a

GAO

United States Government Accountability Office

Report to Congressional Committees

June 2005 DOD PROBLEM 

DISBURSEMENTS

Long-standing 

Accounting 

Weaknesses Result in 

Inaccurate Records 

and Substantial 

Write-offs

GAO-05-521
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-521.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gregory D. 

Kutz at (202) 512-9505 or kutzg@gao.gov. 

Highlights of GAO-05-521, a report to 

congressional committees 

June 2005

DOD PROBLEM DISBURSEMENTS

Long-standing Accounting Weaknesses 

Result in Inaccurate Records and 

Substantial Write-offs 

After decades of financial management and accounting weaknesses, 

information related to aged disbursement and collection activity was so 

inadequate that DOD was unable to determine the true value of the 

write-offs. While DOD records show that an absolute value of $35 billion 

or a net value of $629 million of suspense amounts and check payment 

differences were written off, the reported amounts are not reliable. Many of 

the write-offs represented transactions that had already been netted together 

(i.e., positive amounts offsetting negative amounts) at lower level accounting 

sites before they were recorded in the suspense accounts. This netting or 

summarizing of transactions misstated the total value of the write-offs and 

made it impossible for DOD to locate the support needed to identify what 

appropriations may have been under- or overcharged or determine whether 

individual transactions were valid. In particular, DOD could not determine 

whether any of the write-off amounts, had they been charged to the proper 

appropriation, would have caused an Antideficiency Act violation. 

It is important that DOD accurately and promptly charge transactions to 

appropriation accounts since these accounts provide the department with 

legal authority to incur and pay obligations for goods or services. DOD has 

hundreds of current and closed appropriation accounts that were authorized 

by law over the years. Similar to a checking account, the funds available in 

DOD’s appropriation accounts must be reduced or increased as the 

department spends money or receives collections that it is authorized to 

retain for its own use. Just as an individual who maintains multiple checking 

accounts must be sure that transactions are recorded to the proper account, 

DOD also must ensure that the proper appropriation account is charged or 

credited for each specific disbursement and collection. 

Our review found that DOD’s guidance and processes developed to ensure 

compliance with the legislation provided reasonable assurance that amounts 

were written off properly except that check payment differences did not 

have the required written certification. The write-off process did not correct 

underlying records and significant DOD resources were needed to ensure 

that write-off amounts were properly identified and handled. Also, using 

staff resources to process old transactions resulted in fewer staff to research 

and clear current problems. At December 31, 2004, DOD reports showed that 

after the write-offs, more than $1.3 billion (absolute value) of suspense 

amounts and $39 million of check differences remained uncleared for more 

than 60 days. However, DOD has acknowledged that its suspense reports are 

incomplete and inaccurate. 

Until DOD complies with existing laws and enforces its own guidance for 

reconciling, reporting, and resolving amounts in suspense and check 

differences on a regular basis, the buildup of current balances will likely 

continue, the department’s appropriation accounts will remain unreliable, 

and another costly write-off process may eventually be required. 

Over the years, the Department of 

Defense (DOD) has recorded 

billions of dollars of disbursements 

and collections in suspense 

accounts because the proper 

appropriation accounts could not 

be identified and charged. DOD has 

also been unable to resolve 

discrepancies between its and 

Treasury’s records of checks issued 

by DOD. Because documentation 

that would allow for resolution of 

these payment recording problems 

could not be found after so many 

years, DOD requested and received 

legislative authority to write off 

certain aged suspense transactions 

and check payment differences. 

The conference report (H.R. Conf. 

Rep. No. 107-772) that 

accompanied the legislation 

(Pub. L. No. 107-314) required GAO 

to review and report on DOD’s use 

of this write-off authority. 

 

What GAO Recommends

GAO recommends that DOD: 

• Require the accounting centers 

and field sites to perform 

proper reconciliations each 

month with Treasury records. 

• Use the results of the 

reconciliations to improve the 

quality of its suspense account 

reports. 

• Enforce guidance requiring 

disbursements in suspense be 

resolved within 60 days or be 

charged to current 

appropriations if research is 

unsuccessful. 

DOD concurred with our 

recommendations. 
Page i GAO-05-521 DOD Problems Disbursements

Contents

Letter 1

Results in Brief 4

Background 7

Actual Amount of Write-offs Cannot Be Calculated 12

Write-off Process Reasonably Effective but Resource Intensive 14

Write-offs Had Little Effect on Financial Reporting 21

Current DOD Policies Are Not Being Enforced 23

Conclusion 26

Recommendations for Executive Action 27

Agency Comments and Our Evaluation 27

Appendixes

Appendix I: Objectives, Scope, and Methodology 30

Appendix II: Comments from the Department of Defense 32

Appendix III: GAO Contact and Staff Acknowledgments 35

Table Table 1: DOD Reported Suspense Account Write-off Totals 13

Figures Figure 1: DOD’s Review Process 17

Figure 2: Check Payment Write-off Process 20

Figure 3: Suspense Amounts Older Than 60 Days 25

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Page 1 GAO-05-521 DOD Problem Disbursements

United States Government Accountability Office

Washington, D.C. 20548

A

June 2, 2005 Letr

Congressional Committees

The Department of Defense’s (DOD) inability to accurately account for and 

record its disbursements and collections has been a serious, long-standing, 

and much reported financial management problem. The department’s 

ability to improve its accounting has historically been hindered by its 

reliance on fundamentally flawed financial management systems and 

processes and a weak overall internal control environment. Rather than 

promoting quality financial information, DOD’s complex and inefficient 

payment processes have all too often inhibited the proper recording of 

transactions when they occur, including the prompt and proper matching 

of disbursements with obligations, which is a critical funds control 

measure. Having such payment recording problems means that DOD does 

not know the true amount of funds that it has available to obligate and 

spend in each appropriation account. As a result, DOD may not be using its 

funds in accordance with legislative requirements and risks overspending 

its appropriations or, conversely, forgoing purchases of needed items. Such 

problems also create an environment conducive to fraud, waste, and abuse 

because it is difficult, if not impossible, to monitor and audit individual 

disbursement transactions.

Over the years, we and DOD auditors have reported that the department 

recorded billions of dollars of disbursements and collections in suspense 

accounts because the proper appropriation accounts could not be 

identified. It is important that DOD accurately and promptly charge 

transactions to appropriation accounts since these accounts provide the 

department with legal authority to incur and pay obligations for goods or 

services. The Antideficiency Act requires that no officer or employee of 

DOD incur obligations or make expenditures in excess of the amounts 

made available by the appropriation accounts.1

 Therefore, DOD must 

(1) properly record obligations against appropriation accounts and 

(2) track disbursements related to such obligations and collections that 

should properly be credited to the account, in order to ensure that it is in 

compliance with the law. In some ways, appropriation accounts are similar 

to private checking accounts. The funds available in DOD’s appropriation 

accounts must be reduced or increased as the department spends money or 

receives collections that it is authorized to retain for its own use. Just as an 

1

 31 U.S.C. §1341.
Page 2 GAO-05-521 DOD Problem Disbursements

individual who maintains multiple checking accounts must be sure that 

transactions are recorded to the proper account, DOD must also ensure 

that the proper appropriation account is charged for each specific 

disbursement and collection.

Auditors have also reported problems with DOD’s ability to resolve 

differences between the summary and detail amounts reported by DOD for 

the paper checks it issued as well as differences with the amounts reported 

by banks for the paper checks that were cashed. DOD has long 

acknowledged that many disbursements, collections, and check 

differences remained in suspense for years and that the support needed to 

properly record them to specific appropriations no longer existed. 

