Financial Management: DOD Needs to Lower the Disbursement Prevalidation Threshold
AIMD-96-82
Published: Jun 11, 1996. Publicly Released: Jun 11, 1996.
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Highlights
Pursuant to congressional requests, GAO reviewed, in conjunction with the Department of Defense's (DOD) Inspector General (IG), DOD efforts to reduce problem disbursements and its implementation of a statutory requirement to match each disbursement exceeding $5 million to the appropriate obligation before the disbursement is made.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should direct the Comptroller, DOD, to develop a plan to prevalidate all disbursements in the short term to protect the integrity of the DOD disbursement process while long-term improvements are made to DOD contract pay, disbursing, and accounting processes and systems. As a first step, the Comptroller should reduce the threshold at the DFAS Columbus Center to $4 million and continuously lower the threshold in accordance with the plan. |
Closed – Implemented
DOD lowered the threshold at DFAS Columbus to $4 million. A formal plan to continue to lower the disbursement threshold below the $4 million level was presented to the DOD IG for review in January 1997. The plan called for gradual reductions of the threshold at DFAS Columbus to a level of $1 million by June 1999 for disbursements made against all contracts awarded in fiscal year 1996 or earlier. For all new contracts awarded in fiscal year 1997 and later, all disbursements made by DFAS Columbus are to be prevalidated 100 percent. The plan also called for 100 percent prevalidation of all payments, at all non-DFAS Columbus locations regardless of when the contract was awarded. In its letter of assessment to the Congress, the DOD IG agreed with the overall approach. The DOD IG noted, however, that any corrective action plan in this difficult area cannot avoid significant risk. The DOD IG agreed to continue to monitor DOD management on the success of lowering the threshold.
|
| Department of Defense | The Secretary of Defense should direct the Comptroller, DOD, to develop similar plans for prevalidating all disbursements at all the other DOD disbursing activities. These plans should incorporate DOD IG recommendations. |
Closed – Implemented
See responses to prior recommendation. One plan was developed that addresses both recommendations.
|
| Department of Defense | The Secretary of Defense should direct the Comptroller, DOD, to ensure that existing accounting policies and procedures are followed in recording obligations, detecting and correcting errors, and posting complete and accurate accounting information in systems supporting the disbursement process. |
Closed – Implemented
The DOD Comptroller and the Director, DFAS have reemphasized the importance of accurately accounting for and reporting obligations and disbursements. For example, the Comptroller issued new guidance effective July 1, 1996, requiring quarterly reviews of obligations to ensure that transactions recorded in the accounting systems are accurate and complete. The Comptroller noted that to the extent that obligation records in the official accounting systems are not fully accurate, the associated disbursements cannot be successfully matched to the correct obligation. The requirement for quarterly reviews extends to all appropriations and funds in the Department of Defense and sets minimum dollar thresholds of obligations that must be reviewed each quarter of $200,000 or more for investment appropriations, such as Procurement, RDT&E, and Military Construction, and $50,000 or more for operating appropriations, such as Operation and Maintenance, Revolving Funds, and DBOF.
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Topics
Accounting proceduresBudget obligationsBudget outlaysContractor paymentsDefense procurementErroneous paymentsFederal agency accounting systemsFinancial managementInternal controlsStatutory law