Pentagon Still Doesn’t Have a Grasp on Improper Payments, Auditors Find

Estimate of $1.1 billion 'not statistically valid,' says GAO.

The Defense Department is falling down in its efforts to comply with laws requiring a crackdown on improper payments, producing estimates that are “neither reliable nor statistically valid” due to long-standing weaknesses in financial reporting, an audit found.

The Pentagon’s reported $1.1 billion in improper payments to contractors and vendors for fiscal 2011 is questionable, according to a Government Accountability Office report released Thursday, in part because managers did not systematically identify the programs most vulnerable to bad payouts as required under the 2002 Improper Payments Information Act and the 2010 Improper Payments Elimination and Recovery Act.

“By not performing a risk assessment as required by IPERA, DoD did not reap the associated benefits, including the ability to better identify root causes and develop a comprehensive and effective corrective action plan to reduce improper payments, the audit said. “DoD’s lack of a detailed and effective corrective action plan also made it difficult for department officials to monitor and measure the extent of progress made to remediate causes, hold individuals responsible for implementing corrective actions, or communicate to DoD leadership and other key stakeholders the extent of the department’s progress in remediating the causes of improper payments.”

Specifically, GAO said, the department failed to implement “key quality assurance procedures,” such as reconciliations, to validate the completeness and accuracy of the populations used to estimate improper payments. Its planners did not develop appropriate sampling methodologies for estimating such payments or create a statistical estimate for payments from its largest program -- the Defense Finance and Accounting Service’s commercial pay. And it did not maintain key documentation supporting its reported improper payment estimates.

GAO made 10 recommendations for Defense to help it identify root causes of improper payments and to perform recovery audits in compliance with criteria in the two laws and in guidance from the Office of Management and Budget.

On reviewing a draft of the report, Pentagon planners largely accepted the recommendations.

The push to curb improper payments governmentwide -- including at such agencies as the Centers for Medicare and Medicaid Services and the Internal Revenue Service -- has been a key focus of both the Obama administration and congressional committees as essential to deficit reduction.

(Image via Frontpage/