oversight

Effective Conversion of National Guard Technical Positions to Federal Positions

Published by the Government Accountability Office on 1971-04-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

G~ "- REPORT TO THE CONGRESS
-ocous';"~




             Effective Conversion
             Of National Guard
             Technician Positions
             To Federal PositionsB_,2,,,
             Department of Defense



              FILE C0PY - "' L L



             BY THE COMPTROLLER GENERAL
             OFT HE UNI T ED S T A T ES


                         J4          APRIL 29, 19 7
           COMPTROLLER GENERAL OF THE UNITED STATES
                      WASHINGTON. D.C.   20548




B- 20748




To the President of the Senate and the
Speaker of the House of Representatives

       This is our report on the effective conversion of Na-
tional Guard technician positions to Federal positions in the
Department of Defense.

      Our review was made pursuant to the Budget and Ac-
counting Act, 1921 (31 U.S.C. 53), and the Accounting and Au-
diting Act of 1950 (31 U.S.C. 67).

      Copies of this report are being sent to the Director,
Office of Management and Budget; the Secretary of Defense;
the Secretaries of the Army and Air Force; and the Chairman,
Senate Committee on Armed Services.




                                         Comptroller General
                                         of the United States




                50TH ANNIVERSARY           1921-1971
COMPTROLLER GENERAL'S              EFFECTIVE CONVERSION OF NATIONAL GUARD
REPORT TO THE CONGRESS             TECHNICIAN POSITIONS TO FEDERAL POSITIONS
                                   Department of Defense B-20748


DIGEST


WHY THE REVIEW WAS MADE

      The National Guard Technicians Act of 1968 converted Army and Air Na-
      tional Guard technicians from State to Federal employee status, effec-
      tive January 1, 1969. One of the principal purposes of the legislation
      was to provide an adequate and uniform retirement and fringe benefit
      program. (See p. 3.)
      A National Guard technician is a civilian employee whose employment
      generally requires him to be a military member of the Guard also.
      Before the conversion the technicians were considered employees of
      the States, even though their salaries were paid from Federal funds.
      The General Accounting Office (GAO) reviewed National Guard personnel
      and payroll records to see if the conversion had been accomplished in-
      accordance with the act and implementing regulations.

FINDINGS AND CONCLUSIONS

      GAO reviewed records of over 1,000 technicians selected at random in
      12 States and found that the conversion, in general, had been carried
      out in accordance with the act and implementing regulations and in-
      structions. With few exceptions the grades, rates of compensation,
      leave balances, and annual leave accrual categories recorded at the
      time of conversion were proper.
      There were many discrepancies, however, in data pertaining to service
      prior to the conversion, attributable primarily to clerical error,
      omission of data, and misinterpretation of instructions. (See p. 5.)
      The erroneous data had no significant effect on the status of the tech-
      nicians at the time of conversion and generally will have no significant
      effect as long as they are employed by the Federal Government. The
      errors could have an effect on the technicians' retirement rights and
      benefits and on the related cost to the Government. (See p. 6.)
      Nine of the 12 States had, or were planning to have, consolidated per-
      sonnel offices; the other three had separate personnel offices for the
      Army National Guard and the Air National Guard. Consolidation offers
      the advantages of centralized authority, uniformity of operations, and
      possible savings in personnel costs. (See p. 14.)
Tear Sheet



                                       i          APRIL 29, 1 9 7 1
     The Secretary of Defense entered into agreements in 1961 with the gov-
     ernments of 19 States and Puerto Rico, providing for payments by the
     Federal Government of the employer's contribution to the retirement
     funds for National Guard technicians covered by State retirement sys-
     tems. Since many of these technicians have elected, under the act of
     1968, to be covered by the Federal civil service retirement system, a
     question has been raised concerning whether the States should be per-
     mitted to retain Federal contributions for those technicians who did
     not have a vested interest in,or who did not remain in, the State re-
     tirement system. The Senate Committee on Armed Services had requested
     the Department of Defense to resolve this matter with the States.
     (See p. 15.)

RECOMMENDATIONS OR SUGGESTIONS

     The Secretary of Defense should require the National Guard Bureau, in
     cooperation with the States, to review the personnel records of all
     technicians converted to Federal employee status to ensure the accuracy
     of service records, service and annual leave computation dates, and
     gross compensation. (See p. 13.)

AGENCY ACTIONS AND UNRESOLVED ISSUES

     The Assistant Secretary of Defense agreed, in general, except on the
     matter of Federal contributions. He said that corrective action to
     overcome the deficiencies would be taken promptly but that the Depart-
     ment had serious reservations regarding the recovery of Federal funds
     previously contributed to certain States.
     The Department subsequently told GAO that personnel offices in all
     States had been consolidated by the end of calendar year 1970 and that
     the National Guard Bureau had been assigned responsibility for advising
     the Senate Committee on Armed Services on the matter of uncommitted
     Federal contributions in State retirement systems.

