Cash Management Improvements Will Save Federal Insurance and Benefits Programs Millions Annually

GAO reported on the cash management problems in the handling of funds for the federal employees' life insurance and health benefits (FEIHB) programs. Funds held by the Department of the Treasury and insurance carriers for FEIHB programs are invested and the income earned is used to reduce costs to federal employees and the government.

GAO found serious weaknesses in the procedures used by the Office of Personnel Management (OPM) and the Treasury to remit premiums to insurance carriers. The payments to the insurer for the life insurance program were being made prematurely. Not only did the life insurance program not gain any additional income by being paid early, it actually lost income from Treasury special issues each month. GAO estimated this loss of investment income at about $3.5 million during 1979. OPM and the Treasury did not follow prudent cash management practices in paying insurance carriers under the health insurance program. GAO also found that payments were being made by check instead of the more efficient method of bank wire transfer. Because payments made by check are often delayed, at least $550,000 of investment income has been lost since 1976.

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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