Financial Management
DOD's Ability to Prevent, Identify, Investigate, and Report on Antideficiency Act Violations Gao ID: GAO-08-941R July 28, 2008This report formally transmits a briefing in response to Senate Report No.110-77, which accompanied the National Defense Authorization Act for Fiscal Year 2008. The Senate Report directed GAO to review the department's efforts to prevent, identify, investigate, and report Antideficiency Act (ADA) violations and disciplinary actions taken when violations occur. On July 22, 2008, we provided our preliminary observations to staff of Congressional committees in response to the mandate. We will be reporting details on the information presented in the briefing in a future report.
GAO-08-941R, Financial Management: DOD's Ability to Prevent, Identify, Investigate, and Report on Antideficiency Act Violations
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GAO-08-941R:
United States Government Accountability Office:
Washington, DC 20548
July 28, 2008:
Congressional Committees:
Subject: Financial Management: DOD's Ability to Prevent, Identify,
Investigate, and Report on Antideficiency Act Violations:
This report formally transmits the attached briefing in response to
Senate Report No. 110-77,[Footnote 1] which accompanied the National
Defense Authorization Act for Fiscal Year 2008.[Footnote 2] The Senate
Report directed GAO to review the department's efforts to prevent,
identify, investigate, and report Antideficiency Act (ADA) violations
and disciplinary actions taken when violations occur. On July 22, 2008,
we provided our preliminary observations to staff of your committees in
response to the mandate. We will be reporting details on the
information presented in the briefing in a future report.
We are sending copies of this report to the appropriate congressional
committees. We are also sending copies of our final report to the
Secretary of Defense; the Under Secretary of Defense (Comptroller); and
the Secretaries of the Army, Navy, and Air Force. This report will also
be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov]. Should you or your staff have any questions
concerning this report, please contact me at (202) 512-9095 or
rasconap@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. Key contributors to this report were Darby Smith, Assistant
Director; Evelyn Logue, Assistant Director; F. Abe Dymond, Assistant
General Counsel; Lauren Catchpole; Francine DelVecchio; Sandra Lord-
Drakes; Jamie Haynes; Wil Holloway; and Jason Kirwan.
Signed by:
Paula M. Rascona:
Director, Financial Management and Assurance:
List of Congressional Committees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Enclosure: Slide presentation:
DOD‘s Ability to Prevent, Identify, Investigate, and Report on
Antideficiency Act Violations:
Briefing for the Congressional Defense Committees:
July 2008:
Briefing Agenda:
* Introduction;
* Summary of Preliminary Observations;
* Background;
* Objectives;
* Scope and Methodology;
* Preliminary Observations;
* Agency Views.
Introduction:
On January 17, 2007, the Department of Defense (DOD) Acting Inspector
General testified before the Senate Committee on Armed Services,
Subcommittee on Readiness and Management Support, on potential
violations of the Antideficiency Act (ADA) at DOD.
Based on the DOD Inspector General‘s testimony, the committee expressed
concerns about the volume of potential ADA violations, the pace and
transparency of ADA investigations, and DOD's process for investigating
potential violations.
Senate Report No. 110-77,[Footnote 3] which accompanied the National
Defense Authorization Act for Fiscal Year 2008,[Footnote 4] directed
GAO to review the department‘s efforts to prevent, identify,
investigate, and report ADA violations and disciplinary actions taken
when violations occur.
Summary of Preliminary Observations:
Given the numerous documented control risks over funds control, DOD
does not have reasonable assurance that it has prevented, identified,
investigated, and reported all potential ADA violations.
DOD has stated that knowledgeable personnel are critical to improving
the department‘s funds control processes and the military services have
efforts underway to provide training. However, neither the Navy nor the
Air Force could provide documentation of the processes and procedures
they have or will utilize to ensure that their key funds control
personnel are trained.
Neither the DOD Comptroller nor the military services had effectively
overseen and monitored compliance with DOD‘s Financial Management
Regulation (FMR) provisions to ensure that those assigned to
investigate potential ADA violations were qualified, trained, and
independent.
The DOD Comptroller has taken steps to improve transparency within the
department over the ADA investigation process.
Disciplinary actions taken by the military services for the 34 cases
with confirmed ADA violations in fiscal years 2006 and 2007 were
consistent with the Act and the DOD FMR.
Background – Antideficiency Act:
Federal agencies, including DOD, are responsible for ensuring that
appropriated funds are used only for purposes, and within the amount
and timeframes, prescribed by Congress.
ADA is not a single act, but rather a series of related provisions that
evolved over a period of time to require and enforce apportionments and
agency subdivisions of apportionments to achieve more effective control
and conservation of funds.
