[Congressional Record Volume 140, Number 56 (Tuesday, May 10, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: May 10, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
DOD FINANCIAL MISMANAGEMENT
Mr. GRASSLEY. Madam President, I would like to speak about gross,
continuing financial mismanagement at the Department of Defense [DOD].
I have spoken on the issue a number of times over the past year.
Last week, I spoke about the financial horror stories laid out before
Senator Glenn's Governmental Affairs Committee on April 12, and the
need for accountability.
Today, I would like to follow up on the need for accountability.
All the available evidence suggests the situation is getting worse.
A slew of recent DOD inspector general [IG] and GAO audit reports
clearly suggest DOD is faced with a deepening and a dangerous financial
crisis, and the outlook for reform is dim.
Now, the new DOD Comptroller, Mr. John Hamre, deserves a lot of
credit for what he is trying to do. He is leading the Department out of
the dark ages of denial. He is creating the kind of atmosphere where
real reform could happen. He is developing a plan to fix the problem.
He is on the right track.
But I fear his plan is lacking in one vital area--accountability.
Without accountability, Mr. Hamre's plan just will not work.
The bureaucrats will do him in. They are already responding to Mr.
Hamre's initiatives in very positive but predictable ways. Of one
thing, I am sure. The bureaucrats will drag their feet.
The Pentagon bureaucrats have already erected a major roadblock. They
are saying the Hamre fix cannot be made overnight. The system is so big
and complicated. It is an evoluationary process that will take years to
fix--5, 10, or more years.
Well, that is bureaurcratic baloney. That is just not good enough.
A good dose of accountability right now would get the bureaucrats off
the dime and Mr. Hamre's reforms moving at a more reasonable pace.
Mismanagement must have consequences. Responsible officials should be
identified and removed from office.
In my last speech, I identified four senior officials at the Defense
Finance and Accounting Service or DFAS, including the Director of DFAS,
Mr. John P. Springett, who are accountable.
I believe Mr. Springett and his management team are directly
responsible for the continuing lack of internal controls and discipline
in accounting.
Mr. Hamre defends Mr. Springett. He believes Mr. Springett is helping
him fix the problem.
I do not buy it. I think Mr. Hamre needs a reality check.
I am not interested in Mr. Springett's promises. I am interested in
his performance over the last 4 years.
What has Mr. Springett accomplished as boss--top manager--at DFAS
since the day DFAS was created--November 26, 1990?
DFAS was one of the famous DMR or Defense management report
initiatives. DFAS was created to clean up the mess, and Mr. Springett
was placed in charge of the cleanup.
Did Mr. Springett do the cleanup, or did he make significant
progress?
As I said in the beginning, we have a slew of new IG and GAO audit
reports.
All the reports point to just one conclusion: Mr. Springett has been
a dismal failure as Director of DFAS. I know of no other way to say it.
To gauge Mr. Springett's performance, I would like to examine two key
issues: His progress on unmatched disbursements; and negative
unliquidated obligations or NULO's pronounced new-low's.
I have a document signed by the late Mr. Donald J. Atwood who
launched the DMR initiatives. He was the Deputy Secretary of Defense at
the time. The document is dated April 14, 1992. In this document, Mr.
Atwood outlines DFAS's mission.
One of DFAS's most important jobs, according to Mr. Atwood, was to
eliminate unmatched disbursements.
Unmatched disbursement are so dangerous because they signal the
breakdown of internal control over money.
I quote from the April 1992 Atwood document:
On October 24, 1991, guidance was issued requiring the DOD
Components, under the leadership of the Defense Finance and
Accounting Service, to develop a plan for eliminating
unmatched disbursements. The Components were requested to
identify future actions that will preclude unmatched
disbursements in the future. The Defense Finance and
Accounting Service is tasked with implementing those plans
and actions.
That order went out in October 1991.
That was over 2 years ago.
The DMR, Mr. Atwood, and the Comptroller all told Mr. Springett to
get on the stick; clean up the mess; and eliminate unmatched
disbursements.
I bet Mr. Springett promised the last Comptroller that he would help
him, too.
Today's $41 billion in unmatched disbursements stands as a monument
to Mr. Springett's do-nothingness. Under the leadership of Mr.
Springett, the unmatched disbursements have continued to pile up.
The April 1992 Atwood document also reveals that DFAS had other
important marching orders. These too were ignored.
DFAS was ordered on February 18, 1992, to ``review and resolve all
account balances with negative unliquidated obligations.''
