Judgment Fund: Treasury's Estimates of Claim Payment Processing
Costs under the No FEAR Act and Contract Disputes Act (28-APR-04,
GAO-04-481).
The Notification and Federal Employee Antidiscrimination and
Retaliation (No FEAR) Act, which took effect October 1, 2003,
requires agencies to repay discrimination settlements and
judgments paid on their behalf. The No FEAR Act is similar to the
Contract Disputes Act (CDA) of 1978, which holds agencies
accountable for payment in contract disputes. Under both laws,
federal agencies must reimburse the Judgment Fund, which is
administered by the Treasury Department. Before the No FEAR Act,
agencies did not have to repay the fund. The No FEAR Act requires
GAO to review the financial impact on Treasury of administering
that law and CDA. Based on this requirement, this report provides
information on (1) Treasury's estimates of its costs to process
discrimination claim payments and CDA payments in fiscal year
2003 and its costs to process and seek reimbursement for claim
payments under lawsuits covered by the No FEAR Act beginning in
fiscal year 2004, (2) differences in claims processing and
reimbursement efforts under CDA and the No FEAR Act, and (3) the
extent of federal agency compliance with CDA's reimbursement
requirements and Treasury's view of how effective its No FEAR Act
collection efforts may be. We make no recommendations in this
report. Treasury officials had no official comment on the report.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-481
ACCNO: A09874
TITLE: Judgment Fund: Treasury's Estimates of Claim Payment
Processing Costs under the No FEAR Act and Contract Disputes Act
DATE: 04/28/2004
SUBJECT: Claims processing
Claims settlement
Comparative analysis
Discrimination
Federal funds
Financial analysis
Judgment Fund
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GAO-04-481
United States General Accounting Office
GAO Report to Congressional Recipients
April 2004
JUDGMENT FUND
Treasury's Estimates of Claim Payment Processing Costs under the No FEAR Act and
Contract Disputes Act
a
GAO-04-481
Highlights of GAO-04-481, a report to congressional recipients
The Notification and Federal Employee Antidiscrimination and Retaliation
(No FEAR) Act, which took effect October 1, 2003, requires agencies to
repay discrimination settlements and judgments paid on their behalf. The
No FEAR Act is similar to the Contract Disputes Act (CDA) of 1978, which
holds agencies accountable for payment in contract disputes. Under both
laws, federal agencies must reimburse the Judgment Fund, which is
administered by the Treasury Department. Before the No FEAR Act, agencies
did not have to repay the fund.
The No FEAR Act requires GAO to review the financial impact on Treasury of
administering that law and CDA. Based on this requirement, this report
provides information on (1) Treasury's estimates of its costs to process
discrimination claim payments and CDA payments in fiscal year 2003 and its
costs to process and seek reimbursement for claim payments under lawsuits
covered by the No FEAR Act beginning in fiscal year 2004, (2) differences
in claims processing and reimbursement efforts under CDA and the No FEAR
Act, and (3) the extent of federal agency compliance with CDA's
reimbursement requirements and Treasury's view of how effective its No
FEAR Act collection efforts may be. We make no recommendations in this
report. Treasury officials had no official comment on the report.
www.gao.gov/cgi-bin/getrpt?GAO-04-481.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact George H. Stalcup at (202)
512-9490 or [email protected].
April 2004
JUDGMENT FUND
Treasury's Estimates of Claim Payment Processing Costs Under the No FEAR Act and
Contract Disputes Act
Treasury estimates that it cost about $334,000 to certify, pay, and seek
reimbursement for CDA claim payments in fiscal year 2003, and about
$240,000 to certify and pay discrimination claims that year. For fiscal
year 2004, assuming relatively constant case and processing cost levels,
and agency compliance with reimbursement requirements similar to that
experienced under CDA, Treasury estimates that it will incur about
$171,500 in personnel costs in order to seek reimbursements for No FEAR
claim payments (see table below). These include recurring costs to set up
and administer accounts receivable and seek reimbursement from agencies
for claims paid out of the Judgment Fund and a one-time cost for in-house
personnel to upgrade computer systems.
