Feb. 13, 2018 —
Our objective was to determine whether the U.S. Army Corps of Engineers (USACE) used a complete universe of payments and accurately identified improper payments when reporting improper payment estimates in the DoD FY 2016 Agency Financial Report (AFR) for the Commercial Pay and Travel Pay programs.
Public Law 111-204, “Improper Payments Elimination and Recovery Act of 2010” (IPERA) requires agencies to report in the AFR a statistically valid estimate of improper payments for each program deemed susceptible to significant improper payments. Furthermore, OMB Circular A-123, Appendix C, consolidates and streamlines IPERA reporting requirements for all agencies and Inspectors General. Additionally, OMB guidance establishes requirements for estimating improper payments and subjecting payments to improper payment testing.
The USACE Commercial Pay and the USACE Travel Pay programs are 2 of 10 programs reported in the DoD FY 2016 AFR. The USACE Commercial Pay program reported total payments of $18,158.00 million ($18.16 billion), and no improper payments in the DoD FY 2016 AFR.1 While the USACE Travel Pay program reported total payments of $188.00 million, and $0.38 million in improper payment in the DoD FY 2016 AFR.
We reviewed FY 2016 payments in the USACE Travel and Commercial Pay programs and compared those payments to the total payments reported in the DoD FY 2016 AFR. To determine if USACE accurately identified improper payment, we analyzed USACE payment documentation and compared our conclusions to USACE testing results. Additionally, we discussed with USACE personnel total payments, improper payment testing, and procedures for identifying and reporting improper payments.
USACE Finance Center (UFC) personnel did not accurately report the total payments, the improper payment estimate, or the improper payment rate for the Commercial Pay program in the DoD FY 2016 AFR. Specifically, UFC personnel:
- inaccurately reported $18,158.00 million of USACE commercial payments in the DoD FY 2016 AFR when UFC personnel should have reported $17,895.79 million ($17.90 billion), which is an overstatement of $262.21 million;
- did not subject 15,165 Government purchase card (GPC) payments, valued at $144.53 million, to improper payment testing; and
- did not identify improper payments in 9 of the 62 commercial payment sample items, valued at $1.79 million, that we reviewed.
This occurred because UFC personnel did not:
- establish standard operating procedures for identification and reporting of commercial payments; and
- develop adequate standard operating procedures for reviewing commercial payments; or
- coordinate internally with personnel responsible for post pay reviews of the GPC program to obtain the necessary documentation for IPERA reporting.
As a result, USACE understated the Commercial Pay program’s improper payments in the DoD FY 2016 AFR. We project that UFC personnel made $2.25 million in improper payments for the 1,293 sample items reviewed by USACE, which would have resulted in reporting improper payments and an improper payment rate for the Commercial Pay program in the DoD FY 2016 AFR. Instead, USACE reported $0 in improper payments in the DoD FY 2016 AFR. Until USACE establishes adequate procedures to identify improper payments, USACE will not recover a potential $2.22 million in questioned costs.
UFC personnel did not accurately report the Travel Pay universe, improper payment estimate, and the improper payment rate for the USACE Travel Pay program in the DoD FY 2016 AFR. Specifically, UFC personnel:
- understated their total travel payments in the DoD FY 2016 AFR by $5.20 million;
- did not subject at least 26,400 travel payments, valued at $14.77 million, to improper payment testing; and
- did not calculate the improper payment estimate in accordance with OMB guidance.
This occurred because UFC personnel did not establish standard operating procedures to identify and accurately report improper payment information; therefore, UFC personnel were non-compliant with IPERA requirements. In addition, UFC personnel did not follow procedures that would have assisted in developing statistically valid estimates. Moreover, the USACE Travel Pay program understated the improper payment estimate by at least $3.73 million and the improper payment rate by at least 1.93 percent in the DoD FY 2016 AFR.
Until USACE corrects these issues with the Commercial Pay and Travel Pay programs, it will not be able to identify and take corrective actions, and recover improper payments. Furthermore, the DoD Improper Payment Program will continue to be non-compliant with IPERA requirements.
We recommend the Director, UFC, establish procedures to identify and include all commercial payments required within the improper payment estimates reported in the DoD AFR. The Director should subject all commercial payments to improper payment testing and should provide training to UFC personnel responsible for performing improper payment testing. In addition, the Director should review, research, and collect improper overpayments related to the 1,293 FY 2016 commercial payments selected for IPERA compliance testing.
In addition, the Director should subject all travel payments to improper payment testing and should include centrally billed travel accounts as part of the USACE Travel Pay program. To ensure all sample items are being reviewed, the Director should develop procedures to require a statistician to review and approve the improper payment estimates and track IPERA sample items. Furthermore, the Director should establish standard operating procedures to identify a complete and accurate universe, review selected payments, and ensure improper payment estimates for Travel Pay program are calculated properly.
Finally, the Director should implement a process of higher-level reviews prior to submitting to the Under Secretary of Defense (Comptroller)/Chief Financial Officer information for inclusion in the DoD AFR.
Management Comments and Our Responses
The Chief of Finance and Accounting Policy Division, Directorate of Resource Management, responding for the Director, UFC, agreed with the recommendations to:
establish standard operating procedures for the Commercial Pay Program;
- implement a review process to verify accurate testing for improper payments is performed;
- subject all commercial payments to improper payment testing;
- implement a process for higher-level reviews prior to submitting information to the Under Secretary of Defense (Comptroller)/Chief Financial Officer for inclusion in the DoD AFR;
- update standard operating procedures for the Travel Pay program;
- develop procedures to require a statistician review and approve the improper payment estimate; and
- track IPERA sample item reviews.
Therefore, these recommendations are resolved but remain open. We will close these recommendations once we verify that USACE has implemented the planned corrective actions.
The Chief also agreed with the recommendation to train UFC personnel responsible for reviewing commercial payments. We verified that USACE has established training for commercial pay reviews and that the training was implemented for FY 2017; therefore, this recommendation is closed.
The Chief disagreed with our recommendation to review, research, and collect improper overpayments related to the 1,293 FY 2016 commercial payments selected for IPERA compliance testing. Therefore, this recommendation is unresolved.
The Chief did not meet the intent of our recommendation to subject all travel payments to improper payment testing. Although the Chief agreed with our recommendation, he did not provide planned actions to implement it. Therefore, this recommendation is unresolved.
We request the Director, UFC, provide details about actions planned to resolve these recommendations by March 15, 2018.
OMB Circular A-136 requires agencies to report in the
AFR improper payments and total payments in millions
and carried out to at least two decimal points. To stay
consistent with totals reported by agencies in the AFR,
we followed OMB’s guidance and reported all totals