Financial Management:

Defense Accounting Adjustments for Stock Fund Obligations Are Illegal

AFMD-87-1: Published: Mar 11, 1987. Publicly Released: Mar 11, 1987.

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GAO reviewed the magnitude of a series of Department of Defense (DOD) obligation adjustments to determine whether: (1) the procedures the Army and Air Force used to calculate and record the adjustments were proper; and (2) the adjustments complied with existing legal requirements.

GAO found that: (1) it was not in the government's interest for DOD to augment current appropriations through retroactive accounting adjustments which it did not fully disclose to Congress for approval; (2) DOD used inadequate methods to inform Congress of the impact of obligational adjustments on budget authority; (3) the use of statistical sampling to estimate and adjust recorded obligations was illegal, since the Air Force and the Army could not identify specific transactions or support calculated totals; (4) the adjustments provided additional obligational resources in excess of the amounts DOD requested from Congress; and (5) an accounting policy change was necessary to bring DOD into compliance with accepted accounting principles and standards.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In light of the fact that DOD agreed to comply with directions from the House Appropriations Committee (HAC), which are not identical to the GAO recommendations. GAO believes that this recommendation should be closed. GAO plans to continue monitoring the issue through its FIA efforts.

    Recommendation: The Secretary of Defense should direct the Secretaries of the Air Force and Army to ensure that future obligation adjustments made to surplus fund and "M" account balances comply with existing legal requirements, including the documentation requirements of 31 U.S.C. 1501.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: In light of the fact that DOD agreed to comply with directions from HAC, which are not identical to the GAO recommendations. GAO believes that this recommendation should be closed. GAO plans to continue monitoring the issue through its FIA efforts.

    Recommendation: The Secretary of Defense should require the Office of the Assistant Secretary of Defense (Comptroller) to review and approve individual service adjustments to surplus fund and "M" account balances exceeding a certain threshold, such as $1 million.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: In light of the fact that DOD agreed to comply with directions from HAC, which are not identical to the GAO recommendations. GAO believes that this recommendation should be closed. GAO plans to continue monitoring the issue through its FIA efforts.

    Recommendation: The Secretary of Defense should promptly and fully disclose adjustments exceeding this threshold to the appropriate congressional committee chairmen.

    Agency Affected: Department of Defense

 

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