Systems cited in DOD overpayments

Overpayments Continue and Management and Accounting Issues Remain

The Defense Department overpaid contractors some $448 million in fiscal 2001, partly because of its complex and stovepiped financial management systems, according to an audit by the General Accounting Office.

DOD has taken some actions to rectify the situation, but further moves should be taken, GAO auditors said in a report, "DOD Contract Management: Overpayments Continue and Management and Accounting Issues Remain," issued July 1.

"DOD has taken short-term actions, including increased contract audits focusing on overpayments, that are achieving immediate results," the GAO report says.

But DOD's longer-term initiatives rely on automated systems in DOD's contract management and payment processes. The success of those systems is uncertain because of the problems in functionality, costs and significant delays of DOD's contract management and payment process.

GAO examined 183 Defense contractors to assess the extent of improper payments made by DOD. GAO auditors also reviewed data from Defense Finance and Accounting Service information on overpayments.

DOD has taken some actions to contain overpayments, such as auditing major Defense contractors, evaluating control mechanisms for identifying overpayments and reconciling and closing old accounts.

As of January 2002, the Defense Contract Audit Agency had completed audits of overpayments at 46 contractors and discovered more than $22.7 million in overpayments, GAO reported. "These results illustrate what can be accomplished from programs to identify payment errors and recover erroneous payments," GAO said.

Longer-term fixes will be more difficult, however. DOD's "procedures and practices do not fully meet federal accounting standards and federal financial system requirements for the recording of accounts receivable and liabilities," the report said. "As a result, Defense managers do not have important information for effective financial management, such as ensuring that contractor debt is promptly collected."

GAO recommended that DOD comptroller and chief financial officer Dov Zakheim work with Michael Wynne, the DOD's principal deputy undersecretary for acquisition, technology and logistics, to develop and maintain more comprehensive and complete records on contractor refunds and underpayments to better measure and monitor payments.

In a written response to GAO's report, Zakheim agreed with the report's findings and said that DOD is developing performance measures for senior managers that focus on accounts receivable and overpayments.

About the Author

Christopher J. Dorobek is the co-anchor of Federal News Radio’s afternoon drive program, The Daily Debrief with Chris Dorobek and Amy Morris, and the founder, publisher and editor of the DorobekInsider.com, a leading blog for the Federal IT community.

Dorobek joined Federal News Radio in 2008 with 16 years of experience covering government issues with an emphasis on government information technology. Prior to joining Federal News Radio, Dorobek was editor-in-chief of Federal Computer Week, the leading news magazine for government IT decision-makers and the flagship of the 1105 Government Information Group portfolio of publications. As editor-in-chief, Dorobek served as a member of the senior leadership team at 1105 Government Information Group, providing daily editorial direction and management for FCW magazine, FCW.com, Government Health IT and its other editorial products.

Dorobek joined FCW in 2001 as a senior reporter and assumed increasing responsibilities, becoming managing editor and executive editor before being named editor-in-chief in 2006. Prior to joining FCW, Dorobek was a technology reporter at PlanetGov.com, one of the first online community centers for current and former government employees. He also spent five years at Government Computer News, another leading industry publication, covering a variety of federal IT-related issues.

Dorobek is a frequent speaker on issues involving the government IT industry, and has appeared as a frequent contributor to NewsChannel 8’s Federal News Today program. He began his career as a reporter at the Foster’s Daily Democrat, a daily newspaper in Dover, N.H. He is a graduate of the University of Southern California. He lives in Washington, DC.


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