MATTERS FOR CONSIDERATION BY THE CONGRESS

     The National Guard Technicians Act of 1968 was enacted as a result of
     many years of deliberations by committees of the Congress on ways to
     improve the employment conditions of civilian technicians.
     GAO is sending this report to the Congress to inform it of the effec-
     tiveness and timeliness of this implementation of the act.




                                   2
                          Contents
                                                        Page

DIGEST                                                    1

CHAPTER

   1       INTRODUCTION                                   3

   2       VERIFICATION OF RECORDS PERTAINING TO
           SERVICE PRIOR TO CONVERSION                    5
               Service records                            6
               Service computation dates                  8
               Leave status                               9
               Gross compensation                        10
               Salary rates                              12
               Conclusion                                12
               Recommendation                            13

   3       CONSOLIDATION OF PERSONNEL OFFICES            14
               Agency action                             14

   4       UNCOMMITTED FEDERAL CONTRIBUTIONS TO
           STATE RETIREMENT SYSTEMS                      15
               Agency comments                           18
               Conclusion                                19

   5       SCOPE OF REVIEW                               20

APPENDIX

   I       Letter from the Assistant Secretary of
             Defense (Manpower and Reserve Affairs),
             dated September 1, 1970, to the General
             Accounting Office                           23

  II       Principal officials of the Department of
             Defense, the Departments of the Army and
             the Air Force, and the National Guard
             Bureau responsible for administration of
             activities discussed in this report         25
COMPTROLLER GENERAL'S             EFFECTIVE CONVERSION OF NATIONAL GUARD
REPORT TO THE CONGRESS            TECHNICIAN POSITIONS TO FEDERAL POSITIONS
                                  Department of Defense B-20748

DIGEST

WHY THE REVIEW WAS MADE

     The National Guard Technicians Act of 1968 converted Army and Air Na-
     tional Guard technicians from State to Federal employee status, effec-
     tive January 1, 1969. One of the principal purposes of the legislation
     was to provide an adequate and uniform retirement and fringe benefit
     program. (See p. 3.)
     A National Guard technician is a civilian employee whose employment
     generally requires him to be a military member of the Guard also.
     Before the conversion the technicians were considered employees of
     the States, even though their salaries were paid from Federal funds.
     The General Accounting Office (GAO) reviewed National Guard personnel
     and payroll records to see if the conversion had been accomplished in
     accordance with the act and implementing regulations.

FINDINGS AND CONCLUSIONS

     GAO reviewed records of over 1,000 technicians selected at random in
     12 States and found that the conversion, in general, had been carried
     out in accordance with the act and implementing regulations and in-
     structions. With few exceptions the grades, rates of compensation,
     leave balances, and annual leave accrual categories recorded at the
     time of conversion were proper.
     There were many discrepancies, however, in data pertaining to service
     prior to the conversion, attributable primarily to clerical error,
     omission of data, and misinterpretation of instructions. (See p. 5.)
     The erroneous data had no significant effect on the status of the tech-
     nicians at the time of conversion and generally will have no significant
     effect as long as they are employed by the Federal Government. The
     errors could have an effect on the technicians' retirement rights and
     benefits and on the related cost to the Government. (See p. 6.)
     Nine of the 12 States had, or were planning to have, consolidated per-
     sonnel offices; the other three had separate personnel offices for the
     Army National Guard and the Air National Guard. Consolidation offers
     the advantages of centralized authority, uniformity of operations, and
     possible savings in personnel costs. (See p. 14.)




                                      l
     The Secretary of Defense entered into agreements in 1961 with the gov-
     ernments of 19 States and Puerto Rico, providing for payments by the
     Federal Government of the employer's contribution to the retirement
     funds for National Guard technicians covered by State retirement sys-
     tems. Since many of these technicians have elected, under the act of
     1968, to be covered by the Federal civil service retirement system, a
     question has been raised concerning whether the States should be per-
     mitted to retain Federal contributions for those technicians who did
     not have a vested interest in, or who did not remain in, the State re-
     tirement system. The Senate Committee on Armed Services had requested
     the Department of Defense to resolve this matter with the States.
     (See p. 15.)

RECOMENDATIONS OR SUGGESTIONS

     The Secretary of Defense should require the National Guard Bureau, in
     cooperation with the States, to review the personnel records of all
     technicians converted to Federal employee status to ensure the accuracy
     of service records, service and annual leave computation dates, and
     gross compensation. (See p. 13.)

AGENCY ACTIONS AND UNRESOLVED ISSUES

     The Assistant Secretary of Defense agreed, in general, except on the
     matter of Federal contributions. He said that corrective action to
     overcome the deficiencies would be taken promptly but that the Depart-
     ment had serious reservations regarding the recovery of Federal funds
     previously contributed to certain States.
     The Department subsequently told GAO that personnel offices in all
     States had been consolidated by the end of calendar year 1970 and that
     the National Guard Bureau had been assigned responsibility for advising
     the Senate Committee on Armed Services on the matter of uncommitted
     Federal contributions in State retirement systems.

