DOD Financial Management:

Actions Needed to Address Deficiencies in Controls over Army Active Duty Military Payroll

GAO-13-28: Published: Dec 12, 2012. Publicly Released: Dec 12, 2012.

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Asif A. Khan
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khana@gao.gov

 

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What GAO Found

GAO identified deficiencies in the design of key control procedures relied on by the Army and the Defense Finance and Accounting Service-Indianapolis (DFAS-IN) to detect errors in payroll disbursements to active duty Army military personnel. Specifically, GAO found that the Army's procedures for reviewing Unit Commander Finance Reports (UCFR) do not (1) provide for monitoring of required UCFR reviews to better assure detection of payroll errors, (2) require reporting on completed UCFR reviews in all cases, and (3) clearly establish time frames for completing and reporting on UCFR reviews. GAO's analysis of DFAS data on military pay debts and Army investigations of potential fraud completed over the past 2 years identified numerous instances of the effect of errors or irregularities in Army active duty payroll disbursements that went undetected for lengthy periods of time, including some that were not detected for up to 2 years or until the soldier left the Army. For example:

  • A soldier who separated from the Army in 2009 continued to receive active duty pay totaling about $185,000 until 2011.
  • A soldier who was absent without leave from January 2010 to September 2011 received military pay of $33,268 to which she was not entitled.
  • A soldier under investigation for possible fraud allegedly received over $34,000 in paratrooper and language proficiency pay but did not have a documented record of jumps performed or up-to-date proficiency certifications.

GAO's analysis determined that the Army could reduce its risk of lengthy delays in detecting and correcting pay errors with more stringent UCFR monitoring and reporting requirements.

GAO also found that DFAS and the Army have procedures and metrics in place that focus on the timeliness of manual processing and payroll adjustments for error corrections. However, they do not have procedures and metrics to enable them to gather data on active duty pay errors that were related to causes other than timeliness, such as over- and underpayments, data entry errors, and unauthorized payments. Further, the design of existing Defense Joint Military Pay System-Active Component and DFAS-IN Case Management System procedures for transaction processing and error correction did not provide for monitoring to capture data on all types of pay errors and their causes that would be useful in identifying the extent to which there are any additional systemic payroll control weaknesses. For example, an Army National Guard colonel deployed on active duty to Afghanistan reported that he experienced financial hardship when his military pay was stopped for 1-1/2 months. The absence of data on the extent and causes of all types of Army active duty military payroll errors impairs the Army's ability to identify and address any adverse trends that may indicate the existence of other systemic control weaknesses. Overall, the control deficiencies that GAO identified increase the risk that the nearly $47 billion in reported fiscal year 2011 Army active duty military payroll includes Army servicemembers who received pay to which they were not entitled and others who did not receive the full pay they were due. Further, to the extent that errors in Army active duty pay are not identified and addressed in a timely manner, they can have a negative effect on soldier welfare and, ultimately, could erode soldiers' focus on their Army mission.

Why GAO Did This Study

In March 2012, GAO reported on challenges that DOD and the Army face in achieving audit readiness with respect to the over $45 billion in reported fiscal year 2010 Army active duty military payroll disbursements. In performing that work, GAO identified indications of possible weaknesses in selected processes, systems, and controls relied on to reasonably assure the validity and accuracy of reported Army active duty military payroll that were beyond the scope of that audit. GAO subsequently completed work on those issues and is presenting the results in this report. GAO (1) assessed the design of key controls for payroll accuracy and (2) determined the extent to which the Army and DFAS-IN have monitoring controls to identify and address any systemic weaknesses. GAO compared selected Army and DFAS-IN processes, systems, and controls for assuring payroll accuracy to applicable internal control standards and to applicable provisions of law, regulations, and policies and procedures. GAO also interviewed officials and examined related data and information.

What GAO Recommends

GAO made five recommendations to strengthen Army and DFAS monitoring and reporting controls over Army active duty military payroll accuracy. DOD partially concurred with all five recommendations, stating that it concurs fully with the goal of improving military pay but additional testing is needed to identify any cost-effective corrective actions. GAO continues to believe that its recommendations for corrective action are appropriate, as discussed more fully in the report.

For more information, contact Asif Khan at (202) 512-9869 or khana@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Army has not revised AR 37-104-4 to incorporate our recommendation. DOD and Army officials stated that the Army and DFAS performed an analysis of the effectiveness of the Unit Commander Finance Report (UCFR) in preventing late transactions to change pay. Army stated that its analysis indicated that the certification of the UCFR would appear to be of minimal value as it would only impact one third of one percent of the entitlement transactions processed. It is Army's position that the UCFR is an effective tool as a snapshot of a soldier's pay, but it is not comprehensive enough to provide the level of detail to manage many entitlements. The Army intends to wait on the implementation of the Integrated Personnel Pay System - Army (IPPS-A) in 2020 to address any issues, rather than develop periodic monitoring of UCFR reviews or revising AR-37-104-4. Based on Army's position, we consider this recommendation closed not implemented.

