United States General Accounting Office

GAO Report to the Honorable

Frank R. Wolf,

House of Representatives

January 1998 FEDERAL

DOWNSIZING

Controls Needed to

Ensure Compliance

With Buyout

Repayment Provisions

GAO/GGD-98-12

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-277085 

January 26, 1998

The Honorable Frank R. Wolf

House of Representatives

Dear Mr. Wolf:

As part of its downsizing efforts over the last several years, the federal

government has offered employees of various federal agencies incentive

payments, or buyouts, to leave federal employment through voluntary

separations. Employees who accept buyouts are not prohibited from later

returning directly to federal employment or working under contract for

the government. However, under a provision of the Federal Workforce

Restructuring Act (FWRA),1

 unless a waiver is granted, buyout recipients

generally must repay the buyout if they return to federal employment or if

they are employed under a personal services contract within 5 years of

their separation.2

During the period we reviewed, January 1993 through June 1995, two

different buyout rules were in effect for the Department of Defense (DOD).

From January 1993 to March 29, 1994, DOD employees could receive

buyouts, and these buyout recipients were not required to repay the

buyouts if they returned to federal employment. However, DOD’s policy

during this period was that it would not rehire its buyout recipients until 1

year after their separation. As of March 30, 1994, under the FWRA,

employees from DOD as well as other federal agencies could receive

buyouts, but the buyout recipients generally had to repay the buyout if

they returned directly to federal employment within 5 years of their

separation.3

1

Public Law 103-226, March 30, 1994.

2

Under the Federal Acquisition Regulation (FAR) a personal services contract is one that, by its

express terms or as administered, makes the contract personnel in effect, government employees. (See

the Background section for the elements of a personal services contract.) Contract personnel who are

employed under nonpersonal services contracts are not required to repay the buyout. Under a

nonpersonal services contract, personnel providing the services are not subject, either by the

contract’s terms or by the manner of its administration, to the supervision and control usually

prevailing in relationships between the government and its employees, as is the case in personal

services contracts.

3

The FWRA amended the DOD buyout authority so that DOD employees who received a buyout on or

after March 30, 1994, were subject to the same reemployment provisions as non-DOD employees with

the exception that—unlike their non-DOD colleagues—DOD buyout recipients were not required to

repay the buyout if they returned to federal employment under a personal services contract.

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In an October 1996 letter4 to you on compliance with reemployment

requirements, we reported that there were 23 cases of buyout recipients

(1) who appeared to have violated the FWRA repayment provision or the

DOD reemployment policy or (2) about whom we could not determine

whether they had returned to federal employment because of inconsistent

source data.

As agreed with your office, this report provides information on

(1) whether the 23 buyout recipients returned to federal employment and,

if so, whether they repaid the buyout or met the DOD reemployment policy

and (2) whether the 9 agencies5

 that were identified as employing these 23

buyout recipients and other selected agencies, which may have buyout

recipients under contract, had internal control procedures6

 in place to help

ensure that buyout recipients repay buyouts when required to do so.

Results in Brief The information provided to us by the appropriate agencies’ Office of

Inspector General (OIG) and personnel office showed that a violation of the

FWRA repayment provision or the DOD reemployment policy occurred in 11

of the 23 cases. The FWRA repayment provision was violated in 9 of the 11

cases, and the DOD reemployment policy was violated in the 2 other cases.

The remaining 12 cases were not violations, although they had originally

appeared to be questionable to us because of discrepancies between

agency reports and data in the Office of Personnel Management’s (OPM)

Central Personnel Data File (CPDF), which we used as the source of our

information. For example, although the CPDF showed that certain buyout

recipients were reemployed at federal agencies, subsequent checks found

that the agencies had no records of rehiring them.

In addition, while researching 1 of the 23 cases, an agency OIG found that

the agency employed an additional buyout recipient who had not repaid

the buyout. This brought our total of confirmed violations of the

repayment provision to 10. OPM undertook two research efforts in which it

found violations of the FWRA repayment provision, but it could not verify

4

Buyout Recipients’ Compliance With Reemployment Provisions (GAO/GGD-97-7R, Oct. 3, 1996).

5

The 9 agencies that were identified as employing the 23 buyout recipients were the Departments of

the Air Force, the Army, the Navy, Defense, Justice, State, the Treasury, Agriculture, and Veterans

Affairs. The agencies we selected to understand the experiences agencies have had with buyout

recipients’ returning as employees under contract were the General Services Administration and the

Department of Transportation. For details on how we selected these agencies, see our Scope and

Methodology section.

6

Internal control procedures are the specific steps established by management to provide reasonable

assurance that control objectives are met.

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B-277085 

the total number of violations because one of the efforts did not collect

names and social security numbers, which could have been used to verify

the CPDF data used in its other effort and in our review.

Regarding internal control procedures, none of the 9 agencies that we

contacted for information on the 23 buyout recipient cases had adequate

internal control procedures in place to provide reasonable assurance that

the FWRA repayment provision was met. This was the case despite OPM’s

1994 and 1996 guidance to agencies on the FWRA repayment provision as

well as OPM’s list of options explaining steps agencies could take to

identify returning buyout recipients, steps that OPM said were inexpensive

to implement (see app. III). However, to help ensure compliance with the

FWRA repayment provision, one agency created a form for job applicants to

complete (and sign and date) indicating whether they had received a

buyout within the previous 5 years. By having an applicant certify his or

her buyout status in writing, the agency would have documented evidence

of the applicant’s response to the question of receiving a buyout should a

question arise after the applicant was hired. However, according to

officials of this agency, if an applicant indicated that he or she were a

buyout recipient, the agency had no personnel procedures in place to

ensure that the appropriate repayment provision was satisfied. Such

certification was not required by the other eight agencies.

Two other agencies notified their personnel officers of the FWRA

repayment provision; however, only one component of each agency

developed additional procedures to help ensure compliance with the

provision. The two components developed these procedures as a result of

our inquiry into apparent violations, and one component’s procedures

were optional. Also, four other agencies, according to their DOD

spokesperson, had programs in place that addressed some of OPM’s

optional procedures, such as to notify agency personnel of the FWRA

repayment provision, or had programs in place to periodically detect

financial fraud. But none of the nine agencies had procedures to help

ensure compliance with the FWRA repayment provision at the time of

application for employment.

In addition to buyout recipients who return directly to federal

employment, some buyout recipients work under contract for the federal

government. Some of these contract personnel are employed under

contracts that are expressly identified as personal services contracts and,

thus, are subject to the FWRA repayment provision. In addition to these

personnel, other contract personnel who are subject to relatively

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B-277085 

continuous supervision and control by agency officials are, in effect,

working under personal services contracts and are subject to the FWRA

repayment provision. However, sometimes it is difficult to determine if a

contract is a personal services contract, particularly when it is not

identified as such. The OIGs of two agencies—the Department of

Transportation (DOT) and the General Services Administration

(GSA)—audited their contractor employees and reported their results in

February and September, 1996, respectively. They found a combined total

of 27 buyout recipients in their agencies who, in effect, were working

under personal services contracts and who had not repaid their buyouts.

The OIGs concluded that one of DOT’s components and GSA had ineffective

control procedures concerning buyout recipients who worked under

personal services contracts for the government. OPM’s 1996 guidance for

identifying returning buyout recipients includes steps for ensuring

compliance with the FWRA repayment provision when buyout recipients are

employed under personal services contracts for the government.

Background In 1992, DOD was the first federal agency authorized to offer buyouts to its

employees, and it has been using buyouts since January 1993 to reduce the

size of its workforce.7

 On March 30, 1994, the FWRA authorized buyouts for

other executive agencies and amended DOD’s authority. For both DOD and

other executive agencies, employees generally were offered a buyout

payment that was the lesser of $25,000 or their severance pay entitlement.

