GAO

United States General Accounting Office

Report to the Honorable 

Charles E. Grassley, U.S. Senate

March 2000 FINANCIAL 

MANAGEMENT

Differences in Army 

and Air Force 

Disbursing and 

Accounting Records

GAO/AIMD-00-20

Page 1 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Contents

Letter 3

Appendixes Appendix I: Objectives, Scope, and Methodology 22

Appendix II: Comments From the Department of Defense 25

Appendix III: GAO Contacts and Staff Acknowledgments 28

Related GAO Products 29

Tables Table 1: Fiscal Year 1997 MOCAS Transactions That Were Recorded 

Differently or Could Not Be Located in Accounting Systems 

Used for Army 11

Table 2: Examples of Differences in Contract ACRN Balances 

Between MOCAS and Accounting Records 14

Table 3: Strata for Army Sample of 534 Fiscal Year 1997 MOCAS 

Transactions 23

Table 4: Strata for Air Force Sample of 523 Fiscal Year 1997 MOCAS 

Transactions 23

Abbreviations

ACRN Accounting Classification Reference Number

DCMC Defense Contract Management Command

DFAS Defense Finance and Accounting Service

DOD Department of Defense

DPPS Defense Procurement Payment System

EOR element of resource

MOCAS Mechanization of Contract Administration Services

NULO negative unliquidated obligation
Page 2 GAO/AIMD-00-20 Army and Air Force Contract Disbursements
Page 3 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

United States General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

B-283070 Letr

March 7, 2000

The Honorable Charles E. Grassley

United States Senate

Dear Senator Grassley:

The reliability of contract disbursing data is critical to the ability of the 

Army and the Air Force to (1) effectively account for and control billions of 

dollars in budget authority and (2) prepare reliable financial information on 

the results of operations to support management and congressional 

decision-making on programs, operations, and budget requests. In 

response to your request, this report discusses Army and Air Force 

accounting for contract disbursements. As noted in your request, we 

previously reported serious problems in accounting for Department of 

Defense (DOD) contract disbursements. (See the “Related GAO Products” 

list at the end of this report.) For example, we reported1

 that the 

appropriation initially charged for a disbursement in the DOD disbursing 

system was changed for 17 percent of the transactions when they were 

subsequently recorded in the responsible Army units’ accounting records. 

The Defense Finance and Accounting Service (DFAS) payment center in 

Columbus, Ohio, makes contract payments for the Army, the Air Force, and 

other DOD organizations. In fiscal years 1997 and 1998, DFAS Columbus 

contract payments totaled a reported $69 billion and $70.5 billion, 

respectively. DFAS Columbus relies on the Mechanization of Contract 

Administration Services (MOCAS) system to process DOD contract 

payment transactions. MOCAS transactions are to be recorded in DFAS 

accounting systems used for the Army and Air Force, which maintain the 

official accounting records, including the availability and status of funds. 

Our objectives were to determine (1) if, and to what extent, contract 

payment transactions recorded in the Army and the Air Force official 

accounting records differed from MOCAS disbursing system records, 

(2) the types of differences between the disbursing and accounting systems 

and, to the extent possible, the causes for the differences, and (3) the 

1

Financial Management: Strong Leadership Needed to Improve Army’s Financial 

Accountability (GAO/AIMD-94-12, December 22, 1993).
B-283070

Page 4 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

potential effect any identified deficiencies may have on DOD’s planned 

contract payment system improvements. 

Results in Brief Our sample results showed billions of dollars of differences in the way 

contract payment transactions were originally recorded in MOCAS and the 

applicable accounting systems prior to the mid-1990s for the Air Force and 

prior to fiscal year 1999 for the Army. These differences related primarily to 

manual processes for recording MOCAS transactions in the accounting 

systems, which resulted in DFAS accounting station officials making a 

different determination about how the transactions were to be recorded. 

Our sample of fiscal year 1997 Army contract payment transactions showed 

that an estimated $6.7 billion2

 in MOCAS disbursement and collection 

transactions were recorded differently or could not be located in the DFAS 

accounting systems used to record Army transactions, including $2 billion 

recorded to different appropriations in MOCAS and Army’s accounting 

records. The current electronic processes for recording MOCAS 

transactions in the applicable accounting systems should reduce 

significantly the opportunity for such differences. However, existing 

differences will ultimately result in the need for adjustments to reconcile 

accounting and disbursing records and to resolve uncertainties concerning 

the status of appropriated funds. For example, a DFAS Army accounting 

station recorded one disbursement transaction totaling $4.3 million to the 

fiscal year 1995 “Procurement of Weapons and Tracked Combat Vehicles, 

Army” appropriation, while DFAS Columbus recorded this same 

transaction to the fiscal year 1991 “Other Procurement, Army” 

appropriation in MOCAS.

2

The range of our confidence interval, at a 95-percent confidence level, indicates that the 

actual amount of MOCAS transactions that were recorded differently or could not be 

located in the DFAS accounting system for Army was between $5.9 billion and $7.6 billion.
B-283070

Page 5 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Further, our analysis showed that about one of every two dollars processed 

by MOCAS was for adjustments to previously recorded disbursement 

transactions and that billions of dollars of MOCAS adjustments were not 

recorded in DFAS Army accounting station records. Prior to February 1999, 

DFAS Columbus did not send most MOCAS adjustments to the DFAS 

accounting stations that processed Army transactions because, according 

to DFAS Columbus officials, the accounting stations did not generally 

accept MOCAS adjustments. Based on our sample, we estimate that DFAS 

Columbus did not report $21.6 billion3

 of these transactions to DFAS Army 

accounting stations. Unlike the Army adjustment transactions, most of the 

Air Force adjustment transactions in our sample were recorded in Air 

Force accounting records. 

