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CFPB Report: 2015-MO-C-013 August 26, 2015

The CFPB Can Further Enhance Internal Controls for Certain Hiring Processes

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Our objective was to assess the efficiency and effectiveness of certain hiring processes of the Consumer Financial Protection Bureau (CFPB), as well as the agency's compliance with CFPB recruitment and selection policies and procedures and certain laws and regulations. To achieve our objective, we reviewed specific CFPB recruitment and selection processes and tested select internal controls related to (1) filling competitive service and excepted service positions, (2) approving recruitment incentives, and (3) executing noncompetitive promotions and reassignments. For the purposes of our internal controls testing, we selected a sample of CFPB hiring activities within these processes that occurred from July 2012 through February 2013. We also evaluated the CFPB's recruitment and selection policies and procedures, including the CFPB's method for measuring the timeliness of its hiring process, and the agency's implementation of select internal controls through December 2014.

The CFPB obtains agreed-upon human capital–related support services from the U.S. Department of the Treasury's Bureau of the Fiscal Service (BFS), Administrative Resource Center (ARC). These services include, among other things, evaluating particular applicants' technical and core competencies to determine which applicants are best qualified for an open position. Evaluating BFS ARC's services was beyond the scope of our review. For additional information regarding our scope and methodology, see appendix A.

Other Reviews of the CFPB's Hiring Processes Related to the Objective for This Evaluation

During the course of our evaluation, multiple external organizations were also reviewing the CFPB's hiring processes. For example, on initiating our evaluation, we learned that the U.S. Office of Personnel Management (OPM) planned to assess the CFPB's delegated examining activities1 for hiring individuals into competitive service positions that occurred from April 1, 2011, through September 30, 2012, as part of its evaluation of BFS ARC's client agencies. As a result, we designed our evaluation to minimize any duplication of efforts.

During our review period, OPM was also in contact with the CFPB regarding its implementation of a human capital accountability system (HCAS), which OPM reviews, approves, and uses to inform its efforts to assess human capital management in the federal government. Title 5, section 250, of the Code of Federal Regulations requires agencies to establish an HCAS to measure and assess human capital management systems for mission alignment; effectiveness; efficiency; and compliance with merit system principles, laws, and regulations. Among other requirements, the HCAS must be formal, documented, and approved by OPM, and it must assess agencies' human resources programs for effectiveness and compliance with merit system principles and related civil service requirements.2 According to a CFPB official, the CFPB postponed the full implementation of its HCAS after consulting with and receiving concurrence from OPM about anticipated revisions to both title 5 of the Code of Federal Regulations and related OPM guidance. The CFPB's Office of Human Capital (OHC) plans to implement its HCAS within 90 days of the issuance of the revisions. Therefore, because the revised OPM guidance has not been issued, and to avoid duplication of effort with OPM, we did not comment on the CFPB's HCAS implementation.

In addition to human capital–related reviews performed by OPM during the course of our review, our office and the U.S. Government Accountability Office (GAO) received separate congressional requests pertaining to various aspects of the CFPB's hiring practices. On March 24, 2014, we received a congressional request to assess the CFPB's activities related to diversity and inclusion. As part of the audit conducted pursuant to that request, we reviewed relevant human resources–related operations, policies, and procedures (e.g., performance management, hiring, and promotions) to determine whether adequate controls were established to prevent and detect bias or discrimination. We issued our report on March 4, 2015.3 In addition, GAO received a congressional request on July 18, 2014, to examine specific CFPB personnel management issues, including any unlawful or irregular practices regarding workforce planning, hiring, compensation, and promotion. At the time we issued this report on the CFPB's hiring processes, GAO had not yet completed its review.


The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established the CFPB as an executive agency, defined in title 5, section 105 of the United States Code, and as a bureau within, yet autonomous from, the Federal Reserve System. The Dodd-Frank Act authorized the Director of the CFPB to hire employees in accordance with the applicable provisions of title 5 of the United States Code, which permits executive agencies to hire employees into competitive service and excepted service positions.4 The CFPB's human capital programs and practices must largely adhere to title 5, sections 2301 and 2302, of the United States Code, which establish merit system principles and prohibited personnel practices, respectively. In addition, title 5, chapter 33, of the United States Code, and the requisite implementing regulations, establish procedures for the examination, selection, and placement of civil service employees in the executive branch.

