Conflict Minerals: Company Reports on Mineral Sources in 2017 Are Similar to Prior Years and New Data on Sexual Violence Are Available

Over the past decade, the United States and the international community have sought to improve security in the DRC. In the eastern DRC, armed groups have committed severe human rights abuses, including sexual violence, and reportedly profit from the exploitation of “conflict minerals”— in particular, tin, tungsten, tantalum, and gold, according to the United Nations. Congress included a provision in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that, among other things, required the SEC to promulgate regulations regarding the use of conflict minerals from the DRC and adjoining countries. The SEC adopted these regulations in 2012. The act also included a provision for GAO to annually assess the SEC regulations' effectiveness in promoting peace and security and report on the rate of sexual violence in the DRC and adjoining countries.

In this report, GAO provides information about (1) companies' conflict minerals disclosures filed with the SEC in 2017 compared with disclosures filed in the prior 2 years and (2) the rate of sexual violence in the eastern DRC and adjoining countries published in 2017 and early 2018. GAO analyzed a generalizable random sample of SEC filings and interviewed relevant officials. GAO reviewed U.S., United Nations, and international organizations' reports; interviewed DRC officials, and other stakeholders; and conducted fieldwork in New York at the United Nations headquarters.

GAO's review of companies' conflict minerals disclosures filed with the U.S. Securities and Exchange Commission (SEC) in 2017 found that, in general, they were similar to disclosures filed in the prior 2 years. In 2017, 1,165 companies filed conflict minerals disclosures—about the same as in 2016 and 2015. Percentages of companies reporting country-of-origin inquiries in 2017 were also similar to the percentages from those 2 prior years. As a result of the inquiries they conducted, an estimated 53 percent of companies reported in 2017 whether the conflict minerals in their products came from the Democratic Republic of the Congo (DRC) and adjoining countries—similar to the estimated 49 percent in 2016 and 2015 but significantly higher than the estimate of 30 percent in 2014 (see figure). In their 2017 disclosure reports, many companies described actions they took to improve data collection processes, and most companies indicated some challenges in determining the country of origin.

Similar to the prior 2 years, almost all companies required to conduct due diligence, as a result of their country-of-origin inquiries, reported doing so. After conducting due diligence to determine the source and chain of custody of any conflict minerals used, an estimated 37 percent of these companies reported in 2017 that they were able to determine that their conflict minerals came from covered countries or from scrap or recycled sources, compared with 39 and 23 percent in 2016 and 2015, respectively. Four companies in GAO's sample declared their products “DRC conflict-free,” and of those, three included the required Independent Private Sector Audit report (IPSA), and one did not. In 2017, 16 companies filed an IPSA; 19 did so in 2016.

GAO found information on the rate of sexual violence in the 2017 Uganda and Burundi Demographic and Health Surveys. For Uganda, 22 percent of women and 9 percent of men reported they had experienced sexual violence at least once in their lifetime. For Burundi, 23 percent of women and 6 percent of men reported they had experienced sexual violence at least once in their lifetime. The most recent information on the rate of sexual violence for eastern DRC and Rwanda is from 2016 and is discussed in our previous GAO reports.

The exploitation of the mining and trade of “conflict minerals”—in  particular, tin, tungsten, tantalum, and gold from the eastern region of the  Democratic Republic of the Congo (DRC)—has contributed to the  displacement of people and severe human rights abuses. The 2010  Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- Frank Act) addresses, among other things, trade in conflict minerals.  Section 1502 of the act required several U.S. agencies, including the U.S.  Securities and Exchange Commission (SEC), to take certain actions to  implement the act’s conflict minerals provisions. The act required the  SEC to promulgate disclosure and reporting regulations regarding the use  of conflict minerals from the DRC and adjoining countries (in this report  also collectively referred to as “covered countries”) by April 2011. The  SEC adopted a conflict minerals disclosure rule (hereafter, SEC  disclosure rule) in August 2012 and published it in the Federal Register in  September 2012.

The SEC disclosure rule requires companies to file a specialized  disclosure report known as the Form SD if they manufacture, or contract  to have manufactured, products that contain conflict minerals necessary  to the functionality or the production of those products and, as applicable,  to file a conflict minerals report. The Form SD provides general  instructions to companies for filing the conflict minerals disclosure and  specifies the information that each Form SD and conflict minerals report  must include. In addition, the Dodd-Frank Act included a provision for  GAO to report, beginning in 2012 and annually thereafter, on the  effectiveness of the SEC disclosure rule in promoting peace and security  in the DRC and adjoining countries and to report annually, beginning in  2011, on the rate of sexual violence in war-torn areas of the DRC and  adjoining countries, among other things.

In this report, we (1) examine conflict minerals disclosures filed with the  SEC in 2017 compared with such disclosures filed in each of the prior 2  years and (2) provide information on the rate of sexual violence in the  eastern DRC and adjoining countries published in 2017 and early 2018.

To examine disclosures that companies filed with the SEC in 2017 in  response to the SEC disclosure rule, we downloaded disclosure reports  (Form SDs) and conflict minerals reports from the SEC’s publicly  available Electronic Data Gathering, Analysis, and Retrieval (EDGAR)  database. We randomly sampled 100 Form SDs from a population of  1,165 to create estimates generalizable to the population of all companies  that filed in response to the SEC disclosure rule. All estimates based on  our sample have a margin of error of plus or minus 10 percentage points  at the 95-percent confidence level, unless otherwise noted. We  determined that the EDGAR database was sufficiently reliable for  identifying the universe of Form SD filings. As described in that report, to  review the completeness and accuracy of the EDGAR database, we  reviewed relevant documentation, interviewed knowledgeable SEC and  GAO officials, and reviewed prior GAO reports on internal controls related  to the SEC’s financial systems. We reviewed the Dodd-Frank Act and the  requirements of the SEC disclosure rule to develop a questionnaire that  guided our data collection and analysis of the Form SD filings. We also  interviewed company representatives attending an industry conference in  Santa Clara, California, to obtain additional perspectives on meeting  disclosure requirements. In addition, we met with representatives of a  range of stakeholders, including nongovernmental organizations, service  providers, international organizations, and the private sector, in  Washington, D.C., and Santa Clara, California. To identify information  published since our last report about sexual violence in the eastern DRC  and adjoining countries, we conducted Internet literature searches to  identify academic articles published in 2017 and early 2018, and we  interviewed and obtained key documents from researchers and  representatives of U.S. agencies and several United Nations agencies.

We conducted this performance audit from September 2017 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

History of Conflict in the DRC and the Region

The DRC is a vast, mineral-rich nation with an estimated population of  about 83 million people and an area that is roughly one-quarter the size of  the United States, according to the United Nations. Figure 1 shows the  DRC’s provinces and adjoining countries.

Since gaining its independence from Belgium in 1960, the DRC has  undergone political upheaval and armed conflict. From 1998 to 2003, the  DRC and eight other African countries were involved in what has become  known as “Africa’s World War,” which resulted in a death toll of an  estimated 5 million people in the DRC, according to the U.S. Department  of State (State). The eastern DRC has continued to be plagued by  violence, often perpetrated against civilians by illegal armed groups and  some members of the Congolese national military. Notably, in 2012, an  illegal armed group occupied the city of Goma and other cities in the  eastern DRC and clashed with the Congolese national army. During this  time, the United Nations reported numerous cases of sexual violence  against civilians, including women and children, which were perpetrated  by armed groups and some members of the Congolese national military.  In 2017, the United Nations reported that serious violations of human  rights remain widespread in the DRC, including continued acts of sexual  violence by government security forces as well as nonstate armed  groups.

Various industries, particularly manufacturing industries, use the four  conflict minerals specifically named in the Dodd-Frank Act—tin, tungsten,  tantalum, and gold—in a wide variety of products. For example, tin is  used to solder metal pieces and is also found in food packaging, steel  coatings on automobile parts, and some plastics. Tungsten is used in  automobile manufacturing, drill bits and cutting tools, and other industrial  manufacturing tools and is the primary component of filaments in  incandescent light bulbs. Most tantalum is used to manufacture  capacitors that enable energy storage in electronic products such as cell  phones and computers or to produce alloy additives used in turbines in jet  engines. Gold is held as bullion by central bank reserves and used in  making jewelry and also in the electronics industry, for example, to  manufacture cell phones and laptops.