Negative unliquidated obligations are accounts where total
disbursements exceed available funding. These are called new-low's.
They may constitute violations of the Antideficiency Act. Those who
knowingly and willfully violate this law can be fined or imprisoned.
Did Mr. Springett fix this problem? Again, the answer is ``no.''
In fact, a March 1994 DOD IG audit report states that DFAS is making
new-low's worse by knowingly forcing payments on to the wrong accounts.
This devious DFAS maneuver is done for two reasons: First, to conceal
the practice of writing checks on accounts that are in the red; and
second, to keep the number of unmatched disbursements down.
The IG says DFAS finance center at Columbus, OH, had $3.1 billion of
new-low's at the contract line-item level, and 2,659 contracts has
negative balance totaling $408 million.
The IG says the new-low problem is continuing to deteriorate.
The situation is so bad that Mr. Hamre had to issue a special
directive, ordering DFAS to immediately stop writing checks against
accounts with negative balances.
Madam President, I ask unanimous consent to print Mr. Hamre's
directive, dated March 31, 1994, in the Record.
There being no objection, the directive was ordered to be printed in
the Record, as follows:
Comptroller of the
Department of Defense,
Washington, DC, March 31, 1994.
Memorandum for Secretaries of the Military Departments, Under
Secretaries of Defense, Assistant Secretaries of Defense,
General Counsel, Inspector General, Commander-in-Chief,
United States Transportation Command, Director,
Administration and Management, Directors of the Defense
Agencies, President, Uniformed Services University of the
Health Sciences, Director, Joint Staff, Directors of DOD
Field Activities, Director, Joint Logistics Systems
Center.
Subject: Negative Unliquidated Balances/Disbursements in
Excess of Obligations.
In February the Senior Financial Management Oversight
Council met to consider the Department's compliance with the
Antideficiency Act. In preparation for that
review, I learned that the Department routinely disburses
funds in excess of available balances. In colloquial terms,
the Department routinely writes checks on accounts that are
``in the red,'' under the assumption that these accounts are
in the red because of innocent accounting errors. Indeed,
even when accounts have been in a deficit status for some
time, Department procedures permit continued expenditure of
funds against those negative balances. In other cases, funds
are expended in excess of recorded obligations.
Such practices are clearly contradictory to the
Antideficiency Act and flatly violate minimum standards of
sound financial management. We cannot continue these ad hoc
practices.
To correct these unacceptable situations, I am directing
the implementation of certain policies on a DoD-wide basis as
highlighted below:
If disbursements exceed obligations and the appropriation
manager does not have sufficient unobligated balances
available, payments will be stopped immediately until the
condition has been corrected.
If disbursements exceed obligations and the appropriation
manager or fund holder has sufficient unobligated balances
available, an obligation will be required to cover such
disbursements if the condition [disbursements in excess of
obligations] is not corrected within a specified period of
time--generally 120 days.
I have attached detailed implementing policy guidance,
which will take effect immediately.
As a Department, we have become complacent to accept
negative balances as the product of errors with few people
feeling responsible for correcting the problem. As of
December 31, 1993, the Department had 23 accounts ``in the
red'' and another 23 accounts in which disbursements exceeded
recorded obligations. The Comptroller is the fund holder for
22 of those accounts. I have asked the Inspector General,
DoD, to initiate an investigation of 10 potential
Antideficiency Act violations in accounts for which my office
is responsible. The new guidelines that I am hereby
implementing are designed to correct this long-standing
problem.
These new policies will entail a painful period of initial
implementation. I recognize that it may be necessary to
quickly reprogram funds in order to maintain valid
disbursements and to avoid disruption of Defense programs.
Also, it may be necessary for DoD Components to reserve
additional funds in order to deal with contingencies created
by the implementation of these policies. Accordingly, I have
asked my staff to work closely with your staffs to maintain
expeditious payments and well executed programs.
Ms. Susan M. Williams is my staff contact for this matter.
She may be reached at (703) 697-3193.
John J. Hamre.
____
Department of Defense Accounting Policy and Procedures for Resolving
Disbursements in Excess of Obligations at the Appropriation/Fund
Holder/Obligation Levels
i. background
A. Generally, disbursements in excess of obligations occur
as a result of accounting or disbursing errors. This
condition normally occurs when an accounting station records
an expenditure transaction--a disbursement made by a
disbursing office--in the official accounting records against
a fund holder's availability, and the disbursement is in
excess of a previously recorded obligation for that same
transaction. This condition may also occur when an
expenditure transaction does not match any obligation in the
official accounting records or for other reasons.
