Defense steps up efforts to recover overpayments

The Defense Department is stepping up its efforts to collect hundreds of millions of dollars in overpayments made to contractors, an agency official said Friday. JoAnn Boutelle, director of commercial pay services at the Defense Finance and Accounting Service (DFAS), said the agency has already put in place several recommendations from the General Accounting Office to improve its debt management. "We've recently implemented a new contract debt tracking system, which flags overdue debts for transfer to the Treasury Department," Boutelle said. The Debt Management Office at DFAS handles debts over $600 that are owed by contractors who have been unresponsive to requests for payment. A June GAO report criticized DFAS for not using checklists to distinguish between real debts and ones that had already been paid, failing to promptly issue notification letters to contractors, and failing to communicate directly with contractors to resolve debts. The watchdog agency also found that DFAS did not take advantage of Treasury's centralized debt collection programs to recover debt or use the Defense Criminal Investigative Service to pursue potential fraud. "Ineffective and insufficient efforts by the office are the results of both deficiencies in and lack of adherence to policies and procedures," said the report, "Debt Collection: Defense Finance and Accounting Service Needs to Improve Collection Efforts (GAO-01-686). According to a March GAO report, overpayments to contractors frequently occur when discrepancies arise between the actual costs incurred during a project and the original cost estimate. Contracting officers must monitor project progress and take action if progress lags behind payments, adjusting liquidation rates accordingly. The contracting officer is responsible for ensuring the government receives a refund when there is a change in the project schedule or the quantity of items delivered by the contractor. GAO recommended that DFAS establish internal controls to validate debts, including holding backup documentation in each debt file, establishing time frames for sending letters to contractors and communicating directly with contractors. GAO also suggested that DFAS improve its timeliness in referring debts to Treasury and seek help from the Justice Department when debts involve illegal activities. "The improved procedures for issuing demand letters and controlling the debt cases will allow the agency to resolve the issues identified in the report," Boutelle said. DFAS has incorporated all of GAO's recommendations so far except the suggestion regarding debt referral to Treasury. DFAS said it plans to implement that recommendation by the end of August.

Overpayments to contractors are a longstanding problem for the Defense Department. From 1994 to 1999, Defense contractors returned nearly $1.2 billion in overpayments to the department. As of September 2000, contractors still owed Defense nearly $750 million.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care


When you download a report, your information may be shared with the underwriters of that document.