Superintendent's Memo #071-09

State seal, Commonwealth of Virginia

COMMONWEALTH of VIRGINIA
Department of Education

March 20, 2009

TO: Division Superintendents

FROM: Patricia I. Wright, Superintendent of Public Instruction

SUBJECT: Letter from U. S. Department of Education Regarding Proper Treatment of Retirement Incentive Payments

I received a letter from the U.S. Department of Education (USED) alerting me to recent audit findings in various states and local education agencies (LEAs) in the area of severance costs, specifically retirement incentive payments that are provided to encourage employees to leave their employment. This letter is posted to http://www.doe.virginia.gov/school_finance/budget/index.shtml and is provided as an attachment to this memorandum. The letter indicates that some states and LEAs are not obtaining the required prior approval from the U.S. Department of Education to charge retirement incentive payments to federal programs.

Severance payments associated with normal employee turnover cannot be charged directly to federal funds. They must be charged as an indirect cost.

Charging “abnormal or mass severance pay” directly to federal funds is allowable only if approved by the U. S. Department of Education in advance. Determinations will be made on a case-by-case basis. Mass severance or termination benefits would include all expenses associated with the employee separation event. This would include: lump sum payments that may be linked to years of service, increased pension benefits such as granting additional years or eliminating penalties for early retirement, payments of unused leave, and the cost of any other incentive offered to employees as an incentive to leave government service, such as buy-outs.

Before charging any abnormal or mass severance payments to federal funds, please submit your written request to the Virginia Department of Education so that we may forward it to USED for consideration. Requests should be sent to the attention of Marie G. Williams, Accounting Director, Department of Education, P.O. Box 2120, Richmond, VA 23218.

If you have any questions or need additional information, please contact Marie Williams, accounting director, via e-mail at marie.williams@doe.virginia.gov or telephone (804) 225-2040.

PIW / MGW / cle

Attachment

a. Letter from U. S. Department of Education Regarding Proper Treatment of Retirement Incentive Payments (PDF)