Judgment Fund
Treasury's Estimates of Claim Payment Processing Costs under the No FEAR Act and Contract Disputes Act
Gao ID: GAO-04-481 April 28, 2004
The Notification and Federal Employee Antidiscrimination and Retaliation (No FEAR) Act, which took effect October 1, 2003, requires agencies to repay discrimination settlements and judgments paid on their behalf. The No FEAR Act is similar to the Contract Disputes Act (CDA) of 1978, which holds agencies accountable for payment in contract disputes. Under both laws, federal agencies must reimburse the Judgment Fund, which is administered by the Treasury Department. Before the No FEAR Act, agencies did not have to repay the fund. The No FEAR Act requires GAO to review the financial impact on Treasury of administering that law and CDA. Based on this requirement, this report provides information on (1) Treasury's estimates of its costs to process discrimination claim payments and CDA payments in fiscal year 2003 and its costs to process and seek reimbursement for claim payments under lawsuits covered by the No FEAR Act beginning in fiscal year 2004, (2) differences in claims processing and reimbursement efforts under CDA and the No FEAR Act, and (3) the extent of federal agency compliance with CDA's reimbursement requirements and Treasury's view of how effective its No FEAR Act collection efforts may be. We make no recommendations in this report. Treasury officials had no official comment on the report.
Treasury estimates that it cost about $334,000 to certify, pay, and seek reimbursement for CDA claim payments in fiscal year 2003, and about $240,000 to certify and pay discrimination claims that year. For fiscal year 2004, assuming relatively constant case and processing cost levels, and agency compliance with reimbursement requirements similar to that experienced under CDA, Treasury estimates that it will incur about $171,500 in personnel costs in order to seek reimbursements for No FEAR claim payments. These include recurring costs to set up and administer accounts receivable and seek reimbursement from agencies for claims paid out of the Judgment Fund and a one-time cost for in-house personnel to upgrade computer systems. Although the certification, payment, and accounting processes that Treasury uses for the No FEAR Act are virtually the same as those used for CDA, the procedures Treasury is required to use to seek reimbursement for claims paid under the No FEAR Act will differ. For example, as part of Treasury's effort to seek reimbursement for No FEAR Act claims paid, No FEAR Act regulations require Treasury to record on its public Web site the failure of agencies to make reimbursement or arrange to make reimbursement within a specified time limit. There is no similar requirement under CDA claims. During fiscal years 2001, 2002, and 2003, federal agencies reimbursed Treasury for fewer than one of every five dollars owed under CDA, with at least 18 agencies having unpaid amounts at the end of each fiscal year. According to Treasury, while its No FEAR Act collection efforts are just beginning, reimbursement rates under the act may be as low as under CDA because the No FEAR Act, like CDA, does not impose reimbursement deadlines on agencies, and Treasury has very little authority to enforce reimbursement.
GAO-04-481, Judgment Fund: Treasury's Estimates of Claim Payment Processing Costs under the No FEAR Act and Contract Disputes Act
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Report to Congressional Recipients:
April 2004:
JUDGMENT FUND:
Treasury's Estimates of Claim Payment Processing Costs under the No
FEAR Act and Contract Disputes Act:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-481]:
GAO Highlights:
Highlights of GAO-04-481, a report to congressional recipients
Why GAO Did This Study:
The Notification and Federal Employee Antidiscrimination and
Retaliation (No FEAR) Act, which took effect October 1, 2003, requires
agencies to repay discrimination settlements and judgments paid on
their behalf. The No FEAR Act is similar to the Contract Disputes Act
(CDA) of 1978, which holds agencies accountable for payment in contract
disputes. Under both laws, federal agencies must reimburse the Judgment
Fund, which is administered by the Treasury Department. Before the No
FEAR Act, agencies did not have to repay the fund.
The No FEAR Act requires GAO to review the financial impact on Treasury
of administering that law and CDA. Based on this requirement, this
report provides information on (1) Treasury‘s estimates of its costs to
process discrimination claim payments and CDA payments in fiscal year
2003 and its costs to process and seek reimbursement for claim payments
under lawsuits covered by the No FEAR Act beginning in fiscal year
2004, (2) differences in claims processing and reimbursement efforts
under CDA and the No FEAR Act, and (3) the extent of federal agency
compliance with CDA‘s reimbursement requirements and Treasury‘s view of
how effective its No FEAR Act collection efforts may be. We make no
recommendations in this report. Treasury officials had no official
comment on the report.