1. If the condition occurs at the appropriation level, the
appropriation manager could be the Office of the Deputy
Comptroller (Program/Budget)--for Defense-wide accounts--the
Assistant Secretary (Financial Management) of the Military
Department, or the Comptroller of the Defense Agency/Field
Activity involved.
2. If the condition occurs at a lower level, i.e., major
command, field activity level, program office, etc., the fund
holder could be the activity or organization that has
Antideficiency Act responsibility as delegated by funding
documents.
B. When disbursements exceed obligations, accounting
stations must perform substantial and intensive research to
correct the erroneous transactions. In most cases, the errors
are discovered and resolved, and the accounting records and
official accounting reports, e.g., document control files,
transaction ledgers, general ledgers, reports, etc., are
corrected.
C. In some cases, an accounting or disbursement error is
not the cause of disbursements in excess of obligations and
the conditions cannot be easily corrected. These situations
require further research that may lead to the discovery of a
potential violation of the Antideficiency Act or other
serious conditions.
D. Disbursements in excess of obligations may occur under
three different primary conditions. These conditions, which
are addressed separately in Sections II.A.1., II.A.2., and
II.A.3., below, include:
1. Disbursements in excess of recorded obligations at the
appropriation level when the appropriation manager does not
have sufficient unobligated balances available in amounts
that equal, or exceed, the amount by which disbursements
exceed recorded obligations at the appropriation level.
2. Disbursements in excess of recorded obligations at the
appropriation or fund holder level when the appropriation
manager or fund holder do have sufficient unobligated
balances available in amounts equal to, or in excess of, the
amount by which disbursements exceed recorded obligations at
the appropriation/fund holder level.
3. Disbursements in excess of obligations at the obligation
level, including when no obligations has been recorded.
E. This guidance provides policy and procedures for the
correction or remedy of conditions caused by disbursements in
excess of obligations at the appropriation/fund holder/
obligation levels. In summary, such corrective actions
involve:
1. The research, and when possible, correction of
conditions caused by accounting and disbursing errors.
2. The reservation, commitment, and when conditions
warrant, the obligation of funds.
3. The investigation and, when conditions warrant, the
reporting of violations of the Antideficiency Act when an
investigation determines that a violation has occurred.
F. To assist in the implementation of necessary corrective
action, each DoD Component will be required to designate a
central point of contact within their Component's
headquarters-level financial management office. This
individual (hereafter referred to as the ``appropriation
manager'') will be responsible for receiving, processing and
taking other appropriate actions upon notification by the
Defense Finance and Accounting Service accounting stations or
other accounting stations.
II. RESPONSIBILITIES
A. The Defense Finance and Accounting Service (DFAS) and
other Accounting Stations shall:
1. When an appropriation does not have sufficient
unobligated balances available that equal, or exceed, the
amount by which disbursements exceed recorded obligations:
a. Immediately stop all future payments until the condition
is satisfactorily resolved.
b. Immediately begin research efforts to determine the
cause of the condition and correct any accounting and/or
disbursing errors identified.
c. Immediately notify the appropriation manager that:
(1) All payments against the appropriation have been
stopped and that a potential Antideficiency Act violation
exists.
(2) To the extent that any availability exists in the
appropriation, such funds are required to be reserved,
committed or obligated until the condition is satisfactorily
resolved.
d. If, at the end of 120 days from the date of discovery of
the condition, research effort fails to result in the
correction and elimination of the condition, immediately
notify the appropriation manager that:
(1) To the extent that any availability exists in the
appropriation, the funds are required to be obligated within
5 days and the obligation remain until such time as the
condition is satisfactorily resolved.
(2) An obligation funding document is to be provided to the
DFAS or applicable Accounting Station.
(3) A potential violation of the Antideficiency Act should
be reported and an investigation initiated, if one is not
already underway.
e. For appropriations, whose availability for new
obligations expired at the end of FY 1986 through the end of
FY 1991 and which have not yet been canceled, charge all
future payments to the applicable current appropriation,
subject to a 1 percent limitation and other restrictions,
when:
(1) The provisions of section 1004 of Public Law 102-484,
National Defense Authorization Act for FY 1993 apply, and
(2) The provisions of an Acting DoD Comptroller memorandum,
dated December 4, 1992, subject: Additional Requirements
Associated with Merged, Expired, and Canceled Accounts, are
met, and
(3) The appropriation manager authorizes such action.
