19:1032(121)CA - USCS and NTEU and all NTEU Customs Service Chapters -- 1985 FLRAdec CA



[ v19 p1032 ]
19:1032(121)CA
The decision of the Authority follows:


 19 FLRA No. 121
 
 UNITED STATES CUSTOMS SERVICE
 Respondent
 
 and
 
 NATIONAL TREASURY EMPLOYEES UNION AND
 ALL NATIONAL TREASURY EMPLOYEES UNION
 UNITED STATES CUSTOMS SERVICE CHAPTERS
 Charging Party
 
                                            Case No. 3-CA-20772
 
                            DECISION AND ORDER
 
    The Administrative Law Judge issued the attached Decision in the
 above-entitled proceeding, finding that the Respondent had engaged in
 certain unfair labor practices alleged in the complaint, and
 recommending that it be ordered to cease and desist therefrom and take
 certain affirmative action.  Thereafter, the Respondent filed exceptions
 to the Judge's Decision and an accompanying brief.
 
    Pursuant to section 2423.29 of the Authority's Rules and Regulations
 and section 7118 of the Federal Service Labor-Management Relations
 Statute (the Statute), the Authority has reviewed the rulings of the
 Judge made at the hearing and finds that no prejudicial error was
 committed.  The rulings are hereby affirmed.  Upon consideration of the
 Judge's Decision and the entire record, the Authority hereby adopts the
 Judge's findings, conclusions and recommended Order only to the extent
 consistent herewith.
 
    The Judge found that (1) the Respondent bypassed the Charging Party
 (the Union) in violation of section 7116(a)(1) and (5) of the Statute by
 distributing, without prior notice to the Union, questionnaires to
 certain unit employees which elicited their opinions and information
 concerning an Employee Performance Appraisal System (EPAS);  and (2) the
 Respondent also violated section 7116(a)(1) and (5) of the Statute by
 failing to bargain with the Union concerning the manner in which such
 employees would participate in the development of EPAS.  /1/ In reaching
 such determination, the Judge first considered but rejected the
 Respondent's defense that it did not violate the Statute because the
 questionnaires herein were disseminated as part of an internal audit
 alluded to in Government-wide rules and regulations designed to protect
 the independence of the audit function, finding, inter alia, that the
 subject audit was not conducted by an independent agency separated and
 insulated from Customs Service supervision and control;  nor was it
 mandated by statute, Government-wide rule or regulation, by the Office
 of Management and Budget, or by the Inspector General of the Treasury
 Department.
 
    The Respondent filed exceptions to the Judge's Decision, and in its
 brief, essentially argues that the subject questionnaires were designed
 for the purpose of gathering information for an internal audit of EPAS
 by its Office of Management Integrity (OMI);  that such audit was
 subject to Government-wide rules and regulations designed to protect the
 independence of the audit function;  and therefore the distribution of
 the questionnaires did not constitute a bypass or otherwise pose a duty
 to bargain under section 7116(a)(1) and (5) of the Statute.
 
    In agreement with the Judge, the Authority finds that the
 audit/survey herein was not independent in nature noting particularly
 that it was not conducted by an independent entity separated and
 insulated from the Respondent's control, but rather was conducted by
 representatives of the Respondent, and that certain employees not
 assigned to OMI assisted the auditors in the conduct of the EPAS survey.
  Notwithstanding this, the Authority finds, contrary to the Judge and
 for the reasons set forth below, that the Respondent did not bypass the
 Union in violation of the Statute by distributing the questionnaires
 herein or by failing to bargain with the Union concerning the manner in
 which unit employees would participate in the development of EPAS.
 
    In Internal Revenue Service (District, Region, National Office
 Units), 19 FLRA No. 48 (1985), the Authority, in considering whether the
 agency's conduct therein in distributing questionnaires to unit
 employees constituted an unlawful bypass of the exclusive
 representative, stated:
 
          (A)s part of its overall management responsibility to conduct
       operations in an effective and efficient manner, an agency may
       question employees directly provided that it does not do so in a
       way which amounts to attempting to negotiate directly with its
       employees concerning matters which are properly bargainable with
       its employees' exclusive representative.  In this regard, as the
       Authority has previously noted, management must have the latitude
       to gather information, including opinions, from unit employees to
       ensure the efficiency and effectiveness of its operations.
 
 The Authority concluded that the agency's conduct therein did not
 constitute an unlawful bypass of the exclusive representative because
 the questionnaires were an information gathering mechanism in connection
 with the management function of studying its operations, and because
 there was no indication that management attempted to deal or negotiate
 directly with unit employees concerning their conditions of employment.
 
    In the instant case, the Authority finds that the Respondent's
 distribution of the questionnaires herein was not an improper direct
 communication with its employees in derogation of its duty to bargain
 with the Union.  In this regard, the record reveals that in October
 1981, the Respondent, pursuant to 5 U.S.C. 4302 established the EPAS for
 its employees;  that it later designed the subject questionnaires as an
 information gathering mechanism in order to obtain information
 concerning the implementation of the newly established performance
 appraisal system, including the identification of problem areas in its
 implementation as well as to determine if certain objectives were being
 met;  and that such information has been used in the preparation of a
 draft report.  Further, there is no indication in the record that
 through the questionnaires the Respondent attempted to or changed any
 condition of employment of the unit employees herein.  Thus, the
 Authority finds that in the circumstances of this case that the
 Respondent's distribution of the subject questionnaires was not an
 attempt to deal or negotiate directly with unit employees concerning
 their conditions of employment, but rather was for the purposes of
 gathering information on how the existing performance appraisal system
 was working.  /2/
 
