Federal Downsizing: Controls Needed to Ensure Compliance With Buyout Repayment Provisions
Released: 1998-02-10T00:00:00

Letter

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. 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 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.

Under new buyout authority enacted in 1996, the repayment provision was changed. 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. (See app. I for additional information on selected buyout laws enacted from 1992 to 1997.) “(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, retain control of the function involved, or retain full personal responsibility for the function supported in a duly authorized federal officer or employee.”

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?

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. 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.

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. 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 DOTand 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 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. In the three cases where the buyout recipients were no longer in their employ, the hiring agencies billed the recipient in one case, and took no action in the other two cases.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.

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. 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. 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 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.

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,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 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 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 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. 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. 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.

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. 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 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. 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 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.

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.

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 Employment 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 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 violations 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 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 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.

Comparison of Selected Buyout Laws

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.

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.

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.

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.

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.

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)

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.

Employment Status of the 23 Buyout Recipient Cases, by Federal Agency

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.“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. “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.”

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.

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.

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.

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.

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. 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.

Comments From the Department of Justice

Comments From the Department of the Treasury

Major Contributors to This Report

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