What GAO Found:
Treasury estimates that it cost about $334,000 to certify, pay, and
seek reimbursement for CDA claim payments in fiscal year 2003, and
about $240,000 to certify and pay discrimination claims that year. For
fiscal year 2004, assuming relatively constant case and processing cost
levels, and agency compliance with reimbursement requirements similar
to that experienced under CDA, Treasury estimates that it will incur
about $171,500 in personnel costs in order to seek reimbursements for
No FEAR claim payments (see table below). These include recurring costs
to set up and administer accounts receivable and seek reimbursement
from agencies for claims paid out of the Judgment Fund and a one-time
cost for in-house personnel to upgrade computer systems.
Although the certification, payment, and accounting processes that
Treasury uses for the No FEAR Act are virtually the same as those used
for CDA, the procedures Treasury is required to use to seek
reimbursement for claims paid under the No FEAR Act will differ. For
example, as part of Treasury‘s effort to seek reimbursement for No FEAR
Act claims paid, No FEAR Act regulations require Treasury to record on
its public Web site the failure of agencies to make reimbursement or
arrange to make reimbursement within a specified time limit. There is
no similar requirement under CDA claims.
During fiscal years 2001, 2002, and 2003, federal agencies reimbursed
Treasury for fewer than one of every five dollars owed under CDA, with
at least 18 agencies having unpaid amounts at the end of each fiscal
year. According to Treasury, while its No FEAR Act collection efforts
are just beginning, reimbursement rates under the act may be as low as
under CDA because the No FEAR Act, like CDA, does not impose
reimbursement deadlines on agencies, and Treasury has very little
authority to enforce reimbursement.
Estimated Cost of Seeking Reimbursement for No FEAR Act Claim Payments
in Fiscal Year 2004:
Reimbursement collection efforts: $115,004;
Accounts receivable set-up and administration: $4,442;
System upgrades for the No Fear Act: $52,000;
Total: $171,446.
Source: Department of Treasury.
[End of table]
www.gao.gov/cgi-bin/getrpt?GAO-04-481.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact George H. Stalcup at
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[End of section]
Contents:
Letter:
Results in Brief:
Background:
Treasury Expects to Incur Additional Costs under the No FEAR Act to
Seek Reimbursement for Discrimination Claims:
Processes for Certifying and Paying CDA and No FEAR Act Claim Payments
Are the Same, but Collection Efforts Will Differ:
Reimbursement Rates for Contract Dispute Payments Have Been Low,
Similar Rates Expected under the No FEAR Act:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Acknowledgments:
Tables:
Table 1: Estimated Costs of Processing Contract Disputes Act Claim
Payments, Fiscal Year 2003:
Table 2: Estimated Costs of Processing Discrimination Claim Payments,
Fiscal Year 2003:
Table 3: Estimated Cost of Seeking Reimbursement for No FEAR Act Claim
Payments in Fiscal Year 2004:
Table 4: Amount of Contract Dispute Claim Payments Collected by the
Judgment Fund during Fiscal Years 2001 through 2003 and Unpaid Balance
at End of Each Fiscal Year:
Abbreviations:
No FEAR Act: Notification and Federal Employee Antidiscrimination and
Retaliation Act:
CDA: Contract Disputes Act:
FMS: Financial Management Service:
OPM: Office of Personnel Management:
MSPB: Merit Systems Protection Board:
CFO: Chief Financial Officer:
Letter April 28, 2004:
Congressional Recipients:
Before the Notification and Federal Employee Antidiscrimination and
Retaliation (No FEAR) Actof 2002 was enacted on May 15, 2002,[Footnote
1] we and others expressed concern that federal agencies had an
incentive to avoid settling discrimination and whistleblower protection
complaints in order to have any final judgment against the agency
rendered by a court.[Footnote 2] This incentive arose from the fact
that agencies paid costs from their appropriations when such complaints
were settled without a lawsuit being filed, but that any money awarded
after a suit was filed (whether by settlement or court judgment) was
generally paid from the Judgment Fund, a permanent, indefinite
appropriation administered by the Department of the Treasury. We
estimated that the Judgment Fund paid almost $43 million for
discrimination claims in fiscal year 2000 on behalf of
agencies.[Footnote 3]
The Judgment Fund continues to pay money awarded for settlements and
judgments under lawsuits covered by the No FEAR Act. But beginning on
October 1, 2003, the effective date of the act, each federal agency
must reimburse the Treasury for the amounts paid from the fund. As we
noted in testimony describing how the No FEAR Act addresses the need
for federal agency accountability with respect to discrimination and
whistleblower protection cases, Congress faced a similar situation when
lawmakers passed the Contract Disputes Act (CDA) of 1978.[Footnote 4]
Before CDA was enacted, agencies had an incentive to avoid settling
contract disputes so that any final judgments against an agency
occurred in court because the Judgment Fund paid such court judgments.