MATTERS FOR CONSIDERATION BY THE CONGRESS

    The National Guard Technicians Act of 1968 was enacted as a result of
    many years of deliberations by committees of the Congress on ways to
    improve the employment conditions of civilian technicians.
    GAO is sending this report to the Congress to inform it of the effec-
    tiveness and timeliness of this implementation of the act.




                                  2
                         CHAPTER 1

                       INTRODUCTION

     The General Accounting Office reviewed the conversion
of National Guard technician positions from State to Fed-
eral positions under the provisions of the National Guard
Technicians Act of 1968, Public Law 90-486, (32 U.SC. 709).

     On August 13, 1968, the Congress enacted the National
Guard Technicians Act of 1968, to become effective Janu-
ary 1, 1969. Among other things the act provided for (1)
conversion of National Guard technicians from State to Fed-
eral employee status in General Schedule or wage board po-
sitions, (2) credit for all or part of past technician ser-
vice for Federal employee purposes with respect to status,
fringe benefits, and retirement, and (3) election by a tech-
nician to remain covered by a State retirement system with
the consent of the State.

     Both the Senate and House Committees on Armed Services
reported that one purpose of the legislation was to provide
a retirement and fringe benefit program that would be both
uniform and adequate.

     The act provided that the Secretary of the Army or of
the Air Force be responsible for fixing the rates of basic
compensation for all technician positions existing on Janu-
ary 1, 1969, in the Army National Guard or the Air National
Guard, respectively. The rates of compensation, except the
special rates for technicians assigned to perform operational
duties at air defense sites, were to be fixed in accordance
with the General Schedule or with the appropriate prevailing
wage schedules, as applicable.

     Authority for administering the National Guard Techni-
cian Program is specifically delegated to the Chief, National
Guard Bureau, a joint bureau of the Departments of the Army
and the Air Force.

     Upon passage of the act, officials of the National
Guard Bureau made an intensive effort to provide information
to all States on the major features of the act and on the
implementing procedures for the conversion. Information was


                              3
provided for use by the States in briefing technicians on
the impact of the act upon them as individuals and on the
fringe benefits involved. In addition, area orientation
conferences were held and visits to States were made by Na-
tional Guard Bureau officials to discuss the conversion pro-
cedures.

     The adjutant general of each State is responsible for
carrying out and administering, through a civilian personnel
office, the National Guard Technician Program authorized for
his State. It is the prerogative of each State adjutant
general to organize and operate either a centralized or a
decentralized civilian personnel office.

     At the time of their conversion to Federal employee sta-
tus, there were about 40,000 technicians who were full-time
civilian employees of the National Guard in the 50 States,
the District of Columbia, and Puerto Rico. As a condition
for their civilian technician employment, about 95 percent
of the technicians are required by regulations to be military
members of the National Guard. Before the conversion the
technicians, except those in the District of Columbia Na-
tional Guard, were considered employees of the States, even
though their salaries were paid from Federal funds.

     Prior to January 1, 1969, 19 States and Puerto Rico pro-
vided coverage of National Guard technicians under their
State retirement systems. The act provided coverage under
the Federal civil service retirement system for all new
technicians to be employed after January 1, 1969, and for all
technicians employed on that date, except those who elected
to remain covered by a State retirement system with the con-
sent of the State concerned. Approximately 4,450 technicians
had acquired a vested interest in a future annuity under one
of the State retirement systems on the basis of past service.




                             4
                         CHAPTER 2

           VERIFICATION OF RECORDS PERTAINING TO

                SERVICE PRIOR TO CONVERSION

     We examined the personnel and payroll records of 673
Army National Guard technicians and of 419 Air National
Guard technicians, selected at random from 9,571 Army and
5,951 Air technicians, respectively, who had converted from
State to Federal employee status as of January 1, 1969, in
the 12 States in which we did our work.

     The short period of time in which technicians were to
be converted from State to Federal employee status--Au-
gust 13, 1968, to January 1, 1969--caused a crash program
to be undertaken to transfer all pertinent data and records
to Federal forms. We were informed that the volume of work
to be performed in some States was greater than could be
accomplished within that time by the limited number of per-
sonnel available.

     With few exceptions we found that the grades, rates of
compensation, leave balances, and annual leave accrual cat-
egories recorded at the time of conversion were proper for
the technicians selected at random for review. We found
many discrepancies, however, in both Army and Air National
Guard records pertaining to service prior to the date of
conversion, attributable primarily to clerical errors, omis-
sion of data, and misinterpretation of instructions. The
discrepancies generally involved

     -- incorrect beginning or ending dates of prior service,

     -- omission of periods of prior creditable service or
        inclusion of periods of noncreditable service,

     -- incorrect computations or recording of data,

     -- incomplete data, and

     --absence of certification to show that prior service
       had been verified.


                               5
     The erroneous data had no significant effect on the
status of the technicians at the time of conversion and
generally will have no significant effect as long as the
technicians are actively employed by the Federal Government.
The errors could have an effect on the rights and benefits
accruing to the technicians, particularly with regard to
their retirement rights and benefits, and on the related
cost to the Government.

