Reporting of Contract Holdbacks on the DoD Financial Statements
Abstract
This report resulted from our DoD-wide audit of DoD progress payment procedures. The Military Department audit organizations assisted in obtaining the information included in the report. Progress payments are a means of providing contract financing for Work-in-Process expenditures with long lead times, often required on Government contracts. Progress payments alleviate undue strain on a contractor's cash flow by financing a specified percentage of contract costs incurred as work progresses. Contract holdbacks are unreimbursed contractor costs not funded through progress payments. The amounts are held back, rather than paid as progress payments, to provide assurance that the work will be completed as required by the contract. Contract holdbacks represent Accounts Payable because the Government has incurred a liability for the amount held back. Office of Management and Budget Bulletin No. 94-01, "Form and Content of Agency Financial Statements," November 16, 1993, requires that Federal agencies report contractors' work progress, including the liability for funds held back from progress payments, in the financial statements. The Military Departments and the Defense Logistics Agency (DLA) reported unliquidated progress payments for FY 1996 of about $29.7 billion. Contract holdbacks of about $2.3 billion were reported on the financial statements.
Document Details
- Document Type
- Technical Report
- Publication Date
- Nov 17, 1997
- Accession Number
- ADA368686
Entities
Organizations
- Office of the Inspector General, U.S. Department of Defense