The business wing of the Office of Personnel Management is inefficient and lacks sufficient oversight, potentially hurting national security, according to testimony before Congress on Wednesday.
The inspector general for the Office of Personnel Management (OPM), an OPM representative, and a representative from a private sector company that works with the federal government testified before a House Oversight subcommittee.
The three witnesses discussed OPM’s revolving fund, which is the business wing of OPM that sells services such as background checks to other government agencies and charges a fee to recoup the cost of the services.
OPM provides services to all of the major government agencies through the revolving fund, said OPM Inspector General Patrick McFarland in his written testimony.
The revolving fund’s budget has grown from $191 million in 1998 to $2 billion now, according to McFarland.
The inspector general’s budget has not kept pace with the rapidly expanding revolving fund budget, McFarland said. As a result, his office cannot properly oversee their operations.
"The majority of our office’s revolving fund criminal investigations involve the falsification of Federal Investigative Services background investigations," McFarland said. "These are situations where background investigators report interviews that never occurred, record answers to questions that were never asked, and document records checks that were never conducted."
A background investigator in one case "admitted to falsifying 1,600 credit checks," McFarland said.
"Federal Investigative Services’ largest customers are the defense agencies, underscoring the fact that this program’s integrity does not only affect huge sums of money but also has a significant impact upon national security," McFarland said.
The revolving fund has never gone through a complete audit, McFarland said, even though it makes up 90 percent of OPM’s financial obligations and 63 percent of OPM’s full time equivalent employees.
Linda Brooks Rix, co-CEO of Avue Technologies Corporation, testified on other problems inherent in the revolving fund’s operations.
"Our concern, as shared by many private companies, is that OPM acts as a regulator and a policymaker at the same time it operates a fee-for-service business that competes against private industry," Rix said in her written testimony. "OPM sells human resources products and services to the very agencies it regulates and whose human resources processes it audits."
OPM also offers a staffing technology service through the revolving fund that some agencies, including the Department of Veterans Affairs (VA), are required to use.
"Because USAStaffing is technologically outdated and does not scale appropriate to the VA’s size and hiring needs, the VA has had to hire more HR personnel to use the software within its operations," Rix said. The VA has increased its HR workforce by over 50 percent and increased its HR payrolls by $100 million over the last five years, Rix said.
Experts on government management and privatization said the government could use the private sector to drive down costs and improve the quality of services.
"There are multiple studies going back decades that show that on average, when privatization is done well, it can save governments and taxpayers anywhere from 15 to 20 percent," said Leonard Gilroy, director of government reform at the Reason Foundation.
"More than 850,000 federal employees are in positions that are commercial in nature, as calculated by the agencies' own FAIR Act inventories," said John Palatiello, president of the Business Coalition for Fair Competition. "These are government jobs that are also found in the Yellow Pages in private sector companies."
Rix noted that many private companies are lowering their human resources costs, while the government’s are rising. The federal government spends 7.4 times as much on human resources per employee than the private sector does, Rix said.
Charles Grimes, chief operating officer for OPM, defended the revolving fund services before the committee, calling them effective and noting the value they provide to government agencies in his written testimony.
Grimes also noted that President Barack Obama’s budget includes an expansion in the inspector general’s budget.
"OPM agrees with the importance of strong oversight in order to ensure the integrity of the revolving fund, and we look forward to continuing to work with OIG on this and other legislative proposals in this area," Grimes said in his written testimony.
Subcommittee chairman Blake Farenthold (R., Texas) was alarmed at the testimony.
"At a time when agencies are furloughing workers to meet payroll, questionable business practices gravely affect the entire federal government," Farenthold said in a press release.