Financial Management:

Internal Control Weaknesses Impede Air Force's Budgeting for Repairable Items

AFMD-92-47: Published: Aug 26, 1992. Publicly Released: Aug 26, 1992.

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GAO reviewed the Air Force's inventory and related financial management systems for repairable items, focusing on: (1) the accuracy of inventory data used to develop the Air Force's repairable item budget for procurement; and (2) Air Force actions to correct previously reported weaknesses in the budget development process for repairable items.

GAO found that: (1) the Air Force has duplicate automated and manual worldwide inventory records that do not provide accurate and reliable data for estimates and decisions because the automated system has inadequate internal controls, and the manual system is subject to errors and unsupported adjustments; (2) managers could not resolve discrepancies between the two systems due to lack of data and noncompliance with reconciliation procedures and regulations; (3) continuing system problems and internal control weaknesses could adversely affect two Department of Defense (DOD) initiatives to improve financial accountability and management; (4) Air Force efforts to correct system problems have been fragmented and incomplete; (5) the Air Force's plan to automate the manual records system will not resolve the problem of maintaining two parallel systems; (6) the Air Force may benefit from considering the inventory management practices followed by private-sector airlines, which have similar needs and problems; and (7) the Air Force failed to report its internal control weaknesses in its budgeting process in its 1991 Federal Managers' Financial Integrity Act report.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Air Force Materiel Command developed an implementation plan in February 1993. It also contracted with MITRE to evaluate systems, and MITRE recommended actions in May 1993. The Air Force Materiel Command, the Joint Logistics Systems Center, and the Defense Finance and Accounting Service began to coordinate actions and seek funding to implement changes. However, in October 1993, the Deputy Secretary of Defense directed that the Center expedite the CIM initiatives. Actions required for this recommendation are long-term and, according to DOD, incorporated into the CIM effort.

    Recommendation: The Secretary of the Air Force should direct the Air Force Assistant Secretary for Financial Management and the Air Force Deputy Chief of Staff for Logistics to jointly develop a comprehensive, long-term strategy for improving processes and designing systems for these processes that would better ensure the reliability of repairable items inventory data. The processes and systems should eliminate dual recordkeeping, include controls to ensure accurate recordkeeping, and link accounting, budgeting, and inventory information.

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

  2. Status: Closed - Implemented

    Comments: The Air Force Materiel Command completed a review of its policy in June 1993 and issued policy changes. According to DOD, these changes have been implemented. The manual records referred to in the recommendation have subsequently been automated.

    Recommendation: The Secretary of the Air Force should direct the Air Force Deputy Chief of Staff for Logistics to require ALC to periodically review manual records for errors and for compliance with instructions and report the results to AFLC.

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

  3. Status: Closed - Implemented

    Comments: The Air Force Materiel Command, successor of the Air Force Logistics Command, completed a review of its policy in June 1993. It has issued policy changes to the item managers. According to DOD, the item managers have implemented the changes.

    Recommendation: The Secretary of the Air Force should direct the Air Force Deputy Chief of Staff for Logistics to revise AFLC procedures to provide all item managers consistent detailed guidance for maintaining the manual records, including: (1) the sources from which an item manager should record losses, gains, and adjustments to the manual record; and (2) specific instructions on how to document changes to the manual record inventory balances.

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

  4. Status: Closed - Implemented

    Comments: The Air Force Materiel Command contracted with MITRE to evaluate systems, and MITRE recommended appropriate actions in May 1993. The results of this evaluation formed the basis for refocusing some of the corrective actions. The Joint Logistics System Center has set short-term and long-term goals for addressing data quality. However, in October 1993, the Deputy Secretary of Defense directed that the implementation of the CIM initiatives should be expedited. As a result, only absolutely essential changes are being made. DOD has determined that this recommendation is not an essential change and is discontinuing follow-up tracking of this recommendation.

    Recommendation: The Secretary of the Air Force should direct the Air Force Deputy Chief of Staff for Logistics to implement controls to ensure that data are completely and correctly transmitted between the automated systems or subsystems.

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

  5. Status: Closed - Implemented

    Comments: The Air Force Materiel Command, the successor of the Air Force Logistics Command, completed a review of its policies in June 1993. Since then, policy amendments have been issued to the item managers and, according to DOD, the changes have been implemented.

    Recommendation: The Secretary of the Air Force should direct the Air Force Deputy Chief of Staff for Logistics to require AFLC to: (1) comply with policies for performing worldwide physical inventories for items that have significant unresolved differences between the manual and automated records; and (2) revise policies to eliminate unsupported adjustments to the manual records and the requirements system. The results of physical inventories need to be reported directly to the item manager.

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

  6. Status: Closed - Implemented

    Comments: Although DOD did not agree with this recommendation, the Air Force Materiel Command developed an implementation plan by February 1993 to address system changes needed to help ensure more reliable data on worldwide inventory balances. Since then, the Joint Logistics Systems Center has pursued short and long-term actions, which include 123 system change requests. These changes have been deferred due to the Deputy Secretary of Defense's October 1993 guidance that expedited implementation of CIM initiatives. DOD is discontinuing follow-up tracking on this recommendation because DOD views the recommended action as not absolutely essential.

    Recommendation: The Secretary of the Air Force should direct the Air Force Deputy Chief of Staff for Logistics to determine the most efficient way to provide item managers ready access to the inventory management systems data they need for the required reconciliation of worldwide inventory balances. This data should include the receipt, issue, and physical inventory adjustment transactions for each reporting activity.

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

  7. Status: Closed - Implemented

    Comments: The Air Force Materiel Command has not implemented the recommendation as stated because the Command believed it was not practical, being too labor-intensive. Instead, it has relied upon automation of the reconciliation process in December 1993 that is supposed to identify all items with differences.

    Recommendation: The Secretary of the Air Force should direct the Air Force Deputy Chief of Staff for Logistics to require that Air Logistics Centers (ALC) report to Air Force Logistics Command (AFLC) management the differences between the manual and automated records before and after reconciliation efforts.

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

  8. Status: Closed - Not Implemented

    Comments: The Air Force does not agree that report findings and related internal control weaknesses are significant.

    Recommendation: The Secretary of the Air Force should direct the Air Force Assistant Secretary for Financial Management and the Air Force Deputy Chief of Staff for Logistics to jointly include in the Air Force's Financial Integrity Act report to DOD material internal control weaknesses in the reliability of worldwide repairable item inventory balances.

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

 

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