Under CDA, however, agencies must reimburse the fund from available
appropriations or, if they are not adequate, seek additional
appropriations for this purpose.
From fiscal year 2001 through 2003 under the Judgment Fund, 1,140
discrimination claim payments were processed and about $656 million was
paid. All of these claims were for court judgments and settlements.
During this period, the fund also processed 304 CDA claim payments and
paid about $713 million. This included payments for court judgments and
settlements and board of contract appeals awards.[Footnote 5] The fund
did not make any payments for whistleblower protection claims as these
payments were typically made by agencies.[Footnote 6]
The No FEAR Act requires that we review the financial impact on the
Treasury of administering both the No FEAR Act and CDA. Based on this
requirement and discussions with committee staff, this report provides
information on (1) Treasury's estimates of costs to process CDA and
discrimination payments for fiscal year 2003 and its estimates to
process and seek reimbursement for No FEAR Act claim payments in fiscal
year 2004, (2) differences in payment processing under CDA and the No
FEAR Act, and (3) the extent of federal agencies' compliance with CDA's
reimbursement requirement and Treasury officials' view of how effective
the reimbursement collection efforts under the No FEAR Act may be.
We obtained information from Treasury's Financial Management Service
(FMS), which administers the Judgment Fund,[Footnote 7] on the costs of
processing Judgment Fund reimbursement payments in fiscal year 2003 and
estimated costs in fiscal year 2004. Since FMS does not track the cost
of processing Judgment Fund claim payments, agency officials could only
provide us with estimates of the costs, based primarily on staff time
spent processing these claims. We reviewed supporting documentation,
interviewed Judgment Fund officials, and compared the estimated
personnel costs to the percentage of claims paid to determine the
reasonableness of the cost estimate (that is, if the estimated costs
were disproportionately large when compared to the number of claims
processed). On the basis of our assessment, we determined that the data
provided by Treasury in its estimates were sufficiently reliable for
the purposes of our report. We interviewed FMS officials to determine
the differences between the No FEAR Act's and CDA's payment processing
and to obtain the officials' views of how effective the reimbursement
collection efforts allowed under the No FEAR Act may be. To determine
the extent of federal agency compliance with CDA's reimbursement
requirement, we obtained from FMS information on the amount of money
sought and received from agencies in fiscal years 2001, 2002, and 2003.
(See app. I for more detailed information on our scope and
methodology.) We conducted our work from November 2002 to February 2004
in accordance with generally accepted government accounting standards.
Results in Brief:
Treasury estimates that it cost about $334,000 to certify, pay, and
seek reimbursement for CDA claim payments in fiscal year 2003 and about
$240,000 to certify and pay discrimination claims that year. In
arriving at its estimate of the costs of processing discrimination
payments under the No FEAR Act in fiscal year 2004, Treasury assumed
that the number of discrimination cases and the legal and
administrative costs for processing these cases would remain relatively
constant. Treasury's estimates of fiscal year 2004 costs for No FEAR
Act claim payments also assumed that agency compliance with the No FEAR
Act would be similar to that under CDA. Actual costs to Treasury may
vary from the estimates because of differences in the nature of the
claims under the two laws. On the basis of the above assumptions,
Treasury estimated that it will allocate about $171,500 from its
personnel budget in order to seek reimbursement for discrimination and
any other No FEAR Act claims payments in fiscal year 2004. Treasury's
estimate is comprised of both one-time and recurring costs. Treasury
estimates about $119,500 in recurring costs to set up and administer
accounts receivable and seek reimbursement for No FEAR Act claims and a
one-time start-up cost of about $52,000 for in-house personnel to
upgrade computer systems. Treasury plans to absorb any increase in
costs within its existing budget.
