printable banner

U.S. Department of State - Great Seal

U.S. Department of State

Diplomacy in Action

Management of Payments


FY 2007 Financial Report
Bureau of Resource Management
November 2007
Report
Share

PROMPT PAYMENT ACT


TIMELINESS OF PAYMENTS

The Prompt Payment Act (PPA) requires Federal agencies to pay their bills on time or an interest penalty must be paid to vendors. During FY 2007, the Department made 731,830 payments subject to prompt payment of which 704,583 or 96% were paid on time. Presented below is a chart that reflects the timeliness of the Department's payments from FY 2005 through FY 2007.

Timeliness of DOS Payments
FY 2005 - FY 2007
  FY 2005 FY 2006 FY 2007
On Time 96% 95% 96%
Late  4%  5%  4%

During FY 2007, The Department realized an increase in interest penalties paid (4 percent), when compared to one percent or $405 K in FY 2006. The increase in Prompt Payment penalties was primary due domestic payment delays caused by the transition to a new accounting system in FY 2007. Also, the effects of the system transition were seen in the percentage domestic invoices paying penalties against the total amount of domestic payments paid (FY 2007 - 0.031 percent vs. FY 2005 - 0.013 percent and FY 2006 - 0.009 percent).

SELECTED PAYMENT DATA
Selected Payment Data for Invoices Requiring Interest Penalties
FY 2005 - FY 2007
  2007 2006 2005
Interest Paid ($000)  1,420    405    557
Interest Under $1 Not Due ($000)      —      —      —
Interest Due But Not Paid ($000)      —      —      —
Number of Procurement Card Transactions
Domestic 41,524 45,804 54,061
Overseas 93,480 82,023 75,407

 

ELECTRONIC PAYMENTS

Payments made through Electronic Funds Transfer (EFT) were 90 percent of the total payments made for domestic and overseas payments. This is an increase of 3 percent over the fiscal year 2006 rate. EFT payments made for the Domestic operations were 97 percent of the total domestic payments. EFT payments made through the USDO for overseas operations was 85 percent of the total number of overseas payments. This is an increase of over 4 percent of the fiscal year 2006 rate. Payments made for overseas operations will not have the same rate as the domestic payments due to the result of complexities of banking operations in some of the countries where payments are made by the Department of State.

EFT and Check Payment Volumes

EFT and Check Payment Volumes
FY 2005 - FY 2007
Payment Type 2007 2006 2005
Number Percent Number Percent Number Percent
EFT:
Domestic 1,263,429  97 1,095,691  98 1,120,735  98
Overseas 1,586,790
single underline
 85
single underline
1,455,055
single underline
 81
single underline
1,309,530
single underline
 77
single underline
EFT Subtotal 2,850,219
single underline
 90
single underline
2,550,746
single underline
 87
single underline
2,430,265
single underline
 85
single underline
Checks:
Domestic    39,924   3    26,869   2    23,539   2
Overseas   289,585
single underline
 15
single underline
  352,092
single underline
 19
single underline
  400,985
single underline
 23
single underline
Checks Subtotal   329,509
single underline
 10
single underline
  378,961
single underline
 13
single underline
  424,524
single underline
 15
single underline
 
Total Domestic 1,303,353  41 1,122,560  38 1,144,274  40
Total Overseas 1,876,375  59 1,807,147  62 1,710,515  60
Total Payments 3,179,728
double underline
100
double underline
2,929,707
double underline
100
double underline
2,854,789
double underline
100
double underline

 

IMPROPER PAYMENTS INFORMATION ACT

The Improper Payments Information Act of 2002 (IPIA), Public Law No. 107-300, requires agencies to annually review their programs and activities to identify those susceptible to significant improper payments. OMB Circular A-123, Appendix C, defines significant improper payments as annual improper payments in a program that exceed both 2.5 percent of program annual payments and $10 million. Once those highly susceptible programs and activities are identified, agencies are required to estimate and report the annual amount of improper payments. Generally, an improper payment is any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, and administrative or other legally applicable requirement. Summarized below are the Department's IPIA accomplishments and future plans for identifying improper payments as provided for in OMB Circular A-136, Financial Reporting Requirements.

