Objective:
We determined whether selected Other
Defense Organizations (ODO) properly
reconciled civilian pay reports to their
general ledger in FY 2014. This included
whether civilian pay was properly accrued
and employer contributions were recorded.
Finding:
Defense Finance and Accounting
Service (DFAS) properly performed civilian
pay reconciliations to the general ledger
for 18 of 33 ODOs totaling $6.6 billion of
$11.1 billion in civilian pay. In addition,
DFAS properly accrued civilian pay
for the 12 ODOs that used the Defense
Agencies Initiative or the Defense Business
Management System general ledgers.
Furthermore, DFAS Agency-wide Audited
Financial Statement team properly
calculated employer contributions for 28 of
the 33 ODOs. However, DoD officials did
not reconcile civilian pay records or review
reconciliations to the general ledger for
15 of the 33 ODOs reviewed, which totaled
$4.5 billion of the approximate $11.1 billion
of the civilian pay amount. Specifically:
- DFAS Indianapolis, DFAS Columbus, or ODO officials did not reconcile civilian pay records for 8 of 33 ODOs reviewed, totaling $2.3 billion; and
- DFAS Indianapolis did not review the reconciliations performed by 7 of 33 ODOs reviewed, totaling $2.2 billion, to ensure that the reconciliations were accurate and supported by transaction detail.
In addition, DFAS Indianapolis officials could not identify a
complete universe of ODOs that paid civilian employees with
general funds.
This occurred because DFAS did not have a formal plan to
reconcile civilian pay for ODOs that paid civilians with general
funds. In addition, DFAS Indianapolis did not have a process
narrative, process map, or adequate standard operating
procedures on the civilian pay reconciliation process.
Additionally, the reconciliation of ODO’s civilian pay was
decentralized within DFAS.
ODOs civilian pay represented 5.85 percent of the FY 2014
DoD Combined Statement of Budgetary Resources for
ODO General Funds. If DFAS cannot identify a complete
universe of ODOs that paid civilian employees with general
funds and does not have a plan to reconcile or review that
civilian pay reconciliations are performed for the 15 ODOs
that remain, DoD may not achieve audit readiness by the
statutory deadline of September 30, 2017. Furthermore, if
civilian pay reconciliations for ODOs are not performed on a
regular basis, significant testing and larger sample sizes will
be required in future audits at an excessive amount of time
and cost.
Recommendations:
We recommend that the Director, DFAS Indianapolis identify
the universe of ODOs. In addition, we recommend the DFAS
Directors at Indianapolis and Columbus develop a formal plan
to reconcile or review the civilian pay reconciliations for the
remaining 15 ODOs. The Director, DFAS Indianapolis should
develop a process map and process narrative, and prepare
standard operating procedures that clearly describe the
civilian pay reconciliation process. The Director should also
centralize the ODOs civilian pay reconciliation process, and
coordinate with the Financial Improvement Audit Readiness
Directorate to ensure there is an accurate assessment of the
audit readiness of the ODO General Fund financial statements.
Management Comments and Our Response:
The Director, Enterprise Solutions and Standards
concurred with all the recommendations and addressed
the specifics of the recommendations except for
Recommendations 1.b.(1), and 1.b.(2). We request
that the Director provide additional comments on
Recommendations 1.b.(1), and 1.b.(2) by April 25, 2016.