GAO-05-402R DOD Transportation Payment Documentation 

United States Government Accountability Office

Washington, DC 20548 

March 31, 2005 

Brigadier General Charles W. Fletcher, Jr., 

Commanding General 

Military Surface Deployment and Distribution Command 

Department of the Army 

200 Stovall Street 

Alexandria, VA. 22332-5000 

Subject: Payment Processing: Documentation Procedures For Electronic Billing and 

Payment Under the Families First Personal Property Program 

Dear General Fletcher: 

This letter responds to your request for our views on whether certain payment 

procedures included in the Defense Department’s (DOD) proposed Families First 

Personal Property Program1 conform with relevant criteria in GAO’s Policy and 

Procedures Manual for Guidance of Federal Agencies. As you know, Families First is a 

DOD initiative to reengineer its processes for transporting household goods and personal 

property for its service members and civilians. Your request is in response to a Defense 

Finance and Accounting Service (DFAS) recommendation that DOD seek our views 

specifically on whether the proposed procedures for electronic billing and payment meet 

the supporting documentation requirements in Title VII of GAO’s Policy and Procedures 

Manual for Guidance of Federal Agencies. 

While the General Services Administration (GSA) is responsible for issuing federal 

regulations for transportation, including moves of household goods and personal 

property2 as well as agency prepayment and postpayment audit requirements for 

transportation payments, we are responsible for issuing fiscal guidance based on 

authorities in the U.S. Code.3

 We considered DOD’s proposed process of electronic 

billing and payment in light of our requirements established in Title VII for 

disbursements and related documentation. Our views are based on our understanding of 

DOD’s planned implementation of the Families First program on a conceptual basis. We 

 

1

The Families First program is being implemented over three phases. In reviewing a draft of this report for 

factual accuracy, SDDC indicated that the procedures for billing, payment, and supporting documentation, 

which are the subject of this request, were implemented as part of Phase I on March 29, 2005. 

2

Federal regulations for transportation are published in the Code of Federal Regulations, 41 C.F.R. Parts 

102-117 and 102-118 (2004). 

3

General authorizations and requirements for agency accounting and auditing are set forth in numerous 

statutes, primarily in chapter 35 of Title 31, U.S. Code. The fiscal guidance in Title VII is based on the 

Comptroller General’s authority to settle accounts of accountable officers and conduct audits. 
Page 2 GAO-05-402R DOD Transportation Payment Documentation 

did not perform tests of your current or proposed system or validate information 

provided to us. 

In order to respond to DOD’s request, we contacted your staff to gain an understanding 

of Families First. We considered additional information about the proposal provided by 

your staff. We analyzed sections of the law pertaining to this request. We interviewed 

GSA staff concerning their audit responsibilities in the transportation area, including for 

Families First. 

As explained to us, Families First does not fully meet Title VII documentation 

requirements for federal payments because the documentation that DOD is to use as 

evidence of receipt of accessorial4

 services does not provide adequate assurances about 

the propriety of these services. This is because the documentation is prepared by the 

transportation service provider (TSP) without independent corroboration upon 

preparation, and then the documentation is retained by the TSP. These documentation 

procedures increase the potential risk of improper transportation payments. 

Management must determine what changes to the documentation procedures or what 

additional controls will mitigate these risks so that the documentation requirements of 

Title VII are fully met. The objective of such controls should be to ensure that invoiced 

accessorial services are allowed, necessary, and were indeed rendered. Automated 

procedures do not reduce the need for effective internal control nor relieve a 

certifying/disbursing officer of his or her responsibility. These officers must have 

sufficient knowledge of the automated systems in order to carry out their 

responsibilities, and must make sure they can rely on the quality of the automated 

systems to ensure that transportation invoices authorized for payment are legal, proper, 

and correct. 

Background 

The Surface Deployment and Distribution Command (SDDC) is DOD’s Traffic Manager 

for the Household Goods and Personal Property Program. SDDC5 provides an interface 

between DOD’s local shipping offices and the commercial shipping industry. SDDC is 

developing the Families First program under DOD’s business process reengineering 

efforts. SDDC staff estimate that Families First will process over 500,000 shipments at a 

cost of almost $2 billion annually. The goal for Phase I of Families First is to implement 

a new electronic bill payment process in a Web-based environment. 

