There may be cases however, where contractors are financially strapped and cannot repay the overpayment right away. If the overpayment involves a DoD contract, there may be some relief. The DoD Financial Management Regulation, Volume 10, Chapter 18 allows for a series of installment payments under certain circumstances. When a debtor to the U.S. Government can establish sufficient justification, a series of installment payments may be approved by DFAS (Defense Finance and Accounting Service) in amounts that will ensure liquidation of the debt within a reasonable time frame.
Prior to approving the installment agreement, DFAS will ask the contracting officer to perform a financial capability analysis, taking into consideration the proposed installment payments to ensure that the contractor has the financial capability to make the installment payments. In addition to determining the contractor's ability to repay, the contracting officer will also determine
- what the contractor did with the overpayment and
- why it is not currently in a position to return the overpayment to the Government.
Needless to say, contractors that embark down this road must have strong rationale to support its case and must expect and be prepared to have auditors poking around in their financials. Tomorrow, we will look at some of the specific things that the Government will request when performing its review.
Go to Part 2
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