Defense accounting criticized

Financial Management: Controls over DOD Closed Appropriations

The Defense Department needs better oversight over so-called closed appropriations to ensure those funds are not used for purposes for which they were not originally intended, a DOD inspector general says.

According to a report released Sept. 15, the Defense Finance and Accounting Service (DFAS) didn't maintain accurate records of balances for closed appropriations — that is, those that have expired without being completely expended — and didn't effectively control adjustments to them. As a result, hundreds of millions of dollars may not have been accounted for, the inspector general said.

In 1990, Congress put a five-year limit on appropriations spending. After that period, an account is considered closed and can no longer be used. However, the law allows agency officials to make adjustments to the records of those closed accounts.

"DFAS central accounting sites either lacked standard operating procedures for maintaining closed appropriation balances or did not enforce the standard operating procedures that had been established," this week's report reads. "In the absence of effective standard operating procedures, not all of the adjustments DFAS made were included in the closed appropriation balances."

The inspector general cited an example where DFAS employees in Denver may have exceeded disbursements by more than $279 million in one case. The workers researched the discrepancy and reported "that they did not have confidence in the reliability of the payment data reported by DFAS field accounting sites in their network...."

The report is not the first time Defense officials have been criticized for their financial controls over closed accounts. DOD officials told lawmakers in 2001 that they were taking steps to make improvements, including changing systems to recognize and prohibit adjustments to canceled appropriations, and prevent proposed adjustments not enacted at the time of the original payment. But the inspector general now says those controls, if in place, are not being enforced.

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