According to OPM, in fiscal year 1996, $24,833 was the average buyout

amount for regular optional retirements; $24,949 was the average for early

retirements; and $14,499 was the average for resignations.

The legislation granting DOD its initial buyout authority in 1992 did not

impose any buyout-related conditions or repayment provision on buyout

recipients who were reemployed by the federal government. However,

DOD’s policy was that it would not rehire DOD buyout recipients within 1

year of their separation, unless an exception was approved by a high-level

DOD official.

In 1994, the FWRA required buyout recipients from federal agencies that

were under the act’s authority, including DOD, to repay their buyouts if they

returned to federal employment within 5 years of their separation. DOD

buyout recipients had to repay their buyouts if they were reemployed as

civil servants, but not if they were reemployed under personal services

7

National Defense Authorization Act for Fiscal Year 1993, October 23, 1992. National Defense

Authorization Act for Fiscal Year 1995, October 5, 1994.

Page 4 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

contracts. Non-DOD buyout recipients had to repay their buyouts if they

returned directly to federal employment or if they were employed under a

contract that was expressly identified or administered as a personal

services contract. Also, under the FWRA, buyout recipients who were

obligated to repay their buyouts could do so after an agency hired them.

However, the agency rehiring the buyout recipient could seek a repayment

provision waiver for the employee from OPM, in certain situations.8

Under new buyout authority enacted in 1996, the repayment provision was

changed.9

 Among other things, employees who accept buyouts under the

1996 authority must repay the entire buyout before their first day of

federal reemployment, and there is no authority for waivers. Congress also

passed other laws providing specific statutory authority for repaying

buyouts for employees in selected agencies. The agency-specific buyout

authorizations generally require that recipients repay their buyouts if they

rejoin the federal workforce. In addition, under the time frames of the

current buyout laws, agencies will need to verify buyout recipients’

compliance with repayment provisions through 2006.10 (See app. I for

additional information on selected buyout laws enacted from 1992 to

1997.)

Concerning contract employees, under the FAR, an agency may not award a

personal services contract unless specifically authorized to do so by

statute. Although each contract arrangement must be judged by its own

facts and circumstances, the FAR lists six elements that should be

considered when assessing whether a contract is personal in nature. These

six elements are as follows:

“(1) performance on site; (2) the principal tools and equipment are furnished by the

government; (3) the services are applied directly to the integral effort of agencies or agency

components to further their assigned function or mission; (4) the performance of

comparable services and the meeting of comparable needs in the same or similar agencies

using civil service personnel; (5) the need for the type of service provided can reasonably

be expected to last beyond 1 year; (6) the requirement of government direction or

supervision of contractor employees because of the inherent nature of the service, or the

manner in which it is provided, in order to adequately protect the government’s interest,

8

Both the FWRA and 5 C.F.R. 576, Waiver of Repayment of Voluntary Separation Incentive Payments,

state that OPM may waive repayment if the individual involved possesses unique abilities and is the

only qualified applicant available for the position.

9

The Treasury, Postal Service, and General Government Appropriations Act for Fiscal Year 1997, which

was enacted on September 30, 1996 (P.L. 104-208, sec. 663).

10National Defense Authorization Act for Fiscal Year 1998, Public Law 105-85, November 18, 1997.

Page 5 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

retain control of the function involved, or retain full personal responsibility for the function

supported in a duly authorized federal officer or employee.”11

The FAR also states that the key question to consider in determining

whether a personal services contract exists is the following: Will the

government exercise relatively continuous supervision and control over

the contract personnel performing the contract?12

From January 1993 to June 1995, OPM’s CPDF data showed that 87,743

federal employees took buyouts and that federal agencies reemployed 394

of the buyout recipients as civil servants.13 However, according to CPDF

data as of September 1996, the number of employees who had accepted

buyouts grew to 128,467, or an additional 40,724 employees. The number

of buyout recipients who are working as contractors to federal agencies or

as contractor employees is unknown because no governmentwide data are

available.

Scope and

Methodology

To gather information concerning the 23 buyout recipients who were

discussed in our October 1996 letter, we sent letters on November 8, 1996,

to the OIGs of the 9 federal agencies identified in OPM’s CPDF data as

employing these individuals. We asked the OIGs whether the buyout

recipients had returned to federal employment and, if so, whether they had

repaid the buyout or met DOD’s reemployment policy. We limited the scope

of our work to the buyout recipients who were reemployed as federal

employees between January 1993 and June 1995.

Among other things, our letters to the OIGs identified the buyout recipients

by name and social security number and asked specific questions

concerning their reemployment. We asked the OIGs to review the 23 buyout

recipient cases, provide us with information concerning the clarification of

conflicting data and apparent violations, and take any needed action, as

appropriate. In cooperation with the OIG offices, we contacted selected

federal agencies’ personnel officials about the status of some cases. We

also followed up with the OIGs and agency personnel officials by providing

them with additional information, such as detailed case information and

OPM documentation.

1148 C.F.R. 37.104 (d).

1248 C.F.R. 37.104 (c) (2).

13Reemployment of Buyout Recipients (GAO/GGD-96-102R, June 14, 1996).

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To determine if the 9 federal agencies that were identified in the CPDF data

as employing the 23 buyout recipients had internal control procedures in

place to provide a reasonable assurance of compliance with buyout

reemployment requirements, we asked the agencies to provide us with

copies of these procedures. Specifically, we asked the agencies for copies

of their internal control procedures on the reemployment of buyout

recipients either as members of the civil service or as personal services

contract employees.

To determine whether other selected agencies had internal control

procedures for the reemployment of buyout recipients under personal

services contracts, we first had to decide which agencies to select for the

review. To do so, we reviewed OPM’s August 1996 interim report to

Congress on the reemployment of buyout recipients.14 In that report, OPM

said that none of the agencies in its review reported cases involving

buyout recipients’ returning to work under personal services contracts,

but that several agencies reported having completed or having begun

reviews and follow-ups of their contracting arrangements.

In its report, OPM identified DOD and DOT as having conducted reviews of

their contracting arrangements and GSA as having a review under way. DOD

reported to OPM that it had not reemployed any buyout recipients under

personal services contracts. However, OPM asked DOD to provide an

updated report because DOD had looked only at DOD buyout recipients and

not recipients from other agencies. As a result, we excluded DOD from our

review of this matter. We decided to review the OIG audit reports of DOT15

and GSA to (1) gain an understanding of the experiences agencies have had

with buyout recipients’ being hired under personal services contracts and

(2) learn what kind of internal control procedures may be applicable.

Because governmentwide data on buyout recipients hired under personal

services contracts do not exist and because of time constraints, we limited

the part of our review concerning internal controls for personal services

contracts to the agencies that had the two OIG audits. We also obtained

OPM’s 1994 and 1996 written guidance as well as OPM’s list of possible

options that agencies could take to help ensure compliance with the

14Interim Status Report, OPM, Washington, D.C.: August 1996. In December 1997, OPM issued its final

reports to Congress entitled Voluntary Separation Incentive Payments: Buyouts Under the Federal

Workforce Restructuring Act of 1994 (WRO 97-103, Dec. 1997) and Voluntary Separation Incentive

Payments: A Report on Reemployment and Repayment Activity. Our report was already in final

processing at the time that OPM’s final reports were issued.

15The DOT OIG’s audit report concerned the Federal Aviation Administration, which was previously

identified in our June 1996 letter (GAO/GGD-96-102R).

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B-277085 

buyout repayment provision, and we discussed this guidance with OPM

officials.