    Further, the Authority finds that the Respondent did not violate the
 Statute by failing to bargain with the Union concerning the manner in
 which unit employees would participate in the development of EPAS.  In
 reaching his decision, the Judge relied on Social Security
 Administration, Baltimore, Maryland, 9 FLRA 909 (1982) wherein the
 Authority found that the agency therein violated the Statute by failing
 and refusing to give the Union an opportunity to negotiate over the
 manner in which bargaining unit employees would participate in
 establishing performance standards.  The Authority disagrees, finding
 such case to be inapposite.  In that case, certain supervisors conducted
 feedback meetings with unit employees concerning performance standards
 in order to obtain input to formulate a proposal concerning performance
 goals/standards where none had been established pursuant to 5 U.S.C.
 4302.  Here, as noted above, the record evidence reveals that the
 subject performance appraisal system had been established prior to the
 distribution of the questionnaires, and that the Respondent was not
 attempting to negotiate with unit employees concerning the establishment
 of performance standards, but rather was merely seeking the information
 as to how the existing standards were working.  In these circumstances,
 as the employees were not participating in the establishment of
 performance standards, the Respondent had no obligation to bargain
 concerning the subject questionnaires.
 
    Accordingly, the Authority concludes that the Respondent did not
 violate section 7116(a)(1) and (5) of the Statute, and therefore shall
 order that the complaint be dismissed in its entirety.
 
                                   ORDER
 
    IT IS ORDERED that the complaint in Case No. 3-CA-20772 be, and it
 hereby is, dismissed in its entirety.  
 
 Issued, Washington, D.C., August 27, 1985
 
                                       Henry B. Frazier III, Acting
                                       Chairman
                                       William J. McGinnis, Jr., Member
                                       FEDERAL LABOR RELATIONS AUTHORITY
 
 
 
 
 
 
 
 
 
 -------------------- ALJ$ DECISION FOLLOWS --------------------
 
                                       Case No.: 3-CA-20772
 
    Allan L. Martin, Esquire
    Alfonso Robles, Esquire
       For the Respondent
 
    Peter A. Sutton, Esquire
    Erica F. Cooper, Esquire
       For the General Counsel
 
    Joseph Kaplan, Esquire
    John McEleney, Esquire
       For the Charging Party
 
    Before:  LOUIS SCALZO
       Administrative Law Judge
 
                                 DECISION
 
                           Statement of the Case
 
    This case arose as an unfair labor practice proceeding under the
 provisions of the Federal Service Labor-Management Relations Statute, 92
 Stat. 1191, 5 U.S.C. 7101 et seq. (hereinafter called "the Statute"),
 and the Rules and Regulations issued thereunder.
 
    The complaint alleged that in June of 1982, the United States Customs
 Service (hereinafter called Respondent, Customs Service or Service),
 unilaterally, and without prior notice to the National Treasury
 Employees Union (hereinafter called Charging Party or Union) required
 certain bargaining unit employees exclusively represented by the Union,
 to respond to a 25-question questionnaire designed to elicit opinions
 and information concerning an Employee Performance Appraisal System
 (EPAS) /3/ instituted by the Respondent.  It was further alleged that
 such conduct constituted a bypass of the Union, and a failure and
 refusal to bargain in good faith with the Union, in violation of
 Sections 7116(a)(1) and (5) of the Statute.
 
    Counsel representing the Respondent argues that the questionnaire
 mailed to bargaining unit employees in this case was designed for the
 sole purpose of gathering information for use in an internal audit of
 EPAS by the Respondent's Office of Management Integrity, that the audit
 was subject to government-wide rules and regulations promulgated by the
 Comptroller General and the Office of Management and Budget;  and that
 because of these considerations the questionnaire did not constitute a
 bypass of the Union, and did not otherwise pose a duty to bargain under
 the Statute.
 
    The parties were represented by counsel during the hearing and were
 afforded full opportunity to be heard, adduce relevant evidence, and
 examine and cross-examine witnesses.  Based upon the entire record
 herein, including a stipulation of facts, stipulated exhibits, other
 relevant evidence adduced at the hearing, /4/ and briefs filed by the
 parties, I make the following findings of fact, conclusions and
 recommendations.
 
                             Findings of Fact
 
    Facts Stipulated
 
    The following stipulations of fact entered into the record are
 accepted as true:  /5/
 
          1.  The original charge was filed by the Union on September 15,
       1982, and a copy thereof was served on Respondent, by certified
       mail, on September 21, 1982.
 
          2.  The first amended charge was filed by the Union on December
       9, 1982, and was served on Respondent, by certified mail, on
       December 9, 1982.
 
          3.  The complaint and answer herein were issued and duly
       served.
 
          4.  At all times material, the Union was a labor organization
       within the meaning of Section 7103(a)(4) of the Statute.
 
          5.  At all times material, Respondent has been an agency within
       the meaning of Section 7103(a)(3) of the Statute.
 
          6.  At all times material Mr. Allen W. Wilk occupied the
       position of Area Director, Northwest Area, Office of Management
       Integrity, United States Customs Service, and was, during such
       periods, an agent of the Respondent and a supervisor or management
       official within the meaning of Section 7103(a)(10) and (11) of the
       Statute.
 
          7.  At all times material Mr. Eugene H. Mach occupied the
       position of Regional Commissioner, Chicago Region, United States
       Customs Service, and was during such periods, an agent of the
       Respondent and a supervisor or management official within the
       meaning of Section 7103(a)(10) and (11) of the Statute.
 
          8.  At all times material the Respondent recognized the Union
       as the certified representative of professional and
       non-professional bargaining units which included certain of
       Respondent's employees.
 
