46:0512(47)RO - - Navy, Naval Audit Service, Southeast Region and NFFE - - 1992 FLRAdec RO - - v46 p512



[ v46 p512 ]
46:0512(47)RO
The decision of the Authority follows:


46 FLRA No. 47

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

U.S. DEPARTMENT OF THE NAVY

NAVAL AUDIT SERVICE

SOUTHEAST REGION

(Activity)

and

NATIONAL FEDERATION OF FEDERAL EMPLOYEES

(Labor Organization/Petitioner)

3-RO-10012

(44 FLRA 717 (1992))

DECISION AND ORDER ON REVIEW

November 10, 1992

Before Chairman McKee and Members Talkin and Armendariz.

I. Statement of the Case

This case is before the Authority for review of the Regional Director's Decision and Order dismissing the petition for exclusive recognition filed by the Petitioner (NFFE or the Union). NFFE sought to represent a unit of approximately 72 auditors. The Regional Director found that section 7112(b)(7) of the Statute precludes a finding that the unit sought is appropriate.

NFFE filed an application for review of the Regional Director's decision. Subsequently, we granted review pursuant to section 2422.17 of the Authority's Rules and Regulations. We stated that a question was raised as to whether the employees involved in this case are "primarily engaged in investigation or audit functions relating to the work of individuals employed by an agency whose duties directly affect the internal security of the agency . . ." within the meaning of section 7112(b)(7) of the Statute. We permitted the parties to submit briefs on this issue. Both parties filed briefs.

For the reasons discussed below, we affirm the Regional Director's dismissal of NFFE's petition.

II. Background and Regional Director's Decision

The Union filed a petition seeking to represent a unit of approximately 72 GS-511 auditors at the Activity's Southeast Region. The Union contended that the proposed unit of auditors constituted a distinct group of employees who share a clear and identifiable community of interest. The Activity objected to the proposed unit on the grounds that: (1) the employees who would be included in the unit are exempt from inclusion in any bargaining unit under section 7112(b)(7) of the Statute because their duties directly affect the internal security of the Activity;(*/) and (2) the proposed regional unit is inappropriate because the employees in that unit do not possess a community of interest separate and distinct from other Naval Audit Service (NAS) employees across the country and the proposed unit would not promote the efficiency of Agency operations.

According to the Regional Director, the auditors conduct internal audits that involve: (1) evaluating and making recommendations concerning the integrity and reliability of financial and other data used to make management decisions; (2) determining the adequacy of policies and procedures affecting the expenditure of funds, safeguarding and determining the efficient use of resources, and the achievement of management objectives and program results; and (3) determining the extent of compliance with applicable policies, procedures, laws, and regulations.

The Activity is part of the NAS, which is the internal audit organization within the Department of the Navy (Navy) and is under the direction of the Auditor General of the Navy. The Auditor General develops and implements Navy audit standards, policies and procedures consistent with the guidance of the Inspector General, Department of Defense.

The Naval Inspector General inspects, investigates, or inquires into matters of importance concerning fraud, waste, inefficiency, and related improprieties throughout the Navy. However, the Regional Director found that the internal audit function performed by the auditors "serves a primary role of preventing and detecting fraud and illegal acts." Regional Director's Decision at 3. The Regional Director found, in this regard, that the auditors are required to submit copies of all procurement-related fraud reports and standards of conduct reports to the Naval Inspector General. In addition, the Regional Director found that in cases of suspected criminal activity, the auditors are required to submit a written report of suspected fraud to the Naval Investigative Service Command (NISC) with a copy to the activity's commanding officer or the immediate superior in command when the commanding officer may be involved. According to the Regional Director, where such criminal activity is suspected during the audit, notification and dissemination of the auditors' reports are coordinated with the NISC in order to preclude compromise of the investigation or destruction and/or alteration of the evidence.

The Regional Director found that auditors also are responsible for identifying indicators of fraud sufficient to warrant recommending an investigation. The Regional Director noted that the NAS may use investigators from the NISC on selected audits of areas susceptible to fraudulent activities, such as procurement, and found that auditors assist the NISC in documenting fraud.

