Living Quarters Allowance – Year 1 Reconciliation
Okay, you’ve been in country for a year. You’re living your best life hopefully feeling the high of the honeymoon period of being in a new country! Now it’s time for down to earth finances. If you are a U.S. civil service employee who is getting the benefit of living quarters allowance, it is now time to do the Year 1 Reconciliation – insert Yaaa! or Ugh! as appropriate to your mood.
Background: Living quarter allowance or LQA is an incentive offered to civil service employees who moved from the U.S. to a foreign area. It covers the cost of living such as rent, utilities, and in some cases, parking. This incentive is not a blanket amount but rather is tailored specifically to each individuals situation. Which means you are only supposed to be paid exactly what you need to live.
The reconciliation is going to happen in two parts. The first part is just after you pay your last rent check for the reconciliation period. The second part is after you paid the last utility which is billing you for the reconciliation period. The reconciliation period is the day the LQA started plus one year. Example: 5 January 2020 thru 4 January 2021.
Rent and Fees Reimbursement
You will need to submit to HR receipts or a report showing the rent which has been paid and what the amounts were. What I did was go to my leasing agent and got a report of all my rent payments. This should just be a formality that yes, you really did pay your rent and yes, this is the amount of the rent you paid.
Then submit a signed SF 1190, my HR prepared mine for me and I just reviewed and signed. This SF 1190 is going to adjust the LQA to remove the fees reimbursement. Wait, what fees reimbursement? When I moved in, I paid out of pocket two different fees that was then reimbursed back to me through my LQA over the course of the first year. Once that reimbursement is complete then the LQA is to be adjusted to reflect that decrease.
Utilities
At the time of setting up the LQA the amount of money you would need for utilities was estimated. Now, after you had paid all the bills for the period of the reconciliation, you have the actual costs of utilities. If you overestimated at the front end you will need to pay that overage back. If you underestimated, then you will need to be reimbursed that gap. This goes back to the fact that LQA is supposed to cover exactly what you need for utilities.
This first year of utilities will now set the amount that will be paid going forward. From what I have heard and understand about this system, unless there is a specific need to do so, there will be no more audits. First year utilities will be the amount you get from here on out.
Side note: this is where people can abuse the system, which I do not recommend and am pulling attention to because I don’t like fraud. In the first year you could have purposefully inflated the cost of your bills. Then at this reconciliation you can set the amount of your utilities as artificially high. Going forward, you decrease the utility usage in your home to create low bills, and you now pocket the difference. For example, you can run the AC and heat all day and night creating a $500 electric bill, which is not an exaggeration. You can then turn off the AC and heat and use it more frugally, creating a $200 bill. You now have $300 extra you just defrauded the government out of for your use on beer and hamburgers. Yum!
Back to the how-to: Once you have the utilities receipts, scan them and submit them with a second SF 1190. Again, the form was prepared for me by my HR person, and I just reviewed and signed.
And that’s it! Easy-peasy.
Observations and Questions
Now, some personal observations. The idea behind the LQA being tailored to each individual’s living situation is that since this is an incentive and not an entitlement the government is saving money by paying only exactly what is needed. I would like to see if that is actually true in practice when you factor in the paid time that HR and employees have to spend on the paperwork. It really is a significant amount of time being spent on this process. As a control group, the civilians LQA can be compared to the active duty’s BHA.
Active duty gets, as an entitlement, basic housing allowance (BHA) which for them is a blanket amount. Based on rank you get x amount of dollars to be spent on housing. End of story.
The difference between an entitlement and an incentive is that the entitlement is a requirement and the incentive is an elective. Active duty are required to be quarter and billeted at the expense of the Department of Defense, says so in the original paperwork setting up the DoD. There is no equivalent requirement for the U.S. Government, whether it is Dept. of Ed, Dept. of Defense, or any other department operating outside of the U.S. to provide housing to civilians. But the gov chooses to offer this LQA incentive to make working for them a more desirable option. Okay, moving on.
Has there been any studies done of the LQA’s current system and how well it is meeting the goal of saving the government money? If not, there should be. If so, it should be easy to find.
Second of all, how much money is being lost because people are abusing the system? And if the system changed to a set amount, would that ‘even’ things out? Right now, we have some people using the system as intended and others are abusing it. The abuse is running the LQA bill up higher. But if we switch to a set amount system, while some people will see an increase in their annual LQA those others who are abusing the system will most likely also see a decrease, so that’s what I mean by ‘even out’.
What do you think?
Oh, and what happens to folks who abuse the system? That is a whole 'nother post about politics in the workplace. On paper, the answer is straightforward. Human Resources initiates an investigation into the LQA usage of the person in question and if found to have defrauded the government then they are to pay those funds back, will most likely lose the LQA all-together, and could potentially get sent back to the U.S. How that plays out in real life, well, politics.
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