          9.  Pursuant to 5 U.S.C. 4302, Respondent, in October of 1981,
       established EPAS.
 
          10.  On or about June 3, 1982, Mr. William Inch, Respondent's
       agent and an Auditor-In-Charge, distributed a questionnaire
       relating to EPAS to approximately 300 randomly selected bargaining
       unit employees of Respondent's Chicago and San Francisco Regions,
       in accordance with a June 3, 1982 memorandum addressed to
       "Selected Employees" in the Chicago and San Francisco Regions by
       Mr. Wilk (Jt. Exh. 5).
 
          11.  The EPAS questionnaire was issued by Respondent's Office
       of Management Integrity as part of a "survey/audit" of EPAS being
       conducted by the Office of Management Integrity.
 
          12.  The EPAS questionnaire was distributed to bargaining unit
       employees without prior notice to, or the consent of, the Union.
 
    Nature of Questions Addressed to Bargaining Unit Employees
 
    In addition to stipulations outlined, the record disclosed, that of
 the 25 questions included in the questionnaire (Jt. Exh. 5), Questions 1
 through 5 were designed to elicit data concerning the date employees
 surveyed were first introduced to EPAS, the source of introductory
 information about the program, the quality of the introduction, and
 whether employees surveyed had previously read prepared printed material
 about EPAS.  Question 6 was designed to obtain an evaluative comparison
 between EPAS and the employee rating system which had preceded EPAS.
 Questions 7 and 8 constituted inquiries concerning the nature of views
 held about EPAS by supervisors;  and Questions 9 through 12 were
 designed to obtain a detailed evaluation of EPAS as implemented by
 management.  Question 13 was structured to obtain employee views
 concerning the most desirable method of developing employee performance
 plans.  Questions 14 through 19 sought employee evaluations of the
 presentation of progress reviews by supervisors.  Questions 20 and 21
 concerned the issue of whether EPAS provided an adequate vehicle for
 discussing work performance with supervisors.  Questions 22 through 24
 pertained to employee evaluation of the progress review phase of EPAS;
 and Question 25 was designed to obtain employee perceptions of
 administrative action which might flow from poor performance under EPAS.
  /6/
 
    Customs Service Internal Audit Function
 
    Relevant portions of the United States Customs Service Policies and
 Procedures Manual (Jt. Exh. 6, hereinafter called "Customs Manual")
 disclose that the Assistant Commissioner (Office of Management
 Integrity) was the official responsible for the Office of Management
 Integrity.  /7/ The Office of Management Integrity was responsible for
 the performance of an "Internal Audit function," as a service to Customs
 Management (Jt. Exh. 6, at 1311.1A).  It was comprised of the Internal
 Audit and Internal Security Divisions, a Management Inspection Staff,
 and four Area Management Integrity Offices in the field.  /8/
 
    The Director of the Internal Audit Division, under the general
 supervision of the Assistant Commissioner (Management Integrity), was
 responsible for the development and establishment of a nationwide
 internal audit strategy for the Service.  /9/ Under the general
 supervision of the Area Director (Management Integrity), the Assistant
 Area Director (Internal Audit) was responsible for the execution of the
 audit program in the respective areas (Jt. Exh. 6 at 1311.1C).  All of
 these offices were situated in the chain of command leading directly to
 the Commissioner of Customs (Tr. 51).  All offices were staffed with
 Customs employees (Tr. 28), and the Assistant Commissioner (Office of
 Management Integrity) reported directly to the Commissioner (Tr. 25).
 Area Directors were not subject to Regional Commissioners of the Customs
 Service, the principal Customs Service field officers (Tr. 26).  They
 reported directly to the Assistant Commissioner (Management Integrity)
 (Tr. 26).
 
    The internal audit function was subject to the Customs Manual.  It
 was not disputed that the internal audit function provided in the
 Customs Manual was organized to comply with the statutory mandate
 reflected in Section 113 of the Budget and Accounting Procedures Act of
 1950, 31 U.S.C. 66a.  This Act provides that the systems implemented by
 executive agencies "shall conform to the principles, standards and
 related requirements prescribed by the Comptroller General . . . . " (31
 U.S.C. 66a(b)).  These are set forth in a pamphlet entitled, "Standard
 for Audit of Governmental Organizations, Programs, Activities and
 Functions (1981 Revision), (Jt. Exh. 11, hereinafter called "Comptroller
 General Standards").
 
    In addition to the foregoing standards the Service's internal audit
 function was organized to comply with Treasury Department Directives
 contained in the Department of the Treasury Directives Manual, TD 15-02,
 which "prescribes the Department of the Treasury's internal audit
 policies, outlines the responsibilities of Treasury's bureaus to develop
 and maintain audit systems within the framework of departmental policies
 and Federal audit standards, and imposes reporting requirements on the
 bureaus." (Jt. Exh. 9, hereinafter called "Treasury Directives Manual").
  As set forth in the Treasury Directives Manual, the conduct of federal
 internal audits are subject to policies promulgated by the Office of
 Management and Budget (OMB) as contained in Revised OMB Circular No.
 A-73, dated March 15, 1978 (Jt. Exh. 10, hereinafter called "OMB
 Circular No. A-73").
 
    A study of the Comptroller General Standards, OMB Circular No. A-73,
 Treasury Directives Manual, and Customs Manual, reflects an intent to
 insulate those performing audit functions from those entities being
 audited.  This goal is designed to help insure the independence and
 integrity of audit results.  However, these documents also reflect that
 such independence is not always possible in situations involving
 internal audits.
 
    Comptroller General Standards provide that:
 
          In all matters relating to the audit work, the audit
       organization and the individual auditors, whether government or
       public, must be free from personal or external impairments to
       independence, must be organizationally independent, and shall
       maintain an independent attitude and appearance (Jt. Exh. 11 at
       17).
 