In addition to transaction-level differences, contract balances (including 

obligations, disbursements, and unliquidated obligations) also differ 

between MOCAS and the DFAS accounting systems used to process Army 

and Air Force transactions. Differences in contract balances represent 

timing differences and the cumulative effect of differences in the way that 

disbursement and obligation transactions were previously recorded in 

MOCAS and the accounting systems. Accurately maintaining these 

balances is critical to ensuring that disbursements do not exceed available 

budget authority and that the disbursements are made within the 

constraints imposed by law. For the contract accounting lines associated 

with the transactions in our Army sample, actual differences in balances 

amounted to about $909 million in obligations and about $908 million in 

disbursements between MOCAS and the DFAS accounting systems used to 

process Army transactions. For the contract accounting lines associated 

with the transactions in our Air Force sample, actual differences amounted 

to about $1.3 billion in obligations and about $1.4 billion in disbursements.4

DOD has a number of initiatives planned or under way to address 

acknowledged deficiencies in its contract payment processes. One of the 

initiatives involves a new contract payment system currently targeted to 

3

The range of our confidence interval, at a 95-percent confidence level, indicates that the 

actual amount of adjustments that were not reported to DFAS Army accounting stations 

would be between $20.1 billion and $22.7 billion.

4

These differences represent only the balances associated with the accounting lines in our 

Army and Air Force samples for which data were available in both MOCAS and the 

accounting system. Therefore, the total differences in accounting line balances between 

MOCAS and the applicable accounting systems would be expected to be much greater in our 

sample as well as the total population.
B-283070

Page 6 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

begin implementation in June 2000. In March 1999, when we briefed DOD 

systems integration officials on the magnitude of the differences in 

contract payment data between MOCAS and accounting system records, 

DOD did not have a plan for ensuring the reliability of contract payment 

data before implementing the new system. As of August 1999, the Defense 

Contract Management Command had proposed an overall approach to help 

ensure the reliability of MOCAS data in the new system. The approach 

relies on accelerating the closeout of existing contracts in MOCAS to the 

extent possible and reconciling those contracts that would need to be 

loaded into the new system. However, this high-level approach has not yet 

been approved and incorporated into a detailed data conversion plan. This 

report discusses the basic steps necessary for developing such a plan, 

including (1) comparing the two sets of records to identify the magnitude 

of the differences between MOCAS and the accounting records, 

(2) stratifying the contracts by the number and amount of the differences 

so that priorities for data cleanup can be established, (3) developing a 

policy for addressing how the differences will be handled, and (4) for those 

existing contracts that will be entered into the new system, including steps 

in the plan to retain the transactional history of each contract, whether in 

MOCAS or by some other automated means.

We are making recommendations that address the need for DOD to develop 

a data conversion plan as part of its efforts to implement new corporate 

procurement and contract payment systems. 

Scope and 

Methodology

Our results are based on a stratified random sample of 534 Army and 

523 Air Force fiscal year 1997 MOCAS transactions totaling about 

$5.6 billion and $8.2 billion, respectively. Fiscal year 1997 data were the 

most current available for an entire fiscal year at the time we began our 

review. The universe of Army transactions totaled 474,448 in the amount of 

about $45.7 billion. The universe of Air Force transactions totaled 

550,407 in the amount of about $84.9 billion.

As with any statistical analysis, the results are subject to some uncertainty 

or sampling error because only a portion of the universe was selected for 

review. Our projections are expressed as point estimates that fall within 

confidence intervals. This means that if you were to determine an estimate 

for 100 different random samples of the same size from this population, 

95 out of 100 times, the estimate would fall within the confidence interval. 

In other words, the true value is between the lower and upper limits of the 

confidence interval 95 percent of the time.
B-283070

Page 7 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Our work was performed from May 1998 through August 1999 in 

accordance with generally accepted government auditing standards. We 

performed our work primarily at the DFAS Columbus, Ohio, disbursing 

center; the DFAS St. Louis, Missouri, operating location;5

 and the DFAS 

Dayton, Ohio, operating location. Further details on our scope and 

methodology are included in appendix I. We requested comments on a draft 

of this report from the Secretary of Defense or his designee. The Under 

Secretary of Defense (Comptroller) provided written comments, which are 

discussed in the “Agency Comments and Our Evaluation” section and are 

reprinted in appendix II. DOD’s technical comments are also discussed but 

are not included. 

Background DOD payment and accounting processes are complex, generally involving 

separate functions carried out by separate offices in different locations 

using different systems. For example, DOD has estimated that a dozen 

organizations may be involved in making a single payment on a complex 

weapon system and that over 31 different computer systems (feeder 

systems) are relied on to support the various phases of the contracting 

process. In addition, during fiscal years 1997 and 1998, DFAS accounting 

stations generally recorded Army contract payments in four major 

accounting systems and Air Force contract payments in two major 

accounting systems. 

DFAS, created in 1991 to consolidate DOD payment and accounting 

functions under one organization, performs disbursing and accounting 

functions for the Army and the Air Force, as well as other DOD 

organizations. The various DOD organizations use different disbursement 

and accounting systems and processes, and different DFAS offices have 

been given responsibility for providing disbursing and accounting services 

for these organizations. 

