WASHINGTON – Today, Senate Homeland Security and Governmental Affairs Committee Chairman Tom Carper (D-Del.), Ranking Member Tom Coburn (R-Okla.) and Financial and Contracting Oversight Subcommittee Chairwoman Claire McCaskill (D-Mo.) highlighted a report from the Government Accountability Office (GAO) entitled, “DOD Financial Management: Significant Improvements Needed in Efforts to Address Improper Payment Requirements.” The report details how the Department of Defense has not complied with provisions of federal improper payment laws that require agencies to identify, prevent and recover wasteful and fraudulent payments to contractors and others, placing the Department at a higher risk for waste and fraud.

GAO found that long-standing and pervasive financial management weaknesses make it nearly impossible for DOD to curb improper payments. Instead of fully complying with the law, DOD has relied on poor and ineffective methods to identify waste and fraud. One of these methods is self reporting, or a simplistic honor system, that relies on contractors themselves to flag incorrect payments they have received. In 2011, DOD reported just $1.1 billion of improper payments. GAO notes, though, that DOD itself has found at least $200 million of unreported payment errors that were not included in the official 2011 number. The report concludes that unless DOD implements strategies to comply with improper payment laws, it will remain “…at risk of continuing to make improper payments and wasting taxpayer funds.”

“Today’s Government Accountability Office report is a troubling reminder that the Department of Defense still has more work to do in order to protect taxpayer funds," said Chairman Carper. “The Department spends about a trillion dollars annually, but officials have no idea how much of that money it loses to waste and fraud. This is simply unacceptable. The Improper Payments Elimination and Recovery Act of 2010, a critical law that applies to the Department of Defense and other departments and agencies throughout the federal government, requires agency officials to sharpen their pencils and do a much better job keeping track of the taxpayer dollars that we entrust to them. Unfortunately, at the Department of Defense, this hasn’t happened to the extent that it needs to. The current fiscal environment requires us to look in every nook and cranny of the federal government to find ways to cut waste and fraud. It’s about time the Department of Defense took this sentiment to heart as well. I will continue to work with my colleagues to push the Department of Defense to do a better job for American taxpayers."

“Today’s GAO report provides further evidence of financial mismanagement at DOD,” Dr. Coburn said.  “When our largest federal agency cannot produce a viable financial audit, it should be no surprise DOD cannot account for how much money it wastes on improper payments.  Until DOD can accurately account for the money it is spending, it won’t have the data it needs to make good financial decisions.  As a result, we’ll  continue to see more examples like the one highlighted in the report, which found the U.S. Army Corps of Engineers has spent $256,000 since 2009 on an automated overpayment-detection program that has recovered just one improper payment of $20.65.  DOD also needs to produce an accurate audit to make defense spending transparent and allow DOD to be held accountable.  That is why we need to pass the Audit the Pentagon Act, which I introduced last year and intend to reintroduce this year.”

“Improper payments should be low-hanging fruit when it comes to eliminating government waste—but that clearly hasn’t been the case here,” said McCaskill, Chairman of the Subcommittee on Financial & Contracting Oversight. “The Pentagon is failing to adequately address this issue, and as the government agency that most frequently employs contractors, it’s all the more important that they strengthen safeguards over taxpayer funds.”

In 2010, Senators Carper, Susan Collins (R-Maine) and a bipartisan group of colleagues introduced the Improper Payments Elimination and Recovery Act of 2010 (IPERA), which was designed to save taxpayers money by reducing unnecessary payments throughout the federal government. The measure, signed into law by President Obama in 2010, requires all federal agencies to adopt a robust process to identify and recover improper payments made to federal contractors. In 2012, Congress enacted and the President signed the Improper Payments Elimination and Recovery Improvement Act, which further strengthened to curb federal agencies' improper payments; mandate the establishment of a government-wide "Do Not Pay List"; and prevent improper payments to deceased individuals. 

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