GAO 

United States Government Accountability Office

Report to Congressional Requesters

IMPROPER 

PAYMENTS 

Significant 

Improvements Needed 

in DOD’s Efforts to 

Address Improper 

Payment and 

Recovery Auditing 

Requirements 

July 2009 

GAO-09-442 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 2009

IMPROPER PAYMENTS

Significant Improvements Needed in DOD's Efforts to 

Address Improper Payment and Recovery Auditing

Highlights of GAO-09-442, a report to Requirements

congressional requesters 

The Department of Defense (DOD) 

is required, as are other federal 

executive agencies, to report 

improper payment information 

under the Improper Payments 

Information Act of 2002 (IPIA) and 

recovery auditing information 

under section 831 of the National 

Defense Authorization Act for 

Fiscal Year 2002, commonly known 

as the Recovery Auditing Act. The 

DOD Office of Inspector General 

has previously reported 

deficiencies at DOD related to 

these acts and GAO’s prior work on 

DOD’s reporting of its fiscal year 

2006 travel improper payments 

estimate also identified 

shortcomings. Because of these 

and other long-standing 

weaknesses, the subcommittee 

asked GAO to examine DOD’s 

fiscal year 2007 improper payment 

and recovery audit reporting to 

determine whether adequate 

processes existed to address both 

statutory requirements. To 

complete this work, GAO reviewed 

DOD’s annual reports, conducted 

site visits, and met with cognizant 

DOD officials. 

What GAO Recommends

GAO made 13 recommendations 

aimed at improving DOD’s efforts 

to strengthen its improper payment 

and recovery auditing processes. 

DOD concurred with only one of 

our recommendations and 

provided technical comments 

which we incorporated as 

appropriate. GAO continues to 

believe the recommendations are 

appropriate to meet the intent of 

both acts and improve management 

of these key activities. 

DOD’s process for addressing IPIA requirements had significant weaknesses. 

For example, as shown in the figure below, DOD did not conduct risk 

assessments for all of its payment activities as $322 billion in agency outlays 

were excluded from the amounts assessed. For those payment activities 

reviewed, DOD assessed the risk of improper payments occurring as low 

despite the department’s long-standing financial management weaknesses and 

could not provide documentation supporting the methodologies used and the 

final risk level. GAO also found that DOD did not estimate improper payments 

for commercial pay under IPIA requirements, its largest payment activity. 

Further, the Office of the Comptroller’s oversight and monitoring activities 

were inadequate because they did not include verifying the accuracy and 

completeness of the information in the agency’s financial report (AFR). 

DOD's Fiscal Year 2007 Payment Population Subjected to the Risk Assessment and 

Estimation Processes under IPIA 

Source: GAO analysis of DOD fiscal year 2007 payment activity outlays.

Estimates done

for five payment

activitiesa

$152.7 Billion

Estimates not done for one payment 

activity–commercial pay

$340.3 Billion

Risk assessments done

$493 Billion

Risk assessments not done

$322 Billion

Agency outlays

$815 Billion

 aThe five payment activities include civilian pay, military health benefits, military pay, military 

retirement pay, and travel pay. 

In addition to not estimating improper payments for commercial pay, DOD’s 

processes for identifying and recovering commercial overpayments were 

inadequate, because they were not designed for this purpose as required by 

the Recovery Auditing Act. For example, GAO found that contract closeout 

processes were designed to ensure that applicable administrative actions had 

been completed (e.g., all classified documents were disposed of) and not to 

specifically identify contract overpayments. DOD also lacked detailed 

guidance on how to conduct a recovery audit program and did not fully 

address the recovery auditing reporting requirements in its AFR, such as 

disclosing the total cost associated with its recovery auditing activities. The 

Office of the Comptroller also did not verify the accuracy and completeness of 

the recovery audit information in the AFR, which resulted in $20.5 billion 

being excluded from its universe of commercial payments. DOD stated that its 

processes were sufficient to address the requirements of both acts, but since 

then has taken some actions, such as updating relevant guidance. Until these 

critical deficiencies are addressed, DOD will be unable to determine the 

extent to which improper payments exist and are subsequently recovered. 

View GAO-09-442 or key components.

For more information, contact Kay L. Daly at 

(202) 512-9095 or dalykl@gao.gov. 
Page i GAO-09-442 

Contents 

Letter 1

Background 4 

Significant Weaknesses Existed in DOD’s Efforts to Address IPIA 

Requirements 10 

Much Work Remains at DOD to Effectively Address the Recovery 

Auditing Act Requirements 19 

Conclusions 28 

Recommendations for Executive Action 28 

Agency Comments and Our Evaluation 29 

Appendix I Objectives, Scope and Methodology 34 

Appendix II List of DOD Agencies and Military Service 

Components Included in the IPIA Survey 38 

Appendix III DOD’s Fiscal Year 2007 Improper Payment Sample 

Plans by Program 39 

Appendix IV Comments from the Department of Defense 44 

Appendix V GAO Contacts and Staff Acknowledgments 49 

Tables 

Table 1: Fiscal Years 2004-2008 Improper Payment Estimates 9 

Table 2: Recovery Audit Results for Fiscal Years 2004 through 2008 10 

Table 3: DOD’s Key Postpayment Processes to Identify Commercial 

Overpayments for Recovery in Fiscal Year 2007 21 

Table 4: Military Health Benefits Program Sample Plans 40 

Table 5: Military Pay Program Sample Plans 41 

Table 6: Civilian Pay Program Sample Plans 41 

Table 7: Military Retirement Program Sample Plans 42 

Table 8: Travel Pay Program Sample Plans 43 

 DOD Improper Payments 
Figures 

Figure 1: IPIA Required Steps to Identify, Estimate, Reduce, and 

Report Improper Payment Information 6 

Figure 2: DOD’s Fiscal Year 2007 Payment Population Subjected to 

the Risk Assessment Process under IPIA 12 

Figure 3: DOD’s Fiscal Year 2007 Payment Population Subjected to 

the Risk Assessment and Estimation Processes under 

IPIA 14 

Page ii GAO-09-442 DOD Improper Payments
Abbreviations 

AFR Agency Financial Report 

BAM Business Activity Monitoring 

BRAC Base Realignment and Closure 

CAM Contract Audit Manual 

CAPS-Clipper Commercial Accounts Payable System-Clipper 

CAPS-W Commercial Accounts Payable System-Windows 

CAS Cost Accounting Standards 

CDS Contractor Debt System 

DCAA Defense Contract Audit Agency 

DCMA Defense Contract Management Agency 

DOD Department of Defense 

DODD Department of Defense Directive 

DOD OIG Department of Defense Office of the Inspector General 

DFARS Defense Federal Acquisition Regulation Supplement 

DFAS Defense Finance and Accounting Services 

FAR Federal Acquisition Regulation 

FMR Financial Management Regulation 

IAPS Integrated Accounts Payable System 

IPIA Improper Payments Information Act 

IPOD Improper Payments Online Database 

MOCAS Mechanization of Contract Administration Services 

OMB Office of Management and Budget 

One Pay Standard Accounting and Reporting System-One Pay 

PAR Performance and Accountability Report 

SBR Statement of Budgetary Resources 

TMA TRICARE Management Activity 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 

Page iii GAO-09-442 DOD Improper Payments
Page 1 GAO-09-442 

 

United States Government Accountability Office

Washington, DC 20548 

 

July 29, 2009 

The Honorable Thomas R. Carper 

Chairman 

The Honorable John McCain 

Ranking Member 

Subcommittee on Federal Financial Management, 

 Government Information, Federal Services, 

 and International Security 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Tom Coburn, M.D. 

United States Senate 

The Department of Defense (DOD) spends hundreds of billions of dollars 

on its mission to defend the United States from attack upon its territory 

and secure its interests abroad. With an annual appropriation exceeding 

$500 billion in fiscal year 2009, and supplemental funding of about $77 

billion for that same year to support overseas military operations, DOD 

has been entrusted with more of the taxpayers’ dollars than any other 

federal agency. Given its size and mission, it is the largest and most 

complex organization to manage in the world. As a steward of taxpayer 

dollars, DOD is accountable for how it spends and safeguards these funds 

against improper payments1

 as well as having mechanisms in place to 

recoup those funds when improper payments occur. 

DOD is required, as are other executive agencies, to report improper 

payment information under the Improper Payments Information Act (IPIA) 

of 2002.2

 IPIA requires executive agencies, aided by guidance from the 

Office of Management and Budget (OMB),3

 to annually identify programs 

1

Improper payments are defined as any payment that should not have been made or that 

was made in an incorrect amount (including overpayments and underpayments) under 

statutory, contractual, administrative, or other legally applicable requirements. It also 

includes any payment to an ineligible recipient or ineligible service, duplicate payments, 

payments for services not received, and any payment for an incorrect amount. 

2

Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002). 

3

Appendix C to OMB Circular No. A-123, Requirements for Effective Measurement and 

Remediation of Improper Payments (Aug. 10, 2006). 

 DOD Improper Payments 
 

and activities susceptible to significant improper payments, estimate 

amounts improperly paid under those programs and activities, and report 

on the amounts improperly paid and their actions to reduce improper 

payments.4

 Similarly, agencies are also required to report on their efforts 

to recover overpayments made to contractors under section 831 of the 

National Defense Authorization Act for Fiscal Year 2002, commonly 

known as the Recovery Auditing Act.5

 This act requires, among other 

things, that all executive branch agencies entering into contracts with a 

total value exceeding $500 million in a fiscal year have cost-effective 

programs for identifying errors in paying contractors and for recovering 

amounts erroneously paid. Since fiscal year 2004, agencies have been 

required by OMB to report on IPIA and recovery auditing efforts in their 

performance and accountability reports (PAR). 

For years, we have reported on long-standing weaknesses and the lack of 

adequate transparency and appropriate accountability across DOD’s major 

business areas, resulting in billions of dollars of wasted resources 

annually.6

 In our January 2009 High-Risk Update,

7

 we identified various 

DOD high-risk areas, including contract management (designated in 1992) 

and financial management (designated in 1995), that make the department 

vulnerable to improper payments. DOD’s contract management 

weaknesses, such as ineffective oversight, increase the risk that DOD will 

pay more than the value of the goods delivered or services performed. 

Financial management deficiencies adversely affected the department’s 

ability to control costs; ensure basic accountability; prevent and detect 

fraud, waste, and abuse; and represent a significant obstacle to achieving 

an unqualified opinion on the U.S. government’s consolidated financial 

statements. 

 

4

OMB’s guidance defines significant improper payments as those in any particular program 

that exceed both 2.5 percent of program payments and $10 million annually. For improper 

payment estimates exceeding $10 million, IPIA and OMB guidance requires agencies to 

develop action plans to reduce improper payments. 

5

National Defense Authorization Act for Fiscal Year 2002, Pub. L. No. 107-107, div. A, title 

VIII, § 831, 115 Stat. 1012, 1186 (Dec. 28, 2001), codified at 31 U.S.C. §§ 3561-3567.

6

GAO, High-Risk Series: Defense Contract Pricing, GAO/HR-93-8 (Washington, D.C.: 

December 1992); High-Risk Series, GAO/HR-95-1 (Washington, D.C.: February 1995); HighRisk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007). 

7

GAO, High-Risk Series: An Update, GAO-09-271 (Washington, D.C.: January 2009). 

Page 2 GAO-09-442 DOD Improper Payments
 

Given DOD’s size, complexity, and history of financial management 

weaknesses, you asked us to examine DOD’s fiscal year 2007 improper 

payment and recovery auditing reporting—the most current data available 

at the time of the request—to determine whether DOD had adequate 

processes in place to address IPIA and Recovery Auditing Act reporting 

requirements. To address these objectives, we reviewed applicable 

improper payment and recovery auditing legislation, related OMB 

guidance, and past GAO and DOD Office of Inspector General (DOD OIG) 

reports. We also reviewed improper payment and recovery audit 

information reported in DOD’s agency financial report (AFR)8

 for fiscal 

years 2004 through 2008. We obtained supporting documentation and 

performed independent assessments, including statistical sampling 

analysis, to determine the accuracy and completeness of DOD’s reported 

fiscal year 2007 improper payment and recovery audit information. We 

also inquired about any improvements and other changes made in the 

fiscal year 2008 improper payments and recovery auditing processes. 

