This is significant due to the large number of attorney and student trainee accessions that occurred during our review period. For example, over the past two years the Federal Government has hired over 8,000 attorneys and 95,000 student trainees through excepted appointments. Many HR specialists and selecting officials consider 5 CFR 302.101(c) to be very ambiguous, and it is clear that some erroneously interpret it to mean that veterans' preference does not apply to these positions. OPM's guidance is that, consistent with the law, veterans' preference is one factor to be taken into consideration for these positions.

In the one case where adequate records exist to reconstruct the action (United States Attorney's Office in San Antonio, Texas), we found a 30 percent disabled veteran did not receive preference for a Student Temporary Employment Program vacancy. We have directed corrective action and the veteran will receive priority employment consideration.

Our audit also included a review of several non-title 5 personnel systems, specifically title 38 within the Department of Veterans Affairs (VA) and title 49 that was used to establish the personnel system for the Transportation Security Administration (TSA). We found that procedures to apply veterans' preference have been established in both systems. VA recently issued additional guidance for its field components to clarify the specific procedures that must be applied in granting veterans' preference under title 38, and our review of staffing actions did not identify any instances where veterans' preference was not applied properly. We found nearly 42 percent of the recently hired baggage handlers at TSA are veterans, which is impressive. During an internal review, TSA found several instances where veterans' preference was applied inconsistently; however, TSA is taking steps to correct the problem.

Recommendation:

• OPM will provide additional guidance to all agencies to help eliminate the
confusion that exists with applying veterans' preference, where appropriate, to
excepted service positions and other positions exempt from title 5
appointment procedures.

Competitive examining

The audit included a review of unused competitive certificates issued by both agency delegated examining units and OPM to determine if veterans received proper consideration and application of the preference to which they are entitled, and to identify patterns of missed opportunities to select veterans if they exist. Our assessment found veterans do receive appropriate consideration and application of preference in the competitive examining process, and requests for passovers and objections to veteran applicants are limited. The objection and passover cases we reviewed were handled properly and contained the appropriate justifications.

Agencies provided the same reasons for not using a competitive certificate whether the unused certificate was topped by veterans or non-veterans. Generally, the position was

filled by some other means, e.g., merit promotion or non-competitive appointment, or a funding issue causing the vacancy to be cancelled surfaced between the time the job was announced and the certificate was provided to the selecting official.

The terms "competitive examining" and "competitive certificate" do not denote that those procedures and results are the only means of meeting the merit requirement of competition. For example, merit promotion and most non-competitive promotion procedures (e.g., "career ladder" promotions) are either themselves a form of direct competition (e.g., "merit promotion") or reflect prior competition. However, the benefits of veterans' preference requirements only operate in the examining and accessions described in Figure 1 as "competitive examining."

We did not find a direct correlation between agencies' use or non-use of certificates containing veterans and the representation of veterans in the workforce. We found the same pattern of use and non-use among agencies with a high percentage of veterans on their rolls as in those agencies with veteran levels below the CLF percentage. In fact, 25 percent of veteran accessions are through competitive examining, which is about the same selection rate from this appointment source for non-veterans (as depicted in Figure 1).

As a result of the audit and cases brought to OPM's attention during the course of the audit, there were three agencies and four specific instances where veterans' preference had been violated in competitive examining. Each of the violations occurred while accessions were being processed by an agency's DEU, and OPM ordered corrective actions in each case.

Department of Agriculture, Departmental Administration, Washington, DC

In this case, there was a violation of the "rule of three" for a GS-2210-13, Information Technology Specialist position. The number three ranked preference eligible was not selected. A non-preference eligible ranked fourth on the certificate was selected improperly. Agency human resources officials attributed the error to inadequately trained staff and the lack of an internal quality control process. To correct the violation, the agency has agreed to provide the veteran priority consideration for the next available vacancy in the same occupation and grade. The agency is attempting to obtain authorization to fill another position so that the veteran can be given priority consideration in the near term. OPM is initiating a further review of the agency's DEU to ensure that it is functioning in accordance with merit principles and in compliance with law. To date, the agency has put in place an aggressive schedule to address these concerns, and OPM will continue to monitor its progress.

Department of the Army, Army Materiel Command, George C. Marshall Center, Garmisch, Germany

This case involved a selecting official soliciting the declination of a disabled veteran who had been referred by a delegated examining unit as the number one eligible for a GS-0301-11, Operations Specialist position. The veteran alleged that the agency asked him to disavow his interest in the position because management wanted to choose another candidate who was blocked by the veteran. The veteran declined to withdraw from consideration, and subsequently the agency sent a request to OPM asking for permission to bypass the veteran because he was not qualified. OPM disagreed and advised the agency that the veteran should be considered for the job. The agency cancelled the vacancy announcement and re-wrote it in a manner that excluded the veteran from consideration. Several months later, another candidate was selected. Responding to a complaint filed by the veteran, an Office of Special Counsel investigation concluded that several prohibited personnel practices were committed in connection with this case. The agency, without admitting liability, agreed to a lump sum payment of $132,706 in settlement of the complaint. In reviewing this finding, OPM concluded that the circumstances of this case were so serious that further action must be taken to protect the integrity of the merit system and ensure compliance with the law. OPM has notified the agency that OPM may withdraw delegated examining authority from the unit unless it provides sufficient assurances that appropriate corrective actions have been taken and that it has instituted measures to avoid future failures of its human capital accountability system.