Therefore, DOD requested and received legislative authority to write off 

certain aged suspense transactions and aged differences between checks 

issued and checks paid, hereafter referred to as check payment differences.

Section 1009 of the Bob Stump National Defense Authorization Act for 

Fiscal Year 20032

 (NDA Act) authorized DOD to write off long-standing 

debit and credit transactions that could not be cleared from the 

department’s books because DOD lacked the supporting documentation 

necessary to record the transactions to the correct appropriations. To be 

eligible for write-off,3

 suspense account transactions must have occurred 

prior to March 1, 2001, and check payment differences before October 31, 

1998. The Secretary of Defense was required to make a written 

determination that further efforts to identify the correct appropriation to 

charge are not in the best interest of the government. The legislation 

specified that DOD must complete any write-offs by December 2, 2004.

The conferees, in the report that accompanied the NDA Act,4

 directed that 

we review and report on DOD’s use of this write-off authority. As agreed 

with your offices, our objectives were to determine (1) what amount DOD 

wrote off using its legislative authority, (2) whether DOD had effective 

procedures and controls to provide reasonable assurance that amounts 

were written off in accordance with the legislation, (3) how the write-offs 

affected Treasury and DOD financial reports, and (4) what aged DOD 

2

 Pub. L. No. 107-314, 116 Stat. 2458, 2635 (Dec. 2, 2002).

3

 A write-off is a removal or clearance of suspense account transactions or check payment 

differences from DOD’s accounting records.

4

 H.R. Conf. Rep. No. 107-772, at 686 (2002).
Page 3 GAO-05-521 DOD Problem Disbursements

suspense account balances and check differences are being reported after 

the write-offs have been accomplished. In addressing this last objective, we 

also looked at whether DOD had procedures in place to prevent another 

build-up of aged, unsupported suspense transactions and check payment 

differences.

In conducting this work, we visited various Defense Finance and 

Accounting Service (DFAS) centers, the Department of the Treasury, and 

the office of the Secretary of Defense and gathered, analyzed, and 

compared information on how write-off amounts were identified and 

processed. We interviewed DOD officials to obtain a general understanding 

of DOD’s use of suspense accounts and compared DOD’s policies and 

practices for the write-offs to the specific provisions contained in the 

legislation and with any Treasury requirements. We identified and tested 

DOD’s primary controls over the suspense account write-offs. We 

interviewed officials to identify the impact of the write-offs on DOD and 

governmentwide suspense accounts and appropriation balances. We also 

reviewed DOD management reports, performance metrics data, and fiscal 

year 2004 financial statements to identify current outstanding suspense 

account balances and check differences. Because of serious data reliability 

deficiencies, which the department has acknowledged, it was not our 

objective to—and we did not—audit the completeness and accuracy of 

DOD reported amounts, including the write-off amounts. We performed our 

work from June 2004 through April 2005 in accordance with generally 

accepted government auditing standards. Appendix I provides details of 

our scope and methodology. We requested comments from the Secretary of 

Defense or his designee. We received written comments from the Principal 

Deputy Under Secretary of Defense (Comptroller), which are reprinted in 

appendix II. We also sent the draft report to the Secretary of the Treasury. 

Treasury sent us a few technical comments, which we have incorporated in 

the report as appropriate.
Page 4 GAO-05-521 DOD Problem Disbursements

Results in Brief DOD reported that it wrote off an absolute value of $35 billion, or a net 

value of $629 million,5

 of suspense account amounts6 and check payment 

differences using its legislative authority. However, these reported amounts 

do not represent the true value of the write-offs. Neither of these amounts 

accurately represents the total value of all the individual transactions that 

DOD did not correctly record to appropriations and, therefore, left in 

suspense for years. Many DOD accounting systems and processes routinely 

offset individual disbursements, collections, adjustments, and correcting 

entries against each other and recorded only the net amount in suspense 

accounts. Over time, amounts might even have been netted more than 

once. Because DOD had not developed effective tools for tracking or 

archiving the individual transactions that had been netted together, there 

was no way for DOD to know how much of the suspense amounts recorded 

prior to March 1, 2001, represented disbursements and collections versus 

how much represented adjustments and correcting entries. For example, 

one of the write-offs consisted of a single $326 million amount for which 

DFAS Cleveland was unable to distinguish any of the underlying individual 

transactions and, therefore, had no way of knowing what amounts might 

have been netted or summarized to arrive at that figure. In order to 

calculate absolute values for the suspense account write-offs, DOD could 

only add together the already netted disbursement, collection, adjustment, 

and correcting amounts. For check payment differences, DOD reported 

that it wrote off $14.5 million of net differences. As with suspense account 

write-offs, DOD could not calculate the true absolute value because 

officials could not identify the individual underlying checks.

5

 When absolute amounts are reported, collections and adjustments are added to 

disbursements. When net amounts are reported, collections and adjustments are offset 

against disbursements. Reporting net amounts can significantly understate the magnitude 

and impact of transaction errors. 

6

 We use the word “amounts” rather than “transactions” because DOD’s suspense account 

entries and check payment differences are often not recorded at the transaction level. 

DOD’s write-offs included summarized totals of monthly suspense account activity, net 

monthly differences between Treasury and DOD check issue totals, reconciling 

adjustments, and other non-transaction-level information.
Page 5 GAO-05-521 DOD Problem Disbursements

To manage the suspense account write-off process, DOD developed 

detailed documentation and multilayered review procedures that provided 

reasonable assurance of compliance with the legislation. Multiple layers of 

review were performed by high-ranking DOD officials from DFAS, the 

military service and defense agency financial management offices (FMO), 

and the DOD Comptroller’s office. In addition, a thorough review was 

performed by DFAS internal review staff. DOD reviewers identified and 

questioned or rejected proposed write-off amounts that did not appear to 

comply with the legislation, including 18 of the original 116 packages7

submitted by DFAS centers. One of the main reasons that the reviewers 

rejected packages was because center officials had not included sufficient 

evidence that the proposed write-off amounts were recorded in DOD 

systems prior to March 1, 2001. While reasonably effective, DOD’s 

documentation and review procedures were costly. Because DOD had not 

enforced the use of proper accounting practices or complied with its own 

regulations, significant staff and management resources were required to 

prepare, support, and review the suspense write-off packages. For check 

payment differences, the process was much less complicated. DFAS center 

officials prepared, reviewed, and approved all of the proposed write-off 

amounts. All check payment difference write-offs met the provisions of the 

legislation except that the required written determination by the Secretary 

of Defense was not obtained prior to the write-offs being recorded by 

Treasury.

DOD left suspense account transactions and check payment differences 

unresolved for so long that supporting documentation was lost or 

destroyed. As a result, DOD could not identify which, if any, of the aged 

underlying transactions would have resulted in Antideficiency Act 

violations had they been correctly charged. The write-off of aged suspense 

account amounts and check payment differences did not change DOD’s 

reported appropriation account balances or correct any of the over- and 

undercharges that the department may have made to those appropriations 

over the years. The write-off process simply reclassified suspense amounts 

and check payment differences from DOD accounts to general government 

accounts. The most significant result of the write-off process was to ensure 

7

 Each write-off package varied in content but generally included a certification statement 

from the DFAS center director, an electronic file and a narrative description of the 

individual amounts that made up the package, and any additional system reports or 

documents that demonstrated compliance with legislative limits regarding dates and 

accounts. 
Page 6 GAO-05-521 DOD Problem Disbursements

that current appropriation balances would not be required to cover the 

aged unrecorded transactions.