We conducted site visits at two Defense Finance and Accounting Service 

(DFAS) locations (DFAS-Kansas City and DFAS-Columbus).9

 During our 

site visits, we conducted walkthroughs to understand the process for 

identifying, estimating, and reporting improper payment estimates as well 

as the processes for identifying and recovering overpayments. In addition, 

we interviewed knowledgeable agency officials about their processes to 

prevent, detect, and reduce improper payments; recover and report 

commercial overpayments; and oversee and monitor these various efforts 

at a departmentwide level. We obtained supporting documentation and 

performed independent assessments, including legal analysis, to determine 

the adequacy of the processes to meet IPIA and Recovery Auditing Act 

requirements and related OMB guidance. 

 

8

Prior to fiscal year 2007, executive branch agencies were required to report improper 

payment information in their PAR. Beginning with fiscal year 2007, OMB established a pilot 

program for the AFR in which select agencies alternatively presented their PAR 

information, including improper payment and recovery audit information, in a condensed 

format. DOD is one of nine agencies that issued an AFR for fiscal year 2008. 

9

DFAS is responsible for providing professional, financial, and accounting services to DOD 

and other federal agencies. It delivers mission-essential payroll, contract and vendor pay, 

and accounting services. Five DFAS offices—Columbus, Indianapolis, Cleveland, 

Limestone, and Rome—processed contract and vendor payments. DFAS-Columbus 

processes DOD’s largest payment activity, commercial payments. For our period of review, 

DFAS-Kansas City was responsible for identifying and estimating improper payments for 

military and civilian pay. DFAS-Kansas City was closed in July 2008 due to a base 

realignment and closure decision. 

Page 3 GAO-09-442 DOD Improper Payments
 

To assess the reliability of data reported in DOD’s fiscal year 2007 AFR, we 

reviewed DOD’s supporting improper payment and recovery audit 

information as well as data from systems that produced payment 

information, and interviewed knowledgeable agency officials about 

procedures used to assume the quality of the data. We determined that the 

data were sufficiently reliable for the purposes of this report. We 

conducted this performance audit from June 2008 to July 2009 in 

accordance with generally accepted government auditing standards.10

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. See appendix I for more details 

on the scope and methodology. 

Our work over the past several years has demonstrated that improper 

payments are a long-standing, widespread, and significant problem in the 

federal government.11 In December 2007, we reported on DOD’s fiscal year 

2006 travel program improper payment estimates.12 We found that (1) the 

improper payment estimate was understated by at least $4 million, 

(2) several weaknesses in DOD’s sampling methodology did not result in 

statistically valid estimates of travel improper payments at the component 

level, and (3) limited guidance and oversight by the Office of the 

Background 

 

10We initiated preliminary audit work under a separate job code in February 2008 and orally 

briefed your subcommittee on this work in June 2008. 

11GAO, DOD Travel Cards: Control Weaknesses Led to Millions in Fraud, Waste, and 

Improper Payments, GAO-04-825T (Washington, D.C.: June 9, 2004); Financial 

Management: Challenges in Meeting Requirements of the Improper Payments 

Information Act, GAO-05-417 (Washington, D.C.: Mar. 31, 2005); Improper Payments: 

Agencies’ Fiscal Year 2005 Reporting Under the Improper Payments Information Act 

Remains Incomplete, GAO-07-92 (Washington, D.C.: Nov. 14, 2006); Improper Payments: 

Incomplete Reporting under the Improper Payments Information Act Masks the Extent of 

the Problem, GAO-07-254T (Washington, D.C.: Dec. 5, 2006); Improper Payments: 

Agencies’ Efforts to Address Improper Payment and Recovery Auditing Requirements 

Continue, GAO-07-635T (Washington, D.C.: Mar. 29, 2007); Improper Payments: Status of 

Agencies’ Efforts to Address Improper Payment and Recovery Auditing Requirements, 

GAO-08-438T (Washington, D.C.: Jan. 31, 2008); and Improper Payments: Progress Made 

but Challenges Remain in Estimating and Reducing Improper Payments, GAO-09-628T 

(Washington, D.C.: Apr. 22, 2009). 

12GAO, DOD Travel Improper Payments: Fiscal Year 2006 Reporting Was Incomplete and 

Planned Improvement Efforts Face Challenges, GAO-08-16 (Washington, D.C.: Dec. 14, 

2007). 

Page 4 GAO-09-442 DOD Improper Payments
 

Comptroller contributed to the unreliable assessment of improper 

payments for the travel program. The DOD OIG also has issued reports for 

the past few years highlighting weaknesses in the department’s efforts to 

report on improper payment information.13 The DOD OIG reported that the 

department had not implemented guidance to address the use of valid 

statistical sampling in determining programs and activities susceptible to 

significant improper payments. In January 2008, it reported that DFAS had 

not conducted adequate research to determine if contractor refunds were 

improper and, in some cases, had not reported improper payments 

associated with these refunds.14 The DOD OIG continues to report that the 

department has not fully complied with the requirements of IPIA and 

OMB’s implementing guidance and does not have adequate controls to 

fully implement a recovery audit program.15

Overview of IPIA, the 

Recovery Auditing Act, 

and OMB Implementing 

Guidance 

Guidance for reporting under IPIA and the Recovery Auditing Act is 

provided in Appendix C of OMB Circular No. A-123. IPIA requires agencies 

to perform four key steps in meeting the improper payment reporting 

requirements as shown in figure 1. 

 

13DOD OIG Report, Identification and Reporting of DOD Erroneous Payments, D-2005-

100 (Aug. 17, 2005); Identification and Reporting of Improper Payments through 

Recovery Auditing, D-2007-110 (July 9, 2007); and Identification and Reporting of 

Improper Payments by the Defense Logistics Agency, D-2008-096 (May 20, 2008). 

14DOD OIG Report, Identification and Reporting of Improper Payment Refunds from 

DOD Contractors, D-2008-043 (Jan. 31, 2008). 

15DOD OIG Report, D-2007-110. 

Page 5 GAO-09-442 DOD Improper Payments
 

Figure 1: IPIA Required Steps to Identify, Estimate, Reduce, and Report Improper 

Payment Information 

Source: GAO.

Improper Payments - Required Steps

1. Perform risk assessment

Annually review all programs and activities to identify those 

susceptible to significant improper payments, defined by OMB as

exceeding $10 million and 2.5 percent of program payments.

2. Estimate improper payments

Estimate improper payments for programs susceptible to 

significant improper payments.

3. Implement a plan

Implement a plan to reduce improper payments for any program 

or activity exceeding $10 million in estimated improper payments.

4. Annually report

Annually report improper payment estimates and actions to 

reduce them.

OMB’s implementing guidance instructs agencies to carry out the four key 

steps under IPIA, with one exception. For the first step—perform a risk 

assessment—OMB guidance allows agency programs deemed not risksusceptible to conduct a risk assessment generally every 3 years. Further, 

agencies need not conduct formal risk assessments for those programs in 

which improper payment baselines are already established, are in the 

process of being measured, or will be measured by an established date. 

However, OMB guidance does state that if a program experiences a 

significant change in legislation, a significant increase in funding level, or 

both, agencies are required to reassess the program’s risk susceptibility 

during the next annual cycle, even if it is less than 3 years from the last 

Page 6 GAO-09-442 DOD Improper Payments
 

assessment. As we have previously testified before your Subcommittee16

this is inconsistent with the express terms of IPIA, which require that 

agencies annually review all of their programs and activities. 

OMB then requires that agencies estimate the gross total of both over- and 

underpayments for those programs and activities identified as susceptible. 

These estimates shall be based on a statistically random sample of 

sufficient size to yield an estimate with a 90 percent confidence interval of 

plus or minus 2.5 percentage points. If an agency cannot determine 

whether a payment was proper because of insufficient documentation, 

Appendix C to OMB Circular No. A-123 requires that the payment be 

considered improper. The guidance further requires that agencies develop 

corrective action plans that include a discussion of the causes of the 

improper payments identified, corrective actions taken for each different 

type or cause of error, and the results of actions taken to address those 

causes. In addition, OMB Circular No. A-136, Financial Reporting 

Requirements requires agencies to report, in table format, improper 

payment estimates and related outlay amounts for the prior year, current 

year, and the following 3 years. As part of this reporting, OMB encourages 

agencies to report underpayment and overpayment amounts, if available. 

The Recovery Auditing Act requires each executive branch agency that 

annually enters into contracts with a total value of $500 million or more to 

use recovery audits and recovery activities as part of a cost-effective 

recovery auditing program. The law authorizes federal agencies to retain 

recovered funds to cover actual administrative expenses as well as to pay 

other contractors, such as collection agencies. OMB guidance requires, 

among other things, that agencies include in their annual reporting a 

general description and evaluation of the steps taken to carry out a 

recovery auditing program, the total amount of contracts subject to 

review, the actual amount of contracts reviewed, the amounts identified 

for recovery, and the amounts actually recovered in a current year. 

Further, OMB Circular No. A-136 requires agencies to report cumulative 

amounts identified for recovery and amounts actually recovered as a part 

of their current year reporting. 

 

16GAO, Improper Payments: Status of Agencies’ Efforts to Address Improper Payment 

and Recovery Auditing Requirements, GAO-08-438T (Washington, D.C.: Jan. 31, 2008).

Page 7 GAO-09-442 DOD Improper Payments
 

The responsibility for assessing and reporting DOD’s improper payments 

information rests with the Office of the Under Secretary of Defense 

(Comptroller) (Office of the Comptroller). The Accounting and Finance 

Policy Directorate within the Office of the Comptroller is responsible for 

carrying out the day-to-day activities involved in meeting IPIA 

requirements. To collect improper payment information including risk 

assessments, improper payment estimates, and corrective actions, the 

Accounting and Finance Policy Directorate sends out an improper 

payment survey (IPIA survey)17 to all DOD agencies and military services 

requesting improper payment information for the current fiscal year (see 

app. II for a list of the 33 agencies and military services).18 The agencies 

and services are required to submit improper payment estimates to the 

Accounting and Finance Policy Directorate for all DOD payment activities 

identified under IPIA. The Accounting and Finance Policy Directorate then 

aggregates and reports the improper payment information in DOD’s annual 

AFR. 

Organizational 

Responsibility for IPIA 

Reporting at the 

Department of Defense 

Since implementation of IPIA, DOD has reported improper payment 

estimates for the following payment activities for fiscal years 2004-2008 as 

shown in table 1 below. 

 

17The IPIA annual survey requires agencies and military services to perform a risk 

assessment of all programs and activities that may be susceptible to erroneous payments 

and to report improper payment information. The agency and military services’ 

submissions are to be based on fiscal year disbursements, and identify both the gross totals 

of overpayments and underpayments and the methodology used to estimate improper 

payments. 

18For fiscal year 2007, the Accounting and Finance Policy Directorate distributed the survey 

to 33 entities. Of the 33 entities, 22 reported that they did not process payments for fiscal 

year 2007 and deferred to their applicable payment processing center responsible for 

conducting the risk assessment. The remaining 11 entities either processed their own 

payments or were DOD payment processing centers. Only 9 of those 11 DOD entities 

reported conducting risk assessments for one or more of the six payment activities 

reviewed under IPIA. 

Page 8 GAO-09-442 DOD Improper Payments
 

Table 1: Fiscal Years 2004-2008 Improper Payment Estimates 

(dollars in millions) 

Payment activity 2004 2005 2006 2007 2008

Civilian payaNot reportedbNot reportedb$16.7 $74.6 $73.9 

Commercial pay Not reportedb Not reportedb $550.0 Not reportedc Not reportedc

Military health benefits $99.6 $87.8 $83.5 $88.6 $178.0 

Military payaNot reportedb$432.0 $65.9 $416.4 $434.6 

Military retirement $66.0 $49.3 $49.4 $48.7 $44.0 

Travel pay Not reportedbNot reportedb$29.4 $43.6 $103.0 

Totals $165.6 $569.1 $794.9 $671.9 $833.5 

Source: GAO analysis of DOD’s fiscal years 2004 through 2008 PARs or AFRs. 

a

Beginning in fiscal year 2007, military and civilian improper payments included estimated and actual 

amounts. 

b

DOD did not report improper payment estimates for these payment activities because it determined 

that they were not susceptible to significant improper payments. 

c

DOD changed its approach, which resulted in its not calculating an estimate for improper payments 

for this payment activity. Instead, DOD decided to annually report actual overpayments discovered 

via its recovery auditing program. 

