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The decision of the Authority follows:
44 FLRA No. 57
FEDERAL LABOR RELATIONS AUTHORITY
U.S. DEPARTMENT OF THE NAVY
NAVAL AUDIT SERVICE
NATIONAL FEDERATION OF FEDERAL EMPLOYEES
ORDER GRANTING APPLICATION FOR REVIEW
March 27, 1992
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This case is before the Authority on an application for review filed by the Petitioner (the Union) under section 2422.17(a) of the Authority's Rules and Regulations. In his Decision and Order, the Regional Director dismissed the Union's petition seeking to represent a regional unit of approximately 72 auditors because he found that section 7112(b)(7) of the Statute precludes a finding that the unit sought is appropriate. The Union seeks review of the Regional Director's Decision and Order dismissing the Union's petition. The Activity filed an opposition to the Union's application for review.(1)
For the reasons discussed below, we find that the Union has established that compelling reasons exist for granting the application for review pursuant to the provisions of section 2422.17 of the Authority's Rules and Regulations. Accordingly, we grant the application for review.
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 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;(2) and (2) the proposed regional unit is inappropriate because these employees 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), 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 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. The Application for Review
The Union asserts that its application for review should be granted under section 2422.17 of the Authority's Rules and Regulations because the Regional Director's decision: (1) raises a substantial question of law due to the absence of clear Authority precedent with regard to section 7112(b)(7) of the Statute; and (2) is clearly erroneous as to a substantial factual issue and that error prejudices his decision against the Union.
The Union contends that the GS-511 Auditors "are not primarily engaged in investigative or audit functions relating to individuals employed by the Navy[,]" but are instead "engaged in audits of large programs which rarely result in an individual being audited or investigated." Application at 2-3. The Union notes that there is very little Authority precedent concerning the evidence that is sufficient to establish that auditors are "'primarily' engaged in investigation or audit functions[.]" Id. at 3. The Union contends that the Regional Director did not explain the meaning of the phrase "primarily engaged in" under section 7112(b)(7), but found that there is always the potential that an audit may result in an investigation of fraud, misuse of funds, or malfeasance by an Activity employee. Id.
The Union claims that the evidence in the record demonstrates that only a small percentage of the auditors' activities actually involve investigative assistance. The Union argues that the primary purpose of NAS is not to uncover fraud or malfeasance by employees, but to ensure the efficiency and effectiveness of the Agency. Consequently, the Union contends that, although the auditors perform audits that could lead to the discovery of fraud or malfeasance by employees, the record does not establish that discovering fraud or malfeasance is the activity in which the auditors are primarily engaged.
B. The Opposition
The Activity contends that the Union's application for review has not established that a substantial question of law or policy is raised or that extraordinary circumstances warrant reconsideration of the Regional Director's decision. The Activity asserts that no substantial factual issue is in dispute and that the Union has not supported its disagreement with the rationale of the Regional Director's decision.
IV. Analysis and Conclusions
We conclude that the Union has established that compelling reasons exist, under section 2422.17(c)(1) of the Authority's Rules and Regulations, for granting the application for review because the Regional Director's decision raises a substantial question of law or policy due to the absence of, or a departure from, Authority precedent. We find that a question is 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. Accordingly, we will grant the application for review.
For the reasons discussed above, we grant the application for review. In accordance with section 2422.17(g) of the Authority's Rules and Regulations, the parties may, within 10 days after issuance of this Order, submit briefs on the issues raised by the application for review. Briefs should be directed to:
Alicia N. Columna
Director, Case Control Office
Federal Labor Relations Authority
500 C Street, SW., Room 213
Washington, D.C. 20424
(If blank, the decision does not have footnotes.)
1. The Activity asserts that the Union's application for review should be dismissed for failure to comply with the requirements of section 2429.27(a)-(c) of the Authority's Rules and Regulations because the application was undated and a statement of service was not included. We note that a signed and dated statement of service was filed with the application showing that the Activity's designated representative of record was served by certified mail. We find that although the Union did not provide a copy of its statement of service to the Activity at the time it served its application on the Activity, its failure to do so is not a basis for dismissing the application under the Authority's Regulations. Moreover, we find that the Activity has not been prejudiced because it acknowledges that it was served with the Union's application for review and filed a timely response to the application. Therefore, we find that the application is properly before the Authority.
2. Section 7112(b)(7) of the Statute provides that a bargaining unit may not include:
any employee 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, but only if the functions are undertaken to ensure that the duties are discharged honestly and with integrity.