department of defense agency financial report fiscal year 2012

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Department of Defense Agency Financial Report for FY 2012 annual estimates of improper payments. Civilian Pay. The DFAS randomly samples Civilian Pay accounts from each of the Components (Army, Air Force, Navy/Marine Corps, and Defense Agencies) on a monthly basis. The DFAS processes the largest portion of DoD’s civilian payments; however, both the Navy and Army independently process civilian payments for civilian mariners and local national payrolls in foreign countries. These amounts are reported by Components and included in the total Civilian Pay payments for the Department. DFAS Commercial Pay. In FY 2012, DFAS implemented statistically valid, random sampling for commercial payments by site and system for payments that DFAS computes. Approximately 2,000 invoices were reviewed monthly across the DFAS sites. Disbursements in the Navy Enterprise Resource Planning (NERP) System that are computed by the Navy are reviewed by the Navy; however, its sampling and review plan was not in place early enough in FY 2012 to report improper payments in this year’s AFR. The NERP disbursement universe for FY 2012 was approximately $1.4 billion. Military Retirement and Annuitant Benefit Payments. The monthly random sampling universe of military retirement payments includes both the retired and annuitant pay accounts. The FY 2012 scope of the pay reviews for retired and annuitant pay was expanded to include drilling reserve retiree offsets, Survivor Benefit Plans, transfers to/from the Temporary Disability Retired List to the Permanent List, and Veterans Affairs offsets. Special reviews continue for Combat Related Special Compensation, Concurrent Receipt of Disability Payment, daily payroll accounts, and other targeted areas. Travel Pay. The DFAS reports the largest portion of the Department’s travel payments made by both the Defense Travel System (DTS) and Windows Integrated Automated Travel System (WinIATS) for the Department of the Army and select Defense Agencies. The DFAS randomly samples travel vouchers from each system on a monthly basis. The Department’s total travel payments include travel payments computed, paid, and reported independently by the Military Services and other Defense agencies. Table 4, included at the end of this section, represents the combined results of the review of DFAS-disbursed travel payments as well as non-DFASdisbursed travel payments for Army- Europe, Army-Korea, Air Force, and Navy. Both Temporary Duty Travel (TDY) and Permanent Change of Station (PCS) travel vouchers are included in the post-payment reviews. A-54 Figure A-1. Improper Payment Rate – Military Health Benefits 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 0.42% FY 2012 Target 2.00% 0.24% 0.15% FY 2010 FY 2011 FY 2012 FY 2013 Target Note: TMA reports 12 months in arrears; i.e., the figures listed for FY 2012 are from FY 2011. 2.00% 2.00% 2.00% FY 2014 Target FY 2015 Target B10-37 Addendum A
Department of Defense Agency Financial Report for FY 2012 Root Causes of Error and Corrective Actions Military Health Benefits. As shown in Figure A-1, the Department projects 0.15 percent in FY 2012 Military Health Benefits improper payments. The Department’s purchased care contracts have had payment performance standards for processing military health benefit claims in place for many years. Specifically, if improper payments exceed 2 percent of total dollars paid out during the contract period, the contractor is subject to monetary penalties. Annual audits of payments made by managed-care support contracts are conducted. Overpayments discovered are projected to the review universe, and managed-care support contractors are liable for the total unallowed healthcare amounts paid. The purchased care contracts have a performance standard of 98 percent accuracy, so the contractor is incentivized to keep payment error rates as low as possible to increase contract awards. Actual error rates, however, have been consistently less than ½ of 1 percent. This contract design, combined with numerous pre-payment and post-payment controls, effectively minimizes improper payments for purchased care contracts and ensures the Government’s risk for improper payments in the military health benefits program is minimized. Root Causes. The primary reasons for payment errors in the Military Health Benefits program are: • Incorrect pricing of medical procedures and equipment, 30 percent • Cost-share/deductible miscalculations, 17 percent • Other Health Insurance/government pay miscalculations, 13 percent • All other causes combined, 40 percent. Corrective Actions: TRICARE's thirdparty contractors are monetarily incentivized to reduce and eliminate improper payments through contractual performance standards. The fewer improper payments the contractors make, the less money is deducted from their contractual reimbursements. Military Pay. As shown in Figure A-2, the Department projects 0.24 percent in Military Pay improper payments based on reviews, estimates, and forecasts for October 2011 through September 2012. The decrease from FY 2011 is attributed to a change in DoD regulations (DoD Instruction (DODI) 1327.06)) that authorized Reservists the opportunity to A-55 Figure A-2. Improper Payment Rate – Military Pay 0.80% 0.60% 0.40% 0.20% 0.00% B10-38 carry forward accumulated leave from one period of Active Duty service to another, which had been the primary cause of underpayments in FY 2011. 0.61% FY 2012 Target 0.48% 0.49% FY 2010 FY 2011 FY 2012 FY 2013 Target 0.24% 0.24% 0.24% 0.24% FY 2014 Target FY 2015 Target Addendum A
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