To obtain copies of Office of the Assistant Inspector General for Auditing Reports, contact the Secondary Reports Distribution Division of the Audit Followup and Technical Support Directorate at (703) 604-8937 or FAX (703) 604-8932.
Who Should Read This Report and Why? Defense Finance and Accounting Service (DFAS) management, staff, supporting contractor personnel who process Military Retirement Fund payments, and military retirees and their spouses or dependents should read this report. The report discusses the need for change in the process for determining continued eligibility of retirees.
Background. DFAS Cleveland Center administers the Military Retirement Fund, using contractor support. The fund pays military retirement benefits to retirees or their survivors for the life of each recipient. During 2003, DFAS administered payments to about 2 million retirees and survivors totaling about $39 billion. This audit is a continuation of our audit of the FY 2002 Military Retirement Fund Financial Statements. In that audit we identified management control weaknesses related to account management. These weaknesses involved cases where DFAS received death notifications pertaining to retirees. We identified cases where DFAS should have suspended and eventually closed accounts based on receipt of a notification of death.
Results. Systemic control weaknesses led DFAS to improperly pay military retirement benefits of about $4.8 million per month to the accounts of as many as 3,100 deceased retirees who were still on the retirement rolls as of August 1, 2003. And retiree accounts that DFAS should have taken steps to close remained suspended, thus incurring unnecessary maintenance fees. These payments are material to this audit due to their sensitive nature and were not addressed in the FY 2002 audit results. By working more closely with the Social Security Administration, DFAS could help improve the accuracy of both agencies’ databases of deceased beneficiaries and reduce the incidence of erroneous payments. Also, DFAS should improve efforts to recover benefit payments made to the accounts of deceased retirees.
Management Comments Audit Response. The Director of the Defense Finance and Accounting Service fully concurred with Recommendations 1, 2, 3, 4, and 6 and partially concurred with Recommendation 5. For recommendation 5, management proposes to annually contact retirees over a statistically determined age for a Certificate of Eligibility.
Audit Response. Management comments are responsive to all recommendations. The alternative to Recommendation 5 that DFAS proposed meets the intent of our objective. We included the full text of the DFAS comments in the Management Comments section of this report.
Any comments or suggestions should be sent to: auditnet@dodig.mil