Although the certification, payment, and accounting mechanisms that
Treasury uses for No FEAR Act and CDA payments are virtually the same,
Treasury's current efforts under CDA and anticipated efforts under the
No FEAR Act to seek reimbursement from federal agencies contain
differences. Certification for both No FEAR Act and CDA payments is
accomplished using the same review process. Payments are made through
the same Treasury financial center, and payments are recorded on the
Judgment Fund's books in the same way. In seeking reimbursement from
federal agencies, however, Treasury is required to use a different
chain of correspondence for the No FEAR Act than it has for CDA. To
prompt agencies to make No FEAR Act reimbursements, No FEAR Act
regulations issued by the Office of Personnel Management (OPM) require
Treasury to annually record on its public Web site an agency's failure
to make reimbursements within a specified time limit or to make
arrangements to do so within the limit. There are no similar
requirements for CDA reimbursements, and Treasury has no plans to post
on the Web agency failures to make such reimbursements.
Federal agencies reimbursed the Judgment Fund for fewer than one of
every five dollars they owed for CDA payments in each of fiscal years
2001, 2002, and 2003. At least 18 agencies owed money to the Judgment
Fund at the end of each of the 3 years. Our review of a sample of
agencies' correspondence in response to the Judgment Fund branch's
requests for CDA reimbursement showed that agencies most often deferred
payment because of the adverse effect they said it would have on their
programs and mission-critical activities. According to Treasury, while
its No FEAR Act collection efforts are just beginning, reimbursement
rates under the act may be as low as under CDA because the No FEAR Act,
like CDA, does not impose reimbursement deadlines on agencies, and
Treasury has very little authority to enforce reimbursement.
Treasury officials had no official comments on this report, but
provided technical and clarifying comments, which we have incorporated
as appropriate.
Background:
In 1956, Congress established the Judgment Fund--a permanent,
indefinite appropriation--to pay judgments against federal agencies
that are not otherwise provided for in agency appropriations.[Footnote
8] Among other things, the fund is intended to allow for more prompt
payments to claimants, thereby reducing the assessment of interest
against federal agencies (where allowed by law) during the period
between the rendering and payment of an award. In 1961, legislation was
enacted allowing the fund to pay Department of Justice settlements of
ongoing or imminent lawsuits against federal agencies.[Footnote 9]
The No FEAR Act requires federal agencies to reimburse the Judgment
Fund for payments of judgments, awards, or settlements that the fund
makes to employees, former employees, or job applicants in connection
with litigation alleging violation of certain federal laws. The Senate
committee report[Footnote 10] accompanying the No FEAR Act explains
that the act is intended to prompt federal agencies to pay more
attention to their equal employment opportunity and whistleblower
complaint activities and act more expeditiously to resolve complaints
before they get to court. Accordingly, No FEAR Act cases include those
brought before federal courts under discrimination statutes and certain
cases brought before the Merit Systems Protection Board (MSPB),
including discrimination and whistleblower protection claims. These
latter cases, however, typically result in either a settlement while
the case is pending at MSPB or an award issued by MSPB, both of which
are paid out of agency funds, not the Judgment Fund.
As provided for under the No FEAR Act, the President designated OPM to
issue regulations to carry out the agency reimbursement provisions of
the law. OPM's interim final regulations[Footnote 11] issued earlier
this year state that the procedures that agencies must use to reimburse
the Judgment Fund are those prescribed by FMS.
Under procedures prescribed by Treasury, FMS Judgment Fund branch
analysts, in consultation with FMS's Office of the Chief Counsel,
certify whether a judgment, award, or settlement is appropriate for
payment and whether the agency on whose behalf payment was made must
reimburse the fund. FMS does not review the merits underlying the claim
nor certify the merits of the judgment or award.
