Financial Management:

Air Force Records Contain $512 Million in Negative Unliquidated Obligations

AFMD-89-78: Published: Jun 30, 1989. Publicly Released: Aug 3, 1989.

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Pursuant to a congressional request, GAO reviewed negative unliquidated obligations (ULO) relating to the Air Force's purchase of supply and equipment inventories, focusing on the: (1) age and causes of ULO; and (2) procedures that the Air Force's air logistics centers (ALC) used to report them to senior Air Force officials and to Congress.

GAO found that: (1) as of April 1988, 5 ALC had 6,257 individual negative ULO account balances totalling about $512 million; (2) although regulations required immediate corrective action on negative ULO, ALC had more than $132 million in negative ULO that were at least 6 months old; (3) accounting supervisors attributed the lack of attention to negative ULO to staff shortages and clerical errors; (4) many Air Force officials did not know about negative ULO problems, since the Air Force did not require ALC to report negative ULO information; and (5) although ALC did not maintain statistics on the causes of negative ULO, many ALC accounting supervisors cited such internal control weaknesses as contractor overpayments, appropriations accounting errors, and inaccurate or incomplete obligations information as the primary causes.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The House Appropriations Committee used the GAO report as a basis for reducing Defense's fiscal year (FY) 1990 budget. The Department of Defense is taking action to correct the problem.

    Recommendation: The Secretary of Defense should direct the Secretary of the Air Force and the Director of the Defense Logistics Agency to jointly resolve negative ULO already recorded in ALC accounting records with the initial objective of promptly identifying and collecting any overpayments made to contractors.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Air Force has developed a monthly report that ages negative ULO. This report will be produced by the Central Procurement Accounting System.

    Recommendation: The Secretary of the Air Force should direct ALC to report, on a quarterly basis to the Air Force Logistics Command, summary-level data on the total amount and age of negative ULO.

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

  3. Status: Closed - Implemented

    Comments: The Air Force has issued guidance to the major commands and bases to ensure that they follow regulations and review ULO. The negative ULO balance has been reduced from about $500 million to about $400 million.

    Recommendation: The Secretary of the Air Force should ensure that ALC follow existing regulations on taking immediate action to correct negative ULO.

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

  4. Status: Closed - Implemented

    Comments: The Air Force identified negative ULO as a material weakness in its fiscal year 1989 FMFIA report.

    Recommendation: The Secretary of the Air Force should identify negative ULO as a material weakness in the annual Federal Managers' Financial Integrity Act (FMFIA) report to the Secretary of Defense until this weakness is corrected.

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

 

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