    Recommendation: To strengthen the design of controls over active duty Army military payroll, and to assure the effectiveness of the UCFR process as a compensating control for confirming the accuracy of its military pay, the Secretary of Defense should direct the Secretary of the Army to revise AR 37-104-4, Military Pay and Allowances Policy, to establish a requirement for periodic monitoring of the effectiveness of unit commander UCFR reviews.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: Army officials told us that the Army and Defense Finance and Accounting Service (DFAS) performed an analysis of the effectiveness of the Unit Commander Finance Report (UCFR) in preventing late transactions for updating pay. The Army stated that its analysis showed that units certifying and returning UCFRs to the Finance Office did not increase timely corrective actions being taken to a soldier's pay. Based on this analysis, the Army stated that creating a mandatory process of requiring commanders to certify and return the UCFR (even when there are no errors) imposes additional administrative requirements and associated costs on the unit, the Finance Office, and DFAS. The Army further stated that, based on the sample taken, most units are already certifying UCFRs and returning them to Finance, with little impact on Soldiers' pay. The Army stated that it intends to rely on existing controls over pay transactions and the implementation of the Integrated Personnel and Pay System-Army (IPPS-A) targeted for August 2020 to address any issues, rather than revise AR-37-104-4 to require certification of the UCFR and its return to the finance office. The Army stated that the development and fielding of IPPS-A offers opportunities for reducing errors and manual inputs, while providing improved transaction timeliness and pay accuracy. Based on Army's position, we consider this recommendation closed not implemented.

    Recommendation: To strengthen the design of controls over active duty Army military payroll, and to assure the effectiveness of the UCFR process as a compensating control for confirming the accuracy of its military pay, the Secretary of Defense should direct the Secretary of the Army to revise AR 37-104-4, Military Pay and Allowances Policy, to require unit commanders to review and submit documentation showing completion of all monthly UCFR reviews.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: The Army stated that its regulations require units to take immediate action when an error is discovered during a review of an Unit Commander Finance Report (UCFR). According to the Army, specifying a timeframe for the review and submission of UCFRs, such as 10 days, would require the development of additional controls and monitoring procedures and create exceptions/waivers for those units deployed or on training exercises. As a result, the Army intends to rely on existing primary controls over pay transactions and the targeted implementation of the Integrated Personnel and Pay System-Army (IPPS-A) in August 2020 to address any issues, rather than revise AR-37-104-4. Based on the Army's position, we consider this recommendation closed not implemented.

    Recommendation: To strengthen the design of controls over active duty Army military payroll, and to assure the effectiveness of the UCFR process as a compensating control for confirming the accuracy of its military pay, the Secretary of Defense should direct the Secretary of the Army to revise AR 37-104-4, Military Pay and Allowances Policy, to specify the time frame for submitting UCFRs, such as no later than the 10th of the month.

    Agency Affected: Department of Defense

  4. Status: Closed - Not Implemented

    Comments: DFAS stated that it conducted a gap analysis for two installations (Ft. Carson and Ft. Gordon). The analysis concluded that most errors that occurred were due to units' late submissions of source personnel documents. The Army stated that its position that the key metric for military pay accuracy is the timeliness of processing of pay impacting transactions. The Army also stated that it intends to rely on the implementation of the Integrated Personnel and Pay System-Army (IPPS-A) in 2020 to address pay transaction timeliness and address any other identified issues rather than require DFAS-Indianapolis to develop additional criteria and metrics within the current systems environment to measure all types of conditions affecting accuracy. Based on Army's position, we consider this recommendation closed not implemented.

    Recommendation: To strengthen the design of controls over active duty Army military payroll, and to provide a means for monitoring the overall accuracy of the Army's military payroll, the Secretary of Defense should direct the DOD Comptroller to require DFAS-IN to develop criteria and establish a comprehensive metric to capture and measure all types of pay errors affecting accuracy.

    Agency Affected: Department of Defense

  5. Status: Closed - Not Implemented

    Comments: Army officials stated that it intends to rely on its current transaction timeliness metrics, pre-payment statistical sampling, Improper Payment Elimination and Reporting Act (IPERA) reporting, and eventually implementation of the Integrated Personnel and Pay System - Army (IPPS-A) to address the issues regarding completeness, accuracy, and validity of military pay. The Army's expects IPPS-A to be fully implemented in 2020. Based on Army's position, we consider this recommendation closed not implemented.

    Recommendation: To strengthen the design of controls over active duty Army military payroll, and to provide a means for monitoring the overall accuracy of the Army's military payroll, the Secretary of Defense should direct the Department of Defense (DOD) Comptroller to require DFAS-IN to establish an interim mechanism at DFAS-IN for identifying and analyzing the extent and causes of all types of military payroll errors processed by Defense Military Pay Offices (DMPOs), Army Finance Offices, Defense Joint Military Pay System-Active Component (DJMS-AC), and Case Management System (CMS) to address any systemic control weaknesses.

    Agency Affected: Department of Defense

 

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