Financial Audit:

Aggressive Actions Needed for Air Force to Meet Objectives of the CFO Act

AFMD-92-12: Published: Feb 19, 1992. Publicly Released: Feb 19, 1992.

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GAO reviewed: (1) the Air Force's financial management operations for fiscal year (FY) 1989; (2) Department of Defense (DOD) efforts to correct deficiencies in Air Force financial operations; and (3) actions the Air Force and DOD need to take to meet objectives of the Chief Financial Officers Act.

GAO found that: (1) the Air Force and DOD have made limited progress in implementing previous GAO recommendations regarding financial management; (2) the Air Force's accounting and financial management systems are not integrated and generate unreliable and inaccurate financial information that was of little value for either internal management purposes or external reporting; (3) in FY 1989, approximately $20 billion of budgetary expenditures for capital assets were not recorded or could not be traced to accounts in the general ledger system; (4) the Air Force and DOD rely on long-term initiatives to solve financial management problems, but short-term actions are needed to meet objectives of the Chief Financial Officers Act; (5) it will take billions of dollars in adjustments to correct errors and improve the accuracy of the Air Force's FY 1989 financial reports and records; (6) DOD requires the Air Force to record and report the actual costs invested in weapons systems, but it uses unit costs instead; (7) weaknesses in inventory management and control have resulted in $11 billion of unreported inventory and inaccurate inventory records and accounts; (8) the Air Force's internal control system was not adequate to safeguard all assets or ensure the reliability and accuracy of account balances and financial reports; and (9) the Air Force did not report internal control weaknesses identified by GAO to DOD pursuant to the Federal Managers' Financial Integrity Act.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: A CFO implementation branch has been formed at the Defense Finance and Accounting Service (DFAS), Denver Center, to oversee ongoing corrective actions, and a corrective action plan has been developed to address weaknesses in GAFS. Implementation of the general ledger development component is behind schedule. No resources were assigned to this effort by DFAS. The Air Force Audit Agency issued disclaimers of opinions on the Air Force's fiscal years 1992 and 1993 financial statements due to significant uncertainties regarding the reliability of account data and accounting systems.

    Recommendation: In view of the long-term nature of the Corporate Information Management initiative in developing standardized, DOD-wide systems, the Secretary of Defense should direct the DOD Comptroller to give high priority to improving the accuracy and reliability of financial information included in the General Accounting and Finance System.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: During FY 1992, the Air Force and DFAS began a project to revalue the recorded cost of weapons systems. The Air Force annual financial statement report for FY 1992 contains procedures to revalue the recorded cost. The Air Force has updated the reported values of the recently acquired aircraft and will continue to revalue through FY 1994. However, the Air Force Audit Agency reported that the Air Force's reported costs of assets, including weapons systems, in its fiscal years 1992 and 1993 financial statements were not reliable.

    Recommendation: Until an improved system is available, the Secretary of Defense should direct the DOD Comptroller to develop methodologies to use data from the Air Force fund control system to develop and report more reliable costs for weapons systems, particularly for newer systems.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: During FY 1992, the Air Force and DFAS began a project to revalue the recorded cost of weapons systems. The Air Force annual financial statement for FY 1992 contains procedures to revalue the recorded cost. The Air Force has updated the reported values of the recently acquired aircraft and will continue to revalue through FY 1994. However, the Air Force Audit Agency reported that the Air Force's reported costs of assets, including aircraft, in its fiscal year 1992 and 1993 financial statements were inaccurate.

    Recommendation: Until an improved system is available, the Secretary of Defense should direct the DOD Comptroller to develop procedures for establishing values for older systems by appraisal or another reasonable basis.

    Agency Affected: Department of Defense

 

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