Savings Can Be Realized if Nonappropriated Fund Instrumentalities Pay for Their Unemployment Costs

GGD-85-51: Published: Jul 9, 1985. Publicly Released: Jul 9, 1985.

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During a review of unemployment benefit payments to former federal employees, GAO identified an opportunity for the Department of Defense (DOD) to save several million dollars in appropriated funds annually.

GAO found that DOD does not require nonappropriated fund instrumentalities (NAFI) to pay for unemployment benefits received by former NAFI employees. Since fiscal year 1982, about $22 million in DOD appropriated funds have been paid to the Department of Labor to cover NAFI unemployment costs. GAO believes a requirement that NAFI-generated funds be used to cover these costs would: (1) be consistent with a DOD policy to reduce the scope and magnitude of appropriated fund support for NAFI activities; and (2) provide an incentive for NAFI managers to reduce unemployment costs. GAO noted that: (1) no other federal agency uses appropriated funds to pay NAFI unemployment costs; (2) congressional subcommittees have directed DOD to use NAFI-generated funds to cover NAFI unemployment costs; and (3) DOD could use current accounting procedures to allocate unemployment costs to each individual NAFI.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Action to implement this recommendation will be included in the preparation of the fiscal year 1987 budget. Congress reduced the DOD budget request for 1987 and DOD begun charging the military department's central nonappropriated funds for the unemployment costs incurred by the funds.

    Recommendation: The Secretary of Defense should require that NAFI-generated funds be used to pay for unemployment benefits received by former NAFI employees.

    Agency Affected: Department of Defense


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