    The high goal reflected above is not always met, as the Standards
 also detail the clear possibility of personal, external, and
 organizational impairments to the audit function (Jt. Exh. 11 at 18-20).
  Under the heading "Internal auditors," the Standards note that "(a)
 Federal, state, or local government auditor may be subject to policy
 direction from persons involved in the government management process."
 (Jt. Exh. 11 at 19-20).  The Standards suggest a methodology for
 reducing the impact of impairments, and removing them in whole or in
 part, but do not require compliance with the high standard quoted in
 connection with the implementation of the internal audit function.
 
    The Comptroller General Standards and OMB Circular No. A-73 both
 state that the internal audit function should be organizationally
 located outside the staff or line management function of the unit under
 audit.  (Jt. Exh. 11 at 19, Jt. Exh. 10 at 2-3).  However, optimum
 realization of this goal is not required in that the audit of the EPAS
 Program in the Chicago and San Francisco Regions constituted an audit of
 organizational components at the Regional Commissioner level.  Regional
 activities would necessarily be the appropriate concern and
 responsibility of the Commissioner of Customs, and both Regional
 Commissioners, and the entire internal audit function, were
 organizationally located below the Commissioner of Customs.  The
 following statement from the Comptroller General Standards reflects a
 clear recognition of this dependency in connection with the distribution
 of internal audit reports pertaining to the audit of program results:
 
          Internal auditors should follow their entity's own
       arrangements.  Usually, they report to their entity's top
       management and the entity is responsible for distribution of the
       report (Jt. Exh. 11 at 49).  /10/
 
    The Treasury Directives Manual places on Bureau heads, responsibility
 for "(d)eveloping and maintaining an effective internal audit system
 within their bureau(s) . . .." (Jt. Exh. 9 at 3).  This policy also
 illustrates the merger of internal audit and management functions.
 
    The Customs Manual refers to the necessity of a mantle of
 independence for Service auditors (Jt. Exh. 6 at 6).  Again, this
 standard was not mandated.  That is, the placement of the audit function
 was theoretically designed to effect a separation from those responsible
 for the management of Customs activities;  however, there was a merger
 of functions at the higher levels;  and as will be detailed hereinafter,
 there was close cooperation between operations management and auditors
 at the level where the EPAS audit was implemented.
 
    Agencies are, under the general criteria set forth in OMB Circular
 No. A-73, and Comptroller General Standards, required to develop annual
 internal audit plans.  Audit targets for inclusion in such plans are
 conceived at various locations throughout the Customs Service (Tr. 31).
 The process of developing the Service's annual plan was described by Mr.
 Paul R. Frey, Director of the Internal Audit Division, in the following
 terms:
 
          We have developed in the Internal Audit Division what we call
       an audit universe.  It lists all the areas in the Customs Service
       that we would review.  It's comprised of approximately 274 areas.
       The areas are selected by the field people and headquarters people
       based on the newness of the program and the cost of the program,
       the risk involved, and abuse of the program, the objectivity of
       the program . . . . (Tr. 32).
 
    Possible audit targets are considered at the Internal Audit Division
 level of the Service, and are culled for inclusion in the audit plan
 (Tr. 20, 29, 32).  These plans are approved at the Assistant
 Commissioner level, and by the Inspector General of the Department of
 the Treasury.  /11/ They are then assigned to the field for
 implementation (Tr. 20, 31).
 
    The testimony of Respondent's witnesses established that internal
 audit reports issued pursuant to the annual audit plan are prepared with
 management concerns and management functions in mind (Tr. 43).  They are
 designed for decision making purposes within the Customs Service (Tr.
 43), and efforts are made to issue reports which are material, relevant
 and useful to management in the administration of the Customs Service
 (Tr. 58, 68).  Specific recommendations as to what action Customs
 management should take are included in these reports (Tr. 56-57).
 Although those directly involved in the audit function do not mandate
 action on the basis of such reports, the fruits of their labors are
 utilized as a basis for decisions made at the highest levels of the
 Customs Service.  They are distributed down through chains of command
 for appropriate action (Tr. 33, 38, 44-45, 57-58).  Internal audit
 reports would be prepared upon request of the Commissioner of Customs
 (Tr. 67-68).  The results of these reports are designed for use solely
 within the Customs Service (Tr. 79).
 
    Additional documentary evidence showing high-level Customs Service
 management participation in the internal audit function is reflected at
 numerous points in the Customs Manual (Jt. Exh. 6 at 13.11.1B, D;
 1311.2A, B;  1311.3B;  1311.4A, B, C;  1311.5A, D, E, F;  1311.7B, C(1),
 (2), (3);  1311.8A, B;  1311.10A, B, C. D;  1311.11;  1311.12A, B;  and
 1311.15).  Other references indicating that internal auditing is
 performed as a service to management are reflected in the Treasury
 Directives Manual (Jt. Exh. 9 at 5a;  6;  7b(5)), in OMB Circular No.
 A-73 (Jt. Exh. 10 at 6a;  7a;  7b(5));  and in Comptroller General
 Standards (Jt. Exh. 11 at i (fourth paragraph));  6 (Scope of Audit
 Work, last paragraph);  14 (last paragraph);  19 (last paragraph);  27
 (2a, last paragraph);  39 (last paragraph);  49 (second paragraph).
 