The suspense account write-offs also did not affect the federal cumulative 

budget deficit as reported by Treasury. Amounts in DOD suspense accounts 

had already been counted against the federal deficit in the years that DOD 

reported the related collection and disbursement transactions to Treasury. 

For check payment differences, the surplus/deficit had not been adjusted 

to recognize differences between issued check amounts as reported by 

DOD and paid check amounts as reported by banks. Since the check 

payment differences had not previously been reported as disbursements by 

DOD and thus included in the deficit calculation, the cumulative federal 

deficit was increased by DOD’s write-off amount of $14.5 million.

Even after the write-offs and despite policies requiring the resolution of 

suspense account transactions and check differences within 60 days, DOD 

continues to have significant aged amounts outstanding. According to 

DOD reports for December 2004, the absolute value of suspense account 

transactions over 60 days old was $1.3 billion. However, as with DOD’s 

write-off estimate, this figure is unreliable because DOD officials were 

unable to reconcile the reports with Treasury records to ensure that the 

information included was complete and accurate. DOD guidance requires 

the reconciliation of the suspense account reports, but DFAS management 

was not enforcing the guidance. For check differences, Treasury reported 

that the absolute value of differences aged over 60 days was $39 million as 

of December 2004. DFAS officials explained that $36 million of this amount 

is related to the lengthy processing times for expenditure transactions 

related to overseas military deployments.

The keys to eliminating aged problem disbursements and preventing their 

future occurrence include improved disbursement processes and better 

management controls. In line with these goals, DOD is currently developing 

and implementing a plan for improving its accounting systems that is 

intended to, among other things, reduce the occurrence of disbursement 

errors. However, we reported in January 20058

 that DOD has made only 

limited progress in its system improvements. We have made numerous 

systems-related recommendations that have not yet been addressed and 

systems modernization is likely many years away. Therefore, DOD cannot 

afford to wait until new systems are in place but should take action now to 

8

 GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).
Page 7 GAO-05-521 DOD Problem Disbursements

prevent the buildup of aged, unidentifiable transactions in suspense 

accounts. DOD has already developed policies and procedures that if 

enforced would improve basic accounting practices at DFAS centers and 

field sites. Therefore, we are recommending that DOD (1) enforce its policy 

that DFAS centers and field-level accounting sites perform proper 

reconciliations with Treasury each month, (2) use the results of the 

reconciliations to improve the quality of its suspense account reports, and 

(3) enforce guidance requiring that disbursements in suspense be resolved 

within 60 days or be charged to current appropriations if research attempts 

are unsuccessful.

In comments on a draft of this report, DOD agreed with our 

recommendations and described actions being taken to implement them.

Background For decades, we and DOD auditors have reported that DOD has not 

promptly or accurately charged its appropriation accounts for all of its 

disbursements and collections. Instead, DOD has recorded billions of 

dollars in suspense and other accounts that were set up to temporarily hold 

disbursements and collections until the proper appropriation account 

could be identified. But, rather than being a temporary solution, amounts 

accumulated and remained in suspense for years because DOD did not 

routinely research and correct its records. Over time, DOD lost the ability 

to identify the underlying disbursement and collection transactions in 

suspense because they had been summarized and netted over and over. 

Also, in many cases the documentation necessary to properly account for 

the transactions was lost or destroyed.

It is important that DOD charge transactions to appropriation accounts 

promptly and accurately because these accounts provide the department 

with legal authority to incur and pay obligations for various kinds of goods 

and services. DOD has hundreds of current and closed appropriation 

accounts that were authorized by law over the years. In some ways, 

appropriation accounts are similar to an individual’s checking account—

the funds available in DOD’s appropriation accounts must be reduced or 

increased as the department disburses money or receives collections that it 

is authorized to retain. Just as an individual who maintains multiple 

checking accounts must be sure that transactions are recorded to the 

proper account, DOD also must ensure that the proper appropriation 

account is charged or credited for each specific disbursement and receipt. 

DOD’s failure over the years to promptly and correctly charge and credit its 
Page 8 GAO-05-521 DOD Problem Disbursements

appropriation accounts has prevented the department and Congress from 

knowing

• whether specific appropriations were over- or underspent,

• whether money was spent for authorized purposes, and

• how much money was still available for spending in individual 

appropriation accounts.

Many disbursements and collections remained in DOD suspense accounts 

well beyond the date that the associated spending authority expired and 

canceled.9

DOD’s inability to properly record its financial transactions has also 

created an environment conducive to fraud, waste, and mismanagement. 

Auditors have issued numerous reports over the years that identify specific 

problems related to DOD’s poor controls over its accounting for 

disbursements and collections.10 But DOD’s ability to improve its 

accounting has historically been hindered by its reliance on fundamentally 

flawed financial management systems and processes and a weak overall 

internal control environment. Complex disbursement processes, missing 

information, and errors often combine to prevent DOD from promptly and 

accurately charging its appropriation accounts.

9

 Generally, amounts made available to DOD by annual appropriations acts are available 

to incur new obligations for 1 fiscal year unless expressly otherwise provided by the 

appropriation act. Once the period of availability for incurring new obligations expires with 

respect to an appropriated amount, the amount remains available for 5 fiscal years for the 

purpose of adjusting and paying obligations properly incurred prior to the expiration of the 

appropriation. After 5 years in expired status, the account is closed and remaining balances 

are canceled. Once an account is closed, an obligation that is properly chargeable to the 

closed account is payable from an account currently available for the same purpose up to 

1 percent.

10 See GAO, Canceled DOD Appropriations: $615 Million of Illegal or Otherwise Improper 

Adjustments, GAO-01-697 (Washington, D.C.: July 26, 2001); DOD Contract Payments: 

Management Action Needed to Reduce Billions in Adjustments to Contract Payment 

Records, GAO-03-727 (Washington, D.C.: Aug. 8, 2003); Military Pay: Army National Guard 

Personnel Mobilized to Active Duty Experienced Significant Pay Problems, GAO-04-89

(Washington, D.C.: Nov. 13, 2003). Also, see Department of Defense, Office of Inspector 

General, Independent Auditor’s Report on the Fiscal Year 2004 DOD Agency-wide 

Financial Statements, Report No. D-2005-017 (Washington, D.C.: Nov. 12, 2004). 
Page 9 GAO-05-521 DOD Problem Disbursements

Disbursement Problems In general, DOD’s disbursement process begins with military service or 

defense agency personnel obligating11 funds in specific appropriations for 

the procurement of various goods and services. Once the goods or services 

are received, DFAS personnel pay for them using electronic funds transfers 

(EFT), manual checks, or interagency transfers. Although the bill for goods 

and services received should be matched to the relevant obligation to 

ensure that funds are available for payment before any disbursement is 

made, DFAS, military service, or defense agency personnel often do not 

identify the correct appropriation and perform the match until after making 

the payment. If the appropriation and obligation then cannot be identified 

based on the available information, the disbursement is recorded in a 

suspense account until research is performed, additional information is 

received, or any errors are corrected. If DFAS staff cannot determine the 

correct appropriation account to charge, DOD policies allow DFAS staff to 

request approval for charging current funds.

