United States General Accounting Office

GAO Report to the Chairman, Committee on

Agriculture, Nutrition, and Forestry

U.S. Senate

July 1997 FEDERAL

DOWNSIZING

Buyouts at the Farm

Service Agency

GAO/GGD-97-133

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-275640 

July 23, 1997

The Honorable Richard Lugar

Chairman, Committee on Agriculture, Nutrition, and Forestry

United States Senate

Dear Mr. Chairman:

This letter responds to your request that we review voluntary separation

incentives or “buyouts” at the U.S. Department of Agriculture Farm

Service Agency (FSA). Specifically you asked us to (1) determine if FSA’s

fiscal year 1997 buyout program was planned in accordance with legal

requirements, (2) determine if the decision to grant buyouts was based on

a well-supported cost and savings analysis, and (3) describe the results of

the fiscal year 1997 buyouts, including the impact of buyouts and

downsizing on the agency’s operations.

Background FSA, an agency of the U.S. Department of Agriculture (USDA), administers

farm commodity and conservation programs for farmers and makes farm

loans. With over 17,000 employees, FSA maintains its headquarters in

Washington, D.C., and operates offices in each state and in most counties.

FSA is the lead agency for administering payments to the farmers who

receive federal agricultural assistance.

Each state director oversees the operation of county field offices through

district directors, who generally supervise operations in 6 to 10 counties.

Employees in county offices can be either federal or nonfederal.

Nonfederal employees are county employees who are governed by

separate FSA personnel regulations and are subject to county supervision.

Their pay and benefits, including retirement benefits, are provided by the

federal government and are generally the same as those federal employees

receive. A key difference in personnel regulations is that nonfederal

employees, unlike their federal counterparts, cannot displace other

employees under a reduction-in-force (RIF). Prior to a 1994 reorganization

creating FSA, these nonfederal employees managed farm commodity

programs for the Agricultural Stabilization and Conservation Service.

Under the reorganization, these nonfederal employees joined the FSA

organization.

Work in the county offices includes direct services to farmers and

producers; administering loans on commodity programs; administering

disaster assistance programs; managing direct and guaranteed farm loan

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programs to help farmers who are temporarily unable to obtain private,

commercial credit; and administering a conservation program that

encourages farmers or producers to plant grass or trees instead of crops

on highly erodible and environmentally sensitive lands. The County

Executive Director, a nonfederal employee, is selected by a committee of

local farmers.

The Federal Agriculture Improvement and Reform Act of 1996 (P.L.

104-127) provided fundamental changes to the way farm programs are

administered. This act removed the link between income support

payments, production levels, and farm prices. Farmers receiving federal

support for agriculture can now operate with fewer federal controls over

which crops to plant and how much acreage to put into production.

As part of its continuing streamlining and downsizing efforts, USDA was

authorized in its fiscal year 1997 appropriations to offer voluntary

separation incentive payments over a 4-year period to assist those

agencies within the Department that were targeted for workforce

reductions.1

 These payments, commonly referred to as buyouts, were

authorized for employees serving under a permanent appointment for a

continuous period of at least 3 years. The law established the amount of

the fiscal year 1997 payments as the lesser of the employee’s severance

pay entitlement or an amount up to $25,000, as determined by the agency

head. The maximum buyout amount authorized by the law is reduced by

$5,000 each year until fiscal year 2000, the final year of the authority, when

the maximum amount is $10,000.

Results in Brief Faced with a need to reduce its staff by 1,339 positions (7.6 percent)

during fiscal year 1997, FSA designed its buyout program to help it reach its

downsizing goals while minimizing the need for RIFs. FSA included all

required legal provisions in its buyout program. These included a strategic

plan for using buyouts that identified the types of positions that were to be

eliminated by organizational unit, location, broad occupational groups and

grade levels; the number and amounts of buyout payments anticipated;

and how the mission areas would be affected by elimination of the

positions and functions.

Although not required to do so by legislation, USDA completed a cost and

savings comparison of buyouts and RIFs for FSA prior to the fiscal year 1997

1

The buyouts were authorized by the Agriculture, Rural Development, Food and Drug Administration,

and Related Agencies Appropriations Act of 1997 (P.L. 104-180).