Organizational 

Responsibility for 

Recovery Auditing 

Reporting at the 

Department of Defense 

Similarly to improper payment reporting, the Office of the Comptroller is 

responsible for identifying and annually reporting recovery audit 

information in DOD’s AFR, while its Accounting and Finance Policy 

Directorate is responsible for carrying out the day-to-day activities. DOD’s 

recovery auditing process over contract and vendor payments 

(commercial payments) encompasses several organizations including 

DFAS offices and external contractors, which are discussed later in this 

report.19 These organizations are required to compile and submit the 

universe of commercial payments, commercial overpayments identified 

for recovery, and commercial payments actually recovered to the 

Accounting and Finance Policy Directorate. It in turn aggregates and 

reports the recovery audit information in DOD’s annual AFR. DOD’s 

reported recovery audit information for fiscal years 2004-2008 is shown in 

table 2 below. 

 

19Contract payments include disbursements for complex, multiyear purchases with high 

dollar amounts, such as weapon systems. Vendor payments include purchases for day-today goods and services, such as food, fuel, and transportation. 

Page 9 GAO-09-442 DOD Improper Payments
 

Table 2: Recovery Audit Results for Fiscal Years 2004 through 2008 

(amounts in millions) 

Fiscal year 

Agency-reported 

amount subject to review 

for fiscal year reporting 

Agency-reported

actual amount reviewed

and reported in fiscal year

Agency-reported 

overpayments identified 

for recovery in fiscal year 

Agency-reported 

amount recovered

in fiscal year

2004a Not reportedb Not reportedb Not reportedb $ 6.3 

2005a $ 222,800.0 $ 222,800.0 $469.5c $414.9c

2006a $ 299,400.0 $ 299,400.0 $170.0 $133.3 

2007d, e $ 189,300.0 $ 189,300.0 $24.6 $19.6 

2008d $ 331,192.0 $ 331,192.0 $53.3 $41.7 

Source: GAO analysis of DOD’s fiscal years 2004 through 2008 PARs or AFRs. 

a

Prior to fiscal year 2007, DOD generally reported recovery audit amounts resulting from contractoridentified and DOD-identified overpayments. 

b

For fiscal year 2004, OMB did not require agencies to report on this information as part of their 

recovery auditing reporting. 

c

In fiscal year 2005, the amount identified for recovery includes both underpayments (67 percent) and 

overpayments (33 percent). Also, the amounts recovered include both recouped amounts and 

disbursements for underpayments. 

d

Beginning in July 2007, DOD excluded contractor-identified vendor overpayments from its recovery 

audit reporting since these overpayments did not result from DOD’s recovery auditing efforts. 

e

In fiscal year 2007, DOD excluded vendor payments from its recovery audit reporting. 

DOD’s processes to conduct risk assessments, estimate improper 

payments, and develop corrective actions to reduce improper payments 

for its fiscal year 2007 IPIA reporting had significant weaknesses. A lack of 

detailed guidance as well as inadequate monitoring and oversight of DOD’s 

improper payment activities also existed, raising doubts about the 

accuracy of the information reported. 

Significant 

Weaknesses Existed 

in DOD’s Efforts to 

Address IPIA 

Requirements 

Risk Assessment Process, 

Guidance, and 

Documentation Need 

Improvements 

DOD’s risk assessment process was inadequate to ensure that appropriate 

consideration was given to the risks associated with its payment activities, 

thus not allowing management appropriate visibility of its vulnerabilities. 

DOD lacked detailed guidance on how to conduct a risk assessment, 

including identifying the universe of activities, determining if risks exist, 

identifying what those risks are, and evaluating the results, as required by 

our internal control standards.20 Recognizing that the internal guidance 

 

20GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1. 

(Washington, D.C.: November 1999). 

Page 10 GAO-09-442 DOD Improper Payments
 

and documentation needed to be improved, in December 2008, DOD 

issued a new Financial Management Regulation (FMR) chapter—Volume 

4, Chapter 14, Improper Payments—to expand existing guidance to 

address IPIA requirements, by clarifying the agencies’ and military 

services’ responsibilities for reporting improper payment information, 

broken down by payment activity. Although we did not determine the 

adequacy of these changes as the scope of our audit was fiscal year 2007, 

we noted that DOD did not require its agencies and military services to 

document their risk methodologies, including risk factors considered, the 

potential or actual impact on their program operations, and the rationale 

for assessing risk as either low, medium, or high. 

While nine DOD components conducted risk assessments for their six 

payment activities totaling about $493 billion in fiscal year 2007,21 we 

found an additional $322 billion in outlays reported in DOD’s Statement of 

Budgetary Resources (SBR) that had not been assessed22 although IPIA 

requires that agencies annually review all programs and activities (see fig. 

2). According to Office of the Comptroller officials, the six payment 

activities it assessed covered all DOD outlays for fiscal year 2007 and the 

$322 billion difference in outlays represented IPIA reporting differences 

related to payroll payments for three of its six payment activities (net 

outlays reported for IPIA purposes versus gross outlays reported for SBR 

purposes), intragovernmental payments, and payments resulting from 

classified activities. While DOD officials stated that it reconciled the $322 

billion difference to the SBR (with the exception of classified activities), 

these officials did not provide us with this reconciliation to enable us to 

independently substantiate this difference. Further, these officials could 

not reconcile the $493 billion in outlays for the six payment activities to an 

alternative source, such as the SBR. Based on this comparison, DOD had 

not reviewed all of its programs and activities. Office of the Comptroller 

officials told us that DOD agencies and the military services were required 

to reconcile their payment activities with their budget data for fiscal year 

 

21The nine components were the Departments of the Army, the Navy, and the Air Force; the 

United States Marine Corps; the Defense Finance and Accounting Service; the Defense 

Security Service; the National Geospatial Intelligence Agency; the United States Army 

Corps of Engineers; and the TRICARE Management Activity. These components reported 

on one or more of the following six payment activities: civilian pay, commercial pay, 

military health benefits, military pay, military retirement pay, and travel pay. 

22DOD’s Statement of Budgetary Resources for fiscal year 2007 reported gross outlays of 

about $815 billion. The Statement of Budgetary Resources is prepared independently from 

the DOD office responsible for addressing IPIA requirements. 

Page 11 GAO-09-442 DOD Improper Payments
 

2008 to ensure that all payment activities had been accounted for at the 

component level. 

Figure 2: DOD’s Fiscal Year 2007 Payment Population Subjected to the Risk 

Assessment Process under IPIA 

Source: GAO analysis of DOD fiscal year 2007 payment activity outlays.

Agency outlays

$815 Billion

Risk assessments not done

$322 Billion

Risk assessments done

$493 Billion

In addition, DOD did not have sufficient documentation to support the 

level of assessed risk for the six payment activities it did evaluate as 

required by OMB guidance and our internal control standards.23 For 

example, none of the nine components that conducted risk assessments 

described their methodology or rationale for the level of risk assigned to 

each applicable payment activity. For the six risk assessments conducted, 

DOD had determined the risk of having significant improper payments was 

low, based on OMB criteria. However, given the lack of supporting 

documentation and evidence for the risk assessments and DOD’s history 

of long-standing weaknesses, including GAO’s designation of eight 

individual DOD areas as high risk,24 the low risk levels are not based on 

sufficient analysis and are likely unrealistic and not reflective of the wide 

range of vulnerabilities that exist within DOD. Office of the Comptroller 

officials told us that the department calculates improper payment 

estimates for the majority of the payment activities under IPIA, regardless 

of risk level assessed in determination of susceptibility to significant 

improper payments, because of the large volume and high dollar amounts 

of the transactions. DOD did not rely on the results of the risk assessments 

to determine whether to address the remaining IPIA requirements. 

Although DOD did not rely on its risk assessments, the implementation of 

IPIA requires agencies to make decisions as to how to proceed based on 

the completion of risk assessments, which is the first step. Therefore, 

DOD’s failure to conduct adequate risk assessments could negatively 

 

23Appendix C to OMB Circular No. A-123, pt. I(E); GAO/AIMD-00-21.3.1. 

24GAO-09-271. 

Page 12 GAO-09-442 DOD Improper Payments
 

impact its ability to gain the information it needs to make decisions as it 

proceeds through the remaining steps to ensure proper implementation of 

IPIA requirements. 

As we previously reported, the information developed during a risk 

assessment forms the foundation or basis upon which management can 

determine the nature and type of corrective actions needed.25 It also gives 

management baseline information for measuring progress in reducing 

improper payments. Until the department recognizes the importance of 

performing comprehensive risk assessments, the reported information will 

not provide meaningful results or adequately depict DOD’s risk of 

improper payments, thus not providing the level of transparency 

envisioned by IPIA. 

Improper Payment 

Estimate Was Not 

Developed for DOD’s 

Largest Payment Activity 

DOD had neither established a methodology to estimate nor had it 

estimated the amount of improper payments for commercial pay—its 

largest payment activity with total outlays of $340.3 billion (see fig. 3). 

While DOD, in general, developed statistically valid sampling 

methodologies and estimated improper payment amounts for its remaining 

five payment activities,26 collectively the proportion of these five payment 

activities to DOD’s reported payment population subject to IPIA was about 

one-third of the total. See appendix III for a description of the sampling 

plans for DOD’s five payment activities. OMB guidance requires that for 

any programs and activities identified as susceptible to significant 

improper payments, agencies must develop a statistically valid 

methodology to estimate the annual amount of improper payments, 

including a gross total of both under- and overpayments. Although DOD 

assessed all six payment activities to be at low risk for improper 

 

25GAO-07-92. 

26For the military health benefits payment activity, the confidence level TRICARE 

Management Agency used to test the denied claims component was 80 percent, instead of 

the 90 percent confidence level required by OMB guidance. However, we determined that 

the impact of this deviation was immaterial. For the travel payment activity, DFAS 

performed a duplicate review for one of its component systems, the Integrated Automated 

Travel System. We previously reported that these duplicate reviews could not be used to 

estimate the value of improper payments to the entire population. We recommended, and 

DOD agreed, to establish and implement procedures to report a valid improper payment 

estimate for the population. See GAO, DOD Travel Improper Payments: Fiscal Year 2006 

Reporting Was Incomplete and Planned Improvement Efforts Face Challenges, GAO-08-16

(Washington, D.C.: Dec. 14, 2007). We determined that for fiscal year 2008, DFAS had 

developed a statistically valid methodology for the travel payment activity. 

Page 13 GAO-09-442 DOD Improper Payments
 

payments, it chose to develop improper payment estimates for five of the 

six payment activities based on the large volume or high dollar amounts of 

the transactions. However, DOD did not estimate improper payments for 

commercial pay despite the large volume and high dollar amounts of the 

transactions. 

Figure 3: DOD’s Fiscal Year 2007 Payment Population Subjected to the Risk 

Assessment and Estimation Processes under IPIA 

Source: GAO analysis of DOD fiscal year 2007 payment activity outlays.

Agency outlays

$815 Billion

Estimates done

for five payment

activitiesa

$152.7 Billion

Estimates not done

for one payment activity–

commercial pay

$340.3 Billion

Risk assessments not done

$322 Billion

Risk assessments done

$493 Billion

a

The five payment activities include civilian pay, military health benefits, military pay, military 

retirement pay, and travel pay. 

According to DOD officials, the department decided not to establish a 

statistically valid methodology or calculate an estimate for commercial 

improper payments under IPIA because (1) its past attempts to estimate 

commercial improper payments had resulted in improper payment 

estimates that were lower than the actual amount of overpayments 

identified, and (2) it would create duplicate reporting of improper 

commercial payments as this type of information was captured as part of 

DOD’s efforts to address Recovery Auditing Act requirements, which DOD 

officials believed resulted in a better measurement because it represented 

actual overpayments. However, in fiscal year 2006, DOD estimated $550 

million in improper payments, which was nearly 30 percent higher than 

the $426 million of actual under- and overpayment amounts reported to 

address Recovery Auditing Act requirements. 