Our Title VII procedures are designed to complement existing federal accounting, 

internal control, and systems standards.6

 Title VII does not provide specific guidance on 

 

4

Accessorials are services such as packing or special boxing that are performed by a carrier in addition to 

the linehaul transportation charges. 

5

SDDC is a major command of the United States Army that is under the control of the United States 

Transportation Command. 

6

In May 2000, GAO issued a guide to agencies in reengineering payment systems, entitled Streamlining the 

Payment Process While Maintaining Effective Internal Control, GAO/AIMD-21.3.2. (Washington, D.C.: 

May 2000). 
Page 3 GAO-05-402R DOD Transportation Payment Documentation 

how to process financial transactions involving travel and transportation. Those 

functions, originally covered under Title V of GAO’s Policy and Procedures Manual for 

Guidance of Federal Agencies, were transferred to the Executive branch on June 30, 

1996.7

 However, Title VII does provide general guidance on disbursements, including 

necessary steps to help ensure disbursement transactions can be verified as to their 

legality, propriety, and correctness and to spell out the responsibilities of accountable 

officials. 

Section 3726 of title 31, U.S. Code requires each agency that receives a bill from a carrier 

or freight forwarder for transporting property for the U.S. government to verify the bill’s 

correctness using a prepayment audit8

 in accordance with the requirements prescribed 

by GSA.9

 The official certifying a transportation voucher is responsible for computation 

of payment amounts and for the legality of payments.10 The certifying official is also 

responsible for verifying transportation rates, freight classification, and other 

information provided on a government bill of lading or transportation request, unless 

GSA has determined that the prepayment audit of such vouchers will not adequately 

protect the interest of the government.11 The law makes a special provision that permits 

advance payment for transportation services, provided certain usual documentation, 

such as an invoice or bill of lading, is submitted.12 SDDC indicated that GSA has 

tentatively approved its prepayment audit procedures,13 although at the time of our 

inquiries GSA had not yet audited any Phase I transactions. 

Our understanding is that linehaul14 charges make up the single largest component of 

programwide billings. The second largest cost component, and the topic dealt with in 

this letter, is accessorials, which are services such as packing or special boxing that are 

performed by a TSP in addition to linehaul charges. Existing Defense Transportation 

Regulations15 require the TSP to furnish the original DD Form 619, Statement of 

Accessorial Services Performed, and DD 619-1, Statement of Accessorial Services 

 

7

Public Laws 104-53 (Nov 19, 1995 ) and 104-316 (Oct 19,1996) transferred GAO's authority over claims 

settlements and related advance decisions, waivers, and other functions to the Director of the Office of 

Management and Budget (OMB), who in turn delegated specified functions to various executive agencies. 

Among those functions delegated to the General Services Administration are settling claims for travel, 

transportation, and relocation expenses of federal civilian employees and reviewing transportation carrier 

appeals. See B-275605, March 17, 1997. 

8

According to 41 C.F.R. § 102-118.265 (2004), prepayment audit for transportation consists of comparison 

of charges on the TSP’s bill against charges permitted under the applicable contract, rate tender, or other 

agreements. 

9

GSA may exempt bills from prepayment audit and verification and, in lieu thereof, require postpayment 

audit as determined by the public interest, cost effectiveness, or other factors. See 31 U.S.C. § 3726 (a) (2). 

10See 31 U.S.C. § 3528 (a); Title VII, chapter 6, section 6.5, page 7.6-8. 

1131 U.S.C. §§ 3528 (a) (5), 3726(a) (2); and see 41 C.F.R. 102-118.160. 

1231 U.S.C § 3726(h). 

13In a memo from GSA to SDDC on October 23, 2003, GSA granted tentative approval to SDDC’s 

prepayment audit procedures pending certain action steps critical to the audit process, and an in-depth 

analysis after Phase I has been more widely implemented. 

14Linehaul charges include transportation of cargo over carrier routes from point of origin to destination, 

with the exclusion of certain charges such as local pickup or delivery. 