Several military services and DOD agencies can be involved in a single 

disbursement, and each has differing financial policies, processes, and 

nonstandard nonintegrated systems. As a result, millions of disbursement 

transactions must be keyed and rekeyed into the vast number of systems 

involved in any given DOD business process. Also, DOD disbursements 

must be recorded using an account coding structure that can exceed 

75 digits, and this coding structure often differs by military service in terms 

of the type, quantity, and format of data required. The manual entry and 

reentry of the account code alone often results in errors and missing 

information about transactions. Automated system edit checks identify 

transaction records with invalid or missing account coding information, 

such as the appropriation account number or the chargeable entity, and 

refuse to process the faulty records. DFAS then records the problem 

disbursements12 in suspense accounts until the individual transactions can 

be corrected and reprocessed by the accounting systems.

11 Obligations include amounts of orders placed, contracts awarded, services received, and 

similar transactions during a given period that will require payment during the same or a 

future period.

12 For this report, we define problem disbursements as transactions that contain errors, 

missing information, or other problems that prevent DOD from properly accounting for 

them.
Page 10 GAO-05-521 DOD Problem Disbursements

Other reasons for disbursement transactions to be recorded to suspense 

accounts include

• no valid obligation data identified,

• DOD disbursement records and Treasury disbursement records differ, 

and

• unsupported charges between DOD services and defense agencies.

Collection Problems DOD uses suspense accounts to hold several different kinds of collections 

until they can be properly credited to the relevant appropriation account or 

organization. For example, contractors often return overpayments they 

received for the goods and services they provided without including 

sufficient information for DOD to identify which account or which service 

location should be credited for the reimbursement. DOD also routinely 

accumulates estimated payroll tax withholding amounts in suspense 

accounts until the payments must be transferred to the Internal Revenue 

Service. If the estimates are higher than actual payments, amounts can be 

left in suspense indefinitely. Similarly, DOD records user fees collected for 

various purposes, such as grazing rights and forestry products, to suspense 

accounts until the accumulated funds are credited to the correct 

appropriation account or organization. DOD has recognized that using 

suspense accounts for accumulating withholding taxes and user fees is not 

appropriate and exacerbates its problems with these accounts but has 

stated that system and other problems prevent establishment of proper 

holding accounts for these collections.

Check Differences Check differences refer to differences between the summary and detail 

amounts reported by DOD for the paper checks it issued as well as 

differences with the amounts reported by banks for the paper checks that 

were cashed. Monthly, Treasury compares the DOD summary and detail 

amounts and bank discrepancy reports, identifies check issue and payment 

differences, and sends a report to DOD with the cumulative difference 

amount. While the check issue and payment differences could occur for 

various reasons, some of the common reasons are

• check issue records excluded from DOD detail reports but included in 

DOD summary reports to Treasury,
Page 11 GAO-05-521 DOD Problem Disbursements

• erroneous check amount reported by DOD,

• check paid by the bank but not reported by DOD,

• voided check erroneously reported by DOD as check issued, and

• check dated and paid by the bank in a previous month but DOD reported 

its issuance in the current month.

DOD does not record these differences in a suspense account or any other 

holding account. However, Treasury continues to track and report aged 

check differences monthly to DOD until they are cleared.

Legislative Requirements DOD recognized that it would never be able to correctly account for 

billions of dollars of aged, unidentifiable, and unsupportable amounts 

recorded in its suspense accounts or reported as check payment 

differences. Therefore, DOD management requested and received statutory 

authority to write off these problem transactions. The NDA Act authorized 

DOD to cancel long-standing debit and credit transactions that could not be 

cleared from the department’s books because DOD lacked the supporting 

documentation necessary to record the transactions to the correct 

appropriations. The legislation specified that the write-offs

• include only suspense account disbursement and collection 

transactions that occurred prior to March 1, 2001, and that were 

recorded in suspense accounts F3875, F3880, or F3885;13

• include only check payment differences identified by Treasury for 

checks issued prior to October 31, 1998;

• be supported by a written determination from the Secretary of Defense 

that the documentation necessary for correct recording of the 

transactions could not be located and that further research attempts 

were not in the best interest of the government;

13 The legislation defined F3875 as a general Budget Clearing Account, F3880 as the 

Unavailable Check Cancellations and Overpayments Account, and F3885 as the 

Undistributed Intergovernmental Payments Account.
Page 12 GAO-05-521 DOD Problem Disbursements

• be processed within 30 days of the Secretary’s written determination; 

and

• be accomplished by December 2, 2004.

Actual Amount of 

Write-offs Cannot Be 

Calculated

DOD officials estimated the value of the suspense account and check 

payment write-offs to be an absolute amount of nearly $35 billion, or a net 

amount of $629 million. However, neither of these amounts accurately 

represented the total value of all the individual transactions that DOD 

could not correctly record to appropriations and, therefore, left in suspense 

for years.

Many DOD accounting systems and processes routinely offset individual 

disbursements, collections, adjustments, and correcting entries against 

each other and record only the net amount in suspense accounts. Over 

time, amounts might even have been netted more than once. Because DOD 

had not developed effective tools for tracking or archiving the individual 

transactions that had been netted together, there was no way for DOD to 

know how much of the suspense amounts recorded prior to March 1, 2001, 

represented disbursements and collections versus how much represented 

adjustments and correcting entries. In order to calculate absolute values 

for the suspense account write-offs, DOD could only add together the 

already netted disbursement, collection, adjustment, and correcting 

amounts. Table 1 shows the net and absolute values of the suspense 

write-offs as calculated by DOD and illustrates how the use of net values 

can present an entirely different picture than the use of absolute values. 

While suspense account write-offs related to Army appropriations 

represented nearly the total of the calculated absolute values, they 

represented less than 30 percent of the calculated net values—far less than 

the net write-off amounts related to Navy appropriations.
Page 13 GAO-05-521 DOD Problem Disbursements

Table 1: DOD Reported Suspense Account Write-off Totals

Source: GAO analysis of DOD data.

Also, amounts that have been netted and that cannot be traced back to the 

underlying transactions cannot be audited. For the nearly $34 billion of 

suspense write-offs related to Army appropriations, DFAS had almost no 

transaction level information that could differentiate between

• individual disbursement and collection transactions that related to 

specific Army appropriations;

• net reconciling adjustments that resulted from comparing monthly 

totals for Army records with Treasury records;

• net cumulative monthly charges from other military services, defense 

agencies, or federal agencies for goods or services provided to the 

Army;

• summarized suspense account activity reported by Army field 

accounting sites; and

• correcting entries from center or field staff meant to clear amounts from 

suspense.

Dollars in millions

DFAS center Customer

 Absolute

values

Percentage

of total

absolute

values Net values

Percentage

of total net

values

Cleveland Navy $724.5 2.08% $489.1 79.55%

Denver Air Force 45.3 0.13% (5.5) -0.89%

Indianapolis Army 33,963.0 97.45% 180.8 29.41%

Columbus Defense 

agencies 9.1 0.03% 5.7 0.92%

Indianapolis Defense 

agencies 111.1 0.32% (55.5) -9.02%

Kansas City Marine 

Corps 0.3 0.00% 0.2 0.03%

Total $34,853.3 100.00% $614.8 100.00%
Page 14 GAO-05-521 DOD Problem Disbursements

According to DFAS officials, the system used to account for Army 

appropriations had accumulated about 30 years worth of individual, netted, 

summarized, and correcting entries that could not be identified and 

therefore were eligible for write-off.

