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Big problems in $2 billion OPM fund but IG can't touch it

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More than $2 billion sits in the U.S. Office of Personnel Management's little-known Revolving Fund, which grew 615 percent in just five years between 2005 and 2010, but the agency's Inspector-General can't audit it.

In fact, OPM's Revolving Fund hasn't been audited in more than a decade!

The fund, which provides services to every federal agency, competes with private sector businesses to provide services such as background checks, but the lack of oversight leaves lawmakers questioning what the OPM program actually accomplishes.

Its $2 billion budget makes it OPM's most expensive program, but Patrick McFarland, the agency's IG, is barred from using any of the fund's resources to audit its operations or expenditures.

Further complicating his job is the fact that $21 million that technically appears under his budget actually is money paid by OPM's civil service retirement and healthcare divisions to cover the IG's oversight of those programs. That leaves only $3 million for all other IG oversight work in OPM.

Earlier this week, McFarland, Charles D. Grimes, OPM's CEO, and Linda Brooks Rix, co-COO at Avue Technolgoies Corporation and a former OPM employee, answered questions from members of a subcommittee of the House Oversight and Government Reform Committee.

In 2006, McFarland said officials on his staff realized the fund "lacked adequate transparency and required additional oversight - oversight our budget could not support."

Even so, his office has identified big problems with the fund, and McFarland wants amendments to the law so that the program can be brought "into the light with full transparency."

Brooks Rix, whose company often competes with the OPM fund, criticized it as wasteful. She also argued that OPM officials promote inefficiencies in order to continue providing their agency's services.

Brooks Rix described OPM as both a "regulator and for-profit business," and when it acts as the latter, she said it is the "systemic reason the federal government HR costs are skyrocketing."

Grimes agreed that greater oversight of the fund is needed.

Rep. Stephen Lynch, D-MA, questioned why OPM charges approximately $1,500 more for "investigative services" than do private sector businesses.

The cost of employee background checks has increased by almost 79 percent to $1.1 billion in 2011, according to Brooks Rix.

Brooks Rix also criticized OPM officials for using sole-source agreements to provide its services, something she said the personnel agency is not allowed to do under federal procurement law.

Grimes said without having a larger budget, OPM would be unable to lower the price it charges for its services.

Rep. Eleanor Holmes Norton, D-DC, questioned OPM's costs and asked why those costs are higher than those in the private sector.

Holmes Norton said a GAO report suggested that OPM has no cost-control measures in place.

McFarland's testimony can be read here. Grimes' testimony can be read here. Brooks Rix's testimony can be read here.

Kelly Cohen is a data researcher/reporter for The Washington Examiner Watchdog investigative reporting team. She can be reached at kcohen@washingtonexaminer.com.

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