    The Audit of EPAS
 
    Specific details relating to factors relied upon as a basis for
 justifying the internal audit of EPAS do not appear in the record.  This
 fact was acknowledged by counsel representing the Respondent (Tr. 53);
 and Mr. William F. Inch, the senior auditor responsible for the audit,
 related that he could not testify concerning the subject (Tr. 80).  Mr.
 Frey and Mr. Inch did state that the audit was approved under
 "determination of audit priorities" criteria reflected in OMB Circular
 No. A-73, on the ground that EPAS was a new program (Tr. 32, 37, 75).
 It was acknowledged that management's concern and interest was deemed a
 factor in the selection of EPAS as an audit target (Tr. 43).  /12/ The
 audit was not required by statute or regulation, and was not mandated by
 OMB or by the Inspector General of the Treasury Department (Tr. 59-60).
 It was undertaken as a discretionary review by the Customs Service (Tr.
 54, 78).  /13/ It was specifically designed to be of assistance to the
 Customs Service (Tr. 37), to gain information for management concerning
 the implementation of EPAS (Tr. 74, 104), and to "identify problem areas
 in (the) implementation" of EPAS (Tr. 105).
 
    The questionnaire underlying the complaint was developed in May of
 1982 (Tr. 89, 96).  Although counsel representing the Respondent
 endeavored to show that the content of questions posed emanated solely
 from Internal Audit Division personnel (Tr. 25, 59, 65), the record
 clearly indicated effectuation of management purposes.  This is
 evidenced by the June 3, 1982 memorandum from Northwest Area Director
 Allen W. Wilk, which forwarded what was termed "the first" of a series
 of questionnaires to bargaining unit employees in the Chicago and San
 Francisco Regions.  The memorandum to bargaining unit employees
 contained the following statements:
 
          Your Regional Commissioner is aware of this audit, supports the
       intent of the audit and looks forward to the audit results.  Your
       candid response to the questionnaire is expected as though the
       survey audit was being conducted on a face-to-face basis.  /14/ A
       copy of your Regional Commissioner's Memorandum expressing his
       commitment to our review is attached.  /15/
 
    Bargaining unit employees selected to participate in the Chicago and
 San Francisco Regions received, with the memorandum from Mr. Wilk, a
 copy of a memorandum which their respective Regional Commissioners in
 Chicago and San Francisco had previously utilized to forward EPAS
 questionnaires to supervisory employees under their jurisdiction.  /16/
 The Regional Commissioner memorandums supplied to bargaining unit
 employees reflected that Regional Commissioner interests were tightly
 intertwined with those performing the internal audit of EPAS.  They
 stated:
 
          This survey/audit will permit you to give factual information
       on implementation, costs, and other candid information regarding
       EPAS.  Your honesty in response to the survey questionnaires will
       help management determine the effectiveness of the EPAS and
       provide feedback for any changes that may be necessary to make the
       system as cost effective and practical as possible.
 
          As a manager I look forward to the final audit report which
       will summarize the combined responses of over 300 employees
       randomly selected from within the Chicago and San Francisco
       Regions.
 
          I whole-heartedly support this survey/audit and have expressed
       to the Office of Management Integrity my willingness to
       participate in any way possible and the positive attitude toward
       this survey that I expect employees of this region to demonstrate.
 
    Other evidence in the record supports a finding that Mr. Inch and
 those associated with him worked very closely with management elements
 of the Customs Service in developing the questions used in the survey
 sent to bargaining unit employees.  It was admitted that the questions
 were, in part, phrased for the purpose of determining whether
 established Customs Service policies and procedures were being followed
 (Tr. 24);  and further that the questions were developed with the
 assistance of a Mr. Mike Megillicuttie (phonetic), a labor relations
 specialist assigned to the Personnel Office serving the Service's
 Chicago Region (Tr. 76, 79-80, 87, 93, 103).
 
    The Personnel Office was under the control of the Regional
 Commissioner (Tr. 87), and Mr. Megillicuttie was deeply involved in the
 implementation of EPAS policy and procedures in the Chicago Region (Tr.
 87-88).  He was referred to Mr. Inch by the Regional Commissioner or his
 representative as the individual responsible for EPAS in the Region (Tr.
 89).  /17/
 
    Mr. Inch worked with Mr. Megillicuttie for one week preparing the
 questions (Tr. 88).  The latter also provided assistance with respect to
 similar questionnaires addressed to supervisory employees (Tr. 96-97).
 The purpose of the consultation was to provide management with an
 opportunity to receive information which management considered relevant
 and useful to the EPAS program and the Customs Service (Tr. 88,
 104-105).
 
                        Discussion and Conclusions
 
    A threshold question posed in this case relates to the issue of
 whether the Respondent may be absolved from wrongdoing by reason of the
 fact that the questionnaires were disseminated as part of an internal
 audit alluded to in government-wide rules and regulations designed to
 protect the independence of the audit function.  The audit in question
 was not conducted by an independent agency separated and insulated from
 Customs Service supervision and control;  nor was the audit mandated by
 statute, government-wide rule or regulation, by the OMB, or by the
 Inspector General of the Treasury Department.  Those in control of the
 internal audit function in this case were under the direct jurisdiction
 and operational supervision of Customs Service top management, and
 high-level management in the Service fully participated in the internal
 audit of EPAS.  It was also clear that Comptroller General Standards,
 OMB Circular No. A-73, the Treasury Directives Manual, and the Customs
 Manual, all contemplated a distinction between the internal audit
 function such as was involved here, and audits performed by entities
 entirely separate and distinct from the agency being audited.  In this
 case management interests and concerns were a primary focus of the
 audit, and questions were specifically designed for management's use
 within the Customs Service.
 