Regarding DOD’s point that reporting commercial improper payments 

under IPIA and the Recovery Auditing Act would create duplicate 

reporting, we disagree. DOD could leverage the results from its existing 

Recovery Auditing Act processes used to identify actual commercial 

under- and overpayments to develop its statistical sampling methodology 

to enhance the reported estimate. This approach is similar to DOD’s 

Page 14 GAO-09-442 DOD Improper Payments
 

existing statistical sampling methodologies, which also include actual 

amounts for calculating improper payment estimates of civilian and 

military pay. As we previously reported, the scope of review under IPIA 

differs from that of the Recovery Auditing Act.27 Specifically, the scope of 

review under the Recovery Auditing Act targets agency-identified contract 

overpayments,28 whereas the scope of review under IPIA targets both 

under- and overpayments, including agency- and contractor-identified 

improper payments. Further, while OMB guidance allows agencies to 

exclude certain classes of contracts from their recovery auditing reporting, 

no such exclusions exist for IPIA.29

Establishing a well-designed statistical sampling methodology to estimate 

DOD’s improper commercial payments would not only facilitate 

compliance with IPIA requirements, but also help address a current data 

void on the extent of improper payments made to contractors and 

vendors. For example, based on our review of DOD’s fiscal year 2007 data 

of commercial payment errors, we identified $62 million in commercial 

improper payments and another $92 million of potential improper 

payments, which were not identified by DOD’s current Recovery Auditing 

Act processes.30

DCAA and the DOD OIG also identified payment errors not captured by 

DOD. For example, in August 2007, DCAA reported that a contractor had 

overbilled—and DOD had overpaid—award fees31 totaling about $267 

 

27GAO-08-77. 

28Appendix C to OMB Circular No. A-123, pt. II (D)(2). 

29Examples of classes of contracts that OMB allows agencies to exclude from recovery 

auditing activities include cost-type contracts that have not been completed and whose 

payments are subject to further adjustment by the government and cost-type contracts that 

have been completed and subjected to a final contract audit. 

30The $62 million comprised various types of contractor-caused overpayments, including 

payments of duplicate invoices, invoice amounts with errors, and payments made to the 

wrong contractor due to errors in how the contractor entered its information. DFAS 

officials told us that these payment errors are not considered improper payments because 

the errors were not made or caused by DFAS. This distinction based on the source of the 

error is not supported by IPIA or OMB guidance. The $92 million of potential improper 

payments included payments made by DFAS prior to the receipt of a contract modification 

and payments subject to court rulings and other legal settlements. 

31An award fee is an amount that the contractor may earn, in whole or in part, during 

contract performance that is sufficient to provide motivation for excellence in such areas 

as quality, timeliness, and cost-effective management. 

Page 15 GAO-09-442 DOD Improper Payments
 

million.32 Because DOD had not established a methodology to estimate 

improper payments for its commercial payment activity, these and other 

types of payment errors that meet the definition of improper payments 

were not reported, and thus, lacked the level of transparency and 

accountability called for under IPIA. Further, without an across-the-board, 

systematic estimate of the extent of improper commercial payments, DOD 

management could not determine (1) if improper commercial payments 

were significant enough to require corrective actions, (2) how much 

investment in new internal controls would be cost-justified, or (3) the 

effectiveness of any prior corrective actions. 

Corrective Actions Not 

Always Linked to Causes 

Although DOD reported the corrective actions taken or planned to reduce 

improper payments for its five payment activities that met its reporting 

threshold, the corrective actions for three of the five payment activities—

military pay, civilian pay, and travel pay—generally did not address the 

root causes of the improper payments. For travel pay, we found that with 

the exception of one agency component, root causes had not been 

reported in DOD’s AFR, even though a description of the corrective 

actions taken had been disclosed. OMB guidance requires that, for all 

programs and activities with estimated improper payments exceeding $10 

million, agencies must report on the root causes of the improper payments 

identified, actions taken to prevent or reduce those root causes, and the 

results of actions taken. 

For example, DOD reported that inaccurate or untimely reporting of 

entitlement data on such areas as time and attendance, personnel actions, 

and pay allowances was the primary cause for the improper payments for 

military and civilian pay. As actions to address these causes, DOD 

reported that it had developed performance metrics and goals to track the 

timeliness and accuracy of payments and that senior leadership had 

participated in quarterly meetings to discuss problem areas and find 

solutions to mitigate the risk of improper payments. While these actions 

measured entitlement performance, focused attention on the effectiveness 

of existing processes, and facilitated the sharing of information, it was 

 

32DCAA, Report on Evaluation of Over Payments and Associated Interest, Audit Report 

No. 3711-2007A17900011 (Aug. 31, 2007). DCAA performed an audit after the contractor 

notified DCMA and DCAA of potential duplicate billing errors. These payment errors 

occurred over a 5-year period from July 2002 through July 2007. Subsequently the 

contractor reimbursed DOD for the $267 million through an offset against a current invoice 

that DOD had not yet paid and wrote the government a check for $28 million in interest. 

Page 16 GAO-09-442 DOD Improper Payments
 

unclear how these specific actions would address the root causes that led 

to inaccurate or untimely reporting and whether those actions would 

reduce improper payments. Conversely, for travel pay, we found that 

except for the U.S. Army Corps of Engineers, DOD agencies and military 

services did not report the associated root causes contributing to 

improper travel payments, even though corrective actions were disclosed 

in the AFR. The U.S. Army Corps of Engineers reported that the primary 

causes of improper travel payments included traveler input errors and 

inadequate supervisory review of travel vouchers. 

The Office of the Comptroller told us that the root causes and corrective 

actions implemented or underway were not fully disclosed in the AFR due 

to report formatting constraints, preventing the inclusion of all detailed 

information. However, when we reviewed the underlying support, we 

found that this documentation also lacked details as to (1) the corrective 

actions taken or planned and generally mirrored the corrective actions 

reported in the DOD’s AFR, (2) the root causes for improper travel 

payments, and (3) the results, if any, of the corrective actions taken. 

Accurately characterizing and publicly reporting the root causes and 

associated corrective actions to reduce improper payments enables 

agencies and others with oversight and monitoring responsibilities to 

measure progress over time and determine whether further action is 

needed to minimize future improper payments, thus enhancing 

accountability over the reduction of improper payments by ensuring that 

effective corrective actions are taken. 

The Office of the Comptroller’s monitoring and oversight of DOD’s 

improper payment activities were inadequate because they did not include 

verifying the accuracy and completeness of the information reported in 

DOD’s AFR as required by DOD guidance. Specifically, the Office of the 

Comptroller issued a memorandum in November 2006 that required the 

Project Officer for Improper Payments and Recovery Auditing to, among 

other things, verify that DOD’s reported information was accurate, 

complete, and meets or exceeds the minimum OMB reporting 

requirements. In addition, our internal control standards for monitoring 

provide that processes should generally be designed to ensure that 

ongoing monitoring occurs in the course of normal operations and include 

regular management and supervisory activities, comparisons, and 

reconciliations. Further, our internal control standards provide that 

controls should include a wide range of diverse activities including 

Inadequate Monitoring and 

Oversight of DOD’s Improper 

Payment Activities 

Page 17 GAO-09-442 DOD Improper Payments
 

verification of information and be aimed at validating the propriety and 

integrity of both organizational and individual performance measures and 

indicators.33

During our review and analysis of DOD agencies’ and services’ IPIA survey 

responses, we found that the project officer had not conducted adequate 

follow-up to ensure that (1) the information provided was accurate and 

complete and sufficient to support risk assessment conclusions, and (2) 

reported corrective actions planned or underway addressed the root 

causes of the improper payments. For example, DOD agencies and military 

services did not provide supporting documentation for their risk 

assessment methodologies and conclusions, including the risk factors 

considered as part of this assessment and how they arrived at the final 

determination of risk for applicable payment activities. Yet we found no 

evidence that the Office of the Comptroller conducted appropriate followup as part of its oversight and monitoring responsibilities to ensure 

payment activities had been consistently assessed and provided some level 

of comparability among DOD agencies and military services. We 

previously reported on similar instances of lack of oversight and review by 

the Office of the Comptroller over IPIA reporting for DOD’s travel 

payment activity.34 In that report, we found that the IPIA survey excluded 

about $5.1 billion in the universe of travel payments for fiscal year 2006 

and that only $824 million of the total travel payments had been reported 

in DOD’s annual report for the same period. We noted that these 

discrepancies would have been brought to management’s attention in a 

timely manner if monitoring activities, such as periodic reconciliations and 

comparisons, had been performed. 

Office of the Comptroller officials told us that the DOD agencies and the 

military services performed verification reviews prior to submission of 

their improper payment information, providing assurances that the 

reported information was accurate and complete. As a result, they did not 

believe it was necessary for the project officer to independently validate 

this information despite the requirement in the November 2006 

memorandum to do so. However, based on our findings discussed earlier 

in this report, the oversight and monitoring activities performed by the 

agencies and services, as well as the Office of the Comptroller, were 

inadequate. Without adequate monitoring and oversight, DOD is at risk of 

 

33GAO/AIMD-00-21.3.1. 

34GAO-08-16. 

Page 18 GAO-09-442 DOD Improper Payments
 

inaccurately reporting the extent of its improper payments, not taking the 

steps needed to reduce improper payments, and ultimately not meeting 

IPIA requirements. 

DOD’s recovery audit program35 was inadequate because it leveraged 

existing processes that were not specifically designed to identify and 

recover overpayments as stipulated in the Recovery Auditing Act. Further, 

DOD’s internal guidance lacked detailed instructions to effectively address 

recovery auditing requirements. We also found that DOD’s reported 

recovery audit information for fiscal year 2007 was unreliable, as the 

reported amounts were incomplete and not fully supported. In addition, 

we determined that DOD’s monitoring and oversight activities were 

inadequate to ensure the accuracy and completeness of the reported 

recovery audit information. 

Much Work Remains 

at DOD to Effectively 

Address the Recovery 

Auditing Act 

Requirements 

Processes and Guidance 

Were Inadequate to 

Effectively Implement 

Recovery Auditing 

Requirements 

The majority of DOD’s processes used to identify and recover commercial 

(contractor and vendor) overpayments were inadequate because they 

were not specifically designed to do so as required by OMB guidance (see 

table 3 for these processes). Specifically, only DFAS’s Internal Review and 

DOD’s two external recovery audits were specifically designed to identify 

and recover commercial overpayments.36 We also found that DFAS 

suspended its Internal Review postpayment audit of contract payments—

its largest payment activity—for fiscal year 2007, but did not disclose this 

limitation in its fiscal year 2007 AFR. DFAS officials told us that its 

Internal Review contract postpayment audits were suspended and that 

there was a reallocation of staff resources to support base realignment and 

 

35OMB defines a recovery audit program as an agency’s overall plan for the performance of 

recovery audits and recovery activities. The head of the agency will determine the manner 

and combination of recovery audits and activities that are expected to yield the most costeffective recovery audit program for the agency. 

36See Appendix C to OMB Circular No. A-123, pt. II. OMB guidance identifies the following 

types of overpayments or payment errors that a recovery audit should target: duplicate 

payments; errors on invoices or financing requests; failure to reduce payments by 

applicable sales discounts, cash discounts, rebates, or other allowances; payments for 

items not received; mathematical or other errors in determining payment amounts and 

executing payments; and failure to obtain credit for returned merchandise. 

Page 19 GAO-09-442 DOD Improper Payments
 

closure (BRAC) initiatives,37 specifically auditing the records of affected 

DFAS sites that processed commercial payments from 2006 through 2008. 

According to DFAS officials, to compensate for this suspension, DOD 

relied on existing prepayment controls to identify contract overpayments, 

such as daily manual reviews of a random sample of invoices with 

thresholds of $500,000 or more. In January 2009, Internal Review officials 

informed us that the office had reinstituted efforts to conduct audits of 

contract payments. Internal Review’s current audit covers the “catch up” 

period of payments made between April 2006 and March 2008, and the 

audit results are expected by the end of fiscal year 2009. 

 

37BRAC is the process DOD has used to reorganize its installation infrastructure to more 

efficiently and effectively support its forces, increase operational readiness, and facilitate 

new ways of doing business. According to DFAS, its largest vendor pay systems reviewed 

as part of the BRAC examination include Commercial Accounts Payable System-Windows 

(CAPS-W), Commercial Accounts Payable System-Clipper (CAPS-Clipper), Standard 

Accounting and Reporting System-One Pay (One Pay), and Integrated Accounts Payable 

System (IAPS). 