Citing U.S. Department of Labor, Office of Inspector General, Region I, Boston, Massachusetts, 7 FLRA 834 (1982) (Department of Labor) and U.S. Small Business Administration, 34 FLRA 392 (1990) (SBA), the Regional Director concluded that the auditors "are engaged in investigation and audit functions relating to the work of individuals employed by the Navy, and that such functions are encompassed within the meaning of the section 7112(b)(7) exclusion set forth in the Statute." Id. at 4. Specifically, the Regional Director found, based on the evidence in the record, that "the claimed auditors are primarily responsible for the conduct of audits of Department of the Navy programs, contracts, and operations." Id. at 5. The Regional Director noted, however, that although the audits concern agency programs, "they necessarily include auditing the individuals who operate these programs." Id. The Regional Director concluded, therefore, that "the potential always exists that a particular audit may result in an investigation of Activity employees concerning fraud, misuse of funds, or malfeasance." Id. The Regional Director found that the auditors may review employee information, such as information showing that certain Navy employees were paid for travel that did not occur.

The Regional Director also found that, in the course of conducting audit functions related to matters external to the Navy, an investigation of Navy employees may result. The Regional Director noted, for example, that an auditor's advisory report concerning competition for aircraft wing work revealed a violation of Federal law involving an employee who allegedly accepted a bribe in return for providing a contractor with information.

The Regional Director concluded that because the auditors are engaged in audit and investigation functions within the meaning of section 7112(b)(7) of the Statute they must be excluded from any appropriate unit of employees under the Statute. Therefore, the Regional Director dismissed the petition. In reaching his decision, the Regional Director also found that section 7112(b)(7) of the Statute "precludes a finding that a separate unit of auditors is appropriate [because] such [a] unit would create a conflict of interest in that the auditors have the role of internal policemen vis a vis Agency employees who may be represented by the same or another labor organization." Id. at n.2 (emphasis in original). The Regional Director noted that there was no statutory provision for auditors to be represented by a separate, unaffiliated labor organization.

III. Positions of the Parties

A. NFFE

NFFE contends that the legislative history of the Statute demonstrates that in enacting section 7112(b)(7) of the Statute, Congress intended to exclude from bargaining units employees who are engaged primarily in an agency's audit or investigative functions relating to that agency's internal security. Noting the dictionary definition of "primarily," NFFE asserts that "to be 'primarily engaged' in a duty must mean that an employee performs that duty more often and most importantly above all other assigned duties; that is the employee's main duty." NFFE's Brief at 3.

NFFE contends that the record in this case does not demonstrate that the auditors' main duty is to perform audits relating to the work of individuals whose duties directly affect internal security. Rather, according to NFFE, the employees' "audit functions relating to the work of individuals whose duties directly affect internal security[]" constitute "an occasional ancillary activity, resulting from their primary duty of performing financial and program audits." Id. at 5. In this regard, NFFE asserts that the vast majority of Activity audits are program audits and that only a small percentage of the audits concern internal security functions. Accordingly, NFFE contends that the employees involved in this case are eligible for inclusion in a bargaining unit and that the appropriateness of the proposed region-wide unit must be decided by the Regional Director.

B. Activity

The Activity asserts that employees proposed for inclusion in bargaining units may not be included in units under section 7112(b)(7) of the Statute if: (1) the employees investigate, audit, or both; (2) the investigations or audits are related to the work of other agency employees; (3) the duties of such other agency employees directly affect the agency's internal security; (4) the investigations or audits are done to ensure that the duties of such other agency employees are discharged honestly and with integrity; and (5) the employees proposed for inclusion in a unit are engaged primarily in such internal investigations, audits, or both. The Activity contends that the record establishes that these criteria are met in this case and, therefore, the employees involved in this case should not be included in a bargaining unit.

In particular, the Activity asserts that the auditors perform investigative and audit functions and that these functions are related to the work of other Navy employees. The Activity contends that the audits performed by the auditors primarily concern Navy programs and employees of these programs and are conducted "to prevent any mismanagement or fraud by individual [Navy] employees." Activity's Brief at 8. The Activity asserts that although the audits are not directed initially at individuals, "they do evaluate the work of groups of individuals[], and if mismanagement by one or more individuals is found, such individual or individuals [are] held accountable . . . ." Id.

Further, the Activity contends that "[t]he duties of the [Navy] employees whose work is audited or investigated by the . . . auditors directly affect [the Navy's] internal security." Id. The Activity maintains that the audits evaluate the adequacy of internal controls and that such controls consist of internal security measures that are used to ensure the safeguarding of assets, the integrity and reliability of data, and the prevention of fraud, waste, and abuse. Additionally, the Activity asserts that the internal audits are performed to determine if agency personnel are performing their duties with honesty and integrity.

With respect to the last criterion set forth above, the Activity maintains that the auditors "are engaged primarily in internal audits[,]" including performance and program audits. Id. at 11. According to the Activity, the auditors "primarily audit [Navy] programs and the employees who run these programs, and such audits may uncover employee fraud, misuse of funds, or malfeasance." Id. The Activity notes that in Department of Labor the Authority held that other auditors met the "primarily engaged in" test when they primarily conducted internal audits.

