Review of SBA’s Pay Setting Practices for Senior Executive Service Salary Increases

This management advisory is the third and final report evaluating the Small Business Administration’s (SBA’s) pay setting practices.  We identified that SBA improperly approved pay increases for six Senior Executive Service (SES) members in 2015 and one SES member in 2014, for a total of $19,277 in improper payments.  Specifically, SBA’s granting of maintain relative pay increases (MRPs), did not align with Office of Personnel Management guidance and Federal regulations.  Three SES members received MRP pay adjustments in January 2015, even though their FY 2014 performance ratings were below the required threshold to receive any MRP increase.  During the same appraisal period, three other SES members rated below an outstanding, received MRP pay adjustments without a proper justification to support the increase.  Furthermore, Federal regulations prohibit more than one increase in the rate of basic pay during a 12-month period.  Nonetheless, SBA provided one SES member a performance increase to base pay in January 2014 and another in December 2014.  As a result, the pay increase granted to the SES member in December 2014 was unallowable.  These instances occurred because the Office of Human Resources Solutions (OHRS) did not have effective internal controls in place to detect these improper payments.  In addition, OHRS’ policies and procedures did not include sufficient guidance for SES performance based pay increases.  If these internal control deficiencies persist, SBA is susceptible to making future improper pay increases and risks losing the Certified SES Performance Appraisal System.  Accordingly, this advisory contains four recommendations to strengthen internal controls over pay setting practices.  Based on SBA management’s response, we consider all recommendations resolved but open pending completion of final actions.