DFAS Columbus Center uses MOCAS to make payments on contracts for 

all DOD organizations, including the Army and the Air Force. As of June 

1999, MOCAS contained about 342,000 contracts. After recording contract 

disbursements, collections, and adjustments, DFAS Columbus forwards 

transaction data to the DFAS accounting stations responsible for recording 

these data in the various DOD organizations’ accounting systems. The 

5

Operating locations, also known as OpLocs, are DFAS accounting and disbursing stations.
B-283070

Page 8 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

DFAS St. Louis operating location processes about 85 percent of the dollar 

value of Army transactions. During fiscal year 1997 and most of fiscal year 

1998, DFAS Army accounting stations manually entered MOCAS contract 

payment transactions from hard-copy documents into the various 

accounting systems used to record Army transactions. DFAS Army 

accounting stations used a manual process because contract transactions 

are recorded in the accounting systems used for the Army at a greater level 

of detail than in MOCAS. In June 1998, DFAS initiated action to automate 

the contract payment reporting process for the five major Army 

commands. Due to system integration problems, most contract payment 

transactions were still entered manually during fiscal year 1998. However, 

as of August 1999, most MOCAS disbursement and collection transactions 

were being sent electronically to the DFAS Army accounting stations. 

According to DFAS officials, about 87 percent of the MOCAS contract 

payment transactions sent electronically to DFAS Army accounting 

stations were processed directly into the accounting system. The other 

13 percent of the transactions sent electronically were rejected during 

accounting system edit checks and had to be entered manually. 

Prior to the mid-1990s, about half of the MOCAS contract payment 

transactions for the Air Force were manually entered in the applicable 

accounting systems, while the remainder of the MOCAS transactions were 

transmitted electronically. By fiscal year 1997, DFAS Columbus 

electronically transmitted most MOCAS transactions directly into the DFAS 

accounting systems used for the Air Force.

Unreconciled 

Differences Between 

MOCAS and Army and 

Air Force Accounting 

Records Affect Data 

Reliability 

Our sample results identified billions of dollars of differences in the way 

contract payment transactions were recorded in MOCAS and the applicable 

accounting systems. These differences resulted primarily from the manual 

processes that were used to record MOCAS transactions in the accounting 

systems prior to the mid-1990s for the Air Force and prior to fiscal year 

1999 for the Army. With the current electronic transmission of MOCAS 

data, most transactions are being recorded the same way in the DFAS 

accounting systems used to record Air Force and Army transactions. 

However, unreconciled discrepancies between these records resulting from 

the previous manual processes remain a significant factor in DOD’s ability 

to ensure appropriations control as well as the reliability of its financial 

reporting, including its annual financial statements. 

Another significant factor that contributes to differences between these 

records is the number of adjustment transactions. Our analysis of Army 
B-283070

Page 9 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

and Air Force transactions showed that about one of every two dollars 

processed by MOCAS in fiscal year 1997 was an adjustment to a previously 

recorded disbursement. Moreover, prior to February 1999, most MOCAS 

adjustments were not recorded in the accounting systems used for Army 

because, according to DFAS Columbus officials, these accounting stations 

did not generally accept MOCAS adjustments. 

Timing differences and the cumulative effect of unreconciled differences in 

the way that transactions were recorded in the applicable accounting 

systems result in differences in obligation and disbursement balances 

charged to specific accounting lines.6

 In addition, the reliability of program 

and object class data7 used for management decision-making and 

congressional oversight is affected by the ongoing differences in these two 

sets of records.

Differences in Recording 

Original Transactions

Our analysis of fiscal year 1997 Army and Air Force contract transactions, 

the most current fiscal year data available at the time we began our review, 

showed that Air Force disbursement and collection transactions were 

generally recorded the same way in MOCAS and the DFAS accounting 

systems used for Air Force; however, Army disbursement and collection 

transactions differed by billions of dollars between MOCAS and the 

applicable accounting systems. The nearly identical transaction posting in 

MOCAS and the Air Force accounting records is primarily attributable to 

the electronic transfer of MOCAS data to the accounting systems used for 

the Air Force. Army differences related primarily to manual processes for 

recording MOCAS transactions in the accounting systems used for the 

Army, which resulted in DFAS accounting station officials making a 

different determination about how the transactions were to be recorded. 

Specifically, our analysis of a stratified random sample of 534 fiscal year 

1997 Army transactions showed that an estimated $6.7 billion8

 in MOCAS 

6

DOD uses accounting lines to accumulate appropriation, budget, and management 

information for contract obligations and payments. 

7

Object classes, established by the Office of Management and Budget, are used to report 

obligations for each account, according to the nature of the services or articles procured. 

8

The range of our confidence interval, at a 95-percent confidence level, indicates that the 

actual amount of MOCAS transactions that were recorded differently or could not be 

located in the DFAS accounting systems used for Army was between $5.9 billion and 

$7.6 billion.
B-283070

Page 10 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

disbursement and collection transactions were recorded differently or 

could not be located in the applicable accounting systems. 

Of the estimated $6.7 billion in MOCAS transactions that were recorded to 

different accounting lines or could not be located in Army accounting 

records, we estimate that $2 billion9

 was recorded to different 

appropriations in MOCAS and accounting systems used to record Army 

transactions. For example, of the transactions in our sample, we found that 

a DFAS Army accounting station recorded one fiscal year 1997 

disbursement transaction totaling $4.3 million to the fiscal year 1995 

“Procurement of Weapons and Tracked Combat Vehicles, Army” 

appropriation, while DFAS Columbus recorded this same transaction to the 

fiscal year 1991 “Other Procurement, Army” appropriation in MOCAS. The 

DFAS Army accounting station recorded another transaction totaling 

$242,051 to the fiscal year 1990 “Operation and Maintenance, Army” 

appropriation, while DFAS Columbus recorded this transaction to the fiscal 

year 1995 “National Guard and Reserve Equipment” appropriation in 

MOCAS.

