Increased Criticism on DoD’s Monitoring of Improper Payments

By: Kelly Lynch and Gabriella D’Agosto

On May 13, 2013, the U.S. Government Accountability Office (GAO) issued DoD Financial Management: Significant Improvements Needed in Efforts to Address Improper Payment Requirements, a report regarding the Department of Defense’s (DoD) implementation of key provisions of the Improper Payments Information Act of 2002 (IPIA), the Improper Payments Elimination and Recovery Act of 2010, and Office of Management and Budget (OMB) OMB A-123 requirements. The GAO found that DoD’s improper payment estimates as reported in its FY2011 Agency Financial Report were unreliable and statistically invalid. This review follows a 2009 report by the GAO identifying that significant improvements were required in the DoD’s efforts to address the improper payment requirements of the IPIA and requirements of the Recovery Auditing Act.

For fiscal year 2011, the DoD reported over $1.1 billion in improper payments. Improper payments include both payments that should not have been made and payments made in an incorrect amount. Specifically of note to contractors was the $224.6 million of improper payments for Defense Finance and Accounting Service (DFAS) Commercial Pay, which represent payments by DFAS to contractors. Based upon the results of the GAO review, the amount of improper payments for DFAS could be understated as a result of the sampling methodology used by DoD.

The 2013 report included 10 recommendations to improve the DoD’s processes around estimating, identifying, and reducing improper payments and implementing recovery audits The GAO report recommended, with DoD concurrence, that improper payment recovery audit procedures be implemented to identify improper payments. In the event that DoD overpayments are identified during recovery audits, they may result in interest being assessed on overpayments made by a contractor. Since the report calls for increased scrutiny on DoD payments, contractors should continue to focus on the timely identification and repayment of overpayments.

Click here for the full GAO report and recommendations with comments from the DoD.

The views expressed in this article are those of the authors and do not necessarily reflect the position or policy of Berkeley Research Group, LLC.