Department of Defense:

Improving the DOD Payment Process, Using Recovery Auditing and Changing the Prompt Payment Act

T-NSIAD-99-193: Published: Jun 16, 1999. Publicly Released: Jun 16, 1999.

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Pursuant to a congressional request, GAO discussed the Department of Defense's (DOD) payment problems and how recovery auditing is being used to identify and recover overpayments.

GAO noted that: (1) the need for DOD to achieve effective control over its payment process remains an imperative; (2) if DOD does not, it will continue to risk erroneously paying contractors hundreds of millions of dollars and perpetuating other financial management and accounting control problems; (3) further, improving the efficiency of the payment process could save millions of dollars annually in reduced processing costs; (4) while DOD is taking steps to improve its payment process and controls, it will likely take many years before DOD gets its pay ment problems under control; (5) the focus of DOD's actions needs to be on making better use of technology to improve and integrate its payment systems and to streamline and simplify its payment requirements; (6) these actions will, however, require sustained top-management efforts; (7) DOD also needs to concetrate on reducing overpayments and, recognizing that some overpayments are inevitable, adopt best practices to quickly identify and recover them; (8) GAO believes that recovery auditing offers a low-risk opportunity to achieve both these goals, and GAO is supportive of the recently introduced legislation to require federal agencies to use recovery auditing; (9) contractors are not required to inform the government when they have been overpaid; (10) contractors should be required to notify the government of overpayments when they become aware of them; (11) this requirement should not impose a significant burden on the contractor; (12) once notified, government contracting personnel should immediately ask contractors to refund the overpayment; (13) it may be time to raise the minimum dollar threshold required by the Prompt Payment Act; (14) the Defense Finance and Accounting Service pays interest amounts to that are less than it costs them to process the checks; and (15) however, raising the threshold should be part of an overall assessment of the efficiency pf the payment process.

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