Financial Reporting:

Defense Agencies' Reports on Financial Position Need To Be Improved

AFMD-88-19: Published: Apr 14, 1988. Publicly Released: Apr 14, 1988.

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GAO reviewed the Department of Defense's (DOD) compliance with GAO and Department of the Treasury annual reporting requirements, to: (1) determine whether DOD encountered any problems in implementing the requirements; and (2) identify actions DOD should take to improve compliance.

GAO found that DOD: (1) did not develop the required guidelines for compiling financial reports; (2) did not verify the accuracy of the data in its reports to Treasury, which contained computational errors; (3) submitted only four of the five required agency-level reports; (4) overstated its assets by $395 million, liabilities by $11.6 million, and equity by $250.1 million in its general and deposit fund consolidated report; (5) omitted 46 accounts from its consolidated report; (6) did not comply with accounting standards and requirements; and (7) did not require the use of general ledger data.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The project to implement and maintain the Washington Headquarters Service (WHS) general ledger will be the DOD method to ensure compliance with title 2 and Treasury and to minimize the risk of omissions. The WHS general ledger was implemented on September 30, 1989.

    Recommendation: The Secretary of Defense should direct defense agencies to develop and implement agency-specific procedures and instructions for preparing and consolidating Reports on Financial Position which delineate: (1) the unit responsible for preparing each Report on Financial Position; (2) which reports are to be consolidated into reports forwarded to Treasury; (3) a method of preparing and consolidating reports which minimizes the risk of omissions and errors; and (4) a method to ensure compliance with title 2 and Treasury Financial Manual requirements in the areas of reporting advances, receivables, and accounts payable and capitalizing transportation costs of capitalized assets.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD has issued guidance requiring DOD activities to implement the U.S. Government Standard General Ledger. The project to implement the central WHS general ledger in support of centralized reporting is completed. WHS plans to use the central general ledger to prepare the Reports on Financial Position beginning in October 1990.

    Recommendation: The Secretary of Defense should direct the defense agencies to obtain access to, and use, systems containing general ledgers, or a centrally controlled database containing proprietary and budgetary accounts, as a primary source of information in preparing the Reports on Financial Position, as an interim measure until full implementation of the U.S. Government Standard General Ledger.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: A project to integrate the defense agencies general ledger has been established. Through the project task force, the requirement for supervisory review over the preparation and consolidation of Reports on Financial Position has been emphasized. This action was considered complete when the WHS general ledger was implemented on September 30, 1989.

    Recommendation: The Secretary of Defense should direct defense agencies to implement supervisory review of the preparation and consolidation of Reports on Financial Position to ensure that procedures and instructions are followed and accurate information is reported.

    Agency Affected: Department of Defense

 

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