Page 20 GAO-09-442 DOD Improper Payments
 

Table 3: DOD’s Key Postpayment Processes to Identify Commercial Overpayments for Recovery in Fiscal Year 2007 

DOD internal postpayment process 

Component Process Description of process 

Designed 

to identify 

commercial 

overpayments 

for recovery 

(Yes/No) 

Office of Internal Review 

audits of commercial 

payments 

Internal Review has a nonstatutory audit function and is 

responsible for conducting postpayment audits of commercial 

pay (contract and vendor payments) to identify and detect 

erroneous payments. It applies detective software logic against 

the contract and vendor payments data. Internal Review audits 

DOD’s contract payment system, the Mechanization of Contract 

Administration Services (MOCAS) as well as DOD’s four largest 

vendor pay systems. For MOCAS, prior to BRAC, Internal 

Review received the complete universe of all payments on a 

monthly basis and ran the data mining logic. For the vendor pay 

systems, prior to BRAC, Internal Review applied a threshold 

between $200 and $500 dollars to its payment universe and 

then ran the erroneous payment detection logic. 

DFAS Yes 

Contract reconciliations Contract reconciliations involve reconstructing a contract to 

determine the source and reason for an error or discrepancy, 

including comparing data among the contract, disbursement, 

and accounting records.These reconciliations are generally 

performed at the request of the contractor, vendor, or DCMA. 

No 

DCAA interim and final 

voucher reviews 

For contractors enrolled in the direct billing program, whereby 

the contractor submits vouchers for payment without prior 

review, DCAA performs an annual, cursory review of a 

nonstatistical selection of paid vouchers. If a contractor is not 

enrolled in the direct billing program, DCAA is required to 

review and approve contractor interim vouchers for payment 

and suspend payment of questionable costs. DCAA is required 

to review final vouchers and send them to the administrative 

contracting officer. [Contract Audit Manual (CAM) 6-1007.6; 

FAR § 42.803; DFARS § 242.803; DFARS § 242.803(b)(i)(B); 

DODD 5105.36, paras. 5.4 and 5.5; and DOD FMR vol. 10, ch. 

10, para. 100202] 

No 

DCAA incurred cost audits DCAA determines allowability of the contractors’ claimed costs 

incurred and submitted by contractors for reimbursement under 

cost-reimbursable, fixed-price incentive, and other types of 

flexibly priced contracts and compliance with contract terms, 

FAR, and CAS, if applicable. [FAR §§ 42.101, 42.803(b), and 

DFARS § 242.803] 

No 

DCMA and DCAA 

DCMA and DCAA contract 

closeout process 

The closeout process is conducted at the end of a contract and 

involves multiple steps. For example, DCAA reviews final 

completion vouchers and the cumulative allowable cost 

worksheet and may review a contract closing statement. 

[DFARS § 242.803(b)(i)(D); CAM 6-711.3(a) and (d); CAM 6-

708.2(d)] 

No 

Page 21 GAO-09-442 DOD Improper Payments
 

DOD internal postpayment process 

Component Process Description of process 

Designed 

to identify 

commercial 

overpayments 

for recovery 

(Yes/No) 

DOD external recovery audits

TRICARE 

Management 

Activity (TMA)a

TMA Recovery Audit TMA hired a recovery audit contractor to identify overpayments 

made to hospitals for medical services provided to DOD 

beneficiaries. The contractor specialized in identifying 

overpayments to hospitals that failed to submit amended cost 

reports. 

Yes 

NavybNavy Telecommunications 

Recovery Audit 

Navy hired a recovery audit contractor to identify overpayments 

made in its telecommunications program. 

Yes 

Source: GAO’s analysis. 

a

Although the contract was terminated in February 2007, overpayments were still collected in fiscal 

year 2007. The contractor identified about $30 million in overpayments for the period of 1992 through 

1997, of which $27 million had been collected as of fiscal year 2008, including $700,000 in fiscal year 

2007. DCAA assumed responsibility for this process after the contract was terminated and recently 

identified $6 million in overpayments for the period of 1998 through 2004. However, no amounts have 

yet been recovered. 

b

The contractor encountered problems during the audit with data access and quality, which 

contributed to the difficulty in identifying and recovering improper payments. Although the Navy 

projected savings of approximately 21 percent from the recovery audit, no improper payments were 

recovered through this effort. In 2007, DOD OIG reported that other recovery audit contractors 

experienced instances of data access issues and recommended that DOD remove impediments 

caused by proprietary records, and allow timely access to data. DOD did not concur with this 

recommendation. 

According to DOD officials, the existing processes were adequately 

designed to fulfill the requirements of the Recovery Auditing Act and OMB 

guidance and thus, no further actions were needed. However, we found 

the majority of the existing processes were not specifically designed to 

identify overpayments. For example, DFAS’s contract reconciliations were 

performed upon request to resolve previously identified discrepancies, 

including possible overpayments, within DOD’s contract, disbursement, 

and accounting records such as to correct funding classification or lines of 

accounting errors. Because a contract reconciliation would be performed 

only if an error related to a specific contract was found, contracts and the 

associated disbursements that did not have identified errors would not be 

subject to this review. As a result, this process was not intended to identify 

new, undetected contract overpayments as envisioned by the Recovery 

Auditing Act. In addition, we noted that DCMA’s and DCAA’s contract 

closeout processes were designed to ensure that applicable administrative 

actions had been completed during the course of a contract (e.g., all 

classified documents were disposed of) and not to specifically identify 

Page 22 GAO-09-442 DOD Improper Payments
 

contract overpayments. The DOD OIG has reported instances where the 

department was unable to reconcile and close out contracts due to missing 

documentation and staff turnover.38 Further, although DOD considered 

DCAA contract audits an integral part of its recovery audit program, DCAA 

officials pointed out that because recovery auditing is a review of DOD 

components’ books and records, DCAA would generally have no role since 

its audits primarily focus on contractors’ records.39

Moreover, based on our review, DOD’s internal guidance did not identify 

the applicable payment and accounting systems to be reviewed, the 

frequency of this review, and the applicable roles and responsibilities at 

DFAS and the military services processing commercial payments, 

including coordination of these efforts. We found no discussion on how 

DOD would leverage existing audits to identify commercial overpayments 

performed at military service audit agencies, such as the Army Audit 

Agency. Further, the guidance did not include specific actions that 

addressed OMB’s recovery auditing reporting requirements, including 

actions to develop a corrective action plan to address the root causes of 

payment errors and steps to measure the total cost of the agency’s 

recovery auditing program. In fiscal year 2009, DOD acknowledged the 

need to clarify and update its guidance and has efforts underway to revise 

the recovery auditing chapter. 

DOD further reported in its fiscal year 2007 AFR that it had actions 

underway to implement a Business Activity Monitoring (BAM) service to 

provide a real-time or near real-time automated mechanism for analyzing 

transactions to prevent and reduce the risk of duplicate payments and 

other types of errors. DFAS believes this new process will reduce the need 

for internal postpayment reviews of commercial payments by identifying 

errors before payment occurs. DFAS anticipates DOD-wide 

implementation of BAM during fiscal year 2009. Until the department 

establishes processes specifically designed to address recovery auditing 

 

38DOD OIG Reports, Financial Management Contracts Classified as Unreconcilable by 

the Defense Finance and Accounting Service Columbus Contract NO. F30602-81-C-0153, 

D-2005-040 (Mar. 14, 2005) and Financial Management Contracts Classified as 

Unreconcilable by the Defense Finance and Accounting Service Columbus Contract 

DCAA09-81-G-2008/0031, D-2005-047 (Apr. 1, 2005). 

39We note that DCAA’s voucher reviews and incurred cost audits might find some payments 

that are overpayments under the Recovery Auditing Act such as payments that are 

unallowable because they are duplicates. However, DCAA’s work is not designed to detect 

all overpayments under the Recovery Auditing Act. 

Page 23 GAO-09-442 DOD Improper Payments
 

and updates its internal guidance, it will be unable to determine the extent 

to which contract overpayments exist and are subsequently recovered to 

fulfill the Recovery Auditing Act requirements. 

DOD Reported Recovery 

Audit Information for 

Fiscal Year 2007 Was 

Incomplete 

DOD did not fully address OMB recovery auditing reporting requirements 

in its AFR, such as disclosing the total costs associated with its recovery 

auditing activities and the associated recovered amounts related to 

overpayments made to vendors. DOD’s guidance did not include the 

specific recovery auditing reporting requirements identified in OMB’s 

guidance. The following describes the status of DOD’s actions on each of 

the nine reporting elements under OMB’s recovery auditing reporting 

requirements: 

• A general description and evaluation of the steps taken to carry 

out a recovery auditing program. 

• DOD reported a general description of the steps taken to 

implement its recovery auditing program, but did not 

provide an evaluation. 

• The total cost of the agency’s recovery auditing program. 

• DOD informed us that it did not report total costs because 

it was unable to calculate the amount. DOD officials told us 

that the agency did not have cost accountants and thus 

lacked the expertise needed to calculate the total cost of 

the agency’s recovery auditing program, particularly the 

costs of the agency’s internal recovery efforts (agency 

salaries and expenses). 

• The total amount of contracts subject to review. 

• DOD did not report the full amount subject to review. 

Specifically, DOD excluded from its AFR $20.5 billion of its 

commercial payment universe for fiscal year 2007. 

According to Office of the Comptroller officials, it did not 

include $20.5 billion for the U.S. Army Corps of Engineers 

and Army Europe in the universe of commercial payments 

because of an oversight error. The $20.5 billion represents 

commercial payments processed by Army Europe and the 

U.S. Army Corps of Engineers. If the $20.5 billion amount 

had been included, the total universe of reported 

commercial payments would have increased to $340.3 

billion. 

• The actual amount of contracts reviewed. 

• As stated above, DOD excluded $20.5 billion from the full 

amount actually reviewed because of an oversight error. 

Page 24 GAO-09-442 DOD Improper Payments
 

• The amounts identified for recovery. 

• DOD reported the overpayments identified for recovery for 

contractors, but not for vendors. DFAS officials told us that 

they did not report for vendor payments the amounts 

identified for recovery and actually recovered because the 

department did not have a process to separate and quantify 

DOD-identified vendor overpayments from contractoridentified vendor overpayments. In July 2007, DFAS 

introduced an automated process—the Contractor Debt 

System (CDS)—to track DOD-identified overpayments to 

vendors, but CDS was not fully deployed by the time DOD 

issued its fiscal year 2007 AFR.40

• The amounts actually recovered in the current year. 

• DOD reported the associated recovered amounts for 

contractor overpayments, but did not report similar 

information for vendors. As stated above, DOD did not 

report this information because it lacked the processes 

needed to distinguish between DOD-identified and 

contractor-identified vendor overpayments. 

• A corrective action plan to address the root causes of payment 

errors. 

• DOD did not report on its corrective action plan to address 

the root causes of payment errors. We requested—but DOD 

did not provide—its corrective action plan to reduce 

commercial overpayments. 

• A general description and evaluation of any management 

improvement program carried out as part of its recovery 

auditing program. 

• DOD reported a general description of an initiative—

Business Activity Monitoring service—it planned to 

implement to reduce overpayments. However, DOD did not 

report a general evaluation of this initiative, because it had 

not been implemented. 

• A description and justification of the classes of contracts 

excluded from recovery auditing review by the agency head. 

• This reporting element is not applicable as DOD officials 

told us that the department reviewed all classes of 

contracts as part of its recovery auditing program. 

 

40CDS is a debt collection and reporting system used by the DFAS-Columbus Debt 

Management Office to track new and existing contractor debt owed to the government. 

Page 25 GAO-09-442 DOD Improper Payments
 

DOD also could not substantiate the reported $18.9 million of DFAS 

recovered contract overpayments for fiscal year 2007, because it did not 

maintain the underlying documentation that supported the amount. DOD 

was unable to recreate the documentation because the system data 

reflected real-time information and changed daily. Although the Office of 

the Comptroller reported commercial overpayment data for the Navy for 

fiscal year 2008, it did not do so for fiscal year 2007 and was unable to 

confirm whether it should have reported comparable data for that period. 

Office of the Comptroller officials told us that they did not follow up with 

the Navy to determine why it did not report recovery audit information for 

fiscal year 2007. Our internal control standards related to control activities 

state that all transactions and other significant events need to be clearly 

documented and should be readily available for examination, and that 

documentation and records should be properly managed and maintained.41

Until DOD reports the required information and ensures the accuracy of 

the information it does report, the extent to which Congress, OMB, and 

other oversight bodies can rely on this information to make informed 

decisions is questionable. 

