Audit uncovers $615 million in illegal Defense payments

Abuse of old appropriations accounts led to more than $615 million in illegal and improper payments at the Defense Department in fiscal 2000, according to the General Accounting Office. In "Canceled DoD Appropriations: $615 million of Illegal or Otherwise Improper Adjustments" (GAO-01-697), GAO investigated $2.2 billion of Defense's fiscal 2000 adjustments to old appropriations accounts. A 1990 account-closing law prohibits disbursements from closed appropriation accounts. GAO found that 28 percent of Defense adjustments should not have been made for various reasons. In some cases, Defense closed old accounts when payments were made, but in others, new accounts were not yet open when the payment was made or insufficient information and payments were made when no payment was owed. During the 1990s, Defense adjusted 333 appropriations accounts valued at $26 billion, while all other federal agencies collectively adjusted only 21 accounts valued at $5 million. "This is not a new issue," said Rep. Steve Horn, R-Calif., chairman of the Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations, at a hearing on the matter Thursday. "Long ago, Congress suspected that the Department of Defense was abusing old appropriations." The 1990 law was enacted to stop the abuses, but Defense has failed to comply with the law, GAO found. "The [Defense Department's] manipulation of old appropriation balances has continued largely unabated," Horn said. According to GAO, in 1999 the Defense Finance and Accounting Service (DFAS) charged a $79 million payment to an old fiscal 1992 research and development appropriations account. DFAS officials admit the adjustment should not have been made. In January 2000, $21 million in payments charged to fiscal 1989 and 1990 accounts were changed to become charges against fiscal 1998 and 1999 accounts. "Since the actual disbursements were for expenses that were incurred before the fiscal year 1998 and 1999 appropriations were enacted, charging disbursements to these two appropriations violated [the 1990 account closing law]," the report found. Included in that $21 million were $9.9 million in overpayments that the contractors returned and that the DFAS redistributed to other appropriation accounts instead of sending to the Treasury Department, GAO found. DFAS Director Tom Bloom told committee members Thursday that the agency suffers from "procedural and systemic weaknesses" in its contract reconciliation process. "These shortcomings resulted in the recording of adjustments to accounts that may be improper or illegal," Bloom said. GAO recommended that DFAS immediately reverse the adjustments referenced in the report and correct the accounting records. DFAS also should adopt controls so that illegal and improper charges can no longer be made, as well as set up a monitoring program for future adjustments, making it clear to managers that they will be held accountable if improper and illegal payments are made. Tina Jonas, the Defense Department's deputy undersecretary for financial management, told subcommittee members that a recently established departmentwide financial management modernization program would correct situations such as those GAO uncovered. "Where identified weaknesses exist, we are moving out to correct them," Jonas testified. "We are making required policy changes, modifying automated systems and will take individual personnel actions where needed."