With the exception of veterans' preference provisions, the Dodd-Frank Act granted the CFPB interim authority to waive the requirements of title 5, chapter 33, of the United States Code, and the requisite implementing regulations.5 This waiver authority provided the CFPB with the flexibility to fill positions as excepted service positions that would otherwise be filled through the competitive service. Nonetheless, the Dodd-Frank Act still required the CFPB to appoint employees on terms and conditions that are consistent with section 11(1) of the Federal Reserve Act, while providing for 

  • fair, credible, and transparent methods of establishing qualification requirements for, recruitment for, and appointments to positions
  • fair and open competition and equitable treatment in the consideration and selection of individuals to positions
  • fair, credible, and transparent methods of assigning, reassigning, detailing, transferring, and promoting employees6

To address the Dodd-Frank Act's provisions pertaining to fair, credible, and transparent hiring methods, the OHC has incorporated merit system principles into its policies and procedures, according to CFPB officials. The Civil Service Reform Act of 1978 states that federal personnel management should be implemented consistently with merit system principles and free from prohibited personnel practices. As codified, the nine merit system principles address topics such as recruitment, hiring, and promotions, and fair and equitable treatment in all aspects of personnel management, among others.7

The CFPB's Office of Human Capital

On January 9, 2012, Bureau Order 08-2012 delegated most of the Director's human capital management authority to the Chief Human Capital Officer, who leads the CFPB's OHC. The OHC is responsible for recruiting and retaining CFPB personnel, employee training and workforce development, performance management, and the development of human capital infrastructure and policies. BFS ARC provides agreed-upon human capital–related support services to the CFPB, such as determining which applicants meet minimum qualifications.

The OHC developed the CFPB Human Capital Strategic Plan FY2013–FY2015 to provide the CFPB with a road map of human capital initiatives and priorities. The CFPB Human Capital Strategic Plan FY2013–FY2015 aligns with an outcome included in the Consumer Financial Protection Bureau Strategic Plan FY2013–FY2017, which is to "attract, engage, and deploy a workforce that meets dynamic challenges and provides effective oversight of the consumer financial marketplace." To achieve this outcome, the CFPB has steadily expanded its workforce in recent years. The CFPB reported that its staff increased from 212 employees at the agency's inception in July 2011 to 1,428 in December 2014.8

The CFPB's Hiring Processes

The CFPB's standard hiring process begins when a hiring manager within a program office contacts the OHC about an identified staffing need. In coordination with the program office hiring manager, and with BFS ARC when applicable, the OHC will determine the appropriate strategies to fill the vacancy and will implement several steps to recruit, evaluate, and select new employees. The OHC's standard operating procedure (SOP), Hiring Process (Recruitment), describes many of the steps to be taken throughout the hiring process, including the following:9

  1. Identify hiring, recruitment, and selection strategies. The OHC confirms that a vacant position is authorized and then works with the hiring manager to determine the appropriate hiring, recruitment, and assessment strategies. These strategies respectively define the appointment authority and type that will be used to fill the position, the applicant pools that should be targeted, and the assessment methods and tools to evaluate applicants' minimum qualifications and technical and core competencies.
  2. Develop a recruitment package. The OHC coordinates with the hiring manager to develop a recruitment package that includes the position description, a job analysis that defines the required competencies, and a statement describing any necessary specialized experience.
  3. Post a vacancy announcement. The OHC develops vacancy announcements for executive positions, and BFS ARC develops vacancy announcements for nonexecutive positions. Vacancy announcements are typically posted on the CFPB's public website and on, the federal government's website for job announcements and employment information.10
  4. Review applications. When the vacancy announcement closes, the applicants' minimum qualifications, technical competencies, and core competencies are evaluated by the OHC for executive positions and by BFS ARC for nonexecutive positions.
  5. Create a certificate of eligibles. Applicants who meet the minimum qualifications and possess the required technical and core competencies are placed in rank order on a certificate of eligibles, from which selections may or may not be made. BFS ARC evaluates applicants' technical and core competencies to determine which applicants are best qualified for the position.11
  6. Conduct interviews and perform reference checks. The hiring manager may evaluate the best-qualified applicants using methods such as interviews and reference checks, as outlined in the established selection strategy.
  7. Select a candidate and extend a job offer. If the hiring manager decides to select an applicant for the position, the OHC works with the hiring manager to determine the appropriate salary to offer, to take the necessary actions to extend a job offer or recruitment incentive (if applicable), and to onboard the employee.