    The audit in this case was jointly performed by auditors assigned to
 the Internal Audit Division and Customs Service management officials
 and/or their representatives.  It is immaterial that auditors were
 assigned the actual task of preparing the audit report.  They were
 closely tied to, and worked in full cooperation with Customs Service
 management in order to produce a questionnaire which would be of
 significant value to management.  Based on the foregoing a defense
 predicated upon the independent nature of the internal audit function
 must be rejected.  /18/
 
    In a series of cases dealing with the issue of whether a
 communication amounts to an attempt to bypass an exclusive
 representative, the Authority has expressly, and by implication, adapted
 the following criteria articulated in Department of the Navy, Naval Air
 Station, Fallon, Nevada, A/SLMR No. 432, FLRC No. 74A-80, 3 FLRC 697
 (1975), as a basis for deciding whether a bypass exists under the
 Statute:
 
          In determining whether a communication is violative of the
       Order, it must be judged independently and a determination made as
       to whether that communication constitutes, for example, an attempt
       by agency management to deal or negotiate directly with unit
       employees or to threaten or promise benefits to employees.  In
       reaching this determination, both the content of the communication
       and the circumstances surrounding it must be considered.  More
       specifically, all communications between agency management and
       unit employees over matters relating to the collective bargaining
       relationship are not violative.  Rather communications which, for
       example, amount to an attempt to bypass the exclusive
       representative and bargain directly with employees, or which urge
       employees to put pressure on the representative to take a certain
       course of action, or which threaten or promise benefits to
       employees are violative of the Order.  /19/
 
    The facts of this case clearly indicate an attempt by management to
 negotiate directly with bargaining unit employees.  The questionnaire
 was designed to elicit individual employee evaluation of a significant
 condition of employment, that is, the existing performance appraisal
 system;  to obtain details of how the system impacted on individual
 employees;  to obtain employee suggestions or recommendations concerning
 further development of the appraisal program;  and to surface employee
 complaints pertaining to performance appraisal policy implemented as
 part of an effort to resolve or allay complaints.  The record indicated
 that responses received were intended to form the basis of a
 management-sponsored audit report to be disseminated to management
 officials for action;  and further that the Respondent intended to
 utilize employee responses received to make "changes that may be
 necessary" (Jt. Exh. 5).  /20/
 
    Section 7114(a)(1) of the Statute provides that "(a) labor
 organization which has been accorded exclusive recognition is the
 exclusive representative of the employees in the unit it represents and
 is entitled to act for, and negotiate collective bargaining agreements
 covering, all employees in the unit." This entitlement requires that as
 to "conditions of employment," as defined in 7103(a)(14), management's
 "collective bargaining" /21/ be with the exclusive representative.  /22/
 To engage in collective bargaining directly with unit employees
 contradicts the obligation to negotiate in good faith with the labor
 organization that is the exclusive representative.  International
 Communication Agency, supra.
 
    Here the questionnaires disseminated to bargaining unit employees
 effectively bypassed the Union and constituted a breach of the
 Respondent's obligation to bargain in good faith.  It undermined and
 impaired the Union's status as the exclusive representative.  The bypass
 resulted in direct bargaining with employees, and was in derogation of
 the Union's rights as the exclusive representative.  Accordingly, it is
 concluded that the conduct violated Sections 7116(a)(1) and (5).
 
    In addition to the foregoing the Authority has held that performance
 appraisal systems, apart from the identification of critical elements,
 and the establishment of performance standards, are within the duty to
 bargain to the extent that they are consistent with law and regulation.
 National Treasury Employees Union, 3 FLRA No. 119, 3 FLRA 768 (1980),
 affirmed 691 F.2d 553 (D.C. Cir. 1982);  American Federation of
 Government Employees, AFL-CIO, Local 32, 3 FLRA No. 120, 3 FLRA 783
 (1980).  This case involved unilateral questioning of bargaining unit
 employees concerning details of the implementation of a performance
 appraisal system instituted under 5 U.S.C. 4302, for the purpose of
 assisting management in determining whether changes in the system should
 be instituted, and if so, for the purpose of helping management to
 determine the nature of such changes.  Respondent admitted that the
 questionnaire was distributed to 300 randomly selected unit employees
 without prior notice to the Union.  This conduct was also violative of
 Sections 7116(a)(1) and (5) because it effectively determined, without
 Union participation, the manner in which employees in the unit would
 participate in the development of a performance appraisal system, and
 thus deprived the Union of the right to bargain with respect to the
 manner in which employees in the unit would participate in the
 development of the system.  Social Security Administration, Baltimore,
 Maryland, supra at note 19.
 
    Having found that the Respondent violated Sections 7116(a)(1) and (5)
 of the Statute, it is recommended that the Authority issue the following
 Order:
 
                                   ORDER
 
    Pursuant to Section 2423.29 of the Federal Labor Relations
 Authority's Rules and Regulations, and Section 7118 of the Statute, the
 Authority hereby orders that United States Customs Service, shall:
 
    1.  Cease and desist from:
 
          (a) Bypassing the National Treasury Employees Union, the
       exclusive representative of units of its employees, and dealing
       directly with unit employees, by requesting them to respond to
       questionnaires soliciting employee opinions concerning personnel
       policies and practices, and matters affecting working conditions.
 
          (b) Utilizing, in the absence of agreement with the National
       Treasury Employees Union, responses received from bargaining unit
       employees in reply to questionnaires disseminated to unit
       employees during audit of the Employee Performance Appraisal
       System instituted in the Chicago and San Francisco Regions of the
       United States Customs Service.
 
          (c) Failing or refusing to negotiate with the National Treasury
       Employees Union, the exclusive representative of units of its
       employees, concerning the manner in which unit employees will
       participate in the development of the Employee Performance
       Appraisal System initiated by the United States Customs Service.
 
          (d) In any like or related manner interfering with, restraining
       or coercing employees in the exercise of rights assured by the
       Federal Service Labor-Management Relations Statute.
 
