Review of Severance Payments by Selected Military Installations to Separated Civilian Employees

Published by the Government Accountability Office on 1971-07-13.

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

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            Dear Mr. Secretary:

                  The General Accounting           Office has made a review of severance
            payments by selected military             installations to separated civilian

                    In October 1969 and March 1970 you announced actions to consol-
            idate,     reduce, realign,        or close certain        military     installations      in
            the United States and Puerto Rico.                  These actions were expected to
            result     in elimination       of about 85,600 civiiian            positions.        bwly employ-
            ees given initial         reduction-in-force         notices were not involuntarily
            separated because some positions                scheduled for elimination             were vacated
            by the retirement,          voluntary     resignation,      transfer,       or reassignment     of
            employees e The installations              were responsible         for determining       whether
            those who were involuntarily              separated were entitled            to severance pay
            as authorized       by law, and for making those payments in accordance with
             regulations      of the Civil       Service Commission,

                   In our review of civilian     pay and allowances       during fiscal     year
            1970, we made tests of the procedures         and controls     used in processing
            severance payments at each military        installation     visited.    More tests
            are being made in fiscal      year 1971. We made a more detailed            review of
            payments to separated      employees selected      at random at eight Army, Navy
            and Air Force installations       to determine whether the procedures           and
            controls   used were adequate to ensure that the payments were in accord-
            ance with applicable     laws and regulations.

            Entitlement      of separated

                   Section 9 of the Federal Employees Salary Act of 1965, as amended,
            5 TJ-S.C. 5595, and Civil     Service Commission regulations,     contained  in
            the Federal Personnel Manual. (FPM) and FPM Supplements 990-l and 99C-2,
            prescribe    the conditions   under which an employee is entitled      to sever-
            ance pay.      The law and regulations   also prescribe   the method for comput-
            ing the total     amount of severance pay to which an employee is entitled,
            called the severance pay fund, and the manner in which payment is to be

                                        50TH ANNIVERSARY            1921-1971
     An employee     is entitled     to be paid    severance    pay if    he

           --has been employed currently   for a continuous   period             of at
              least 12 months prior to his separation,    and

           --is involuntarily    separated from the service,    not by removal
               for cause on charges of misconduct,  delinquency,    or

       The severance pay fund consists    of a basic allowance computed for
years of service and an age adjustment       allowance   computed for years of
age in excess of 40. The fund may not exceed one year's pay at the rate
received by the employee immediately      prior to his separation,      Payments
are to be made by the separating      agency a t regular   pay period intervals
until   the total   fund is paid out.

       When an employee is rehired by the Federal Government prior             to the
end of his period of entitlement,        previously    authorized    severance pay-
ments are to be discontinued      and the unexpired       portion   of the period
recredited    for subsequent use.     An employee can receive during his life-
time no more than a total    of 52 weeks of severance pay, regardless             of
the number of separations    he has from Government service.             If an employee
is rehired under a temporary      United     appointment,      with or without   a break
in service of three or more days, the payment is to be suspended until
the termination    of that appointment.

        In some instances  of involuntary    separation,  employees are not
entitled    to severance pay.    These include,    but are not limited to, those
instances     where an employee

           --is receiving     or is entitled       to receive an immediate       Federal
               annuity, e.g.,   retired   military     Dersonnel, or

           --has refused an offer of an equiva3.en-t           position    in his   agency
              within the same commuting area.

Effectiveness     of severance
pay procedures     and controls

        We found no pattern     of deficiencies      in the procedures        used in deter-
mining entitlement        to severance pay and in computing and gaying severance
pay at the installations        visited,    and at some installations          we found no
errors.      At several instsllations,        however, internaL      controls     needed
improvement since (1) there was no independent              review and verification          of
the correctness      of determinations      and computations      of entif'ements,       and
 (2) the payroll     office   was not promptly      Wnished     information       and documen-
tation    required   to discontinue      severance payments.


       Civilian personnel  offices    at the installations           determined  whether
separated employees were entitled       to severance pay.            They computed the
severance pay fund, processed the personnel             actions,     and counseled the
employee on his entitlements       and responsibilities          for reporting    any re-
employment in a Federal position       during the period he was entitled             to
receive severance pay.

        Following      the receipt     of separation     personnel actions,    civiliaLn
payroll      offices     processed the severance payyments on a biweekly pay
period basis.          Amounts of biweekly payments and periods they were to
be paid were determined            from infomation       shown on personnel    actions.
Automatic        computer controls      or manual controls      maintained  by payroll
clerks were established            to prevent payments from continuing         beyond
periods      of entitlement.         At most installations,       however, the payroll
office     did not suspend or discontinue            severance payments when notified
that a separated           employee bad been rehired        in a Federal position,       but
continued payments until             a copy of the personnel       document requiring
such action was received.

        At some installations         we found errors     in determinations      of entitle-
ment to severace        pay and in computations          of the severance pay funds.
Most of these errors         resulted    from failure     to consider or properly        apply
prescribed    statutory      and regulatory     provisions.        Some were clerical
errors;     These errors,       which should have been detected          and corrected
through independent        review and verification          of initial   determinations
and computations,       included the following:

            --Administrative     determination      that an employee who had
               refused an offer     of an equivalent     position      in his agency
               in the same commuting area was entitled            to receive
               severance pay totaling       $13,367 uyn his separation             from
               his position,,    We questioned      the administrative        dctermina-
               tion since it was contrary        to a prohibition        prescribed     by
               regulations    of the Civil     Service Commission.          The authori-
               zation was canceled before any payment was processed.