15DOD 4500.9-R, subject: Defense Transportation Regulation, Part IV (Aug. 2003), chapter 405.F.1 
Page 4 GAO-05-402R DOD Transportation Payment Documentation 

Performed (Storage in Transit Delivery and Reweighs)16 to the transportation officer 

within the Personal Property Shipping Office. The Personal Property Shipping Officer 

(PPSO)17 uses these forms to validate receipt of accessorial services submitted with the 

TSP’s invoice. 

Proposed Process for Phase I of Families First 

The focus under Phase I of the Families First program is on streamlining payments to the 

TSPs by using a third-party Web-based payment system called PowerTrack. 

PowerTrack, which is owned and operated by U.S. Bank, has automated prepayment 

audit and verification procedures that are to be satisfied prior to payment. U.S. Bank 

remits electronic payments to TSPs for system-approved transactions and DFAS 

subsequently reimburses U.S. Bank.18

 

As described to us, the business process begins when the local DOD PPSO receives a 

service member’s movement order, calling for transport of household goods and 

personal property.19 Upon receipt of the order, the PPSO is to procure the services of the 

TSP, and prepare an electronic Bill of Lading (BOL) that functions as a contract for 

shipping the household goods. The TSP or its agent is to visit the origin site, conduct a 

move survey, and obtain preapproval20 by either facsimile, e-mail or telephone 

conversation for those authorized accessorial line items or special services that require 

PPSO preapproval.21 The PPSO indicates approved or denied status with a record in the 

SDDC’s Central Web Application (CWA). The TSP is to prepare an inventory of what is 

to be moved and the DD Form 619. The TSP and service member are to sign these 

documents and copies are to be provided to the service member. Under the proposal, 

the TSP would retain all original source documents, except for the weight ticket.22 

Within 7 days of picking up the shipment, the TSP is to physically send the original 

weight ticket to the PPSO, who then is to enter the shipment weight into the CWA23 and 

retain the document. 

Once the move is completed and the household goods have reached their destination, the 

TSP provides the service member a copy of the inventory listing and the DD Form 619-1. 

Then, the TSP is to prepare and send an electronic invoice to the PPSO that includes a 

 

16Throughout this document, we will refer to the DD Form 619 generically, to encompass both the DD 

Form 619 and the DD Form 619-1. 

17Throughout this document, we will use the term Personal Property Shipping Officer (PPSO) to refer to 

the transportation officer within the local DOD Personal Property Shipping Office. 18We did not review the rights and responsibilities that may have been agreed to between DOD and U.S. 

Bank with respect to these payments. 

19Throughout this document, the term “household goods” will be used generically to refer to household 

goods and personal property. 

20These services do not need to be entered in the DD Form 619. 

21Certain accessorial services require preapproval, while others do not. Preapproval is not required to be 

documented on the DD Form 619. 

22The weight ticket is from a third-party, state-regulated weighing station, and documents the shipment 

weight. 

23Technically, the PPSO enters the amount from the weight ticket into a local database, which then 

populates CWA. 
Page 5 GAO-05-402R DOD Transportation Payment Documentation 

Notice of Service Completion (NOSC)24 stating that the shipping services were provided. 

The PPSO is to review invoiced services submitted for payment, in terms of linehaul 

charges, and for accessorial services, compare those charges against the PPSO recorded 

preapproved services in CWA. In addition, the PPSO is to select a sample from the 

invoices submitted daily and request copies of supporting documentation from the TSP 

for those invoices selected. The PPSO is to review the scanned or faxed copies of 

supporting documentation, such as the DD Form 619 and inventory listing for the 

accessorial portion of the invoiced charges before approving them for payment. The 

PPSO’s review is aimed at ensuring the services in CWA were performed and the 

quantities are correct. Once approved, an automated matching process is to occur 

within PowerTrack, where the TSP-submitted invoice data are compared to the cost data 

in CWA. Items that match successfully within established tolerances and threshold 

levels are to be automatically paid to the TSP by U.S. Bank. 

Next, the Certifying Officer (CO)25 prints and reviews the PowerTrack Summary Invoice 

(PSI),26 listing the monthly total of all TSP invoices paid by U.S. Bank. The CO is to 

check for the presence of the necessary elements27 for all transactions and verify their 

accuracy primarily from information available in PowerTrack. The CO is to review all 

transactions over $2,500, those that meet a DOD-established threshold for price 

variances, and a random selection of additional PowerTrack transactions. The overall 

objective of these steps, according to SDDC, is to ensure the invoices contain the 

necessary substantiation and documentation for lawful and proper payment. Once the 

CO has verified the accuracy of the PSI, he or she is to sign the PSI to certify it as correct 

and proper for payment and DFAS reimburses U.S. Bank. 

