Financial Management:

Operating Cash Requirement for Air Force Stock Fund Can Be Reduced

AFMD-89-60: Published: Apr 7, 1989. Publicly Released: May 8, 1989.

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Pursuant to a congressional request, GAO reviewed Air Force stock fund pricing and refund practices to determine: (1) whether the stock fund could operate at less than the currently required 11-day operating cash balance; (2) how refunds made to stock fund customers affected the 11-day cash balance; and (3) how customers used the refunds.

GAO found that: (1) the Air Force stock fund accounting system was incomplete and inaccurate, since it did not distinguish between appropriated and operating stock fund cash balances; (2) the Air Force did not report its accounting system deficiencies in its 1988 Federal Managers' Financial Integrity Act (FMFIA) report to the Secretary of Defense; (3) since 1986, the stock fund fiscal year-end operating balances have been equivalent to less than a 3-day supply of cash; (4) a 3-day cash target could reduce the stock fund customers' budget authority by over $215 million; (5) refunds to customers totalling over $1 billion since fiscal year 1984 have been the major factor in reducing the operating cash balance; and (6) it could not determine the disposition of the refunds because the Air Force merged them with other accounts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Office of the Secretary of Defense (OSD) has changed its criteria concerning the amount of cash needed by the stock fund. Defense has directed the services to use total cash for setting stock fund prices. The total cash balance is included in Defense's accounting system.

    Recommendation: The Secretary of the Air Force should improve the stock fund accounting system so that it produces accurate and reliable reports on both the appropriated and operating cash balances. Until this system deficiency is corrected, this deficiency, together with planned corrective actions, should be included in the Air Force FMFIA reports to the Secretary of Defense.

    Agency Affected: Department of Defense: Department of the Air Force

  2. Status: Closed - Implemented

    Comments: The House and Senate Appropriation Committees used the GAO report as a basis for reducing the Department of Defense's (DOD) fiscal year 1990 budget by $707.2 million. DOD has reduced the amount of cash needed to be maintained by the stock fund.

    Recommendation: The Secretary of the Air Force should prepare future budget submissions to Congress using an operating cash target of approximately 3 days as long as appropriated funds are available to cover temporary operating cash shortages.

    Agency Affected: Department of Defense: Department of the Air Force

 

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