The ADA contains both affirmative requirements and specific
prohibitions, such as the:
* requirement that OMB, on delegation from the President, apportion
appropriated funds and other budgetary resources for all executive
branch agencies. An apportionment may divide amounts available for
obligation by specific time periods (usually quarters), activities,
projects, objects, or combination thereof;
* requirement for a system of administrative controls within each
agency, established by regulation, that is designed to (1) prevent
obligations and expenditures in excess of apportionments or
reapportionments; (2) fix responsibility for any such obligations or
expenditures; and (3) establish the levels at which the agency may
administratively subdivide apportionments, if it chooses to do so, and;
* prohibition against the incurring of obligations or making of
expenditures in advance or in excess of an appropriation.
The DOD FMR, which was approved by OMB, serves as the department's
funds control regulation and establishes procedures for DOD components
to use in identifying, investigating, reporting, and processing ADA
violations.
Objectives: Senate Report areas of interest:
* Determine the effectiveness of existing measures for the prevention
of Antideficiency Act violations (slide 10);
* Determine the adequacy of training provided to DOD military and
civilian personnel (slide 11);
* Determine the adequacy of current procedures utilized for preliminary
and formal investigations of potential Antideficiency Act violations
(slide 12);
* Determine the qualifications and independence of personnel utilized
at each stage of an investigation (slides 13 and 14);
* Determine the timeliness of investigations of potential violations
(slide 15);
* Determine the transparency both inside and outside DOD of the
investigating process (slides 16 and 17);
* Determine the use and adequacy of available disciplinary measures for
Antideficiency Act violations (slides 18 and 19).
Scope and Methodology:
We analyzed the 54 ADA cases DOD closed for the military services in
fiscal years 2006 and 2007:
* 34 cases – DOD concluded that an ADA violation had occurred;
* 20 cases – DOD concluded that an ADA violation had not occurred.
We reviewed prior GAO and DOD Inspector General audit reports, and OMB
and GAO guidance to obtain an understanding of the deficiencies in
DOD's funds control systems, processes, and internal control that
impede its ability to prevent or identify ADA violations.
We reviewed documentation and interviewed DOD and military service
personnel to obtain an understanding of the long-term and interim
solutions the department has underway to improve its ability to prevent
and identify potential ADA violations.
We reviewed DOD‘s FMR and interviewed appropriate officials to identify
DOD criteria pertaining to the timeliness of investigations, the
qualifications and independence requirements of investigating officers,
and the processes and procedures for ensuring compliance with the FMR.
We did not assess whether the conclusions reached or the disciplinary
actions taken for the ADA cases reviewed were appropriate.
We conducted this performance audit from July 2007 through July 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for the information
provided based on our audit objectives.
Preliminary Observations: Effectiveness of Existing Measures in
Preventing ADA Violations:
DOD‘s complex and inefficient payment processes, nonintegrated business
systems, and weak internal control environment hinder its ability to
ensure prompt and proper matching of disbursements with obligations and
to adequately control and record transactions.
DOD‘s processes to timely and reliably determine the amount of funds
available to spend are cumbersome, placing the department at risk for
overobligating and overspending its appropriations in violation of the
ADA.
In its fiscal year 2007 Performance and Accountability Report, the
department acknowledged that there are pervasive weaknesses in its
internal control system.
Preliminary Observations: Adequacy of Training Provided to Funds
Control Personnel:
DOD and military service officials have stated that knowledgeable
personnel are critical to improving the department‘s funds control
processes.
The military services have efforts underway to provide classroom or web-
based training to key funds control personnel.
However, neither the Navy nor the Air Force could provide documentation
of the processes and procedures they have or will utilize to ensure
that key funds control personnel are trained.
Preliminary Observations: Adequacy of Procedures Used to Conduct
Preliminary and Formal ADA Investigations:
The DOD FMR, which was approved by OMB, serves as the department's
funds control regulation and establishes procedures for DOD components
to use in identifying, investigating, and reporting ADA violations.
However, neither DOD nor the military services have processes and
procedures for ensuring compliance with the FMR. While we did not
evaluate how each case was investigated, we found that the military
services did not:
* have documentation to verify that investigating officers were
qualified, trained, and independent;
* comply with the FMR in ensuring that ADA cases were completed within
the established timeframes.
Preliminary Observations: Investigating Officer - Qualifications:
Neither DOD nor the military services had established processes and
procedures to oversee and monitor compliance with FMR provisions to
ensure that investigating officers were qualified.
We were unable to determine whether most of the 66 investigating
officers assigned to the 54 ADA cases reviewed had received training.