Although the certification, payment, and accounting processes that
Treasury uses for the No FEAR Act are virtually the same as those used for
CDA, the procedures Treasury is required to use to seek reimbursement for
claims paid under the No FEAR Act will differ. For example, as part of
Treasury's effort to seek reimbursement for No FEAR Act claims paid, No
FEAR Act regulations require Treasury to record on its public Web site the
failure of agencies to make reimbursement or arrange to make reimbursement
within a specified time limit. There is no similar requirement under CDA
claims.
During fiscal years 2001, 2002, and 2003, federal agencies reimbursed
Treasury for fewer than one of every five dollars owed under CDA, with at
least 18 agencies having unpaid amounts at the end of each fiscal year.
According to Treasury, while its No FEAR Act collection efforts are just
beginning, reimbursement rates under the act may be as low as under CDA
because the No FEAR Act, like CDA, does not impose reimbursement deadlines
on agencies, and Treasury has very little authority to enforce
reimbursement.
Estimated Cost of Seeking Reimbursement for No FEAR Act Claim Payments in
Fiscal Year 2004
Contents
Letter
Appendix I: Appendix II:
Results in Brief
Background
Treasury Expects to Incur Additional Costs under the No FEAR Act
to Seek Reimbursement for Discrimination Claims Processes for Certifying
and Paying CDA and No FEAR Act Claim Payments Are the Same, but Collection
Efforts Will Differ Reimbursement Rates for Contract Dispute Payments Have
Been Low, Similar Rates Expected under the No FEAR Act Agency Comments
Scope and Methodology GAO Contact and Staff Acknowledgments
GAO Contact Acknowledgments
1 3 4
6
8
9 11
14
15 15 15
Tables Table 1: Table 2: Table 3: Table 4:
Estimated Costs of Processing Contract Disputes Act
Claim Payments, Fiscal Year 2003
Estimated Costs of Processing Discrimination Claim
Payments, Fiscal Year 2003
Estimated Cost of Seeking Reimbursement for No FEAR
Act Claim Payments in Fiscal Year 2004
Amount of Contract Dispute Claim Payments Collected by
the Judgment Fund during Fiscal Years 2001 through 2003
and Unpaid Balance at End of Each Fiscal Year
6 6 7
10
Abbreviations
No FEAR Act Notification and Federal Employee Antidiscrimination and
Retaliation Act CDA Contract Disputes Act FMS Financial Management Service
OPM Office of Personnel Management MSPB Merit Systems Protection Board CFO
Chief Financial Officer
This is a work of the U.S. government and is not subject to copyright
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A
United States General Accounting Office Washington, D.C. 20548
April 28, 2004
Congressional Recipients
Before the Notification and Federal Employee Antidiscrimination and
Retaliation (No FEAR) Act of 2002 was enacted on May 15, 2002,1 we and
others expressed concern that federal agencies had an incentive to avoid
settling discrimination and whistleblower protection complaints in order
to have any final judgment against the agency rendered by a court.2 This
incentive arose from the fact that agencies paid costs from their
appropriations when such complaints were settled without a lawsuit being
filed, but that any money awarded after a suit was filed (whether by
settlement or court judgment) was generally paid from the Judgment Fund, a
permanent, indefinite appropriation administered by the Department of the
Treasury. We estimated that the Judgment Fund paid almost $43 million for
discrimination claims in fiscal year 2000 on behalf of agencies.3
The Judgment Fund continues to pay money awarded for settlements and
judgments under lawsuits covered by the No FEAR Act. But beginning on
October 1, 2003, the effective date of the act, each federal agency must
reimburse the Treasury for the amounts paid from the fund. As we noted in
testimony describing how the No FEAR Act addresses the need for federal
agency accountability with respect to discrimination and whistleblower
protection cases, Congress faced a similar situation when lawmakers passed
the Contract Disputes Act (CDA) of 1978.4 Before CDA was enacted, agencies
had an incentive to avoid settling contract disputes so that any final
judgments against an agency occurred in court because the Judgment Fund
paid such court judgments. Under CDA, however, agencies must reimburse the
fund from available appropriations or, if they are not adequate, seek
additional appropriations for this purpose.
