DOD Problem Disbursements

AIMD-97-36R: Published: Feb 20, 1997. Publicly Released: Feb 20, 1997.

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GAO reviewed the Department of Defense's (DOD) decision to exclude certain problem disbursements from its monthly report, beginning with the November 1996 problem disbursement report.

GAO noted that: (1) prior to the November 1996 report, three categories of problem disbursements were included in the monthly reports: (a) unmatched disbursements, which are transactions that were not matched to obligations because the obligations had not been identified in the accounting records; (b) negative unliquidated obligations, which are disbursements that have been posted to specific obligations by the accounting station, but exceeded the obligations; and (c) in-transits, which are disbursements and collections that have been reported to Treasury, but have either not been received by the accounting station or have been received but not processed or posted by the accounting station; (2) GAO fully agrees with the portions of DOD's December 6, 1996, memorandum that deal with the development of more detailed information to track in-transits, such as by type of transaction and by origination; (3) GAO is also in full agreement with DOD's decision to identify a single Defense Finance Accounting Service (DFAS) coordinator for fixing the in-transit disbursement problem; (4) DOD's memorandum further directs that the current reporting process be stopped and that a new methodology be developed for reporting in-transits; (5) DFAS officials have advised GAO that it may be several months before a new methodology is developed and, in the interim, in-transits have already been dropped from the monthly reports; (6) DOD included in-transits in its problem disbursements reports in response to GAO's recommendation in an October 1994 report, and GAO believes that the rationale for doing so remains valid today; (7) as of May 31, 1996, DOD's reported problem disbursement balance of $18 billion included $7.7 billion of in-transits; (8) according to DOD's aging information on these transactions, $3.8 billion, or about 50 percent, were over 180 days old; (9) even more significantly, $1.4 billion were originally processed before April 1, 1994, yet still remained in the "in-transit" category over 2 years later; (10) clearly, these are problem transactions that should be monitored, and maintaining their visibility by including them in monthly reports that are received by top DOD managers and eventually reported the President and Congress is an important means of ensuring that they are resolved; and (11) eliminating the in-transit category from the problem disbursement report removes from scrutiny not only those in-transits that DOD had been reporting on, but also the additional transactions that GAO found as part of its ongoing work.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Although in-transit disbursements were not included in DOD's monthly problem disbursement report along with unmatched disbursements and negative unliquidated obligations (NULOS), DOD agreed to continue to report in-transit amounts in a separate report. As long as DOD does so in a consistent and accurate manner, GAO considers this action responsive to the recommendation.

    Recommendation: The Under Secretary of Defense (Comptroller) should direct the Director, Defense Finance and Accounting Service, to report in-transit transactions, in accordance with the Department's 60- and 120-day criteria, along with unmatched disbursements and negative unliquidated obligations in the monthly problem disbursement reports.

    Agency Affected: Department of Defense: Under Secretary of Defense (Comptroller)

  2. Status: Closed - Not Implemented

    Comments: DOD prepares a separate report on in-transit problem disbursements because it considers problem in-transits to be a different type of payment problem than negative unliquidated obligations and unmatched disbursements. In prior years, DOD understated the magnitude of its problem disbursements by excluding problem in-transits from problem disbursement information that it provides to the Congress. Further, in some instances, DOD has reported net rather than the absolute value of problem in-transits. However, DOD's fiscal year 2000 annual report to the President and Congress did not include the dollar value of problem disbursements including in-transits. As of February 2000, DOD's internal reports showed that the absolute value of its problem disbursements totaled $5.6 billion, including $4.4 billion for unmatched disbursements and $1.2 billion for negative unliquidated obligations and separately reported the absolute value of its problem in-transits as $3.8 billion. Together these items totaled $9.4 billion.

    Recommendation: The Under Secretary of Defense (Comptroller) should ensure that in-transits are included as problem disbursements in all external reporting, including DOD's annual report to the President and Congress.

    Agency Affected: Department of Defense: Under Secretary of Defense (Comptroller)

 

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