oversight

Review of Civil Service Commission's Accounts Receivable

Published by the Government Accountability Office on 1977-09-15.

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

                         DOCUMENT RESUME
03458 - [A25S3737]

[Review of Civil Service Commission's Accounts Receivable].
GGMSD-77-41; B-15c687. September 15, 1977. 4 pp.
Report to Alan K. Campbell, Civil Service Commission; by D. T.
Scantlebury, Director, Financial and General Management Studies
Div.
Issue Area- Accounting and Financial Reporting (2800).
Contact: Financial and General Management Studies Dtv.
BuAget Function: Miscellaneous: Financial Management and
    Information Systnms (1002); 'nterest: Other Interert (902).
         A review of the Civil Service Commission's ;CSC)
accounting system for accounts receivable from the public showed
that accounting and reporting practices were, for the most part,
effective and in accordance with the approved accounting system,
but several shortcomings were found. Findings/Conclusions:
Accounts receivable from the public as of September 30, 1976,
were understated by $7,264,134 because a refund was
misclassified in the report as accounts receivable from
Government agencies. These two major categories of accounts
receivable should be accurately segregated. CSC officials
stated, after this matter was brought to their attention, that
procedures had been revised to help prevent similar
misclassifications. The Government was not charging interest on
claims agaiAst retirement accounts of its former employees.
There were about 8,700 unpaid Government claims in the CSC files
in amounts ranging from $5 to $18,625. About one-half of these
claims were i a suspended status because the individual had a
vested right to a deferred annuity, and collection action could
not be completed until he requested either an annuity or refund
of his contributions. The other half were in a suspended status
because the employees' total contributions to the retirement
account only partially satisfied the claims. Recommendations:
CSC should revise its current policy to require that interest
charges be added to Government claims to be collected through
reduction of an individual's annuity. (Author/HTW)
                             UNITED STATE GNERAL ACCOUNTING OFFICE
                                     WASHINGTON, D.C.   2054


DIVISION OP IANCAL. AND
 ICNIUItL MANAKM'fr ESLuDI

       B-159687                                    SIP 15 197


       The Bonorable Alan ,x. Calmpbell
       Chairman, Civil Service Commission

       Dear M.       Campbell:

            This report reviews the Civil Service Commission's
       accounting system for accounts receivable from the public,
       including related billings and collection procedures. The
       review was part of a multiagency review on which we plan to
       issue an overall report to the Congress.

            Our review showed that the accounting and reporting
       practices for accounts rceivable were, for the mcst part,
       effective and in accordance with the accounting system ap-
       proved by the Comptroller General in May 1970.   However, we
       found that the balance of accounts receivable from the pub-
       lic as repor',ed to the Department of the Treasury was in-
       accurate. Also, the Comrmission's procedures do not provide
       for charging interest on Government claims against former
       employees when claims are collected through reduction of an
       employee's annuity. The purpose of this report is to give
       you our findings on these matters.

       SCOPE OF REVIEW

            We reviewed the         Civil Service Commission's accounting
       for and reporting of         accounts receivable from the public.
       Our work was done at         the Commission's headquarters in Wash-
       ington, D.C., and at         its records storage center in Boyers,
       Pennsylvania.

            During ur review we analyzed the procedures and prac-
       tices used to control, report, and collect accounts receiv-
       able from the public, including Government claims against
       former civil service employees' retirement accounts. At
       September 30, 1976, the Civil Service Commission reported
       accounts receivable from the public of $5,903,000.

       ACCOUNTS RECEIVABLE INCORRECTLY CLASSIFIED

            The two major categories of receivables to the Government
       are those due from the public and those due from other Government


                                                                FGMSD-77-41
                                                                  (90117)
 B-159687


 agencies. To facilitate clear and full disclosure, agency
 financial statements should accurately segregate accounts
 receivable from the public and accounts receivable from
                                                         other
 Government agencies.

      The Commission's reported accounts receivable from
the public a of September 30, 1976, were understated by
$7,264,134 because a refund due from an insurance carrier
was included in the accounts receivable from Government
                                                          agen-
cies. The refund was correctly classified in the accounting
records but was incorrectly classified in the report.
Commission's accounting staff discovered the error afterThe
                                                           the
financial report had been filed with the Treasury. If
                                                         the ex-
pected refund had been correctly classified, the accounts
                                                            re-
ceivable from the public would have been $13.2 million
                                                         instead
of the $5.9 million reported.

     We discussed this matter with Commission officials,
and we were informed that internal review procedures had
been revised to help prevent the recurrence of similar
                                                       mis-
classifications.

