DoD Works to Improve Overpayment Process

By Troy Barnes – Feb. 25, 2019

Overpayments — that is, payments to workers or companies that are duplicated or misrouted — are a fact of life in both the public and private sectors. Businesses and agencies that don’t have a reliable process in place to quickly detect and recoup these overpayments may be at risk of waste, fraud, and abuse. As the ultimate stewards of federal taxpayer dollars, the U.S. Government Accountability Office (GAO) recently recommended some changes to the way the U.S. Department of Defense (DoD) runs its Debt Collection Regulation program.

Under current regulations, if a government contractor is overpaid, the DoD may place that account into its Debt Collection Regulation program for recoupment of these payments. These recoupments can often place an undue financial burden on businesses, potentially leading them into debt or default for a payment mistake that occurred on the DoD’s end.

The GAO’s Recommendations

DoD recently streamlined its Debt Collection Regulation program to correct these systemic errors, but the GAO has made a few additional recommendations that should further improve the process. Its five-point report includes the following action items:

  • Revision of the servicemember debt notification letter template. Currently, this template doesn’t include all of the information the DoD’s financial management regulations (administered by DFAS) require, which can be confusing or contradictory to the letter’s recipients.
  • Revision of DoD Financial Management Regulation Volume 16, along with the DFAS website, to provide clear information as to when and how debt collection proceedings work when a contractor disputes the debt. Generally, when an overpayment is in dispute, said payment won’t be subject to recoupment proceedings until the overpayment has been established and any appeals have concluded.
  • Regular review of (and updates to) the debt collection cross-references in the Financial Management Regulation (FMR) handbook. By keeping this handbook and its many cross-references as up-to-date as possible, DoD officials run far less risk of operating with outdated or inconsistent information.
  • Review of and updates to debt collection procedures on a global level. These orders will be handed down by the Secretary of Defense, who shall direct the DFAS Director and the Secretaries and Commandant of the various military services to perform a comprehensive review of existing debt collection processes and tweak (or eliminate) those that are no longer technologically or logistically feasible. The applicable officials will also be tasked with clarifying the debt collection procedures and due process protections as they relate to Financial Management Regulation Volume 16.

The DoD administration is already hard at work on these changes, and the GAO’s website will reflect progress toward these goals as it occurs.

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