(f) Once applicable additional funding has been made
available and obligated, the DFAS or applicable Accounting
Station will initiate action to resume payments.
2. When the fund holder does have sufficient unobligated
balances available that equal, or exceed, the amount by which
disbursements exceed recorded obligations at the
appropriation/fund holder level:
a. Immediately begin research efforts to determine the
cause of the condition and correct any accounting and/or
disbursing errors identified.
b. Immediately notify the fund holder that the fund holder
is required to reserve, commit or obligate funds in an amount
equal to the amount of disbursements in excess of obligations
and retain such amounts in the fund holder's account until
such time as the condition is satisfactorily resolved. This
may involve withdrawing funds already allotted or reserving
unallotted amounts at higher command levels.
c. If, at the end of 120 days from the date of discovery of
the condition, research effort fails to result in the
correction and elimination of the condition:
(1) Immediately notify the appropriation manager, with a
copy to the fund holder, that:
(a) The fund holder, is required to obligate, within 5
days, funds in an amount equal to the amount of disbursements
in excess of obligations and retain such amounts in the fund
holder's account until such time as the condition is
satisfactorily resolved. This may involve withdrawing funds
already allotted or reserving unallotted amounts at higher
command levels.
(b) An obligation funding document is to be provided to the
DFAS or applicable Accounting Station.
(2) After the receipt of a funding document from the
applicable DoD Component, record an obligation.
3. When disbursements exceed obligations at the obligation
level:
a. Immediately begin research efforts to determine the
cause of the condition.
b. If, at the end of 120 days from the date of discovery of
the condition, research effort fails to result in the
correction and elimination of the condition, immediately
notify the fund holder that:
(1) Disbursements exceed obligations at the obligation
level.
(2) If, at the end of 60 days from the date of the
notification, further research efforts of the fund holder
fail to result in the correction and elimination of the
condition, the fund holder is required to immediately:
(a) Obligate funds sufficient to cover the disbursement in
excess of the obligation, and
(b) Provide the DFAS or applicable Accounting Station an
obligation funding document, and
(c) Maintain that obligation until such time as the
condition is satisfactorily resolved. This may involve
withdrawing funds already allotted or reserving unallotted
amounts at higher command levels.
4. When a disbursement transaction is cross-disbursed and
a. The DFAS or other Accounting Station that received the
disbursement transaction agrees that the disbursement is a
valid charge to the obligation, fund holder, appropriation or
DoD Component, the policy guidance in sections II.A.1.
through 3. applies.
b. The DFAS or other Accounting Station that received the
disbursement transaction, and the DFAS or other Accounting
Station that made the payment, agree that the disbursement is
not a valid charge to the obligation, fund holder,
appropriation or DoD Component charged; and also agree as to
the proper obligation, fund holder, appropriations or DoD
Component to be charged, then a correction document will be
initiated to charge the proper obligation, fund holder,
appropriation or DoD Component.
B. The Deputy Comptroller (Program/Budget) (ODC(P/B)), the
Assistant Secretaries (Financial Management) of the Military
Departments, Comptrollers of the Defense Agencies and DoD
Field Activities and other Fund Holders shall:
1. Designate an appropriation manager to receive, process
and take actions on notifications from the DFAS or other
Accounting Stations, and to take other appropriate action(s)
regarding the stoppage of payments, the expedition of the
obligation of disbursement transactions within prescribed
timeframes allotted for such action(s), and other actions
provided for in this guidance.
2. After the receipt of an initial notification from the
DFAS or other Accounting Station that a disbursement exceeds
an obligation at the appropriation/fund holder level, but
sufficient unobligated balances are available that equal, or
exceed, the amount by which the disbursements exceed recorded
obligations at that level:
a. Reserve, commit, or obligate funds.
b. Provide the DFAS or applicable Accounting Station a
commitment or obligation funding document, as appropriate, to
cover the amount of this disbursement that exceeds the
obligation.
3. Within 5 days after the receipt of a 120-day
notification from the DFAS or other Accounting Station that a
disbursement exceeds an obligation at the appropriation/fund
holder level:
a. Obligate funds.
b. Immediately initiate a review of the circumstances to
determine whether an investigation of a potential
Antideficiency Act is warranted.
c. Notify the Office of the DoD Comptroller when an
apparent/potential violation of the Antideficiency Act has
occurred, through appropriate funding channels.
d. Initiate an investigation of an apparent violation of
the Act when an investigation of a potential Antideficiency
Act violation is deemed appropriate.
e. Provide the DFAS or applicable Accounting Station an
obligation funding document to cover the amount of the
disbursement that exceeds the obligation.