     The following table shows the extent of errors found
in our examination of the records of 673 Army National Guard
technicians and of 419 Air National Guard technicians se-
lected at random for review.

                                    Army                           Air
                                     Total    Percent               Total   Percent
                           Total     with       with      Total     with      with
                         examined   errors     errors   examined   errors    errors

Service records             673       238        35       419        139       33
Service computation
  dates                     673       243        36       419        172      41
Annual leave computa-
  tion dates                673       244        36       4 0 8a     181      44
Annual leave accrual
  category                  673        9          1       4 08 a      6           1
Annual leave balances       673        7          1       419         9           2
Sick leave balances         673       -                   419          1      -
Gross compensation
  recorded on individ-
  ual retirement re-
  cords (note b)            562      361        64        374       246       66
Salary rates                673        4         1        419         3        1

aDates had not been computed at one location for 11 Air technicians se-
 lected for review.

bDoes not include incomplete records or records of those technicians who
 elected to remain covered by State retirement systems.


     The nature, extent, and possible effect of the discrep-
ancies are discussed below.

SERVICE RECORDS

     Public Law 90-486, section 3.(c), provided that, for
National Guard technicians who continued to perform service
on or after January 1, 1969, all technician service per-
formed before that date be included and credited in the

                                          6
determination of length of service for purposes of leave,
Federal employee's death and disability compensation, group
life and health insurance, severance pay, tenure, and career
status.

     The National Guard Bureau instructed the States to use
Service Record, Standard Form 7, for recording prior ser-
vice of the technicians. This record was to contain a
chronological listing of all actions affecting the rate of
compensation or assignment to an organizational unit and
was to show all active military duty and all technician
service.

     The accuracy of the data recorded on the service rec-
ord is important since the record is the primary source for
determining that time requirements for such personnel ac-
tions as promotions and within-grade increases have been
met. Also, the service record for service prior to conver-
sion becomes a part of the service history section of the
individual retirement record which is used by the Civil Ser-
vice Commission in determining retirement entitlements.

     Our review of the data recorded on the service records
for the technicians selected at random is summarized below.

                                            Army       Air
States with discrepancies                      11        11
Technician records reviewed                   673       419
Number of records not certified                57        72
Number of records with discrepancies          238       139
Total entries recorded or to be re-
  corded on records with discrepancies      4,871     2,850
Total discrepancies found                     759       540
Types of discrepancies:
    Incorrect effective date of action        176       111
    Erroneous job description                  13        21
    Incorrect grade or step                    15        22
    Incorrect salary or pay rate               36        34
    Entry omitted                             493       341
    Entry not documented                       26        11




                             7
SERVICE COMPUTATION DATES

     Public Law 90-486, section 5.(a), provided to techni-
cians who continued to perform service on or after Janu-
ary 1, 1969, credit for years of past technician service for
civil service retirement eligibility purposes.

     In accordance with National Guard Bureau instructions,
a Statement of Prior Federal Civilian and Military Service,
Standard Form 144, was to be prepared for each technician at
the time of conversion to show all prior periods of National
Guard technician service, Federal civilian service, and ac-
tive military service.

     Periods of creditable service should be accurately com-
puted to establish a correct service computation date for
use in establishing the date when a technician becomes eli-
gible for retirement. The length of creditable service also
can affect the retention rights of a technician in the event
of a reduction in force and is one of the factors used in
computing the amount of severance pay.

     Our review of service computation dates of the techni-
cians selected at random is summarized below.

                                            Army        Air

States with discrepancies                     11         12
Technician records reviewed                  673        419
Number of records not prepared or
  completed                                  250        143
Number of records not certified              300        134
Total discrepancies found                    243        172
Reasons for discrepancies:
    Use of incorrect beginning
      or ending dates of credit-
      able service                            66         48
    Mathematical errors                       29         44
    Prior creditable service not
      considered                              18         18
    Other                                     16         31
   Not identified--information not
     available                               114         31


                             8
                                         Army                 Air
                              Yrs.       Mos.   Days   Yrs.   Mos.   Days

Range of discrepancies:
    Creditable service                          1 to                 1 to
      not included             7          -       16    11     -       12
    Noncreditable ser-                          1 to                 1 to
      vice included            8          11      29    17     6       7

LEAVE STATUS

     Public Law 90-486, section 3.(d), provided that annual
leave and sick leave to which a technician was entitled on
the day before the conversion of his position should be cred-
ited to him in his new position.

     Sick leave is accrued at the rate of 4 hours each bi-
weekly pay period. Annual leave is accrued at the rate of
4, 6, or 8 hours each biweekly pay period on the basis of the
length of creditable service. In determining the period of
creditable service for annual leave accrual purposes, it was
National Guard Bureau policy to grant credit for active duty
training prior to employment as a technician. Therefore in
many instances the annual leave computation date differed
from the service computation date.

