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IG Says the Pentagon's Estimates of Improper Payments Are Unreliable

Audit notes that too few expenditures were reviewed.

Top financial managers at the Defense Department made a solid effort to comply with the law designed to curb improper payments, an inspector general found, but the IG said estimated error rates are unreliable because too few expenditures were reviewed.

In an audit released Tuesday, the Pentagon watchdog said the Defense Department comptroller completed an annual fiscal 2014 financial report with estimates of wrongful payments and corrective actions as required, but relied too much on a sampling of payments. In the area of travel, the Pentagon failed to meet error reduction targets.

The Defense Health Agency, for instance, in sampling TRICARE claims payments, “excluded a high volume of contract payments from sampling because they were below a certain dollar threshold, which made the result of the improper payment estimate unreliable,” the audit said. Office of Management and Budget “guidance requires activities to obtain an estimate of improper payments in programs susceptible to significant improper payments. The guidance also states that the improper payment rate is calculated by dividing the total improper amount by total program payments.”

The areas deemed susceptible to improper payments include travel and health as well as civilian, military and commercial programs.

To improve precision in the estimates, the inspector general said the comptroller should coordinate with the OMB director to “review the DOD travel pay program and determine reauthorization proposals or proposed statutory changes” in order to comply with the 2002 and 2010 improper payments acts. The IG also recommended that the Navy’s assistant secretary for financial management evaluate the service’s commands for risk of improper payments before excluding them from improper payment testing. Finally, the watchdog advised that the director of the Defense Health Agency subject all expenditures to improper payment sampling for those contracts identified as at risk.

The Pentagon agreed with the recommendation for the Defense Health Agency, but did not concur on the other points. The IG said the department’s response in some cases did not address the specifics of the recommendations.

(Image via gopixa/