District of Columbia: Funding for Certain Union Employee Pay Bonuses
(Correspondence, 09/13/2000, GAO/AIMD-00-309R).

Pursuant to a congressional request, GAO provided information on the
District of Columbia's funding for certain union employee pay bonuses.

GAO noted that: (1) the District reported a surplus of about $445
million for fiscal year (FY) 1998, thus triggering the need to reopen
negotiations about bonus compensation with certain union employees,
based on a 1998 agreement; (2) negotiations took place and an agreement
was reached during November 1999; (3) the bonus payment of $9.9 million
applied to 5,746 District union employees in two compensation plans
represented by several union organizations; (4) the $9.9 million
represents a one-time, lump-sum bonus of about $1,700 per employee,
which the District paid in December 1999; (5) several funding plans were
advanced before arriving at the final approach; (6) initially, the
bonuses were to be funded from the following sources: (a) $4.2 million
from the Tobacco Settlement Fund (TSF); (b) $3.5 million from FY 2000
budget; and (c) $2.2 million in grants from the Financial Responsibility
and Management Assistance Authority; (7) the District proposed to
reimburse the TSF by reprogramming funds from the Department of Public
Works and through short-term borrowing; and (8) the District of Columbia
Council and the Authority approved the proposed reprogramming.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-00-309R
     TITLE:  District of Columbia: Funding for Certain Union Employee
	     Pay Bonuses
      DATE:  09/13/2000
   SUBJECT:  Funds management
	     Reprogramming of appropriated funds
	     Municipal employees
	     Employee incentives
	     Government employee unions
IDENTIFIER:  District of Columbia Tobacco Settlement Fund

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GAO/AIMD-00-309R

District Pay Bonuses

United States General Accounting Office Washington, DC 20548

Accounting and Information Management Division

B-286133 September 13, 2000 The Honorable Ernest J. Istook, Jr. Chairman,
Subcommittee on the District

of Columbia Committee on Appropriations House of Representatives

Subject: District of Columbia: Funding for Certain Union Employee Pay
Bonuses Dear Mr. Chairman: You asked us to determine the funding source for
$9.9 million in bonuses paid to certain District union employees and provide
a chronology of key events related to the bonus payment. You also asked us
to determine the District's authority to reprogram funds to the Tobacco
Settlement Fund (TSF) from other appropriation accounts. On August 10, 2000,
using the slides included in the enclosure to this letter, we briefed the
Subcommittee staff on the results of our work.

To provide the information you requested and address your specific
questions, we (1) interviewed officials at the District of Columbia
Financial Responsibility and Management Assistance Authority (the
Authority), Office of the Mayor, and Office of the Chief Financial Officer
(CFO), (2) reviewed and analyzed documents, including the labor union
agreement with the Mayor, funding plans, and fiscal impact statements, and
(3) sought and received a written response to a legal question regarding
reprogramming of funds. We conducted our work from February 2000 through
July 2000 in accordance with generally accepted government auditing
standards. We did not independently verify underlying data. We obtained oral
comments on a draft of the slides from District officials, who stated that
they agreed with the contents.

Results in Brief

The District reported a surplus of about $445 million for fiscal year 1998,
thus triggering the need to reopen negotiations about bonus compensation
with certain union employees, based on a 1998 agreement. Negotiations took
place and an agreement was reached during November 1999. The bonus payment
of $9.9 million applied to 5,746 District union employees in two
compensation plans represented by several union organizations. The

B-286133 GAO/AIMD-00-309R District Pay Bonuses Page 2 $9.9 million
represents a one- time, lump- sum bonus of about $1,700 per employee, which

the District paid in December 1999. Several funding plans were advanced
before arriving at the final approach. Initially, the bonuses were to be
funded from the following sources:

ï¿½ $4.2 million from the TSF,

ï¿½ $3.5 million from fiscal year 2000 budget, and

ï¿½ $2.2 million (interest earned on funds held in escrow accounts) in grants
from the Authority.

The District proposed to reimburse the TSF by reprogramming funds from the
Department of Public Works and through Short- term Borrowing. The D. C.
Council and the Authority approved the proposed reprogramming. However, the
District abandoned the proposed reprogramming because it was actually a
transfer, and the District subsequently determined that it lacked
legislative authority to transfer funds between appropriation accounts.
Ultimately, the source of funding for the bonuses was fiscal year 2000
personal services budgets for the applicable agencies.