Treasury Expects to Incur Additional Costs under the No FEAR Act to
Seek Reimbursement for Discrimination Claims:
FMS estimates that in fiscal year 2003 it spent about $334,000 to
certify, pay, and seek reimbursement for CDA claim payments and about
$240,000 to certify and pay discrimination claims (see tables 1 and 2).
Table 1: Estimated Costs of Processing Contract Disputes Act Claim
Payments, Fiscal Year 2003:
Cost: Non-Judgment fund branch personnel: Accounts receivable set-up
and administration;
Amount (in dollars): $4,442.
Cost: Non-Judgment fund branch personnel: Reimbursement collection
efforts;
Amount (in dollars): $22,214.
Cost: Non-Judgment fund branch personnel: FMS attorneys;
Amount (in dollars): $10,621.
Cost: Judgment fund branch personnel: Certification and documentation
review;
Amount (in dollars): $46,887.
Cost: Judgment fund branch personnel: Mail processing;
Amount (in dollars): $3,564.
Cost: Judgment fund branch personnel: Reimbursement collection efforts;
Amount (in dollars): $63,146.
Cost: Judgment fund branch personnel: Total personnel cost;
Amount (in dollars): $150,874.
Cost: Judgment fund branch personnel: Total administrative cost;
Amount (in dollars): $182,671.
Cost: Judgment fund branch personnel: Total;
Amount (in dollars): $333,545.
Source: FMS.
[End of table]
Table 2: Estimated Costs of Processing Discrimination Claim Payments,
Fiscal Year 2003:
Cost: FMS attorneys;
Amount (in dollars): $10,621.
Cost: Certification and documentation review (Judgment Fund personnel);
Amount (in dollars): $46,887.
Cost: Total personnel cost;
Amount (in dollars): $57,508.
Cost: Total administrative cost [A];
Amount (in dollars): $182,671.
Total;
Amount (in dollars): $240,179.
Source: FMS.
Note: There were no costs associated with seeking reimbursement for
discrimination payments because the No FEAR Act had not yet taken
effect.
[A] While processing more discrimination payments than CDA payments in
fiscal year 2003, FMS allocated administrative processing,
certification and documentation review, and FMS attorney costs arising
from the two laws equally in estimating its costs for the No FEAR Act.
[End of table]
FMS estimates that it will have to allocate approximately $171,500 for
personnel costs to seek reimbursement for discrimination claims under
the No FEAR Act in fiscal year 2004 (see table 3). This estimate
includes about $119,500 in costs to set up and administer accounts
receivable and seek reimbursement for No FEAR Act payments. FMS
estimates that it will also incur a one-time start-up cost of about
$52,000 for its information technicians to upgrade computer systems to
create and track No FEAR Act accounts receivable. FMS expects no
increase in either the number of personnel or budgeted funds to handle
No FEAR Act reimbursements.
Table 3: Estimated Cost of Seeking Reimbursement for No FEAR Act Claim
Payments in Fiscal Year 2004:
Cost: Accounts receivable set-up and administration[A];
Amount (in dollars): $4,442.
Cost: Reimbursement collection efforts;
Amount (in dollars): $115,004.
Cost: System upgrades to open accounts receivable for the No FEAR
Act[B];
Amount (in dollars): $52,000.
Cost: Total;
Amount (in dollars): $171,446.
Source: FMS.
[A] The estimate assumes that the cost for setting up and administering
accounts receivable for No FEAR Act payments in fiscal year 2004 will
be the same as this cost was for CDA payments the previous year.
[B] There will be no such costs after fiscal year 2004.
[End of table]
FMS's estimates assume that it will pay the same number of
discrimination claim payments under the No FEAR Act in fiscal year 2004
as it paid the previous year. FMS estimates also assume there will be
no increase in the cost for processing discrimination claim payments in
fiscal year 2004. Treasury's estimate of fiscal year 2004 costs for No
FEAR Act claim payments also assumed that agency compliance with the No
FEAR Act would be similar to that under CDA. According to the Judgment
Fund branch, actual costs to Treasury may vary from the estimate
because of differences in the nature of the claims under the two laws.
Processes for Certifying and Paying CDA and No FEAR Act Claim Payments
Are the Same, but Collection Efforts Will Differ:
Although the certification, payment, and accounting mechanisms that FMS
uses for No FEAR Act and CDA payments are virtually the same, some of
Treasury's current and anticipated procedures to seek reimbursement
from federal agencies for claims paid under the two laws differ.