1Pub. L. No. 107-174, 116 Stat. 566.
2U.S. General Accounting Office, The Federal Workforce: Observations on
Protections From
Discrimination And Reprisal for Whistleblowing, GAO-01-715T, (Washington,
D.C.:
May 9, 2001).
3The Judgment Fund also pays other claims, such as personal injury,
property damage, and contract claims. Agencies are generally not required
to reimburse the Judgment Fund for payments made on their behalf.
4Pub. L. No. 95-563, 92 Stat. 2383 (November 1, 1978).
From fiscal year 2001 through 2003 under the Judgment Fund, 1,140
discrimination claim payments were processed and about $656 million was
paid. All of these claims were for court judgments and settlements. During
this period, the fund also processed 304 CDA claim payments and paid about
$713 million. This included payments for court judgments and settlements
and board of contract appeals awards.5 The fund did not make any payments
for whistleblower protection claims as these payments were typically made
by agencies.6
The No FEAR Act requires that we review the financial impact on the
Treasury of administering both the No FEAR Act and CDA. Based on this
requirement and discussions with committee staff, this report provides
information on (1) Treasury's estimates of costs to process CDA and
discrimination payments for fiscal year 2003 and its estimates to process
and seek reimbursement for No FEAR Act claim payments in fiscal year 2004,
(2) differences in payment processing under CDA and the No FEAR Act, and
(3) the extent of federal agencies' compliance with CDA's reimbursement
requirement and Treasury officials' view of how effective the
reimbursement collection efforts under the No FEAR Act may be.
We obtained information from Treasury's Financial Management Service
(FMS), which administers the Judgment Fund, 7 on the costs of processing
Judgment Fund reimbursement payments in fiscal year 2003 and estimated
costs in fiscal year 2004. Since FMS does not track the cost of processing
Judgment Fund claim payments, agency officials could only provide us with
estimates of the costs, based primarily on staff time spent processing
these claims. We reviewed supporting documentation, interviewed Judgment
Fund officials, and compared the estimated personnel costs to the
percentage of claims paid to determine the reasonableness of the cost
estimate (that is, if the estimated costs were disproportionately large
when compared to the number of claims processed). On the basis of our
5Boards of Contract Appeals are administrative tribunals within larger
executive branch agencies that hear contract dispute appeals. While
administrative awards are not normally paid from the Judgment Fund, CDA
authorized payments of board of contract appeals awards out of the
Judgment Fund.
6Whistleblower protection claims are prohibited personnel practice claims
and are typically resolved administratively through the Merit Systems
Protection Board.
7FMS also provides central payment services to federal program agencies,
operates the federal government's collections and deposit systems,
provides governmentwide accounting and reporting services, and manages the
collection of delinquent debts.
assessment, we determined that the data provided by Treasury in its
estimates were sufficiently reliable for the purposes of our report. We
interviewed FMS officials to determine the differences between the No FEAR
Act's and CDA's payment processing and to obtain the officials' views of
how effective the reimbursement collection efforts allowed under the No
FEAR Act may be. To determine the extent of federal agency compliance with
CDA's reimbursement requirement, we obtained from FMS information on the
amount of money sought and received from agencies in fiscal years 2001,
2002, and 2003. (See app. I for more detailed information on our scope and
methodology.) We conducted our work from November 2002 to February 2004 in
accordance with generally accepted government accounting standards.
