Computation of Cost-of-Living Allowances for Uniformed Personnel Could Be More Accurate

FPCD-82-8: Published: Feb 25, 1982. Publicly Released: Feb 25, 1982.

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GAO reviewed the methodology used to compute cost-of-living allowances (COLA's) for federal personnel because there were concerns about its appropriateness.

GAO found that the Department of Defense (DOD) uses an out-dated spendable income table on which to base COLA payments and adjustments for environmental factors resulting in undercompensation for some uniformed personnel and overcompensation for others. DOD, the Department of State, and the Office of Personnel Management administer COLA programs for uniformed and federal civilian employees in foreign and nonforeign areas, respectively. COLA's computed by these agencies are based on prices of a market basket of goods and services in the foreign or nonforeign area compared with prices of a similar market basket in the base area. The administering agencies divide the foreign or nonforeign average prices by the base area average prices to obtain a ratio. These item ratios are weighted by the relative importance of the expenditures they represent. Correcting several deficiencies in data collection and processing would insure that the COLA's more accurately reflect differences in prices. Data received from the field were inconsistently edited and incorrectly adjusted for timelags between base area and COLA area price surveys. DOD COLA's would be improved if sale prices were weighted to reflect the proportion of purchases made at sale and regular prices.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should revise the price collection schedule to minimize the timelag between base area and cost-of-living allowance area price surveys.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should use a scientific sampling system to make living pattern surveys and direct field offices to use the results of living pattern surveys as a basis for selecting outlets for the price surveys.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should discontinue the practice of adjusting cost-of-living allowances in Alaska to reimburse uniformed personnel for special environmental factors. If a transfer allowance is considered necessary, DOD should propose legislation for such an allowance.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should use weighted sale prices to reflect the proportion of purchases made at sale and regular prices.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should use procedures which insure consistent use of price data in the cost-of-living allowance computations.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should adopt a spendable income table based on the most recent consumer expenditure survey.

    Agency Affected: Department of Defense

 

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