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buyouts at the request of the Chairman, Senate Committee on Agriculture,

Nutrition, and Forestry. Actual buyout and RIF costs from fiscal year 1997

were not yet available at the time of our study. Although the USDA analysis

showed that buyouts held an economic advantage over RIFs, estimates for

the RIF costs of relocation and unemployment compensation were not well

supported and appeared to be higher than appropriate for FSA based on

comments from FSA personnel and on our prior work on the costs and

savings of buyouts and RIFs. Although these estimates appeared to be high,

they did not invalidate USDA’s conclusion that buyouts should generate

more net savings than RIFs over a 5-year period.2

However, separating retirement-eligible employees who could not be

reassigned through RIFs in offices that were closing or scheduled to close

may have generated more savings than granting them buyouts. Since

employees eligible for a retirement annuity cannot receive severance pay

under a RIF, a significant cost element would have been avoided by

separating an employee under a RIF rather than a buyout. However, RIFs

can often cause noneconomic impacts that must also be considered. These

include lower productivity and morale, increased work in processing RIFs

and in handling appeals of RIF decisions, and disruptions in the efficient

operation of the workplace. Nevertheless, an economic analysis of RIFs in

those situations where offices are closing can be an important part of the

decision as to which separation strategy to pursue. USDA officials told us

they had analyzed the relative cost and savings of buyouts and RIFs across

the agency but had not considered applying the economic analysis to

employees in offices that are closing.

As of the end of April, FSA reported that 926 employees have been

separated with buyouts in fiscal year 1997, and 329 employees have been

separated under RIFs. The total separations of 1,255 compared to a planned

separation of 1,339 employees. Of the 926 buyout-takers, 57 percent were

eligible for regular retirement, and an additional 33 percent were eligible

for early retirement. The number of federal employees receiving buyouts

met FSA’s expectations; however, 697 buyouts were granted to nonfederal

county employees compared to 875 planned nonfederal buyouts. Agency

officials explained that the shortfall in nonfederal buyouts was created

because some overstaffed county offices did not receive a sufficient

number of applications.

2

Federal Downsizing: The Costs and Savings of Buyouts Versus Reductions-in-Force GAO/GGD-96-63,

May 14, 1996).

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FSA officials reported they generally used the buyout authority in those

areas of the agency where declining workloads and budgets dictated

staffing reductions. However, officials at headquarters and in the Kansas

City Management Office (KCMO) reported that they experienced the loss of

expertise in the administrative and information technology areas when

employees separated with buyouts. Although these employees worked in

positions within the broad administrative occupational area targeted in the

strategic plan, agency officials said that in hindsight, better targeting of

buyouts would have excluded these employees from buyout eligibility,

thus avoiding the loss of needed expertise.

FSA officials indicated the use of buyouts helped them meet downsizing

goals while reducing the need for RIFs. Although they cited cases where

they lost employees with valuable expertise to buyouts, they reported they

were generally able to mitigate this loss through increased training, longer

work hours for the remaining employees, and increased use of contract

services.

FSA officials expressed some strong concerns about future workforce

reductions. They told us that an additional reduction of 2,850 staff years

over the next 2 fiscal years, called for in the President’s fiscal year 1998

budget, could seriously affect the agency’s ability to meet its mission and

maintain high customer service levels. Further, although agency officials

indicated they intend to use the buyout authority in fiscal year 1998 to

facilitate the required workforce reductions, they told us that buyouts may

not be as effective in avoiding RIFs because the lower buyout amount

($20,000) and fewer retirement-eligible employees may generate fewer

buyout-takers than needed. We did not examine the validity of these

concerns for this report. However, as part of our ongoing work, we are

examining the impacts of projected FSA workloads on the agency’s

operations and staffing levels.

Scope and

Methodology

To determine if FSA’s fiscal year 1997 buyouts were planned in accordance

with legal and regulatory requirements, we compared FSA’s buyout plans

with requirements identified in the authorizing legislation. These

requirements included a strategic plan that identified the positions and

functions to be eliminated by organizational unit, location, occupational

category, and grade levels; the number and amounts of buyout payments

anticipated; and a description of how the mission areas would be affected

by elimination of the positions and functions. We interviewed key agency

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human resource and budget personnel to determine how the buyouts were

planned.