Regarding the use of funds for reprogramming, appropriation law defines
reprogramming as the utilization of the funds within an appropriation
account for purposes other than those contemplated at the time of the
appropriation. It further defines transfer as the shifting of funds between
appropriation accounts. On June 1, 2000, the District CFO notified us that
no TSF moneys were used to pay certain union employee bonuses. Subsequently,
in a June 27, 2000, letter to us, the District CFO stated that the plan to
replenish the TSF from other appropriation accounts would have been a
transfer and the District does not have the authority to transfer these
funds.

---- We are sending copies of this letter to Senator Kay Bailey Hutchinson,
Senator Richard Durbin, Senator George Voinovich, and Representative James
P. Moran, Representative Thomas M. Davis, III, and Representative Eleanor
Holmes Norton in their capacities as Chairmen or Ranking Minority Members of
Senate and House Committees and Subcommittees. We are also sending copies of
this letter to Honorable Anthony A. Williams, Mayor of the District of
Columbia, and the Honorable Alice M. Rivlin, Chairperson of the District of
Columbia Financial Responsibility and Management Assistance Authority.
Copies will be made available to others upon request.

B-286133 GAO/AIMD-00-309R District Pay Bonuses Page 3 We appreciate the
opportunity to be of assistance. If you or your staff have any questions

regarding the briefing or this letter, or if we can be of further
assistance, please contact either me at (202) 512- 4476, or Michael
Fischetti, Assistant Director, at (202) 512- 5125. You may also reach me by
e- mail at jarmong. aimd@ gao. gov. Key contributors to this assignment were
Norma Samuel, Jeffrey Jacobson, and Richard Cambosos.

Sincerely yours, Gloria L. Jarmon Director, Health, Education and Human
Services

Accounting and Financial Management Issues Enclosure

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 4

Briefing on the District of Columbia's Funding for Certain Union Employee
Pay Bonuses

District of Columbia Government Funding for Certain Union Employee Pay
Bonuses

Briefing for the House Committee on Appropriations, Subcommittee on the
District of Columbia

August 10, 2000

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 5

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 2

Objectives

You asked us to Determine the actual sources of funding for the bonuses

paid to certain District union employees Determine the District's authority
to reprogram funds to

the Tobacco Settlement Fund (TSF) from other appropriation accounts

Provide a chronology of key events

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 6

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 3

Scope and Methodology

Interviewed officials in the District of Columbia Financial Responsibility
and Management Assistance Authority (the Authority), Office of the Mayor,
and Office of the Chief Financial Officer (CFO)

Reviewed and analyzed documents, including the labor union agreement with
the Mayor, funding plans, and fiscal impact statements

Sought and received written response to a legal question regarding
reprogramming of funds

Conducted our work from February 2000 through July 2000 in accordance with
generally accepted government auditing standards

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 7

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 4

Background

Based on 1998 agreement with certain union employees, negotiations for bonus
compensation would reopen if

the District had a surplus in fiscal year 1998 or additional revenues were
certified by the Chief Financial

Officer (CFO) District reported a surplus of about $445 million for fiscal

year 1998, thus triggering the need to reopen negotiations about bonus
compensation

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 8

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 5

Background

Negotiations took place and an agreement was reached during November 1999

Bonus payment applies to 5, 746 District union employees in 2 compensation
plans represented by several union organizations

$9. 9 million represents a one- time, lump sum bonus of about $1, 700 per
employee

District paid the bonuses in December 1999

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 9

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 6

Results in Brief

Several funding plans were advanced before arriving at the final approach

Initially, the bonuses were to be funded from the following sources:

Tobacco Settlement Fund Fiscal year 2000 budget Grant from the Authority

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 10

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 7

Results in Brief

District proposed to reimburse the TSF by reprogramming funds from the
Department of Public Works and Short- term Borrowings

The proposed reprogramming was actually a transfer, and the District lacked
the legal authority to transfer funds between appropriation accounts as
proposed

Actual source of funding for the bonuses was fiscal year 2000 personal
services budgets for the applicable agencies