Certain hiring steps within the CFPB's process, such as selecting applicants from a certificate of eligibles, are consistent with the competitive service requirements of title 5, chapter 33, of the United States Code. Under the Dodd-Frank Act, which temporarily waived specific title 5 requirements, the CFPB had the flexibility to fill positions without adhering to the competitive service process while providing for fair, credible, and transparent hiring practices. According to CFPB officials, the OHC's policies and procedures incorporated title 5 requirements to address the Dodd-Frank Act's provisions pertaining to fair, credible, and transparent hiring methods. For example, the CFPB's Excepted Service Non-Executive Positions Under Waiver Authority Policy (Interim) established a hiring process for nonexecutive positions that included some provisions— such as ranking applicants according to relevant competencies—similar to those found in title 5, chapter 33, of the United States Code.

Administration of Recruitment Incentives

The OHC's April 2011 Cash Compensation Program Sign On Bonus policy (incentive policy) describes the CFPB's process for offering a sign-on bonus to an applicant deemed highly qualified for a position that, under market pressures and in the absence of an incentive, would be difficult to fill.12 When the OHC determines that a sign-on bonus is warranted, the policy requires that OHC staff complete a sign-on bonus request form (which includes a checklist of factors to document why the position is difficult to fill and thus necessitates a recruitment incentive) and submit it to designated CFPB officials for review and approval. The incentive policy requires the OHC to document the need and rationale for a sign-on bonus, including the relevant Associate Director's justification for the recruitment incentive. The OHC's incentive policy states,

Sign-on bonuses are designed to assist in recruiting highly qualified, critically necessary employees for positions where there are market pressures that make recruiting difficult or that require special qualification and, in the absence of such bonuses; it would be difficult to attract the candidates needed. Reasons for approval of sign-on bonuses must be in writing and maintained for purposes of review and/or audit.

If the sign-on bonus request is approved, the OHC will complete a sign-on bonus receipt and service agreement that will be included in the applicant's job offer package. The policy establishes a service agreement form that provides details, such as the timing and amounts of each incentive payment, that are consistent with requirements set forth in title 5, section 575.110, of the Code of Federal Regulations.

Promotions and Reassignments

CFPB employees may be promoted or reassigned if they meet certain eligibility requirements. A promotion occurs when an employee moves from his or her current pay grade to a higher pay grade. A reassignment is a move from an employee's current position to a different position without a change in pay grade. Promotions and reassignments can be either competitive or noncompetitive. If a promotion or reassignment is competitive, the position must be advertised as a vacancy announcement, and the hiring process described above is to be followed.

For noncompetitive promotions, including career-ladder promotions,13 the employee must demonstrate the ability to perform the work required at the next-higher level and be recommended for promotion by his or her supervisor. The employee's supervisor must also obtain OHC approval if a promotion or reassignment is noncompetitive. Specifically, for career-ladder promotions, the OHC's procedures, as well as title 5, section 335.104, of the Code of Federal Regulations require that an employee's current performance rating of record be fully successful or higher to receive such a promotion. The CFPB updated its noncompetitive promotions program in coordination with the federal union that represents CFPB employees.14 The revised program, effective June 30, 2014, requires documentation of an employee's performance rating before a noncompetitive promotion can be approved.

Federal Guidance and Standards on Hiring Processes

The OHC is responsible for carrying out its recruitment and selection processes in accordance with certain federal statutes and regulations, as noted above. The OHC uses additional federal guidance and standards related to human capital to inform its processes. Specific guidance and standards that applied to our review of the OHC's hiring processes are detailed below.

Presidential Memorandum and Related OPM Guidance

In May 2010, the Presidential Memorandum—Improving the Federal Recruitment and Hiring Process (Presidential Memorandum) initiated a hiring reform in the federal government focused on improving the quality and speed of agency hiring. Accordingly, covered agencies are expected to set specific targets for measuring success in their efforts to reduce the time it takes to hire employees. OHC officials stated that the CFPB was not in existence at the time the Presidential Memorandum was issued, but they incorporated the principles of the memorandum into their hiring process. A CFPB report to OPM refers to this memorandum, stating that "like all agencies, we strive to fulfill the directives set forth in the President's memorandum."