Centers for Disease Control and Prevention, Morgantown, West Virginia

In the final case, two veterans were illegally passed over for a non-veteran who was ranked fourth on the same certificate for a GS-1910-12, Quality Assurance

Specialist position. The error was attributed to a lack of training of the DEU staff, and there was no accountability system in place to catch such mistakes. To correct these violations, OPM directed the agency to provide both veterans with priority consideration for the next available vacancy in the same occupation and grade. In addition, the agency conducted an internal review and has subsequently withdrawn delegated examining from this installation and assigned it to another organization. Withdrawing delegated examining authority is the appropriate course of action OPM would have prescribed in this case.

These cases illustrate the importance of agencies maintaining adequate internal accountability systems to ensure compliance with merit system principles and veterans' preference requirements. Most agencies that we audited did not have adequate accountability systems to detect the kinds of veterans' preference violations we found during our audit. In addition, there are specific oversight requirements for agencies exercising delegated examining on behalf of OPM. The general delegated examining agreement between OPM and the agency states:

The agency shall establish and maintain an internal accountability system
designed to assure that the use of delegated examining authorities is in

compliance with law and merit system principles. This system will be subject to
regular periodic management review by OPM.

The results of delegated examining unit reviews conducted by OPM indicate that many agencies have failed to establish and maintain an effective internal accountability system.

Recommendations:

OPM Human Capital Officers will work with agencies to establish sound internal accountability systems that ensure agencies comply with veterans' preference requirements.

OPM will enhance its oversight to ensure that agencies conduct the internal reviews required under delegated examining agreements.

Because of its unique nature, we also reviewed category rating during our audit at two United States Department of Agriculture (USDA) Forest Service installations. Category rating was part of a demonstration project within the USDA that became permanent. Since that time, the Chief Human Capital Officers Act of 2002 has authorized all agencies to use category rating systems, and OPM issued regulations to implement this form of delegated competitive examining at 5 CFR Part 337.

Under a category rating system, candidates are placed into two or more quality groups. All preference eligibles are placed at the top of the list within each group. The names of all compensably disabled veterans, including those basically eligible, are placed at the top of the highest quality group, except for scientific and professional positions GS-9 and

above, as provided for in statute. Within a quality group, applicants entitled to veterans' preference must be selected unless a formal objection is sustained. The Forest Service's use of a category rating system was evaluated by Pennsylvania State University under the demonstration agreement between OPM and the Forest Service. Category rating was found to have a positive impact on veterans' hiring (18.9 percent selection rate for veterans at the Forest Service versus 16.7 percent at the comparison sites). In terms of compliance, we found that veterans' preference is being properly applied when category rating is used at the Forest Service for competitive examining.

Special hiring authorities

Greater efforts must be made to increase the number of 30 percent or more disabled veterans in the Federal workforce across a broader spectrum of agencies. According to OPM's Annual Report to Congress on Veterans Employment in the Federal Government, the representation of 30 percent or more disabled veterans in the Federal workforce in FY 2002 was 2.0 percent, which is significantly better than the 0.3 percent in the private sector. However, 78.9 percent of the employees in this category work in either the Department of Defense or Department of Veterans Affairs. The Disabled Veterans Affirmative Action Program (DVAAP) requires agencies to develop formal plans to reach this group of veterans. However, at the installation level, we found that the DVAAP plan is not always implemented, and there is very little knowledge of the specific goals and objectives that the program was designed to achieve. There needs to be better communication of expected results, and managers and supervisors must be held accountable for adhering to their respective agencies' DVAAP plans.

A few agencies have recently set specific goals to increase the employment of disabled veterans. For example, starting in FY 2001, the United States Department of Agriculture committed to hiring 9,000 individuals with disabilities over a 5-year period. This effort stemmed from a Presidential initiative to hire 100,000 individuals with disabilities across the Federal Government during this period. More agencies across the Federal Government need to establish specific strategies to increase the employment of disabled

veterans.

Recommendations:

OPM will emphasize, through its compliance program, the importance of the DVAAP by reviewing the effectiveness of agency plans during headquarters and field installation reviews.

Agencies should re-evaluate their hiring strategies to determine additional

actions that can be taken to increase the employment of disabled veterans.

There are a number of special appointing authorities that are available for agencies to use outside of the competitive examining system. These include the Veterans Recruitment Appointment (VRA – formally the Veterans Readjustment Appointment), the Veterans Employment Opportunities Act (VEOA), and appointments for disabled veterans