Computation of Cost-of-Living Allowances for Federal Employees in Nonforeign Areas Could Be More Accurate

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

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Rosslyn S. Kleeman
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GAO reviewed the methodology used by the Office of Personnel Management (OPM) and the Departments of State and Defense (DOD) to compute cost-of-living allowances (COLA's) for Federal personnel. Concerns have been raised by Federal personnel about the appropriateness of that methodology.

COLA programs are administered by OPM for Federal civilian employees stationed in nonforeign areas outside the conterminous United States; by State for Federal civilian employees in foreign areas; and by DOD for uniformed personnel in foreign and nonforeign areas. GAO wanted to identify and analyze inconsistencies in the administration of COLA programs and to find ways of improving methodologies for the computation of COLA's. GAO found that Federal agencies are not using scientific survey procedures to collect information for COLA computation and, for that reason, it questions the accuracy of the data used. A particular problem is the timelag between when price surveys are taken and when the data are used by the agencies to compute base area prices. GAO also noted that OPM computation would be improved if sale prices were included in computation data in areas where the sale price is the normal price paid for certain goods.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Adoption of the recommendation would entail additional data gathering, and the effect, if any, would probably not be significant.

    Recommendation: The Director, OPM, should weight sale prices to reflect the proportion of purchases made at sale and regular prices.

    Agency Affected: Office of Personnel Management

  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 Director, OPM, should require agencies to use a scientific sampling system to make living pattern and housing cost surveys.

    Agency Affected: Office of Personnel Management


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