Inadequate Monitoring and 

Oversight of DOD’s 

Recovery Auditing 

Activities 

The Office of the Comptroller’s oversight and monitoring of DOD’s 

recovery auditing activities were inadequate as they indicated that they 

had not verified the accuracy and completeness of the information 

reported in DOD’s AFR. These activities were generally limited to 

compiling data received from DOD agencies and the military services and 

performing a fluctuation analysis of these data to identify changes in 

amounts between the current and prior year. We found that the roles and 

responsibilities for the Recovery Auditing Project Officer, who was tasked 

with overseeing DOD’s recovery auditing efforts, were not documented in 

the November 2006 memorandum from the Office of the Comptroller 

establishing the position.42 In addition, the project officer devoted minimal 

time—about 10 percent for fiscal year 2007—to overseeing DOD’s 

recovery auditing efforts, and frequent turnover occurred with this 

position. Between fiscal years 2007 and 2008 we noted that four different 

 

41GAO/AIMD-00-21.3.1. 

42On July 10, 2009, DOD informed us that the roles and responsibilities of the Recovery 

Auditing Project Officer would be included in its revised chapter in the DOD Financial 

Management Regulation, Volume 10, Chapter 22, “Recovery Auditing”. DOD anticipates 

that the updated chapter will be published by the end of the fiscal year 2009. 

Page 26 GAO-09-442 DOD Improper Payments
 

people had been assigned to oversee DOD’s recovery auditing program.43

Our internal control standards for monitoring provide that processes 

should generally be designed to ensure that ongoing monitoring occurs in 

the course of normal operations and include regular management and 

supervisory activities, comparisons, and reconciliations. Further, our 

internal control standards provide that controls should include a wide 

range of diverse activities including verification of information and be 

aimed at validating the propriety and integrity of both organizational and 

individual performance measures and indicators.44 Also, excessive 

turnover could significantly impact the department’s ability to sustain the 

knowledge, skills, and experience needed to effectively oversee 

implementation of the Recovery Auditing Act requirements. 

Office of the Comptroller officials acknowledged that the recovery audit 

data submitted by the DOD agencies and military services were not 

independently validated to ensure that the information was accurate, 

complete, and met the minimum reporting requirements. In December 

2007, DOD established a recovery auditing working group comprised of 

representatives from the DOD agencies and military service components 

to identify best practices for recovery auditing; however, this group has 

yet to meet. At the DOD component level, we were informed that Navy, on 

its own initiative, established a working group in fiscal year 2008 to 

identify and recover commercial overpayments and report this 

information to the Office of the Comptroller. Without adequate monitoring 

and oversight, the department does not have adequate assurance that its 

future reporting under the Recovery Auditing Act will be accurate and 

complete. 

 

43For fiscal year 2007, the Project Officer for Improper Payments and Recovery Auditing 

had dual responsibility for overseeing DOD’s improper payment and recovery auditing 

activities. In November 2007, DOD established the Recovery Auditing Project Officer 

position to oversee DOD’s recovery audit program. The Office of the Comptroller informed 

us that the Recovery Auditing Project Officer estimated that up to 25 percent of her time 

was devoted to overseeing recovery auditing activities, as this was an added responsibility 

to other duties she was assigned in the Office of the Comptroller. From March 2008 to 

August 2008, due to staff turnover, DOD reverted back to one person who had dual 

improper payment and recovery auditing responsibilities. For this time period, the Project 

Officer for Improper Payments and Recovery Auditing told us that she devoted only 10 

percent of her time to overseeing recovery auditing activities. Again, in September 2008, 

the Office of the Comptroller filled the Recovery Auditing Project Officer position and that 

person devoted between 35-40 percent of her time to overseeing recovery auditing 

activities at DOD. 

44GAO/AIMD-00-21.3.1. 

Page 27 GAO-09-442 DOD Improper Payments
 

DOD has not established the mechanisms—processes and detailed 

implementing guidance—needed to effectively implement the 

requirements for both IPIA and the Recovery Auditing Act. The 

department reports that its payment activities are at low risk for improper 

payments without adequate supporting analysis and documentation and 

despite its history of long-standing financial management weaknesses. 

Because addressing IPIA requirements is a sequential process, DOD’s 

failure to conduct comprehensive risk assessments, which is the first step, 

has adversely affected decisions made to address subsequent steps in the 

process. DOD has not accurately portrayed the full extent of improper 

payments or the associated root causes. As a result, any corrective actions 

taken are likely to fall short of fixing the problems that resulted in these 

errors. With regard to recovery efforts, DOD continues to rely on 

processes that are inadequate for identifying the extent of overpayments 

to contractors and vendors and ensuring that these amounts are 

recovered. Until the department takes definitive action to fulfill the 

requirements of these acts and implement preventive internal controls, it 

is at risk of making improper payments and wasting taxpayer funds. 

To improve DOD’s efforts to address improper payment and recovery 

auditing requirements, we recommend that the Secretary of Defense direct 

the DOD Comptroller to take the following 13 actions. 

Conclusions 

Recommendations for 

Executive Action 

For IPIA, the DOD Comptroller should 

• Establish and implement a systematic approach, as a part of the risk 

assessment process, to ensure all programs and activities are reviewed 

to determine susceptibility to improper payments. 

• Develop and implement detailed guidance for conducting risk 

assessments, including the steps to determine if risk exists, what those 

risks are, and the potential or actual impact of those risks on program 

operations. 

• Require DOD agencies and the military services to document the risk 

assessment methodology used, including the risk factors considered, 

and the rationale for assessing the risk level for the payment activity. 

• Develop and implement a statistically valid methodology to estimate 

and report commercial improper payments (contract and vendor overand underpayments). This methodology should include all payment 

errors regardless of the source of the error—DOD, contractors, or 

vendors—as required by IPIA. 

• Identify and fully disclose the root causes of improper payments 

annually in the AFR. 

Page 28 GAO-09-442 DOD Improper Payments
 

• Identify and fully disclose the corrective actions, and monitor the 

corrective actions to ensure that they address applicable root causes. 

• Perform oversight and monitoring activities to ensure the accuracy and 

completeness of the improper payment data submitted by the DOD 

agencies and the military services for inclusion in the AFR. 

For Recovery Auditing Act, the DOD Comptroller should 

• Establish and implement processes specifically designed to identify 

and recover commercial overpayments. 

• Develop and implement detailed guidance to assist DOD agencies and 

the military services in effectively carrying out recovery audits and 

activities, including the payment and accounting systems to be 

reviewed, the frequency of these reviews, applicable roles and 

responsibilities, and reporting requirements. 

• Establish and implement a process to identify costs related to the 

department’s recovery auditing program, including costs for 

employees’ salaries. 

• Establish and implement a process to identify and report vendor 

overpayments and the associated recovered amounts. 

• Maintain documentation to support the amounts reported in the AFR 

to allow for independent evaluation of this information. 

• Perform oversight and monitoring activities to ensure the accuracy and 

completeness of the recovery auditing data submitted by the DOD 

agencies and the military services for inclusion in the AFR. Also, 

document the roles and responsibilities of the Recovery Auditing 

Project Officer. 

DOD provided written comments on a draft of this report which are 

reprinted in their entirety in appendix IV. DOD also provided technical 

comments that we have incorporated as appropriate. In its written 

comments, DOD disagreed with all but 1 of our 13 recommendations 

designed to strengthen its improper payment and recovery auditing 

processes. DOD stated that generally the actions envisioned by our 

recommendations were already being accomplished within the department 

or were not required by OMB and thus, such direction from GAO was not 

necessary. We disagree. While DOD presently has efforts underway, as 

noted in this report, it has not yet established the processes and detailed 

guidance for effectively implementing either IPIA or the Recovery Auditing 

Act. In its comments, DOD did not provide any new evidence that was not 

considered in our report. Accordingly, we continue to believe that our 

recommendations are critical for DOD to enhance its efforts to minimize 

improper payments and recover those that are made. The following 

Agency Comments 

and Our Evaluation 

Page 29 GAO-09-442 DOD Improper Payments
 

paragraphs illustrate the nature of DOD’s comments and our analysis of its 

key points. 

DOD’s Processes To 

Address IPIA 

Requirements 

DOD disagreed with our three recommendations aimed at enhancing 

DOD’s risk assessment processes. We recommended the DOD Comptroller 

require DOD agencies and the military services to establish and implement 

risk assessment methodologies, along with documentation of key factors 

considered and the rationale for assessing the risk level for the payment 

activity. DOD stated that such direction was not necessary as it had 

established IPIA program baselines and measures and reports on all of its 

IPIA programs annually in accordance with OMB guidance. As described 

in our report, DOD’s risk assessment process was inadequate to ensure 

that appropriate consideration was given to the risks associated with its 

payment activities as we found an additional $322 billion in DOD outlays 

that had not been assessed under IPIA. For payment activities assessed, 

DOD did not require its agencies and military services to document their 

risk methodologies, including risk factors considered, the potential or 

actual impact on their program operations, and the rationale for assessing 

risk as either low, medium, or high. As such, none of the nine DOD 

components that conducted risk assessments described their methodology 

or rationale for the low level of risk assigned to each applicable payment 

activity. Given the lack of supporting documentation and evidence for the 

risk assessments as well as DOD’s history of long-standing internal control 

weaknesses, including GAO’s prior designation of eight functional DOD 

areas as high risk, the low risk levels are not based on sufficient analysis, 

are likely unrealistic, and are not reflective of the wide range of 

vulnerabilities that exist within DOD. 

DOD also disagreed with our recommendation that it develop and 

implement a statistically valid methodology to estimate and report 

commercial improper payments (contract and vendor over- and 

underpayments). DOD stated that it has followed guidance provided by 

OMB and that commercial improper payments are to be identified, 

recovered and reported in accordance with the Recovery Auditing Act. As 

described in our report, DOD stated that reporting improper commercial 

payments under IPIA would create duplicate reporting because this 

information was captured as part of DOD’s efforts to address Recovery 

Auditing Act requirements. However, we disagree because those actions 

are not sufficient to address IPIA. Both acts must be addressed with 

regard to commercial payment activity. Each act has a different scope of 

review and reporting requirements. Based on the improper payment 

definition under IPIA and OMB’s guidance that instructs agencies to 

Page 30 GAO-09-442 DOD Improper Payments
 

develop a statistically valid estimate, the statistical sampling requirement 

would apply to commercial payments under IPIA. Developing an acrossthe-board, systematic estimate of the extent of improper payments gives 

management baseline information for measuring progress in reducing 

improper payments and how much investment in new internal controls 

would be cost-justified. 

DOD disagreed with our two recommendations to identify and fully 

disclose in the AFR the root causes of improper payments and the 

corrective actions, including monitoring those actions to ensure that they 

address applicable root causes. DOD commented that the AFR was not the 

appropriate forum for this detailed level information and that it had 

procedures in place to identify, fully disclose, and monitor corrections. We 

have two main concerns with DOD’s responses to these recommendations. 

First, DOD did not consistently follow OMB reporting requirements to 

identify root causes and related corrective actions and the underlying 

documentation of the reported corrective actions lacked details as to the 

corrective actions taken or planned and the corresponding results, if any. 

Second, because of the inherent responsibility to be a good steward for 

public resources, it is important that corrective actions and the 

effectiveness of such be openly communicated or available not only to the 

Congress and agency management but also to the general public. 

Balancing the benefits of summarizing information with reporting 

compliance and user needs is critical. Corrective actions cannot be 

effectively monitored and assessed unless the detailed corrective actions 

are known and tied to the root cause(s) of improper payments that they 

are intended to address. 

DOD’s Processes To 

Address Recovery Auditing 

Act Requirements 

We made five recommendations aimed at strengthening DOD’s recovery 

audit processes related to establishing and implementing processes 

specifically designed to identify and recover commercial payments, 

developing detailed guidance to carry out recovery audits and activities, 

identifying costs related to its recovery auditing program, implementing a 

process to identify and report vendor overpayments and associated 

recovered amounts, and maintaining documentation to support reported 

amounts. DOD concurred with our recommendation to identify the cost 

related to its recovery audit program. DOD disagreed with the other four 

recovery auditing recommendations because it believed the agency had 

already established and implemented such processes. 

However, as we point out in this report, the majority of DOD’s processes 

aimed at identifying and recovering improper payments were inadequate 

Page 31 GAO-09-442 DOD Improper Payments
 

Page 32 GAO-09-442 

because the primary purpose of these processes were not to identify 

commercial improper payments as required by the Recovery Auditing Act. 