4. Within 60 days from the date of a 120-day notification
from the DFAS or other Accounting Station that a disbursement
exceeds an obligation at the obligation level and the
condition has not been corrected:
a. To the extent availability exists in the appropriation,
provide the DFAS or applicable Accounting Station an
obligation funding document to cover the amount of the
disbursement that exceeds the obligation.
b. To the extent sufficient availability does not exist in
the appropriation:
(1) Request a realignment of funds within an account or
between accounts, a reprogramming of funds, a deficiency
supplemental, or other acceptable funding solution, as
applicable and appropriate.
(2) Provide the DFAS or applicable Accounting Station an
obligation funding document to record an obligation under
section 1004 authority, if applicable.
(3) Forward supplemental funding documents to the DFAS or
applicable Accounting Station to cover any funding
shortfalls.
5. Immediately initiate a review of the circumstances to
determine whether an investigation of a potential
Antideficiency Act is warranted, and, as appropriate, notify
the Office of the DoD Comptroller that a fund holder may not
have sufficient unobligated balances available that equal, or
exceed, the amount by which disbursements exceed recorded
obligations and a potential violation of the Antideficiency
Act may have occurred.
6. Submit a report of violation in accordance with DoD
Directive 7200.1, Administrative Control of Appropriations,
if the investigation reveals that an Antideficiency Act
violation has occurred.
7. Advise the DFAS or applicable Accounting Station to
correct any error(s) when applicable reviews or
investigations identify any error(s) as the cause of the
condition.
C. When (1) funds in a particular Defense-wide account are
allocated to a number of fund holders (limits) and (2)
disbursements exceed obligations at the appropriation level,
but not at a fund holders' level, the Deputy Comptroller
(Program/Budget) shall ensure that:
1. The applicable DoD Component(s) reserves, commits or
obligates appropriate amounts against the fund holders'
accounts.
2. A report of a potential violation is submitted to the
DoD Comptroller.
3. An investigation of a potential violation of the
Antideficiency Act is initiated.
4. Corrective actions are taken by fund holders and the
DFAS or applicable Accounting Station, as appropriate.
D. Effective date:
1. Section II.A.3 of this guidance is effective October 1,
1994.
2. This guidance is applicable to Military Personnel,
Reserve Personnel, and National Guard Personnel
appropriations effective October 1, 1994.
3. All sections of this guidance (other than section
II.A.3) are applicable for all other appropriations and funds
(other than Military Personnel, Reserve Personnel, and
National Guard Personnel appropriations) as of March 31,
1994.
Mr. GRASSLEY. Madam President, Mr. Hamre states and I quote:
The department routinely writes checks on accounts that are
in the red. Indeed, even when accounts have been in a deficit
status for some time, Department procedures permit continued
expenditure of funds against those negative balances.
That Mr. Hamre should have to issue such an order is a disgrace.
It castes doubt and distrust on DFAS and its Director, Mr. Springett.
Writing checks on accounts that are in the red violates Federal
statutory law. It violates DOD regulations, and it violates commonsense
practices. To repeatedly and routinely write bad checks is careless and
irresponsible.
Comptroller General Bowsher says ``such practices are inexcusable and
must not be tolerated.''
A consensus was reached at Senator Glenn's April 12 hearing: Someone
must be held accountable for what is happening.
Deputy DOD IG Vander Schaaf and Comptroller General Bowsher both
suggested in testimony that senior officials in accounting and finance
are responsible.
Madam President, Mr. Bowsher has offered to conduct an investigation
to determine more precisely where accountability lies.
The law requires that much.
Under title 31 of the United States Code, Mr. Bowsher had broad
responsibilities to ensure that expenditures are recorded, accounts are
accurate, and accountability of assets is maintained.
He is authorized to settle accounts and to recover public money
illegally or erroneously paid. Money can be recovered from public
officials who acted in bad faith or who failed to diligently carry out
their duties.
The settlement of accounts and recovery improper payments requires
detailed audit and investigative work, work that needs to be undertaken
by Mr. Bowsher's office.
Madam President, I call on Mr. Bowsher to help us pinpoint
responsibility.
Madam President, I yield the floor, and since I do not see anybody
else seeking the floor, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. SPECTER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Breaux). Without objection, it is so
ordered.
____________________