What We Did:
The objective of this audit was to determine whether, in FY 2021, the DoD complied with Public Law 116 117, “Payment Integrity Information Act of 2019,” March 2, 2020 (PIIA).
What We Found:
The DoD did not comply with PIIA requirements in its FY 2021 reporting of improper payments. It complied with five of the PIIA’s six payment integrity requirements, but did not comply with one of the payment integrity requirements. Specifically, the DoD published unreliable, improper, and unknown payment estimates for all nine DoD programs required to report estimates.
The DoD published unreliable, improper, and unknown payment estimates for nine of its programs because:
• Defense Finance and Accounting Service personnel did not use an appropriate variable when calculating the sample sizes, did not have sufficient internal controls to ensure reliable estimates, and did not implement corrective actions in developing the population, as recommended by the DoD OIG, for the Commercial Pay program; and
• Defense Health Agency personnel did not use an adequate Sampling and Estimation Methodology Plan (S&EMP) and did not conduct adequate improper payment reviews.
As a result, the DoD produced unreliable estimates for the 11th consecutive year. Even though the DoD did not comply with the 9 previous years of improper payment reporting requirements, this year is the first official year the DoD did not comply with the PIIA. With unreliable estimates in the DoD AFR, DoD leadership and Congress cannot accurately determine whether the DoD has the resources needed and the controls in place to reduce its improper payments.
What We Recommend:
We recommend that the Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD (USD[C]/CFO) develop and implement:
• internal control procedures to ensure that DoD Components produce reliable estimates, and
• a process for accurately reporting confirmed fraud in the accompanying materials to the AFR.
We recommend that the USD(C)/CFO, in coordination with the Deputy Director of Enterprise Accounting and Audit Support for the Defense Finance and Accounting Service:
• use a sufficient sample size to support the improper payment estimate;
• develop and implement internal controls to ensure exclusions occurring during the identification of the sampling universes are appropriate and fully documented; and
• develop and implement additional controls for the post pay review process in the Travel Pay program to ensure accurate reviews.
Additionally, the DoD has yet to fully implement corrective actions to address prior DoD OIG recommendations concerning the development of improper payment estimates for the Commercial Pay and Military Health Benefit programs. Until the DoD implements the recommendations from this report and previous DoD OIG reports, it is unlikely that the DoD will meet PIIA requirements and have reliable improper payment estimates.