Unlike the accounting system used for Army, the systems used by DFAS 

centers to account for the other military services and the defense agencies 

did not accumulate billions of dollars in correcting entries that were meant 

to clear amounts from suspense. However, they did include significant 

amounts of non-transaction-level information, such as reconciling 

adjustments, net charges, and summarized account activity. For example, 

one of the write-offs processed for the Navy consisted of a single 

$326 million amount for which DFAS Cleveland was unable to distinguish 

any of the underlying individual transactions. As a result, DFAS Cleveland 

had no way of knowing what amounts might have been netted or 

summarized in order to arrive at the $326 million figure.

DOD also wrote off $14.5 million of differences between what DOD 

reported as its check payment amounts and what Treasury reported as 

check amounts cleared through the banking system. Treasury had 

accumulated these check payment differences and reported them to DOD 

monthly on its Comparison of Checks Issued reports. Since the Treasury 

reports contained only the cumulative net check payment differences and 

DOD could not identify all of the underlying checks, as with suspense 

account write-offs, it was not possible to calculate an absolute value for all 

of the individual check errors. All of the monthly summary totals reported 

by Treasury for paper checks cashed during the period covered by the 

legislation were higher than the totals reported by DOD for paper checks 

issued during that period.

Write-off Process 

Reasonably Effective 

but Resource Intensive

To manage the suspense account write-off process, DOD developed 

detailed guidance and review procedures that provided reasonable 

assurance, given the limitations in the quality of the underlying data, that 

the department complied with legislative requirements. Before suspense 

amounts were approved for write-off, multiple layers of DOD officials and 

internal auditors reviewed the packages submitted by the five DFAS 

centers. The write-off packages varied in content but generally included a 

certification statement from the DFAS center director, an electronic file 

and a narrative description of the individual amounts that made up the 

package, and any additional system reports or documents that 

demonstrated compliance with legislative limits regarding dates and 
Page 15 GAO-05-521 DOD Problem Disbursements

accounts. For check payment differences, DOD’s management process was 

less complicated—written instructions on how to submit the write-off 

amounts to Treasury were prepared, but there were no reviews other than 

those done at the DFAS centers. The check differences write-offs also met 

the legislative requirements except that the Secretary of Defense did not 

make a written determination regarding the necessity for the write-offs. 

The overall write-off process was not without cost to DOD, however; 

DOD’s lack of enforcement of proper accounting procedures and its own 

regulations meant that significant management and staff resources were 

required to prepare, support, and review the packages submitted for 

write-off.

Suspense Account Write-off 

Guidance and Review 

Processes

DOD developed guidance for the preparation of the write-off packages and 

implemented a series of reviews by high-ranking DOD officials. The 

guidance identified different types of transactions in suspense and 

specified the documentation requirements for each. For example, nearly a 

quarter of the write-offs represented disbursement transactions for which 

vouchers existed, but the vouchers did not contain sufficient information 

for the transactions to be posted to valid lines of accounting. For this type, 

the DFAS center director had to certify that steps were taken to obtain the 

missing information to clear the transactions and that further action was 

not warranted. For more than half of the write-off amounts, the underlying 

transactions could not be identified and vouchers and supporting 

documentation did not exist. Guidance included requirements that this 

write-off type be accompanied by written narrative from the DFAS center 

that described in detail the reason why amounts could not be cleared 

through normal processing.

DFAS centers identified amounts to be written off in various ways 

depending upon the systems and processes in place at each center. Using 

the guidance discussed above, center officials then separated the amounts 

into transaction types, prepared the required supporting documentation or 

narratives, and grouped the amounts into “packages” to be sent forward for 

review.
Page 16 GAO-05-521 DOD Problem Disbursements

DOD’s multilayered review process served as the primary control for 

providing reasonable assurance that the suspense account write-offs met 

legislative requirements. As illustrated in figure 1, the reviews were 

performed sequentially by officials from the DFAS centers, the military 

service and defense agency FMOs, DFAS Arlington14 and DFAS internal 

review and by the DOD Comptroller, the Secretary of Defense’s designee. 

As each level of review was completed, the reviewing official was required 

to sign a certification statement or memorandum. The certification was a 

DOD requirement to demonstrate that reviews had been performed by 

various management officials and all agreed that the proposed write-off 

amounts met the legislative requirements.

14 According to DFAS officials, DFAS Arlington is responsible for overseeing and 

coordinating many of the accounting functions performed at the other five DFAS centers, 

including overseeing the write-off of suspense account transactions and check payment 

differences.
Page 17 GAO-05-521 DOD Problem Disbursements

Figure 1: DOD’s Review Process

CenterIR FM

DFAS

center

Prepares write-off 

package and center 

certification

DFAS Internal

Review (IR)

Reviews write-off

packages

DOD

Comptroller

Reviews write-off 

package containing 

all certification 

statements

DFAS 

Center

Prepares journal adjusting 

entries and clears write-off 

amounts from accounting 

system

DOD

Comptroller

Secretary or designee 

signs Comproller's

Certification

DFAS

Arlington

Sends journal 

adjusting entries to 

Treasury

U.S.

Treasury

Processes write-offs

DFAS

center

Forwards package 

with center 

certification and 

Internal Review letter 

to service financial 

management (FM)

Service financial

management

Reviews write-off 

packages

Service financial

management

Director signs 

financial 

management 

certification 

DFAS

center

Forwards financial 

management 

certification to DFAS 

Arlington

DFAS

Internal Review

Sends package with 

Internal Review letter 

to DFAS Arlington

and a copy of the

letter to DFAS center

Reviews package with 

center, Internal Review, 

and financial 

management 

certifications

Is

write-off

package

approved?

Is

write-off

package

approved?

Is

write-off

package

approved?

Package is

returned for rework

Package is

returned

for rework

Package is

returned for rework

3

1 3

DFAS

Arlington

Director signs DFAS 

Arlington certification

DFAS

Arlington

DFAS Arlington

Internal Review

Validates write-off 

amount by signing 

memorandum

DFAS

Arlington

Notifies DFAS 

centers that Treasury 

has completed writeoff

9 11a

7

8

1789

THEDEPARTMENTOFTHETREASURY

No

Yes

Yes

Yes

No No

Source: GAO analysis of DOD data.

8

12

2

2

1 4

4

6

Center

IR

FMFM

Center

IR

9

Center

IR

Center

IR

FM

Memo

5

11 13

Comptroller

Arlington

Arlington

7

10

5 6
Page 18 GAO-05-521 DOD Problem Disbursements

DOD’s review process was effective in identifying write-off amounts that 

did not appear to meet legislative requirements. DOD reviewers told us—

and documentary evidence supports their claims—that additional 

information was requested from DFAS centers to support various 

questioned amounts or that packages with unsupported amounts were 

rejected and returned to the centers. For example, a $326 million package, 

consisting of a single amount supposedly representing transactions dating 

back to May 1992, was questioned by DFAS Arlington, DFAS internal 

review, and the Comptroller’s office. Because no supporting detailed 

transactions were identified and because the package did not clearly 

demonstrate that the amount had been recorded prior to March 1, 2001, the 

package was flagged. Reviewers contacted the originating DFAS center and 

requested additional documentation and explanation. The center provided 

the reviewers with detailed analyses demonstrating that the proposed 

write-off amounts had to represent transactions transferred into the 

center’s suspense accounts when the center was established in May 1992. 

Based on the additional evidence, the reviewers concluded that the 

proposed write-off met legislative requirements and approved the package. 

DOD reviewers rejected numerous proposed write-off amounts that did not 

comply with the legislation, including 18 of the original 116 packages 

submitted by the DFAS centers, often because they did not clearly support 

a transaction date prior to March 1, 2001.

