Embassy Contracting:

State Department Efforts To Terminate Employee Association Contracts

NSIAD-88-85: Published: Feb 16, 1988. Publicly Released: Mar 17, 1988.

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In response to a congressional request, GAO reviewed the Department of State's efforts to convert service contracts between U.S. embassies and their employee associations to commercial or U.S. embassy personal service contracts.

GAO found that: (1) as of September 30, 1987, 59 of the 67 embassies had converted their employee association contracts to commercial or U.S. embassy personal service contracts; and (2) State plans to convert eight remaining contracts. GAO also found that: (1) since termination of the contracts, associations have had to pay severance benefits for contract employees who lose their jobs; (2) some associations failed to maintain adequate reserves for employees' severance benefits; (3) State has already provided $299,000 to cover associations' debts; and (4) only one post formally requested permission to continue its association contract.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: State believes: (1) appropriated funds used to establish severance reserves can only be used to liquidate severance liabilities as they become payable in the future; and (2) any local reserves found to be in excess of amounts actually needed to fund all outstanding severance liabilities must be returned to the U.S. Treasury. Posts have been advised and directed to collect excess reserves.

    Recommendation: The Secretary of State should direct State and post officials to recover and return to the U.S. Treasury all appropriated funds the associations received to cover the contingent severance liability for those who were subsequently converted to U.S. embassy personal service contracts.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: Under newly adopted procedures, State is now requiring employee associations to submit their operating procedures to the Department for approval. The procedures call for the associations to meet a number of specific criteria. The procedures are now in place to enforce Department regulations that require associations to establish liability reserves to cover severance benefits, according to State.

    Recommendation: The Secretary of State should direct State and post officials to enforce State regulations that require employee associations to establish contingent liability reserves to cover severance benefits.

    Agency Affected: Department of State

  3. Status: Closed - Not Implemented

    Comments: State lacks a legal basis for recovering funds, since funding for creating the reserves was not specifically provided by USG during the course of the contract.

    Recommendation: The Secretary of State should direct State and post officials to obtain from the four involved associations formal commitments to repay the $229,000 provided by State's Diplomatic Security Bureau.

    Agency Affected: Department of State

 

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