Finally, the Activity asserts that the proposed bargaining unit is inappropriate "because a union [sic] of . . . auditors could affect the internal security of the [Navy] by creating a conflict of interest for . . . auditors in performing functions that relate to the honesty and integrity with which other [Navy] employees conduct their work. This conflict arises because of the . . . auditors' role of internal policemen . . . vis-a-vis [Navy] employees."

Id.

IV. Analysis and Conclusions

For the following reasons, we conclude that the auditors in this case meet the criteria of section 7112(b)(7) of the Statute. Therefore, the auditors must be excluded from any appropriate unit of employees under the Statute and we will dismiss the Union's petition.

Section 7112(b)(7) of the Statute provides that employees cannot be included in any appropriate unit if they are primarily engaged in investigation or audit functions relating to the work of individuals employed by the agency whose duties directly affect the internal security of the agency, as long as the functions are undertaken to ensure that those duties are discharged honestly and with integrity. See generally SBA, 34 FLRA at 400-02. In essence, NFFE argues that the exclusion set forth in section 7112(b)(7) does not apply to the claimed auditors because their primary duty is to perform financial and program audits and only a small percentage of the audits performed by them concerns audits of individuals whose duties directly affect internal security. Therefore, according to NFFE, the claimed auditors should not be excluded from an appropriate unit on the basis of section 7112(b)(7) of the Statute. We disagree.

Section 7112(b)(7) of the Statute excludes from any appropriate unit employees who are primarily engaged in investigation or audit functions "relating to the work of" individuals whose duties directly affect the agency's internal security, but only if those functions are undertaken to ensure that the duties are discharged honestly and with integrity. In this case, it is clear that, in auditing the operation of the Navy's programs, the auditors are reviewing the work of the individuals whose duties involve the implementation of Navy programs. Therefore, the fact that only a small percentage of the audits performed by the auditors in this case actually results in investigations or audits of Navy employees whose duties directly affect the Navy's internal security does not mean that section 7112(b)(7) of the Statute is not dispositive of the unit status of those auditors. Rather, the proper inquiry is whether the claimed auditors are primarily engaged in investigation or audit functions "relating to the work of" individuals whose duties directly affect the Navy's internal security, as long as those functions are undertaken to ensure that the duties are discharged honestly and with integrity.

Interpreting section 7112(b)(7) in this manner, we find that the record in this case supports the Regional Director's conclusion that the claimed auditors should be excluded from any appropriate unit of employees under the Statute. Based on the record, we find that the auditors in this case are primarily involved in auditing or investigating programs, activities, systems, and functions of the Navy regarding, among other things, the extent of compliance with policies, procedures, laws, and regulations, the safeguarding of assets, and the "adequacy of internal controls[.]" Transcript at 68. The phrase "internal controls" refers to "the procedures and policies . . . as well as organizational structure that management has in place to ensure the safeguarding of assets, the integrity . . . of data, and to be able to prevent fraud, waste or abuse." Id. at 76. Auditors are required in every audit that they perform to monitor compliance with those internal controls so as to protect agency assets and to detect possible fraud, waste or abuse. Id. at 66, 68, 71, and 72. In performing these audits or investigations, the auditors review the work product of the employees who implement those programs, activities, systems, and functions; for example, the auditors review financial statements, contracts, and other documents prepared by employees as a part of their duties. Id. at 74.

We conclude, therefore, based on the record, that the auditors in this case are primarily engaged in financial and program audits relating to the work of individuals employed by the Navy whose duties directly affect the Navy's internal security and that the audits are undertaken to ensure that those individuals perform their duties with honesty and integrity. Specifically, because the audits are designed to detect possible fraud, waste, and abuse in the work performed by Navy employees whose duties directly affect the Navy's internal security, we find that the audits are undertaken to ensure that the work of those Navy employees is performed with honesty and integrity. Consequently, we find that the auditors sought by the Union in this case meet the criteria of section 7112(b)(7) of the Statute. Inasmuch as section 7112(b)(7) of the Statute provides that no unit shall be determined to be appropriate if it includes employees who meet the criteria set forth therein, we agree with the Regional Director's conclusion that the auditors do not constitute an appropriate unit. See Department of Labor, 7 FLRA at 835 (finding that section 7112(b)(7) of the Statute applied to auditors who were "responsible for the conduct of audits of Department of Labor programs and the employees who run these programs, potentially auditi