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February 11, 2016

Pentagon Claims Low Flubbed Payment Rate, Could Be Totally Wrong

The good news for the Department of Defense: By its own estimation, less than 1 percent of its payments are improper payments (to the wrong party, or of the wrong amount), which is better than the more than 3 percent rate government-wide, with improper payments by the feds adding up to $106 billion in the past fiscal year.

The bad news for the department: The Government Accountability Office “has grave reservations even about DOD’s ability to track and accurately report its improper payments,” John L. Mica, R-Fla., said at a House subcommittee hearing Wednesday.

Mica, chairman of the House Oversight and Government Reform Subcommittee on Government Operations, was holding a hearing  on the subject of improper payments, “a serious and unfortunately very persistent problem.” Over the past five years, more than half a trillion dollars total has gone down the drain to them. The biggest known offenders are the Center for Medicare and Medicaid Services and the Earned Income Tax Credit.

The Defense Department, with its budget of around half a trillion dollars on its own, manages to do less damage, said the department’s deputy chief financial officer, Mark Easton.

“We have a fundamentally sound improper payment program at DOD that minimizes improper payments to very small levels,” he said.

In written testimony, the GAO’s Beryl Davis remarked on the Defense Finance and Account Services Commercial Pay program that handles payroll, contractor and vendor payments:

In May 2013, we reported on major deficiencies in DOD’s process for estimating fiscal year 2012 improper payments in the DFAS Commercial Pay program and recommended that DOD (1) develop key quality assurance procedures to ensure the completeness and accuracy of sampled populations and (2) revise its sampling procedures to meet OMB guidance and generally accepted statistical standards and produce a statistically valid error rate and dollar estimate with appropriate confidence intervals.

The department is reevaluating its methodology for fiscal 2014, based on those recommendations. “Consequently, the fiscal year 2013 improper payment estimate for the DFAS Commercial Pay program may not be reliable,” she continued.

The top Democrat on the subcommittee, Gerald E. Connolly of Virginia, said that because the Defense Department is the only federal agency to never have a clean audit, “There’s every reason to believe you’re underreporting your improper payments.”

But Easton answered the department is “doing a lot right.” In written testimony, he noted that the Office of Management and Budget generally believes the department has a good improper payment program, and has held some aspects of it up as an example for the federal government as a whole.

He also reviewed a number of categories of payment, with most of them well below a 1 percent improper rate but travel at nearly 7 percent.

“Our Travel Pay is an area that has consistently missed annual goals and is receiving increased visibility and emphasis. Poor training for approving officials is leading to a lack of documentation,” he said. “This is a known risk area for us.”

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