We did our review in Washington, D.C., from October 1996 to

October 1997 in accordance with generally accepted government auditing

standards. We provided a draft of this report to the Director of OPM and to

the heads of the 9 agencies identified as employing the 23 buyout

recipients in our review and requested their comments. These comments

are discussed at the end of this report.

Eleven Violations

Were Found in the 23

Buyout Cases, and

More Violations Were

Found by Other

Agencies

Of the 23 cases that we asked the OIGs to examine, the agencies confirmed

that 9 cases violated FWRA’s repayment provision and that 2 cases violated

DOD’s reemployment policy. The remaining 12 cases were not violations,

but they were identified in the CPDF because of inaccurate data. Also, one

additional case of reemployment of a buyout recipient without repayment

was found by the U.S. Department of Agriculture’s (USDA) OIG while

researching the case about which we asked. In addition, OPM found FWRA

repayment provision violations in two other research efforts it undertook,

but it is unclear whether these violations are in addition to the violations

that we found.

Selected Agencies Found

Nine Cases Violated the

Repayment Provision, and

Two Cases Violated DOD’s

Reemployment Policy

The 9 federal agencies identified in the CPDF data as employing the 23

buyout recipients provided information showing that a violation of FWRA’s

repayment provision or DOD’s policy had occurred in 11 of the 23 cases.

(See app. II for the employment status of the 23 buyout recipient cases, by

federal agency.) The agencies reported that in 9 of the 11 cases, FWRA’s

repayment provision was violated. These agencies also reported that they

hired the nine buyout recipients without seeking repayment of the buyout.

The remaining two cases were violations of DOD’s reemployment policy,

which did not require buyout repayment.

After determining that a violation had occurred, the agencies varied in

how they responded. In general, they based their actions on whether they

still employed the buyout recipient. For example, of the nine cases with

violations of FWRA’s repayment provision, six cases involved individuals

who were still employed, and the hiring agencies arranged for the buyout

recipients to make repayments.16 In the three cases where the buyout

recipients were no longer in their employ, the hiring agencies billed the

16In one of the six cases where repayment was arranged, the buyout recipient filed for bankruptcy.

Bankruptcy status was granted by the court, and the agency was legally barred from recovering the

buyout debt.

Page 8 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

recipient in one case, and took no action in the other two cases.17

Although the agencies did not seek repayment in these two cases, the law

requires that if a buyout recipient accepts reemployment within 5 years of

the separation, he or she is required to repay the buyout unless a waiver is

granted by OPM. Therefore, if a buyout recipient is reemployed without

repaying the buyout, the hiring agency is to seek recovery of the debt. The

hiring agency has this obligation even though any money it recovers must

go to the agency that originally paid the buyout, which may not be the

agency rehiring the buyout recipient. OPM has instructed agencies that

when a buyout recipient is reemployed by another agency, the two

agencies should coordinate efforts to collect the buyout amount.

In the two cases that violated DOD’s reemployment policy, DOD’s OIG

reported that the Department had rehired both buyout recipients in

violation of its policy not to rehire such individuals within 1 year of their

separation unless a high-level DOD official grants an exception. DOD

subsequently waived its policy for one buyout recipient; the other

recipient resigned. Both of the buyout recipients received their buyouts

before FWRA was enacted; therefore, the repayment provision did not

apply.

Agencies Found That the

12 Remaining Cases

Involved Inaccurate Data

Agency officials told us that 12 of the cases we identified were not

repayment violations. In 6 of the 12 cases, the federal agencies said that

they mistakenly had submitted inaccurate data to OPM’s CPDF, which we

used in our previous review to identify potential violators. The data that

the agencies submitted to the CPDF showed that they had reemployed six

buyout recipients. However, the agencies reported that, in a follow-up

review of their records, they discovered that they had not reemployed

these recipients. For example, DOD said that three buyout recipient cases it

reported involved individuals who had retired after receiving the buyouts

but that the recipients were identified in Department data as employees,

even though they were never rehired. DOD explained that the positions the

three individuals once held were part of a large transfer of positions within

the Department and that an error was made in recording the transfer.

For the remaining 6 of the 12 cases, the agency officials said that they had

no record of ever employing the buyout recipients. At the time of our

previous review, the CPDF erroneously listed these agencies as the

recipients’ employers.

17The two individuals had resigned from the agency, and it decided not to pursue the individuals to

repay their buyouts.

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USDA Found Another

Violation of the FWRA

Repayment Provision

While researching the case we inquired about, USDA’s OIG reported finding

another buyout recipient that USDA had employed who was required to

repay the buyout as a condition of reemployment but who had not done

so. According to the OIG, USDA planned to bill the buyout recipient to

recover the buyout debt. USDA had hired this buyout recipient after the

review period covered in our October 1996 letter (i.e., Jan. 1993 through

June 1995).

OPM Found FWRA

Repayment Provision

Violations in Two Other

Research Efforts

OPM conducted two research efforts on reemployed buyout recipients; one

collected data using a survey, and the other used an analysis of CPDF data.

The results of the two research efforts are summarized in OPM’s 1996

interim report.18 OPM’s survey, which was conducted from March 30, 1994,

through May 20, 1996, and included the heads of all of the cabinet-level

agencies and most smaller independent agencies, reported that 46 of the

80 buyout recipients whom the agencies reemployed had possibly not

repaid their buyouts. According to OPM’s survey, 40 of the possible 46

violations were in Defense agencies (see app. IV for details), and the

remaining 6 possible violations were in non-Defense agencies. OPM said

that 34 of the 80 cases were in compliance with the FWRA repayment

provision. Although 58 agencies responded to the survey, according to

OPM, 10 agencies that had used buyouts did not respond in time for OPM to

include them in the interim report.

OPM also did a study of possible buyout recipients who may have been

reemployed during March 30, 1994, through June 30, 1995. This study,

which used CPDF data, found a possible 49 reemployed buyout recipients, 9

of whom had violated the FWRA’s repayment provision.19 For the remaining

40 cases, OPM determined that 38 cases had complied with the provision,

and that 2 cases needed further resolution.

As of October 1997, OPM officials said that they were still verifying the

number of possible buyout violations in both of its research efforts, and

that there was no way to be certain of the differences between the number

of reemployed buyout recipients identified under OPM’s two research

efforts or with our review. This uncertainty is because the OPM survey

effort did not collect names and social security numbers, which could

have been compared with the CPDF data in either OPM’s effort or our review

18Interim Status Report, OPM.

19In its study as well as in its written comments on our draft report, OPM identified nine violations of

the FWRA repayment provision. However, in subsequent documentation, OPM identified an additional

violation, which increased the total of CPDF-based violations for this period to 10.

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B-277085 

for verification. Our review and OPM’s study both were based on CPDF data,

and the time frame of OPM’s study was encompassed in our review.

However, the methodologies used to extract the data were not the same,

which provided different results. For instance, although OPM’s study

confirmed 10 FWRA repayment provision violations and we confirmed 9,

only 5 of the violations we confirmed were also confirmed by OPM;

consequently, 5 of the violations OPM confirmed were not confirmed by our

review.

Selected Agencies

Lacked Adequate

Internal Control

Procedures to Help

Ensure Compliance

With the FWRA

Repayment Provision

Federal agencies have an obligation to ensure that the FWRA repayment

provision is met when buyout recipients are reemployed as civil servants,

or when they work under contract expressly identified or administered as

personal services contracts for the government. Agency management is

responsible for establishing effective internal controls to help ensure

compliance with laws and regulations. Internal controls consist of policies

and procedures used to provide reasonable assurance that (1) goals and

objectives are met; (2) resources are adequately safeguarded, efficiently

used, and reliably accounted for; and (3) laws and regulations are being

followed. However, none of the 9 agencies that we asked to provide the

status of the 23 buyout recipient cases had adequate internal control

procedures in place to provide reasonable assurance that the FWRA

repayment provision was met. This was the case despite OPM’s 1994 and

1996 guidance to agencies on the FWRA repayment provision as well as

OPM’s list of options explaining steps agencies could take to identify

returning buyout recipients, steps that OPM said were inexpensive to

implement.