    2.  Take the following affirmative action in order to effectuate the
 purposes and policies of the Federal Service Labor-Management Relations
 Statute:
 
          (a) Notify and, to the extent consonant with law and
       regulation, bargain upon request with the National Treasury
       Employees Union, the exclusive representative of units of its
       employees, concerning the manner in which unit employees
       participate in the development of the Employee Performance
       Appraisal System initiated by the United States Customs Service.
 
          (b) Post at all its facilities in the Chicago and San Francisco
       Regions of the United States Customs Service wherein bargaining
       unit employees are located, copies of the attached Notice on forms
       to be furnished by the Federal Labor Relations Authority.  Upon
       receipt of such forms, they shall be signed by the Commissioner,
       United States Customs Service, and shall be posted and maintained
       by him for 60 consecutive days thereafter, in conspicuous places,
       including all bulletin boards and other places where notices are
       customarily posted.  Reasonable steps shall be taken to insure
       that said notices are not altered, defaced, or covered by any
       other material.
 
          (c) Pursuant to Section 2423.30 of the Authority's Rules and
       Regulations, notify the Regional Director of Region III, Federal
       Labor Relations Authority, 1111 - 18th Street, N.W., Room 700,
       P.O. Box 33758, Washington, D.C.  20033-0758, in writing, within
       30 days from the date of this Order, as to what steps have been
       taken to comply herewith.
 
                                       LOUIS SCALZO
                                       Administrative Law Judge
 
 Dated:  May 24, 1983
         Washington, D.C.
 
                                 APPENDIX
 
                          NOTICE TO ALL EMPLOYEES
 
  PURSUANT TO A DECISION AND ORDER OF THE FEDERAL LABOR
 RELATIONS
 AUTHORITY AND IN ORDER TO EFFECTUATE THE POLICIES OF CHAPTER 71
 OF TITLE
 5 OF THE UNITED STATES CODE FEDERAL SERVICE LABOR-MANAGEMENT
 RELATIONS
 STATUTE We Hereby Notify Our Employees That:
 
 WE WILL NOT bypass the National Treasury Employees Union, the exclusive
 representative of units of our employees, and deal directly with unit
 employees, by requesting them to respond to questionnaires soliciting
 employee opinions concerning personnel policies and practices, and
 matters affecting working conditions.  WE WILL NOT, in the absence of
 agreement with the National Treasury Employees Union, utilize responses
 received from bargaining unit employees in reply to questionnaires
 disseminated to unit employees during audit of the Employee Performance
 Appraisal System instituted in the Chicago and San Francisco Regions of
 the United States Customs Service.  WE WILL NOT, in any like or related
 manner interfere with, restrain, or coerce our employees in the exercise
 of rights assured by the Federal Service Labor-Management Relations
 Statute.  WE WILL notify, and to the extent consonant with law and
 regulation, bargain upon request with the National Treasury Employees
 Union, the exclusive representative of units of our employees,
 concerning the manner in which bargaining unit employees participate in
 the development of the United States Customs Service's Employee
 Performance Appraisal System.
                                       (Agency or Activity)
 
 Dated:  . . .  By:  (Signature) This Notice must remain posted for 60
 consecutive days from the date of posting, and must not be altered,
 defaced or covered by any other material.  If employees have any
 questions concerning this Notice, or compliance with any of its
 provisions, they may communicate directly with the Regional Director,
 Region III, Federal Labor Relations Authority, whose address is:  1111 -
 18th Street, N.W., Room 700, P.O. Box 33758, Washington, D.C.
 20033-0758, and whose telephone number is:  (202) 653-8507.
 
 
 
 
 
 
 --------------- FOOTNOTES$ ---------------
 
 
    /1/ Section 7116(a)(1) and (5) of the Statute provides:
 
          Sec. 7116.  Unfair labor practices
 
          (a) For the purpose of this chapter, it shall be an unfair
       labor practice for an agency--
 
          (1) to interfere with, restrain, or coerce any employee in the
       exercise by the employee of any right under this chapter;
 
                                .  .  .  .
 
          (5) to refuse to consult or negotiate in good faith with a
       labor organization as required by this chapter(.)
 
 
    /2/ See also, Department of Health and Human Services, Social
 Security Administration, 19 FLRA No. 56 (1985).
 
 
    /3/ EPAS was instituted in October of 1981 after collective
 bargaining between the Union and the Respondent (Tr. 14).
 
 
    /4/ Counsel representing the General Counsel moved to correct the
 transcript as follows:
 
    Page Line From To
 
    107 3 legal illegal
 
    111 7 Kaiser Slot Kaiserslautern
 
    The motion to correct is granted.
 
 
    /5/ Jt. Exh. 1.
 
 
    /6/ As of the date of the hearing the final internal audit report of
 EPAS was incomplete (Tr. 34).  However, responses from bargaining unit
 members had been received, and a draft copy of the audit report had been
 prepared (Tr. 35-36, 76-77).
 
 
    /7/ This organizational component has been renamed.  As of the date
 of the hearing it was known as the Office of Internal Affairs (Tr.
 46-47).
 
 
    /8/ The Internal Security Division and Management Inspection Staff
 had no responsibility for mailing the questionnaires to bargaining unit
 employees, and neither was otherwise associated with the audit relating
 to EPAS.  Similarly, only the Area Director (Management Integrity),
 Northwest Area, was concerned with the audit, as the survey was mailed
 to selected employees in the Chicago and San Francisco Regions, both of
 which were situated within the area of responsibility assigned to the
 Area Director for the Northwest Area.
 
 
    /9/ As a member of the Assistant Commissioner's staff the performance
 of the Director of the Internal Audit Division was subject to evaluation
 by the Assistant Commissioner (Tr. 24).  The Director derived his
 appointment from the Commissioner of the Customs Service (Tr. 66), as
 distinct from some other independent entity charged with oversight
 responsibility over Customs Service activities.
 