In August 2012, SEC adopted its conflict minerals disclosure rule in  response to Section 1502(b) of the Dodd-Frank Act. The act required that  SEC promulgate disclosure and reporting regulations regarding the use of  conflict minerals originating from the DRC and covered countries. In the  summary section of the adopting release for the rule, SEC noted that to  accomplish the goal of helping to end the human rights abuses in the  DRC caused by the conflict, Congress chose to use the Dodd-Frank Act’s  disclosure requirements to bring greater public awareness of the sources  of companies’ conflict minerals and to promote the exercise of due  diligence on conflict mineral supply chains.

The SEC disclosure rule addresses the four conflict minerals named in  the Dodd-Frank Act from the DRC and covered countries. The rule  outlines a process for companies to follow, as applicable, to comply with  the rule (see app. II). The process broadly requires a company to  1.  determine whether it manufactures, or contracts to be manufactured,  products with “necessary” conflict minerals;  2.  conduct a reasonable country-of-origin inquiry (RCOI) concerning the  origin of those conflict minerals; and  3.  exercise due diligence, if appropriate, to determine the source and  chain of custody of those conflict minerals, adhering to a nationally or  internationally recognized due diligence framework, if such a  framework is available for these necessary conflict minerals.

If companies choose to disclose that their products are “DRC conflict  free,” the SEC disclosure rule requires companies to obtain an  independent private-sector audit (IPSA).

Conflict Minerals Disclosures Filed in 2017 Were Similar to Those Filed in Prior Years, and SEC Updated Guidance on Enforcement of Due Diligence Requirements

Our review of companies’ conflict minerals disclosures filed with the SEC  in 2017 found that, in general, they were similar to disclosures filed in the  prior 2 years. In 2017, a similar number of companies filed conflict  minerals disclosures as in 2015 and 2016. Based on our review of a  generalizable sample, we found that almost all companies that filed  conflict minerals disclosures in 2017 reported performing inquiries about  their conflict minerals’ country of origin, similar to the results we  previously reported for 2016 and 2015. In their 2017 disclosure reports,  many companies described actions they took to improve data collection  processes, and most companies indicated challenges in determining the  country of origin. Our review of company filings found that almost all  companies required to conduct due diligence, as a result of their country- of-origin inquires, reported performing it. SEC issued revised guidance in  April 2017, indicating that the SEC’s Division of Corporation Finance  would not recommend enforcement action if companies did not report on  specified due diligence disclosure requirements.

About as Many Companies Filed Conflict Minerals Disclosures in 2017 as in Each of the Prior 2 Years

In 2017, 1,165 companies filed conflict minerals disclosures—almost as  many companies as filed in 2016 and 2015 (1,230 and 1,281  respectively). Our analysis of a generalizable sample of filings found that  an estimated 90 percent of the companies that filed in 2017 were  domestic and an estimated 10 percent were foreign companies, similar to  the domestic-to-foreign ratio we found in 2016 and 2015. While not all  companies reported the minerals used, of those that disclosed this  information, an estimated 69 percent reported using tin, 54 percent  reported using tantalum, 59 percent reported using tungsten, and 63  percent reported using gold, figures that are similar to the percentages  reported in 2016.

Percentages of Companies Reporting Minerals’ Country-of-Origin in 2017 Were Similar to Prior 2 Years

Our analysis of a generalizable sample of 2017 filings found that, as in  2016 and 2015, almost all companies that filed conflict minerals  disclosures indicated that they performed country-of-origin inquiries.  Specifically, an estimated 100 percent of the companies reported that  they performed such an inquiry, similar to the percentages that we  estimated reported doing so in 2016 and 2015. As a result of the inquiries  they conducted, an estimated 53 percent of companies reported in 2017  whether the conflict minerals in their products came from covered  countries—similar to the estimate of 49 percent in 2016 and in 2015 but  significantly higher than the estimate of 30 percent in 2014 (see fig. 2).

Some Companies Reported Improvements in Supply Chain Data Collection Efforts, but Challenges Remain

In the filings we reviewed, many companies indicated they had taken  actions to improve their data collection processes, such as gathering  missing information about their supply chains and working with suppliers  to encourage conflict-free sourcing. In interviews, representatives of  selected companies that filed conflict minerals disclosures in 2017 and  other industry participants noted that (1) awareness among suppliers  about the use of conflict minerals had continued to increase and (2) the  process for collecting data on supply chains had become more routine  and standardized. However, as in prior years, our review of filings found  that most companies reported challenges in determining the country of  origin of conflict minerals, in part due to lack of access to suppliers and  complex supply chains involving many suppliers and processing  facilities.

Almost All Companies Required to Conduct Due Diligence Reported Performing It

Our review of company filings found that almost all companies that were  required, as a result of their country-of-origin inquires, to conduct due  diligence on the source and chain of custody of the conflict minerals in  their products reported doing so. In 2017, an estimated 96 percent  reported conducting due diligence, compared with 96 and 97 percent in  2016 and 2015 respectively. An estimated 87 percent of companies in  2017 reported using a due diligence framework prescribed by the  Organization for Economic Co-operation and Development (OECD)  guidance for conducting due diligence on the source and chain of custody  of the conflict minerals in their products. That result is comparable to an  estimated 92 percent that we reported in 2016 and an estimated 95  percent that we reported in 2015. The remaining 13 percent of the  companies that reported conducting due diligence in 2017 did not specify  a framework for their due diligence activities.

After conducting due diligence, an estimated 37 percent of the companies  reported in 2017 that they were able to determine that their conflict  minerals came from covered countries or from scrap or recycled sources,  compared with an estimated 39 and 23 percent in 2016 and 2015,  respectively. An estimated 47 percent of the companies in 2017 reported  that they could not definitively confirm the source of the conflict minerals  in their products, compared with an estimated 55 and 67 percent in 2016  and 2015, respectively. However, as in previous years, almost all of the  companies that reported conducting due diligence in 2017 reported that  they could not determine whether the conflict minerals financed or  benefited armed groups. Four companies in our sample reported  determining that the minerals in their products did not finance or benefit  armed groups in covered countries, and declared some products “DRC- conflict free.” Three of these companies included the required  independent private-sector audit (IPSA) report, and one company did not  include an IPSA report. Overall, a total of 16 companies filed an IPSA  report in 2017, compared with 19 in 2016.

SEC’s Division of Corporation Finance Issued Updated Guidance Indicating It Would Not Recommend Enforcement Action on Due Diligence Disclosure Requirements

In April 2017, the SEC’s Division of Corporation Finance issued revised  guidance indicating that it would not recommend enforcement action to  the Commission if companies did not report on specified due diligence  disclosure requirements. The SEC disclosure rule requires companies,  if applicable, to report on their due diligence in a conflict minerals report  (see app. II for additional detail on the disclosure requirements). SEC’s  Division of Corporation Finance staff told us that they received inquiries  from a small number of companies about the filing process for 2017. In  response to these inquiries, these staff noted that they advised  companies that the companies had the flexibility to determine whether or  not to report on their due diligence and to report their country-of-origin  inquiry findings in either the Form SD or in a conflict minerals report.  However, the Division of Corporation Finance staff also told us that,  regardless of the division’s revised guidance, the SEC could still initiate  enforcement action if companies do not report on their due diligence, as  required by the SEC disclosure rule. In our sample, three companies cited  the updated guidance and other statements issued by the SEC in their  filings as a rationale for not reporting on due diligence activities. In  interviews, representatives of some companies and other industry  participants told us that even though the revised guidance and other  statements made by the SEC raised some uncertainty about the filing  process, generally, companies plan to continue to report similar conflict  minerals disclosure information.

New Survey Data Are Available on the Rate of Sexual Violence in Burundi and Uganda

We identified two new population-based surveys since our last report  related to sexual violence in Burundi and Uganda published in 2018; the  most recent information for eastern DRC and Rwanda is from 2016. We  also identified some new case-file data on sexual violence in the DRC;  however, as we reported previously, case-file data on sexual violence are  not suitable for estimating an overall rate of sexual violence.

Results of Two New Demographic and Health Surveys Conducted in Uganda and Burundi Were Published in 2018

We identified two new population-based surveys related to sexual  violence that were conducted in Uganda and Burundi in 2016 and 2017,  respectively, and whose results were published in 2018. The Uganda  Demographic and Health Survey was conducted from June to December  2016 by the Uganda Bureau of Statistics with technical assistance from  ICF International. The survey estimated that 12.7 percent of women  nationwide, ages 15-49, reported they had experienced sexual violence in  the 12-month period preceding the survey, while 21.9 percent reported  they had experienced sexual violence at some point in their lifetime. In  addition, 4 percent of men nationwide, ages 15-49, reported they had  experienced sexual violence in the 12-month period preceding the survey,  while 8.3 percent reported they had experienced sexual violence at some  point in their lifetime.