Accounting for Payments Is the Same under the Two Laws:
For both No FEAR Act and CDA payments, the Judgment Fund branch
analysts ensure that all documents submitted by the agency and other
parties have (1) the proper signatures and court seals, (2) contact
name and telephone number, and (3) an appropriate address. Payment from
the Judgment Fund is then certified by FMS and made through Treasury's
Philadelphia Financial Center by check or electronic funds transfer.
Once payment is made, FMS reduces the fund's balance, records an
expense by the fund, and records an account receivable in its
recoveries account for the federal agency on whose behalf the payment
was made. The debtor federal agency is required to record an account
payable to the Judgment Fund. Those amounts remain a receivable on
FMS's books and a payable on the agency's books until it reimburses the
fund. FMS sends letters to agencies to verify account balances
quarterly. The agencies must also review their balances and confirm
them to FMS.
According to FMS, on the basis of the cash receipts history for federal
agencies and the age of some of the Judgment Fund's accounts
receivable, it expects that a percentage of the money owed by federal
agencies will probably not be paid back. To allow for this, FMS
calculates a percentage, which it calls an allowance factor, based on
the age of the receivable and the agency's payment history. According
to FMS, it applies the allowance factor to an agency's outstanding
accounts receivable to arrive at a dollar amount that FMS puts into an
allowance account, which is used by FMS to report on the status of the
Judgment Fund in its financial statement. According to FMS, although it
records the debt in the allowance account as an uncollectible loss, the
debt is not written off. FMS expects each agency to record the amount
of unreimbursed debt as a liability, which will remain until the agency
repays Treasury or Congress provides write-off authority.
Reimbursement Efforts for CDA and the No FEAR Act Differ:
For CDA reimbursements, FMS sends a letter to the head of the agency
contracting unit or budget officer seeking reimbursement for payments
made either the same day or the day after payment is made from the
fund. If the agency fails to contact FMS within 30 business days of
this letter, a follow-up letter is sent to the agency. If the agency
fails to respond within 60 business days of the initial contact letter,
FMS sends a letter to the agency's Chief Financial Officer (CFO). The
agency CFO has 30 business days to contact FMS.
For No FEAR Act reimbursements, as provided under the OPM regulations,
FMS provides notice to the agency's CFO within 15 business days after
payment for the No FEAR Act claim from the Judgment Fund. It further
requires an agency to either reimburse the Judgment Fund or work out a
payment arrangement with FMS within 45 business days of being notified
by FMS.
Under OPM's No FEAR Act regulations, FMS is required to annually post
on Treasury's public Web site those agencies that either fail to make
reimbursements or fail to contact FMS within 45 business days of notice
to make arrangements in writing for reimbursement. There is no similar
posting requirement for CDA reimbursements, and FMS said it has no
plans to post CDA reimbursement information on Treasury's public Web
site.
Reimbursement Rates for Contract Dispute Payments Have Been Low,
Similar Rates Expected under the No FEAR Act:
Reimbursement rates for CDA payments were low for the 3 years we
examined and, despite promises of repayment, at least 18 agencies had
not repaid amounts owed to the fund by the end of each of these years.
According to Treasury, while its No FEAR Act collection efforts are
just beginning, reimbursement rates under the act may be as low as
under CDA because the No FEAR Act, like CDA, does not impose
reimbursement deadlines on agencies, and Treasury has very little
authority to enforce reimbursement.
Amounts Owed to the Judgment Fund Have Increased in the Last 3 Fiscal
Years:
The Judgment Fund was reimbursed for fewer than one of every five
dollars agencies owed for each of the 3 fiscal years (see table 4).
Further, the total unpaid amounts to the Judgment Fund increased as of
each fiscal year end. The total amount and percentage collected was at
its highest in fiscal year 2001 and was lowest in fiscal year 2002.
While the total amount and percentage collected increased in fiscal
year 2003, they remained less than in fiscal year 2001.