In addition, we estimate that $1 billion10 of the $6.7 billion in MOCAS 

transactions could not be located in the accounting systems used to record 

Army transactions. DFAS St. Louis accounting station officials could not 

determine whether those transactions that could not be located were 

included in summary records or were not recorded at all in the Army’s 

accounting records. Summary records were used to record balances in the 

applicable accounting systems for accounting stations that closed as part 

of the effort to consolidate DFAS operations. As a result, detailed 

transaction data were lost. Table 1 identifies the types of differences 

associated with the transactions in our sample and provides our projection 

of the dollar impact of these differences on Army accounting records.

9

The range of our confidence interval, at a 95-percent confidence level, indicates that the 

actual amount of differences between the appropriations charged in MOCAS and the DFAS 

accounting systems used for Army was between $1.6 billion and $2.4 billion.

10The range of our confidence interval, at a 95-percent confidence level, indicates that the 

actual amount of MOCAS transactions that could not be located in the DFAS accounting 

systems used for Army was between $0.8 billion and $1.3 billion.
B-283070

Page 11 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Table 1: Fiscal Year 1997 MOCAS Transactions That Were Recorded Differently or 

Could Not Be Located in Accounting Systems Used for Army

a

The projections represent the mid-point between the upper and lower ranges of our confidence 

interval, at a 95-percent confidence level. 

b

Each category of difference in the table is separately projected. Therefore, the total differences will not 

necessarily equal the sum of the categories.

As shown in table 1, based on our analysis of the transactions in our 

sample, we estimate that $3.7 billion11 in Army transactions was recorded 

to different accounting lines but to the same appropriation. These 

differences related to management and budget information, such as 

requisition number, budget activity code, and element of resource (EOR) 

code associated with contract deliverables. For example, our Army sample 

included transactions for other services, supplies, and equipment totaling 

$12.3 million that were recorded to different object classes in MOCAS and 

the applicable accounting systems.

• One transaction totaling $5.5 million was recorded to general equipment 

investment in MOCAS but was recorded to other contractual services in 

the accounting system used for the Army.

• Three transactions totaling $1.4 million were recorded to general 

supplies in MOCAS but were recorded to other contractual services in 

the applicable accounting system.

• Another transaction totaling about $1 million was recorded to other 

contractual services in MOCAS but was recorded to general equipment 

investment in the accounting system. 

Type of difference

Projected

amount

(Dollars in

billions)a

Percentage

differencea

Recorded to different accounting lines and different 

appropriations

 $2.0 4.4

Transactions not located in the accounting systems 1.0 2.3

Recorded to different accounting lines but the same 

appropriation

 3.7 8.0

Total recorded differentlyb $6.7 14.7

11The range of our confidence interval, at a 95-percent confidence level, indicates that the 

actual amount of MOCAS transactions that could not be located in the accounting system 

used for Army was between $3 billion and $4.4 billion.
B-283070

Page 12 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

We previously reported12 that inaccurate reporting by object class hampers 

congressional oversight. In addition, because the Congress has asked for 

and is using object class information for its oversight activities, it is 

important that these data be properly recorded.13

DOD’s lack of adequate control over disbursements (outlays) of 

appropriated funds also affects any analyses based on DOD’s status of 

funds data. For example, congressional budget and appropriation 

committees and the Congressional Budget Office use historical outlay data 

in various analyses, including (1) baseline outlay projections,14 (2) scoring 

of outlays from appropriations,15 and (3) estimating the cost of legislative 

proposals. Unreliable DOD contract payment data can impact such 

analyses and the decisions based on the analyses.

Differences in Recording 

Adjustments

Our analysis of Army and Air Force fiscal year 1997 MOCAS transactions 

also showed that about one of every two dollars in transactions processed 

was for adjustments to previously recorded disbursement transactions. For 

example, during fiscal year 1997, DFAS Columbus processed 101,012 Army 

adjustment transactions totaling $22.7 billion—about 50 percent of the 

$45.7 billion in Army transactions processed. Also during fiscal year 1997, 

DFAS Columbus processed 103,979 Air Force adjustment transactions 

totaling $41.5 billion—about 49 percent of the $84.9 billion in Air Force 

transactions processed—to revise disbursing records maintained in 

MOCAS. Because of the magnitude of MOCAS adjustments, we are 

continuing to review issues related to them.

12DOD Consulting Services: Erroneous Accounting and Reporting of Costs (GAO/

NSIAD-98-136, May 18, 1998).

13Section 512 of Public Law 102-394 directed that OMB create a new object class for 

reporting actual and planned obligations for advisory and assistance services. In 1994, the 

Federal Acquisition Streamlining Act (section 2454) codified section 512 as 31 U.S.C. 

1105(g).

14Baseline outlay projections are based on spend-out rates, which vary by both organization 

and the appropriation involved. For example, spend-out rates would differ for Army and Air 

Force procurement.

15Scorekeeping is the process of estimating the budgetary effects of pending and enacted 

legislation and comparing them to limits set in the budget resolution or legislation. 

Scorekeeping tracks data such as budget authority, receipts, outlays, the surplus or deficit, 

and the public debt limit.
B-283070

Page 13 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Moreover, prior to February 1999, DFAS Columbus did not send most 

MOCAS adjustments to the DFAS Army accounting stations because, 

according to DFAS Columbus officials, the accounting stations did not 

generally accept MOCAS adjustments. For example, DFAS Columbus sent 

only 13 of the 231 MOCAS adjustment transactions in our sample to the 

DFAS Army accounting stations for recording in the accounting systems. 