The Burundi Demographic and Health Survey was conducted from  October of 2016 to March of 2017 by the Burundi Institute of Statistics  and Economic Studies with technical assistance from ICF International.  The survey estimated that 12.7 percent of women nationwide, ages 15- 49, reported they had experienced sexual violence in the 12-month period  preceding the survey, while 23.1 percent reported they had experienced  sexual violence at some point in their lifetime. In addition, 1.9 percent of  men nationwide, ages 15-49, reported they had experienced sexual  violence in the 12-month period preceding the survey, while 6.1 percent  reported they had experienced sexual violence at some point in their  lifetime. The most recent information on the rate of sexual violence for  eastern DRC and Rwanda is from 2016 and is discussed in our previous  reports.

Figure 3 shows the publication dates for the population-based surveys  with data on rates of sexual violence in the eastern DRC, Rwanda,  Uganda, and Burundi that have been published since 2007.

Some Additional Case-File Information about Sexual Violence Has Become Available

State and United Nations entities have provided additional case-file  information about instances of sexual violence in the DRC and adjoining  countries.  State’s annual country reports on human rights practices  provided the following case-file data pertaining to sexual violence in the  DRC and Burundi:

DRC. In 2017, the UN documented 267 adult victims and 171 child  victims, including two boys, of sexual violence in conflict. This  violence was perpetrated by illegal armed groups as well as state  security forces and civilians and was concentrated in North Kivu  Province and in the Kasai region, according to State.

Burundi. One government organization—Humara Center— responsible for investigating cases of sexual violence and rape  received 197 cases of sexual and gender-based violence through  early December 2017, according to State. Observers stated many  women were reluctant to report rape, in part due to fear of reprisal,  according to State.

In addition, UN entities reported the following case-file data about sexual  violence in the DRC:

DRC. In 2017, the United Nations Organization Stabilization Mission  in the DRC verified 195 cases of conflict-related sexual violence, with  illegal armed groups responsible for 80 percent of the cases and DRC  security forces responsible for the remaining 20 percent. United  Nations officials we interviewed raised concerns about a resurgence  of sexual violence in certain regions in the DRC due to a variety of  factors, including political instability arising from the government’s  postponement of the presidential election originally scheduled to take  place in November 2016.

We provided a draft of this report to the SEC, State, and the U.S. Agency  for International Development for comment. SEC provided technical  comments, which we incorporated as appropriate. State and USAID did  not provide comments.

We are sending copies of this report to appropriate congressional  committees and to the Chairman of the Securities and Exchange  Commission, the Secretary of State, and the Administrator of the U.S.  Agency for International Development. The report is also available at no  charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.

Appendix I: Objectives, Scope, and Methodology

In this report, we provide information about (1) companies’ disclosures  filed with the U.S. Securities and Exchange Commission (SEC) in 2017  compared with disclosures filed in the prior 2 years and (2) the rate of  sexual violence in the eastern Democratic Republic of the Congo and  neighboring countries published in 2017 and early 2018.

To examine the fourth annual company disclosures filed with the SEC in  2017 in response to the SEC disclosure rule, we downloaded the  specialized disclosure reports (Form SD) and conflict minerals reports  (CMR) from SEC’s publically available Electronic Data Gathering,  Analysis, and Retrieval (EDGAR) database in September 2017. We  downloaded 1,165 filings identified as Form SDs and the CMRs included  in EDGAR. To review the completeness and accuracy of the EDGAR  database, we reviewed relevant documentation, interviewed  knowledgeable SEC officials, and reviewed prior GAO reports on internal  controls related to SEC’s financial systems. We determined that the  EDGAR database was sufficiently reliable for identifying the universe of  SD filings.

We reviewed the conflict minerals section of the Dodd-Frank Wall Street  Reform and Consumer Protection Act (Dodd-Frank Act) and the  requirements of the SEC disclosure rule to develop a data collection  instrument (DCI) that guided our analysis of Form SDs and CMRs that  contain the information disclosed by the filing companies. Our DCI was  not a compliance review of the Form SDs and CMRs. The questions were  written in both yes-no and multiple-choice formats. An analyst reviewed  the Form SDs and CMRs and recorded responses to the DCI for all of the  companies in the sample. A second analyst also reviewed the Form SDs  and CMRs and verified the responses recorded by the first analyst.  Analysts met to discuss and resolve any discrepancies.

We randomly sampled 100 Form SDs from a population of 1,165 to  create estimates generalizable to the population of all companies that  filed. All estimates based on our sample have a margin of error of plus or  minus 10 percentage points or less at the 95-percent confidence level.  Because we followed a probability procedure based on random  selections, our sample is only one of a large number of samples that we  might have drawn. Since each sample could have provided different  estimates, we express our confidence in the precision of our particular  sample’s results as a 95-percent confidence interval. This is the interval  that would contain the actual population value for 95 percent of the  samples we could have drawn. We also attended an industry conference  on conflict minerals and spoke with company representatives to provide  additional perspective.

To address our second objective, we identified and assessed any  information on sexual violence in the eastern DRC and the three adjoining  countries—Rwanda, Uganda, and Burundi—that had been published or  otherwise had become available in 2017 and early 2018. We discussed  the collection of sexual violence–related data in the DRC and adjoining  countries, including population-based survey data and case-file data,  during interviews with U.S. Department of State and U.S. Agency for  International Development officials and with representatives of  nongovernmental organizations and researchers whom we interviewed  for our prior review of sexual violence rates in the eastern DRC and  adjoining countries. We also interviewed officials from the United Nations  Population Fund and the United Nations Special Representative of the  Secretary-General in New York on Sexual Violence in Conflict. In  addition, we conducted Internet searches to identify new academic  articles containing any additional information on sexual violence  published in 2017 and early 2018.

Appendix II: U.S. Securities and Exchange Commission (SEC) Summary of the Conflict Minerals Disclosure Rule

The U.S. Securities and Exchange Commission (SEC) conflict minerals  disclosure rule requires certain companies to file a specialized disclosure  report, known as the Form SD, if the company manufactures, or contracts  to have manufactured, a product or products containing conflict minerals  that are necessary to the functionality or the production of those  products. The rule also requires each company, as applicable, to provide  a description of the measures the company took to exercise due diligence  in determining the source and chain of custody of the conflict minerals,  the facilities used to process them, their country of origin, and the efforts  made to determine the mine or location of origin with the greatest  possible specificity. Form SD provides general instructions for filing  conflict minerals disclosures and specifies the information that companies  must provide. Companies were required to file under the rule for the first  time by June 2, 2014, and annually thereafter on May 31. Figure 4 shows  the SEC’s flowchart summarizing the conflict minerals disclosure rule.

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the individual named above, Godwin Agbara (Assistant  Director), Farahnaaz Khakoo-Mausel (Analyst-in-Charge), Diana  Blumenfeld, Andrew Kurtzman, Justin Fisher, Grace Lui, David Dayton,  Christopher Keblitis, and Michael McAtee made key contributions to this  report.

Conflict Minerals: Information on Artisanal Mined Gold and Efforts to  Encourage Responsible Sourcing in the Democratic Republic of the  Congo. GAO-17-733. Washington, D.C.: August 23, 2017.

SEC Conflict Minerals Rule: 2017 Review of Company Disclosures in  Response to the U.S. Securities and Exchange Commission Rule.  GAO-17-517R. Washington, D.C.: April 26, 2017.

Conflict Minerals: Insights from Company Disclosures and Agency  Actions. GAO-17-544T. Washington, D.C.: April 5, 2017.

SEC Conflict Minerals Rule: Companies Face Continuing Challenges in  Determining Whether Their Conflict Minerals Benefit Armed Groups.  GAO-16-805. Washington, D.C.: August 25, 2016.

SEC Conflict Minerals Rule: Insights from Companies’ Initial Disclosures  and State and USAID Actions in the Democratic Republic of the Congo  Region. GAO-16-200T. Washington, D.C.: November 17, 2015.

SEC Conflict Minerals Rule: Initial Disclosures Indicate Most Companies  Were Unable to Determine the Source of Their Conflict Minerals.  GAO-15-561. Washington, D.C.: August 18, 2015.

Conflict Minerals: Stakeholder Options for Responsible Sourcing Are  Expanding, but More Information on Smelters Is Needed. GAO-14-575.  Washington, D.C.: June 26, 2014.

