DOD Problem Disbursements: Long-standing Accounting Weaknesses Result in Inaccurate Records and Substantial Write-offs

OSD provided GAO with a copy of a December 2004 DFAS policy memorandum requiring that DFAS central sites modify the existing Suspense Account Report (SAR) to reconcile it to the Treasury Trial Balance. The memorandum required that the sites' reconciliation documentation contain narratives explaining what portion of the differences are supported and what portion cannot be explained. The policy required that the DFAS sites meet the new requirements with the submission of the February 2005 SAR report.

DOD responded to this recommendation by developing a Plan of Actions and Milestones (POA&M) to improve the quality of DFAS suspense account reports (SAR). The POA&M lists detail inflow analysis categorizing all suspense transactions by source drivers and emphasizes the development of a uniform reconciliation process as well as improving the content of the SAR to report all suspense transactions and more thoroughly explain the supported portion of the difference between the SAR and the Treasury Trial Balance.

The Office of the Undersecretary of Defense (OSD), Financial Management and Comptroller, issued a memorandum in May 2005 directing the military departments, defense agencies, and DFAS to strictly enforce and resolve transactions within the 60 day time frame specified in the DOD Financial Management Regulation. The memo noted that OSD will monitor compliance through its established metrics program. GAO has requested that OSD provide evidence that the policy is being enforced. In response to our recommendation, the Office of the Secretary of Defense issued a memorandum in 2005 directing the military service assistant secretaries and the directors of the defense agencies and DOD field activities to strictly comply with the FMR, Volume 3, chapter 11. This requires that transactions not transferred to proper expenditure accounts within 60 days be obligated. DFAS center officials acknowledged that it has taken several years to research and resolve the aged suspense account balances remaining at the end of 2004. Though many of the aged balances were resolved through research and the charging of appropriate prior year accounts, many were charged against current appropriations. For example, DFAS Indianapolis submitted a write off in Feb 2007 for approximately $117,000. In this example, staff could not locate supporting documentation to identify the correct appropriations since the amounts were recorded in suspense by field staff before 2006. They charged O&M of the Defense Threat Reduction Agency for the disbursements. In addition to research and resolution efforts by center staff, increased DFAS oversight, including monthly meetings and the reporting of metrics to the DFAS director, have also contributed to DFAS centers reducing aged suspense account balances to $44 million as of December 2007. Removing aged suspense accounts will allow DFAS staff to focus on the current activity in suspense accounts and help ensure that appropriation accounts are charged in a more timely manner than in the past.