     It is important that the annual leave computation date
be accurate since this date is used to determine when a tech-
nician's annual leave accrual category is subject to change.

     During our review of the leave status of the technicians
selected at random, we found the following discrepancies in
annual leave computation dates.

                                                       Army          Air
States with discrepancies                                12           12
Technician records reviewed                             673          408
Total discrepancies found                               244          181
Reasons for discrepancies:
    Use of incorrect beginning or ending
      dates of creditable service                        26           38
    Mathematical errors                                  46           51
    Prior creditable service not considered              36           47
    Other                                                33           12
    Not identified--information not available           103           33


                                     9
                                    Army                 Air
                          Yrs.      Mos.   Days   Yrs.   Mos.   Days

Range of discrepancies:
    Creditable service                     1 to                 1 to
      not included         6        11       4     11     -      26
    Noncredi table
      service in-                          1 to                 1 to
      cluded               8        11       29    10    8        8

     In most States we found that the annual leave balances
recorded on the leave records had been carried forward cor-
rectly at the beginning of the leave year immediately follow-
ing the date of conversion. The balances carried forward
were incorrect for seven Army technicians in one State and
for nine Air technicians in two States.

     With regard to sick leave balances, we found only one
error of 4 hours for one Air technician.

GROSS COMPENSATION

     Public Law 90-486, section 5.(b) and (c), provided that
technician service performed prior to the effective date of
the National Guard Technicians Act of 1968 be recognized to
the extent of 55 percent as creditable service for retirement
annuity computation purposes.

     To receive the maximum annuity, each technician con-
verted to Federal employee status must deposit with the
Civil Service Commission, for credit to his retirement ac-
count, the amount that he would have contributed on 55 per-
cent of his gross compensation during the prior years of
creditable service. If the technician elects to make no de-
posit for credit to his retirement account, his annuity will
be reduced by 10 percent of the amount not deposited.

     The gross compensation received by a technician for
creditable service is used by the Civil Service Commission
in computing the amount of the deposit to the retirement
fund that may be made for technician service performed prior
to January 1, 1969. The accuracy of total compensation be-
comes significant at the time of a technician's retirement,
since his annual annuity would be reduced by 10 percent of
the amount not deposited.
                               10
     Our review of gross compensation recorded on the Indi-
vidual Retirement Record, Standard Form 2806, for the tech-
nicians selected at random, is summarized below.

                                  Army              Air

States with discrepancies             9              11
Technician records re-
  viewed                            562             374
Number of records not
  certified                        161               60
Records with discrepancies         361              246
Total discrepancies found          375              283
Reasons for discrepancies:
    Understatement of
      gross compensation:
         Portion of Decem-
           ber 1968 accrued
           earnings not in-
           cluded                  ยท211             231
         Clerical errors             33              41
    Overstatement of gross
      compensation:
         Partial January
           1969 earnings
           included                 101                0
         Clerical errors             30               11
Range of discrepancies:
    Understatement of
      gross compensation      $ 8 to $25,233   $10 to $38,105
    Overstatement of
      gross compensation      $44 to $21,651   $92 to $30,590

     Apparently the failure to record gross compensation
earned through December 31, 1968, was attributable to misin-
terpretation of the instructions contained in Technician In-
formation Letter 68-7. During our review we called this mat-
ter to the attention of officials of the National Guard Bu-
reau. More specific instructions were issued in Technician
Information Letter 69-7, dated November 21, 1969, and the
States were requested to correct the records as time permit-
ted, but prior to a technician's application for deposit or
separation, whichever comes first.
SALARY RATES

     Public Law 90-486, section 8(a), provided that the
Secretary of the Army or of the Air Force, as appropriate,
fix the rate of basic compensation of positions existing on
the date of enactment of this act in accordance with Gen-
eral Schedule or prevailing wage board rates, as applicable.
Under the rate-fixing provisions of this section, a techni-
cian would not receive a rate of basic compensation less
than that which he received prior to his conversion.

     The National Guard Bureau furnished the States with
grade and series conversion schedules, which were to be ef-
fective January 1, 1969, for Army and Air National Guard
technicians.

     In most States we found that the salary rates given to
the technicians were in compliance with the conversion
schedules.  Salary rates were incorrect for four Army tech-
nicians in two States and for three Air technicians in
three States.

     At the completion of our review, in each State we dis-
cussed the nature and extent of the discrepancies found
with the adjutant general and/or other officials who gener-
ally agreed with our findings and with the need to initiate
corrective action. In most States the officials agreed
that, in view of the number of discrepancies found during
our examination of a random sample of records, the records
of all technicians should be reviewed. Subsequently our
findings, conclusions, and proposals for action to be taken
were presented in a letter report to the adjutant general
of each State and to the Chief, National Guard Bureau.