GAO’s View of Proposed Documentation Policy 

Improvements to streamline the disbursement process related to service member’s 

moves should be made within a framework of adequate controls that reasonably ensure 

that payment transactions are properly authorized and sufficient records of these 

transactions are maintained. In theory, proper application of technology makes it 

possible to perform prepayment examination without assembling physical 

documentation. However, implementation of such technology does not change the basic 

objectives of prepayment examinations.28 Title VII identifies three essential steps to 

ensure that proper payment is authorized: (1) the acquisition of goods and services has 

been properly authorized as evidenced by an approved purchase order or contract; (2) 

the goods and services ordered have been delivered and accepted, evidenced by a 

 

24NOSC is a requirement before any consideration of payment on invoice can proceed. 

25The certifying official is appointed by the commander, activity director, or others of equivalent rank in 

writing and does not need to be part of the transportation office. 

26This occurs after the 15th of each month, or when U.S. Bank generates the PSI, whichever occurs later. 

27Examples of necessary data elements include a complete line of accounting for each line item and, where 

required, a standard documentation number for each transaction. 

28The objectives of prepayment voucher examinations are described in Title VII, section 6.5 entitled, 

“Prepayment Examination of Vouchers, General Requirements.” See also page 6 of Streamlining the 

Payment Process While Maintaining Effective Internal Control, GAO/AIMD-21.3.2. (Washington, D.C.: 

May 2000). 
Page 6 GAO-05-402R DOD Transportation Payment Documentation 

receiving and inspection report; and (3) a claim has been made against the government 

as evidenced by receipt of an invoice or bill. 

Families First does not fully meet Title VII documentation requirements for federal 

payments because the documentation that DOD is to use as evidence of receipt of 

accessorial services does not provide adequate assurances about the propriety of these 

services as intended in step 2 above. The documentation is not able to provide the 

necessary assurances on accessorial services because it is prepared by the TSP without 

independent corroboration upon preparation. Although the service member is to sign 

the inventory sheets and DD Form 619 upon pickup, when the documentation is 

prepared, and upon delivery of the household goods, the service member’s role in signing 

this documentation is not designed in such a way as to provide government verification 

of receipt of approved services. Further, the service member or other designated 

representative may lack the ability or incentive to verify all accessorial services. In 

addition, the documentation does not necessarily include all accessorial services 

applicable to a particular move. Apart from the copies viewed as part of sampling, the 

only evidence of service delivery that the PPSO would see for all shipments is the TSP’s 

NOSC on the invoice. To create the invoice the TSP is to extract accessorial and other 

shipment data from original source documents in their custody and input the information 

into PowerTrack as part of invoice submission. Then the TSP in essence self-certifies 

that the services ordered have been delivered and accepted, carrying out step 2 above 

through the NOSC indication in PowerTrack. 

The proposal also increases potential risk because the generated documentation 

supporting certain accessorial services is to be retained by the TSP. Phase I of SDDC’s 

Families First increases the level of automation in DOD’s personal property program, but 

does not completely eliminate all paper documentation. Therefore, physical document 

control remains an important part of the proposed process. One core objective of 

document control is to preserve and protect the integrity and validity of the information 

contained in the documents. Because the process is structured so that the original 

source documents are created by and remain in the custody of the TSP, and the PPSO 

reviews copies29 of original documents on a sample basis, the assurance to be gained by 

review of such documents is hindered by the increased risk that they may contain invalid 

data or be subject to potentially undetected alteration, whether intentional or 

unintentional. 

