Improper Payment Acts - DoD's Implementation

Last week we discussed GSA's (General Services Administration) progress toward compliance with the Improper Payments Acts citing a report by the Agency's Office of Inspector General that identified deficiencies in reporting and evaluating improper payments (see Improper Payment Acts - Government Efforts to Reduce Improper Payments). The Acts require federal agencies to review their programs and identify those that are susceptible to significant improper payments.

The Department of Defense Office of Inspector General (DoD-IG) recently issued their report on DoD's compliance with the Improper Payment Acts (see The DoD Did Not Comply With the Improper Payment Elimination and Recovery Act in FY 2016). As the report title implies, the DoD-IG found significant room for improvement in DoD's compliance with the statutory requirements of the Acts.

The DoD identified 10 programs that are at high risk for improper payments. Among the 10 are four at-risk areas affecting payments to contractors. These are,

1. Defense Finance and Accounting Service (DFAS) Commercial Pay - This is where most DoD contractors send their public vouchers and progress payments.
2. U.S. Army Corps of Engineers Commercial Pay
3. Navy Enterprise Resource Planning Commercial Pay
4. Navy Commercial Bill Pay - Naples

DoD organizations are required to implement comprehensive systems of internal controls that provides reasonable assurance that programs are operating as intended and to evaluate the effectiveness of the controls. DoD did not perform risk assessments in some cases nor did it publish estimates that were statistically valid, nor did ity publish corrective actions with planned or actual completion dates.

The DFAS Commercial Pay is one of the programs that report improper payments and the testing that was performed for this system excluded billions of dollars worth of transactions. About $3 billion was excluded because DoD inappropriately believed that since the costs were being audited by DCAA, it was of low risk.

The DoD-IG made a number of recommendations which were essentially concurred to by DoD. As a result, some defense contractors may see increased oversight by the Government in its increased efforts to reduce (or eliminate, if possible) improper payments.