Army Procurement Fraud Recovery – Civil or Criminal
A Joint ASA(FM&C) and OTJAG LSS project
CFO Strategic Plan Presentation
July 24, 2008
BLUF
Problem:
When court cases concerning Procurement Fraud are decided in favor of the Army, no accounts receivable is established on the Army’s books or financial statements. As a result, when DFAS receives the fraud recovery funds, 100% of the time funds are deposited in a suspense account because of a lack of accounting information. > 900 days is average time to research & determine accounting information and fund owner. Eventually, many funds cancel and are collected into the Treasury Miscellaneous Receipts account. The Army loses the opportunity to re-use the funds for vital Army requirements.
Root Cause:
Lack of accounting information at court decision. Lack of effective communication between organizations--CIDC, OTJAG, DOJ, DFAS and ASA(FM&C).
Solution:
Establish an accounts receivable at court decision with necessary accounting information (line of accounting, command, contract, amount). Implement a Fraud Recovery Monitor to improve situational awareness & control process.
Risk:
Solution must work across all organizations. Policy and procedures must be developed and distributed to ensure compliance.
High-Level Swim Lane Process Map
DFAS suspense account: research averages over 2yrs
DFAS doesn’t have accounting information (line of accounting, contract, command, amount) so 100% of the time, funds are collected into a suspense account.
Research loop back
Not located
located
Many funds cancel & are returned to Treasury.
Quick Wins – 2 Case Examples
• • Collected two recoveries in suspense before funds cancelled: $5 M DFAS Columbus – EGL. $1.1 M received Oct 06. – We coordinated efforts of DCMA, DFAS and Army Sustainment Command Resource Management to develop collection voucher. – Funds transferred to owner on 6-16-08. • DFAS Indianapolis – Northrup Grumman. $3.9 M received Sept 07. – We coordinated efforts of DFAS & CECOM Resource Management to develop a correction voucher (funds already in misc. receipts). – DFAS Columbus is working the transfer of funds.
These examples substantiate the team’s analysis: • Once Resource Management personnel & DFAS have proper accounting information (line of accounting, command, contract, amount) an accounts receivable can be established. The funds are then returned to the owner in a more timely manner.
Business Impact
Financial impact:
• • CIDC data shows potential recoveries for FYs 08- 08 (2nd qtr) of $84.5 M or an average of $24.1 M a year. Once new process is in place, we estimate 100% of funds recovered by courts can be returned to the Army fund owner, minus whatever funds cancel during the litigation process.
Fraud Recoveries by FY
Source:
160 $ collected in Millions 140 120 100 80 60 40 20 0 FY05 145
701st
Military Police Group (CID)
143.8 123.6
62.4 43.6 18.4 19.9 2.7 FY06 FY07 FY08
MPFU total recoveries Army Recoveries
Fiscal Year of Recovery Funds
Note: Funds collected as of 2nd Qtr FY08
Conclusion: About $24 M a year (or 100% of whatever courts recover, less any cancelled funds) can be returned to the Army.
Next Steps
• Finish initial project phase:
1. Hold workshop with all players to develop standard process to establish an Accounts Receivable at time of court decision. 2. Visit DFAS Columbus & Indianapolis to clean up $45 million in suspense accounts.
•
Pilot Project: Collect better data and implement control plan.
1. Test pilot process with new transactions, using 2-3 pilot sites. 2. Analyze results. 3. Write policies / procedures to implement. 4. Monitor and control standard process.
•
End State:
1. Utilize standard systems/procedures for receivables. 2. Once Army standard process works well, leverage across DoD.
LSS Team Points of Contact
• Office of the Assistant Secretary of the Army (Financial Management and Comptroller) • Procurement Fraud Branch, US Army Legal Services Agency
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