In GSA and DOT, which entered into contracts involving buyout recipients,

the OIGs reported that GSA and DOT’s Federal Aviation Administration (FAA)

did not have adequate procedures to prevent violations of the FWRA

repayment provision. According to both OIGs, the internal control

procedures of those agencies could not be used to determine whether

contracts were administered as personal services contracts and, therefore,

whether the contract personnel who were buyout recipients were subject

to the FWRA repayment provision.

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The Department of State

Created a Form Requiring

Certification of Buyout

Status, and OPM Believes

That Identifying Buyout

Recipients Is Important

To help ensure compliance with the FWRA repayment provision, the

Department of State created a form for job applicants to complete (and

sign and date) indicating whether they had received a buyout within the

previous 5 years. By having an applicant certify his or her buyout status in

writing, the State Department would have documented evidence of the

applicant’s response to the question of receiving a buyout should a

question arise after the applicant was hired. However, according to a State

Department official, if an applicant indicated that he or she were a buyout

recipient, the agency had no personnel procedures in place to ensure that

the appropriate buyout repayment provision was satisfied. Such

certification was not required by the other 8 agencies from which we

requested information on the 23 buyout recipient cases.

According to OPM, a fundamental step for agencies to help ensure

compliance with the repayment provisions of the various buyout

authorities is for the agencies to identify whether job applicants are

former federal employees and, if so, whether they had received a buyout.

OPM’s instructional pamphlet for job applicants, which is entitled Applying

for a Federal Job, states that individuals may apply for federal employment

using either of two documents. Applicants may use a résumé or the

Optional Application for Federal Employment - Optional Form 612,

20

which asks individuals to provide information about their work history,

including dates of employment, and to certify if they had ever been a

civilian employee with the federal government. According to OPM, when

applicants indicate on any of these applications for employment that they

have prior federal service, hiring officials are to ask the applicant whether

he or she received a buyout.

Job applicants who submit résumés are to provide the same information

that is requested on the Optional Application For Employment—that is,

work history and whether they had ever been federal employees. Of

course, federal agencies must depend on job applicants’ truthfully

reporting such information. However, the Optional Application For

Employment and the instructional pamphlet for résumés state that

providing false information is grounds for not hiring the applicant, for

firing the applicant after he or she is employed, and for imposing a fine or

prison sentence on the applicant.

In our discussions with OPM officials, they said that having job applicants

complete a certification form, like the one developed by the State

20OPM abolished the Application for Federal Employment - Standard Form 171; however, applicants

can use it until the supply is exhausted.

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Department, would help agencies identify applicants who were buyout

recipients. The officials explained that information on whether an

applicant had received a buyout may not be readily available to the hiring

agency. For example, the information may be in the individual’s official

personnel folder, which the hiring agency may not receive for several

weeks, or in a computer system that is located at the agency that paid the

buyout. In addition, such certification would assist agencies that were

hiring individuals who had received buyouts from other agencies,

especially those agencies that do not participate in the CPDF, such as those

in the judicial and legislative branches of government. For agencies

covered by 5 C.F.R. 7.2, it is mandatory that they provide OPM with

personnel information for use in the CPDF, among other things, unless

specifically exempted by statute.

The need for hiring officials to readily know whether a job applicant is a

former federal employee who took a buyout was made even more

important by the enactment of the 1996 legislation. As previously

mentioned, this legislation requires buyout recipients under its authority

to repay the full buyout amount before the employee’s first day of work.

USDA and the Department

of the Treasury Issued

FWRA Notification

Guidance to Its

Components, but Only One

in Each Agency Developed

Internal Control

Procedures

Of the nine agencies, our review showed that only USDA and the

Department of the Treasury had issued guidance notifying component

heads of the FWRA repayment provision. In addition, as a result of our

inquiry into apparent FWRA buyout repayment violations at these

components, one component in each of these agencies—USDA’s Animal and

Plant Health Inspection Service (APHIS) and Treasury’s Internal Revenue

Service (IRS)—developed and issued procedures that could be used to help

prevent future buyout violations, according to agency officials.

USDA issued notification of the FWRA repayment provision on July 18, 1996,

and Treasury issued its notification on February 10, 1997. Each agency’s

notification primarily consisted of OPM’s guidance entitled Reemployment,

Personal Services Contracts, and the Repayment of Voluntary Separation

Incentives, which was dated March 1996. In addition, Treasury’s

procedures included OPM’s list of possible options for agencies but did not

establish procedures to implement the options.

According to its officials, APHIS developed internal control procedures,

which were adopted on November 21, 1996, that require its personnel

officials to screen job applicants and check new employees to help ensure

that APHIS and its employees are in compliance with FWRA’s and other

Page 13 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

buyout authorities’ repayment provisions. However, although the

procedures APHIS officials provided to us require personnel officials to

review job applications to identify whether individuals had previous

federal service and, if so, took voluntary buyouts, APHIS did not have

procedures that personnel officials should follow if they identified such

service or receipt of a buyout. In addition, APHIS did not have the

applicants certify their buyout status.

IRS issued optional procedures on December 24, 1996, to help ensure that

rehired buyout recipients comply with the repayment provision under a

particular buyout authority. These procedures were based, in part, on

OPM’s list of options. However, IRS’ procedures are not required and,

therefore, cannot ensure that the IRS is in compliance with FWRA’s and

other buyout authorities’ repayment provision.

DOD Had Programs in

Place to Address Some of

OPM’s Optional

Procedures

According to a DOD spokesperson, who also represented the Departments

of the Army, Navy, and Air Force, DOD had programs in place that

addressed some of OPM’s optional procedures to help ensure compliance

with the FWRA repayment provision. One of these programs was “Operation

Mongoose,” which was created to prevent and detect financial fraud in

DOD. The program, which was implemented in June 1994, compares DOD’s

automated data with those of other agencies to point out probable fraud

and ensure that erroneous payments are not being made. In March 1995,

DOD first used the program to detect DOD buyout takers who had returned

to work in the federal government. In addition, DOD mailed two

publications to its personnel directors, which are also available via the

Internet and E-mail, to notify them of various personnel matters, including

their responsibilities for buyout repayment provisions. Although DOD’s

efforts to identify financial fraud and to notify personnel directors are

useful steps, DOD did not have procedures in place during the employment

application process to (1) identify whether job applicants were buyout

recipients and (2) help ensure buyout repayment as required by the FWRA

repayment provision and the more recent buyout authorities.

The Department of Justice

and Treasury Did Not Have

Internal Control

Procedures

Neither the Department of Justice nor Treasury had internal control

procedures to help ensure that buyout recipients who return to federal

employment comply with the FWRA repayment provision. A Department of

Veterans Affairs (VA) official said that the Department had no written

guidance that focused on buyout recipients, and that the only way that VA

determines whether an individual is a buyout recipient is to review the

Page 14 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

individual’s Notification of Personnel Action (Standard Form 50) form,

which was generated from his or her personnel office. A Justice official

also said that the Department had no written procedures concerning

buyout recipients who return to federal reemployment.

DOT’s FAA and GSA Had

Ineffective Internal Control

Procedures to Determine If

Buyout Recipients Were

Employed Under

Personnel Services

Contracts

At DOT, several former FAA employees who had received buyouts returned

to work at FAA as employees of DOT contractors. Because of telephone “hot

line” complaints relating to the legality of those employees’ return, the DOT

OIG examined and reported on whether FAA and the rest of DOT were

complying with the FWRA repayment provision.21 Partly as a result of the

DOT OIG’s report, GSA’s OIG examined and reported on whether any former

GSA employees who had received buyouts had returned to GSA as

employees of contractors.22 The two audits found that (1) 27 former DOT

and GSA employees were working under contracts that, although not

identified as personal services contracts, were being administered as such

and (2) these employees had not repaid or arranged to repay their buyouts,

as required by the FWRA.