SEC Conflict Minerals Rule: Information on Responsible Sourcing and  Companies Affected. GAO-13-689. Washington D.C.: July 18, 2013.

Conflict Minerals Disclosure Rule: SEC’s Actions and Stakeholder- Developed Initiatives. GAO-12-763. Washington, D.C.: July 16, 2012.

The Democratic Republic of Congo: Information on the Rate of Sexual  Violence in War-Torn Eastern DRC and Adjoining Countries.  GAO-11-702. Washington, D.C.: July 13, 2011.

The Democratic Republic of the Congo: U.S. Agencies Should Take  Further Actions to Contribute to the Effective Regulation and Control of  the Minerals Trade in Eastern Democratic Republic of the Congo.  GAO-10-1030. Washington, D.C.: September 30, 2010.

Armed groups in the Democratic Republic of the Congo have committed severe human rights abuses, including sexual violence, and reportedly profit from mining and trade in tungsten, gold and other "conflict minerals" found in the region.

In 2012, the Securities and Exchange Commission began requiring companies whose products may contain these minerals (from the DRC and neighboring countries) to report on their sources.

We found in 2017 that nearly all the companies required to report this information did so and that most reported difficulty determining the country of origin. We also identified 2 new surveys on sexual violence in the area.


Bureau of Prisons: Better Planning and Evaluation Could Help Ensure Effective Use of Retention Incentives

BOP is the largest employer within DOJ and is responsible for the care and custody of an inmate population of about 186,000. BOP has faced challenges retaining staff at correctional facilities, although it has used retention incentives, along with other human capital flexibilities. GAO was asked to review BOP's use of retention incentives.

This report addresses: (1) how BOP used its authority to pay retention incentives; (2) internal controls BOP has in place for the use of retention incentives; and (3) the extent to which BOP plans for and evaluates the use of retention incentives. GAO obtained employee-level retention incentive expenditure data from DOJ's Justice Management Division for fiscal years 2012 through 2016. GAO also reviewed agency documentation, such as policy statements and 40 randomly selected retention incentive application packet case files from fiscal years 2014 through 2016. GAO also interviewed officials from BOP's Central Office and four correctional facilities that use retention incentives, selected to reflect variation in the number and types of employees receiving retention incentives, BOP regions, and BOP institution security levels.

From fiscal years 2012 to 2016, the Department of Justice's (DOJ) Federal Bureau of Prisons' (BOP) total retention incentive expenditures generally increased from $10.7 to $14.0 million and the number of employees receiving retention incentives increased from 2,024 to 2,460. During those five years, BOP spent more than 97 percent of its total retention incentive expenditures on employees at four BOP institutions in California and for medical professionals nationwide. Further, total retention incentive expenditures for medical professionals increased by an average of 21 percent per year (see figure). According to BOP officials, BOP uses retention incentives, for example, to supplement BOP's medical professionals' salaries which are generally lower than private sector salaries.

BOP has a variety of internal controls in place throughout the retention incentive process that help ensure retention incentive applications and approvals meet requirements. For example, each application goes through multiple levels of review to verify its accuracy and completeness.

BOP takes steps to determine workforce needs and how to fill those needs, but has not strategically planned for and evaluated its use of retention incentives. According to BOP, planning for human capital needs is conducted at institutions during quarterly meetings, but discussions about these incentives respond to short-term staffing situations rather than proactively addressing future staffing needs. Including human capital goals and strategies in BOP's human capital plan would create a roadmap so the agency could move from being reactive to its current workforce needs to being strategic in trying to achieve its long-term workforce goals. Additionally BOP has not evaluated the effectiveness of its use of retention incentives in retaining staff. As a result, BOP does not know whether retention incentives have contributed to employees' retention in relation to other incentives used by BOP. Consistent with key principles for strategic human capital planning, planning for and evaluating the use of retention incentives could help BOP better determine if these incentives are an efficient and effective means by which to retain staff.

GAO recommends that BOP (1) include human capital goals and how retention incentives will be used to achieve these goals in its human capital plan; and (2) evaluate the use of retention incentives. BOP concurred with GAO's recommendations.

The Federal Bureau of Prisons (BOP) is the largest employer within the  Department of Justice (DOJ). Its staff are responsible for managing the  care and custody of an inmate population of about 186,000, but BOP has  faced challenges retaining staff at some of its correctional facilities. With a  fiscal year 2017 budget of more than $7 billion—a quarter of DOJ’s  budget—and about 40,000 employees, BOP uses retention incentives,  along with other human capital flexibilities, to help retain its staff.

Over the last decade, we, along with the Office of Personnel Management  (OPM), DOJ, and DOJ’s Office of the Inspector General (OIG), have  reported on the challenges BOP encounters when trying to retain or hire  staff critical to the care of prisoners, such as medical professionals.  These reviews showed, in part, that BOP faced challenges in retaining  employees at federal institutions primarily because the private sector  offered higher pay and more desirable work conditions, which was  especially attractive to BOP personnel who were assigned to remote  locations. These reviews found that, as a result of these challenges,  BOP had agency-wide staffing shortages, including mission-critical skills  gaps that could have a significant impact on BOP’s mission. For example,  as of June 2017, only 82 percent of BOP’s authorized medical positions  were filled.

According to BOP officials and OPM, BOP uses retention incentives to  better attract, hire, and retain top talent to work at remote locations and in  undesirable working conditions and to help address staffing challenges at  some institutions. You asked us to review BOP’s use of retention  incentives. For this report, we provide information regarding (1) how BOP  has used its authority to pay retention incentives; (2) what internal  controls BOP has in place for the use of retention incentives; and (3) the  extent to which BOP plans for and evaluates the use of retention  incentives.

To determine how BOP used its authority to pay retention incentives, we  obtained employee-level retention incentive expenditure data from DOJ’s  Justice Management Division (JMD) for fiscal years 2012 through 2016.  We analyzed data from this period in order to capture the most recent  trends in BOP’s retention incentive expenditures and report on the most  current data available. We aggregated and analyzed the employee-level  data by institution, occupation, and employee grade level. We reviewed  BOP, DOJ, and OPM manuals to identify the system codes used to track  retention incentives expenditures related to specific institutions and BOP  regions and to identify the names for each occupational series code in the  datasets. We also obtained aggregated retention incentive expenditure  data from U.S. Department of Health and Human Services’ (HHS) Public  Health Service (PHS) on the total amount of funds BOP reimbursed  PHS. These funds were used to reimburse for retention incentives  awarded to PHS staff who were assigned to BOP for fiscal years 2012  through 2016. Additionally, we interviewed BOP Human Resource  Management headquarters officials to obtain information on the primary  purposes for BOP’s use of retention incentives and their views on  identified retention incentive expenditures trends. We also interviewed  PHS officials to better understand how BOP and PHS manage costs,  including retention incentive expenditures, for PHS staff assigned to BOP.  To assess the reliability of both BOP employee-level data and PHS  aggregated data, we examined the data and related controls, and we  interviewed relevant BOP and PHS officials. We determined these data  are sufficiently reliable for the purposes of this report.

To describe the internal controls that BOP has in place related to  retention incentives, we reviewed documentation regarding BOP  requirements and guidance for the use of retention incentives. We also  interviewed officials from BOP’s Central Office who are responsible for  the administration, management, and oversight of BOP’s human capital  management systems, including retention incentives. Additionally, we  interviewed the warden and human capital officers at 4 of the 122 BOP  institutions to obtain illustrative examples regarding the internal controls in  place at these institutions for ensuring the proper disbursement of  retention incentives. Specifically, we interviewed BOP officials at Federal  Correctional Complex Pollock in Pollock, LA; Federal Correctional  Complex Butner in Butner, NC; United States Penitentiary Atwater in  Atwater, CA and Federal Correctional Institution Phoenix, in Phoenix, AZ.  These institutions were selected to ensure variation in the number and  types of employees receiving retention incentives, BOP region, and  security-level. Although the information we obtained from the interviews  with officials at these four institutions cannot be generalized to other BOP  institutions, these interviews provided important insights and perspectives  about the use of retention incentives at BOP institutions. We also  reviewed a non-generalizable random sample of 40 retention incentive  application packet case files for fiscal years 2014 through 2016 to provide  examples of the internal control activities that BOP institutions have in  place to monitor the application, approval, and funds disbursement  processes of BOP’s retention incentive program.

