Scope and Methodology

To measure DOD’s progress in resolving problem disbursements and evaluate DOD’s criteria for identifying and reporting on disbursements that could not be properly matched to obligations, we met with the DFAS officials responsible for identifying the universe of transactions to discuss and assess how they determined if all disbursements not properly matched with obligations were included and correctly reported. DOD Has Made Some Progress in Reducing Problem Disbursement Transactions

DOD reported that it had reduced its problem disbursements from the benchmark figure of $19.1 billion to $9.7 billion—a $9.4 billion reduction—as of June 30, 1994. We found that $3.6 billion of the reported reduction was for problem disbursements that the Navy reclassified as negative ULOs—which still must be resolved. DOD Team Did Not Initially Identify the Full Extent of Disbursement Problems

Compounding DOD’s disbursement problem is the fact that the June 1993 benchmark, which is used to measure and report DOD’s progress, did not include all types of problem transactions. Using the revised criteria, our analysis showed that DOD’s records contained at least $24.8 billion in problem disbursement transactions as of June 30, 1994. Therefore, to achieve this purpose, DOD would need to properly match disbursements with obligations associated with those accounts. To do this, DOD must maintain current and accurate records of disbursements attributable to both the canceled “M” accounts and any subsequent canceled accounts in order to justify using current appropriations to make payments attributable to these previously closed accounts. In March 1994, the DOD Comptroller issued guidance aimed at reducing disbursements made in excess of recorded obligations. However, the disbursement problem will not be adequately resolved until (1) weaknesses in control procedures that allow problem disbursements to occur are corrected and (2) improvements are made to DOD’s contract pay and accounting systems.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) efforts to properly match disbursements with corresponding obligations, focusing on: (1) DOD progress in resolving its disbursement problems; (2) DOD criteria for identifying and reporting improperly matched disbursements; and (3) systemic control weaknesses that prevent DOD from resolving disbursement problems.

What GAO Found

GAO found that: (1) as of June 30, 1994, DOD reduced its $19.1 billion of reported problem disbursements by $9.4 billion; (2) the $3.6 billion that DOD reclassified as negative unliquidated obligations still need to be resolved; (3) the DOD $19.1-billion benchmark for problem disbursements was understated because DOD criteria for identifying and reporting disbursements did not include all types of problem disbursements; (4) as of June 30, 1994, DOD records contained at least $24.8 billion in problem disbursements, including $5 billion in unreconciled "M" account balances; (5) DOD plans to revise its benchmark figure to reflect its disbursement problems more accurately, but it has not set a date for reporting the revised data; (6) DOD needs to maintain current and accurate disbursement records to justify using current appropriations to pay for obligations from closed accounts; (7) in March 1994, the DOD Inspector General issued guidance to stop DOD from disbursing funds in excess of recorded obligations and account balances; (8) DOD initiatives to resolve its disbursement problems include identifying the extent of the problem and improving its contract pay and accounting systems; and (9) DOD needs to emphasize and enforce sound accounting principles and internal controls to properly match disbursements with obligations.