Financial Management:

More Controls Needed Over Army's Obligation of Funds

AFMD-87-18: Published: May 14, 1987. Publicly Released: May 14, 1987.

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GAO assessed the Army's efforts to prevent improper obligations of customers' operation and maintenance (O&M) funds by industrial fund activities.

GAO found that, of the $3.3 million in O&M funds that the Army carried over in fiscal year 1986, it improperly obligated $2.9 million during previous fiscal years, thereby extending the availability of O&M appropriations which would have either expired or been properly obligated for other purposes. GAO noted that the improper obligations precluded the Army from making valid obligations because the O&M appropriations had expired by the time it deobligated the funds. GAO concluded that, although a December 1985 instruction clarified and provided more guidance concerning obligations, the Army needs to take additional steps to reduce the risks associated with the: (1) year-end obligation process not preventing recurring problems of improper obligations; and (2) quarterly deobligation reports not providing enough information to Army Materiel Command (AMC) headquarters officials to effectively monitor implementation at industrial fund activities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On June 26, 1987, AMC issued a revised Letter of Instruction directing that an independent observer review procedures for year-end obligations and observe the year-end obligation process.

    Recommendation: The Secretary of the Army should direct AMC to improve management controls over its obligation process by revising the December 1985 Letter of Instruction on O&M obligation/deobligation procedures to require an independent observer of the year-end obligation process to help ensure that all regulatory requirements are met.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: On June 26, 1987, AMC issued a revised Letter of Instruction which warned that inadequately supported deobligation analyses would be rejected and returned to their originators.

    Recommendation: The Secretary of the Army should direct AMC to improve management controls over its obligation process by rejecting any deobligation reports submitted by activities that do not adequately explain why deobligations were made.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: On June 26, 1987, AMC issued a revised Letter of Instruction requiring eight additional elements of information in deobligation analysis reports, including the date of the initial obligation.

    Recommendation: The Secretary of the Army should direct AMC to improve management controls over its obligation process by reviewing information currently required for deobligation reports to determine what additional information, such as the date of the initial obligation, is needed to better monitor the deobligation process.

    Agency Affected: Department of Defense: Department of the Army

 

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