For example, DCMA and DCAA’s contract closeout processes were 

designed to ensure that applicable administrative actions had been 

completed during the course of a contract (e.g., all classified documents 

were disposed of) and not to specifically identify contract overpayments. 

In addition, DOD’s current FMR guidance (dated December 2005) did not 

include specific elements that would be necessary to effectively carry out 

a recovery auditing program. Further, DOD had not established a process 

to fully identify and report vendor overpayments. This problem continued 

to exist as DOD acknowledged in its fiscal year 2008 AFR that while it was 

able to identify DOD-identified overpayments for its DFAS component, it 

was unable to identify and report vendor overpayments for all of its 

components and that efforts would continue until all DOD components 

achieved this capability. 

DOD disagreed with our two recommendations related to oversight and 

monitoring and commented that they were duplicative, except for the 

additional language related to documenting the roles and responsibilities 

of the Recovery Auditing Project Officer. We clarified our 

recommendations related to oversight and monitoring to emphasize the 

need of these activities for both IPIA and the Recovery Auditing Act. As we 

stated in our report, the DOD Office of the Comptroller’s oversight and 

monitoring of improper payment and recovery auditing activities were 

inadequate as the office did not verify the accuracy and completeness of 

information received from DOD agencies and military service components 

and reported in its AFR. 

DOD’s Oversight and 

Monitoring Efforts To 

Address IPIA and 

Recovery Auditing Act 

Requirements 

We are sending copies of this report to interested congressional 

committees; the Secretary of Defense; and the Director, Office of 

Management and Budget. In addition, this report will be available at no 

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

DOD Improper Payments
 

If you or your staff have any questions about this report, please contact me 

at (202) 512-9095 or by e-mail at dalykl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. GAO staff who made major contributions to this 

report are listed in appendix V. 

Kay L. Daly, Director 

Financial Management and Assurance 

Page 33 GAO-09-442 DOD Improper Payments
Appendix I: Objectives, Scope and 

Methodology 

Page 34 GAO-09-442 

Appendix I: Objectives, Scope and 

Methodology 

The objectives of this report were to determine whether the Department of 

Defense (DOD) had adequate controls in place to address the Improper 

Payments Information Act (IPIA) and the Recovery Auditing Act 

requirements.1

To determine whether DOD adequately addressed IPIA 

requirements, we reviewed the applicable legislation and related OMB 

implementing guidance.2

We further reviewed DOD’s agency financial 

reports (AFR) for fiscal years 2004 through 2008, internal DOD improper 

payment guidance,3

 and prior GAO4 and DOD Office of Inspector General 

(DOD OIG) reports5

 on improper payments. We reviewed these documents 

to understand DOD’s efforts to address IPIA requirements and to identify 

previously reported issues with DOD’s improper payment reporting. In 

addition, we performed the following work: 

• To assess DOD’s IPIA risk assessment process to identify payment 

activities susceptible to significant improper payments, we reviewed 

our Standards for Internal Control in the Federal Government and 

executive guide on Strategies to Manage Improper Payments: 

Learning from Public and Private Sector Organizations as guidance 

to assess DOD’s internal controls over disbursements. We interviewed 

agency officials such as the Project Officer for Improper Payment and 

 

1

Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002); and National Defense Authorization Act 

for Fiscal Year 2002, Pub. L. No. 107-107, div. A, title VIII, § 831, 115 Stat. 1012, 1186 (Dec. 

28, 2001), codified at 31 U.S.C. §§ 3561-3567. 

2

Appendix C to OMB Circular No. A-123, Requirements for Effective Measurement and 

Remediation of Improper Payments (Aug. 10, 2006). 

3

DOD’s Financial Management Regulation (FMR) Volume 4, Chapter 14, Improper 

Payments. 

4

GAO, DOD Travel Cards: Control Weaknesses Led to Millions in Fraud ,Waste, and 

Improper Payments, GAO-04-825T (Washington, D.C.: June 9, 2004); Financial 

Management: Challenges in Meeting the Requirements of the Improper Payments 

Information Act, GAO-05-417 (Washington, D.C.: Mar. 31, 2005); Improper Payments: 

Agencies’ Fiscal Year 2005 Reporting Under the Improper Payments Information Act 

Remains Incomplete, GAO-07-92 (Washington, D.C.: Nov. 14, 2006); Improper Payments: 

Incomplete Reporting under the Improper Payments Information Act Masks the Extent of 

the Problem, GAO-07-254T (Washington, D.C.: Dec. 5, 2006); Improper Payments: 

Agencies’ Efforts to Address Improper Payments and Recovery Auditing Requirements 

Continue, GAO-07-635T (Washington, D.C.: Mar. 29, 2007); and Improper Payments: Status 

of Agencies’ Efforts to Address Improper Payment and Recovery Auditing Requirements, 

GAO-08-438T (Washington, D.C.: Jan. 31, 2008). 

5

DOD OIG Reports, Identification and Reporting of DOD Erroneous Payments, D-2005-

100 (Aug. 17, 2005); Identification and Reporting of Improper Payments through 

Recovery Auditing, D-2007-110 (July 9, 2007); and Identification and Reporting of 

Improper Payments by the Defense Logistics Agency, D-2008-096 (May 20, 2008). 

 DOD Improper Payments 
Appendix I: Objectives, Scope and 

Methodology 

Recovery Auditing, and obtained and reviewed fiscal year 2007 IPIA 

responses, where available. We also compared the amounts reported 

as the basis for improper payments to other documentation such as the 

President’s Budget and Statement of Budgetary Resources to 

determine whether all DOD outlays were subject to improper payment 

assessments. 

• To assess the statistical validity of DOD’s reported improper payment 

estimates for fiscal year 2007, we conducted an independent analysis 

of its sampling methodologies, including a review of the sampling 

plans for each DOD agency and military service component. In 

addition, we performed an independent assessment of DOD’s IPIA 

processes, including a legal analysis of the improper payment 

definition in relation to DOD’s classification of commercial payment 

errors (contract and vendor payments) as either improper or proper to 

determine whether DOD had reached appropriate conclusions. In 

addition, we interviewed the IPIA Project Officer, Defense Finance 

Accounting Service (DFAS)-Kansas City, and DFAS-Columbus 

officials, to identify, estimate, and reduce improper payments and 

reviewed supporting documentation, when available, in order to gain 

an understanding of DOD’s IPIA process. We also interviewed DOD 

OIG officials to discuss their findings and recommendations related to 

DOD’s efforts to address IPIA requirements. 

• To assess DOD’s corrective action plans to reduce improper payments, 

we interviewed agency officials, reviewed corrective actions to reduce 

improper payments, and reviewed corrective action plans to determine 

whether appropriate linkages existed between the root causes of 

improper payments and specific corrective action steps. We also 

performed an analysis of DOD’s improper payment error rates to 

determine whether the improper payment error rates for DOD 

payment activities had changed from fiscal year to fiscal year. 

• To assess the accuracy and completeness of DOD’s reported fiscal 

year 2007 improper payment amounts, we recalculated summary 

amounts included on DOD’s IPIA survey and traced those amounts to 

supporting documentation. 

To determine whether DOD had adequately addressed the Recovery 

Auditing Act requirements, we reviewed applicable legislation and related 

OMB implementing guidance,6

 DOD’s AFR for fiscal years 2004 through 

 

6

See Appendix C to OMB Circular No. A-123, pt. II. 

Page 35 GAO-09-442 DOD Improper Payments
Appendix I: Objectives, Scope and 

Methodology 

2008, internal DOD recovery auditing guidance,7 and prior GAO8 and DOD 

OIG reports9

 on recovery auditing. We interviewed agency officials such as 

the Recovery Auditing Project Officer, the Director of Internal Review, and 

the Chief of DFAS’s Debt Management Office regarding DOD’s process to 

identify and recover commercial overpayments and reviewed 

accompanying and supporting documentation, when available. 

We also interviewed Defense Contract Audit Agency (DCAA) and Defense 

Contract Management Agency (DCMA) officials such as the DCAA 

Headquarters Program Manager of the Policy Programs Division and 

DMCA contract specialists to determine their role in DOD’s recovery 

auditing process and reviewed applicable guidance.10 Further, we 

interviewed DOD OIG officials such as the DOD OIG Program Director 

and the Audit Project Manager at DFAS-Columbus to discuss their findings 

and recommendations related to DOD’s efforts to address recovery 

auditing requirements. Also, we interviewed Department of the Navy 

officials regarding results of the recovery audit performed to identify 

overpayments made in its telecommunications program. In addition, we 

interviewed TRICARE Management Activity (TMA) officials to obtain 

clarification and supporting documentation on the healthcare-recovered 

amounts reported in DOD’s AFR. To assess the accuracy and 

completeness of DOD’s reported fiscal year 2007 recovery audit 

information, we reviewed DFAS and TMA supporting documentation 

submitted to the Office of the Comptroller to substantiate amounts 

reported in the AFR. We traced these schedules and total amounts 

submitted to the Office of the Comptroller back to various supporting 

breakdowns (at the transaction level). In addition, we recalculated and 

 

7

DOD FMR, Volume 5, Chapter 1 and Volume 10, Chapters 1, 18, 20, and 22. 

8

GAO, Contract Management: Recovery Auditing Offers Potential to Identify 

Overpayments, GAO/NSIAD- 99-12 (Washington, D.C.: Dec. 3, 1998); Contract 

Management: DOD is Examining Opportunities to further Use Recovery Auditing, 

GAO/NSIAD- 99-78 (Washington, D.C.: Mar. 17, 1999); Recovery Auditing: Reducing 

Overpayments, Achieving Accountability, and the Government Waste Corrections Act of 

1999, GAO/T-NSIAD-99-213 (Washington, D.C.: June 29, 1999); and Contract Management: 

DOD Could Benefit From the Use of Internal Recovery Auditing, GAO/NSIAD-00-66R

(Washington, D.C.: Mar. 10, 2000). 

9

DOD OIG, Financial Management: DOD Recovery Audit Program, D-2005-101 (Aug. 17, 

2005); Identification and Reporting of Improper Payments Through Recovery Auditing, 

D-2007-110 (July 9, 2007). 

10DCAA Contract Audit Manual chapter 6 and DCMA Guidebook Contract Closeout. 

Page 36 GAO-09-442 DOD Improper Payments
Appendix I: Objectives, Scope and 

Methodology 

verified the accuracy of the recovery audit amounts in DOD’s summary 

recovery auditing table. 

We conducted site visits at two of the five DFAS processing center 

locations (Kansas City, Missouri and Columbus, Ohio). We selected the 

DFAS-Kansas City site because it was responsible for receiving IPIA 

survey information from other DFAS sites, compiling the information, and 

checking the information for accuracy and completeness. As part of this 

site visit, we obtained an understanding of DFAS’s process for conducting 

monthly postpayment reviews of military and civilian pay to identify 

improper payments. In addition, we selected the DFAS-Columbus site 

because it processed a majority of DOD’s commercial payments—the 

agency’s largest payment activity—on behalf of the DOD agencies and 

military services. Also, DFAS-Columbus was the only DFAS site that 

processed DOD contract payments. At the DFAS-Columbus site, we 

obtained an understanding of the commercial prepayment and 

postpayment controls in place affecting IPIA and Recovery auditing 

requirements. 

To determine the reliability of DOD’s improper payment and recovery 

audit information, we interviewed knowledgeable agency officials, such as 

the DFAS-Indianapolis Director of Accounts Payable and DFASIndianapolis Accounts Receivable specialists, to ascertain the procedures 

used to assume the quality of the data. We reviewed DOD’s commercial 

payment activity from its contract and vendor pay systems and its 

Improper Payments Online Database (IPOD) that stored the improper 

payment information. We also traced data back to supporting 

documentation, including DOD’s fiscal year 2007 IPIA survey, the AFR, 

and the recovery auditing activity schedule. We performed a data 

reliability assessment of DOD’s statistical sampling methodologies for the 

fiscal year 2007 reported improper payment estimates, (see appendix III). 

We concluded that the data were reliable for our purposes. 

We conducted our audit work from June 2008 to June 2009 in accordance 

with generally accepted government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions, 

based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our 

audit objectives. We obtained written comments on a draft of this report 

from the Under Secretary of Defense (Comptroller) and have summarized 

these comments in the Agency Comments and Our Evaluation section of 

this report. 

