Validation of Receipt and Acceptance
AIMD-99-111R, Apr 14, 1999
Pursuant to a congressional request, GAO provided an interpretation of certain parts of Title 7 of its Policy and Procedures Manual for Guidance of Federal Agencies, focusing on whether it is acceptable: (1) for disbursing officers to authorize payment without reviewing evidence transmitted directly by an authorized employee attesting to the receipt and acceptance of goods and services; (2) for disbursing officers to authorize payment after reviewing the vendor's invoice and vendor maintained delivery data without first reviewing evidence of receipt and acceptance by a government official; and (3) to verify receipt and acceptance after payment authorization based on review of a statistically selected sample of invoices in lieu of conducting prepayment verification. GAO noted that the Department of Defense's (DOD) Inspector General (IG) requested clarification of GAO's guidance because it was reviewing the propriety of the process used to authorize payments for certain fuel purchases.
GAO noted that: (1) authorizing payment prior to verification of receipt is referred to as fast pay in Title 7; (2) although fast pay is permitted under certain criteria, the fuel purchases made under this process by DOD would not meet the criteria, given the error rate reported by the IG's office is considered above an acceptable rate or where a particular purchase exceeds the fast pay limitation of $25,000; (3) DOD's IG issued a report on vessel fuel acquisition stating that during a 5-month period ending in January 1997, a 10-percent error rate was found in invoices for fuel purchases reviewed; (4) where the 10-percent error rate is considered above an acceptable error rate as determined by management of the Defense Finance and Accounting Service and the Defense Energy Support Center (DESC) after careful analysis and after concurrence by the IG, fast pay procedures, not withstanding the $25,000 limitation, should be suspended until the error rate is reduced to an acceptable level; (5) regarding sampling of invoices on a postpayment basis to verify receipt by a government employee as proposed but not yet implemented by DESC, Title 7 limits the sampling to invoices under $2,500; (6) when the purchase of these certain fuels exceed the $2,500 limitation, verification of receipt of the fuels would be required; and (7) for invoices under the $2,500 limitation, sampling should be not be implemented until: (a) the 10-percent error rate disclosed in the IG's report is reduced to a level considered to be an acceptable error rate established by management and agreed to by the IG; and (b) the actual error rate remains equal to or above the acceptable rate.