INTEREST SHOULD BE CHARGED ON DELINQUENT ACCOUNTS

     The Government was not charging interest on claims
against retirement accounts of its former employees. We
estimate that, at the time of our review, there were
                                                     about
8,700 unpaid Government claims in the Civil Service Com-
mission files in amounts ranging from $5 to $18,625.

     Government agencies may request payment of amounts due
from former employees through direct offset against the
dividuals' civil service retirement accounts. A majorityin-
                                                           of
the offset requests come from the U.S. Postal Service
                                                       fo. col-
lection of former employees' indebtedness for unearned
leave. Other agencies also request offset action for annual
                                                       unearned
leave as well as for a wide variety of other reasons.

     When a request for collection action is received, the
Civil Service Commission will make the offset against
                                                       the
debtor's annuity or retirement account balance, depending
upon an individual's retirement status. In the cdse
annuity, the Commission simply reduces the debtor's   of an
                                                    annuity
compensation by the amount of the claim without any charge
for interest. If the debtor has less than 5 years of
                                                       credit-
able service, which makes him ineligible for annuity benefits,
the Commission simply makes the offset. If the debtor
                                                        has
years or more of creditable service, he has a vested right 5
                                                            to a


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B-159687


deferred annuity and the collection action cannot be completed
until the individual requests either an annuity or a refund of
his contributions. While collection action is suspended, the
Government does not charge interest on the amoint of the debt.

     We examined Civil Service Commission files to determine
the number of cases 1i wch the Government was not charging
interest on debts that could not be immediately offset against
retirement accounts.   e randomly selected and reviewed 460
Government claims ranging in amounts from $5 to $18,625. Ai-
though statistics on the total volume of such claims were not
compiled by the Civil Servic2 Commission, we estimated, using
statistical sampling techniques, that there were abcut 8,700
unpaid claims in the files. Because of the wide dollar range
of the claims reviewed, we could not make a statistically re-
liable projection of the tctal dollar value of the 8,700
claims.

     We also analyzed the status of these unpaid claims.
About one-half were in a suspended status because the in-
dividual had a vested right to a deferred annuity and the
collection action could not be completed until the indivi-
dual requested either an annuity or refund of his contri-
butiuns. If an individual were to request a lump sum pay-
ment, the retirement account would then be reduced by the
amount of the debt to the Government, and the balance would
be forwarded to the individual.  If the individual were to
request an annuity, the annuity payments would be reduced
until the debt to the Government, without any interest, was
recovered. Although the Government wam not charging inter-
est to these ebtors, the law did not prohibit such interest
charges.

     The other one-half of these unpaid claims were in a sus-
pended status because the employees' total contributions to
the retirement account only partially satisfied the claims.

CONCLUSIONS

      the Commission's procedures for processing claims against
retirement accounts of former Government employees results in
a loss of interest to the Government. Inasmuch as the Govern-
ment must pay interest to borrow money, we believe it is reason-
aible to charge interest on claims against accounts that must be
held until they can be collected through reduction of an in-
dividual's annuity.

RECOMMENDATION
    We recommend that you revise the current policy to require

                              3
B-159687


that interest charges be added to Go,enment claims to be col-
lected through reduction of an indiviiual's annuity.

     We discussed the results of our review with the Director,
Bureau of Retirement, Insurance and Occupational Health. Be
generally agreec with our findings. However, he said that a
February 1977 decision by the U.S. District Court for the
Northern District of California prevents further offsets
against annuity accounts until the court has approved the Com-
mission's procedures for providing due process protection to
the annuitants. The Commission has iitiateA action to comply
with the decision of the court by requiring agencies request-
ing collection by offset to certify to the Commission that due
process requirements have een met.



     As you know, section 236 of the Legislative Reorganiza-
tion Act of 1970 requires the head of a Federal agency to sub-
mit a written statement on actions taken on our recommendations
to the House Committee on Government Operations and the Senate
Committee on Governmental Affairs not later than 60 days after
the date of the report and to the House and Senate Committees
on Appropriaticns with the agency's first request for appropria-
tions made more than 60 days after the date of the report. We
would appreciate receiving copies of these statements.

     We are sending copies of this report to te House Com-
mi:tees on Government Operations and Appropriations and the
Senate Committee on Governmental Affairs. Because of their
expressed interest, we are also sending copies to Senator
Robet Packwood and Congressman Newton I. Steers.    Copies are
also beir 9 sent to the Director, Office of Management and Budget,
anC the Secretary of the Treasury.

     We appreciate the courtesies and cooperation shown to us
by your representatives during this review.

                              Sincerely yours,




                              D. L. Scantlebury
                              Director




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