DOD Procurement:

Funds Returned by Defense Contractors

NSIAD-98-46R: Published: Oct 28, 1997. Publicly Released: Oct 28, 1997.

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Pursuant to a congressional request, GAO reported on money returned to the Defense Finance and Accounting Service's (DFAS) Columbus Center by defense contractors, focusing on: (1) the Center's process to record, research, and categorize money returned by defense contractors; (2) the dollar value of checks received since fiscal year (FY) 1993; and (3) the results of the Center's research on the cause of the returned amounts.

GAO noted that: (1) the Columbus Center has a process in place to record the checks received from defense contractors and to research and categorize the reasons why the checks were received; (2) this process provides the Columbus Center with a way of determining if the checks it receives are the result of factors within its control and facilitating corrective actions, if needed; (3) between FY 1994-96, the Columbus Center received checks from defense contractors totalling about $1 billion a year; (4) for the first 7 months of FY 1997, the Columbus Center received checks totalling about $559 million; (5) the Columbus Center's data show that, of the $5.1 billion that the center received from contractors during the period of FY 1993 throughout the first 7 months of FY 1997, $3.7 billion was attributable to factors outside of its control; (6) these include contract administration actions, such as reductions in contract prices due to contractors' not meeting delivery dates, reallocations of costs to other contracts resulting in returned progress payments, and contract definitizations resulting in lower unit costs than previously billed by the contractor and paid by DFAS; (7) the remaining $1.4 billion was due to payment errors at the Columbus Center; and (8) the Center's data also show that the dollar amounts of its errors have been declining, totalling $592 million in FY 1993, $283 million in FY 1994, $252 million in FY 1995, $191 million in FY 1996, and $67 million through the first 7 months of FY 1997.

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