Table 4: Amount of Contract Dispute Claim Payments Collected by the
Judgment Fund during Fiscal Years 2001 through 2003 and Unpaid Balance
at End of Each Fiscal Year:
Amount collected during fiscal year;
2001: $310,409,773;
2002: $196,123,712;
2003: $279,268,859.
Unpaid balance at end of fiscal year;
2001: $1,412,948,605;
2002: $1,461,768,909;
2003: $1,567,337,604.
Percentage collected[A];
2001: 18%;
2002: 12%;
2003: 15%.
Number of agencies owing money at year end;
2001: 24;
2002: 18;
2003: 19.
Source: FMS.
[A] Calculated by dividing the amount collected during the fiscal year
by the unpaid balance at the end of the year plus the amount collected
during that fiscal year.
[End of table]
Our review of a sample of agencies' correspondence in response to the
Judgment Fund branch's requests for CDA reimbursement showed that
agencies most often deferred payment because of the adverse effect they
said it would have on their programs and mission-critical activities.
The agencies promised to continue to seek opportunities to provide
repayment through the budget and appropriation process.
Because Enforcement Authority Is Limited under Both Laws, Reimbursement
Rates Are Expected to Be Similarly Low:
Neither CDA nor the No FEAR Act set deadlines for reimbursement. We
have acknowledged that agencies are allowed to exercise reasonable
discretion in determining the timing of CDA reimbursements so as not to
cause the disruption of ongoing programs or activities. Similar
flexibility exists under the No FEAR Act. While the No FEAR Act states
that "agencies are expected to reimburse the [Fund] within a reasonable
time," the statute also states that an agency may need to extend
reimbursement over several years to avoid reductions in force,
furloughs, other reductions in compensation or benefits for the agency
workforce, or an adverse effect on the mission of the agency.[Footnote
12] Recognizing that agencies are often confronted with practicalities
of this sort, we have suggested that while an agency may not be in a
position to make CDA reimbursements during the year in which the fund
made payment, we would expect the agency to manage its budgetary
resources to accommodate reimbursement of the fund before the beginning
of the second fiscal year following the fiscal year in which the award
is paid.[Footnote 13]
According to FMS, the lack of a reimbursement deadline under CDA and
the No FEAR Act may be one reason that reimbursement rates under the No
FEAR Act may be as low as they have been under CDA. Another key reason
that FMS officials cite for this possibility is that Treasury has very
little authority to enforce reimbursement. Like CDA, the No FEAR Act
provides no sanctions that would compel agencies to reimburse the
Treasury, and no Treasury authority to take money owed directly from
the agency. FMS officials recognize that the requirement for FMS to
annually post the names of agencies that fail to make No FEAR Act
reimbursements or make arrangements for reimbursement may provide an
incentive for agencies to comply with the regulations. Because posting
has yet to begin, it remains to be seen what impact this requirement
will have.
Agency Comments:
On March 18, 2004, we provided a draft of this report to Treasury for
review and comment. Treasury officials had no official comment on this
report, but provided technical and clarifying comments, which we have
incorporated as appropriate.
We will send copies to Representative James F. Sensenbrenner,
Representative John Conyers, other interested congressional
committees, the Secretary of the Treasury, and the Commissioner,
Financial Management Service. We will also make copies available to
others upon request. In addition, the report will be available at no
charge on GAO's Web site at [Hyperlink, http://www.gao.gov]. If you or
your staff have questions about this report, please call me at (202)
512-6806 or Belva Martin, Assistant Director, on (202) 512-4285. Key
contributors to this report are listed in appendix II.
