State of Alaska Division of Legislative Audit

02-30001-03

June 10, 2013
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SUMMARY OF: A Special Report on the Office of the Governor, Office of Management and Budget, 1996 Retirement Incentive Program Final Summary Schedules, for the Department of Administration, Information Technology Group, and the University of Alaska, January 15, 2001.

Purpose of the Report

In accordance with Title 24 of the Alaska Statutes and a special request by the Legislative Budget and Audit Committee, we have conducted an audit of the 1996 Retirement Incentive Program (RIP) Final Summary Schedules, dated January 15, 2001 issued by the Office of the Governor, Office of Management and Budget (OMB), for the Department of Administration (DOA), Information Technology Group (ITG) and the University of Alaska (UA).

The purposes of this audit were to:

  • Determine if the net savings reported as of January 15, 2001, by OMB to the legislature, presents fairly the results of the retirement incentive programs utilized by ITG and UA, in conformity with the retirement incentive program legislation and the underlying policies and procedures.
  • Determine whether OMB, ITG and UA complied with the applicable laws, regulations, and mandated procedures in its use of RIP. Specifically, we were asked to review changes, reclassifications, and inequities in the eligibility determination process.

Report Conclusions

The Office of the Governor, Office of Management and Budget, overstated the 1996 Retirement Incentive Program savings for the Department of Administration, Information Technology Group, by $423,000 and the University of Alaska by a significant but indeterminable amount. These overstatements were due to the erroneous inclusion of vacancy savings and exclusion of rehires. In other respects, OMB, DOA, and UA generally complied with the laws and rules governing this program.

Department of Administration, Information Technology Group:

Savings overstated primarily by inclusion of vacancy savings

OMB’s misstatement of ITG savings was made up of several errors, with an erroneous inclusion of vacancy savings representing $326,000 of the $423,000.

OMB was responsible for adopting the program’s policies and procedures. OMB specifically prohibited the inclusion of vacancy savings, but it did allow the savings from position eliminations to be counted. That is, OMB decided that temporary vacancies were a normal result of employee turnover and should not be considered part of RIP savings. However, long-term position eliminations were to be counted as RIP savings.

ITG had estimated a net savings from RIP of $875,000. However, when the staff of DOA, Division of Administrative Services, compiled the data to be submitted to OMB, it estimated $1,201,000. The $326,000 increase was largely due to inclusion of vacancy savings from positions remaining vacant rather than being filled. DOA’s Administrative Services erred by including vacancy savings and OMB erred by failing to remove them. In its January 15, 2001 report to the legislature, OMB erroneously stated that vacancy savings had been excluded.

University of Alaska:

Savings overstated by ignoring rehires

UA rehired approximately 140 RIP participants after they retired. OMB instructed agencies to include the cost of replacement employees in the calculations. Had UA included the cost of these rehires, the savings presented would have been substantially less. However, how much less was not reasonably determinable by audit procedures, either by full examination or through sampling. Typically, there was a savings because these RIP participants only worked part-time or part of the year up to 49% of their previous salary and UA only paid into Social Security. That is, UA was no longer responsible for their health insurance and retirement costs.

DOA-UA 1996 Retirement Incentive Program
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