At DFAS Columbus, two offices are involved in collecting contractor debts owed to the government. We found that the debt files did not contain required documentation. In one case, a debt of $17,339 was being pursued as a duplicate payment because two invoices for similar services and amounts were paid a few days apart. The Debt Management Office is not promptly sending the third demand letter. Our investigation of the 10 cases and discussions with DFAS Columbus officials indicate that the Debt Management Office is not making appropriate referrals to the Defense Criminal Investigative Service and the Department of Justice. However, in the interim, management commitment and targeted efforts are critical to ensuring that DFAS Columbus collects or resolves delinquent debts by contractors that are unresponsive to the government’s demands. Recommendations

In order to promote more effective and proactive debt collection, we recommend that the Director of DFAS, establish internal controls to ensure that the Debt Management Office validates debts, internal controls to ensure that debt files include all necessary supporting documentation,   specific time frames for issuing the third demand letter and procedures to track issuance of these letters against the established time frames, requirements that Debt Management Office personnel engage in direct communications and interactions with contractor officials and others to actively identify and resolve issues related to debts,   specific requirements and time frames for referring appropriate debts to the Treasury’s centralized debt collection programs, and   procedures for utilizing the Defense Criminal Investigative Service and the Department of Justice when debts could involve criminal activities. At that time, we will send copies of this report to the DOD Under Secretary of Defense (Comptroller), the Director of the Defense Finance and Accounting Service, and interested congressional committees.
Why GAO Did This Study

Improper payments are a long-standing problem throughout the government. The Department of Defense (DOD) has been overpaying contractors by hundreds of millions of dollars each year. For fiscal years 1994 through 1999, DOD contractors returned nearly $1.2 billion that the Defense Finance and Accounting Service (DFAS) had mistakenly paid them as a result of errors, such as paying the same invoice twice or misreading invoice amounts. Sometimes, however, the contractors do not promptly respond to government demands that the overpayments be returned. The Debt Management Office was created at the DFAS Columbus Center to deal with contractors that are unresponsive to the government's demands that overpayments be returned.

What GAO Found

GAO found that the Debt Management Office at DFAS Columbus is not effectively and proactively pursuing collections of debts assigned to it. Specifically, the Office is not (1) taking appropriate action to establish the validity of the debts that it receives for collection, (2) promptly issuing letters demanding payment, (3) actively communicating with contractors or resolving issues related to the debts, and (4) effectively using the Department of the Treasury's centralized debt collection programs to maximize collections and 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.