Specifically, our work showed that only:
* 7 had received initial training in fiscal law;
* 4 of the above 7 had received refresher fiscal law training within 5
years of initial training;
* 5 had received training on how to conduct an investigation.
Preliminary Observations: Investigating Officer - Independence:
The FMR does not require documentation of investigating officer
independence.
The military services had not established processes and procedures to
ensure that investigating officers were free of personal or external
impairments to their ability to conduct objective and independent ADA
reviews and investigations consistent with the DOD FMR.
The military services‘ appeared to focus on organizational independence
as the criterion for ensuring investigating officer independence.
Our analysis of the 54 ADA cases disclosed that in:
* 35 cases, the military services chose the investigating officer(s)
from an organization external to the one under investigation and
therefore was organizationally independent;
* 19 cases, the military services lacked documentation needed to
determine whether the investigating officer assigned to the case was
organizationally independent.
Preliminary Observations: Timeliness of ADA Cases:
The FMR has set forth that a preliminary review, formal investigation,
and Office of the Secretary of Defense (OSD) review should be completed
within approximately 15 months and 25 days, however, none of the
military services consistently met this timeframe.
Of the 54 ADA cases, 22 (or over 41 percent) took longer than 30 months
to complete.
The average timeframes for the military services to complete the ADA
investigative process:
* Army – 33 months;
* Air Force – 31 months;
* Navy (formal and OSD phases only) – 17 months.
Military service officials were unable to provide specific reasons as
to why the established timeframes were not generally achieved other than
indicating that each case has its own set of specific circumstances and
complexities.
Preliminary Observations: Transparency of the Investigation Process:
DOD had internal visibility over the 54 ADA cases closed for the
military services in 2006 and 2007 as required by the FMR and the Act.
It has begun to provide internal visibility for open cases. The
department externally reported the 34 cases it concluded had an ADA
violation to the President and the Congress, with a copy to GAO, as
required by the Act.
The DOD Comptroller has taken steps to improve transparency of the ADA
investigation process, including:
* implementation of an electronic ’dashboard“ in 2006 for use in
monitoring ongoing formal investigations within the department;
* a February 2008 update to the FMR requires components to report
information to the DOD Comptroller on preliminary reviews.
As of June 17, 2008, none of the military services had reported the
full scope of information on preliminary reviews as required by the
FMR. Examples of missing information include: (1) the means by which
the violation was discovered, (2) anticipated dates of completion, and
(3) the names and contact information for members of the preliminary
review team.
Preliminary Observations: Disciplinary Actions:
For the 34 closed ADA cases in which DOD concluded that an ADA
violation had occurred, we determined that the nature of the
disciplinary actions taken were consistent with the Act and the DOD
FMR.
The Act and the FMR identify the types of disciplinary actions that may
be taken. Agency management decides what disciplinary action, if any,
to take.
Table 1: Disciplinary Actions Taken By the Military Services in 34
Cases of Antideficiency Act Violations Reported in Fiscal Years 2006
and 2007:
Types of discipline: No discipline;
Army: 19;
Navy: 6;
Air Force: 2.
Types of discipline: Verbal discipline;
Army: 2;
Navy: 4;
Air Force: 4.
Types of discipline: Non-punitive discipline;
Army: 19;
Navy: 5;
Air Force: 1.
Types of discipline: Formal discipline;
Army: 19;
Navy: 2;
Air Force: 0.
Types of discipline: Total[Footnote 5];
Army: 59;
Navy: 17;
Air Force: 7.
Source: GAO analysis of DOD data.
[End of table]
We did not assess the appropriateness of disciplinary actions imposed
in any case.
Agency Views:
We obtained oral comments on a draft version of these slides. The DOD
Comptroller, the Army, and the Air Force generally agreed with the
information presented. The Navy generally did not agree with the issues
presented. However, the Navy was unable to provide documentation to
substantiate that funds control personnel were properly trained and
their investigating officers were qualified, trained, and independent.
Based upon comments received, we have revised our slides, as
appropriate.
[End of enclosure]
Footnotes:
[1] S. Rep. No.110-77, at 401 (Oct.1, 2007).
[2] S. 1547, 110TH Cong.: See Pub. L. No. 110-181, 122 Stat. 3 (Jan.
28, 2008).
[3] S. Rep. No. 110-77, at 401 (October 1, 2007).
[4] S. 1547, 110th Cong.: See Pub. L. No. 110-181, 122 Stat. 3 (Jan.
28, 2008).
[5] Disciplinary actions may have been taken against multiple
individuals.
[End of section]
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