 
    /10/ In contrast, audit reports of program results prepared by truly
 independent entities would routinely be distributed to as many
 interested officials as practicable, and appropriate distribution would
 be expected of those responsible for the audit function (Jt. Exh. 11 at
 48).
 
 
    /11/ Under Department of the Treasury Order 101-15, dated February
 27, 1980, the Inspector General, pursuant to a delegation of authority
 from the Secretary of the Treasury, is given authority to review and
 approve annual audit plans submitted by Department of the Treasury
 bureau offices (Jt. Exh. 7).  Also, Treasury Order 101-15 requires
 Treasury officials holding key inspection and audit positions to report
 to the Inspector General "in addition to their present reporting
 responsibilities." The Service's Assistant Commissioner (Management
 Integrity) was identified as one such official having a dual reporting
 responsibility.  The Inspector General also routinely receives copies of
 completed internal audits (Tr. 49-50).  However, the Inspector General
 does not supervise the day to day operations of the Assistant
 Commissioner, and merely has general oversight responsibility involving
 standards and policies (Tr. 42).
 
    Although the Inspector General possesses authority to veto a
 scheduled audit encompassed in an annual audit plan, Mr. Frey was not
 aware of this ever happening (Tr. 43).  It was brought out that the
 Service performs about 70 audits each year, and that Customs is only one
 of 13 Treasury bureaus that report to the Inspector General (Tr. 43).
 As a result the Inspector General, pursuant to his general oversight
 authority in the audit and inspection field, receives a large number of
 annual audit plans with a larger number of proposed audits embraced
 within each plan.
 
 
    /12/ OMB Circular No. A-73 provides that in determining audit
 priorities agencies will, among other factors, consider, "(n)ewness . .
 . of . . . program, activity or function;" and "(m)anagement needs to be
 met, as developed in consultation with the responsible program officials
 . . . . "
 
 
    /13/ Responsibility for the evaluation of performance appraisal
 systems established under 5 U.S.C. 4302, is specifically reposed in the
 Comptroller General and the Office of Personnel Management by reason of
 the provisions of 5 U.S.C. 4304.
 
 
    /14/ The record established that although the questionnaire was
 mailed to named individuals, those responding were not required to
 identify themselves (Tr. 72).  Responses were not coded to identify
 individual employees (Tr. 85).  The Respondent was not aware of the
 identity of those who did respond (Tr. 74).
 
 
    /15/ As previously noted, Regional Commissioners of Customs are the
 principal field officers in the Customs Service (Tr. 26).
 
 
    /16/ Similar questionnaires were also prepared for dissemination to
 supervisors (Jt. Exh. 5, Tr. 90-92, 96-97).  Jt. Exh. 5 includes a
 memorandum dated September 22, 1981, signed by Mr. Eugene H. Mach, the
 Regional Commissioner in Chicago.  A substantially similar memorandum
 was sent on or about the same date by the San Francisco Regional
 Commissioner to supervisory employees in the San Francisco Region (Tr.
 91).  Bargaining unit employees receiving Mr. Wilk's June 3, 1982
 memorandum received copies of Regional Commissioner memorandums utilized
 in their respective regions (Tr. 91-92).
 
 
    /17/ Mr. Inch was somewhat vague about the identity of the management
 official who referred him to Mr. Megillicuttie.  However, it appeared
 that either the Regional Commissioner, or someone at the Regional
 Commissioner level was contacted by Mr. Inch, and that Mr. Megillicuttie
 was identified as the appropriate person to work with (Tr. 89).  The
 Regional Commissioner was briefed concerning the audit, and was aware of
 developments concerning the subject (Tr. 103-104).
 
 
    /18/ In light of the factual picture presented, it is unnecessary to
 decide whether a different result would have been obtained had the audit
 function been performed by an independent agency.
 
 
    /19/ Department of Health, Education and Welfare, Social Security
 Administration, Bureau of Retirement and Survivors Insurance,
 Northeastern Program Service Center, 1 FLRA No. 59, 1 FLRA 508 (1979);
 United States Department of the Air Force, 47th Air Base Group (ATC),
 Laughlin Air Force Base, Texas, 4 FLRA No. 65, 4 FLRA 469 (1980);
 Division of Military and Naval Affairs, State of New York, Albany, New
 York, 8 FLRA No. 71, 8 FLRA 307 (1982);  Iowa National Guard and
 National Guard Bureau, 8 FLRA No. 101, 8 FLRA 500 (1982);
 Kaiserslautern American High School, Department of Defense Dependents
 Schools, Germany North Region, 9 FLRA No. 28, 9 FLRA 184 (1982);  Social
 Security Administration, Baltimore, Maryland, 9 FLRA No. 124, 9 FLRA 909
 (1982);  Department of Health and Human Services, Social Security
 Administration, Bureau of Field Operations, San Francisco, California,
 10 FLRA No. 24, 10 FLRA 115 (1982);  Internal Revenue Service (District,
 Region, National Office Unit), 11 FLRA No. 23, 11 FLRA 69 (1983).  The
 rules outlined have also been adopted by the Foreign Service Labor
 Relations Board in International Communications Agency, Case No.
 3-CA-2861(F) (1982).
 
 
    /20/ The facts of this case closely pattern those in Department of
 Health, Education and Welfare, Social Security Administration, Bureau of
 Retirement and Survivors Insurance, Northeastern Program Center, supra
 at note 19;  Social Security Administration, Baltimore, Maryland, supra
 at note 19;  and International Communications Agency, supra at note 19.
 Bypass cases