To ensure suspense write-off amounts were recorded within 30 days of the 

determination by the Secretary of Defense’s designee15 and before the 

legislative deadline of December 2, 2004, DFAS center officials reviewed 

accounting system records and requested additional information from their 

staff. The Columbus, Denver, and Indianapolis DFAS centers provided us 

with information that demonstrated the time frames were met with a few 

exceptions.16 DFAS Cleveland and DFAS Kansas City officials told us that 

they met the time frames for write-offs but could not provide any 

supporting documentation. Officials at these centers explained that as soon 

as the Comptroller’s office certified each write-off package, center staff 

sent data files to system technicians specifying the information to be 

deleted from suspense account records. According to officials, once the 

15 The Secretary of Defense delegated certification responsibility to the DOD Comptroller to 

make the required written determinations.

16 Three of the 53 write-off amounts we reviewed were recorded 42 days, rather than 

30 days, after the certification. Also, one write-off amount was approved on December 2, 

2004, and recorded in center accounting systems on December 6, 2004.
Page 19 GAO-05-521 DOD Problem Disbursements

technicians had deleted the records, they sent e-mails back to the 

requesting center officials confirming that they had deleted the information 

within the required time frames. However, center officials were unable to 

provide us with copies of these e-mails or the deleted files.

Check Payment Differences 

Write-off Process

Although DOD did not establish a multilayered review process for 

check payment differences, the department did comply with legislative 

requirements for the write-offs with one exception—the Secretary of 

Defense did not provide the required written determination prior to 

Treasury’s recording of the write-off amounts.

As specified in the legislation, DFAS centers used Treasury reports (the 

Treasury Comparison of Checks Issued reports) to identify check payment 

differences dated prior to October 31, 1998. DFAS staff reviewed available 

documents to determine that sufficient information was no longer available 

to identify the proper appropriation account. Even for very large 

differences, DOD’s accounting records provided no information to help 

explain the difference in checks issued and paid or to identify what records 

needed correction. For example, the Treasury report included a single 

difference of almost $6 million (over 40 percent of the total write-off 

amount) that represented a check issued on October 31, 1991, by DFAS 

Columbus payable to the U.S. Treasury. DFAS Columbus was unable to 

locate any documentation to support the reason for the check payment, the 

amount of the check, or the associated appropriation.

DOD established a much abbreviated process for check payment 

differences write-offs. Rather than having check payment write-offs 

reviewed by the Comptroller’s office, DFAS Arlington, DFAS internal 

review, and military service and defense agency FMOs prior to submission 

to Treasury, DOD relied solely on DFAS center management to ensure 

compliance with the legislation. Our review indicated that center officials 

adequately documented that all amounts written off were dated prior to 

October 31, 1998, and were reported on the Treasury Comparison of 

Checks Issued report. However, DOD did not comply with the requirement 

in the legislation that prior to submission to Treasury, the Secretary of 

Defense make a written determination that DOD officials have attempted 

without success to locate the documentation necessary to identify which 

appropriation should be charged with the amount of the check and that 

further efforts to do so are not in the best interests of the United States. 

In October 2004, after DOD had submitted all of the check payment 

difference write-offs to Treasury and Treasury had recorded them, 
Page 20 GAO-05-521 DOD Problem Disbursements

DOD asked DFAS internal review to look at all the submissions and 

determine whether they complied with the legislation. According to a DFAS 

Arlington official, internal review completed its work and concluded that 

the check payment write-offs sent to Treasury were certified by disbursing 

officers, DFAS centers, and the services (either in writing or orally) prior to 

clearing the transactions. The official also stated that this matter has been 

forwarded to the DOD Comptroller’s office for a formal determination to 

meet the legal requirements under the now expired law. Figure 2 below 

illustrates the write-off process for check payment differences.

Figure 2: Check Payment Write-off Process

Resource Intensive Write-off 

Process

The write-off process itself could not and did not fix DOD’s underlying 

problems—outdated, nonstandard, and nonintegrated financial systems 

and lack of enforcement of proper accounting policies and procedures—

that led to the build-up of aged, unsupported suspense transactions and 

check payment differences. To the extent that DOD allows large aged 

suspense and check difference balances to recur, the department will again 

be required to undertake costly procedures to try to support the proper 

recording of those transactions or to write them off.

According to DOD officials, numerous staff members at every level were 

needed to prepare, support, and review the write-off packages and, in some 

instances, to rework previously submitted packages. For example, DOD 

officials told us that for the most part, the research and preparation of the 

write-off packages represented additional tasks that were added to the 

staff’s normal workload. We were told that, although staff tried to prioritize 

2002 2003 2004 2005

U.S. Treasury

Processes

adjustments

1789

THEDEPARTMENTOFTHETREASURY

1789

THEDEPARTMENTOFTHETREASURY

FY03 12-03 10-04 3-05

DFAS 

Internal

Review

Receives

write-off

packages

for review

DFAS Arlington and

U.S. Treasury

Reconcile write-off

amount to general

government suspense

accounts

DFAS

Internal

Review

Completes

review of

write-off

packages

DFAS Centers

prepare and approve

write-off

Write-off

completed

Agency

events

Write-off

steps

Source: GAO analysis of DOD data.
Page 21 GAO-05-521 DOD Problem Disbursements

their work in order to prevent a backlog related to current suspense 

account balances, they could not keep up with their daily activities and 

current suspense account balances increased over the period. Also, several 

DFAS center officials told us that for much of 2003, DFAS Arlington, the 

Comptroller’s office, and Treasury officials tried to reach an agreement on 

exactly how to process the write-off amounts. Because the official 

guidance was not issued by DFAS Arlington until January 2004, there was a 

significant delay in preparing the write-off packages. Although DOD had 

hoped to finish the write-offs by the end of fiscal year 2004, only 

24 packages had been approved by that time. DOD had to assign additional 

resources to enable the remaining 71 packages to be reviewed, approved, 

and processed by December 2, 2004, the legislative cutoff date.

Write-offs Had Little 

Effect on Financial 

Reporting

Writing off aged suspense account amounts and check payment differences 

did not change DOD’s reported appropriation account balances. Nor did 

the write-offs correct any of the over- and undercharges that may have been 

made to those appropriations over the years as a result of not promptly 

resolving suspense account transactions and check payment differences. 

DOD will never identify which, if any, of the aged underlying transactions in 

suspense would have resulted in Antideficiency Act violations had they 

been correctly charged. The suspense account write-offs also did not affect 

the reported federal cumulative budget deficit; however, the write-off of 

check payment differences increased the deficit by $14.5 million. The most 

significant result of the write-off process was to guarantee that current 

appropriation balances would not be required to cover the aged 

unrecorded transactions.

Appropriation Account 

Reports

The legislated write-off of aged suspense account amounts and check 

payment differences did not change DOD’s current or past appropriation 

account balances. Because amounts in suspense and check payment 

differences had never been recorded to the proper appropriation accounts, 

DOD had over- or undercharged these appropriations. To accomplish the 

write-off, Treasury reclassified the aged suspense amounts that met 

legislative requirements from DOD-specific suspense accounts to 
Page 22 GAO-05-521 DOD Problem Disbursements

non-agency-specific general government suspense accounts.17 The check 

payment differences, which had never been recorded in any DOD accounts, 

were simply “sent” to Treasury for recording in that same general 

government suspense account. Although it was unlikely that DOD would 

ever identify individual aged transactions and the support for their proper 

recording, the write-off process was the final step in ensuring that the overand undercharged DOD appropriation accounts will never be corrected.

