GAO/AIMD-00-309R District Pay Bonuses

United States General Accounting Office

Washington, DC 20548

Accounting and Information

Management Division

B-286133

September 13, 2000

The Honorable Ernest J. Istook, Jr.

Chairman, Subcommittee on the District

of Columbia

Committee on Appropriations

House of Representatives

Subject: District of Columbia: Funding for Certain Union Employee Pay Bonuses

Dear Mr. Chairman:

You asked us to determine the funding source for $9.9 million in bonuses paid to certain

District union employees and provide a chronology of key events related to the bonus

payment. You also asked us to determine the District’s authority to reprogram funds to the

Tobacco Settlement Fund (TSF) from other appropriation accounts. On August 10, 2000,

using the slides included in the enclosure to this letter, we briefed the Subcommittee staff on

the results of our work.

To provide the information you requested and address your specific questions, we

(1) interviewed officials at the District of Columbia Financial Responsibility and

Management Assistance Authority (the Authority), Office of the Mayor, and Office of the

Chief Financial Officer (CFO), (2) reviewed and analyzed documents, including the labor

union agreement with the Mayor, funding plans, and fiscal impact statements, and (3) sought

and received a written response to a legal question regarding reprogramming of funds. We

conducted our work from February 2000 through July 2000 in accordance with generally

accepted government auditing standards. We did not independently verify underlying data.

We obtained oral comments on a draft of the slides from District officials, who stated that

they agreed with the contents.

Results in Brief

The District reported a surplus of about $445 million for fiscal year 1998, thus triggering the

need to reopen negotiations about bonus compensation with certain union employees, based

on a 1998 agreement. Negotiations took place and an agreement was reached during

November 1999. The bonus payment of $9.9 million applied to 5,746 District union

employees in two compensation plans represented by several union organizations. The
B-286133

Page 2 GAO/AIMD-00-309R District Pay Bonuses

$9.9 million represents a one-time, lump-sum bonus of about $1,700 per employee, which

the District paid in December 1999.

Several funding plans were advanced before arriving at the final approach. Initially, the

bonuses were to be funded from the following sources:

• $4.2 million from the TSF,

• $3.5 million from fiscal year 2000 budget, and

• $2.2 million (interest earned on funds held in escrow accounts) in grants from the

Authority.

The District proposed to reimburse the TSF by reprogramming funds from the Department of

Public Works and through Short-term Borrowing. The D.C. Council and the Authority

approved the proposed reprogramming. However, the District abandoned the proposed

reprogramming because it was actually a transfer, and the District subsequently determined

that it lacked legislative authority to transfer funds between appropriation accounts.

Ultimately, the source of funding for the bonuses was fiscal year 2000 personal services

budgets for the applicable agencies.

Regarding the use of funds for reprogramming, appropriation law defines reprogramming as

the utilization of the funds within an appropriation account for purposes other than those

contemplated at the time of the appropriation. It further defines transfer as the shifting of

funds between appropriation accounts. On June 1, 2000, the District CFO notified us that no

TSF moneys were used to pay certain union employee bonuses. Subsequently, in a June 27,

2000, letter to us, the District CFO stated that the plan to replenish the TSF from other

appropriation accounts would have been a transfer and the District does not have the

authority to transfer these funds.

-----

We are sending copies of this letter to Senator Kay Bailey Hutchinson, Senator Richard

Durbin, Senator George Voinovich, and Representative James P. Moran, Representative

Thomas M. Davis, III, and Representative Eleanor Holmes Norton in their capacities as

Chairmen or Ranking Minority Members of Senate and House Committees and

Subcommittees. We are also sending copies of this letter to Honorable Anthony A.

Williams, Mayor of the District of Columbia, and the Honorable Alice M. Rivlin,

Chairperson of the District of Columbia Financial Responsibility and Management

Assistance Authority. Copies will be made available to others upon request.
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Page 3 GAO/AIMD-00-309R District Pay Bonuses

We appreciate the opportunity to be of assistance. If you or your staff have any questions

regarding the briefing or this letter, or if we can be of further assistance, please contact either

me at (202) 512-4476, or Michael Fischetti, Assistant Director, at (202) 512-5125. You may

also reach me by e-mail at jarmong.aimd@gao.gov. Key contributors to this assignment

were Norma Samuel, Jeffrey Jacobson, and Richard Cambosos.

Sincerely yours,

Gloria L. Jarmon

Director, Health, Education and Human Services

Accounting and Financial Management Issues

Enclosure
Enclosure

Page 4 GAO/AIMD-00-309R District Pay Bonuses

Briefing on the District of Columbia’s Funding

for Certain Union Employee Pay Bonuses

District of Columbia Government

Funding for Certain Union Employee Pay Bonuses

Briefing for the House Committee on Appropriations,

Subcommittee on the District of Columbia

August 10, 2000
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 2

Objectives

• You asked us to

• Determine the actual sources of funding for the bonuses

paid to certain District union employees

• Determine the District’s authority to reprogram funds to

the Tobacco Settlement Fund (TSF) from other

appropriation accounts

• Provide a chronology of key events
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 3

Scope and Methodology

• Interviewed officials in the District of Columbia Financial Responsibility

and Management Assistance Authority (the Authority), Office of the

Mayor, and Office of the Chief Financial Officer (CFO)

• Reviewed and analyzed documents, including the labor union

agreement with the Mayor, funding plans, and fiscal impact statements

• Sought and received written response to a legal question regarding

reprogramming of funds

• Conducted our work from February 2000 through July 2000 in

accordance with generally accepted government auditing standards
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 4

