Financial Management

The reliability of contract disbursing data is critical to the ability of the Army and the Air Force to effectively account and control for billions of dollars in budget authority and prepare reliable financial information on the results of its operations. The Defense Finance and Accounting Service in Columbus, Ohio, makes tens of billions of dollars in contract payments each year for the Army, the Air Force, and other military organizations. The Center relies on the Mechanization of Contract Administration Services (MOCAS) to process military contract payment transactions. This report discusses (1) if, and to what extent, contract payment transactions recorded in the Army and Air Force official accounting records differed from MOCAS disbursing system records; (2) the types of differences between the disbursing and accounting systems and the causes for the differences; and (3) the potential effect any identified deficiencies may have on the Defense Department's planned improvements to the contract payment system.

GAO noted that: (1) results showed billions of dollars of differences in the way contract payment transactions were originally recorded in MOCAS and the applicable accounting systems prior to the mid-1990s for the Air Force and prior to fiscal year (FY) 1999 for the Army; (2) these differences related primarily to manual processes for recording MOCAS transactions in the accounting systems; (3) GAO's sample of FY 1997 Army contract payment transactions showed that an estimated $6.7 billion in MOCAS disbursement and collection transactions were recorded differently or could not be located in the Defense Finance and Accounting Service (DFAS) accounting systems used to record Army transactions, including $2 billion recorded to different appropriations in MOCAS and Army's accounting records; (4) the electronic processes for recording MOCAS transactions in the applicable accounting systems should reduce significantly the opportunity for such differences; (5) however, existing differences will ultimately result in the need for adjustments to reconcile accounting and disbursement records and to resolve uncertainties concerning the status of appropriate funds; (6) about one out of every two dollars processed by MOCAS was for adjustments to previously recorded disbursement transactions and billions of dollars of MOCAS adjustments were not recorded in DFAS Army accounting station records; (7) unlike the Army adjustment transactions, most of the Air Force adjustment transactions in GAO's sample were recorded in Air Force accounting records; (8) contract balances also differ between MOCAS and DFAS accounting systems used to process Army and Air Force transactions; (9) for the contract accounting lines associated with the transactions in GAO's Army sample, actual differences in balances amounted to about $909 million in obligations and $908 million in disbursements between MOCAS and DFAS accounting systems used to process Army transactions; (10) for the contract accounting lines associated with the transactions in GAO's Air Force sample, actual differences amounted to about $1.3 billion in obligations and about $1.4 billion in disbursements; (11) DOD has a number of initiatives planned or under way to address acknowledged deficiencies in its contract payment process; (12) one of these involves a new contract payment system targeted to begin implementation in October 2000; and (13) however, this high-level approach has not yet been approved and incorporated into a detailed data conversion plan.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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