Page 37 GAO-09-442 DOD Improper Payments
Appendix II: List of DOD Agencies and 

Military Service Components Included in the Appendix II: List of DOD Agencies and IPIA Survey 

Military Service Components Included in the 

IPIA Survey 

1. Department of the Army 

2. Department of the Navy 

3. Department of the Air Force 

4. United States Marine Corps, Assistant Deputy Commandant for 

Programs and Resources 

5. Inspector General of the Department of Defense 

6. Defense Advanced Research Projects 

7. Defense Contract Audit Agency 

8. Defense Finance and Accounting Service 

9. Defense Intelligence Agency 

10. Defense Logistics Agency 

11. Defense Security Service 

12. Missile Defense Agency 

13. National Security Agency/Central Security Service 

14. Defense Commissary Agency 

15. Defense Contract Management Agency 

16. Defense Information Systems Agency 

17. Defense Legal Services Agency 

18. Defense Security Cooperation Agency 

19. Defense Threat Reduction Agency 

20. Pentagon Force Protection Agency 

21. National Geospatial Intelligence Agency 

22. United States Army Corps of Engineers 

23. American Forces Information Services 

24. Defense Technology Security Administration 

25. Department of Defense Education Activity 

26. Department of Defense Test Resource Management Center 

27. Defense Technical Information Center 

28. Defense Prisoner of War/Missing Personnel Office 

29. Department of Defense Counterintelligence Field Activity 

30. Defense Human Resources Activity 

31. Office of Economic Adjustment 

32. TRICARE Management Activity 

33. Washington Headquarters Services 

Page 38 GAO-09-442 DOD Improper Payments 
Appendix III: DOD’s Fiscal Year 2007 Appendix III: DOD’s Fiscal Year 2007 Improper Payment Sample Plans by Program 

Improper Payment Sample Plans by Program 

In its fiscal year 2007 Agency Financial Report (AFR), the Department of 

Defense (DOD) reported on five payment activities as part of its Improper 

Payments Information Act (IPIA) reporting: military pay, military health 

benefits, civilian pay, military retirement, and travel pay. The information 

reported in DOD’s AFR is compiled from the IPIA survey submitted by the 

DOD agencies and military services. DOD agencies and military services 

used related confidence levels over different ranges (generally, as 

prescribed in OMB guidance) to plan and estimate improper payment 

amounts reported in DOD’s fiscal year 2007 AFR. We reviewed the sample 

plans for each of the five payment activities, at the component level, and 

determined those methodologies generally complied with the Office of 

Management and Budget’s (OMB) implementing guidance.1

OMB guidance requires that applicable agencies estimate the gross total of 

both over- and underpayments for those programs and activities identified 

as susceptible to significant improper payments.2

 OMB also requires that 

the estimates be based on a statistically valid random sample of sufficient 

size to yield an estimate with a 90 percent confidence interval of plus or 

minus 2.5 percentage points around the estimate of the percentage of 

improper payments. Alternatively, agencies may use a 95 percent 

confidence interval of plus or minus 3.0 percentage points around the 

estimate of the percentage of improper payments to estimate improper 

payments for agency programs. If an agency cannot determine whether a 

payment was proper because of insufficient documentation, OMB 

guidance requires that the payment be considered an error. A brief 

description of each payment activity’s methodology reported in its 

sampling plan is provided below. 

The military health benefits program consists of disbursements for the 

medical care of active duty military personnel, retirees, their family 

members, and family members of deceased service members. TRICARE 

Management Activity (TMA) processed all military health benefit 

payments for DOD. To estimate military health benefits improper 

payments, TMA selected samples from the two populations of its contract 

1. Military Health 

Benefits Program 

 

1

For military health benefits, its sample of denied claims used a confidence level of 80 

percent, which was not in accordance with OMB guidance. However, we determined that 

this deviation was immaterial. 

2

Appendix C to OMB Circular No. A-123, Requirements for Effective Measurement and 

Remediation of Improper Payments (Aug. 10, 2006). 

Page 39 GAO-09-442 DOD Improper Payments
Appendix III: DOD’s Fiscal Year 2007 

Improper Payment Sample Plans by Program 

payments, as shown in table 4 below. The contract samples were drawn on 

a quarterly basis and stratified by dollar value. For both contract types 

sampled, denied payment samples were based on the amount billed and 

nondenied payment samples were based on government costs. 

Table 4: Military Health Benefits Program Sample Plans 

Components 

Annual universe of payments 

(Population) Annual payment sample size Confidence interval 

Nondenied claims valued at $100 to 

$100k: 9,481 claims 

Nondenied claims: 90%+/- 1% 

100% review of 

Nondenied claims greater than 

$100k: 1,750 claims 

Not applicable 

Denied claims valued at $100 to 

$100k: 3,055 claims 

Denied claims: 80% +/-2% 

TRICARE Next Generation Managed 

Care Support Contracts 

15,433,902 

100% review of 

denied claims greater than $100k: 

885 claims 

Not applicable 

Nondenied claims valued at $1 to 

$25k: 4,737 claims 

Nondenied claims: 90%+/- 1% 

100% review of 

Nondenied claims greater than $25k: 

1,463 claims 

Not applicable 

Denied claims valued at $1 to $500k: 

1,557 claims 

Denied claims: 80% +/-2% 

TRICARE 

management 

activity 

TRICARE Dual Eligibility Fiscal 

Intermediary Contract 

44,607,708 

100% review of 

denied claims greater than $500k: 

385 claims 

Not applicable 

Source: GAO’s analysis of DOD’s sampling plans. 

The military pay program consists of military payroll disbursements. The 

Defense Finance and Accounting Services (DFAS) processed all military 

payroll payments for DOD. To estimate improper payments, DFAS-Kansas 

City conducted monthly postpayment reviews to determine the accuracy 

of net military pay using a simple random attribute sample and summed 

monthly results to calculate an annual estimate. In addition to its 

statistical sample, the military pay program’s estimate of improper 

payments included actual data on improper payment amounts. Table 5 

shows information reported in the sampling plan for military pay. 

2. Military Pay 

Program 

Page 40 GAO-09-442 DOD Improper Payments
Appendix III: DOD’s Fiscal Year 2007 

Improper Payment Sample Plans by Program 

Table 5: Military Pay Program Sample Plans 

Components 

Annual universe of 

payments (Population)

Annual payment 

sample size

Confidence 

interval

DFAS Active Duty: 17,034,781 7,400

Reserve & Guard: 5,062,463 13,400 95% +/- 2.5%

Source: GAO’s analysis of DOD’s sampling plans. 

The civilian pay program consists of civilian payroll disbursements. DFAS, 

Army, and Navy processed civilian payments in fiscal year 2007. DFASKansas City conducted monthly postpayment reviews to determine the 

accuracy of net pay using simple random attribute samples. In addition to 

monthly samples, DFAS added actual improper payment data to further 

enhance its estimate. DFAS monthly results were summed to calculate the 

annual estimate. Army’s sample plan consisted of annual postpayment 

reviews and analysis of a sample of disbursements, and Navy’s sample 

plan consisted of a statistical sample of Military Sealift Command Civilian 

Mariners payments. Table 6 shows detailed sampling plans for each 

component of the civilian pay program. 

Table 6: Civilian Pay Program Sample Plans 

Components

Annual universe of 

payments (Population)

Annual payment 

sample size 

Confidence 

interval

DFAS 7,655,277 6,350 95% +/- 2.5%

Army 15,128 15,128 n/a

Navy $404,522,148 $404,522,148 n/a

Source: GAO’s analysis of DOD’s sampling plans. 

The military retirement program consists of disbursements to military 

retirees and annuitants. DFAS processed all military retirement payments 

for DOD. DFAS-Cleveland performed monthly postpayment reviews to 

determine the accuracy of payments using simple random samples. Three 

samples were conducted to assess the accuracy of payments—one for 

deceased retirees, the other for retired accounts, and the third for 

annuitant accounts, as shown in table 7. The deceased retirees sample is 

designed to identify retiree payments going to deceased individuals, while 

the retired and annuitant samples identify whether regular payments are 

accurate. 

3. Civilian Pay 

Program 

4. Military Retirement 

Program 

Page 41 GAO-09-442 DOD Improper Payments
Appendix III: DOD’s Fiscal Year 2007 

Improper Payment Sample Plans by Program 

Table 7: Military Retirement Program Sample Plans 

Components

Annual universe

of payments (Population)

Annual payment 

sample size

Confidence 

interval

Deceased retiree account 

postpayment reviews: 40,392

1,656 90% +/- 2.5%

Retired account postpayment 

reviews: 2,004,706

DFAS 3,000 95% +/- 2.5%

Annuitant account postpayment 

reviews: 288,749

3,000 95% +/- 2.5%

Source: GAO’s analysis of DOD’s sampling plans. 

The following components processed travel payments: DFAS, Army, Navy, 

and Air Force. Table 8 shows detailed sample plans for each component of 

the travel pay program. DFAS-Indianapolis conducted random monthly 

reviews to determine accuracy of payments and summed monthly results 

to arrive at an annual sample.3

Army travel pay consisted of Army Korea,4

Army Europe, and the Army Corps of Engineers. Army Europe and Army 

Corps of Engineers components conducted monthly postpayment reviews 

of travel payments. Army Korea did not provide sampling results. Navy 

conducted a statistical sample of travel payments processed through its 

system. Air Force conducted post audit reviews of a random sample of 

travel payments. 

5. Travel Pay Program 

 

3

For its other travel payment system, the Integrated Automated Travel System, DFAS 

performed a duplicate payment review for fiscal year 2007. We previously reported that 

these duplicate reviews cannot be used to estimate the value of improper payments to the 

entire population. DOD agreed with our recommendation to establish and implement 

procedures to report a valid improper payment estimate for the population. See GAO, DOD 

Travel Improper Payments: Fiscal Year 2006 Reporting Was Incomplete and Planned 

Improvement Efforts Face Challenges, GAO-08-16 (Washington, D.C.: Dec. 14, 2007). We 

determined for fiscal year 2008 that DFAS had developed a statistically valid methodology 

to estimate its travel improper payments. 

4

Army Korea did not submit its IPIA Survey response in time to be included in the fiscal 

year 2007 AFR. 

Page 42 GAO-09-442 DOD Improper Payments
Appendix III: DOD’s Fiscal Year 2007 

Improper Payment Sample Plans by Program 

Table 8: Travel Pay Program Sample Plans 

Components

Annual universe of 

payments (Population)

Annual

payment sample size

Confidence 

interval

DFAS 2,251,075 43,635 95% +/- 2.5%

Army Europe: 80,816 10% of all vouchers: 8,081 

& 100% of vouchers over 

Army $2,500: 8,331 99% +/- 1.0%

Corps of Engineers: 

165,643

Corps of Engineers: 452

95% +/- 2.0%

Navy $651,374,570 $565,218,446 90% +/- 1.4%

Air Force 1,211,307 186 90%

Source: GAO’s analysis of DOD’s sampling plans. 

Page 43 GAO-09-442 DOD Improper Payments
Appendix IV: Comments from the Department Appendix IV: Comments from the of Defense 

Department of Defense 

Page 44 GAO-09-442 DOD Improper Payments 
Appendix IV: Comments from the Department 

of Defense 

Page 45 GAO-09-442 DOD Improper Payments
Appendix IV: Comments from the Department 

of Defense 

Page 46 GAO-09-442 DOD Improper Payments
Appendix IV: Comments from the Department 

of Defense 

Page 47 GAO-09-442 DOD Improper Payments
Appendix IV: Comments from the Department 

of Defense 

Page 48 GAO-09-442 DOD Improper Payments
A

A

ppendix V: GAO Contacts and Staff

cknowledgments 

Page 49 GAO-09-442 

Appendix V: GAO Contacts and Staff 

Acknowledgments 

Kay L. Daly, (202) 512-9095 or dalykl@gao.gov 

In addition to the contact named above, Carla Lewis, Assistant Director; 

Sharon Byrd; Francis Dymond; Vanessa Estevez; Patrick Frey; Jason 

Kirwan; Crystal Lazcano; Sophie Simonard-Norman; Pamela Valentine; and 

David Yoder made key contributions to this report. 

 DOD Improper Payments 

GAO Contact 

Acknowledgments 

(195140) 
GAO’s Mission The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday afternoon, GAO 

posts on its Web site newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, 

go to www.gao.gov and select “E-mail Updates.” 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Phone The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s Web site, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information. 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, DC 20548 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548 

Public Affairs 

Please Print on Recycled Paper