Payment Processing

GAO reviewed the Department of Energy's (DOE) request to implement a negative confirmation process for the receipt and acceptance of goods and services costing under $25,000 ordered from vendors with whom an ongoing relationship exists.

GAO noted that: (1) although the negative confirmation procedure DOE proposes increases the risks of overpayments to vendors, that risk could be acceptably mitigated if reasonable assurance of recovery of overpayments to vendors exists; (2) combining a negative confirmation process with a statistical sampling procedure to examine invoices under $25,000 also increases risks; (3) these risks would be acceptable provided: (a) an assessment of the benefits of implementing the sampling plan compared to the additional risks associated with it reveals that the benefits exceed the projected costs; (b) the risk of errors and irregularities occurring and going undetected prior to payment is periodically assessed (through a statistical sample taken from all invoices subject to a negative confirmation) and kept within established thresholds; and (c) DOE has a continuing satisfactory relationship with the vendor, thus minimizing the risk of loss; (4) DOE's proposal addresses these conditions, however, GAO has one observation and offers a control procedure to address it; (5) since the 1982 enactment of the Federal Managers' Financial Integrity Act (FMFIA), all agencies are required to review their systems of internal accounting and administrative controls and annually report material weaknesses; (6) GAO believes that during the initial period and/or the first full year the payment system modifications are operational, DOE's FMFIA reviews should specifically emphasize testing the modifications by determining if the controls are effective and working as designed; and (7) therefore, GAO suggests that DOE's FMFIA reviews specifically emphasize testing the controls in the proposal at the end of the year in which the implementation occurred if the modifications have been operational for most of the year and that the emphasis be extended through the following year if implementation occurred toward year-end.