CONCLUSION

     We believe that the conversion of Army and Air National
Guard technicians to Federal employee status on January 1,
1969, generally was carried out in accordance with the pro-
visions of the National Guard Technicians Act of 1968 and
with the implementing regulations and instructions in the
12 States in which we reviewed records selected at random.
We found, however, that significant numbers of errors had
been made on the records of the converted technicians. The


                             12
erroneous data could have an effect on the rights and ben-
efits accruing to the technicians, particularly with regard
to their retirement rights and benefits, and on the cost to
the Government.

RECOMMENDATION

     We recommend that the Secretary of Defense require the
National Guard Bureau, in cooperation with the States, to
review the personnel records of all technicians, including
those in States which we did not visit, to ensure the accu-
racy of the data recorded.



     The Department of Defense agreed with our findings and
recommendation and said that corrective action would be
taken.




                            13
                         CHAPTER 3

            CONSOLIDATION OF PERSONNEL OFFICES

     In four of the 12 States included in our review, a
consolidated personnel office administered personnel matters
for both Army and Air National Guard technicians on Janu-
ary 1, 1969. Prior to the completion of our review, four
additional States had changed from decentralized to consol-
idated personnel operations and one State had initiated ac-
tion to make the change.

     We discussed this matter with the State adjutants gen-
eral and/or personnel officers of 11 States and obtained
their views on the advantages or disadvantages of consoli-
dation. In eight of the States which had, or were planning
to have, consolidated personnel offices, the consensus was
that consolidation was advantageous from the standpoint of
centralized authority, uniformity of operations, and, in
some instances, savings in personnel costs. In the three
States not having, or not planning to have, consolidated
personnel offices, the consensus was that consolidation
would be disadvantageous because of the differences in Army
and Air Force regulations, the additional time required for
processing documents through a central personnel office,
the necessity for duplicate records, and the increase in
personnel costs.

AGENCY ACTION

     In our draft report we proposed that the Secretary of
Defense instruct the National Guard Bureau to initiate ac-
tion in each State still having separate Army National
Guard and Air National Guard personnel offices to consoli-
date these activities into a single personnel office.

     The Department of Defense agreed with our proposal and
said that action would be taken. We have since been advised
by the National Guard Bureau that, as of the end of calendar
year 1970, single personnel offices have been established
in each of the States and Puerto Rico.




                             14
                         CHAPTER 4

            UNCOMMITTED FEDERAL CONTRIBUTIONS

                TO STATE RETIREMENT SYSTEMS

     Since 1961 legislation enacted by the Congress has au-
thorized, within certain limitations, payment by the Federal
Government of the employer's contribution to the States
which have retirement systems. Puerto Rico and 19 States
provided coverage of National Guard technicians under their
State retirement systems; and, as of January 1, 1968, about
16,000, or 40 percent, of all technicians were covered by
these retirement systems.

     The Secretary of Defense entered into agreements with
the governments of the 19 States and Puerto Rico, providing
for payment by the Federal Government of the employer's con-
tribution to the retirement funds for the National Guard
technicians covered by State retirement systems. The con-
tributions were not to exceed 6-1/2 percent of the compen-
sation paid to the technicians from Federal funds, and from
that amount was to be deducted the Federal Government's con-
tribution for the employer's tax under the social security
system.

     The proceeds of these retirement systems' funds were
to be used solely for the payment of benefits or compensa-
tion to technicians or their beneficiaries. We found that
the agreements between the Secretary of Defense and the
States were silent with respect to the rights of the Federal
Government to recoup from the States any portion of its con-
tributions not committed to pay retirement benefits to the
technicians.

     For fiscal years 1962-68, Federal contributions to the
retirement systems of the 19 States and Puerto Rico totaled
about $19.6 million for the technicians who were actively
employed as of January 1, 1968. For all technicians, in-
cluding those who were in the program during those fiscal
years but who were no longer actively employed, the Federal
contributions totaled about $22.5 million.



                              15
     In its report on the National Guard Technicians Act of
1968, the Senate Committee on Armed Services discussed in
some detail the "MATTER OF UNCOMMITTED FUNDS IN STATE RE-
TIREMENT SYSTEMS CONTRIBUTED BY FEDERAL GOVERNMENT." The
Committee said, in part, that:

         "It is the desire of the committee that the
    Department of Defense negotiate with the various
    States where such Federal contributions have been
    made with a view toward determining the portion
    of the Federal contributions which is uncommitted
    to pay for technician retirement and which other-
    wise will constitute Federal windfalls to the re-
    tirement systems of these States. It is recog-
    nized that actuarial commitments of these funds
    will have been made in the following instances:
    (a) where claims have been or are being paid;
    (b) to the extent that some 4,400 technicians
    with a vested interest to a future State annuity
    remain eligible; and (c) to the extent that tech-
    nicians elect to remain in the State retirement
    system in lieu of coming under the Federal civil
    service system.