To determine the extent to which BOP plans for and evaluates the use of  retention incentives, we interviewed BOP officials regarding their  experiences with retention incentives, how they use retention incentives  to strategically manage their workforce needs, how the agency evaluates  the effectiveness of retention incentives, and how retention incentives  contribute to BOP’s broader human capital goals. We then compared  BOP efforts to our prior work on strategic human capital planning,  specifically in terms of planning for and evaluating the use of human  capital flexibilities. Additionally, we interviewed the warden and human  capital officers at the four BOP institutions mentioned above to obtain  illustrative examples of how workforce planning occurs at these  institutions. We also reviewed the DOJ OIG’s relevant work and our prior  reports to better understand the challenges that BOP faces in retaining  medical professionals and other staff.

We conducted this performance audit from August 2016 through  December 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.

Justice Management Division (JMD)  JMD provides the Federal Bureau of Prisons  senior management with guidance as it  relates to Department of Justice (DOJ) policy  for all matters pertaining to organization,  management, and administration, including  the use of human capital flexibilities such as  retention incentives.

BOP is responsible for incarcerating all federal offenders sentenced to  prison. To carry out its mission, BOP, under the oversight of DOJ’s JMD,  manages the human resource operations of its institutions, including the  use of retention incentives. BOP administers, monitors, and oversees  retention incentives through its Central Office, regional offices, and  institutions.

Central Office. The Central Office serves as BOP’s headquarters and  provides oversight of BOP operations and program areas. Within the  Central Office is BOP’s Human Resource Management Division (HRMD)  which is responsible for developing, implementing and administering  human resource policies and programs, including the use of retention  incentives that meet OPM and DOJ requirements. In addition, the  Central Office’s Program Review Division (PRD) is responsible for  assessing BOP programs, including human resources, to ensure that they  are managed and operated effectively.

Regional offices. BOP has six regional offices that cover the Mid- Atlantic, North Central, Northeast, South Central, Southeast, and Western  regions of the United States. These offices, each led by a regional  director, oversee the operations of the 122 federal institutions within their  respective geographic regions of the country. According to BOP officials,  regional office staff also provide local level oversight of institutions’  human capital programs, such as retention incentives, among other  things.

Institutions. BOP institutions are managed by a warden and other  officials, including an executive assistant and associate warden who  generally provide overall direction and, in part, administer the institution’s  human capital policies, including policies on retention incentives.  Correctional services staff represent the largest segment of each  institution’s workforce and are responsible for the correctional treatment,  custody, and supervision of inmates. Non-correctional services staff  include, among others, those employees assigned to non-correctional  services management, facility operations, and the health services unit.  Workers in health services and psychology services are responsible for  providing inmates with medical, dental, and mental health services and  include, for example, dentists, pharmacists, physicians, nurses,  psychologists, and drug treatment specialists.

Federal Laws and Regulations Related to Retention Incentives

The Federal Employees Pay Comparability Act of 1990 first authorized  OPM to allow federal agencies to give incentives, including retention  incentives, to employees. The Federal Workforce Flexibility Act of 2004  provided federal agencies increased flexibilities regarding these  incentives. For example, individual retention incentives that were  capped at 25 percent of an employee’s basic pay rate could be increased  up to 50 percent in cases of critical agency need with OPM’s approval.  Generally, under OPM regulations, an agency is authorized to pay a  retention incentive to employees. This happens when the agency  determines that the unusually high or unique qualifications of the  employee or a special need of the agency for the employee’s services  makes it essential to retain the employee and that the employee would be  likely to leave federal service in the absence of an incentive. In addition,  OPM requires agencies to develop plans for using retention incentives  outlining, in part, the required documentation for justifying the retention  incentive and any criteria for determining the amount of incentive and the  length of the service period. Generally, agencies must require that  employees sign a written service agreement that outlines the terms of the  service such as the employee’s agreement to remain a certain length of  time with the agency. Additionally, according to OPM regulations, to  qualify for a retention incentive, each employee must have a performance  rating of at least “fully successful” or an agency’s equivalent performance  rating.

BOP funds the majority of its retention incentives through its Salaries and  Expenses appropriation account which represented almost 93 percent of  BOP’s budget in FY 2016. According to BOP officials, BOP’s Central  Office allocates funding from the Salaries and Expenses account to the  regional offices. These regional offices then determine how to allocate  their budget among various salary and expense activities, including  retention incentives. HRMD delegates retention incentive determinations  to each institution. In accordance with OPM requirements and BOP’s  October 2016 Program Statement on Compensation, the wardens make  retention incentive requests based on documented evidence that the  employee possesses unusually high or unique qualifications or meets a  special need of the agency and has a performance rating of at least  “successful or its equivalent.” These incentives are calculated as a  percentage of the employee’s basic pay and are disbursed in installments  to the employee each pay period.

Other Compensation- Based Human Capital Flexibilities

In addition to retention incentives, BOP has authority to provide other  compensation-based human capital flexibilities to employees, in certain  circumstances. The following summarizes some of the compensation- based human capital flexibilities that BOP uses in addition to retention  incentives, to retain and recruit staff:

Recruitment and relocation incentives. BOP pays recruitment  incentives to new hires and relocation incentives to current employees  who elect to move to a different geographic area, when a position is  likely to be difficult to fill in the absence of an incentive.

Student loan repayments. Using this authority, BOP may repay  federally-insured student loans to attract job candidates or retain  current employees.

Special salary rates. With OPM approval, BOP may establish higher  rates of pay for an occupation or group of occupations nationwide or  in a local area when it finds the government’s recruitment or retention  efforts are, or would likely become, significantly handicapped without  those higher rates.

Physicians and dental comparability allowances. Comparability  allowances may be paid to certain eligible physicians or dental  professionals who enter into service agreements. These allowances  are paid only to categories of physicians and dentists for which the  agency is experiencing recruitment and retention problems and are  fixed at the minimum amounts necessary to deal with such problems.

BOP Increased Its Use of Retention Incentives and Used Them Primarily to Retain Staff in California and for Medical Professionals Nationwide

BOP’s Total Retention Incentive Expenditures and the Number of Employees Receiving Retention Incentives Generally Increased from Fiscal Year 2012 through Fiscal Year 2016

BOP retention incentive expenditures generally increased from $10.7  million in fiscal year 2012 to $14.0 million in fiscal year 2016.  Additionally, as illustrated in table 1, the number of employees who  received retention incentives increased each year from 2,024 employees  in fiscal year 2012 to 2,460 employees in fiscal year 2016.

In general, BOP employees who received retention incentives received  the incentive for more than one year. For example, from fiscal year 2012  through fiscal year 2016, a total of 3,382 BOP employees received  retention incentive payments. Of those, 82 percent (2,766 of 3,382)  received retention incentive payments for at least 2 years and 39 percent  received retention incentives all 5 years, as shown in figure 1.

BOP Used Retention Incentives Primarily at Four California Institutions and for Medical Professionals Nationwide

From fiscal years 2012 through 2016, BOP spent more than 97 percent of  its total retention incentive expenditures on employees at four California  institutions and for medical professionals nationwide. BOP’s total  retention incentive expenditures for the four California institutions and  medical professionals nationwide in fiscal year 2016 are provided in figure  2.

Four California Institutions. The California institutions—United States  Penitentiary (USP) Atwater, Federal Correctional Institution (FCI)  Herlong, FCI Mendota, and Federal Correctional Complex (FCC)  Victorville—constituted the largest portion of BOP’s total retention  incentive expenditures, and the level of their expenditures remained  relatively steady from fiscal year 2012 through 2016. BOP provides group  retention incentives for staff at the General Schedule (GS) grades level  12 and below and those in the Federal Wage System at three  institutions—USP Atwater, FCI Herlong, and FCC Victorville. BOP also  provides individual retention incentives to its employees at GS grades  level 12 and below and in the Federal Wage System at FCI Mendota. As  shown in figure 3, our analysis of BOP data found that from fiscal years  2012 through 2016, these four California institutions had the largest  percentage of retention incentive expenditures across institutions as well  as the largest percentage of employees who received retention  incentives.

Additionally, the four California institutions’ retention incentive  expenditures remained relatively steady—around $8.1 to $8.2 million  during the 5-year period—even though the overall number of employees  who received the incentives generally increased. BOP officials told us that  these California institutions’ retention incentive expenditures remained  relatively steady in spite of an overall increase in the number of  employees receiving incentives, in part, because in fiscal year 2013 BOP  reduced the retention incentive rate—the percentage of an employee’s  basic pay that determines the employee’s retention incentive— by 3  percent at the four California institutions.