Signed by:
George H. Stalcup
Director, Strategic Issues:
Congressional Recipients:
The Honorable Ted Stevens:
President Pro Tempore:
United States Senate:
The Honorable J. Dennis Hastert:
Speaker of the House:
House of Representatives:
The Honorable Susan M. Collins:
Chairman:
Committee on Governmental Affairs:
United States Senate:
The Honorable Joseph I. Lieberman:
Ranking Minority Member:
Committee on Governmental Affairs:
United States Senate:
The Honorable Jo Ann Davis:
Chairwoman:
Subcommittee on Civil Service and Agency Organization:
Committee on Government Reform:
House of Representatives:
The Honorable Danny K. Davis:
Ranking Minority Member:
Subcommittee on Civil Service and Agency Organization:
Committee on Government Reform:
House of Representatives:
The Honorable John Ashcroft:
Attorney General:
Department of Justice:
[End of section]
Appendix I: Scope and Methodology:
To address our objectives, we reviewed relevant laws, procedures, and
guidelines, and interviewed officials in FMS, its Judgment Fund branch,
and FMS's Office of the Chief Counsel. Judgment Fund officials provided
us with the number and amount of CDA and discrimination claims paid
from the Judgment Fund from fiscal year 2001 through 2003. Since FMS
does not track the cost of processing Judgment Fund claim payments,
agency officials could only provide us with estimates of the costs for
processing payments and reimbursements for CDA and discrimination
payments and the estimated increase in costs for fiscal year 2004 for
processing discrimination and any other No FEAR Act claim payments. The
Judgment Fund's cost estimates do not include costs for processing
payments of whistleblower protection claims because the fund generally
does not pay these claims. To arrive at their estimate of the personnel
costs involved, Judgment Fund officials used the percentage of staff
time spent processing CDA and discrimination payments. To determine the
extent of federal agencies' compliance with CDA's reimbursement
requirement, we obtained data through FMS from Treasury's central
accounting system on the amount of money sought and received from
agencies in fiscal years 2001, 2002, and 2003. We interviewed Judgment
Fund and FMS officials to obtain their views of how effective the
reimbursement collection efforts allowed under the No FEAR Act may be.
To assess the reliability of the data from Treasury's financial system,
we reviewed available supporting documentation and interviewed Judgment
Fund officials and the FMS accountant. In addition, we tested the
reasonableness of the fiscal year 2003 estimated personnel costs of
processing CDA and discrimination claims by calculating the percentage
of personnel costs in the fund's total fiscal year 2003 estimate and
comparing this to the percentage of CDA and discrimination claims in
fiscal year 2003 to determine if they were disproportionately large
when compared to the total number of claims processed. On the basis of
our test of the reasonableness of the personnel cost estimates provided
by FMS and our assessment of the reliability of the data generated by
the accounting system used by FMS and the Judgment Fund branch
database, we determined that the data for fiscal years 2001 through
2003 were sufficiently reliable for the purposes of our report.
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Belva Martin, (202) 512-4285:
Acknowledgments:
In addition to the person named above, Karin Fangman, Amy Friedlander,
Domingo Nieves, and Michael Rose made key contributions to this report.
(450164):
FOOTNOTES
[1] Pub. L. No. 107-174, 116 Stat. 566.
[2] U.S. General Accounting Office, The Federal Workforce: Observations
on Protections From Discrimination And Reprisal for Whistleblowing,
GAO-01-715T, (Washington, D.C.: May 9, 2001).
[3] The Judgment Fund also pays other claims, such as personal injury,
property damage, and contract claims. Agencies are generally not
required to reimburse the Judgment Fund for payments made on their
behalf.
[4] Pub. L. No. 95-563, 92 Stat. 2383 (November 1, 1978).
[5] Boards of Contract Appeals are administrative tribunals within
larger executive branch agencies that hear contract dispute appeals.
While administrative awards are not normally paid from the Judgment
Fund, CDA authorized payments of board of contract appeals awards out
of the Judgment Fund.
[6] Whistleblower protection claims are prohibited personnel practice
claims and are typically resolved administratively through the Merit
Systems Protection Board.
[7] FMS also provides central payment services to federal program
agencies, operates the federal government's collections and deposit
systems, provides governmentwide accounting and reporting services, and
manages the collection of delinquent debts.
[8] Pub. L. No. 814, § 1302, 70 Stat. 678, 694 (July 27, 1956)
(codified at 31 U.S.C. § 1304).
[9] Pub. L. No. 87-187, 75 Stat. 415 (August 30, 1961).
[10] S. Rep. No. 107-143, at 2 (2002).
[11] 69 Fed. Reg. 2997 (Jan. 22, 2004) (to be codified at 5 C.F.R. pt.
724).
[12] Pub. L. No. 107-174, § 102.
[13] U.S. General Accounting Office, Principles of Federal
Appropriations Law, vol. 3, 2nd ed., GAO/OGC-94-33 (Washington, D.C.,
Nov. 1994) Ch. 12, at 78.
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