Results in Brief Treasury estimates that it cost about $334,000 to
certify, pay, and seek reimbursement for CDA claim payments in fiscal year
2003 and about $240,000 to certify and pay discrimination claims that
year. In arriving at its estimate of the costs of processing
discrimination payments under the No FEAR Act in fiscal year 2004,
Treasury assumed that the number of discrimination cases and the legal and
administrative costs for processing these cases would remain relatively
constant. Treasury's estimates of fiscal year 2004 costs for No FEAR Act
claim payments also assumed that agency compliance with the No FEAR Act
would be similar to that under CDA. Actual costs to Treasury may vary from
the estimates because of differences in the nature of the claims under the
two laws. On the basis of the above assumptions, Treasury estimated that
it will allocate about $171,500 from its personnel budget in order to seek
reimbursement for discrimination and any other No FEAR Act claims payments
in fiscal year 2004. Treasury's estimate is comprised of both one-time and
recurring costs. Treasury estimates about $119,500 in recurring costs to
set up and administer accounts receivable and seek reimbursement for No
FEAR Act claims and a one-time start-up cost of about $52,000 for in-house
personnel to upgrade computer systems. Treasury plans to absorb any
increase in costs within its existing budget.
Although the certification, payment, and accounting mechanisms that
Treasury uses for No FEAR Act and CDA payments are virtually the same,
Treasury's current efforts under CDA and anticipated efforts under the No
FEAR Act to seek reimbursement from federal agencies contain differences.
Certification for both No FEAR Act and CDA payments is accomplished using
the same review process. Payments are made through the same Treasury
financial center, and payments are recorded on the
Judgment Fund's books in the same way. In seeking reimbursement from
federal agencies, however, Treasury is required to use a different chain
of correspondence for the No FEAR Act than it has for CDA. To prompt
agencies to make No FEAR Act reimbursements, No FEAR Act regulations
issued by the Office of Personnel Management (OPM) require Treasury to
annually record on its public Web site an agency's failure to make
reimbursements within a specified time limit or to make arrangements to do
so within the limit. There are no similar requirements for CDA
reimbursements, and Treasury has no plans to post on the Web agency
failures to make such reimbursements.
Federal agencies reimbursed the Judgment Fund for fewer than one of every
five dollars they owed for CDA payments in each of fiscal years 2001,
2002, and 2003. At least 18 agencies owed money to the Judgment Fund at
the end of each of the 3 years. Our review of a sample of agencies'
correspondence in response to the Judgment Fund branch's requests for CDA
reimbursement showed that agencies most often deferred payment because of
the adverse effect they said it would have on their programs and
mission-critical activities. According to Treasury, while its No FEAR Act
collection efforts are just beginning, reimbursement rates under the act
may be as low as under CDA because the No FEAR Act, like CDA, does not
impose reimbursement deadlines on agencies, and Treasury has very little
authority to enforce reimbursement.
Treasury officials had no official comments on this report, but provided
technical and clarifying comments, which we have incorporated as
appropriate.
Background In 1956, Congress established the Judgment Fund-a permanent,
indefinite appropriation-to pay judgments against federal agencies that
are not otherwise provided for in agency appropriations.8 Among other
things, the fund is intended to allow for more prompt payments to
claimants, thereby reducing the assessment of interest against federal
agencies (where allowed by law) during the period between the rendering
and payment of an award. In 1961, legislation was enacted allowing the
fund to pay
8Pub. L. No. 814, S: 1302, 70 Stat. 678, 694 (July 27, 1956) (codified at
31 U.S.C. S: 1304).
Department of Justice settlements of ongoing or imminent lawsuits against
federal agencies.9
The No FEAR Act requires federal agencies to reimburse the Judgment Fund
for payments of judgments, awards, or settlements that the fund makes to
employees, former employees, or job applicants in connection with
litigation alleging violation of certain federal laws. The Senate
committee report10 accompanying the No FEAR Act explains that the act is
intended to prompt federal agencies to pay more attention to their equal
employment opportunity and whistleblower complaint activities and act more
expeditiously to resolve complaints before they get to court. Accordingly,
No FEAR Act cases include those brought before federal courts under
discrimination statutes and certain cases brought before the Merit Systems
Protection Board (MSPB), including discrimination and whistleblower
protection claims. These latter cases, however, typically result in either
a settlement while the case is pending at MSPB or an award issued by MSPB,
both of which are paid out of agency funds, not the Judgment Fund.
