Publicly Released: May 23, 2023
Objective
The objective of this audit was to determine whether, in FY 2022, the DoD complied with the “Payment Integrity Information Act of 2019,” (PIIA).
Background
The PIIA was enacted to improve efforts to identify and reduce Government-wide improper payments. It requires Federal agencies to identify programs that may be susceptible to significant improper payments, report an estimated amount of improper payments for those programs, and report on actions planned to reduce improper payments. In FY 2022, the DoD Components reported both improper and unknown payment estimates of $2 billion for nine DoD Programs that were required to provide improper and unknown payment estimates.
The PIIA defines an improper payment as any payment that should not have been made, was made in an incorrect amount, was made to an ineligible recipient, or was made for ineligible goods or services. Under PIIA requirements, an agency is considered noncompliant if it has one or more programs that are found noncompliant with any of the six PIIA reporting requirements.
Findings
The DoD did not comply with PIIA requirements in FY 2022. While the DoD complied with five of the six PIIA requirements, it did not comply with the requirement to publish adequate improper payment estimates. Specifically, the DoD published unreliable, improper, and unknown payment estimates for all nine DoD programs required to report estimates.
The DoD did not publish reliable estimates because the Defense Finance and Accounting Service (DFAS) did not fully implement corrective actions recommended previously by the DoD Office of Inspector General (OIG); or conduct adequate post pay reviews of the DoD Travel Pay program.
As a result, the DoD produced unreliable estimates for the 12th consecutive year, and did not comply with the PIIA for a 2nd consecutive year. With unreliable estimates in the DoD Agency Financial Report (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.
Recommendations
We recommend that the Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD (USD[C]/CFO) establish and implement a process for determining a program’s tolerable rate. We also recommend that the Director of DFAS reclassify the Hawaii water contamination evacuation payments as unknown payments, and develop and implement additional controls to identify and review high-risk payments. Additionally, the DoD has yet to fully implement corrective actions to address 14 prior DoD OIG recommendations concerning the development of improper payment estimates. 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. Please see Appendix C, Table 5 for the status of all outstanding recommendations.
Management Comments and Our Response
The Deputy Chief Financial Officer (DCFO), responding for the USD(C)/CFO and DFAS Director, agreed with all of the recommendations. Therefore, the recommendations are resolved but will remain open. We will close the recommendations once we verify that management has implemented corrective actions.
This report is a result of Project No. D2022-D000FL-0171.000.