23

The DOT OIG examined 260 cases of buyout recipients—20 former FAA

employees and 240 former employees of other DOT agencies—who had

returned to work for DOT contractors.24 The OIG reported violations in some

of the FAA cases but did not find any problems with the other DOT cases.

According to the OIG’s 1996 report, FAA allowed 17 of the 20 former

employees to return to work under contracts, which were administered as

personal services contracts, without meeting the FWRA buyout repayment

provision. The OIG’s report attributed these 17 violations to inadequate

internal control procedures at FAA and inadequate enforcement of FAA’s

21Voluntary Separation Incentive Payments, Department of Transportation, R6-FA-6-009, Washington,

D.C.: February 9, 1996.

22GSA Needs To Take Additional Actions to Implement the Federal Workforce Restructuring Act of

1994, A63317/O/H/F96026, Washington, D.C.: September 30, 1996.

23Section 5 (g) of the FWRA also states that “appropriate action [shall be taken] to ensure that there is

no increase in the procurement of service contracts by reason of the enactment of the act, except in

cases in which a cost comparison demonstrates such contracts would be to the financial advantage of

the federal government.” However, both the DOT and GSA OIG audits found that few, if any, cost

comparisons were done and those that were done understated the cost of the contract to the federal

government and did not follow the Office of Management and Budget’s guidance in this matter. The

DOT audit determined that an annual increase in the government’s cost exceeded $1 million in

reemploying buyout recipients who returned as employees of FAA contractors compared with the cost

of federal employees.

24The scope of the DOT OIG’s audit was limited to (1) the 20 former FAA employees who had taken

buyouts in fiscal year 1994 and (2) the 240 other former DOT employees who had taken buyouts in

fiscal year 1994 and through March of fiscal year 1995.

Page 15 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

guidance by its contracting officers. The report also stated that buyout

payments totaling $425,000 for the 17 employees should be recouped, and

that the OIG had referred these violations to DOT’s Office of Investigations

for coordination with the United States Attorneys to begin the process of

seeking buyout repayments.

The GSA OIG reviewed the cases of 39 former GSA employees who had

received buyouts and were employed by contractors working for GSA.

25 Of

the 39 cases, the OIG determined that 10 employees were, in effect,

working under personal services contracts without meeting the FWRA

buyout repayment provision. As in the case of the 17 employees at FAA,

these 10 employees were hired under contracts that were actually being

administered as personal services contracts. The OIG attributed these

violations to GSA’s lack of adequate policy guidance for defining a personal

services contract. The OIG said that program managers, buyout recipients,

and contracting officers did not fully understand what a personal services

contract was or under what conditions a buyout recipient could return to

federal employment without repaying the buyout.

The GSA OIG also said the risk was increasing that more GSA buyout

recipients may return to work for GSA under personal services contracts

without repaying their buyouts. The OIG said that a number of additional

buyout recipients had already returned to work under various contracts,

some of which were being administered as personal services contracts.

The OIG explained that GSA staffing had decreased 21 percent overall from

its 1993 level, which would require GSA program offices to reduce program

services, contract out work to maintain workload, or do both.

Increased contracting, according to the GSA OIG, heightens the risk of

buyout recipients’ returning under personal services contracts. However,

the OIG did not believe that action should be taken against the 10 buyout

recipients it found in violation because the OIG did not find that any of the

instances appeared to be willful or deliberate attempts to circumvent the

FWRA repayment provision. In fact, the OIG added, the buyout recipients

took specific steps to try to comply with the FWRA, such as not performing

the same functions, not working in their former offices, and not working

as a contractor directly for the government. Although we did not attempt

to determine whether any of the GSA contracts were, in effect, personal

services contracts, if in fact they were, then the FWRA repayment provision

25The scope of the GSA OIG’s audit was limited to the 39 employees who had accepted buyouts from

GSA between March 1994 and February 1996.

Page 16 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

would have been violated and the buyout debt would have to be

recovered.

The DOT and GSA OIG audits determined that violations of the FWRA

repayment provision have occurred under agency contracts. However, the

audits might have uncovered more violations if they had looked for all

buyout recipients that were employed at the two agencies under service

contracts and had not limited their search to their agency’s buyout

recipients.

As illustrated by the DOT and GSA audits, violations of the FWRA repayment

provision may occur not only under contracts expressly identified as

personal services contracts but also in connection with contracts that are

administered as personal services contracts. As previously mentioned, OPM

provided optional guidance to agencies on ways to help ensure

compliance with the buyout repayment provision, and some of these

suggestions pertained specifically to contracting. In its guidance, OPM

suggested that agencies

• issue their own guidance to personnel involved in the oversight and

management of contracts (e.g., contracting officers) and have them

monitor compliance with the buyout repayment provisions,

• require contractors to identify and certify that contract employees who

have received buyouts are not working in violation of the law, and

• require periodic spot checks of contracting personnel to help ensure

compliance.

These OPM suggestions were also recommended to some extent by the DOT

and GSA OIGs in their reports. For example, the DOT OIG recommended that

(1) FAA identify all of its employees who took buyouts and returned to

work for FAA as employees of contractors and (2) the circumstances of

each case be evaluated to determine whether FAA and the employees who

took buyouts complied with the FWRA. The GSA OIG said that GSA’s policies

and procedures for implementing the FWRA should be clarified, and that the

clarification should include information explaining how a contract that is

not intended to be a personal services contract can become one and what

key actions to take if that happens. According to the GSA OIG, the clarified

policies and procedures should be distributed to all employees who are

scheduled to leave under the buyout program, all program managers, and

all contracting officers.

Page 17 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

Conclusions Our review found violations of the FWRA repayment provision and DOD’s

reemployment policy as well as a lack of internal controls to help prevent

such violations. OPM’s list of possible options that agencies could take to

help ensure compliance with buyout repayment provisions generally was

not implemented by the agencies we studied, even though OPM officials

believe that doing so would not be costly to agencies. Because agency

management is responsible for ensuring its compliance with laws and

regulations, it is also responsible for establishing effective internal

controls to avoid violations of such laws and regulations, including the

FWRA repayment provision. Under the time frames of the current buyout

laws, every federal agency will need to verify buyout recipients’

compliance with repayment provisions of the various buyout authorities

through 2006.

According to OPM, a fundamental step for agencies to help ensure

compliance with the repayment provisions of the various buyout

authorities is for the agencies to identify whether job applicants are

former federal employees and, if so, whether they had received a buyout.

Identifying buyout recipients who work under contracts with the

government that are not expressly identified as personal services

contracts, but are administered as such, appears to be more difficult than

identifying buyout recipients who return directly to federal service. In the

cases of DOT and GSA, their OIGs found that the agencies’ controls did not

adequately identify contracts administered as personal services contracts.

Thus, DOT and GSA found it difficult to identify buyout recipients who had

returned under personal services contracts. For an agency to determine

that a contract employee must comply with a repayment provision, it must

first determine that the employee’s contract is expressly identified as, or is

being administered as, a personal services contract.

The need for agencies to be able to better recognize the administration of

contracts as personal services contracts was pointed out by the audit

report of GSA’s OIG. The audit report said that, as downsizing occurs,

agencies are turning to contractors to accomplish tasks, and that some

employees who leave agencies because of downsizing are working for

those contractors. As a result, the DOT and GSA OIGs made

recommendations in their reports to help ensure that their employees and

contractors know what constitutes a personal services contract and how

the identification of buyout recipients under such contracts could help

prevent future repayment provision violations.