To determine if the decision to grant buyouts was based on a

well-supported cost and savings analysis, we analyzed USDA’s cost and

savings analysis of FSA buyouts and RIFs, comparing it to our prior work

that identified the type of cost and savings data needed to analyze the

economics of buyouts. We interviewed USDA and FSA human resource

management and budget personnel to obtain their rationale for the

estimates, and we interviewed FSA program personnel to determine their

perceptions about the appropriateness of the estimates.

To describe the results of the fiscal year 1997 buyouts, we collected and

analyzed demographic data on buyout-takers from the agency’s human

resource managers, compared original expectations with results, and

interviewed agency officials in those areas where the greatest number of

buyouts took place. These included the state directors in the five states

with the most buyouts and managers in KCMO and at those headquarters

units that had the most buyouts.3

 In addition, we interviewed

representatives of four employee associations and two unions to obtain

additional information on the results of the fiscal year 1997 buyout

program. We did not independently verify agency officials’ statements

about the impact of downsizing on service delivery nor about how

successful agency efforts such as outsourcing mitigated the loss of

expertise created by downsizing.

Our work was performed in Washington, D.C., and Denver, Colorado,

between October 1996 and May 1997, in accordance with generally

accepted government auditing standards.

We provided the Secretary of Agriculture and the Administrator of the

Farm Service Agency with a draft of this report for their comments on

May 30, 1997. USDA’s written comments are summarized and evaluated at

the end of this letter and are presented in full in appendix II.

3

The five states included Illinois, Iowa, Minnesota, North Carolina, and Texas. These states, along with

the Kansas City Management Office, and the offices of the Deputy Administrator for Management at

headquarters, accounted for over one-third of the total 926 buyouts granted.

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Buyout Program

Planned in

Accordance With

Legal Requirements

FSA’s plan for using buyouts addressed all elements required by P.L.

104-180, which authorized buyouts at USDA. The law required USDA to

submit a strategic plan to the House and Senate Committees on

Appropriations, the Senate Committee on Governmental Affairs, and the

House Committee on Government Reform and Oversight that showed the

intended use of buyouts and a proposed organizational chart for the

agency once the buyouts have been completed. The law required the plan

to include:

(1)the positions or functions to be reduced or eliminated, identified by

organizational unit, geographic location, occupational category, and grade

level;

(2)the number and amounts of voluntary separation incentive payments to

be offered; and

(3)a description of how the agency will operate without the eliminated

positions and functions.

According to FSA’s strategic plan, 1,108 buyouts were to be directed to

positions within broad occupational groups at headquarters, in KCMO, the

Kansas City Commodity Office (KCCO), the Aerial Photography Field Office

in Salt Lake City, and in state offices. Buyouts were to be targeted at

headquarters to higher graded employees who were eligible for regular or

early retirement. At KCMO, KCCO, and the Aerial Photography Office,

buyouts were generally to be targeted to positions within the broad

occupational groups of personnel, general administration and clerical,

accounting/budgeting, legal, business and industry, and education.

Buyouts were authorized for all series and grades of federal positions in

the state offices. Nonfederal employees in the counties could apply for

buyouts, but buyouts granted were targeted to those counties considered

to be overstaffed relative to their workloads. It was also anticipated that

almost all buyouts (99 percent) would go to retirement-eligible federal and

nonfederal employees.

In the field areas where the staffing reductions were being driven by

workload, the plan stated that adjustments in staffing would be made to

accommodate shortages and to conduct rightsizing where needed.4

 The

plan further stated that program delivery and support would be adjusted

4

Rightsizing occurs when personnel reductions made in overstaffed units are offset by employees hired

in units that are understaffed.

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on the basis of fiscal year 1997 appropriation levels to ensure the

maintenance of customer service expectations.

FSA did not anticipate any changes to the agency’s mission areas or

organizational structure as a result of the buyouts. A proposed

organizational chart approved on November 26, 1996, was submitted to the

cognizant congressional committees.

