Army Procurement Fraud Recovery –
Civil or Criminal
A Joint ASA(FM&C) and OTJAG LSS project
CFO Strategic Plan Presentation
July 24, 2008
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.
Lack of accounting information at court decision.
Lack of effective communication between organizations--CIDC, OTJAG, DOJ, DFAS and
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.
Solution must work across all organizations.
Policy and procedures must be developed and distributed to ensure compliance.
High-Level Swim Lane Process Map
averages over 2yrs
DFAS doesn’t have accounting information
(line of accounting, contract, command, Not located
amount) so 100% of the time, funds are
collected into a suspense account.
Research loop back
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.
• 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: 701st Military Police Group (CID)
160 145 143.8
$ collected in Millions
80 62.4 MPFU total recoveries
60 43.6 Army Recoveries
40 18.4 19.9
FY05 FY06 FY07 FY08
Note: Funds collected as of
Fiscal Year of Recovery Funds
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.
• 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
• 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