Financial Management:

Differences in Army and Air Force Disbursing and Accounting Records

AIMD-00-20: Published: Mar 7, 2000. Publicly Released: Mar 7, 2000.

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Pursuant to a congressional request, GAO provided information on differences in the Army's and Air Force's disbursing and accounting records, focusing on: (1) if, and to what extent, contract payment transactions recorded in the Army and the Air Force official accounting records differed from mechanization of contract administration services (MOCAS) disbursing system records; (2) the types of differences between the disbursing and accounting systems and, to the extent possible, the causes for the differences; and (3) the potential effect any identified deficiencies may have on the Department of Defense's (DOD) planned contract payment system improvements.

GAO noted that: (1) results showed billions of dollars of differences in the way contract payment transactions were originally recorded in MOCAS and the applicable accounting systems prior to the mid-1990s for the Air Force and prior to fiscal year (FY) 1999 for the Army; (2) these differences related primarily to manual processes for recording MOCAS transactions in the accounting systems; (3) GAO's sample of FY 1997 Army contract payment transactions showed that an estimated $6.7 billion in MOCAS disbursement and collection transactions were recorded differently or could not be located in the Defense Finance and Accounting Service (DFAS) accounting systems used to record Army transactions, including $2 billion recorded to different appropriations in MOCAS and Army's accounting records; (4) the electronic processes for recording MOCAS transactions in the applicable accounting systems should reduce significantly the opportunity for such differences; (5) however, existing differences will ultimately result in the need for adjustments to reconcile accounting and disbursement records and to resolve uncertainties concerning the status of appropriate funds; (6) about one out of every two dollars processed by MOCAS was for adjustments to previously recorded disbursement transactions and billions of dollars of MOCAS adjustments were not recorded in DFAS Army accounting station records; (7) unlike the Army adjustment transactions, most of the Air Force adjustment transactions in GAO's sample were recorded in Air Force accounting records; (8) contract balances also differ between MOCAS and DFAS accounting systems used to process Army and Air Force transactions; (9) for the contract accounting lines associated with the transactions in GAO's Army sample, actual differences in balances amounted to about $909 million in obligations and $908 million in disbursements between MOCAS and DFAS accounting systems used to process Army transactions; (10) for the contract accounting lines associated with the transactions in GAO's Air Force sample, actual differences amounted to about $1.3 billion in obligations and about $1.4 billion in disbursements; (11) DOD has a number of initiatives planned or under way to address acknowledged deficiencies in its contract payment process; (12) one of these involves a new contract payment system targeted to begin implementation in October 2000; and (13) however, this high-level approach has not yet been approved and incorporated into a detailed data conversion plan.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD originally planned to address GAO's recommendations through the implementation of its new corporate contractor payment system--the Defense Procurement Payment System (DPPS), which was targeted to begin implementation in 2001. In March 2000, DOD issued DOD Reform Initiative (DRID) 53 directing the military departments and the Defense Contract Management Agency (DCMA) to develop comprehensive plans for closing out all completed contracts to prepare for the orderly transition to DPPS. The Defense Finance and Accounting Service (DFAS) was to reengineer the contract reconciliation process and develop procedures to support the conversion from the existing Mechanization of Contract Administration Services (MOCAS) system to DPPS. The Comptroller and DCMA developed and implemented a plan with assigned responsibilities and milestone dates for resolving data reliability problems associated with existing contract payment data. DOD established an Integrated Process Team chaired by the Principal Under Secretary of Defense (Acquisition and Comptroller) to integrate and coordinate the reconciliation, closeout, and conversion of MOCAS to DPPS. To identify the magnitude of differences requiring reconciliation, DOD compared contract records with disbursing and accounting records. DOD also stratified contracts by the number and amount of the difference to establish reconciliation priorities. Under DRID 53, the initial focus was to reconcile contracts that would be the most difficult to reconcile and contracts over $100 million with expeditious efforts to move forward to reconcile and close all other contracts. In May 2001, the DOD Comptroller published new business rules for contract reconciliations in volume 10, chapter 20 of the DOD Financial Management Regulation. In January 2003, due to unresolved problems, DOD terminated efforts to implement DPPS, and funding was made available to implement systemic and process improvements in MOCAS. As a result, transaction history was retained in MOCAS. DOD's contract payment and reconciliation process improvements, which were documented by DFAS as completed in March 2003, addressed GAO's recommendations by eliminating or significantly reducing the differences between disbursing and accounting system data.

    Recommendation: In implementing DOD's new corporate procurement and payment systems, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) and the Defense Contract Management Command (DCMC) to develop and implement a data conversion plan identifying responsibilities and milestone dates for resolving data reliability problems associated with existing contract payment data. In developing such a plan, the Comptroller and DCMC officials should consider the basic steps discussed in this report, such as: (1) comparing the two sets of records to identify the magnitude of the differences between MOCAS and the accounting records; (2) stratifying the contracts by the number and amount of the difference so that priorities can be established; (3) developing a policy for addressing how the differences will be handled; and (4) for those existing contracts that will be entered into the new system, including steps to retain the transactional history of each contract, whether in MOCAS or by some other automated means.

    Agency Affected: Department of Defense

 

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