The remaining 218 adjustment transactions totaling $5 billion were 

recorded only in MOCAS. Of the total $22.7 billion in MOCAS adjustment 

transactions, based on our sample, we estimate that DFAS Columbus did 

not report $21.6 billion16 to DFAS Army accounting stations. Unlike the 

Army adjustment transactions, most of the 237 Air Force adjustment 

transactions in our sample were recorded in Air Force accounting records, 

primarily due to the automated transmission of transactions.

According to DFAS St. Louis accounting officials, since a February 1999 

DFAS directive, DFAS accounting stations responsible for Army 

transactions receive and record all MOCAS Army adjustment transactions 

in the accounting systems. However, if accounting station personnel 

believe that the adjustment is incorrect, they research the transaction, 

record any necessary adjustment, and are to send the corrected adjustment 

and supporting documentation to DFAS Columbus to help ensure that 

MOCAS and Army accounting records agree.

ACRN-Level Balances Also 

Differ

Accounting Classification Reference Numbers, two-digit codes 

representing accounting lines and commonly referred to as ACRNs, are a 

key element of Army and Air Force funds control. Obligations are 

established at the ACRN level to ensure that funds are available to cover 

disbursements. We found differences between contract ACRN balances 

(including obligations, disbursements, and unliquidated obligations) in 

MOCAS and the applicable accounting systems. Differences in ACRN 

balances represent (1) timing differences17 in recording transactions in 

MOCAS and the accounting systems and (2) the cumulative effect of 

16The range of our confidence interval, at a 95-percent confidence level, indicates that the 

actual amount of adjustments that were not reported to the accounting stations would be 

between $20.1 billion and $22.7 billion.

17For the Army, timing differences for our sample of fiscal year 1997 transactions averaged 

37 days due to the manual processes for recording MOCAS transactions in the applicable 

DFAS accounting systems. For the Air Force, DFAS officials stated that timing differences 

were generally limited to about 3 days.
B-283070

Page 14 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

differences in the way that disbursement and obligation transactions were 

previously recorded in MOCAS and the accounting systems. 

Because obligations are recorded at the ACRN level, maintaining these 

balances accurately is critical to ensuring that disbursements do not 

exceed available authority and that the disbursements are made within the 

constraints imposed by law. For the ACRNs associated with the 

transactions in our Army sample, actual differences in ACRN balances in 

MOCAS and the accounting systems amounted to about $909 million in 

obligations and about $908 million in disbursements. For the ACRNs 

associated with the transactions in our Air Force sample, actual differences 

in ACRN balances amounted to about $1.3 billion in obligations and about 

$1.4 billion in disbursements. However, data were not available in both 

MOCAS and the accounting systems for all of the balances associated with 

the ACRNs in our Army and Air Force samples. Therefore, the total 

differences in ACRN balances between MOCAS and the accounting 

systems would be expected to be much greater for the transactions in our 

sample as well as in the total population. Table 2 illustrates the differences 

in contract ACRN balances for an Air Force contract ACRN and an Army 

contract ACRN included in our samples.

Table 2: Examples of Differences in Contract ACRN Balances Between MOCAS and 

Accounting Records

Discrepancies in ACRN balances undermine the reliability of Army and Air 

Force account balances used for funds control and contract management 

Dollars in millions

MOCAS balance

Accounting

records balance Difference

Air Force example—F-15I Flight Test Ground Station ACRN

Obligations $729.9 $725.2 $4.7

Disbursements $534.5 $508.5 $26.0

Unliquidated 

obligations

$195.4 $216.7 $21.3

Army example—Electronic communication equipment ACRN

Obligations $117.2 $82.5 $34.7

Disbursements $117.0 $79.9 $37.1

Unliquidated 

obligations

$0.2 $2.6 $2.4
B-283070

Page 15 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

purposes. The Air Force example in table 2 shows that for the ACRN 

identified, there is a $21.3 million difference in the amount available for 

disbursement between what is recorded in MOCAS and the accounting 

records. Similarly, the ACRN identified in the Army example shows a 

difference of $2.4 million available to disburse for this equipment between 

MOCAS and the official accounting records. Table 2 also indicates that 

DFAS Columbus may have paid (1) $26 million more than what was 

recorded in the accounting system used for the Air Force for the F-15I 

ground station and (2) $37.1 million more for electronic communication 

equipment than what was in the applicable accounting system for the Army. 

Conversely, more disbursements or less obligational authority could be 

recorded in the accounting records than in MOCAS in some cases. This 

could result in payments that exceed the available obligational authority 

reflected in the accounting records. DOD’s payment validation process is 

intended to ensure that specific ACRNs have available obligational 

authority before payments are made to avoid negative unliquidated 

obligations (NULOs).18 As of September 30, 1998, DFAS headquarters 

reported $311 million in Army NULOs and $228 million in Air Force NULOs 

based on accounting systems data. These amounts represent reported 

NULOs related to all Army and Air Force payment activity, including 

NULOs related to MOCAS contract payment transactions. As of the same 

date, MOCAS reported $198.8 million in Army NULOs and $115.8 million in 

Air Force NULOs related to contract payments.

Further Actions Are 

Needed to Improve the 

Reliability of Contract 

Payment Data 

DOD has a number of initiatives planned or under way that are intended to 

address acknowledged deficiencies in its contract payment processes, 

including staffing, training, contract writing, and systems improvements. 

However, DOD does not yet have a documented, detailed plan with 

milestone dates for transitioning from MOCAS to the new contract 

administration and payment systems, including resolving differences 

between MOCAS and accounting records as a basis for establishing the 

initial balances in the new system. 

