Civil Service Fund

Pursuant to a congressional request, GAO reviewed the Department of the Treasury's management of the Civil Service Retirement and Disability Trust Fund during debt ceiling crises in 1984 and 1985 to determine how much interest Treasury lost by not following its normal securities investment and redemption policies.

GAO found that: (1) during two periods when the federal debt was near its legal limit, Treasury departed from its normal procedures by delaying investment of fund receipts or prematurely redeeming fund securities; (2) the unintentional consequences of Treasury's actions cost the fund about $160 million; and (3) although Congress enacted legislation to permit Treasury to reimburse the fund and its intent was to fully restore the losses, the legislative language was somewhat restrictive and the fund's future earnings could ultimately decrease by up to $13.6 million. GAO also found internal control weaknesses not related to the debt ceiling, in that: (1) adjustments to the fund's accounting records were not adequately documented and did not ensure the accuracy of interest earnings; and (2) the Office of Personnel Management (OPM) underreported to Treasury the amounts to be invested on the fund's behalf. Treasury cannot restore the losses resulting from those weaknesses because of statutory limitations. In addition, GAO found that Treasury has not evaluated the system used to account for fund investments for conformance with applicable accounting principles and standards, as required by the Federal Managers' Financial Integrity Act.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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