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DoD IG Has Sinking Review of Navy Pay System

The Navy’s Contract/Vendor Pay (CVP) system is “not auditable,” and as a result, Department spending might be wasteful and its financial statements inaccurate. That was the conclusion of the Department of Defense (DoD) Inspector General (IG) after it reviewed the Navy’s CVP as part of the congressional mandate that DoD be audit-ready by FY 2017 (see Pub. Law 111-84, Sect. 1003). Overall, the DoD IG concluded, “there is an increased risk” that the Navy will not be able to gather the information necessary to achieve auditability.

The IG’s review found that the Navy’s Office of Financial Operations “could not provide a complete CVP transaction universe,” meaning that contractor transactions and vendor payments might be missing from the CVP system. This finding contrasts with the Navy’s claims, as reported by the GAO, that CVP was audit-ready as of April 2014. The IG also found that the Navy hadn’t maintained supporting documentation in 17 of the 30 transactions that were selected for review. The IG report also detailed transactions that were not processed in a timely fashion in accordance with government auditing standards, which would make it less likely the audit would be successful.

Technically speaking, this process is more difficult than me balancing my checkbook to the penny each week. The Navy has numerous financial and accounting systems that handle billions of dollars. However, the Navy seems to even have problems with basic payment systems, which the Project On Government Oversight brought to the attention of the Secretary of the Navy and DoD IG many years ago.

In July 2008, POGO wrote to those offices to expose the shutdown of a CVP system the Navy was creating, the Centralized and Integrated Reporting for the Comprehensive Utilities Information Tracking System (CIRCUITS). The system was designed to collect utility data and ensure that the Navy would better manage its budgeting and spending on electricity, water, and gas utilities. In addition, CIRCUITS would help reduce millions of dollars spent annually on late fees, overcharges, and duplicate utility payments. A POGO source stated that, before the system was shut down, the managers were “working to make CIRCUITS a fully auditable feeder system as well as a fully integrated [accounts payable/accounts receivable] and budgeting/reporting system.”  

POGO never heard back from the Navy or the DoD IG’s office, but it seems that some of the basic payment problems are long-standing inside the Navy, and the Army and Air Force encountered payment issues in the early 2000s—issues that have cost taxpayers a lot of money. And even the current mandate to audit the Pentagon is nothing more than a delayed reaction to broken promises to audit the Pentagon in the 1990s.

The Navy isn’t alone in thinking it was at the top of the class when it comes to having audit-ready systems. Earlier this year, the DoD IG had to withdraw the clean audit report it gave the Marine Corps in 2013 because Department of Treasury accounts may contain Marine Corps transactions that had not been included in the review. As a result, the DoD IG stated that its audit “is not reliable” and that its report will be reissued once additional information has been gathered and analyzed.

It’s absurd to think that in the years since POGO first voiced our concerns and Congress mandated that DoD be audit-ready, the DoD is still struggling to get its books in order. And as often is the case with DoD programs, audit readiness is expected to be delayed even longer, which might highlight the fact that its systems are more muddled than expected and that there isn’t a culture inside the Pentagon that values shining a light on its finances.

By: Scott H. Amey, J.D.
General Counsel, POGO

Scott Amey Scott Amey is General Counsel for the Project On Government Oversight. Some of Scott's investigations center on contract oversight, human trafficking, the revolving door, and ethics issues.

Topics: Government Accountability

Related Content: Audit the Pentagon, Defense, Wasteful Defense Spending

Authors: Scott H. Amey, J.D.

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