Page 18 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

Recommendations to

the Director of OPM

To help ensure that agencies establish procedures to comply with the

buyout repayment provisions of the FWRA and other buyout authorities, we

recommend that the Director of the Office of Personnel Management

(OPM) take the following actions to establish steps to identify potential

violations of the provisions.

• Promulgate regulations requiring agencies to identify buyout recipients

who (1) are applying to return or have returned directly to federal

employment or (2) are applying to work for or already work for the federal

government under a contract that is, by its terms, a personal services

contract, or administered as such, and require them to repay their buyouts.

In doing so, the Director may want to consider OPM’s list of possible

options (see app. III) that agencies could take to help ensure compliance

with the buyout repayment provisions.

• Create a form that job applicants would be required to complete to certify

whether they were buyout recipients and, if so, from which agency they

received the buyout. The Director may want to consider requiring that the

form (1) be attached to employment résumés or to the Optional

Application for Employment26 or (2) be completed only by those

applicants to which agencies are considering making job offers.

Agency Comments

and Our Evaluation

We provided a draft of this report for review and comment to the Director

of OPM and the heads of the 9 agencies from which we had requested

information on the 23 buyout recipient cases.

In a letter dated August 15, 1997, the Director of OPM said that OPM does not

oppose our recommendations but that it does question the need for these

actions, because of the extent of the cooperation it has with the federal

agencies. The Director said agencies have been extremely cooperative in

responding to OPM’s requests for information regarding reemployed buyout

recipients, regardless of whether the recipient is in violation of the FWRA

repayment provision. The Director also said that we overestimated the

scale of the FWRA repayment provision problem because we

double-counted the number of violations by adding the number of

violations we identified to those of OPM’s research efforts, although both of

us very likely identified the same violations.

We also received cooperation from agencies in tracking down the status of

the 23 cases we reviewed. However, we contacted these agencies after the

26Some applicants may use the Standard Form 171 because it is still an accepted form of application

and may be used until the supply of the form is exhausted.

Page 19 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

buyout recipients were rehired. Although the information the agencies

provided may serve to assist in identifying violations after they have

occurred, it does not prevent violations from occurring. Preventing

violations is especially important for the more recent buyout laws, which

require buyout recipients to repay their buyouts before their first day of

reemployment with the federal government or employment under a

personal services contract. Therefore, we continue to believe that agencies

are obligated to have internal controls that are adequate to reasonably

ensure compliance with the buyout provisions. In addition, we agree that

our draft report included some instances of apparent double-counting, and

we have made the appropriate changes in this report. Our review and one

of OPM’s studies in its interim report were based on CPDF data, and the time

frame of OPM’s study was encompassed in the period we reviewed.

However, the methodologies used to extract the data were not the same,

which provided different results. For instance, although OPM’s CPDF-based

study confirmed 10 FWRA repayment provision violations27 and we

confirmed 9, only 5 of the violations we confirmed were the same as those

confirmed by OPM. Consequently, five of the violations that OPM confirmed

were not confirmed by our review.

In addition, the Director made a number of technical comments regarding

accuracy or context in the draft report; we made these changes in this

report where appropriate. See appendix V for a reprint of the OPM letter

and our additional comments.

On August 7, 1997, we met with the Director of Staffing and Career

Development, Office of the Deputy Assistant Secretary of Defense

(Civilian Personnel Policy), who provided oral comments on a draft of this

report for the Department of Defense (DOD) and the Departments of the

Army, Navy, and Air Force. The Director believed it would not be cost

effective to comply with OPM’s suggested option to contact the

approximately 95,000 buyout recipients who had left DOD and to remind

them of the FWRA repayment provision, given the very small numbers of

detected violations. However, she agreed that before prospective

employees are hired, they should be required to certify whether they have

received a buyout from a previous federal employer.

Although we believe OPM’s suggested options are useful indicators of the

steps that can be taken to help ensure compliance with buyout repayment

provisions, we do not suggest that all of OPM’s options should be

27Nine violations were identified by OPM in its study and in its comments on our draft report. One

additional violation was subsequently identified by OPM staff.

Page 20 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

implemented by every agency. We believe that documenting whether

prospective employees have received buyouts is a sound step to help

ensure compliance, but it must be linked to procedures to help ensure that

those who have received such payments repay them to satisfy the

appropriate buyout provision.

We received written comments on a draft of this report from the U.S.

Department of Agriculture (USDA) in a letter dated August 8, 1997, from the

Director of its Office of Human Resources Management. The Director

provided no specific comments on our recommendations. However, he did

express concern regarding what he perceived as an overemphasis on USDA

in the draft report and an underemphasis on difficulties that the

Department faced. Changes were made to this report to address these

concerns as appropriate. See appendix VI for a reprint of USDA’s letter and

our response to specific comments.

We met with the Associate Deputy Assistant Secretary for Human

Resources Management of the Department of Veterans Affairs (VA) on

August 14, 1997, to obtain oral comments on the draft report. She said that

VA was not against regulations as long as they are not prescriptive and

inflexible. VA also agreed that a certification form could be useful.

The Department of Justice’s Assistant Attorney General for Administration

said, in a letter dated August 7, 1997, that Justice agreed with the

recommendations in the draft report. The Assistant Attorney General

added that Justice will continue to provide guidance to its organizational

components on the need to exercise caution in rehiring buyout recipients.

He said that Justice also intends to work closely with the Department’s

Justice Management Division’s Procurement Services Staff to provide

components with clear guidance on the definition of a “personal services

contract.” See appendix VII for a reprint of Justice’s letter.

In a letter dated August 13, 1997, the Department of the Treasury’s

Assistant Director of the Office of Personnel Policy said that Treasury had

no comment on the draft report. See appendix VIII for a reprint of the

Treasury letter.

We spoke with the Department of State’s GAO Liaison on August 22, 1997,

to obtain oral comments on the draft report. She said that the State

Department wanted us to define the “certain situations” we referred to

when agencies could seek a waiver of repayment from OPM. We resolved

Page 21 GAO/GGD-98-12 Buyout Repayment Provisions
B-277085 

this comment by providing additional information. She said that the State

Department had no other comments.

As arranged with your office, unless you announce the contents of this

report earlier, we plan no further distribution until 15 days after its issue

date. At that time, we will send copies of this report to the Chairmen and

Ranking Minority Members of interested congressional committees, the

Director of OPM, the heads of the nine agencies included in our review, and

other interested parties. Upon request, we will also make copies available

to others.

The major contributors to this report are listed in appendix IX. Please call

me on (202) 512-8676 if you have any questions.

Sincerely yours,

Michael Brostek

Associate Director,

Federal Management

 and Workforce Issues

Page 22 GAO/GGD-98-12 Buyout Repayment Provisions
Page 23 GAO/GGD-98-12 Buyout Repayment Provisions
Contents

Letter 1

Appendix I 

Comparison of

Selected Buyout Laws

26

Appendix II 

Employment Status of

the 23 Buyout

Recipient Cases, by

Federal Agency

28

Appendix III 

OPM’s List of Possible

Options Agencies

Could Take to Ensure

Compliance With

Buyout Repayment

Provisions

29

For Buyout Recipients Returning Directly to Federal Service 29

For Buyout Recipients Returning as Contract Employees 29

For Buyout Recipients Returning as Either Federal or Contract

Employees

29

Appendix IV 

Status of the 40 Open

Department of

Defense Cases of

Possible Violations

31

Appendix V 

Comments From the

Office of Personnel

Management

32

GAO Comments 36

Page 24 GAO/GGD-98-12 Buyout Repayment Provisions
Contents

Appendix VI 

Comments From the

U.S. Department of

Agriculture

38

GAO Comments 40

Appendix VII 

Comments From the

Department of Justice

42

Appendix VIII 

Comments From the

Department of the

Treasury

43

Appendix IX 

Major Contributors to

This Report

44

Table Table IV.1: DOD’s 40 Open Cases of Possible Violations 31

Abbreviations

APHIS Animal and Plant Health Inspection Service

CPDF Central Personnel Data File

DOD Department of Defense

DOT Department of Transportation

FAA Federal Aviation Administration

FAR Federal Acquisition Regulation

FWRA Federal Workforce Restructuring Act

GSA General Services Administration

IRS Internal Revenue Service

OIG Office of Inspector General

OPM Office of Personnel Management

USDA U.S. Department of Agriculture

VA Department of Veterans Affairs

Page 25 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix I 

Comparison of Selected Buyout Laws

Statutory authority Buyout payment Duration Federal reemployment requirements

Department of Defense (P.L.

