Instead, DOD has recorded billions of  dollars in suspense and other accounts that were set up to temporarily hold  disbursements and collections until the proper appropriation account  could be identified. It is important that DOD charge transactions to appropriation accounts  promptly and accurately because these accounts provide the department  with legal authority to incur and pay obligations for various kinds of goods  and services. DOD has hundreds of current and closed appropriation  accounts that were authorized by law over the years. In some ways,  appropriation accounts are similar to an individual’s checking account— the funds available in DOD’s appropriation accounts must be reduced or  increased as the department disburses money or receives collections that it  is authorized to retain. Just as an individual who maintains multiple  checking accounts must be sure that transactions are recorded to the  proper account, DOD also must ensure that the proper appropriation  account is charged or credited for each specific disbursement and receipt. Therefore, DOD management requested and received statutory  authority to write off these problem transactions. The legislation specified that the write-offs  include only suspense account disbursement and collection  transactions that occurred prior to March 1, 2001, and that were  recorded in suspense accounts F3875, F3880, or F3885; include only check payment differences identified by Treasury for  checks issued prior to October 31, 1998;  be supported by a written determination from the Secretary of Defense  that the documentation necessary for correct recording of the  transactions could not be located and that further research attempts  were not in the best interest of the government;  be processed within 30 days of the Secretary’s written determination;   be accomplished by December 2, 2004. Actual Amount of Write-offs Cannot Be Calculated

DOD officials estimated the value of the suspense account and check  payment write-offs to be an absolute amount of nearly $35 billion, or a net  amount of $629 million. However, neither of these amounts accurately  represented the total value of all the individual transactions that DOD  could not correctly record to appropriations and, therefore, left in suspense  for years. Over  time, amounts might even have been netted more than once. Check Payment Differences Write-off Process

Although DOD did not establish a multilayered review process for  check payment differences, the department did comply with legislative  requirements for the write-offs with one exception—the Secretary of  Defense did not provide the required written determination prior to  Treasury’s recording of the write-off amounts. DOD will never identify which, if any, of the aged underlying transactions in  suspense would have resulted in Antideficiency Act violations had they  been correctly charged. The suspense account transactions had already  been charged to the federal surplus or deficit in the specific year that DOD  reported the related collection and disbursement transactions to Treasury. Current DOD Policies Are Not Being Enforced

We found that, even though DOD policies require that most suspense  account transactions and check differences be resolved within 60 days,  DFAS centers were reporting an absolute value of $1.3 billion in aged  suspense account amounts and an absolute value of $39 million in aged  check differences as of December 31, 2004. Until DOD  enforces its own guidance for reconciling and resolving its suspense  accounts and check differences regularly, balances will likely grow. Unless DOD  complies with existing laws and its own regulations, its appropriation  accounts will remain unreliable and another costly write-off process may  eventually be required. Objectives, Scope, and Methodology

As required by the conference report (H.R. Conf. Rep. No. L. No. Our objectives were to determine (1) what amount DOD wrote  off using the legislative authority, (2) whether DOD had effective  procedures and controls to provide reasonable assurance that amounts  were written off in accordance with the legislation, (3) how the write-offs  affected Treasury and DOD financial reports, and (4) what aged DOD  suspense account balances and check payment differences remain after the  write-offs have been accomplished.
Why GAO Did This Study

Over the years, the Department of Defense (DOD) has recorded billions of dollars of disbursements and collections in suspense accounts because the proper appropriation accounts could not be identified and charged. DOD has also been unable to resolve discrepancies between its and Treasury's records of checks issued by DOD. Because documentation that would allow for resolution of these payment recording problems could not be found after so many years, DOD requested and received legislative authority to write off certain aged suspense transactions and check payment differences. The conference report (H.R. Conf. Rep. No. 107-772) that accompanied the legislation (Pub. L. No. 107-314) required GAO to review and report on DOD's use of this write-off authority.

What GAO Found

After decades of financial management and accounting weaknesses, information related to aged disbursement and collection activity was so inadequate that DOD was unable to determine the true value of the write-offs. While DOD records show that an absolute value of $35 billion or a net value of $629 million of suspense amounts and check payment differences were written off, the reported amounts are not reliable. Many of the write-offs represented transactions that had already been netted together (i.e., positive amounts offsetting negative amounts) at lower level accounting sites before they were recorded in the suspense accounts. This netting or summarizing of transactions misstated the total value of the write-offs and made it impossible for DOD to locate the support needed to identify what appropriations may have been under- or overcharged or determine whether individual transactions were valid. In particular, DOD could not determine whether any of the write-off amounts, had they been charged to the proper appropriation, would have caused an Antideficiency Act violation. It is important that DOD accurately and promptly charge transactions to appropriation accounts since these accounts provide the department with legal authority to incur and pay obligations for goods or services. DOD has hundreds of current and closed appropriation accounts that were authorized by law over the years. Similar to a checking account, the funds available in DOD's appropriation accounts must be reduced or increased as the department spends money or receives collections that it is authorized to retain for its own use. Just as an individual who maintains multiple checking accounts must be sure that transactions are recorded to the proper account, DOD also must ensure that the proper appropriation account is charged or credited for each specific disbursement and collection. Our review found that DOD's guidance and processes developed to ensure compliance with the legislation provided reasonable assurance that amounts were written off properly except that check payment differences did not have the required written certification. The write-off process did not correct underlying records and significant DOD resources were needed to ensure that write-off amounts were properly identified and handled. Also, using staff resources to process old transactions resulted in fewer staff to research and clear current problems. At December 31, 2004, DOD reports showed that after the write-offs, more than $1.3 billion (absolute value) of suspense amounts and $39 million of check differences remained uncleared for more than 60 days. However, DOD has acknowledged that its suspense reports are incomplete and inaccurate. Until DOD complies with existing laws and enforces its own guidance for reconciling, reporting, and resolving amounts in suspense and check differences on a regular basis, the buildup of current balances will likely continue, the department's appropriation accounts will remain unreliable, and another costly write-off process may eventually be required.