DOD Problem Disbursements:

Contract Modifications Not Properly Recorded in Payment System

AIMD-97-69R: Published: Apr 3, 1997. Publicly Released: Apr 3, 1997.

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Lisa G. Jacobson
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GAO reviewed the Defense Finance and Accounting Service's (DFAS) contract modification files, focusing on whether: (1) modifications were being input properly into the Center's payment system in a timely manner; and (2) information from the modification files was being used to effectively manage the input process. GAO did not independently verify or audit the data.

GAO noted that: (1) for the 175 selected contracts in GAO's review, GAO found that the Center's missing modification file identified over 2,400 missing modification numbers, including some that had been missing for years; (2) according to DFAS staff and consistent with GAO's observation of the Center's modification input process, the missing modification file is not being used to follow up on unrecorded modifications; (3) however, as DFAS staff noted, clearing such unused numbers from the missing file should not be difficult and would serve as an important control for ensuring that all actual modifications are accounted for and entered into the payment system; (4) according to personnel responsible for modification input and problem correction, modifications that have not been entered into the system are often not detected under current processes until a payment problem occurs; (5) because the timely input of contract modifications is necessary to ensure accurate and timely payment of invoices, GAO compared the modification effective dates with input dates over a 1-year period for 25 of the more frequently modified contracts from the 175 selected contracts; (6) GAO found that for 17 of the 25 contracts, modifications, on average, were input 30 days or more after their effective dates; (7) for 10 of the 25 contracts, the average time between the effective modification dates and the input dates exceeded 100 days; (8) in addition, over 5,200 modifications related to GAO's selected 175 contracts had been input out of sequence with respect to their effective dates; (9) although GAO did not analyze the causes for input delays, GAO did note that in many cases Columbus Center did not receive the modifications from the responsible contract officials within 30 days of their effective dates; (10) finally, GAO identified 146 numbered modifications that had been entered more than once into the Center's system; (11) in responding to matters discussed in this letter, DOD officials advised GAO that actions are under way to improve the accuracy and timeliness of modification input; (12) they said that the Department of Defense (DOD) is testing the feasibility of direct input of modifications by administrative contracting offices rather than by Columbus Center personnel; and (13) also, they said DOD has proposed an edit change to the contract payment system that will help prevent modifications from being entered out of sequence.

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