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Hon. Harry E. Mitchell, Chairman, and a Representative in Congress from the State of Arizona

June 12, 2007

This hearing will come to order.

Thank you all for coming today.  I am pleased that so many folks could attend this oversight hearing on “The Process of Awarding SES Bonuses at the Department of Veterans Affairs.”

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 in all, and we hope that this oversight hearing will assist the VA in making sure that its bonuses more closely match 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 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 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 reduction of the backlog of claims, those leaders will bring all of their creative energy to bear on the problem.

The subcommittee is also concerned about performance measures for central office employees.  VA appears to be doing a commendable job in 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 at 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 in the central office are 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 and by the Office of Medical Investigations.  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 in 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 had 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 with his predecessor.  The committee assumes that Mr. Mansfield will be able to address this issue as well.

In closing, I want to reiterate that this committee has no desire to denigrate the good work of the senior managers of 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 to improve 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.