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PSAD-77-52 1 (1976-11-24)

handle is hein.gao/gaobaacae0001 and id is 1 raw text is: '-4 UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20M4 D-- 62517 The onorable LMO III The Secretary of Defense Dear Mr. Secretary: We believe that you will be interested in a method cf improving cash management in the Department of Defense and reducing the cost of Government borrowing. The basic concept is to delay disbursements from the United States Treasury to take greater advantage of the time value of money by con- verting from a checks-written basis to a checks-paid' basis for reimbursing contractors for their expenditures. One of the most likely situations where this technique can be applied is in the Army's reimbursement of contractors for expenses incurred in operating Government ammunition plants. There are 26 such Government-owned contractor-operated (GOCO) plants. HOW IT WORKS NOW (CHECKS-WRITTE;j There is an Army disbursing officer at each of the GOCO plants. Once a week, or more often if necessary, the con- tractor presents a voucher to the disbursing officer for pay- ment. This voucher is supported by a listing of checks the contractor intends to issue and, after appropriate review, the disbursing officer issues the contractor a Treasury check for the total amount of the voucher. The contractor then mails checks to the payees and deposits the Treasury check in its checking account. Within a day or so the Treasury check is processed with a reduction in the U.S. Treasury balance while the contrac- tor's individual checks are still unpaid. They are generally Ofloating in the banking system for 3 or more additional days. The time value of money (interest) is represented by -the period of time between when a Trtasury_ check is deposited and when the contractor's checks are cleared and deducted from the contractor's account. PSAD-77-52

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