Debt Collection:

Defense Finance and Accounting Service Needs to Improve Collection Efforts

GAO-01-686: Published: Jun 29, 2001. Publicly Released: Jul 30, 2001.

Contact:

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

 

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

Improper payments are a long-standing problem throughout the government. The Department of Defense (DOD) has been overpaying contractors by hundreds of millions of dollars each year. For fiscal years 1994 through 1999, DOD contractors returned nearly $1.2 billion that the Defense Finance and Accounting Service (DFAS) had mistakenly paid them as a result of errors, such as paying the same invoice twice or misreading invoice amounts. Sometimes, however, the contractors do not promptly respond to government demands that the overpayments be returned. The Debt Management Office was created at the DFAS Columbus Center to deal with contractors that are unresponsive to the government's demands that overpayments be returned. GAO found that the Debt Management Office at DFAS Columbus is not effectively and proactively pursuing collections of debts assigned to it. Specifically, the Office is not (1) taking appropriate action to establish the validity of the debts that it receives for collection, (2) promptly issuing letters demanding payment, (3) actively communicating with contractors or resolving issues related to the debts, and (4) effectively using the Department of the Treasury's centralized debt collection programs to maximize collections and the Defense Criminal Investigative Service to pursue potential fraud. Ineffective and insufficient efforts by the Office are the results of both deficiencies in and lack of adherence to policies and procedures.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: In order to promote more effective and proactive debt collection, the Director of DFAS should establish specific requirements and time frames for referring appropriate debts to the Department of the Treasury's centralized debt collection program.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

    Status: Closed - Implemented

    Comments: In April 2002, DFAS Columbus issued interim guidance (02-PRO-006) to address GAO's findings. Included in this guidance are specific requirements and time frames for referring appropriate debts to the Department of Treasury's centralized debt collection program. The guidance establishes specific procedures that Debt Management Office accountants are to follow in transferring debts to Treasury. The debts continue to be tracked in the Contractor Debt System, which provides real-time data on the status of each debt, and tracks and reports on the life cycle of debt cases.

    Recommendation: In order to promote more effective and proactive debt collection, the Director of DFAS should establish requirements that Debt Management Office personnel engage in direct communications and interactions with contractor officials and others to actively identify and resolve issues related to debts.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

    Status: Closed - Implemented

    Comments: In April 2002, DFAS Columbus issued interim guidance (02-PRO-006) to address GAO's findings. The guidance requires that Debt Management Office personnel must (1) contact contractors directly, and (2) establish a communication log. Also, the Debt Checklist was modified to ensure that Debt Management Office accountants initiate initial and follow-up communications with contractors indebted to the U.S. Government.

    Recommendation: In order to promote more effective and proactive debt collection, the Director of DFAS should establish specific time frames for issuing the third demand letter and procedures to track issuance of these letters against the established time frames.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

    Status: Closed - Implemented

    Comments: In April 2002, DFAS Columbus issued interim guidance (02-PRO-006) to address GAO's findings. Included in this guidance are specific requirements and time frames for issuing demand letters, and a process to track actions against established time frames. The guidance requires initial action on a debt case within 2 weeks, and transfer of the case to the Treasury Offset Program after 30 days if debt is 180 days old. Also, the Contractor Debt System provides real-time data on the status of each debt and tracks and reports on the life cycle of debt cases.

    Recommendation: In order to promote more effective and proactive debt collection, the Director of DFAS should establish internal controls to ensure that debt files include all necessary supporting documentation.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

    Status: Closed - Implemented

    Comments: In April 2002, DFAS Columbus issued interim guidance (02-PRO-006) to address GAO's finding. The guidance requires the Debt Management Office to examine debt files to ensure that (1) the file is complete, (2) supporting documentation is in the debt folder, and (3) the debt is validated. The guidance provides a file checklist of required documentation and actions. It also provides for valid debts to be entered into the Contractor Debt System and invalid debts to be returned to the issuing activity.

    Recommendation: In order to promote more effective and proactive debt collection, the Director of the Defense Finance and Accounting Service (DFAS) should establish internal controls to ensure that the Debt Management Office validates debts.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

    Status: Closed - Implemented

    Comments: In April 2002, DFAS Columbus issued interim guidance (02-PRO-006) to address GAO's findings. The guidance requires the Debt Management Office to examine debt files to ensure that (1) the file is complete, (2) supporting documentation is in the debt folder, and (3) the debt is validated. The guidance provides a file checklist of required documentation and actions. It also provides for valid debts to be entered into the Contractor Debt System and invalid debts to be returned to the issuing activity.

    Recommendation: In order to promote more effective and proactive debt collection, the Director of DFAS should establish procedures for utilizing the Defense Criminal Investigative Service and the Department of Justice when debts could involve criminal activities.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

    Status: Closed - Implemented

    Comments: In April 2002, DFAS Columbus issued interim guidance (02-PRO-006) to address GAO's findings. Included in this guidance are specific requirements and time frames for referring appropriate debts to the Defense Criminal Investigative Service and the Department of Justice. The guidance establishes specific procedures that Debt Management Office accountants are to follow in transferring appropriate debts, and for follow-up every 6 months to determine disposition.

    Mar 27, 2014

    Mar 13, 2014

    Mar 12, 2014

    Feb 27, 2014

    Dec 23, 2013

    Dec 16, 2013

    Dec 12, 2013

    Dec 11, 2013

    Looking for more? Browse all our products here