USDA’s Economic

Analysis of Buyouts

and RIFs Was Not

Well Supported and

Was Not Applied to

Separations Created

by Office Closures

Although not required to do so by legislation, USDA, in November 1996,

completed a cost and savings comparison of buyouts and RIFs in the FSA

and Rural Development mission areas over a 5-year period in response to a

request from the Chairman, Senate Committee on Agriculture, Nutrition,

and Forestry. The analysis for FSA concluded that if buyouts were granted

to employees in all 1,339 positions targeted for elimination, the first year’s

net savings would be almost $3 million; separating the same number of

employees through RIFs would result in a net cost of $13 million. The

analysis also concluded that after 5 years, the net savings from buyouts

would be almost $243 million; the net savings from RIFs would be

$191 million.

USDA’s analysis of the relative costs and savings of buyouts and RIFs in FSA

appears to have overstated per capita RIF costs in two areas. USDA officials

told us they based their RIF cost estimates on actual costs from a small RIF

in the Forest Service in 1993, and they said that they realize the estimates

may not be accurate for FSA. Actual cost and savings data from the fiscal

year 1997 buyouts and RIFs were not available for our analysis at the time

of our study. Appendix I includes a comparison of USDA’s buyout and RIF

cost estimates for the year of separation with the cost estimates we used

in our previous work on the costs and savings of buyouts and RIFs.

RIF costs typically include unemployment compensation payments;

outplacement costs and, if the employee is not eligible for an annuity,

severance pay; and refunds of retirement contributions. Other costs such

as processing costs or appeals costs could be included if they represent

additional costs, such as the hiring of an employee to manage a RIF or the

hiring of a lawyer to handle RIF appeals. Costs can be incurred for other

employees not separated but nevertheless affected by the RIF. These

include retraining and relocation costs. Buyout costs generally include the

cost of the incentive (up to $25,000) and the additional agency payment to

the retirement fund (15 percent of final salary) required by authorizing

legislation.

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The two RIF cost elements appearing high in the USDA analysis of FSA RIFs

were relocation and unemployment compensation costs. The USDA analysis

included an estimate of $30,000 for relocation costs per RIF for employees

affected by each RIF action. However, in our 1996 report, we estimated

relocation costs at $3,500 per RIF based on a 1993 Congressional Budget

Office study of RIF costs. In addition, FSA officials told us that very few

relocations would occur as a result of RIFs in FSA, since nonfederal

employees cannot compete for positions in other county offices in a RIF

situation.

USDA used an estimate of $13,200 per RIF for unemployment costs incurred

for each person separated by the RIF. However, according to the

Department of Labor (DOL) data we used in our prior report, the average

1994 recipient of unemployment compensation received $3,233. This

varied from a low of $1,632 in Mississippi to a high of $6,341 in

Pennsylvania. In addition, DOL data showed that only about 60 percent of

those individuals unemployed actually filed initial claims. USDA officials

could not explain why the costs from the 1993 Forest Service RIF were

substantially higher than the costs documented in the 1994 DOL data.

Although these estimates for RIF costs appear to have been overstated, it is

likely that buyouts would still generate greater net savings than RIFs over a

5-year period. If the estimates for relocation costs and unemployment

compensation were adjusted on the basis of the estimates we used in our

previous work, the revised comparison would show RIFs as generating

greater savings in the year of separation. However, because RIFs generally

separate lower graded employees, the higher savings in salaries and

benefits of buyout-takers would result in buyouts generating greater

savings than RIFs in the second and subsequent years of the analysis.

Although buyouts are generally the more economical choice, RIFs could

generate greater net savings in specific situations where the positions of

retirement-eligible employees are targeted for elimination in offices that

are closing or scheduled to close. If positions are to be eliminated in an

office that is closing and the employees cannot relocate to another

location, the agency has various options available for separating the

employees. It can grant buyouts to all employees desiring voluntary

separations and issue RIF notices to those not desiring buyouts, issue RIF

notices to all employees, or offer buyouts only to those employees not

eligible to retire and RIF notices to retirement-eligible employees. Whatever

approach the agency takes can be based on noneconomic factors as well

as costs and savings estimates. These noneconomic factors, such as lower

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productivity and morale, increased work in handling appeals of RIF

decisions, and disruptions in workplace operations, can weigh heavily in

the decision as to which option to pursue. Nevertheless, an economic

analysis of RIFs is an important part of this decision.