While the write-off authority did not change or correct any DOD 

appropriation balances, it did mean that DOD’s current appropriations 

would not be used to pay for the uncharged disbursements. Generally, 

authorized disbursements may be made only to pay valid obligations 

properly chargeable to an appropriation account. If the correct 

appropriation and obligation cannot be identified and charged with a 

disbursement, DOD regulations provide that the disbursement be treated 

as an obligation that is chargeable against current appropriations. 

However, using current funding authority to cover past disbursements 

reduces the funds available to purchase goods and services needed to 

support current operations.

Federal Deficit Reports We found that the write-off of suspense amounts had no effect on the 

cumulative federal deficit. The suspense account transactions had already 

been charged to the federal surplus or deficit in the specific year that DOD 

reported the related collection and disbursement transactions to Treasury. 

The reclassification of suspense amounts from DOD accounts to general 

government suspense accounts did not affect Treasury’s previous recording 

of the underlying collection and disbursement transactions to the 

cumulative deficit.

With regard to the write-off of check payment differences, according to 

Treasury, the surplus/deficit had not been adjusted to recognize differences 

between issued check amounts as reported by DOD and paid check 

amounts as reported by banks. Since the check payment differences had 

not previously been reported as disbursements by DOD and thus included 

in the deficit calculation, the cumulative federal deficit was increased by 

DOD’s write-off amount of $14.5 million.

17 While a non-agency-specific general government suspense account was used, it was only 

used as a means of closing the write-off amounts against the cumulative federal deficit. 

There is no remaining balance in these general government suspense accounts. 
Page 23 GAO-05-521 DOD Problem Disbursements

Current DOD Policies 

Are Not Being 

Enforced

We found that, even though DOD policies require that most suspense 

account transactions and check differences be resolved within 60 days, 

DFAS centers were reporting an absolute value of $1.3 billion in aged 

suspense account amounts and an absolute value of $39 million in aged 

check differences as of December 31, 2004. DFAS knows that the reported 

suspense amounts are not complete and accurate because

• DFAS center officials are still not performing the required 

reconciliations of their appropriation accounts, including suspense 

accounts, with Treasury records;

• some field sites are not reporting any suspense activity to the centers or 

are reporting inaccurate suspense account information; and

• some of the reported amounts for suspense and check differences still 

reflect netted and summarized underlying transaction information.

Given these deficiencies with suspense account reporting, the actual value 

of aged problem transactions could be significantly understated.

Suspense Account 

Reconciliations

DFAS centers are not performing effective reconciliations of their 

appropriation activity, including suspense account activity, even though 

DOD policies have long required them. Similar to checkbook 

reconciliations, DFAS centers need to compare their records of monthly 

activity to Treasury’s records and then promptly research any differences in 

order to identify and correct erroneous or missing transactions. When we 

reviewed the DFAS centers’ December 31, 2004, reconciliations of suspense 

account activity, we found that all of the centers had unexplained 

differences between their records and Treasury records—differences for 

which they could not identify transaction-level information. DFAS 

excluded transactions related to the unexplained differences from its 

reports on suspense account activity. In addition, we noted that amounts 

recorded in DFAS suspense accounts often reflected transactions that had 

been netted or summarized at a field site level. As illustrated by the recent 

write-off activity, netting transactions often obscures the underlying 

transactions, makes it more difficult for the centers to identify and correct 

errors and omissions, and understates the magnitude of suspense account 

problems.
Page 24 GAO-05-521 DOD Problem Disbursements

Suspense Account Reports In 1999, DFAS Arlington issued guidance that instructed each of its centers 

to develop their own procedures for preparing a monthly suspense account 

report (SAR) that would show the net value, absolute value, and aging of 

amounts charged to each suspense account. Because the systems and 

processes are not uniform across the centers, they were instructed to 

develop their own procedures for obtaining the necessary information from 

their systems, reconcile their suspense account records to Treasury 

records to help ensure accuracy and completeness, and explain any 

improper charges or overaged amounts.18

However, as discussed previously, we found that the centers were not 

effectively reconciling their suspense accounts and, therefore, could not 

demonstrate that their SARs were complete and accurate. In fact, center 

officials told us that some field sites did not report any of their suspense 

information or they reported inaccurate information in the SAR; however, 

those officials could not quantify the missing information or inaccuracies. 

As discussed above, the SARs also did not include transactions related to 

the unreconciled differences between center and Treasury records, 

including residual balances from prior to March 2001 that DOD was unable 

to write off. Figure 3 shows the aging of the $1.3 billion of suspense 

amounts reported on the December 31, 2004, SAR.

18 The suspense account aging categories include 0-30 days; 31-60 days; 61-90 days; 91 to 

180 days; 181 days to 1 year; over 1 year to October 1, 1997; and older than October 1, 1997. 
Page 25 GAO-05-521 DOD Problem Disbursements

Figure 3: Suspense Amounts Older Than 60 Days

We also found that DFAS Arlington officials had not performed any 

comprehensive reviews to determine whether the centers were compiling 

the SARs in accordance with their own guidance. DFAS Arlington officials 

and other center officials told us that it would be an overwhelming task to 

review the information submitted by the hundreds of DFAS field sites 

responsible for compiling the SARs. Although not required, some centers 

have documented the processes they are following to gather suspense 

account information and prepare the SARs; however, DFAS Arlington 

officials have not reviewed the written documentation. Arlington officials 

also did not know whether the centers were using the same criteria for 

reconciling and calculating absolute values.

$40.0 million - In suspense 61-90 days

$1.3 billion - Total

$74.0 million - In suspense 91 days - 1 year

$1.2 billion - In suspense over 1 year

Source: GAO analysis of DOD data.
Page 26 GAO-05-521 DOD Problem Disbursements

Required Recording 

Procedures

As previously stated, as of December 31, 2004, DFAS reports identified 

$1.3 billion absolute value of aged suspense account amounts and Treasury 

reports identified $39 million in absolute value of unresolved check 

differences. These aged problem transactions persist despite the DOD 

Financial Management Regulation (FMR) that requires staff to identify and 

charge the correct appropriation account within 60 days.19 The FMR allows 

DFAS to charge current appropriations for suspense account transactions 

and problem disbursements that cannot be resolved through research if 

approved by the fund holder, military service assistant secretaries, or 

defense agency Comptroller.

For suspense account transactions, DFAS officials stated that the primary 

reasons for not consistently following the FMR are (1) staff have been too 

busy processing the write-off amounts and have not had the resources to 

clear more recent suspense transactions promptly and (2) military service 

and defense agency officials are unwilling to accept charges to current 

appropriation accounts without DFAS supplying them with sufficient proof 

that the charges actually belong to them.

For the $39 million of unresolved check differences, DFAS officials stated 

that $36 million is related to transactions initiated by Army staff overseas. 

DFAS officials claimed that with the exception of the $36 million, they have 

been able to resolve almost all check differences within 60 days due to 

increased oversight and staff efforts, implementation of new controls over 

the check reconciliation process, and the increasing use of EFTs rather 

than checks.