18NULOs occur when recorded disbursements exceed recorded obligations, indicating that 

expenditures may exceed amounts obligated.
B-283070

Page 16 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Planned Contract Payment 

System

One of DOD’s improvement initiatives is centered on a new contract 

payment system currently targeted to begin implementation in June 2000. 

According to DOD’s 1998 Biennial Financial Management Improvement 

Plan, the initiative would improve the accuracy and integrity of contract 

financial data, help to reduce problem disbursements, and reduce reliance 

on paper documents. According to DOD system integration officials, DOD’s 

new concept of operations envisions a single DFAS Corporate Database 

with end-to-end processing of electronic transactions—from the point of 

origin (such as approval of a purchase request) to obligation and control of 

funds (including prevalidation19) to subsequent disbursing, accounting, and 

financial reporting. 

In addition to the DFAS Corporate Database, the planned system is to 

include the Standard Procurement System,20 the Defense Procurement 

Payment System (DPPS),21 the Defense Standard Disbursing System, and 

the Defense Accounting System. The Standard Procurement System would 

replace the contract administration functions currently performed by 

MOCAS. DPPS would replace MOCAS contract payment functions, 

including computation of payment amounts, automatic response to 

prevalidation requests, and transmission of payment information to the 

Defense Standard Disbursing System for disbursement and the Defense 

Accounting System for entry into official accounting records. 

According to a DOD system integration directorate official, DOD began 

testing the initial release of the corporate database in November 1999. 

DPPS will begin supporting the contract payment function in October 2000. 

At that time, all new contracts will be entered in the corporate database. 

However, existing contracts will be maintained in MOCAS until a majority 

19Prevalidation is a process whereby DOD disbursing stations prematch disbursements, 

subject to various dollar thresholds, with recorded obligations to ensure that agency funds 

are available.

20The objective of the Standard Procurement System (SPS) is to establish a fully functional 

automated procurement information system, which will be used to prepare and administer 

procurement contracts. SPS is planned to replace DOD’s manual procurement systems and 

about 76 unique automated procurement systems that are used to prepare contracts, 

including the contract administration functions performed by MOCAS.

21DPPS is intended to be the single standard DOD system for calculating contractor 

payments and generating accounting records. It is expected to standardize and improve 

contract payment processes by computing timely and accurate payments and making 

disbursement data available to DOD entities responsible for procurement, logistics, and 

accounting. 
B-283070

Page 17 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

of the existing contracts are closed out. According to DFAS and Defense 

Contract Management Command (DCMC) officials working with the 

system integration team, conversion of MOCAS contracts to the corporate 

database is expected to be accomplished by September 2002. The DCMC 

official told us that DOD is preparing a Defense Reform Initiative Directive 

that will address the time frame for the MOCAS conversion.

DOD’s planned corporate systems are designed to address some of the 

business processes that have resulted in unreliable contract payment data. 

For example, the new systems are to provide for electronic transfer of 

contract payment transactions to the accounting systems used to process 

Army transactions. The new systems are also intended to establish a single 

source of data entry for DOD’s accounting lines, thereby eliminating errors 

caused by multiple entries of an accounting line to process a transaction. 

Additional Actions Needed In March 1999, when we briefed DOD systems integration officials on the 

magnitude of the differences in contract payment data between MOCAS 

and accounting system records, DOD did not yet have a plan for ensuring 

the reliability of contract payment data before implementing the new 

system. As of mid-August 1999, in response to an overall approach 

proposed by DCMC, DOD was considering options for accelerating the 

closeout of existing contracts in MOCAS and reconciling those contracts 

that would need to be loaded into the new system. 

However, DOD did not yet have a documented, detailed plan with 

milestone dates for transitioning from MOCAS to the new contract 

administration and payment systems, including resolving differences 

between MOCAS and accounting records as a basis for establishing the 

initial balances in the new system. One of the basic principles of any 

systems conversion project is to ensure that accurate and complete data 

are entered in the new system.22 A contract payment data conversion plan 

would need to include the following basic steps.

• Comparing MOCAS data to accounting system records to identify the 

magnitude of the differences between the two sets of records. 

22See, for example, Systems Auditability and Control Report, “Module 5: Managing 

Information and Developing Systems” (The Institute of Internal Auditors Research 

Foundation, December 1991).
B-283070

Page 18 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

• Stratifying the contracts by the number and amount of the differences 

so that priority can be given to data cleanup for those contracts with the 

largest imbalances.

• Developing a policy for addressing how the differences will be handled. 

The goal of this effort is to determine the best information on the status 

of funds available under the contract. For example, the policy may 

include a provision for certain contracts to be maintained outside of the 

new system. The criteria for such contracts should be specified. Also, 

the policy must address whether contract reconciliation will be required 

or whether certain records will be accepted as the best available 

information without a full reconciliation. Again, the basis for that 

determination should be included in the policy.

• Finally, for those existing contracts that will be entered into the new 

system, the plan should address (1) the feasibility of automating the data 

entry process and (2) determine whether complete contract histories or 

summary-level information will be entered in the new system. If the 

latter, the plan should include steps to retain the transactional history of 

each contract, whether in MOCAS or by some other automated means.

Conclusions DOD has not yet completed a strategy for addressing the fundamental 

problem of having two unreconciled sets of contract disbursing data for the 

Army and the Air Force. Specifically, it has not yet developed a data 

conversion plan to ensure the accuracy of contract payment data that will 

be loaded in the new DOD corporate systems. Unless DOD addresses this 

issue, inaccurate contract payment data will continue to (1) hinder DOD’s 

ability to accurately account for and report on contract disbursements and 

(2) affect the reliability of DOD’s financial reporting, including its reports 

on budget execution and annual financial statements. As DOD moves 

forward to implement its corporate procurement and payment systems, 

establishing contract payment data accuracy will be critical to ensuring 

that DOD can maintain accountability over its multibillion dollar annual 

contract payments.

