We determined whether selected DoD disbursing offices were holding appropriate amounts of cash on hand and cash in limited depositary checking accounts. Additionally, we determined whether controls were in place to assess cash holding requirements accurately at selected DoD disbursing offices.
As of October 1, 2013, Air Force deputy disbursing officers (DDOs) held $6.3 million in cash that was in excess of what was needed to fund paying agents and contingency operations. Specifically, the DDOs at:
- Joint Base Charleston held $1.2 million in excess cash to fund paying agents and contingency operations;
- Hurlburt Field held $1.1 million in excess cash to fund paying agents and contingency operations;
- MacDill Air Force Base (AFB) held $1.8 million in excess cash to fund contingency operations;
- Eglin AFB held $2 million in excess cash to fund contingency operations; and
- Offutt AFB held $185,000 in excess cash to fund paying agents.
This occurred because the Defense Finance and Accounting Service (DFAS) Disbursing Operations Procedures Manual did not provide adequate guidance for determining the cash needs for paying agents and contingencies. Additionally, it did not require that automated teller machines or electronic funds transfer be used for contingency operations such as hurricane evacuations in the continental U.S. (CONUS). The U.S. Treasury could save up to $6,300 in annual borrowing costs if the Air Force reduced its level of excess cash. Air Force DDOs could reduce the risks of theft or loss by adopting practices used by the Navy to limit cash held on hand to fund hurricane evacuations.
In addition, the Hurlburt Field DDO held more cash than authorized, exceeding his cash holding authority (CHA) of $1.2 million by $88,000. This occurred because he misinterpreted the DoD Financial Management Regulation’s definition of cash. As a result, controls designed to limit the DDO’s accountability were weakened and the risks of theft or loss of cash were increased.
During the audit, Joint Base Charleston reduced the amount of cash to fund paying agents by $400,000 in its CHA; while Offutt AFB stated that it planned to reduce its cash to fund paying agents by $185,000 in its CHA. In addition, the Hurlburt Field DDO reduced his cash on hand to be in compliance with his CHA.
We recommend that the Director, Disbursing Operations revise the DFAS Disbursing Operations Procedures Manual to provide DDOs guidance to calculate how much cash is needed to fund paying agents. In addition, revise the manual to require alternatives to cash for CONUS evacuation payments or justify how much cash must be used to make these payments.
Management Comments and Our Response
The Director, DFAS, Indianapolis, responding for the Director, Disbursing Operations (DFAS, Indianapolis), fully addressed all specifics of the recommendation, and no further comments are required.
This report is a result of Project No. D2013-D000FE-0117.000.