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). 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. 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. 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. 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. 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 Judgment Fund Have Increased in the Last 3 Fiscal Years

The Judgment Fund was reimbursed for fewer than one of every five  dollars agencies owed for each of the 3 fiscal years (see table 4). Similar flexibility  exists under the No FEAR Act. 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. 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. 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. 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.
Why GAO Did This Study

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.

What GAO Found

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. 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.