As provided for under the No FEAR Act, the President designated OPM to
issue regulations to carry out the agency reimbursement provisions of the
law. OPM's interim final regulations11 issued earlier this year state that
the procedures that agencies must use to reimburse the Judgment Fund are
those prescribed by FMS.
Under procedures prescribed by Treasury, FMS Judgment Fund branch
analysts, in consultation with FMS's Office of the Chief Counsel, certify
whether a judgment, award, or settlement is appropriate for payment and
whether the agency on whose behalf payment was made must reimburse the
fund. FMS does not review the merits underlying the claim nor certify the
merits of the judgment or award.
9Pub. L. No. 87-187, 75 Stat. 415 (August 30, 1961).
10S. Rep. No. 107-143, at 2 (2002).
1169 Fed. Reg. 2997 (Jan. 22, 2004) (to be codified at 5 C.F.R. pt. 724).
Treasury Expects to Incur Additional Costs under the No FEAR Act to Seek
Reimbursement for Discrimination Claims
FMS estimates that in fiscal year 2003 it spent about $334,000 to certify,
pay, and seek reimbursement for CDA claim payments and about $240,000 to
certify and pay discrimination claims (see tables 1 and 2).
Table 1: Estimated Costs of Processing Contract Disputes Act Claim
Payments, Fiscal Year 2003
Cost Amount (in dollars) Non-Judgment fund branch personnel
Accounts receivable set-up and administration $4,442
Reimbursement collection efforts 22,214
FMS attorneys 10,621
Judgment fund branch personnel
Certification and documentation review 46,887
Mail processing 3,564
Reimbursement collection efforts 63,146
Total personnel cost 150,874
Total administrative cost 182,671
Total $333,545
Source: FMS.
Table 2: Estimated Costs of Processing Discrimination Claim Payments,
Fiscal Year 2003
Cost Amount (in dollars)
FMS attorneys $10,621
Certification and documentation review (Judgment Fund 46,887 personnel)
Total personnel cost 57,508
Total administrative cost a 182,671
Total $240,179
Source: FMS.
Note: There were no costs associated with seeking reimbursement for
discrimination payments because the No FEAR Act had not yet taken effect.
a While processing more discrimination payments than CDA payments in
fiscal year 2003, FMS allocated administrative processing, certification
and documentation review, and FMS attorney costs arising from the two laws
equally in estimating its costs for the No FEAR Act.
FMS estimates that it will have to allocate approximately $171,500 for
personnel costs to seek reimbursement for discrimination claims under the
No FEAR Act in fiscal year 2004 (see table 3). This estimate includes
about $119,500 in costs to set up and administer accounts receivable and
seek reimbursement for No FEAR Act payments. FMS estimates that it will
also incur a one-time start-up cost of about $52,000 for its information
technicians to upgrade computer systems to create and track No FEAR Act
accounts receivable. FMS expects no increase in either the number of
personnel or budgeted funds to handle No FEAR Act reimbursements.
Table 3: Estimated Cost of Seeking Reimbursement for No FEAR Act Claim
Payments in Fiscal Year 2004
Cost Amount (in dollars)
Accounts receivable set-up and administrationa $4,442
Reimbursement collection efforts 115,004 System upgrades to open accounts
receivable for the 52,000
No FEAR Actb
Total $171,446
Source: FMS.
aThe estimate assumes that the cost for setting up and administering
accounts receivable for No FEAR Act payments in fiscal year 2004 will be
the same as this cost was for CDA payments the previous year.
bThere will be no such costs after fiscal year 2004.
