Internal Controls:

Defense Fuel Supply Center's Recording and Reporting of Accounts Payable

AFMD-87-30: Published: May 13, 1987. Publicly Released: Jun 10, 1987.

Additional Materials:

Contact:

Jeffrey C. Steinhoff
(202) 275-9454
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

In response to a congressional request, GAO assessed the adequacy of the Defense Fuel Supply Center's (DFSC) financial and management information system in controlling, accounting for, and reporting on its fuel program, specifically its accounts payable.

During fiscal year 1986, DFSC purchased over $4.3 billion in fuels and, as of September 30, 1986, had over 17,500 accounts-payable balances, totalling about $416 million. GAO found that DFSC: (1) did not have adequate controls to ensure the proper recording and reporting of accounts payable resulting from its fuel purchases; (2) inaccurately reported the amounts it owed contractors; and (3) conducted inaccurate reviews of accounts-payable balances and did not know if the balances that remained outstanding for long periods were correct. GAO also found that DFSC improperly recorded and reported overpayments to contractors as negative accounts payable rather than accounts receivable, which understated both balances and caused management to lose control over collections. GAO noted that DFSC manually processes contractors' requests for payments and relies on documentary evidence to validate these payments, but it plans to implement an automated disbursing system which will interface with the Defense Fuel Automated System (DFAM) and rely primarily on DFAM data to validate payment information.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Review of accounts-payable balances has identified problems. Also, DOD is monitoring monthly changes in manual and automated general ledgers for differences. DOD estimated full implementation of the automated disbursement system by December 1988. Problems in DFAMS have been corrected as of June 1988.

    Recommendation: The Secretary of Defense should direct the Director, DLA, to require the Administrative Support Center (ASC) and DFSC to ensure that the accounts-payable weaknesses have been corrected, and that the payable information reported by DFAM can be depended upon for payment purposes prior to fully relying on the automated disbursing system.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DFSC began recording negative accounts payable as accounts receivable as of December 1987. Over $30 million of negative balances have been cleared and/or collected. A complete review of negative balances was estimated to be completed by May 1988. Accomplishment report A-AFMD-87-6 was completed for $17.5 million of overpayment recoupments. Account payable review was completed in June 1988.

    Recommendation: The Secretary of Defense should direct the Director, DLA, to require DFSC to classify and report negative accounts-payable amounts as accounts receivable as they occur and ensure the prompt collection of these receivables.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD hired co-op students to conduct reviews of accounts payable balances and added 14 additional full-time staff to maintain adequate accounts payable reviews.

    Recommendation: The Secretary of Defense should direct the Director, DLA, to require DFSC to review the resources needed to conduct the accounts-payable reviews required by DLA regulations and, if resources are adequate, begin conducting the required reviews or, if resources are not considered adequate, develop alternatives for complying with the requirements.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The Department of Defense (DOD) completed its review and identified and corrected the causes of errors.

    Recommendation: The Secretary of Defense should direct the Director of the Defense Logistics Agency (DLA) to require DFSC to determine why accounts-payable data on price adjustments, delivery dates, and quantities delivered are not being properly recorded in and processed by DFAM, and institute controls to correct these problems.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: A realignment within DLA resulted in the disbursement function being transferred to DFSC. Currently, DFSF is testing the automated disbursing system and will not fully implement it until full testing has been completed.

    Recommendation: The Secretary of Defense should direct the Director, DLA, to require ASC and DFSC to continue to operate the manual disbursing system until the automated system shows that it can make reliable disbursements.

    Agency Affected: Department of Defense

 

Explore the full database of GAO's Open Recommendations »

Sep 29, 2016

Sep 28, 2016

Sep 27, 2016

Sep 26, 2016

Sep 23, 2016

Sep 21, 2016

Sep 7, 2016

Aug 30, 2016

Looking for more? Browse all our products here