BOP officials reported using retention incentives primarily at these four  institutions to supplement correctional officers’ salaries and compensate  for the gap between BOP’s and other institutions’ salaries. Specifically,  officials told us that these four California institutions were consistently  understaffed as a result of their lower salaries in comparison to salaries  offered at California state and local prisons and at other BOP institutions  in California metropolitan areas. The Department of Labor’s Bureau of  Labor Statistics reports that the average salary for correctional officers in  California in 2016 was $70,020. For the same year, the annual average  salary for BOP correctional officers at these four institutions was $50,859.  To bring these four California institutions’ salaries in line with those  offered by state, local, and other BOP institutions in California  metropolitan areas, BOP officials told us that they first use recruitment  incentives to attract and hire staff and then provide retention incentives to  employees with a performance rating of at least “successful.”

Medical Professionals. From fiscal years 2012 through 2016, BOP  retention incentive expenditures for medical professionals increased by  an average of approximately 21 percent per year. Our analysis showed  that most recently—for fiscal years 2015 and 2016—BOP retention  incentive expenditures for medical professionals accounted for the largest  portion of BOP’s total retention incentive expenditures across the various  occupation groups and was primarily responsible for the overall increase  in BOP’s total retention incentive expenditures from fiscal year 2012  through fiscal year 2016. For example, in fiscal year 2016, BOP spent  approximately 42 percent of total retention incentives expenditures for  medical professionals ($5.8 million), 27 percent on correctional officers  ($3.8 million), and the remaining 31 percent on employees in other  occupations. In total, BOP retention incentive expenditures for medical  professionals increased from approximately $2.7 million in fiscal year  2012 to $5.8 million in fiscal year 2016, as shown in figure 4. The  increase accounted for 92 percent of BOP’s total increase in retention  incentive expenditures during the five-year period. In comparison, BOP’s  retention incentive expenditures for correctional officers and all other  occupations remained relatively steady from fiscal year 2012 through  fiscal year 2016, increasing by an average of approximately 1 percent per  year.

According to our analysis, the increase in retention incentive expenditures  for medical professionals during the five years is partially explained by the  increase in the number of institutions providing retention incentives to  medical professionals. Specifically, from fiscal years 2012 through 2016,  the number of institutions providing retention incentives to medical  professionals increased from 53 institutions with 341 employees in  medical occupations receiving retention incentives to 84 institutions  providing retention incentives to a total of 646 employees in medical  occupations.

According to BOP officials, BOP primarily uses retention incentives for  medical professionals in an effort to retain these employees by  supplementing BOP salaries which are generally lower than salaries  offered to medical professionals in the private sector. Officials told us that  BOP has designated medical professional positions as hard-to-fill and,  therefore, BOP retaining these professionals in a correctional setting  requires the use of a variety of incentives, including retention incentives,  in order to increase pay.

BOP Has a Variety of Internal Controls in Place throughout the Retention Incentive Process

BOP’s Internal Controls Are Intended to Ensure That Retention Incentive Applications and Approvals Meet Requirements

BOP has a number of internal controls in place to ensure that retention  incentive applications meet BOP and other requirements. BOP officials  told us that these controls are part of a multilayered application and  review process that begins at the institution and culminates at BOP’s  Central Office. Our review of a random sample of 40 application packet  case files for retention incentives awarded from fiscal year 2014 through  fiscal year 2016 found that they all generally incorporated the internal  controls described by officials. The key controls in this process include:  Application review at the institution and regional levels.  According to BOP officials, the retention incentive application  process begins with an institution’s human resources office,  whose staff complete a retention incentive application on behalf of  an employee. The institution’s human resources office verifies that  the information in the application justifies a retention incentive and  that funds are available to pay the incentive. Although it is not  required, BOP officials said that they use a retention incentive  application checklist to help institutions ensure that retention  incentive applications are complete. The institution’s human  resources office then submits the completed application packet,  which includes supporting documentation, to the warden for  review. Next, the application packet is forwarded to the respective  BOP regional director who also reviews it for accuracy and  completeness. The regional director then adds an approval  statement and forwards the packet to the Central Office for final  review and approval. Of the 40 randomly selected application  packet case files that we reviewed, 36 included a retention  incentive checklist used by the institutions and all contained  information to justify the retention incentive as well as a statement  of the regional director’s approval.

Central Office’s final application approval. BOP policy requires  that all retention incentive applications undergo two levels of  review in BOP’s Central Office: first by the Human Resource  Management Division’s (HRMD) Staffing and Employee Relations  Section (SERS) and next by HRMD’s Personnel Director, for final  review and approval. According to BOP officials, during the review  process there is ongoing communication between the various  entities to ensure that applications are complete and accurate; for  example, if SERS finds an error in the application or requests  additional information, SERS returns the application to the  regional or institutional level for correction and re-review. All of the  40 BOP application packet case files that we reviewed included  approvals by HRMD’s Personnel Director or an authorized official,  as required by BOP policy.

Annual review and re-certification to continue retention  incentives. According to BOP policy, on an annual basis,  institutions’ human resources offices are required to review  employees’ retention incentives to determine whether the  incentive is still warranted. Payment of a retention incentive may  be recertified and continued as long as the conditions giving rise  to the original determination to pay the incentive still exist and  funds are available. For each retention incentive, an institution’s  human resources office must determine whether to continue,  adjust, or terminate the incentive within one year of the initial or  most recent approval. If the human resources office decides to  continue the retention incentive, the institution’s warden must  again submit a retention incentive application. Applications to  continue the retention incentive proceed through the same review  and approval process as initial applications. Of the 40 application  files that we reviewed, 29 were continuations and 8 were initial  requests for a retention incentive.

BOP Institutions Use Internal Controls to Help Monitor the Expiration, Continuation, or Termination of Retention Incentives

According to BOP officials, after the initial approval of a retention  incentive, an institution’s human resources office has primary  responsibility for the monitoring of retention incentive payments.  According to officials, institutions use a variety of internal controls to  monitor the expiration, continuation, or termination of retention incentives,  for example:  Monitoring expiration dates. BOP officials stated that  institutions’ human resources offices monitor retention incentives  in order to identify incentives that are approaching their expiration  date and need to be terminated or renewed. For example,  according to BOP officials from USP Atwater, FCC Butner and FCI  Phoenix, staff from their institutions’ human resources offices may  generate a retention incentive activity report and cross reference  this report with their locally generated tracking sheets. This  process helps identify retention incentives approaching their  expiration dates so that the human resources offices can submit a  request for continuation before the incentive expires.

Using automated reminders to prompt file review. BOP  officials stated that institutions use automated reminders to alert  human resources staff to check the records of retention incentive  recipients for human resources-related events such as promotions  or relocations that could affect the continuation of a retention  incentive.

Following a checklist of steps for relocation processes. BOP  officials told us that in April 2016 they instituted a checklist that  outlines steps that an institution’s human resources staff must  take when employees relocate to a different institution. Based on  our review of this checklist, one step on the sheet prompts human  resources staff to review the employee’s retention incentive.  According to BOP policy, when an employee receiving a retention  incentive transfers to another location, the human resources office  where the employee was receiving the retention incentive is  responsible for submitting a request to terminate the incentive.  The termination must be effective the last day of the pay period  that the employee occupies the position.

Submitting forgiveness waivers. BOP officials told us that  institutions submit forgiveness waivers if a request to continue a  retention incentive is not submitted and approved prior to the  retention incentive expiring. BOP officials said that a forgiveness  waiver is considered an acknowledgement of an administrative  error and is a late submission of a retention incentive renewal that  was still warranted. The waiver is not a request to forgive an  overpayment since the employee was still considered to be  eligible for the retention incentive. Of the 40 retention incentive  applications that we reviewed, 5 applications included forgiveness  waivers to excuse the tardiness of the filing and request  continuations of the retention incentive.

BOP and DOJ Conduct Periodic Reviews of Retention Incentive Controls

According to BOP officials, BOP conducts periodic audits and reviews of  its human capital activities and related internal controls, to ensure that  retention incentives are being used appropriately. The following offices  conduct various audits and reviews involving BOP’s retention incentives:  BOP’s Program Review Division (PRD) audits regional and  institutional human resources functions. PRD audits BOP’s  regional and institutional human resources offices to ensure that  they are in compliance with BOP policies and procedures.  According to BOP officials, as part of the audit process, PRD  audits retention incentives to ensure that they have the proper  approvals and are justified. PRD audits each institution’s human  resources office at least every three years. During these audits,  PRD generates retention incentive activity reports (the same  reports that institutions run when monitoring for expiration dates),  to check the accuracy of retention incentive programs under  review. Following each audit, PRD issues a final report with  findings to the institution and to the staff operating the program  area under audit. Institutions respond to the report with corrective  actions that the institution will take to address the findings. When  the institution has resolved all corrective actions from the audit,  the audit is closed. Additionally, each quarter, PRD provides  HRMD with a report that summarizes its quarterly audit findings.  According to BOP officials, HRMD uses these reports to identify  any agency-wide trends that need to be addressed.