Statistical Sampling Process

Records of payments were provided to the statistician for sample selection. The statistician randomly selected the records and the required number of samples for analysis of accuracy. The number selected was the minimum required to yield an estimate with a 90 percent confidence level and a confidence interval of plus or minus 2.5 percent.

INTERNATIONAL INFORMATION PROGRAMS (IIP) -U.S. SPEAKER PROGRAM

In FY 2003, the Department of State began to institute an effort that would identify programs that were susceptible to significant improper payments in accordance with the Improper Payments Information Act (IPIA) of 2002 (Public Law No. 107-300). All of the Department's expenditures for FY 2002 were classified into three categories: employee pay, vendor payments, and federal financial assistance. A risk assessment was performed based on a number of factors such as dollar volume, number of recipients, internal controls and the audit reports of the programs. As a result of this risk assessment, International Information Program (IIP), U.S. Speaker and Specialist program was classified as high-risk.

In FY 2004, a statistical sample was selected for IIP and detailed evaluations were performed. The improper payments projected error rate over the entire population was 81.18 percent or $1.4 million. The findings related to insufficient supporting documentation being provided and an incorrect financial assistance award instrument being used to obligate the award. In FY 2005, there were no detailed evaluations for improper payments performed for IIP. As a result, the program was reviewed during FY 2006.

In FY 2006, a statistical sample was selected for IIP and detailed evaluations were performed. The detailed evaluations resulted in 30 improper payments and several internal control findings. The projected error rate and dollar amount of improper payments in the population sampled was 23.81 percent or $348,567.

In FY 2007, a statistical sampling was conducted for IIP and a comprehensive assessment was performed. The assessment resulted in four improper payments and three internal control findings. The projected error rate and dollar amount of improper payments shows significant improvement with an error rate of only 4 percent or $17,038. The findings related to insufficient documentation (Bio or Resume) to support whether the grantee was eligible for the award. In no instance was evidence found that a payment was erroneous and needed to be recovered.

Last Quarter FY 2006 and First Three Quarters FY 2007-International Information Programs-US Speaker Program (IIP)

 

Internatinoal Information Programs - US Speaker Program (IIP)
Last Quarter FY 2006 and First Three Quarters FY 2007
Program Transactions in Dollars in Projected
Population Sample Population Sample Error Rate Improper Payments
International Information Programs- U.S. Speaker and Specialist Program 1,061 126 $23,747,609 $388,693 4% $17,038

 

Corrective Action Plans

During our review of the International Information Program -U.S. Speaker and Specialist Program, four improper payments were found where there was insufficient documentation provided to support the grantee eligibility for the award (i.e. biographical information or resumes). To address these issues, the program officers will periodically check project tracker for each respective grantee to ensure that the documentation required to validate and support the eligibility of each grantee is supported.

IPIA REPORTING FY 2007-BUSINESS CLASS TRAVEL

In March 2006, GAO issued a report that identified shortcomings in the Department of State's authorization and administration of business class travel. In April 2006, in response to the report, the Department instituted additional measures to tighten internal controls over the approval and use of business class travel. The GAO report also recommended that the Secretary of State conduct regular reviews of the Department's use of business class travel and report the findings to senior management. Specifically, the reviews would determine whether the Travel Management Centers, bureaus and travelers adhered to government-wide and Department regulations for premium class travel.

In response to this recommendation, the Department incorporated the audits of premium class travel into the ongoing reviews conducted in accordance with the IPIA, the GAO guide, and other guidelines for evaluating and testing controls over sensitive payments. Grant Thornton was tasked with testing the controls for authorization and issuance of Business Class Travel for FY 2006 and FY 2007.