            --Erroneous    authorization       of severance pay to an employee who
               was receiving    a Federal      annuity as a retired military  member.

            --Failure  to reduce the period of severance pay entitlement      by
               the number of weeks of severance pay received by an employee
               during a previous period of separation   from Federal service.

            -=-Incorrect     computation     of years     of service    and age.

            --Mathematical       errors    in computing     severance    pay funds.

       When a former employee of the Federal Government is rehired                by a
Federal agency after a break in setice             of less than one year, the re-
aploying    agency is responsible        for making certain      determinations
before processing      the employee’s appointnent.         Included    among these is
the responsibility       for determining     whether the former employee is
receiving   or entitled     to receive severance pay.         This determination
should be made by wire, telephone,           or review of available       personnel
documents, or by requesting        previous    emplopent     data.

        When it is determined    that a former employee is receiving         severance
pay, the reemplo-ying agency has additional       responsibilities.         These Ln-
elude (1) notifying      the paying agency, by wire or telephone,          of reemploy-
ment of the former employee and confirming        by a cop;r of the personnel
documents 9 (2) requesting     the former employee”s official         personnel
folder,    and (3) noting on the appointment     personnel      action the number
of weeks of severance pay the rehired        employee was paid and that sever-
ance pay was discontinued,

      Where the rehired     employee is determined    to be receiving   severance
pay, the paying agency      is responsible   for discontinuing    fhe severance
payments upon receipt      of notice of reemployment of the fo-rmer employee
and for releasing   his    official  personne 1 folder to the reenployiw

        We found that some installations      failed  to discontinue    severance
payments promptly when separated employees were rehired             by another
installation     or Federal agency.      Some overpayments,   and their basic
causes, are described below.

           --A separated      employee was overpaid $5,232.          In this case the
              payroll  office    was not informed of his reesnpioyment by
              another Federal agency,          This failure   resulted     frcm a break-
              down in c ommunicatisns       between the civilian       personnel   office
              and the payroll      office   of the pa-finq agency.        The overpayment
              is being recovered        from the rehired    eqloyee     at she rate of
              $50 a pay period.

           --Overpayments     of $850 and $585, respectively,     were made to
              two separated employees.       In one case the civi?.ian   Tersonnel
              office   of the paying agency did not furnish     prompt notice
              of the reemployment     of the former employee to the pa-yrcll
              office.    In the other case the reaFloying      agency did no2
              promptly   advise t;le paying agency C,hat the employee had been
              rehired.     These overpayments have been. rex:d     by thz employees.

              #-A separated employee was overpaid $44-7 because payments were
                not discontinued    until     about one month after     the employee
                was rehired by another Federal agency.            In this case the
                employee had notified       the payroll    office   of his reemployment
                and the reemploying       agency had promptly     processed the nec-
                essary personnel    actions.       The reason for failure     to promptly
                discontinue    the payments could not be determined.            A portion
                of this overpayment has been repaid and action to recover
                the balance has been promised.

       If overpayments        of severance pe,y to rehired    employees are to be
avoided, personnel        offices     of both the reemploying   and paying agencies
and the payroll      office     of the paying agency must coordinate      and dis-
charge their     responsibilities        promptly.   This can be accomplished    by
strict    adherence to and prompt compliance with the requirements            now
prescribed     by the Civil       Service Commission in FPM Supplcraent 296-31,
Book I, Subchapter S2-23 and Appendix D to F_n?/iSupplement 990-2, Book


       To ensure that severance payments to separated civilian          employees
are made in accordance with applicable     laws and regulations,        internal
controls   need to be improved in two areas; independent      verification       of
the correctness    of determinations  and ccanputations  of entitlements,        and
prompt discontinuance     of payments upon reem.$-oyment by 3, Federal agency.

       Determining    the correctness        of an em@-oyeePs entitlement        to sever-
ance pay at the installation           from which he was separated requires            close
coordination     between civilian        personnel    and payroll   offices    and independ-
ent verification      to ensure that provisions          of applicable      Xws and regu-
Lations of the Civil      Service Cotission           are properly    applied.     To prevent
the payment of severance pay to rehired               employees also reqtires       close
coordination     between personnel        and payroll    offices   of the p8ying instal-
lation    and the personnel     office      of the recm$.oyi_ng agency.


        We recommend that you require        all organizations       of the Department
involved     in the processing      of severance p<ay XJ f.xtitute         procedures     for
 (1) coordinating       their actions in a timely manner, (2) independent
verification      of determinations     and computa$ions       of entitlements      prior
to processing      action documents (3) prom$ no%ficathon                of reemployment
of a separated employee by a Defense agency, z~nd jb) suspension of
severance payments as soon as informal           noL;';_catizn     of reemployment
has been received,


       your attention    is invited  to Section 236 of the Legislative     Reorga-
nization     Act of 19Kl which requires     that you submit written  statments
of the action taken on our recmnendations.           The statements  are to be
sent to the House md Senate Committees on Government Operations            hot
later    thah 60 days after the date of this report,       and to the Committees
on Appropriations     with the first    request for appropriations   submitted
by your agency more thrnn 60 days after the date of this report.

      Copies of this report are being       sent to the Director,     Office     of
Management and Budget; the Secretaries        of the     ) Navy,     and Air     Force;
and the Chairman, United States Civil        Service Commission.

      We would appreciate    receiving   your   cements   on the matters       discussed
in this report,

                                         Sincerely   yours,

                                         Director,   Defehse   Division


The Honorable
The Secretary   of Defense