FMS's estimates assume that it will pay the same number of discrimination
claim payments under the No FEAR Act in fiscal year 2004 as it paid the
previous year. FMS estimates also assume there will be no increase in the
cost for processing discrimination claim payments in fiscal year 2004.
Treasury's estimate of fiscal year 2004 costs for No FEAR Act claim
payments also assumed that agency compliance with the No FEAR Act would be
similar to that under CDA. According to the Judgment Fund branch, actual
costs to Treasury may vary from the estimate because of differences in the
nature of the claims under the two laws.
Processes for Certifying and Paying CDA and No FEAR Act Claim Payments Are
the Same, but Collection Efforts Will Differ
Although the certification, payment, and accounting mechanisms that FMS
uses for No FEAR Act and CDA payments are virtually the same, some of
Treasury's current and anticipated procedures to seek reimbursement from
federal agencies for claims paid under the two laws differ.
Accounting for Payments Is the Same under the Two Laws
For both No FEAR Act and CDA payments, the Judgment Fund branch analysts
ensure that all documents submitted by the agency and other parties have
(1) the proper signatures and court seals, (2) contact name and telephone
number, and (3) an appropriate address. Payment from the Judgment Fund is
then certified by FMS and made through Treasury's Philadelphia Financial
Center by check or electronic funds transfer. Once payment is made, FMS
reduces the fund's balance, records an expense by the fund, and records an
account receivable in its recoveries account for the federal agency on
whose behalf the payment was made. The debtor federal agency is required
to record an account payable to the Judgment Fund. Those amounts remain a
receivable on FMS's books and a payable on the agency's books until it
reimburses the fund. FMS sends letters to agencies to verify account
balances quarterly. The agencies must also review their balances and
confirm them to FMS.
According to FMS, on the basis of the cash receipts history for federal
agencies and the age of some of the Judgment Fund's accounts receivable,
it expects that a percentage of the money owed by federal agencies will
probably not be paid back. To allow for this, FMS calculates a percentage,
which it calls an allowance factor, based on the age of the receivable and
the agency's payment history. According to FMS, it applies the allowance
factor to an agency's outstanding accounts receivable to arrive at a
dollar amount that FMS puts into an allowance account, which is used by
FMS to report on the status of the Judgment Fund in its financial
statement. According to FMS, although it records the debt in the allowance
account as an uncollectible loss, the debt is not written off. FMS expects
each agency to record the amount of unreimbursed debt as a liability,
which will remain until the agency repays Treasury or Congress provides
write-off authority.
Reimbursement Efforts for CDA and the No FEAR Act Differ
For CDA reimbursements, FMS sends a letter to the head of the agency
contracting unit or budget officer seeking reimbursement for payments made
either the same day or the day after payment is made from the fund. If the
agency fails to contact FMS within 30 business days of this letter, a
follow-up letter is sent to the agency. If the agency fails to respond
within 60 business days of the initial contact letter, FMS sends a letter
to the agency's Chief Financial Officer (CFO). The agency CFO has 30
business days to contact FMS.
For No FEAR Act reimbursements, as provided under the OPM regulations, FMS
provides notice to the agency's CFO within 15 business days after payment
for the No FEAR Act claim from the Judgment Fund. It further requires an
agency to either reimburse the Judgment Fund or work out a payment
arrangement with FMS within 45 business days of being notified by FMS.
Under OPM's No FEAR Act regulations, FMS is required to annually post on
Treasury's public Web site those agencies that either fail to make
reimbursements or fail to contact FMS within 45 business days of notice to
make arrangements in writing for reimbursement. There is no similar
posting requirement for CDA reimbursements, and FMS said it has no plans
to post CDA reimbursement information on Treasury's public Web site.
