Improper Payments Information Act of 2002:

Department of Defense Travel Expenditure Reporting

GAO-07-767R: Published: May 31, 2007. Publicly Released: May 31, 2007.

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In November 2002, the Congress passed the Improper Payments Information Act of 2002 (IPIA). The major objective of the legislation was to enhance the accuracy and integrity of federal payments. This legislation, in conjunction with implementing guidance from the Office of Management and Budget (OMB), requires executive branch agency heads to review their programs and activities annually, identify those that may be susceptible to significant improper payments, estimate amounts improperly paid, and report on the amounts of improper payments and actions to reduce them. Since passage of IPIA, the Department of Defense (DOD) has continued to expand its annual disclosures in its performance and accountability reports (PAR) and currently discloses some detail of improper payment estimates for six programs or activities, including civilian pay, commercial pay, travel pay, military retirement, military health benefits, and military pay. DOD has reported improper payment information since 2003. The Congress mandated that we consider one facet of this reporting related to DOD--travel pay. The DOD Office of the Inspector General (OIG) first reported on whether the department complied with IPIA in fiscal year 2006 and identified several significant flaws in DOD's efforts to comply with IPIA. Over the past several years, GAO has issued numerous reports that highlighted problems with DOD travel practices that resulted in wasteful spending of millions of dollars, including weak controls over first class travel, unused airline tickets, and the accuracy of travelers' claims. Conference Report 109-676 accompanying the Department of Defense Appropriations Act, 2007 included a requirement for GAO to assess the reasons why DOD is not fully in compliance with IPIA related to travel expenditures and make any needed recommendations for corrective action. In response, this initial report provides an overview of DOD's IPIA reporting for fiscal years 2003 through 2006 and a discussion of the reasons reported by the DOD OIG that DOD was not in compliance with IPIA for fiscal year 2006. To further respond to this mandate, we plan to issue a separate report later this year that will include the results of a more comprehensive review of (1) the scope and methodology DOD used in its IPIA travel-related improper payments assessment and (2) DOD's internal control over travel-related IPIA reporting disclosures.

In fiscal year 2003, DOD began improper payment reporting in its annual PAR. As required under OMB Circular No. A-11, it reported improper payments for military health benefits and military retirement. In fiscal year 2004, DOD reported that its improper payment survey did not identify any programs or activities that were susceptible to risk of significant improper payments for purposes of IPIA. As in the prior year, DOD provided additional information for military retirement and military health benefits. In fiscal year 2005, DOD reported that none of its programs or activities met OMB's criteria for risk of significant improper payments under IPIA. Its survey, however, did find military pay susceptible to significant risk of improper payments. DOD's fiscal year 2005 reporting included information on statistical sampling and corrective action plans for its military retirement, military health benefits, and military pay programs. In its most recent PAR for fiscal year 2006, DOD continued to expand its annual reporting, including information in varying levels of detail concerning improper payment estimates for civilian pay, commercial pay, travel pay, military retirement, military health benefits, and military pay. In total, DOD identified $875.5 million in improper payments. Specifically, for travel pay for fiscal year 2006, DOD estimated about $8 million in improper payments. For fiscal year 2006, the DOD OIG reported that the department did not fully comply with the requirements of IPIA and implementing OMB guidance. The DOD OIG cited, for example, an inadequate control process at the Defense Finance and Accounting Service as well as control weaknesses identified in GAO's prior assessments demonstrating that programs related to military pay, travel, property, contract payments, and automated systems may be at risk of making significant improper payments. The DOD OIG also reported on steps the department was taking to improve IPIA compliance, including the establishment of a Project Officer for Improper Payments and Recovery Auditing.

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