The first review was conducted for the first and second quarters of FY 2006. Results generally supported the findings end of the GAO report.. The second review, covering the second and third quarters of FY 2007, was conducted after the new management controls were implemented in April 2006. The improvements were significant. In particular, there were no instances where the travelers flying business class were found to be ineligible.

Errors that were found stemmed from weaknesses in administrative procedures and instances where supporting documentation was not readily available. These can be projected to an overall error rate of 3.97% or $21,594. In no instance was evidence found that a business class travel payment was erroneous and needed to be recovered.

Second and Third Quarters FY 2007-Business Class Travel and Sensitive Payments

 

Business Class Travel and Sensitive Payments
Second and Third Quarters FY 2007
Program Transactions in Dollars in Projected
Population Sample Population Sample Error Rate Improper Payments
Business Class Travel and Sensitive Payments 3,808 126 $16,568,322 $649,697 3.974% $21,594

 

Corrective Action Plans

  • For Blanket Authorizations, one instance was found where it was not possible to verify that the appropriate justification for business class travel was properly authorized and approved. The requirement for the DS 4087 became effective in April 2006, when 14 FAM 567.2-2 (b) was revised to establish the requirement for use of DS 4087 to document the justification for authorizing business class travel, including travel over 14 hours.

    To address this problem, a Business Class Travel Department Notice will be issued to re-emphasize the business class travel regulations as cited in 14 FAM 567.2-4 and the Disposition Authorization Number, GRS 9 that provides travelers with specific instructions on what documents are to be retained for travel relating to routine and operational aspects of travel.

  • Three instances were identified where full supporting documentation was missing (travel voucher, DS-4087 and itinerary) in order to verify compliance in accordance with 14FAM 567.2-2 (A) and (B).

    The correction action plan provides that the Department will issue a Business Class Travel directive that states that all travel documentation (travel orders, travel vouchers, receipts related to a reimbursable expense, DS 4087 and the government travel agency issued itinerary) be retained for not less than seven years.

  • One instance was found during the review where full supporting travel voucher documentation did not provide the appropriate signature (electronic) by the designated approving official.

    As a corrective measure, the Department will require that the voucher be sent back to the person aware of the travel for proper approval before the voucher can be funded.

Results Summary

The following table summarizes the results of the International Information Programs (IIP), Business Class Travel Improper Payment Review, and the projected improper payment percentage and outlay estimates for the next three years.

The Improper Payment dollar amounts in the table represents the estimated value of errors in the entire population based upon the samples average dollar amount per improper payment times the prospected number of improper payment transactions in the population.

 

Improper Payments Information with Projections for the Next Three Years
Program PY
Outlays
PY% PY$
(in dollars)
CY
Outlays
(dollars in millions)
CY
IP%
CY
IP $
(in dollars)
CY+1
Est Outlays
(dollars in millions)
CY+1
IP%
CY+1
IP$
(in dollars)
CY+2
Est Outlays
(dollars in millions)
CY+2 IP% CY+2 IP$
(in dollars)
CY+3
Est Outlays
(dollars in millions)
CY+3 IP% CY+3
IP$
(in dollars)
IPIA
FY 2006-2007 International Information Programs 28 23.81% $348,567 23 4% $180,794 24 <1% $182,602 25 <1% $184,428 26 <1% $186,272
Sensitive Payments
FY 2007 Business Class Travel N/A N/A N/A 16 4% $652,603 17 >1% $659,129 18 <1% $665,720 19 <1% $672,377

 

RECOVERY AUDIT PROGRAM RESULTS

Currently the Department of State, Bureau of Resource Management has established a two-tiered erroneous payment monitoring and review program, which supplements the formal account receivable process. The Global Financial Services (GFS), Office of Claims, has integrated erroneous payment identification and collection as key functions of the accounts payable process and the paying office's operations. The claims office has established an internal debt management unit, whose primary mission is the identification and collection of erroneous payments, coordinating with the Accounts Receivable Division (ARD) as necessary. In addition, the GFS Office of Oversight Management & Analysis conducts a monthly query of all domestic payments, focusing on identifying potential erroneous and duplicate payments. The GFS approach has incorporated various manual and automated data analysis techniques and processes to identify, validate and collect erroneous payments, including use of data mining software, manual sampling of internal payment records, U.S. Treasury TIN matching, sampling of vendors etc.

