/ DEFENSE DIWISION / , ‘ / Sidk I 3 1i.m I’ ,.7 B-157753 llllllllllllllllllllllllllllllllllllll LM095598 /’ Dear Mr. Secretary: The General Accounting Office has made a review of severance payments by selected military installations to separated civilian employees. 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 made. ./ 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 inefficiency. 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. -2- B-157753 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. -39 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 agency. 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. B-157753 #-A separated employee was overpaid $44-7 because payments were not discontinued until about one month after the employee was rehired by another Federal agency. In this case the employee had notified the payroll office of his reemployment and the reemploying agency had promptly processed the nec- essary personnel actions. The reason for failure to promptly discontinue the payments could not be determined. A portion of this overpayment has been repaid and action to recover the balance has been promised. If overpayments of severance pe,y to rehired employees are to be avoided, personnel offices of both the reemploying and paying agencies and the payroll office of the paying agency must coordinate and dis- charge their responsibilities promptly. This can be accomplished by strict adherence to and prompt compliance with the requirements now prescribed by the Civil Service Commission in FPM Supplcraent 296-31, Book I, Subchapter S2-23 and Appendix D to F_n?/iSupplement 990-2, Book 550. Conclusions To ensure that severance payments to separated civilian employees are made in accordance with applicable laws and regulations, internal controls need to be improved in two areas; independent verification of the correctness of determinations and ccanputations of entitlements, and prompt discontinuance of payments upon reem.$-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$.oyi_ng agency. Recorznendation We recommend that you require all organizations of the Department involved in the processing of severance p<ay XJ f.xtitute procedures for (1) coordinating their actions in a timely manner, (2) independent verification of determinations and computa$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, -5- B-157753 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 Enclosure The Honorable The Secretary of Defense -6-
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)