The Value of Frequency - how the Defense Department paid millions in wages to invalid accounts

Last week, the Office of Inspector General for the Department of Defense (DOD) issued Report 2009-092 titled "Validity of DOD Civilian Employee Accounts." As widely reported on CNN and elsewhere, the DOD "Specifically, the DOD's Payroll System included invalid Social Security numbers, employees under the legal employment age, and multiple employee accounts that shared the same bank account. As a result, DFAS [the Finance arm of DOD) may have paid approximately $15.4 million to more than 2,300 invalid DoD civilian employee accounts from January 2002 through April 2008 (excluding 2007).

These payments represent fraud and misuse of tax dollars, but because the audit approach was a point in time audit, looking backward over a very long time period (six years!), it is highly likely that the money will never be recovered.

Had the DOD used leading edge technology like Continuous Controls Monitoring for Transactions (CCM-T), which can compare all SSN's from master files, from payment files, to the suspicious SSN lists like those at Social Security Death Index database, they could have known of the errors PRIOR to payment. The more frequently the data is compared, the more valuable the analysis becomes.

And implementation is a tiny fraction of the $15 million spent for erroneous payments. Factor in the time value of money (errors go back to 2002!) and the reputation risk associated with such errors, and CCM-T looks better and better.

Joe Oringel
Visual Risk IQ
Charlotte NC, USA