $15,857 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.

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 distinctions 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.

Secretary Nicholson has agreed to fully implement the recommendations made as a result of the OPM analysis. 

Mr. Chairman, 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.

The scope of our services is enormous, and the implications for senior personnel management are equally great.

Most of our SES have dedicated their entire careers to the welfare of America’s veterans.  Many are retirement eligible—and were they to retire—they would quickly be hired at considerably higher salaries by one of the many organizations with whom VA does business.

While the bonus dollar amounts under discussion are sizeable, 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, dedication, and leadership are essential to the Department of Veterans Affairs, as they are to 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, this concludes my prepared remarks.  I would be happy to answer any questions you may have.

VA Top-Level Bonus Chart