	Background

For years, auditors have reported long-standing weaknesses in DOD’s  ability to promptly pay its bills and accurately account for and record its  disbursements. Cited Metrics Were Generally Based on Improved Definitions and Methodologies

In general, the definitions and methodologies for gathering the data used by  DOD Comptroller officials to calculate the cited improvement percentages  at the ending measurement date were either consistent with or better than  those used at the beginning measurement date or for prior reporting on  payment recording errors, commercial payment backlogs, and travel card  payment delinquencies. However, recalculation of the metrics after correcting for  these factors still showed positive—although less dramatic—improvement  trends. Our recalculation shows an overall 46  percent reduction in payment recording errors between October 2000 and  October 2001 rather than the 57 percent reduction reported by the  Comptroller; however, the reductions are still significant and the trend is  still overwhelmingly positive. Travel Card Delinquencies

For the travel card metrics, consistent definitions and methodologies were  used to gather the data and calculate the improvement percentages cited by  the DOD Comptroller for January 2001 and December 2001. For individual and centrally billed travel card delinquencies,  we were able to obtain independent verification from a source outside  DOD that supported the Comptroller’s metrics. Although we could not audit the reported metrics for all of the measured  areas, we verified that DFAS and other DOD organizations have made  numerous policy, procedure, and systems changes that would support an  overall trend toward improved performance. As a result of these and other actions, DOD has been able to sustain  reduced delinquency rates between October 2002 and December 2002, as  illustrated in figure 5 below. While some of the  cited metrics could be effective indicators of short-term financial  management progress, assuming they could be verified, others are not  necessarily good indicators, particularly if taken alone. However, improved delinquency rates do not necessarily indicate improved  financial management of centrally billed travel cards or commercial  payments. In fact, by placing too much emphasis on paying bills promptly,  DOD staff may be tempted to shortcut important internal control  mechanisms that are meant to ensure that the goods and services being  paid for were properly authorized and actually received. Recommendations

DOD systems do not provide the transaction-level support needed to verify  the accuracy and completeness of many of its selected metrics. Specifically, our objectives were to determine  whether (1) the cited performance measures were applied and calculated  in a manner consistent with previous reporting on payment delinquencies  and recording errors, (2) the cited improvement data were properly  supported and represent real improvements in performance, and (3) the  metrics are effective indicators of short-term financial management  progress.
Why GAO Did This Study

The Department of Defense (DOD) has historically been unable to accurately account for and record its disbursements. In March 2002, the DOD Comptroller cited metrics that showed dramatic reductions in payment recording errors (57 percent between October 2000 and October 2001), backlogs of commercial payments (41 percent between April and October 2001), and travel card payment delinquencies (34 percent for those individually billed and 86 percent for those centrally billed between January and December 2001). As a result, the Congress asked us to determine whether the cited reductions were (1) calculated using consistent definitions and methodologies, (2) properly supported, and (3) effective indicators of short-term financial management progress.

What GAO Found

The DOD Comptroller's metrics showing significant reductions in payment recording errors and in commercial and travel card payment delinquencies were, in general, based on definitions and methodologies that were either consistent with or better than those used for prior reporting on these issues. Although the methodology used to calculate two of the cited measures resulted in overstating the rates of improvement, our recalculation after correcting for the methodology errors still showed positive--although less dramatic--improvement trends. While we were able to verify the reductions in travel card delinquencies because the underlying data were available from an independent source, we could not verify the accuracy of the specific improvement percentages reported for payment recording errors and commercial payment delinquencies. DOD's archaic and nonintegrated systems either do not contain the transaction-level detail to support the completeness and accuracy of the metrics or they make it extremely onerous and time consuming for the staff to gather and reconcile the needed detail. However, we were able to verify that DOD has made numerous policy, procedure, and systems changes that support an overall trend toward improved performance in these areas. If they could be verified, some of the cited metrics could be effective indicators of short-term financial management progress. However, if considered alone, delinquency rates are not necessarily good indicators for centrally billed travel cards or commercial payments. Placing too much emphasis on paying bills promptly may tempt DOD staff to bypass important internal controls meant to ensure that the goods and services being paid for were properly authorized and actually received. Despite shortcomings, the cited metrics have focused DOD's attention on highly visible financial management problems. As shown below, recent metrics issued by the DOD Comptroller indicate continuing improvements.