Reimbursement Rates for Contract Dispute Payments Have Been Low, Similar
Rates Expected under the No FEAR Act
Reimbursement rates for CDA payments were low for the 3 years we examined
and, despite promises of repayment, at least 18 agencies had not repaid
amounts owed to the fund by the end of each of these years. According to
Treasury, while its No FEAR Act collection efforts are just beginning,
reimbursement rates under the act may be as low as under CDA because the
No FEAR Act, like CDA, does not impose reimbursement deadlines on
agencies, and Treasury has very little authority to enforce reimbursement.
Amounts Owed to the The Judgment Fund was reimbursed for fewer than one of
every five Judgment Fund Have dollars agencies owed for each of the 3
fiscal years (see table 4). Further, Increased in the Last the total
unpaid amounts to the Judgment Fund increased as of each fiscal
year end. The total amount and percentage collected was at its highest in3
Fiscal Years fiscal year 2001 and was lowest in fiscal year 2002. While
the total amount
and percentage collected increased in fiscal year 2003, they remained less
than in fiscal year 2001.
Table 4: Amount of Contract Dispute Claim Payments Collected by the
Judgment Fund during Fiscal Years 2001 through 2003 and Unpaid Balance at
End of Each Fiscal Year
2001 2002 2003
Amount collected during fiscal year $310,409,773 $196,123,712 $279,268,859
Unpaid balance at end of fiscal year $1,412,948,605 $1,461,768,909
$1,567,337,604 Percentage collected a 18 12 15
Number of agencies owing money at 24 18 year end
Source: FMS.
aCalculated by dividing the amount collected during the fiscal year by the
unpaid balance at the end of the year plus the amount collected during
that fiscal year.
Our review of a sample of agencies' correspondence in response to the
Judgment Fund branch's requests for CDA reimbursement showed that agencies
most often deferred payment because of the adverse effect they said it
would have on their programs and mission-critical activities. The agencies
promised to continue to seek opportunities to provide repayment through
the budget and appropriation process.
Because Enforcement Authority Is Limited under Both Laws, Reimbursement
Rates Are Expected to Be Similarly Low
Neither CDA nor the No FEAR Act set deadlines for reimbursement. We have
acknowledged that agencies are allowed to exercise reasonable discretion
in determining the timing of CDA reimbursements so as not to cause the
disruption of ongoing programs or activities. Similar flexibility exists
under the No FEAR Act. While the No FEAR Act states that "agencies are
expected to reimburse the [Fund] within a reasonable time," the statute
also states that an agency may need to extend reimbursement over several
years to avoid reductions in force, furloughs, other reductions in
compensation or benefits for the agency workforce, or an adverse effect on
the mission of the agency.12 Recognizing that agencies are often
confronted with practicalities of this sort, we have suggested that while
an agency may not be in a position to make CDA reimbursements during the
12Pub. L. No. 107-174, S: 102.
year in which the fund made payment, we would expect the agency to manage
its budgetary resources to accommodate reimbursement of the fund before
the beginning of the second fiscal year following the fiscal year in which
the award is paid.13
According to FMS, the lack of a reimbursement deadline under CDA and the
No FEAR Act may be one reason that reimbursement rates under the No FEAR
Act may be as low as they have been under CDA. Another key reason that FMS
officials cite for this possibility is that Treasury has very little
authority to enforce reimbursement. Like CDA, the No FEAR Act provides no
sanctions that would compel agencies to reimburse the Treasury, and no
Treasury authority to take money owed directly from the agency. FMS
officials recognize that the requirement for FMS to annually post the
names of agencies that fail to make No FEAR Act reimbursements or make
arrangements for reimbursement may provide an incentive for agencies to
comply with the regulations. Because posting has yet to begin, it remains
to be seen what impact this requirement will have.
Agency Comments On March 18, 2004, we provided a draft of this report to
Treasury for review and comment. Treasury officials had no official
comment on this report, but provided technical and clarifying comments,
which we have incorporated as appropriate.
