Methods of Setting Pay for Nonappropriated Fund Employees Should Be Improved

FPCD-77-51: Published: Dec 14, 1977. Publicly Released: Dec 14, 1977.

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About 200,000 employees of the Veterans Administration and Departments of Defense and Transportation are paid from nonappropriated funds. They conduct programs to improve the morale, welfare, and recreation opportunities of present and former military personnel. Nonappropriated fund employees are not paid by funds which have gone through the congressional appropriation process but are paid directly from the receipts of activities such as military post exchanges and recreation clubs.

Legally, these employees are treated inconsistently. While some are Federal employees in all respects, most are not covered by civil service laws. Some have civil service tenure, protection, and fringe benefits while others do not. Each agency has promulgated policies and procedures for its nonappropriated fund employees resulting in different pay and benefits among its activities and between such employees and other Federal workers. It has been argued that nonappropriated fund employees should be accorded the same pay and benefits as their civil service counterparts. The Coast Guard and Defense oppose civil service methods because they believe higher costs would threaten the financial stability of nonappropriated fund activities which support themselves through revenues they produce. Pay differences between nonappropriated fund employees and other employees are due to certain constraints upon the several pay systems involved which preclude comparability with counterpart private industry pay.

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