Preparation and custody of original source documentation by a service provider rather 

than the agency, though not expressly prohibited, does increase risk to the payment 

process. Other permissible modifications to the traditional practice that agencies 

confirm receipt of services prior to payment have been made. For example, agency 

payment of transportation charges in advance of completion of services is specifically 

allowed by statute. Federal “Fast Pay” procedures also contemplate payment to vendors 

for purchases under $25,000 before the agency processes evidence of its receipt of goods 

 

29SDDC indicated that the copies would most likely be faxed to the PPSO or scanned by the TSP and sent 

electronically to the PPSO. 
Page 7 GAO-05-402R DOD Transportation Payment Documentation 

and services, but these procedures call for proper documentation of such receipt.30 Each 

permissible modification to the traditional payment practice increases the risk of 

improper payments and the combination of such practices further increases such risk, 

absent compensating controls. 

These factors, when considered collectively in context with the objectives of Title VII 

documentation requirements, increase the risk of improper transportation payments. 

Management must determine what changes to the documentation procedures or what 

additional controls will mitigate these risks so that the documentation requirements of 

Title VII are fully met. The objective of such controls should be to help ensure that 

invoiced accessorial services are allowed, necessary, and were indeed rendered. 

Recognizing that cost-benefit considerations are important to any control procedures, 

management must make such assessments and determinations based on its experience, 

through both quantitative and qualitative analysis. Such analysis should be applied to the 

full range of potential options for possible solutions. In our discussions, SDDC told us of 

certain planned procedures, such as quality control inspections where DOD quality 

control inspectors would be present at selected shipments when being picked up or 

delivered. If based on relevant analysis and potential deterrence for shipments not 

inspected is factored in, these inspections may be part of the solution. Another 

possibility would be strengthening the service member’s role in representing the 

government’s interest. A fully electronic signature system that complies with GAO 

guidance31 is another option for management consideration from a cost-benefit 

standpoint. 

As with any control procedure, effectiveness is dependent upon many factors, including 

whether the control activity is directly related to the control objective, how the control is 

applied, including the frequency with which it is applied and the proficiency of the 

personnel who apply the control, the reasonableness and relevance of the criteria used, 

and actions taken when an exception is identified, including follow-up. Therefore, 

monitoring of these procedures is needed to verify that they properly address the related 

risks, particularly related to the validity of the underlying transactions. 

As discussed earlier, the changes to transportation billing and payment proposed under 

Families First Phase I and the use of PowerTrack do not influence one way or the other 

the need for effective internal controls. In fact, GAO and Inspectors General audits of 

another bank sponsored electronic billing and payment system, the government-wide 

purchase card program, have found many instances of improper and fraudulent 

payments.32 While new technologies and reengineered business processes may change 

how accountable officials operate, their basic responsibilities and accountabilities 

remain unaltered. Consequently, these officials must have valid and documented 

assurances that the systems and key controls on which they rely for authorizing 

payments are working as intended and remain intact and effective over time. 

 

3048 C.F.R. §13.402(f)(2004). 

31Streamlining the Payment Process While Maintaining Effective Internal Control, GAO/AIMD-21.3.2 

(Washington, D.C.: May 2000). 

32Purchase Cards: Increased Management Oversight and Control Could Save Hundreds of Millions of 

Dollars, GAO-04-71T (Washington, D.C.: April 28, 2004). 
Page 8 GAO-05-402R DOD Transportation Payment Documentation 

In this regard, the Federal Managers’ Financial Integrity Act of 198233 (FMFIA) requires 

all executive branch agencies to periodically assess their systems of internal control 

using the assessment guidance issued by the OMB.34 Title VII also provides that FMFIA 

reviews be designed, executed, and reported in ways that show that payment processing 

controls are reliable. As part of DOD’s required internal control review under FMFIA, 

special emphasis could be given to testing controls of the Families First Phase I process, 

in order to help ensure effective implementation. 

 - - - - 

The contents of this report were discussed with Mr. George Thomas, Jr. of your staff. 

We hope our comments are responsive. If you have any questions, or would like to 

discuss these matters further, please contact me at (202) 512-6906 or Mary Arnold 

Mohiyuddin, Assistant Director, at (202) 512-3087. This report will be available at no 

charge on GAO’s Web site at http://www.gao.gov. 

Sincerely yours, 

McCoy Williams 

Director, Financial Management 

 and Assurance 

(195035) 

 

3331 U.S.C. 3512 (c), (d), commonly referred to as FMFIA. 

34OMB Circular A-123, Management’s Responsibility for Internal Control, was revised on December 21,

2004, and this revised version is effective for fiscal year 2006.