102-484, Oct. 23, 1992; P.L.

103-337, Oct. 5, 1994, and

implementing instructions;

P.L. 105-85, Nov. 18, 1997)

The lesser of severance pay

or $25,000.

Separations must be made

by September 30, 2001.

DOD’s initial buyout legislation contained no

reemployment requirements. However, it

was DOD policy that employees could not

be reemployed by any DOD installation in

any capacity for 12 months following their

separation. No restrictions were placed on

their ability to return to non-DOD agencies.

FWRA amended DOD’s buyout authority so

that DOD employees who received a buyout

on or after March 30, 1994, must repay the

buyout or obtain a waiver from OPM, when

they return to federal employment within 5

years. DOD employees do not have to repay

the buyout if they return to federal

employment under personal services

contracts.

Federal Workforce

Restructuring Act (P.L.

103-226, Mar. 30, 1994)

The lesser of severance pay

or $25,000.

March 30, 1994, through

March 31, 1995. Delayed

buyouts were permitted

through March 31, 1997.

Employees who received buyouts must

repay the buyout or obtain a waiver from

OPM when they return to federal

employment (including employment under

personal services contracts) within 5 years.

Treasury, Postal Service, and

General Govt. Appropriations

Act for FY 1997, Sec. 663

(P.L. 104-208, Sept. 30, 1996)

The lesser of severance pay

or an amount determined

by the agency head, not to

exceed $25,000.

October 1, 1996, through

December 30, 1997.

Employees who received buyouts must

repay the buyout prior to the first day of

federal government reemployment

(including employment under personal

services contracts) when they return to

federal employment within 5 years.

National Aeronautics and

Space Administration (P.L.

104-204, Sept. 26, 1996)

The lesser of severance pay

or $25,000.

September 26, 1996,

through September 30,

2000.

Employees who received buyouts must

repay the buyout prior to the first day of

federal government reemployment

(including employment under personal

services contracts) when they return within 5

years. Repayment may be waived if the

individual possesses unique abilities and is

the only qualified applicant available for the

position.

U.S. Department of

Agriculture, FY 1997

Appropriation (P.L. 104-180,

Aug. 6, 1996)

The lesser of severance pay

or (1) $25,000 from

enactment through FY

1997, (2) $20,000 in FY

1998, (3) $15,000 in FY

1999, or (4) $10,000 in FY

2000.

October 1, 1996, through

September 30, 2000.

Employees who received buyouts must

repay the buyout prior to the first day of

federal government reemployment

(including employment under personal

services contracts) when they return within 5

years. No provision to waive repayment is

provided.

Agency for International

Development (P.L. 104-190,

Aug. 20, 1996)

The lesser of severance pay

or an amount determined

by the agency head, not to

exceed $25,000.

August 20, 1996, through

January 31, 1997.

Employees who received buyouts must

repay the buyout prior to the first day of

federal government reemployment

(including employment under personal

services contracts) when they return within 5

years.

(continued)

Page 26 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix I 

Comparison of Selected Buyout Laws

Statutory authority Buyout payment Duration Federal reemployment requirements

Smithsonian Institution (P.L.

104-134, Apr. 26, 1996)

Determination to be made

by the Secretary, but shall

not exceed $25,000.

April 26, 1996, through

October 1, 1996.

Employees who received buyouts must

repay the buyout upon reemployment with

the federal government within 5 years.

Repayment may be waived by the Secretary

of the Smithsonian. Repayment is not

required if employee returns under a

personal services contract.

Source: GAO.

Page 27 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix II 

Employment Status of the 23 Buyout

Recipient Cases, by Federal Agency

Status of buyout recipient cases

Hiring agency

Individual employed in

violation of legislative

or DOD policy

provisions

Individual mistakenly

coded as reemployed

Agency had no record

of ever employing the

individual Total

Department of the Air Force 1a 0 2 3

Department of the Army 1 1 1 3

Department of the Navy 0 0 3 3

Department of Defense 1a 3 0 4

Department of Justice 1 0 0 1

Department of State 0 2 0 2

Department of the Treasury 4 0 0 4

Department of Agriculture 1 0 0 1

Department of Veterans

Affairs

2 0 0 2

Total 11 6 6 23

Note: This table does not include the additional violation that the Department of Agriculture

identified because it was outside the scope of our initial review.

aDOD policy violations.

Sources: Selected federal agencies.

Page 28 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix III 

OPM’s List of Possible Options Agencies

Could Take to Ensure Compliance With

Buyout Repayment Provisions

Listed below are the possible options that the Office of Personnel

Management (OPM) developed and encouraged agencies to use to help

them comply with buyout repayment provisions. We have reordered and

categorized the options on the basis of their application; however, the text

of each option is quoted directly from OPM’s original list.

For Buyout Recipients

Returning Directly to

Federal Service

“Alert agency hiring officials. Some existing buyout authorities (i.e., Agriculture and NASA)

provide for the payment of buyouts through as late as September 30, 2000. Thus, some

buyout takers will be covered under the repayment requirement through at least

September 30, 2005. Agency hiring officials are advised to judiciously review applicants for

Federal jobs at least through September 30, 2005, to insure that employees covered by the

repayment requirements are repaying the entire amount of the incentive or that they are

not being reemployed.28

“Scrub agency payroll and/or personnel records. Agencies may conduct periodic checks to

identify employees who have received buyouts and who are now reemployed by a Federal

agency. The Nature of Action Code (NOAC) for separation incentives is 825. OPM is also

conducting these checks through the Central Personnel Data File.”

For Buyout Recipients

Returning as Contract

Employees

“Review agency’s contract agreements. Structure contractual agreements involving

personal services contracting to address contractors’ use of former Federal employees who

have received buyouts. Additional options include requiring contractors to identify and

certify that contract employees who have received buyouts are not working in violation of

the law.

“Alert agency contract management personnel. Issue guidance to personnel involved in

contracting oversight and management for use in monitoring compliance.

“Require periodic spot checks of contracting personnel to ensure compliance.”

For Buyout Recipients

Returning as Either

Federal or Contract

Employees

“Remind each agency manager and/or supervisor of the repayment requirement and

provide guidelines for identifying violations.

“Post reminders in agency benefits or retirement office. This is a good location to reach

employees who have retired with incentives.

28This option does not reflect the effect of the National Defense Authorization Act for Fiscal Year 1998,

Public Law 105-85, November 18, 1997, which extends DOD’s buyout authority to September 30, 2001,

which would require hiring officials to judiciously review applicants for federal jobs at least through

September 30, 2006, to ensure that employees covered by the repayment requirements are repaying the

entire amount of the incentive or that they are not being reemployed.