In our prior work, we found that separating retirement-eligible employees

who cannot displace other employees through RIFs can generate greater

net savings than granting them buyouts.5

 Retirement-eligible employees

cannot receive severance pay in a RIF. Since this pay could amount to as

much as a year’s salary, depending on age and years of service, a

significant cost could be avoided by separating an employee under a RIF

rather than a buyout. Of nonfederal FSA employees separating with

buyouts in fiscal year 1997, 90 percent were eligible for a retirement

annuity.

We found that 14 retirement-eligible nonfederal employees received

buyouts in 13 county offices that were closing or scheduled to close. In

addition, FSA data show that 19 federal district directors who were

stationed in the states and received buyouts were eligible for retirement.

We were not able to determine which, if any, of these federal employees

were stationed in county offices that were closing. However, if they were

precluded from displacing other employees, RIF separations could have

generated greater savings than buyouts. USDA officials told us they had

analyzed the relative cost and savings of buyouts and RIFs across the

agency, but they had not considered applying the economic analysis to

those situations where offices were closing. Such an analysis may be an

important part of decisions as to which separation strategies to use in the

next 2 years. Fiscal year 1998 budget documents project the closure of an

additional 500 county offices by the end of fiscal year 1999.

5

Under federal RIF procedures, an employee whose position is targeted for elimination can, if

qualified, displace another federal employees who is in a lower tenure group (appointment category)

or who has less service. These processes, often called “bumping” and “retreating,” do not apply to

FSA’s nonfederal employees.

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Buyout Results

Generally Met

Expectations, but FSA

Officials Noted Some

Buyouts Resulted in

the Loss of Needed

Expertise

As shown in table 1, the total number of FSA reductions in fiscal year 1997

has been slightly less than planned. According to FSA officials, the

combination of a hiring freeze and higher than normal attrition allowed the

agency to reduce the size of the total reduction it needed to take. Although

the number of nonfederal employee buyouts in the counties fell slightly

short of FSA’s expectations, the number of RIFs was higher than expected.

An agency official estimated that about 10 percent of the 304 agency RIFs

were rightsizing RIFs, where the separation of an employee through a RIF in

an overstaffed unit was made so that an understaffed unit could hire a new

employee. FSA officials said that the number of buyout applications

received from nonfederal employees in some offices scheduled for

downsizing was somewhat below the number needed at these locations.

Although agency officials reported they were able to avoid some RIFs by

asking nonfederal employees in overstaffed offices to relocate, this was

not always successful.

Table 1: FSA FY 1997 Separations

Federal employees

Nonfederal (county

employees) Totals

Planned Actual Planned Actual Planned Actual

Buyouts 233 229 875 697 1,108 926

RIFs 0 25a 231 304 231 329

Total

separations

233 254 1,106 1,001 1,339 1,255

aIncludes 9 full-time permanent employees in the states and 16 temporary/term employees in the

KCMO.

Source: FSA buyout plan, FSA statistics on buyouts and RIFs as of April 30, 1997.

As shown in table 2 below, most of the buyouts went to employees who

were eligible for either regular or early retirement.

Table 2: FSA FY 1997 Buyouts by Retirement Eligibility

Regular

retirement Percent

Early

retirement Percent Resignations Percent Totals Percent

Federal employees 113 49 89 39 27 12 229 100

Nonfederal

 employees

411 59 220 32 66 10 697 100

Totals 524 57 309 33 93 10 926 100

Source: FSA statistics on FY 1997 buyouts and GAO calculations.

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FSA officials considered buyouts as a useful management tool in helping

them reach agency downsizing goals while reducing the need for RIFs. The

agency generally used buyouts in areas of declining workloads and where

budgets dictated staffing reductions. Buyouts were excluded for certain

positions in the farm credit area, since staffing was already at minimum

levels considered essential for meeting customer service expectations.