         "It would appear that a substantial portion
    of the funds which have been paid on behalf of
    some 16,000 individuals would be uncommitted and
    therefore available for return to the Federal
    Government. The committee as a part of this re-
    port is hereby requesting the Department of De-
    fense to first determine, with the cooperation
    of the States, the portion of these funds which
    are uncommitted with a view to thereafter deter-
    mining the most equitable means of either a re-
    turn of the money to the Federal Government or
    an offset from Federal funds which might other-
    wise be made available to the States."  (Cal.
    1426, Rept. 1446, 90th Cong., 2d sess., pp. 17
    and 18.)




                             16
     In recognition of the interest of the Senate Committee
on Armed Services in the portion of Federal contributions
not committed to pay for technician retirement benefits,
the National Guard Bureau requested the States to present
their views on the feasibility of refunding to the Federal
Government the uncommitted portion of its contribution to
the State retirement funds. The position taken by the
States generally was that there were no identifiable uncom-
mitted funds since the Federal contributions for all tech-
nicians were not sufficient to cover the Federal share of
the commitments for the approximately 4,450 technicians
having a vested interest in a State annuity.

      Our review included four States which covered techni-
cians under State retirement programs prior to the date of
conversion. For three of the States, we obtained the fol-
lowing information concerning the election of technicians
to be covered by either the State retirement system or the
Federal civil service retirement system after January 1,
1969.

                                             Army      Air

Number who elected to remain in a
  State retirement system                      591      290
Number who elected to be covered by the
  Federal civil service retirement system    1,697      897

    Total                                    2,288    1,187

     We discussed this matter with National Guard officials
of three of these States. The opinion of these officials
was that no part of the Federal contributions should be re-
turned. Officials of two States said that the Federal con-
tributions made for all technicians were insufficient to
cover the Federal share of actuarial commitments of funds
for technicians who now have a vested interest in, or who
elected to remain in, the State retirement system. Offi-
cials of the third State told us that the Federal contribu-
tions were unidentifiable since they were part of the gen-
eral fund of the State and therefore could not be returned.




                             17
AGENCY COMMENTS

     In our draft report submitted to the Secretary of De-
fense for comment, we proposed that, in view of the ex-
pressed congressional interest in this matter, appropriate
action be taken to resolve with the 19 States and Puerto
Rico the matter of the return to the Government of that por-
tion of Federal contributions which is not committed to pay
for technician retirement benefits.

     The Assistant Secretary of Defense (Manpower and Re-
serve Affairs) said in his September 1, 1970, letter that
the matter of previously contributed Federal funds to the re-
tirement systems of certain States had been explored and that
the Department had serious reservations regarding this matter.
(See app. I.)

     An attachment to the Assistant Secretary's letter stated
that there was no obligation on the part of the States un-
der their contracts with the Government and presented data
which showed that expenditures with respect to technicians
and their survivors would exceed the total Federal contribu-
tion. It stated also that:

     "*** In establishing, maintaining and budgeting
     for retirement systems, the fact that some em-
     ployees are separated before completing the years
     of service required for vesting, and others with-
     draw their deposits upon separation, leaving un-
     committed the employer's contribution with re-
     spect to their employment, is taken into consid-
     eration."

     Although this statement is a valid actuarial assumption
used in pension plan calculations, the conclusion to which
it leads is not valid in the case of the conversion of the
National Guard technicians. This is because the termination
assumption accounts for normal and anticipated terminations
but not for such wholesale terminations as transfers to an-
other retirement system, as in the case of the National
Guard technicians.




                             18
CONCLUSION

     We believe that a distinction should be made between
the Federal funds contributed, prior to the date of conver-
sion to Federal employee status, for those technicians who
elected to remain under State retirement systems and the
funds contributed for those technicians who elected to trans-
fer to the Federal retirement system. State retirement sys-
tem now have, and will have in the future, a commitment to
the payment of benefits to technicians who had a vested in-
terest as of the date of their conversion to Federal em-
ployee status or who elected to remain under a State retire-
ment system. The National Guard Technicians Act of 1968
stated that the Federal Government may continue to pay to
the States the amount of the employer's contribution for the
technicians who elected to remain covered by a State retire-
ment system.

     On the other hand, State retirement systems do not now
have, and will not have in the future, a commitment to the
payment of benefits to the many technicians who transferred
to the Federal retirement system without a vested interest
in, and therefore without a future claim against, a State
retirement system; the Federal retirement system has the
commitment to payment of benefits to these technicians. We
question whether States should be permitted to retain any
uncommitted Federal contributions.

     On October 1, 1970, we were told that neither the De-
partment of Defense nor the National Guard Bureau had re-
ported to the Senate Committee on Armed Services on the de-
termination made with respect to the matter of uncommitted
Federal funds in State retirement system. On March 4, 1971,
the Deputy Assistant Secretary of Defense (Manpower and Re-
serve Affairs) instructed the Chief, National Guard Bureau,
to report to the Committee on this matter.