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 11

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 8

Source of Funds

Total amount to be funded - $9.9 million District CFO proposed that funding
be obtained from a

combination of sources TSF - $4. 2 million Fiscal year 2000 budget - $3. 5
million Grant from the Authority - $2. 2 million (interest earned

on funds held in escrow accounts)

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 12

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 9

Source of Funds

The District proposed to replenish the TSF by reprogramming amounts from
other appropriation accounts

Regarding the reprogramming of $4.2 million to replenish the TSF, the CFO
reported that reimbursements would come from the following

$2.2 million from the Department of Public Works and $2 million from Short-
term Borrowings

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 13

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 10

Source of Funds

The District abandoned the proposed funding plan According to the District
CFO, the actual source of funding

for all bonuses was the fiscal year 2000 personal services budgets within
the applicable agencies

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 14

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 11

Legal Authority to Reprogram or Transfer Funds

On April 13, 2000, we requested that the Mayor provide the legal basis for
treating the use of appropriations to replenish the TSF as either

a reprogramming and not a transfer or a transfer for which statutory
authority has been provided

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 15

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 12

Legal Authority to Reprogram or Transfer Funds

Appropriation Law definitions “Reprogramming” is the utilization
of the funds within

an appropriation account for purposes other than those contemplated at the
time of the appropriation

“Transfer” is the shifting of funds between appropriation
accounts

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 16

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 13

Legal Authority to Reprogram or Transfer Funds

On June 1, 2000, the District CFO notified us that no TSF monies were used
to pay certain union employee bonuses

Subsequently, a June 27, 2000, District CFO letter to us stated that the
plan to replenish the TSF from other appropriation accounts would have been
a transfer and the District does not have the authority to transfer these
funds

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 17

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 14

Chronology of Key Events

November 4, 1999: District and union officials signed memorandum of
agreement for bonus compensation based on 1998 agreement

December 2, 1999: District officials sought budget authority for $10 million
from the Authority to be used to fund the onetime, lump sum bonuses

December 3, 1999: The Authority approved the increase in budget authority
for $10 million from the proceeds from onetime transaction involving tobacco
settlement funds

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 18

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 15

Chronology of Key Events

December 13, 1999:

District officials sought DC Council approval to reprogram funds from other
appropriation accounts to the TSF

The Authority determined that the District's request to reprogram funds was
consistent with the applicable financial plan and budget

December 14, 1999: DC Council adopted the fiscal impact statement provided
by the CFO on December 10, 1999, and approved the compensation settlement

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 19

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 16

Chronology of Key Events

December 16, 1999: Mayor sent notification of a reprogramming of fiscal year
2000 budget authority from the Department of Public Works and Short- Term
Borrowings to the TSF -- which the Mayor considered necessary to replenish
funds used from the Fund to pay for a one- time, lump sum bonus for certain
District union employees -- to the following:

the Senate Committee on Appropriations, Subcommittee on the District of
Columbia

the House Committee on Appropriations, Subcommittee on the District of
Columbia

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 20

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 17

Chronology of Key Events

January 24, 2000: The Authority approved reprogramming of $4. 2 million to
replenish the TSF

February 8, 2000: The District CFO notified the Mayor that the reprogramming
was complete

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 21

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 18

Chronology of Key Events

February 23, 2000: The District OCFO provided the following to the House
Appropriations Subcommittee on the District:

documentation for funding of union bonus pay union bonus pay distribution
statement tobacco settlement proceeds white paper (discusses

options to assist District policymakers in selecting an administrative
structure and in developing processes that would lead to successful programs
funded by tobacco settlement proceeds)

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 22

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 19

Chronology of Key Events

April 13, 2000: We requested that the Mayor provide the legal basis for
replenishing the TSF from other appropriation accounts

June 1, 2000: The District CFO notified us that no TSF monies were used to
pay the bonuses

Enclosure GAO/ AIMD- 00- 309R District Pay Bonuses Page 23

GAO- AIMD- 00- 309R District of Columbia: Funding for Certain Union Employee
Pay Bonuses 20

Chronology of Key Events

June 27, 2000: District CFO reported to us that the plan to replenish the
TSF from other appropriation

accounts would have been a transfer, and the District does not have the
authority to transfer these funds

agency fiscal year 2000 personal services budgets are the source of funding
for the pay bonuses

(916341)
*** End of document. ***