Although most FSA employees could apply for buyouts, some states and

organizational units offered buyouts to all applicants; others screened

applications, offering buyouts only to employees from units or offices

determined to be overstaffed.

Because the buyout program relied on voluntary separation decisions, FSA

officials said they could not directly control who would apply for a buyout.

However, they stated that they were generally able to manage the

distribution of buyouts so that the number of RIFs would be minimized. For

example, they said one of their options under the buyout program was to

grant a buyout in an office that was not overstaffed, refill the position with

an employee relocated from an overstaffed office, and count the position

reduction in the overstaffed office as the required offset to the buyout.

Although agency officials and representatives of employee associations

and unions stated they generally believed the buyout program was well

implemented, some cited examples where employees separating with

buyouts created the loss of critical expertise. State program officials cited

some loss of expertise at the state and county levels through buyout

separations, but they indicated they have instituted aggressive training

programs to enable remaining staff to complete the required work.

Officials at headquarters and KCMO reported the buyouts granted to federal

employees in the administrative and information technology areas resulted

in the loss of valuable expertise and, as one official stated, a “brain drain.”

Although these employees worked in occupational groups targeted in the

strategic plan, agency officials at headquarters and in Kansas City said that

in hindsight, it would have been better to exclude employees in these

positions from receiving buyouts. They said that better targeting of

buyouts could have prevented this situation from taking place.

To compensate for the departure of buyout-takers, FSA officials reported

they have increased training of the remaining staff. Officials at KCMO have

also increased the use of contract services, primarily in the information

technology services area, to mitigate the effect of the loss of employees

through buyouts.

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State officials we contacted reported they have generally been able to

maintain high levels of customer satisfaction during this downsizing

period and have received very few complaints from farmers and

producers, but they also said they are already operating at staffing levels

below what their workload levels would suggest. As a result, they said

many employees are working longer hours to ensure customer service

levels are maintained.

Fiscal year 1998 budget documents indicate that FSA may need to close or

consolidate at least 500 more county offices by the end of fiscal year 1999,

with additional staff reductions of 2,850 staff years. FSA officials indicated

they are planning to use buyouts as a management tool for separations in

fiscal year 1998, as authorized by P.L. 104-180, to assist in these future

downsizing efforts. However, they expressed serious concerns about the

impact of future downsizing on their ability to meet their mission. They

said the workload reductions are not dropping as fast as the budgets for

staffing, and as a result they will likely not be able to meet their customers’

service needs in the future. Further, they told us that buyouts may not be

as effective in avoiding RIFs in the future, because the lower buyout

amount ($20,000) and fewer retirement-eligible employees may result in

fewer buyout-takers than needed. We did not examine the validity of these

concerns for this report. However, as part of our ongoing work, we are

examining the impacts of projected FSA workloads on the agency’s

operations and staffing levels.

Conclusions FSA’s fiscal year 1997 buyout program included all the required legal

provisions and was beneficial in helping the agency manage its downsizing

efforts. The legislation authorizing FSA’s buyouts did not require that

decisions to grant buyouts be based on a cost and savings comparison

with RIFs. Although USDA completed such an analysis covering FSA, it

included estimates for two RIF cost elements that appear to be higher than

what might be expected in an FSA RIF. Actual costs experienced were not

available at the time of our study. If these cost estimates were revised,

buyouts would still generally hold an economic advantage over RIFs.

Nevertheless, analyzing buyouts and RIFs in situations where offices are

closing could have yielded different results, especially in offices where

retirement-eligible employees were working. Although noneconomic

considerations of RIFs can weigh heavily in the decision on which

separation strategy to pursue, the economics of separating employees

through buyouts versus RIFs in offices that are closing can be an important

element in the decisionmaking process. Since the President’s fiscal year

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1998 budget indicates an additional 500 county offices might be closed by

the end of fiscal year 1999, the potential exists that greater savings could

be realized through RIF separations in these offices than through buyouts.

