Saturday, August 21, 2004

Defence Dept. Mishandles Millions of Dollars

Aug. 21, 2004. 07:19 AM
Millions mishandled, military audit finds
Dubious dealings could reach $81M
Transactions with suppliers examined

OTTAWA—An audit of the way the military spends has found problems with up to $81 million in payments it makes each year to suppliers.
The newly released audit, which examined the local budgets of hundreds of National Defence facilities across Canada, found examples of payments made to the wrong supplier, cheques in the wrong amount, missing documentation and financial rule-breaking.
Altogether, a sampling of 521 randomly selected transactions found that 7.4 per cent had serious problems that violated government guidelines.
"The level of non-compliance ... appears significant and exceeds the targets established by some other federal government departments," says the report, dated January this year but only made public this summer.
Projecting the findings to the $1.1 billion spent each year by hundreds of local units, the report said the value of the dubious transactions is between $23 million and $81 million.
"We observed 10 instances where payment was made before goods were received, including two large prepayments — totalling $1.3 million — of utilities at year-end," the auditors noted. "Expediency was often given as the reason for non-compliance. However, the resulting purchases ... did not appear operationally urgent."
At some locations, there were problems with as many as 13 per cent of all payments.
The military's top accountant, Maj.-Gen. Terry Hearn, said the findings are troubling.
"Anything at that level, to be quite frank, is a concern to me," said Hearn, chief financial officer at National Defence.
The department has since devoted more people to inspecting invoices before they're paid, and to auditing them afterward to try to reduce problems, he said.
And over the last four months, thousands of staff involved in accounting services were required to take a rigorous training course to improve their performance, Hearn said.
None of the suspicious transactions cited in the audit have led to police investigations or fraud-related charges, he added.
The audit report called on the department to make better use of the 5,000 Visa and MasterCard credit cards distributed throughout the department to help root out fraud and other problems, with potential savings of $12 million annually.
Charging low-value purchases to the cards helps save the department up to $70 in processing costs connected with using traditional purchase orders and cheques for each purchase.
The credit-card firms also deliver a daily report on suspicious transactions, such as bars, nightclubs and escort services.