Background

• Based on 1998 agreement with certain union employees,

negotiations for bonus compensation would reopen if

• the District had a surplus in fiscal year 1998 or

• additional revenues were certified by the Chief Financial

Officer (CFO)

• District reported a surplus of about $445 million for fiscal

year 1998, thus triggering the need to reopen negotiations

about bonus compensation
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 5

Background

• Negotiations took place and an agreement was reached

during November 1999

• Bonus payment applies to 5,746 District union employees in

2 compensation plans represented by several union

organizations

• $9.9 million represents a one-time, lump sum bonus of

about $1,700 per employee

• District paid the bonuses in December 1999
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 6

Results in Brief

• Several funding plans were advanced before arriving at the

final approach

• Initially, the bonuses were to be funded from the following

sources:

• Tobacco Settlement Fund

• Fiscal year 2000 budget

• Grant from the Authority
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 7

Results in Brief

• District proposed to reimburse the TSF by reprogramming

funds from the Department of Public Works and Short-term

Borrowings

• The proposed reprogramming was actually a transfer, and

the District lacked the legal authority to transfer funds

between appropriation accounts as proposed

• Actual source of funding for the bonuses was fiscal year

2000 personal services budgets for the applicable agencies
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 8

Source of Funds

• Total amount to be funded - $9.9 million

• District CFO proposed that funding be obtained from a

combination of sources

• TSF - $4.2 million

• Fiscal year 2000 budget - $3.5 million

• Grant from the Authority - $2.2 million (interest earned

on funds held in escrow accounts)
Enclosure

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Source of Funds

• The District proposed to replenish the TSF by

reprogramming amounts from other appropriation

accounts

• Regarding the reprogramming of $4.2 million to

replenish the TSF, the CFO reported that

reimbursements would come from the following

• $2.2 million from the Department of Public Works and

• $2 million from Short-term Borrowings
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 10

Source of Funds

• The District abandoned the proposed funding plan

• According to the District CFO, the actual source of funding

for all bonuses was the fiscal year 2000 personal services

budgets within the applicable agencies
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 11

Legal Authority to Reprogram or

Transfer Funds

• On April 13, 2000, we requested that the Mayor provide the

legal basis for treating the use of appropriations to replenish

the TSF as either

• a reprogramming and not a transfer or

• a transfer for which statutory authority has been provided
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 12

Legal Authority to Reprogram or

Transfer Funds

• Appropriation Law definitions

• “Reprogramming” is the utilization of the funds within

an appropriation account for purposes other than

those contemplated at the time of the appropriation

• “Transfer” is the shifting of funds between

appropriation accounts
Enclosure

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Legal Authority to Reprogram or

Transfer Funds

• On June 1, 2000, the District CFO notified us that no TSF

monies were used to pay certain union employee bonuses

• Subsequently, a June 27, 2000, District CFO letter to us

stated that the plan to replenish the TSF from other

appropriation accounts would have been a transfer and the

District does not have the authority to transfer these funds
Enclosure

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Chronology of Key Events

• November 4, 1999: District and union officials signed

memorandum of agreement for bonus compensation based

on 1998 agreement

• December 2, 1999: District officials sought budget authority

for $10 million from the Authority to be used to fund the onetime, lump sum bonuses

• December 3, 1999: The Authority approved the increase in

budget authority for $10 million from the proceeds from onetime transaction involving tobacco settlement funds
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 15

Chronology of Key Events

• December 13, 1999:

• District officials sought DC Council approval to

reprogram funds from other appropriation accounts to

the TSF

• The Authority determined that the District’s request to

reprogram funds was consistent with the applicable

financial plan and budget

• December 14, 1999: DC Council adopted the fiscal impact

statement provided by the CFO on December 10, 1999, and

approved the compensation settlement
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 16

Chronology of Key Events

• December 16, 1999: Mayor sent notification of a

reprogramming of fiscal year 2000 budget authority from the

Department of Public Works and Short-Term Borrowings to

the TSF -- which the Mayor considered necessary to

replenish funds used from the Fund to pay for a one-time,

lump sum bonus for certain District union employees -- to

the following:

• the Senate Committee on Appropriations, Subcommittee

on the District of Columbia

• the House Committee on Appropriations, Subcommittee

on the District of Columbia
Enclosure

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Chronology of Key Events

• January 24, 2000: The Authority approved reprogramming

of $4.2 million to replenish the TSF

• February 8, 2000: The District CFO notified the Mayor that

the reprogramming was complete
Enclosure

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Chronology of Key Events

• February 23, 2000: The District OCFO provided the

following to the House Appropriations Subcommittee on the

District:

• documentation for funding of union bonus pay

• union bonus pay distribution statement

• tobacco settlement proceeds white paper (discusses

options to assist District policymakers in selecting an

administrative structure and in developing processes that

would lead to successful programs funded by tobacco

settlement proceeds)
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 19

Chronology of Key Events

• April 13, 2000: We requested that the Mayor provide the

legal basis for replenishing the TSF from other appropriation

accounts

• June 1, 2000: The District CFO notified us that no TSF

monies were used to pay the bonuses
Enclosure

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GAO-AIMD-00-309R District of Columbia: Funding for Certain Union Employee Pay Bonuses 20

Chronology of Key Events

• June 27, 2000: District CFO reported to us that

• the plan to replenish the TSF from other appropriation

accounts would have been a transfer, and the District

does not have the authority to transfer these funds

• agency fiscal year 2000 personal services budgets are

the source of funding for the pay bonuses

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