Recommendations In implementing DOD’s new corporate procurement and payment systems, 

we recommend that the Secretary of Defense direct the Under Secretary of 

Defense (Comptroller) and the DCMC to develop and implement a data 

conversion plan identifying responsibilities and milestone dates for 

resolving data reliability problems associated with existing contract 

payment data. In developing such a plan, the Under Secretary of Defense 
B-283070

Page 19 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

(Comptroller) and DCMC officials should consider the basic steps 

discussed in this report, such as (1) comparing the two sets of records to 

identify the magnitude of the differences between MOCAS and the 

accounting records, (2) stratifying the contracts by the number and amount 

of the difference so that priorities can be established, (3) developing a 

policy for addressing how the differences will be handled, and (4) for those 

existing contracts that will be entered into the new system, including steps 

to retain the transactional history of each contract, whether in MOCAS or 

by some other automated means.

Agency Comments and 

Our Evaluation

In commenting on a draft of this report, DOD stated that the department 

already had developed and implemented strategies for resolving 

differences between MOCAS and applicable accounting systems. Such 

strategies include forming contract reconciliation teams, allowing 

accounting stations access into the MOCAS history files for research 

purposes, and implementing “fast track” contract reconciliation 

procedures. In addition, DOD’s response stated that DFAS has established a 

DPPS conversion team to assist in planning and overseeing the transition 

from MOCAS. A program management office has been chartered to work 

with DCMC and the military components to develop a strategy and more 

detailed supporting plans to better ensure that the transition from MOCAS 

to DPPS results in an accurate, complete database of information to 

support DPPS operations. According to DOD, these plans will take into 

account all of the factors identified in our report as well as methods for 

addressing each contract in force at the time of conversion. DOD’s 

response stated that this effort is formalized in a directive currently 

forwarded to the Deputy Secretary of Defense for signature.

We are pleased that DOD is taking action to develop and document a 

comprehensive plan that encompasses DOD’s various contract 

reconciliation and MOCAS conversion activities. We will review the new 

directive when it is completed and approved.

DOD also provided several technical comments on the draft report, which 

we have incorporated as appropriate throughout the report. However, DOD 

made a comment regarding our sampling methodology that may indicate a 

misunderstanding of statistical sampling techniques and therefore warrants 

further explanation. DOD noted that the use of high-dollar, complex 

transactions in our stratified random sample may have overstated the 

projection of differences between MOCAS and the accounting stations. We 

disagree and reiterate that our sample provided accurate projected results. 
B-283070

Page 20 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

The stratified random sampling method we used—classical variable 

sampling−is a commonly accepted statistical technique. This sampling 

procedure takes into account the size of each stratum and only projects a 

result within the individual stratum. The results of each stratum are then 

added together to get a total projected error rate. This method took into 

account the probability of an amount being selected and thus, is an 

effective and appropriate means of projecting the dollar amount of 

differences in MOCAS and the applicable accounting systems.

Further, DOD stated that the fiscal year 1997 data we reviewed were 

somewhat dated and that it should not be assumed that similar differences 

exist for more recent data. As stated in our report, the current electronic 

processes for recording MOCAS transactions in the applicable accounting 

systems should reduce significantly the opportunity for such differences. 

However, to the extent that the differences we identified in fiscal year 1997 

data relate to contracts that remain open and unreconciled, the differences 

continue to exist. For example, in discussing the planned MOCAS 

transition, a DCMC official estimated that tens of thousands of MOCAS 

contracts will remain open and need to be transferred to the new systems. 

Existing differences will ultimately result in the need for adjustments to 

reconcile accounting and disbursing records and to resolve uncertainties 

concerning the status of appropriated funds.

We are sending copies of this letter to the Honorable William S. Cohen, 

Secretary of Defense; the Honorable Louis Caldera, Secretary of the Army; 

the Honorable F. Whitten Peters, Secretary of the Air Force; and Thomas 

Blum, Director, Defense Finance and Accounting Service. We are also 

sending a copy of this report to the Honorable Jacob J. Lew, Director of the 

Office of Management and Budget, and to interested congressional 

committees.
B-283070

Page 21 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Please contact me at (202) 512-9095 if you or your staff have any questions 

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

listed in appendix III.

Sincerely yours,

Lisa G. Jacobson

Director, Defense Audits
Page 22 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

In response to your request, our objectives were to determine (1) if, and to 

what extent, contract payment transactions recorded in the Army and the 

Air Force official accounting records differed from MOCAS disbursing 

system records, (2) the types of differences between the disbursing and 

accounting systems and, to the extent possible, the causes for the 

differences, and (3) the potential effect any identified deficiencies may 

have on DOD’s planned contract payment system improvements. 

Our results are based on a stratified random sample of 534 Army and 

523 Air Force fiscal year 1997 MOCAS transactions totaling about 

$5.6 billion and $8.2 billion, respectively. Fiscal year 1997 data were the 

most current available for an entire fiscal year at the time we began our 

review. The universe of Army transactions totaled 474,448 in the amount of 

about $45.7 billion. The universe of Air Force transactions totaled 

550,407 in the amount of about $84.9 billion. Specifically, through review of 

available data and discussions with DFAS officials, we 

• performed a comparative analysis of contract disbursements by 

accounting lines associated with the transactions tested;

• analyzed the results of the comparison to characterize differences in 

terms of information in the two systems on both an individual 

transaction basis and on a cumulative summary contract accounting 

(ACRN) level; and

• identified (1) the type of differences (dollar amount, appropriation, 

fiscal year, and program) between disbursing and accounting station 

records and (2) the causes for the differences (to the extent possible).