Conclusion Overall, the write-off process enabled DOD to clear aged, unsupported 

amounts from its accounting systems and records and ensured that current 

appropriations would not be required to cover these amounts. However, 

the write-off did not correct appropriation account records or fix any of 

19 DOD revised the FMR in 2001 to allow DFAS to charge current appropriations for aged 

problem disbursements, including those recorded in suspense accounts, if staff are unable 

to locate sufficient supporting documents. The FMR requires that suspense account 

transactions be resolved within 60 days except for Interfund suspense, which must be 

resolved within 180 days. DOD also revised the FMR and issued it as a draft in July 2003—

the final version was issued in January 2005—to require staff to research each check 

difference and clear it within 60 days from the check issue date, a requirement that was 

excluded from the FMR previously. 
Page 27 GAO-05-521 DOD Problem Disbursements

DOD’s deficient systems or accounting procedures. Therefore, DOD needs 

to continue its focus on the keys to eliminating aged problem 

disbursements and preventing their future occurrence, including improved 

disbursement processes and better management controls. Until DOD 

enforces its own guidance for reconciling and resolving its suspense 

accounts and check differences regularly, balances will likely grow. 

Without adequate tools for tracking and archiving the individual 

transactions charged to suspense, DOD will continue to have difficulty 

researching and determining proper accounting treatment. DOD’s inability 

over the years to promptly and correctly charge its appropriation accounts 

has prevented the department and Congress from knowing whether 

specific appropriation accounts were overspent or underspent and from 

identifying any potential Antideficiency Act violations. Unless DOD 

complies with existing laws and its own regulations, its appropriation 

accounts will remain unreliable and another costly write-off process may 

eventually be required.

Recommendations for 

Executive Action

To prevent the future buildup of aged suspense accounts and check 

payment differences, we recommend that the Secretary of Defense take the 

following three actions:

• enforce DOD’s policy that DFAS centers and field-level accounting sites 

perform proper reconciliations of their records with Treasury records 

each month,

• use the results of the monthly reconciliations to improve the quality of 

DFAS suspense account reports, and

• enforce guidance requiring that disbursements in suspense be resolved 

within 60 days or be charged to current appropriations if research 

attempts are unsuccessful.

Agency Comments and 

Our Evaluation

In written comments on a draft of the report, the Principal Deputy Under 

Secretary of Defense (Comptroller) stated that the department concurred 

with our recommendations and described actions that are being taken to 

address them. DOD’s comments are reprinted in appendix II.
Page 28 GAO-05-521 DOD Problem Disbursements

We are sending copies of this report to other interested congressional 

committees; the Secretary of the Treasury; the Secretary of Defense; the 

Under Secretary of Defense (Comptroller); the Director, Defense Finance 

and Accounting Service; and the Assistant Secretaries for Financial 

Management (Comptroller) for the Army, the Navy, and the Air Force. 

Copies will be made available to others upon request. In addition, this 

report is available at no charge on the GAO Web site at http://www.gao.gov.

Please contact me at (202) 512-9505 or kutzg@gao.gov if you or your staffs 

have any questions about this report. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Other GAO contacts and key contributors to this report are 

listed in appendix III.

Gregory D. Kutz

Managing Director

Forensic Audits and Special Investigations
Page 29 GAO-05-521 DOD Problem Disbursements

List of Committees

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Duncan L. Hunter

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

The Honorable C. W. Bill Young

Chairman

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Page 30 GAO-05-521 DOD Problem Disbursements

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

As required by the conference report (H.R. Conf. Rep. No. 107-772) that 

accompanied the Bob Stump National Defense Authorization Act for Fiscal 

Year 2003 (Pub. L. No. 107-314 § 1009, 116 Stat. 2458, 2635), we undertook a 

review of the Department of Defense’s (DOD) use of authority to write off 

certain aged suspense account transactions and check payment 

differences. Our objectives were to determine (1) what amount DOD wrote 

off using the legislative authority, (2) whether DOD had effective 

procedures and controls to provide reasonable assurance that amounts 

were written off in accordance with the legislation, (3) how the write-offs 

affected Treasury and DOD financial reports, and (4) what aged DOD 

suspense account balances and check payment differences remain after the 

write-offs have been accomplished.

In conducting this work, we identified prior audit reports and other 

background information to determine the events that led DOD to request 

write-off authority. We visited DOD Comptroller offices, visited DFAS 

centers in Arlington, Indianapolis, Cleveland, and Denver, and contacted 

officials in DFAS Columbus and Kansas City to perform the following:

• Interviewed Comptroller and DFAS officials to obtain a general 

understanding of DOD’s use of suspense accounts and the department’s 

request for write-off authority.

• Gathered, analyzed, and compared information on how write-off 

amounts were identified and processed.

• Compared DOD’s policies and practices for the write-offs (including 

those policies and practices in effect at the relevant DFAS centers) to 

the specific provisions contained in the legislation and with any 

Treasury requirements.

• Identified DOD’s primary controls over the suspense account 

write-offs—a series of reviews performed by DOD/DFAS management 

and DFAS internal review—and tested the effectiveness of these 

controls by reviewing all certification statements resulting from the 

control procedures, comparing amounts reviewed to amounts written 

off, inquiring about and reviewing examples of rejected write-off 

amounts, and reviewing all of the support available for selected 

individual write-off amounts.
Appendix I

Objectives, Scope, and Methodology

Page 31 GAO-05-521 DOD Problem Disbursements

• Compared all check payment difference write-offs to Treasury reports 

to ensure the amounts were in compliance with the legislative 

requirements.

To determine the impact of the suspense account and check payment 

write-offs on DOD’s budgetary and financial reports, we determined which 

specific DOD/Treasury accounts were affected by the write-off entries. We 

asked DOD and Treasury officials how the write-off entries affected DOD 

budgetary accounts and the federal deficit. We also reviewed financial 

reports, journal vouchers, and other documents provided by DOD and 

Treasury.

To identify the current outstanding suspense account balances and check 

payment differences, we reviewed amounts disclosed in DOD’s fiscal year 

2004 financial statements and obtained relevant performance metrics as of 

September 30, 2004, and December 31, 2004. We identified any remaining 

aged suspense account or check differences being monitored by DOD 

management. To determine whether DOD reconciles its records to 

Treasury, we requested proof of DOD’s most current suspense account 

reconciliations and check difference reports.

We performed our work from June 2004 through April 2005. Because of 

serious data reliability deficiencies, which the department has 

acknowledged, it was not our objective to—and we did not—verify the 

completeness and accuracy of DOD reported amounts, including current 

suspense account report amounts. We requested comments from the 

Secretary of Defense or his designee. We received written comments from 

the Principal Deputy Under Secretary of Defense (Comptroller), which are 

reprinted in appendix II. We also sent the draft report to the Secretary of 

the Treasury. Treasury sent us a few technical comments, which we have 

incorporated in the report as appropriate. We performed our work in 

accordance with generally accepted government auditing standards.
Page 32 GAO-05-521 DOD Problem Disbursements

Appendix II

Comments from the Department of Defense ApendxiI
Appendix II

Comments from the Department of Defense

Page 33 GAO-05-521 DOD Problem Disbursements
Appendix II

Comments from the Department of Defense

Page 34 GAO-05-521 DOD Problem Disbursements
Page 35 GAO-05-521 DOD Problem Disbursements

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Gregory D. Kutz (202) 512-9505

Acknowledgments Staff making key contributions to this report were Shawkat Ahmed, 

Rathi Bose, Molly Boyle, Sharon Byrd, Rich Cambosos, Francine 

Delvecchio, Gloria Hernandez-Saunders, Wilfred Holloway, Jason Kelly, 

and Carolyn Voltz.

(192132)
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