We will send copies to Representative James F. Sensenbrenner,
Representative John Conyers, other interested congressional committees,
the Secretary of the Treasury, and the Commissioner, Financial Management
Service. We will also make copies available to others upon
13U.S. General Accounting Office, Principles of Federal Appropriations
Law, vol. 3, 2nd ed., GAO/OGC-94-33 (Washington, D.C., Nov. 1994) Ch. 12,
at 78.
request. In addition, the report will be available at no charge on GAO's
Web site at http://www.gao.gov. If you or your staff have questions about
this report, please call me at (202) 512-6806 or Belva Martin, Assistant
Director, on (202) 512-4285. Key contributors to this report are listed in
appendix II.
George H. Stalcup Director, Strategic Issues
Congressional Recipients
The Honorable Ted Stevens
President Pro Tempore
United States Senate
The Honorable J. Dennis Hastert
Speaker of the House
House of Representatives
The Honorable Susan M. Collins
Chairman
Committee on Governmental Affairs
United States Senate
The Honorable Joseph I. Lieberman
Ranking Minority Member
Committee on Governmental Affairs
United States Senate
The Honorable Jo Ann Davis
Chairwoman
Subcommittee on Civil Service
and Agency Organization
Committee on Government Reform
House of Representatives
The Honorable Danny K. Davis
Ranking Minority Member
Subcommittee on Civil Service
and Agency Organization
Committee on Government Reform
House of Representatives
The Honorable John Ashcroft
Attorney General
Department of Justice
Appendix I
Scope and Methodology
To address our objectives, we reviewed relevant laws, procedures, and
guidelines, and interviewed officials in FMS, its Judgment Fund branch,
and FMS's Office of the Chief Counsel. Judgment Fund officials provided us
with the number and amount of CDA and discrimination claims paid from the
Judgment Fund from fiscal year 2001 through 2003. Since FMS does not track
the cost of processing Judgment Fund claim payments, agency officials
could only provide us with estimates of the costs for processing payments
and reimbursements for CDA and discrimination payments and the estimated
increase in costs for fiscal year 2004 for processing discrimination and
any other No FEAR Act claim payments. The Judgment Fund's cost estimates
do not include costs for processing payments of whistleblower protection
claims because the fund generally does not pay these claims. To arrive at
their estimate of the personnel costs involved, Judgment Fund officials
used the percentage of staff time spent processing CDA and discrimination
payments. To determine the extent of federal agencies' compliance with
CDA's reimbursement requirement, we obtained data through FMS from
Treasury's central accounting system on the amount of money sought and
received from agencies in fiscal years 2001, 2002, and 2003. We
interviewed Judgment Fund and FMS officials to obtain their views of how
effective the reimbursement collection efforts allowed under the No FEAR
Act may be.
To assess the reliability of the data from Treasury's financial system, we
reviewed available supporting documentation and interviewed Judgment Fund
officials and the FMS accountant. In addition, we tested the
reasonableness of the fiscal year 2003 estimated personnel costs of
processing CDA and discrimination claims by calculating the percentage of
personnel costs in the fund's total fiscal year 2003 estimate and
comparing this to the percentage of CDA and discrimination claims in
fiscal year 2003 to determine if they were disproportionately large when
compared to the total number of claims processed. On the basis of our test
of the reasonableness of the personnel cost estimates provided by FMS and
our assessment of the reliability of the data generated by the accounting
system used by FMS and the Judgment Fund branch database, we determined
that the data for fiscal years 2001 through 2003 were sufficiently
reliable for the purposes of our report.
Appendix II
GAO Contact and Staff Acknowledgments
GAO Contact Belva Martin, (202) 512-4285
Acknowledgments In addition to the person named above, Karin Fangman, Amy
Friedlander, Domingo Nieves, and Michael Rose made key contributions to
this report.
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