FSA officials reported that some buyouts granted to employees in the

administrative and information technology areas resulted in the loss of

needed skills and expertise. A more selective use of buyouts could have

alleviated some of the adverse operational impacts noted, such as the loss

of expertise and critical skills.

Recommendations to

the Secretary, USDA

We recommend the Secretary, U.S. Department of Agriculture, ensure that

a well-supported cost and savings analysis of buyouts and RIFs is part of

any future decision to offer buyouts to FSA employees. The analysis should

show the economic advantage of either buyouts or RIFs for the agency as a

whole and for those situations where employees might be separated in

offices that are closing.

In addition, we recommend that the Secretary direct the FSA Administrator,

in planning any future buyouts, to ensure that positions or occupational

series where the loss of experienced personnel may adversely affect the

agency’s operations be excluded from buyout offers. The Administrator

should ensure that buyouts are linked to areas where workloads are

anticipated to decline, or to areas where separations will assist the agency

in meeting organizational workforce goals, rather than offered broadly

across occupational groups.

Agency Comments

and Our Evaluation

USDA’s Acting Under Secretary for Farm and Foreign Agricultural Services

provided written comments on a draft of this report. These comments and

our responses to certain of the specific comments are contained in

appendix II.

USDA generally agreed with our report and its recommendations. In

particular, USDA agreed that a well-supported cost and savings analysis of

buyouts and RIFs should be part of any future plan. In doing future

analyses, USDA said that it would review and revise as appropriate its

estimates of relocation and unemployment compensation costs associated

with RIFs. However, USDA cautioned that it may be difficult to estimate

unemployment costs accurately given variation in state laws. Specifically

in regard to addressing in the cost analyses the economic advantage of

buyouts or RIFs in offices that are closing, USDA said that it would attempt

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to do so. However, USDA observed that the extent of any further

downsizing and office closures is uncertain, and, therefore, estimates must

be tentative. Finally, USDA also agreed that future buyouts should be done

in a way that minimizes adverse effects on its ability to conduct its

operations.

We believe USDA’s commitment to doing well-supported cost and savings

analyses will better ensure that the full savings potential of buyouts or

other employee separation strategies will be realized consistent with other

USDA objectives. We also recognize that estimating specific cost

components, like unemployment costs, can be challenging and that budget

uncertainties can complicate the task of determining how best to conduct

further downsizing and office closures. We believe that a well-supported

cost and savings analysis that takes the full range of options into account

can help USDA select buyout and other separation strategies that achieve

savings while minimizing adverse effects on mission-related operations.

USDA also offered various suggestions to improve the clarity or accuracy of

the report. We incorporated these changes in the report where

appropriate.

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

report earlier, we plan no further distribution until 5 days after its issue

date. At that time, we will send copies to the Ranking Minority Member of

the Senate Committee on Agriculture, Nutrition, and Forestry; the

Chairman and Ranking Minority Member of the Subcommittee on Civil

Service, House Committee on Government Reform and Oversight; the

Chairman and Ranking Minority Member of the Senate Committee on

Governmental Affairs; the Secretary of Agriculture; and the Administrator,

Farm Service Agency. We will make copies available to others on request.

Page 14 GAO/GGD-97-133 Federal Downsizing
B-275640 

The major contributors to this report are listed in appendix III. If you have

any questions about the report, please call me on (202) 512-9039 or

Assistant Director Steve Wozny on (202) 512-5767.

Sincerely yours,

Michael Brostek

Associate Director,

Federal Management and

 Workforce Issues

Page 15 GAO/GGD-97-133 Federal Downsizing
Contents

Letter 1

Appendix I 

Comparison of

USDA’s First-Year

Buyout and RIF Cost

Estimates for FSA

With Cost Estimates

Used in 1996 GAO

Report

18

Appendix II 

Comments From the

U.S. Department of

Agriculture

19

Appendix III 

Major Contributors to

This Report

23

Tables Table 1: FSA FY 1997 Separations 10

Table 2: FSA FY 1997 Buyouts by Retirement Eligibility 10

Abbreviations

DOL Department of Labor

FSA Farm Service Agency

KCCO Kansas City Commodity Office

KCMO Kansas City Management Office

RIF reduction-in-force

USDA United States Department of Agriculture

Page 16 GAO/GGD-97-133 Federal Downsizing
Page 17 GAO/GGD-97-133 Federal Downsizing
Appendix I 

