Summary
The Department of Defense (DOD) is required, as are other federal executive agencies, to report improper payment information under the Improper Payments Information Act of 2002 (IPIA) and recovery auditing information under section 831 of the National Defense Authorization Act for Fiscal Year 2002, commonly known as the Recovery Auditing Act. The DOD Office of Inspector General has previously reported deficiencies at DOD related to these acts and GAO's prior work on DOD's reporting of its fiscal year 2006 travel improper payments estimate also identified shortcomings. Because of these and other long-standing weaknesses, the subcommittee asked GAO to examine DOD's fiscal year 2007 improper payment and recovery audit reporting to determine whether adequate processes existed to address both statutory requirements. To complete this work, GAO reviewed DOD's annual reports, conducted site visits, and met with cognizant DOD officials.
DOD's process for addressing IPIA requirements had significant weaknesses. For example, as shown in the figure below, DOD did not conduct risk assessments for all of its payment activities as $322 billion in agency outlays were excluded from the amounts assessed. For those payment activities reviewed, DOD assessed the risk of improper payments occurring as low despite the department's long-standing financial management weaknesses and could not provide documentation supporting the methodologies used and the final risk level. GAO also found that DOD did not estimate improper payments for commercial pay under IPIA requirements, its largest payment activity. Further, the Office of the Comptroller's oversight and monitoring activities were inadequate because they did not include verifying the accuracy and completeness of the information in the agency's financial report (AFR). In addition to not estimating improper payments for commercial pay, DOD's processes for identifying and recovering commercial overpayments were inadequate, because they were not designed for this purpose as required by the Recovery Auditing Act. For example, GAO found that contract closeout processes were designed to ensure that applicable administrative actions had been completed (e.g., all classified documents were disposed of) and not to specifically identify contract overpayments. DOD also lacked detailed guidance on how to conduct a recovery audit program and did not fully address the recovery auditing reporting requirements in its AFR, such as disclosing the total cost associated with its recovery auditing activities. The Office of the Comptroller also did not verify the accuracy and completeness of the recovery audit information in the AFR, which resulted in $20.5 billion being excluded from its universe of commercial payments. DOD stated that its processes were sufficient to address the requirements of both acts, but since then has taken some actions, such as updating relevant guidance. Until these critical deficiencies are addressed, DOD will be unable to determine the extent to which improper payments exist and are subsequently recovered.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director:
Team:
Phone:
Kay L. Daly
Government Accountability Office: Financial Management and Assurance
(202) 512-9312
Recommendations for Executive Action
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for IPIA, the Secretary of Defense should direct the DOD Comptroller to establish and implement a systematic approach, as a part of the risk assessment process, to ensure all programs and activities are reviewed to determine susceptibility to improper payments.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for IPIA, the Secretary of Defense should direct the DOD Comptroller to develop and implement detailed guidance for conducting risk assessments, including the steps to determine if risk exists, what those risks are, and the potential or actual impact of those risks on program operations.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for IPIA, the Secretary of Defense should direct the DOD Comptroller to require DOD agencies and the military services to document the risk assessment methodology used, including the risk factors considered, and the rationale for assessing the risk level for the payment activity.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for IPIA, the Secretary of Defense should direct the DOD Comptroller to develop and implement a statistically valid methodology to estimate and report commercial improper payments (contract and vendor over- and underpayments). This methodology should include all payment errors regardless of the source of the error--DOD, contractors, or vendors--as required by IPIA.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for IPIA, the Secretary of Defense should direct the DOD Comptroller to identify and fully disclose the root causes of improper payments annually in the AFR.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for IPIA, the Secretary of Defense should direct the DOD Comptroller to identify and fully disclose the corrective actions, and monitor the corrective actions to ensure that they address applicable root causes.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for IPIA, the Secretary of Defense should direct the DOD Comptroller to perform oversight and monitoring activities to ensure the accuracy and completeness of the improper payment data submitted by the DOD agencies and the military services for inclusion in the AFR.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for the Recovery Auditing Act, the Secretary of Defense should direct the DOD Comptroller to establish and implement processes specifically designed to identify and recover commercial overpayments.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for the Recovery Auditing Act, the Secretary of Defense should direct the DOD Comptroller to develop and implement detailed guidance to assist DOD agencies and the military services in effectively carrying out recovery audits and activities, including the payment and accounting systems to be reviewed, the frequency of these reviews, applicable roles and responsibilities, and reporting requirements.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for the Recovery Auditing Act, the Secretary of Defense should direct the DOD Comptroller to establish and implement a process to identify costs related to the department's recovery auditing program, including costs for employees' salaries.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for the Recovery Auditing Act, the Secretary of Defense should direct the DOD Comptroller to establish and implement a process to identify and report vendor overpayments and the associated recovered amounts.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for the Recovery Auditing Act, the Secretary of Defense should direct the DOD Comptroller to maintain documentation to support the amounts reported in the AFR to allow for independent evaluation of this information.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve DOD's efforts to address improper payment and recovery auditing requirements for the Recovery Auditing Act, the Secretary of Defense should direct the DOD Comptroller to perform oversight and monitoring activities to ensure the accuracy and completeness of the recovery auditing data submitted by the DOD agencies and the military services for inclusion in the AFR. Also, document the roles and responsibilities of the Recovery Auditing Project Officer.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