As with any statistical analysis, the results are subject to some uncertainty 

or sampling error because only a portion of the universe was selected for 

review. Our projections are expressed as point estimates that fall within 

confidence intervals. This means that if you were to determine an estimate 

for 100 different random samples of the same size from this population, 95 

out of 100 times, the estimate would fall within the confidence interval. In 

other words, the true value is between the lower and upper limits of the 

confidence interval 95 percent of the time. The following tables show the 

stratification of our Army and Air Force samples by dollar amounts. 
Appendix I

Objectives, Scope, and Methodology

Page 23 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Table 3: Strata for Army Sample of 534 Fiscal Year 1997 MOCAS Transactions

Table 4: Strata for Air Force Sample of 523 Fiscal Year 1997 MOCAS Transactions

To assess the potential effect of identified differences on the reliability of 

information recorded in MOCAS and the corresponding Army and Air 

Force accounting records, we projected the results of our samples and 

analyzed the extent and nature of the differences on Army and Air Force 

accounting records. We also considered the results of our past Army and 

Air Force work. We did not determine the accuracy of transactions 

recorded in MOCAS and the applicable DFAS accounting systems because 

DFAS was unable to provide us with adequate supporting documentation to 

make such a determination.

To determine the effect any identified deficiencies would have on DOD’s 

planned contract payment systems improvements, we reviewed the status 

of DOD’s efforts to develop a concept of operations for the development of 

Strata Universe Sample

Transactions Absolute dollars Transactions Absolute dollars

Under $10,000 287,695 $597,753,964.96 8 $13,794.00

$10,000 to under $100,000 134,266 4,645,711,757.87 56 1,850,814.66

$100,000 to under $1 million 45,410 13,402,248.931.52 167 48,764,316.14

$1 million to under $10 million 6,697 16,623,581,147.72 217 531,848,683.28

$10 million to under $50 million 347 6,309,180,289.59 53 842,190,696.42

$50 million and over 33 4,131,204,742.49 33 4,131,204,742.49

Total 474,448 $45,709,680,834.15 534 $5,555,873,046.99

Strata Universe Sample

Transactions Absolute dollars Transactions Absolute dollars

Under $10,000 299,805 $769,504,858.24 3 $3,788.14

$10,000 to under $100,000 178,946 6,174,476,239.51 36 1,398,937.62

$100,000 to under $1 million 60,812 17,279,482,685.06 105 30,631,289.05

$1 million to under $10 million 9,793 27,174,223,137.76 173 444,621,702.94

$10 million to under $100 million 1,011 27,193,689,175.55 189 5,068,204,588.95

$100 million and over 40 6,271,957,518.76 17 2,659,305,024.93

Total 550,407 $84,863,333,614.88 523 $8,204,165,331.63
Appendix I

Objectives, Scope, and Methodology

Page 24 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

the Defense Corporate Database and its supporting systems. We also met 

with DOD’s systems integration team to discuss the impact of MOCAS data 

reliability problems on the planned systems.

Our work was performed from May 1998 through August 1999 in 

accordance with generally accepted government auditing standards. We 

performed our work primarily at the DFAS Columbus, Ohio, disbursing 

center; the DFAS St. Louis, Missouri, operating location; and the DFAS 

Dayton, Ohio, operating location.
Page 25 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Appendix II

Comments From the Department of Defense ApendxiI
Appendix II

Comments From the Department of Defense

Page 26 GAO/AIMD-00-20 Army and Air Force Contract Disbursements
Appendix II

Comments From the Department of Defense

Page 27 GAO/AIMD-00-20 Army and Air Force Contract Disbursements
Page 28 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Appendix III

GAO Contacts and Staff Acknowledgments ApendxiI

GAO Contacts Gayle L. Fischer, (202) 512-9577

Keith E. McDaniel, (937) 258-7955

Acknowledgments In addition to those named above, Brian Chan, Francine DelVecchio, James 

Loschiavo, Robert C. Sommer, and Evert A. Stevens made key 

contributions to this report.
Page 29 GAO/AIMD-00-20 Army and Air Force Contract Disbursements

Related GAO Products

Financial Management: Analysis of DOD's First Biennial Financial 

Management Improvement Plan (GAO/AIMD-99-44, January 29, 1999).

Major Management Challenges and Program Risks: Department of 

Defense (GAO/OCG-99-4, January 1999).

Financial Management: Problems in Accounting for Navy Transactions 

Impair Funds Control and Financial Reporting (GAO/AIMD-99-19, 

January 19, 1999).

Financial Management: Improvements Needed in Air Force Vendor 

Payment Systems and Controls (GAO/AIMD-98-274, September 28, 1998).

Financial Management: Seven DOD Initiatives That Affect the Contract 

Payment Process (GAO/AIMD-98-40, January 30, 1998).

Department of Defense: Financial Audits Highlight Continuing 

Challenges to Correct Serious Financial Management Problems (GAO/

T-AIMD/NSIAD-98-158, April 16, 1998).

Financial Management: DOD Progress Payment Distribution Procedures

(GAO/AIMD-97-107R, July 21, 1997).

Financial Management: Improved Reporting Needed for DOD Problem 

Disbursements (GAO/AIMD-97-59, May 1, 1997).

Contract Management: Fixing DOD's Payment Problems Is Imperative

(GAO/NSIAD-97-37, April 10, 1997).

Financial Management: Strong Leadership Needed to Improve Army's 

Financial Accountability (GAO/AIMD-94-12, December 22, 1993).

(918970) Letr

United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. GI00