Comparison of USDA’s First-Year Buyout

and RIF Cost Estimates for FSA With Cost

Estimates Used in 1996 GAO Report

Cost per buyout Cost per RIF

Cost element USDA estimate GAO estimate USDA estimate GAO estimate

Buyout amount $25,000 regular retirement

early retirement

resignation

$24,501a

$24,802a

$14,031a

Payment to retirement fund 15 percent of

final salary

15 percent of

final salary

Unemployment

compensation payments

$13,200 $1,222

Outplacement $7,456 $7,456

Retraining $1,900 $1,900

Relocationb $30,000 $3,500

Severance pay $9,527c $6,182d

Refund of retirement

contributions

(not included) $6,085

aActual buyout amounts will vary based on age and years of service. GAO figures shown are

based on actual governmentwide demographic data for buyout-takers.

bUSDA estimate based on costs from a small 1993 Forest Service RIF; GAO estimate based on a

1993 Congressional Budget Office study of average relocation costs in the Department of

Defense.

cAverage severance pay of both federal and nonfederal employees in previous agency RIFs.

dBased on average governmentwide demographic data for non-retirement-eligible employees

separated by a RIF from FY 1993 through the first half of FY 1995.

Page 18 GAO/GGD-97-133 Federal Downsizing
Appendix II 

Comments From the U.S. Department of

Agriculture

See comment 1.

Now on pp. 7 and 8.

Page 19 GAO/GGD-97-133 Federal Downsizing
Appendix II 

Comments From the U.S. Department of

Agriculture

Modified text

See p. 1.

Now on p. 3.

See comment 2.

Now on p. 8.

Now on pp. 7 and 8.

See comment 3.

Page 20 GAO/GGD-97-133 Federal Downsizing
Appendix II 

Comments From the U.S. Department of

Agriculture

Now on p. 11.

See comment 4

Page 21 GAO/GGD-97-133 Federal Downsizing
Appendix II 

Comments From the U.S. Department of

Agriculture

GAO Comments 1. USDA said that FSA had prepared analyses that were reviewed by USDA,

the Office of Management and Budget, and various congressional staff.

These analyses were said to include cost and savings based on many

variables, but not including relocation and unemployment cost elements.

We had suggested in the draft report that the relocation and

unemployment cost elements in the USDA cost and savings analyses were

inappropriately high. The FSA estimates to which USDA refers were

conducted in the spring of 1997, after the buyout round was virtually

completed. The cost and savings analyses we analyzed for our report were

those done by USDA at the Department level in November 1996. These are

the analyses that supported FSA’s buyout decisions. We clarified in the

report that the analyses we analyzed were those done by the Department.

2. USDA said that our statement that “separating employees through RIFs in

offices that were closing or scheduled to close may have generated more

savings than granting buyouts, especially in those offices where

retirement-eligible employees worked” was only partially true. USDA said

our statement was partially true because only the positions of the County

Executive Director and at most one subordinate position are eliminated in

county offices that are closing, since much of the work and most of the

subordinate employees usually move to a neighboring county office. We

have clarified the report to show that additional savings may be realized

when separating through RIFs retirement-eligible employees whose

positions are eliminated in offices that are closing. Buyouts may remain

the best option from a cost and savings standpoint for those excess

subordinate employees who are not retirement eligible and who would

receive severance pay under a RIF separation.

3. The report has been revised to state that nonfederal employees compete

only within their county offices in a RIF situation.

4. The report has been clarified to distinguish between buyout applications

and actual buyout offers made to employees.

Page 22 GAO/GGD-97-133 Federal Downsizing
Appendix III 

Major Contributors to This Report

General Government

Division, Washington,

D.C.

Steven J. Wozny, Assistant Director

Robert Goldenkoff, Senior Evaluator

Denver Office Thomas R. Kingham, Evaluator-in-Charge

(410085) Page 23 GAO/GGD-97-133 Federal Downsizing
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