Report | March 28, 2016

Other Defense Organizations andDefense Finance and AccountingService Controls Over High-RiskTransactions Were Not Effective DODIG-2016-064


Objective:

We determined whether Other Defense Organizations (ODOs) had appropriate controls in place over the procure‑to‑pay process to ensure accurate, complete, and auditable line-item data for financial statement audits. Specifically, we reviewed whether controls were in place to ensure the accurate and timely update of ODO expenditures identified as problem disbursements.


Finding:

For the ODOs we reviewed, controls did not effectively ensure the accurate and timely update of ODO expenditures identified as problem disbursements.

As a result, the Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) could not use detail‑level disbursement and collection detail provided by the Defense Finance and Accounting Service (DFAS) to support U.S. Treasury index 97 Fund Balance With Treasury reconciliations.

OUSD(C) must be able to reconcile (match) detail-level data to U.S. Treasury data to demonstrate that controls are in place to produce a complete universe of transactions for auditable financial statements. Until a complete universe can be produced, OUSD(C) may be unable to resolve its longstanding Fund Balance With Treasury material weakness or achieve audit readiness.

Recommendations:

We recommend that the Under Secretary of Defense (Comptroller) and the Deputy Chief Management Officer:
  • develop a coordinated and standardized strategy with the DFAS and the ODOs to exchange and manage problem disbursement data; and
  • oversee the strategy’s implementation to ensure standardization.

We also recommend that the Directors, ODOs, and DFAS revise service-level agreements based on the end-to-end business process identified. These agreements should include clearly defined roles and responsibilities, internal controls, performance metrics, and quality assurance plans to provide detail-level data and timely correct and reduce problem disbursements.

Management Comments and Our Response:

Comments from the Deputy Chief Financial Officer, responding for the Under Secretary of Defense (Comptroller) and the Deputy Chief Management Officer; the Principal Director for Business Operations, Defense Security Cooperation Agency (DSCA), responding for the Director, DSCA; and the Deputy Director, Missile Defense Agency (MDA), responding for the Director, MDA, addressed all specifics of the recommendations, and no additional comments are required.

However, comments from the Deputy Director of Operations, DFAS, responding for the Director, DFAS, and the Director of Finance, Defense Logistics Agency (DLA), responding for the Director, DLA, partially addressed the recommendations. In addition, the Director, Defense Health Agency (DHA) did not provide comments to the draft report. We request Deputy Director of Operations, DFAS; Director of Finance, DLA; and Director, DHA, provide comments to the final report by April 29, 2016.