Financial Management:

Improved Reporting Needed for DOD Problem Disbursements

AIMD-97-59: Published: May 1, 1997. Publicly Released: May 1, 1997.

Additional Materials:

Contact:

Gregory D. Kutz
(202) 512-9505
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) reporting on the amount of its problem disbursements, focusing on whether DOD's reporting is producing accurate and consistent data needed to effectively measure its progress and manage the reduction of its problem disbursements. GAO did not audit the validity of the underlying disbursement data.

GAO noted that: (1) to ensure that problem disbursement reports are an effective management tool, DOD's reports, at a minimum, need to accurately identify the amount of problem disbursements; (2) however, the reports by the Defense Finance and Accounting Service (DFAS) do not provide this needed information; (3) GAO's testing of problem disbursement amounts reported by DFAS as of May 31, 1996, shows that the $18 billion total reported by DOD was understated by at least $25 billion; (4) accordingly, neither the Congress nor DOD management can rely on DOD's reported amount to determine the extent of problem disbursements or to monitor progress made in resolving them; (5) furthermore, the underlying data for DFAS' reports are not sufficient to ensure consistent reporting and do not provide basic information about the sources and causes of problem disbursements; (6) additional data are essential if DOD is to prioritize and focus reengineering efforts and other corrective actions on those organizations, activities, and actions that are the more significant contributors to disbursement problems and to measure its success in addressing specific problems; (7) while summary data would be acceptable for some analyses, the ability to identify sources and causes of problem disbursements depends on the availability of detailed data about transactions that result in problem disbursements; (8) while DOD and DFAS have committed significant resources to reducing problem disbursements, they have not taken the steps needed to ensure accurate and consistent reporting and the availability of underlying data that are needed to quantitatively measure and manage reduction efforts; (9) although DFAS prepared its first comprehensive reporting guidance in May 1996, the understatement GAO identified resulted from the guidance not: (a) being followed because DFAS did not establish adequate oversight and controls over the reporting process; (b) offering detailed instructions for offsetting transactions; and (c) appropriately identifying certain types of transactions as problems; (10) DOD disagreed with GAO's findings and stated that it no longer characterizes in-transit transactions as problem disbursements; (11) GAO believes aged in-transits are problem disbursements, and, until recently, they have been treated as such by DOD; (12) DOD also stated that it officially reports in-transit disbursements on a net basis, which is inconsistent with the written policies of DOD and DFAS; and (13) to report these balances on a net basis grossly understates and masks the magnitude and seriousness of DOD's long-standing disbursing problems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In June 1997, DFAS revised its reporting guidance and began to report absolute amounts from detailed transactions in its monthly in-transit report to address GAO's concerns. In addition, DFAS Cleveland, the accounting center which is responsible for reporting the Navy's problem disbursements, began to report all suspense transactions that were: (1) rejected regardless of age; and (2) not previously reported, such as routine and recurring transactions citing closed offices and decommissioned ships. This action is responsive to the recommendation. Because DFAS has taken action, the recommendation is being closed.

    Recommendation: To provide for accurate and consistent reporting of DOD's problem disbursements, the Secretary of Defense should ensure that the Under Secretary of Defense (Comptroller) revises DFAS reporting guidance to include: (1) reporting problem disbursements from detailed transactional data at the DFAS center level, which would allow DOD to maintain a source of management data necessary to identify, quantify, and resolve its problems and would provide for more meaningful calculations of amounts; (2) detailed instructions addressing the offsetting of positive and negative transactions and the logical relationships, such as voucher number, accounting line, or reversal indicator, of these transactions; (3) reporting all transactions that are rejected by edit routines as problems regardless of age, consistent with current DOD Comptroller guidance; and (4) reporting additional problems such as recurring and routine suspense transactions citing closed or invalid disbursing offices and decommissioned ships.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: After GAO's briefing to DFAS in November 1996, DFAS Headquarters established permanent positions to monitor the reporting of problem disbursements by its Centers. As a result of monitoring DFAS Indianapolis, the accounting center responsible for reporting Army problem disbursements--DFAS Indianapolis complied with existing guidance for classifying and aging problem disbursement transactions. Because DOD does not intend any further action, this recommendation is being closed.

    Recommendation: To provide for accurate and consistent reporting of DOD's problem disbursements, the Secretary of Defense should ensure that the Under Secretary of Defense (Comptroller) establishes adequate quality controls over the collection, compilation, and reporting of problem disbursements at DFAS to enhance the credibility of problem disbursement reports. At a minimum, these controls should: (1) include documentation of the process, procedures, and sources of data used for preparing problem disbursement reports at all reporting centers and headquarters; and (2) establish an accountability process to include reviewing and approving the compilation of the reported amounts at all reporting levels, enforcing existing guidance for classifying and aging transactions, and reporting total problem disbursement amounts.

    Agency Affected: Department of Defense

 

Explore the full database of GAO's Open Recommendations »

Sep 22, 2016

Sep 21, 2016

Sep 19, 2016

Sep 12, 2016

Sep 8, 2016

Sep 7, 2016

Sep 6, 2016

Aug 25, 2016

Looking for more? Browse all our products here