To support implementation of the Presidential Memorandum, OPM issued guidance in April 2011 that describes how to measure and report time-to-hire information. OPM issued updated requirements to support the Presidential Memorandum in its March 2014 guidance, which requires agencies to (1) report on time-to-hire statistics on an annual basis, (2) measure time-to-hire in calendar days, and (3) set targets for measuring success in their efforts to reduce the time it takes to hire employees.

OPM also developed the End-to-End Hiring Initiative, which encourages agencies to complete the entire hiring process, from identification of a staffing need to onboarding the employee, within 80 calendar days. OPM recognizes that agencies may need to adjust the number of days for each step within the hiring process based on their practices and procedures.

GAO's Standards for Internal Control in the Federal Government

Internal control is an integral component of an organization's management and can provide the CFPB with reasonable assurance that it is achieving its human capital objectives, including those related to employee recruitment and selection. GAO's Standards for Internal Control in the Federal Government provides the overall framework for establishing and maintaining internal control and for identifying and addressing major performance and management challenges and areas at greatest risk of fraud, waste, abuse, and mismanagement. GAO's internal control framework contains several components, including control activities and monitoring. Control activities are policies, procedures, and other mechanisms that help ensure that management's directives are achieved. Monitoring activities assess the quality of performance over time and help agencies identify internal control deficiencies. When effectively implemented, the components of internal control can help ensure that agencies meet their program objectives, such as the CFPB's goals related to recruiting and retaining highly qualified staff.

  • 1. Title 5, section 1104, of the United States Code permits the Director of OPM to delegate authority to the heads of executive agencies to examine the qualifications of applicants for admission to the competitive service. Title 5, section 2102, of the United States Code describes the competitive service as civil service positions within the executive branch. Excepted service positions are those within the executive branch that are specifically excepted from the competitive service by statute, the President, or OPM. 5 U.S.C. § 213.101.  Return to text
  • 2. 5 C.F.R. § 250.203. In addition, agencies are required to submit a Human Capital Accountability Report to OPM for review and approval on an annual basis.  Return to text
  • 3. Office of Inspector General, The CFPB Can Enhance Its Diversity and Inclusion Efforts, OIG Report No. 2015-MO-C-002, March 4, 2015.  Return to text
  • 4. The competitive service hiring authority allows the CFPB to fill positions through open competition among the general public. Under the excepted service hiring authority, the CFPB can fill positions outside the competitive service that are specifically excepted by statute, the President, or OPM. There are a number of other governmentwide hiring authorities available to the CFPB, including those related to the hiring of veterans and their family members, individuals with disabilities, Peace Corps staff and volunteers, and students.  Return to text
  • 5. The CFPB's interim authority to waive the requirements of title 5, chapter 33, of the United States Code, and the requisite implementing regulations, expired July 21, 2015.  Return to text
  • 6. 12 U.S.C. § 5493.  Return to text
  • 7. 5 U.S.C. § 2301(b).  Return to text
  • 8. In addition to hiring personnel, the CFPB augmented its staff with transferees from other federal agencies. In accordance with the Dodd-Frank Act, the CFPB transferred in 232 employees from the Office of the Comptroller of the Currency, the former Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the U.S. Department of Housing and Urban Development.  Return to text
  • 9. Since we conducted our testing, the OHC has updated its hiring policy. The OHC's Hiring, Promotions, and Internal Movements Policy, dated August 11, 2014, establishes specific policies and procedures for hiring and promoting CFPB employees and executives and for effecting internal personnel movements.  Return to text
  • 10. The CFPB posts vacancy announcements for executive positions on the CFPB's public website but not on  Return to text
  • 11. The CFPB determines the eligible and best-qualified applicants for executive positions. Best-qualified applicants are to be ranked as set forth in title 5, section 3313, of the United States Code and title 5, part 330, of the Code of Federal Regulations.  Return to text
  • 12. According to OHC officials, while the CFPB has made no specific determination on whether title 5, section 575, of the Code of Federal Regulations is applicable, the agency has incorporated provisions of the regulation into the OHC's incentive policy.  Return to text
  • 13. A career ladder is a series of positions of increasing difficulty through multiple pay grades within an occupational series.  Return to text
  • 14. In May 2013, CFPB employees voted in favor of representation by the National Treasury Employees Union. Generally, nonsupervisory employees are classified as bargaining-unit employees and are represented by the union. In October 2014, the union and the CFPB established specific collective bargaining agreement articles for telework, promotions, relocation, performance management, compensation, and grievance and arbitration.  Return to text