Our review of BOP data showed that between fiscal years 2012  and 2016, PRD conducted nearly 200 audits. For example, in the  fourth quarter of fiscal year 2016, PRD audited five institutions’  and regional offices’ human resource management functions.  During these audits, PRD identified nine deficiencies, one of which  pertained to retention incentives. Specifically, it found that one  audited institution did not terminate an employee’s retention  incentive after the employee had relocated to another institution.  To correct the deficiency, the institution cancelled the retention  incentive which discontinued future disbursements. According to  BOP officials, a bill was generated to recoup the overpayment  from the employee.

BOP institutions conduct annual operation reviews of internal  functions, such as human resources. BOP officials told us that  each institution conducts annual operational reviews of various  internal functions, such as human resources. According to BOP’s  Program Review Guidelines for Human Resource Servicing  Offices, during these reviews, institutions are required to review  supporting documentation for staff currently receiving an incentive  to determine if the incentives are still warranted. If the initial  request for the retention incentive was made over the preceding  12 months, institutions are also required to ensure that it was  approved. According to BOP officials, the results of these reviews  are reported to PRD through the Central Office.

DOJ’s Justice Management Division (JMD) audits BOP’s  human resources programs. According to BOP officials, JMD  conducts audits of component-level human resources programs to  determine whether BOP’s systems are compliant with DOJ policy  and aligned with DOJ’s Human Capital Strategic Plan. JMD’s most  recent audit of BOP’s human resources programs that included a  review of BOP’s retention incentives occurred in September 2010  at BOP’s Human Resource Service Center in Grand Prairie,  Texas. JMD found that in some cases BOP granted retention  incentives prior to the signing of service agreements. JMD also  found that BOP lacked documentation to authorize a group  retention incentive for employees at its Victorville, California  institution. BOP’s written response to the findings stated that JMD  incorrectly applied the service agreement requirement, as service  agreements were not warranted in the specific case that it  identified. Additionally, BOP stated that the documents JMD  identified as missing from the case files in question were kept in  separate files and not required to be part of the retention incentive  application. JMD agreed with BOP’s responses and in January  2013, JMD closed out the audit’s findings noting that these  responses satisfied all required corrective actions.

BOP Conducts Limited Planning and Evaluation of the Effectiveness of Retention Incentives

BOP’s Planning for the Use of Retention Incentives is Limited

While BOP takes a number of steps to determine current workforce needs  and how to fill those needs, BOP does not strategically plan for how  retention incentives can be used to meet long-term human capital goals.  BOP officials stated that planning for human capital needs is conducted at  institutions during quarterly workforce utilization meetings or manpower  salary meetings. During these meetings, executive staff at the institution  discuss the current state of the institution’s workforce. According to the  BOP officials, while considering attrition, hiring, and turnover rates, the  executive staff decide strategies they will employ to attract and retain  employees for their current needs.

While officials we spoke with at four institutions have discussed retention  incentives at their workforce utilization meetings, details about the content  of these discussions ranged. According to these officials and our review  of meeting minutes from the four institutions, discussions about retention  incentives respond to each institution’s short-term staffing situation rather  than address future staffing needs based on an overall strategic human  capital plan. For example:

USP Atwater officials told us that they review the current turnover  rate, budget, projected vacancies, and use of retention incentives at  annual budget development meetings. Meeting minutes reflected the  following on retention incentives: “retention …  still  necessary to retain staff and hard-to-fill positions.”

FCC Butner is a medical facility that offers retention incentives to all  medical officers (all types of doctors) and nurses (practitioners,  registered, etc.) at the institution. According to Butner officials, during  workforce utilization meetings, Butner officials discuss recruitment and  staffing trends for the institution and plans for how to address any  staffing challenges. Meeting minutes we reviewed did not indicate  specific discussions about the use of retention incentives.

FCC Pollock executive staff discuss current institutional salary  expenditures and projections and the status of vacant positions at  workforce utilization meetings. While meeting minutes we reviewed  indicated discussions about projected expenditures for incentive  awards, the minutes did not differentiate between retention incentive  awards, and other incentive awards such as recruitment or relocation  incentive awards.

FCI Phoenix officials stated that in their workforce utilization  meetings, executive staff discuss salary projections and vacancy  statuses. Meeting minutes we reviewed did not indicate specific  discussions about the use of retention incentives.

BOP decisions about retention incentives are currently not tied to any  strategic human capital plan for how to use human capital flexibilities— such as retention incentives—to address their ongoing challenge of  retaining staff in hard-to-fill positions. According to officials, retention  incentives are awarded on an as-needed basis, determined by an  institution’s warden, if funds are available.

According to key principles for effective strategic human capital planning,  such planning is an important component of an agency’s effort to develop  long-term strategies for acquiring, developing, and retaining staff needed  for an agency to achieve its goals. Specifically, senior leaders should be  involved in developing, communicating, and implementing strategic  human capital plans. Within an agency’s strategic human capital plan, the  human capital policies, practices, and programs—for example, an  agency’s retention incentive program—should clearly link to the human  capital and program goals of the organization. By not having a strategic  human capital plan that clearly establishes strategies that will be used to  achieve specific human capital goals, BOP cannot ensure that its  institutions are strategically managing their workforces in a manner that  meets the agency’s human capital needs.

In August 2017, BOP officials told us that they began drafting a strategic  human capital operating plan that will include strategic objectives, action  plans, performance objectives and measures, and evaluation/reporting  requirements. Officials stated that the plan will also include planning  regarding the use of human capital flexibilities, such as retention  incentives. BOP officials told us that they anticipate that the strategic  human capital operating plan will be a supplement to their workforce  utilization meetings and that an agency-wide plan will provide a set of  strategies for all institutions to consider. However, BOP could not provide  documentation of the project beginning or whether it would include a  strategic approach specific to retention incentives. Including retention  incentives in BOP’s strategic human capital operating plan would create a  roadmap for the agency and the institutions to use to move from being  reactive in their current workforce needs—for example, awarding  retention incentives on an ad hoc basis when funds are available—to  being strategic in how retention incentives are used and to ensure that  these and other flexibilities help the agency achieve its long-term  workforce goals.

BOP Does Not Evaluate the Effectiveness of Retention Incentives

From fiscal year 2012 through fiscal year 2016, BOP spent more than $59  million on retention incentives but has not established any measures to  evaluate their effectiveness. According to officials, BOP has not evaluated  the effectiveness of its use of retention incentives because BOP officials  consider a retention incentive successful if an employee does not leave  the agency. However, BOP also uses other human capital flexibilities  along with retention incentives to help retain staff. For example, BOP  uses physician and dental comparability allowances—additional pay to a  physician or dentist who enters into an agreement for a specified period  of service—to help retain these medical personnel. According to officials,  it would otherwise be difficult to compete with private sector salaries  without the use of all available incentives. However, BOP has not studied  whether or how retention incentives have contributed to employees’  retention in relation to other incentives such as physician and dental  comparability allowances.

According to our work on strategic human capital management and  OPM’s guidance, it is crucial for organizations to evaluate the success of  their human capital strategies, such as the use of retention incentives.  In measuring the performance of these strategies and their contribution to  key programmatic results, agencies can make adjustments, if  necessary. For example, agencies can use evaluation results to make  targeted investments in certain human capital strategies—such as the  use of retention incentives—creating a cycle of strategic workforce  management, where evaluation informs planning, planning dictates  strategies, and strategies are evaluated for effectiveness. While BOP  uses retention incentives to address critical skills gaps—such as with  medical professionals—evaluating the effectiveness of retention  incentives would help BOP determine whether and how retention  incentives, as well as other human capital flexibilities, contribute to an  employee’s continued employment at BOP or if adjustments to BOP  retention strategies must be made for improved results.

BOP officials agreed that evaluating the effectiveness of retention  incentives would help them be more strategic about their human capital  needs and spending on incentives. By including and implementing such  an evaluation in its upcoming strategic human capital operating plan,  BOP could better determine if it is making maximum use of its funds to  retain the necessary qualified personnel or if changes must be made to  most effectively retain its staff.

