Management Advisory 17-08: Review of SBA’s Practices for Schedule C Political Appointee Initial Pay Setting

As part of its ongoing review of the U.S. Small Business Administration’s (SBA’s) pay setting practices, the Office of Inspector General issued Report 17-08, which notified SBA of issues identified as part of our review.

We identified that SBA did not prepare the required documentation to justify the higher initial pay determinations for Schedule C political appointees (Schedule Cs) hired during 2014–2016.  While we determined that all 10 Schedule C appointees SBA hired in 2014 met the criteria supporting superior qualifications for higher pay, SBA did not adequately document each use of the superior qualifications authority.  SBA took steps to correct this deficiency during 2015–2016; however, SBA still hired six Schedule C employees without all the necessary documents to comply with Federal regulations and internal policies.  Personnel responsible for setting pay did not receive fundamental training on the use of the superior qualifications authority.  Additionally, SBA’s SOP on the superior qualifications authority insufficiently provides guidance specifically for Schedule Cs.  Without systematic controls in place to assure compliance with all documentation requirements, SBA is susceptible to improperly using the superior qualifications authority, resulting in potential salary overpayments for future Schedule C hiring.  Accordingly, this advisory contains two recommendations to strengthen internal controls over pay setting practices.  SBA management’s planned actions resolve these recommendations.