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PSAD-77-100 1 (1977-05-19)

handle is hein.gao/gaobaachj0001 and id is 1 raw text is: DOCUMENT RESUME 02331 - (A1452459] Contractor Pension Plan Costs: More Control Could Sava Department of Defense Millions. PSAD-77-100; B-146991. May 19, 1977. 83 pp. Report to the Congress; by Elmer B. Staats, Comptroller General. Issue Area: Federal Procurement of Goods and Services: Reasonableness of Prices Under Negotiated Contracts and Subcontracts (1904). Contact: Procurement and Systems Acquisition Div. Budget Function: National Defense- Department of Defense - Procurement & Contracts (058) ; Income Security (600). Organization Concerned: Department of Defense; Cost Accounting Standards Board. Congressional Relevance: House Committee on Armed Services; Senate Committee on Armed Services; Congress. Authority: Employee Retirement Income Security Act of 1974. P.L. 91-379. Internal Pevenue Code of 1954, as amended. The Government incurred pension plan costs that were inequitable and too high because the Department of Defense permitted actuarial assumptions or unjustified changes in actuarial cos t methods. Findings/Conclitsions: Government controls and surveillance over contractors* pension plan practices were not adequate considering the costs involved. Establishing effective controls and surveillance over these practices could save the Government millions of dollars. Department of Defense auditing and contracting activities also lacked personnel with actuarial skills to evaluate pension plan costs. Properly implementing the existing requirements of the Cost Accounting Standards Board and the proposed standard on pension plan costs should prevent the increased costs. Recommendations: The Secretary of Defense should have the Armed Services Procurement Regulation (ASPR) revised to require that pension plan costs charged to the Government (1) are equitably distributed between Government and commercial work when different actuarial cost methods are used, (2) reflect allocation of pension fund assets in proportion to contributions, and (3) are alloca'ed by using assumptions based on aivision or cost center experience instead of compaDywide experience. The ASPR should also be revised to require that any changes in the policies and procedures affecting allocation of pension plan costs be completely disclosed. (Author/SC)