                             19
                         CHAPTER 5

                      SCOPE OF REVIEW

     We reviewed Public Law 90-486 and the implementing reg-
ulations and discussed with appropriate officials at Head-
quarters, National Guard Bureau, and in 12 States the proce-
dures entailed in converting the National Guard technicians
to Federal status January 1, 1969. Our field review was
made at all National Guard civilian personnel and payroll
offices in the States of California, Colorado, Illinois,
Indiana, Louisiana, Massachusetts, New Jersey, New York,
Pennsylvania, Rhode Island, Tennessee, and Texas. We ex-
amined pertinent personnel and payroll records of technicians
selected at random in each State.

     Since some States now have decentralized personnel of-
fices for Army National Guard and Air National Guard techni-
cians, we inquired into the feasibility of having a single
consolidated personnel office within each State.

     We inquired into action taken by the National Guard Bu-
reau to negotiate with those States that had covered techni-
cians under their retirement systems for the return to the
Federal Government of that portion of Federal contributions
which no longer is committed to payment of future technician
retirement benefits.




                             20
APPENDIXES




21
                                                                APPENDIX I




                       ASSISTANT SECRETARY OF DEFENSE
                               WASHINGTON. D. C. 20301


                                       1 SEP 1970
 MANPOWER AND
RESERVE AFFAIRS




       Mr. Charles M. Bailey
       Defense Division
       General Accounting Office
       Washington, D. Co 20548

       Dear Mr. Bailey:

       The draft of the proposed report to the Congress on your review of
       the conversion of National Guard technicians to Federal status (OSD
       Case #3122) has been closely examined.    The privilege of reviewing
       and offering comments on the report prior to its being submitted to
       the Congress is appreciated.

       The enclosure to this letter explores the matter of previously con-
       tributed Federal funds to the retirement systems of certain states.
       We have serious reservations regarding this matter and are request-
       ing a reconsideration of this aspect of the report prior to its being
       furnished to the Congress.

       Except for this item, this Department offers no suggestions for change
       or modification to the report as drafted. Corrective action to over-
       come the deficiencies will be promptly directed to formalize the re-
       cognition being given to the report. In this regard, however, we are
       advised that the debriefings and informal reviews that your evaluators
       provided have resulted in a substantial corrective effort already being
       underway.

       The National Guard Bureau has expressed its gratitude for the benefits
       to be derived by this identification of discrepancies early in the appli-
       cation of P. Lo 90-486. Also, we are advised that the states visited
       considered this evaluation as an assist to their effort and have expressed
       appreciation for the professional review.




                                         23
APPENDIX I

                                      its appreciation for the managerial
 Likewise, this Department conveys
                                                                  this
                                  will accrue from the efforts of
 and administrative benefits that
 evaluation.

                                     Sincerely,




                                                  W. P. Mack
                                                  Vice Admiral, U.S. Navy
 Enclosure
                                         .~ting
  Federal contributions to State
  Retirement Systems




                                       24
                                                   APPENDIX II
                                                        Page 1

                   PRINCIPAL OFFICIALS

               OF THE DEPARTMENT OF DEFENSE,

     THE DEPARTMENTS OF THE ARMY, AND THE AIR FORCE,

               AND THE NATIONAL GUARD BUREAU-

      RESPONSIBLE FOR ADMINISTRATION OF ACTIVITIES

                 DISCUSSED IN THIS REPORT


                                         Tenure of office
                                         From          To

                   DEPARTMENT OF DEFENSE

SECRETARY OF DEFENSE:
    Melvin R. Laird                 Jan.    1969    Present
    Clark M. Clifford               Mar.    1968    Jan. 1969

ASSISTANT SECRETARY OF DEFENSE
  (MANPOWER AND RESERVE AFFAIRS):
    Roger T. Kelley                 Mar.    1969    Present
    Vacant                          Feb.    1969    Feb. 1969
    Alfred B. Fitt                  Oct.    1967    Jan. 1969


                  DEPARTMENT OF THE ARMY

SECRETARY OF THE ARMY:
    Stanley R. Resor                July    1965    Present

ASSISTANT SECRETARY OF THE ARMY
  (MANPOWER AND RESERVE AFFAIRS):
    William K. Brehm                Apr.    1968    Present


                DEPARTMENT OF THE AIR FORCE

SECRETARY OF THE AIR FORCE:
    Dr. Robert C. Seamans, Jr.      Jan.    1969    Present
    Dr. Harold Brown                Oct.    1965    Jan. 1969


                             25
APPENDIX II
     Page 2

                                       Tenure of office
                                       From          To

                DEPARTMENT OF THE AIR FORCE (continued)

ASSISTANT SECRETARY OF THE AIR
  FORCE (MANPOWER AND RESERVE AF-
  FAIRS):
    James P. Goode (acting)         Apr.   1970   Present
    Dr. Curtis W. Tarr              June   1969   Apr. 1970
    James P. Goode (acting)         Mar.   1969   June 1969
    J. William Doolittle            Apr.   1968   Mar. 1969


                   NATIONAL GUARD BUREAU

CHIEF, NATIONAL GUARD BUREAU:
    Maj. Gen. Winston P. Wilson     Sept. 1963    Present




                                                  U.S. GAO Wash., D.C.
                              26