Page 29 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix III 

OPM’s List of Possible Options Agencies

Could Take to Ensure Compliance With

Buyout Repayment Provisions

“Contact buyout recipients and remind them of repayment requirements. Agencies may opt

to send informational mailers to employees to remind them of applicable repayment rules.”

Page 30 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix IV 

Status of the 40 Open Department of

Defense Cases of Possible Violations

According to the Department of Defense (DOD), the Office of Personnel

Management (OPM) identified potential DOD violations of the Federal

Workforce Restructuring Act (FWRA) repayment provision in two lists. The

March 15, 1996, list identified 51 possible violations that were based on a

survey completed by DOD for OPM, and its January 3, 1997, list, which was

based on OPM’s Central Personnel Data File research effort, identified 11.

Of the 51 potential violations in the March 1996 list, OPM and DOD

determined that 11 had either repaid their buyouts or were inappropriately

identified as DOD personnel subject to the FWRA repayment provision. Table

IV.1 shows the results of DOD’s investigation of the 40 remaining cases.

Some of these cases were violations of the repayment provision, but it is

not clear exactly how many were violations. For instance, to the extent

that the 17 “collections in progress” were initiated at the time the

individual applied for the job, they may not represent violations.

Table IV.1: DOD’s 40 Open Cases of

Possible Violations Type of action Number of cases

Operation Mongoose:

No debt owed 3

Collection initiated 13

Repaid 3

Collection in progress 17

Under investigation 4

Total 40

Source: DOD.

Of the 11 potential violations that DOD said OPM identified in its

January 1997 list, DOD reemployed two buyout recipients. One had made

the repayment; the other was making repayment.

Page 31 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix V 

Comments From the Office of Personnel

Management

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 32 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix V 

Comments From the Office of Personnel

Management

See p. 19.

See comment 1.

See comment 2.

Page 33 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix V 

Comments From the Office of Personnel

Management

See p. 19

and comment 2.

Page 34 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix V 

Comments From the Office of Personnel

Management

See comment 2.

Page 35 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix V 

Comments From the Office of Personnel

Management

The following are GAO’s comments on the Office of Personnel

Management’s letter dated August 15, 1997.

GAO Comments 1.OPM said that we should refer to 5 C.F.R. 576 in our report. This

regulation on buyouts, repayments, and waivers of repayment was

published on November 9, 1994. We had not specifically referred to OPM’s

regulation 5 C.F.R. 576 in our draft report because it was not pertinent to

our focus on agencies’ internal controls. Section 576.101 of the regulation

provides guidance on who is covered by the buyout conditions, what is

covered, what is required (the buyout recipient must repay the entire

amount of the buyout to the agency that gave the buyout), and exceptions

under the repayment provisions. However, the section is stated generally

and does not address what agencies should do to help ensure that

returning buyout recipients comply with the law. Section 576.102 deals

with buyout recipients’ requests for OPM’s approval for waivers of the

repayment provision, and, while it does not deal with what agencies

should do to help ensure compliance with the provision, this section is an

example of the instructional approach OPM could use in regulations

requiring agencies to adopt internal control procedures. We have added a

reference to 5 C.F.R. 576 to the report to provide additional information on

waivers of the repayment provision in accordance with OPM’s and another

agency’s suggestion.

2.OPM said that the draft report needed to more accurately reflect its

analysis and findings regarding buyout recipients who were reemployed in

violation of the repayment requirement, particularly the differences in the

methodologies used in the two analyses OPM conducted and the most

current data available from OPM. We had not distinguished between OPM’s

two research methodologies because it did not make that distinction in its

interim report, which we cited in the draft. On the basis of information OPM

provided in its comments, we made changes to make that distinction clear

in the final report. In addition, our draft report had contained the most

current data OPM had said was available prior to providing us its

comments. OPM provided, subsequent to our receiving its comments on our

draft report, a more current list of confirmed repayment provision

violators, which we used in the final report. On the basis of clarifying

information OPM provided in, and subsequent to, its comments, we also

made changes to the report to recognize that the repayment violations

found by OPM could overlap with those we found.

Page 36 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix V 

Comments From the Office of Personnel

Management

In addition, we clarified in the report the time frames for our effort and

OPM’s two research efforts. Although the time frames overlapped, they

were not identical.

Page 37 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix VI 

Comments From the U.S. Department of

Agriculture

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See comment 1.

See comment 2.

See comment 3.

Page 38 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix VI 

Comments From the U.S. Department of

Agriculture

See comment 4.

Page 39 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix VI 

Comments From the U.S. Department of

Agriculture

The following are GAO’s comments on the U.S. Department of Agriculture’s

letter dated August 8, 1997.

GAO Comments 1.USDA did not believe that our draft report sufficiently recognized the

difficulty agencies face in enforcing the buyout repayment requirements in

cases where buyout recipients do not reveal that they have received

buyout payments. We believe that our draft report did recognize the

responsibility of buyout recipients to reveal their buyout status; our

recommendation that a form be created on which job applicants would

certify their buyout status explicitly recognizes this responsibility of

buyout recipients. However, although any failure of buyout recipients to

acknowledge their status when reapplying for federal employment can

make enforcing the law more difficult, agencies nevertheless retain

responsibility for ensuring compliance. We recommended that OPM

promulgate regulations requiring that agencies take steps to identify

buyout recipients who need to repay their buyout because the agencies we

reviewed had not established procedures that provided a reasonable

assurance of compliance with the repayment requirement.

2.USDA said it was important to note that discrepancies in OPM’s CPDF data

compared with data in agency reports can contribute to the difficulty that

agencies may have in identifying repayment violations and observed that

such discrepancies explained some of the possible violations we had

found. We agree that discrepancies between the CPDF and agency reports

can make use of the CPDF an imperfect mechanism for identifying possible

buyout repayment violations. However, we did not recommend that

agencies rely on the CPDF to identify possible violations. Use of the CPDF

could be but one of several options for identifying possible violations. To

the extent that the CPDF is used, discrepancies in CPDF data can, at least in

part, be reduced by the agencies themselves—many of the inconsistencies

between CPDF data and agency reports were due to agencies’ not having

provided updated, accurate data to OPM.

3.USDA was concerned that the description and placement of references

to USDA violations at the beginning of the draft report implied that USDA

was the first and most significant violator. Our use of the USDA example

was intended to show the proactive response of this agency to the

situation, which distinguished it from the other agencies, and to show its

recognition of the importance of compliance with the law. However, due

to USDA’s concerns, we modified the report to lessen the emphasis on

USDA’s experiences.

Page 40 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix VI 

Comments From the U.S. Department of

Agriculture

4.USDA expressed concern about us not mentioning that it had issued

repayment provision procedures to the entire Department on July 18, 1996.

Although we requested that agencies provide us with copies of their

procedures, we only received a copy of APHIS’ procedures from USDA

officials and were told that they were not aware of any other USDA

procedures. We have changed the report to reflect that USDA had issued

notification of the FWRA repayment provision to its components and that

APHIS subsequently developed internal control procedures.

Page 41 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix VII 

Comments From the Department of Justice

Page 42 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix VIII 

Comments From the Department of the

Treasury

Page 43 GAO/GGD-98-12 Buyout Repayment Provisions
Appendix IX 

Major Contributors to This Report

General Government

Division, Washington,

D.C.

Steven J. Wozny, Assistant Director,

 Federal Management and Workforce Issues

Robert Goldenkoff, Assignment Manager

Walter E. Reed, Jr., Evaluator-in-Charge

Gregory Wilmoth, Senior Social Science Analyst

Office of the General

Counsel, Washington,

D.C.

Alan Belkin, Assistant General Counsel

Victor B. Goddard, Senior Attorney

(410092) Page 44 GAO/GGD-98-12 Buyout Repayment Provisions
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