As the largest employer within DOJ with some staff working in remote  locations and undesirable conditions, BOP relies on a number of available  flexibilities, including retention incentives, to help retain its employees.  However, BOP currently lacks a strategic approach for using and  evaluating retention incentives to address human capital goals. Given  BOP’s ongoing staffing challenges, for example, retaining staff in hard-to- fill medical positions, developing a plan that includes a thoughtful  blueprint for using retention incentives could help BOP better anticipate  and address staffing needs. Moreover, evaluating its use of retention  incentives could help BOP determine whether these incentives are  effective or whether adjustments are needed to better retain its  employees. By using evaluation results to inform planning, and planning  to inform how retention incentives are used, BOP would be better  positioned to achieve its long-term human capital goals and address its  critical staffing needs.

We are making two recommendations to BOP:  1.  The Director of BOP should include in the forthcoming strategic  human capital operating plan, 1) human capital goals and 2)  strategies on how human capital flexibilities—including retention  incentives—will be used to meet these goals. (Recommendation 1)  2.  The Director of BOP should evaluate the effectiveness of BOP’s use  of retention incentives to help determine whether the incentives have  helped BOP achieve its human capital goals or if adjustments in  retention incentives are needed. (Recommendation 2)

We requested comments on a draft of this report from DOJ. In an email  received November 15, 2017, the DOJ liaison stated that DOJ concurred  with our recommendations. The Department did not provide official written  comments to include in our report, but did provide written technical  comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the Attorney  General and the Director of BOP. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-9627 or maurerd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in Appendix III.

This report examines (1) how BOP has used its authority to pay retention  incentives; (2) what internal controls are in place for the use of retention  incentives; and (3) the extent to which BOP plans for and evaluates the  use of retention incentives.

To determine how BOP has used its authority to pay retention incentives,  we reviewed BOP’s July 2012 report on its use of recruitment, relocation,  and retention (3R) incentives. We then obtained underlying retention  incentive expenditure data from DOJ’s Justice Management Division  because it serves as the focal point for performance and financial  information for all Department of Justice components and employees,  including BOP. In particular, we obtained employee-level retention  incentive payroll data for fiscal years 2012 through 2016. We selected this  time period because it includes the most recent five complete fiscal years  for which data were available and because we believe five years is  sufficient time to identify trends in BOP’s retention incentive expenditures.  We analyzed and aggregated the employee-level data by institution,  occupation, and employee grade level. To identify trends, we compared  per fiscal year expenditures across the various categories of occupations  and locations across the five years. Additionally, we categorized  institutions by BOP region, institutions that use group retention incentives,  and institutions that use individual retention incentives. We also  categorized occupations as medical professionals, correctional officers,  and all other occupations and compared aggregate retention incentive  expenditures for the different groups. Using information from BOP’s  website and testimonial evidence from BOP officials on its health care  system, for the purposes of this report, we defined medical professionals  as BOP employees in occupations that provide medical, dental, and  mental health care services and who do not solely provide these services  in an administrative function. For the purposes of our analyses, medical  professionals are dentists, dental assistants and hygienists, diagnostic  radiological technologists, health aid and technicians, medical doctors  (including psychiatrists), medical technologists, nurses, pharmacists,  pharmacy technicians, physician assistants, and practical nurses and  psychologists. To assess the employee-level retention incentive payroll  data’s reliability, we obtained and analyzed documentation on systems’  capabilities and data control, interviewed data users and managers  responsible for maintaining data, conducted checks for completeness and  logical consistency, and compared the employee-level data to aggregated  institution-level retention incentive expenditure data from BOP’s Financial  Management Information System. We found the employee-level data to  be sufficiently reliable for the purpose of this report.

Additionally for this objective, we reviewed documents such as the DOJ’s  Financial Management Information System Sub-Object Classification  Code Guide and the Office of Personnel Management (OPM) Handbook  of Occupational Groups and Families to respectively identify the system  codes used to track retention incentives expenditures and to identify the  names for each occupational series code in the datasets. We also  interviewed BOP Human Resource Management headquarters officials to  obtain information on the primary purposes for BOP’s use of retention  incentives and their views on identified retention incentive expenditures  trends. We also interviewed U.S. Department of Health and Human  Services’ (HHS) Public Health Service (PHS) officials to better  understand how BOP and PHS manage costs, including retention  incentive expenditures, for PHS staff assigned to BOP. BOP partners with  PHS to acquire medical staff to provide medical care for BOP’s inmate  population. BOP reimburses PHS for the costs of compensation and  benefits—including retention incentive payments, if applicable—for PHS  staff assigned to BOP. PHS has final approval authority for retention  incentives paid to PHS staff assigned to BOP facilities. Furthermore, we  obtained aggregated retention incentive expenditure data from PHS on  the total amount of funds BOP reimbursed PHS for fiscal years 2012  through 2016. For the reliability of PHS’s data, we reviewed the system’s  data fields to check that the appropriate fields were used to provide data  and interviewed data users and managers to discuss how expenditures  are recorded and maintained. We found the PHS data to be sufficiently  reliable for the purpose of this report.

To identify and describe the internal controls that BOP has in place  related to retention incentives, we obtained and analyzed documentation  regarding BOP requirements and guidance for the use of retention  incentives. We also interviewed officials from BOP’s Central Office who  are responsible for the administration, management, and oversight of  BOP’s human capital management systems, including retention  incentives. We focused on the management and administrative controls  used by BOP to review, approve, re-certify, and monitor retention  incentives. Additionally, we interviewed the warden and human capital  officers at 4 of the 122 institutions to obtain illustrative examples  regarding the internal controls in place at these institutions to ensure the  proper disbursement of retention incentives. We interviewed BOP officials  at Federal Correctional Complex Pollock in Pollock, LA; Federal  Correctional Complex Butner in Butner, NC; United States Penitentiary,  Atwater in Atwater, CA and Federal Correctional Institution Phoenix, in  Phoenix, AZ. These institutions were selected to ensure variation in the  number and types of employees receiving retention incentives, BOP  region, and security-level. Although the information we obtained from the  interviews with officials at these four institutions cannot be generalized to  other BOP institutions, these interviews provided important insights and  perspectives about the use of retention incentives at BOP institutions. We  also reviewed a non-generalizable random sample of 40 retention  incentive application packet case files to determine the extent to which  these files contained documentation on the internal control activities in  place to monitor the application, approval, and funds disbursement  processes of BOP’s retention incentive program. To identify our sample,  we used employee-level expenditure data to randomly select 40  application files from the universe of BOP employees who received  retention incentives from fiscal years 2014 through 2016. Each  application file was reviewed by two GAO analysts who each assessed  the extent to which each application contained the appropriate  justification, approval signatures, and other documentation such as an  application checklist and whether the application was an initial or  continuation application.

To determine the extent to which BOP plans for and evaluates the use of  retention incentives, we interviewed BOP officials regarding their  experiences with retention incentives, how they use retention incentives  to strategically manage their workforce needs, how the agency evaluates  the effectiveness of retention incentives, and how retention incentives  contribute to BOP’s broader human capital goals. We then compared  these efforts to our work on strategic human capital planning, specifically  in terms of planning for and evaluating the use of human capital  flexibilities. Additionally, we interviewed the warden and human capital  officers at four BOP institutions mentioned above to obtain illustrative  examples of how workforce planning occurs at these institutions. We also  reviewed the DOJ’s Office of Inspector General Report 16-02 “Review of  the Federal Bureau of Prisons’ Medical Staffing Challenges” (March  2016) and our past work to better understand the challenges that BOP  faces in retaining medical professionals and other staff.

Appendix II: Bureau of Prisons’ Use of Retention Incentives by Occupations in Fiscal Year 2016

Table 2 provides the Bureau of Prisons’ (BOP) fiscal year 2016 retention  incentive expenditures by various occupations and groups of occupations,  such as medical professionals, correctional officers, and other  occupations. A range of occupations are reflected in the table primarily as  a result of four California institutions—United States Penitentiary (USP)  Atwater, Federal Correctional Institution (FCI) Herlong, FCI Mendota, and  Federal Correctional Complex Victorville—providing retention incentives  to all employees at General Schedule grades level 12 and below and  those in the Federal Wage System.

In addition to the contact named above, Dawn Locke (Assistant Director)  and Meghan Squires (Analyst-in-Charge) managed the work. Also, David  Alexander, Renee Caputo, Willie Commons III, Jamarla Edwards, Robert  Goldenkoff, Chelsa Gurkin, Eric Hauswirth, Janice Latimer, Lerone Reid,  Rachel Stoiko, and Adam Vogt made significant contributions to this  report.