Financial Reporting:

Navy's 1986 Consolidated Report on Financial Position Is Unreliable

AFMD-89-18: Published: Apr 6, 1989. Publicly Released: Apr 6, 1989.

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GAO reviewed the Department of the Navy's fiscal year 1986 Consolidated Report on Financial Position to determine its compliance with GAO and Department of the Treasury annual financial reporting requirements.

GAO found that the Navy provided inaccurate and incomplete financial position reports to Treasury, since it: (1) did not effectively supervise, review, or control report preparation to ensure accuracy; (2) did not disclose approximately $58 billion in real property, understating property assets by 34 percent and total assets by 18 percent; (3) did not disclose $1.7 billion in guaranteed loans or data on operating leases for ships; (4) presented accounts receivable data that differed from the accompanying support schedules by $164.5 million; (5) used different data sources, with different requirements, to prepare reports for Treasury and Congress; (6) did not reconcile property records with its accounting system; (7) did not develop service-specific guidelines for complying with Treasury reporting requirements; and (8) lacked controls to identify and correct problems occurring from dual recording of assets, property recording delays, and minimum acquisition-reporting thresholds.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Navy implemented the Department of Defense Uniform Chart of Accounts in the Navy Headquarters Financial System and is using that system to prepare its reports on financial position. The Navy has also completed its monitoring for compliance with existing procedures.

    Recommendation: The Secretary of the Navy should direct the Navy Comptroller to: (1) prepare the report on financial position based on general ledger account data rather than budget execution documents; and (2) monitor and take action necessary to ensure adherence to existing procedures to reconcile balances of property accounting activities with detailed property record balances contained in the real property management system.

    Agency Affected: Department of Defense: Department of the Navy

  2. Status: Closed - Implemented

    Comments: The Naval Facilities Engineering Command has reiterated its procedures and monitored the Engineering Field Division's compliance with those procedures.

    Recommendation: The Secretary of the Navy should direct the Commander, Naval Facilities Engineering Command, to adhere to existing procedures requiring accounting documents containing the cost status of real property being constructed to be issued to property accounting activities for reconciliation purposes.

    Agency Affected: Department of Defense: Department of the Navy

 

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