In FY 2007, the GFS domestic claims debt management process identified and validated 214 actual duplicate/erroneous payments, totaling $5.3 million, out of 551,149 total payments, totaling $23.2 billion. The claims office has collected or recovered 198 of the 214 validated erroneous payment debts (93 percent), totaling $4.9 million (92 percent). While the transition to a new financial system in 2007 has increased the number of incidents and expanded the debt collection timeline, the primary reasons for these improper payments and debts continues to be the use the wrong vendor payment record in the funding of the awards and/or authorization of payment on submitted claims.

The GFS duplicate or erroneous payment program has proven to be a cost effective tool (the program's annual $100 thousand operating costs) to supplement the ARD domestic commercial debt management and recovery. Identified debts not collected by the office of claims are transferred to ARD for follow-up collection. Since FY 2005, this GFS program has identified 736 duplicate/erroneous payments ($13.1 million), and collected 673 identified debts ($12.6 million or a collection rate of 96.2 percent).

 

Recovery Audit Program Results
Agency Component Amount
Subject to
Review for CY Reporting
Actual Amount
Reviewed and Reported
CY
Amounts
Identified for Recovery
CY
Amounts Recovered
CY
Amounts
Identified for Recovery
PY's
Cumulative
Amounts
Identified for Recovery
(CY + PY's)
Cumulative
Amounts
Recovered
(CY + PY's)
Outstanding
Number 551,149 551,149 214 198 522 736 673 63
Amount $23.2 billion $23.2 billion $5,353,615 $4,900,338 $7,765,452 $13,119,067 $12,627,827 $491,240

 

ACCOUNTABILITY

The Department is committed to reducing erroneous payments issued domestically and overseas. Programs and procedures have been instituted that will strengthen agency management and internal control procedures for prevention, detection and recovery of erroneous payments. The following improvements are being undertaken:

  • Issue updated guidance for performing program reviews and risk assessments
  • Strengthen policies and procedures with regard to proper documentation requirements for payments
  • Provide training to affected staff regarding proper payment requirements and documentation
  • Strengthen payment and debt management programs policies and practices that will improve detection, referral and recovery efforts
  • Report information on improper payments in the annual Agency Financial Report
INFORMATION SYSTEMS

Based on the improper payment reviews conducted in FY 2005 and FY 2006, the improper payments identified did not result from the lack of proper information systems. Although the Department transitioned to a new global financial management system in FY 2007, the current financial management system did not have an impact on the level of improper payments identified.

ISSUES

As previously mentioned, one of the challenges the Department faced in FY 2007 was determining to what extent federal financial assistance should be tested to obtain reasonable assurance that improper payments are not occurring at the grantee level. The Department performed limited procedures to test for improper payments that did not involve reviewing payments at the grantee level. However, to supplement the test work performed, the Department relied on monitoring procedures performed at the program offices, the A-133 reports of grantees, and the results of OIG reviews. In FY 2008, the Department will consider establishing procedures in the Bureau of Resource Management to monitor financial transactions. The Department will also seek guidance from OMB in FY 2008 to determine the most feasible way to test federal financial assistance for compliance with the IPIA. The Department will also review best practices to follow in FY 2008.

 


< Go to Previous Page         Go to Next Page >



Back to Top
Sign-in

Do you already have an account on one of these sites? Click the logo to sign in and create your own customized State Department page. Want to learn more? Check out our FAQ!

OpenID is a service that allows you to sign in to many different websites using a single identity. Find out more about OpenID and how to get an OpenID-enabled account.