Financial Management:

Army Conventional Ammunition Production Not Effectively Accounted for or Controlled

AFMD-92-57: Published: Aug 31, 1992. Publicly Released: Aug 31, 1992.

Additional Materials:

Contact:

Lisa G. Jacobson
(202) 512-9542
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO evaluated the internal controls at the Army Armament, Munitions, and Chemical Command (AMCCOM), focusing on AMCCOM ability to: (1) account for and control assets used in the production of conventional ammunition; and (2) account for and report the cost of conventional ammunition production.

GAO found that: (1) existing AMCCOM systems and procedures do not effectively account for and control ammunition component movements, government furnished material at contractor-owned and -operated facilities, and reconciliations between its records and individual plant inventory records; (2) AMCCOM cannot ensure proper accounting for its ammunition and component parts or promptly detect any loss or theft; (3) plant managers do not always follow procedures and sometimes circumvent systems controls; (4) AMCCOM has no logistics records of government-furnished materials held by contractors; (5) the lack of logistics records and the failure of plants to perform required annual physical inventories make it impossible for AMCCOM to reconcile its records with individual plant records; (6) AMCCOM acknowledges its inventory problems but has not satisfactorily resolved them, and its development project for inventory control will not correct all problems; and (7) the Army's accounting, control, and reporting systems do not provide a reliable basis for determining the total cost of producing conventional ammunition.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD does not agree with the need to provide detailed information specifically on DD Form 1662. DD Form 1662 is an annual report of all classes of property in the possession of contractors that is prepared based on the official government property records maintained by contractors. The report shows the total acquisition cost of property under a contractor's control. DD Form 1662 is not a record to show the detailed data, as proposed by GAO. Amending DD Form 1662 in the proposed manner would destroy the purpose of that reporting format, and be a costly burden to place on industry and the government. Detailed data are available in the official government records maintained by contractors, but that data are not reportable on DD Forms 1662. However, DOD has agreed that access to information that supports DD Form 1662 by means of integrated systems is a departmental goal to be carried out through its corporate information management initiative.

    Recommendation: For contractor-owned facilities, the Secretary of the Army should direct the Commander, AMC, in conjunction with the Commander, AMCCOM, to modify existing policies and procedures in consultation with DOD for Form DD 1662 annual reports of government-furnished material to identify the government agency providing the government-furnished material and the units of government-furnished material provided, by national stock number.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: The Defense Finance and Accounting Service is coordinating its business process model functional requirements for government property and other financial operations with Army and other DOD components. In its report evaluating actions taken to implement GAO's recommendations, the Army Audit Agency determined that, while current DOD financial and contract management systems cannot produce the necessary financial accountability, contractors maintained accountable logistical records. Therefore, until DOD implements a new financial system, the Army Audit Agency recommended that the Army use the contractors' information to account for government-furnished property in the hands of contractors.

    Recommendation: For contractor-owned facilities, the Secretary of the Army should direct the Commander, AMC, in conjunction with the Commander, AMCCOM, to establish internal control policies and procedures to maintain auditable financial records in the Commodity System to account for and track government-furnished material.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Not Implemented

    Comments: Initially, DOD established a unit cost resourcing task force to develop recommendations to address GAO's concerns. Subsequently, the task force was disestablished and any efforts in this area were put on hold indefinitely.

    Recommendation: To correct weaknesses in logistics control and accounting at government-owned plants, the Secretary of the Army should direct the Commander, AMC, in conjunction with the Commander, AMCCOM, to accumulate and report all costs relevant to ammunition production through the Conventional Ammunition Working Capital Fund.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: A senior-level empowered team reviewed operations to identify more-efficient ways to follow established reconciliation policies and procedures. As a result of this review, conventional ammunition working capital fund inventory has been realigned to the Single Manager for Conventional Ammunition. In evaluating actions taken to implement GAO's recommendation, the Army Audit Agency reported that the Armament Command had improved controls to ensure that automated matches between its accountable records and custodial records at the 17 ammunition facilities were completed on schedule. In addition, procedures were established for researching inventory discrepancies, including establishing a database to track open investigations and requiring inventory personnel to follow up on delinquent investigations.

    Recommendation: To correct weaknesses in logistics control and accounting at government-owned plants, the Secretary of the Army should direct the Commander, AMC, in conjunction with the Commander, AMCCOM, to follow established reconciliation policies and procedures requiring: (1) individual plants to annually submit their inventory records to AMCCOM; (2) AMCCOM to compare plant records with its central accountable records in the Commodity System; and (3) any difference to be resolved within the 45- and 90-day criteria.

    Agency Affected: Department of Defense: Department of the Army

  5. Status: Closed - Implemented

    Comments: IOC completed inventory of the Conventional Ammunition Working Capital Fund's assets for FY 1995. The installations certified that all inventories are complete. The Command's internal review report no. E95-21, showed that accountable and custodial records were reconciled and that controls were implemented to improve the research of inventory discrepancies.

    Recommendation: To correct weaknesses in logistics control and accounting at government-owned plants, the Secretary of the Army should direct the Commander, Army Materiel Command (AMC), in conjunction with the Commander, AMCCOM, to schedule and conduct a wall-to-wall inventory of all ammunition components at the production plants concurrent with the implementation of the Standard Depot System to establish an accurate baseline.

    Agency Affected: Department of Defense: Department of the Army

  6. Status: Closed - Implemented

    Comments: The Army Audit Agency reported, as part of its fiscal year 1993 review of the Army's financial audit, that the Armament Command had issued new procedures to control work-in-process inventories and new guidance to ammunition activities. However, while the Army Audit Agency initially found that not all activities were adequately implementing these requirements, the Armament Command took action during the audit to ensure that personnel at ammunition facilities were aware of their responsibilities.

    Recommendation: To correct weaknesses in logistics control and accounting at government-owned plants, the Secretary of the Army should direct the Commander, Army Materiel Command (AMC), in conjunction with the Commander, AMCCOM, to establish internal control policies and procedures to account for and track government-furnished material and ammunition components in the Commodity System as they move within and among AMCCOM production plants.

    Agency Affected: Department of Defense: Department of the Army

  7. Status: Closed - Implemented

    Comments: On December 7, 1992, the Assistant Secretary of the Army (Financial Management) requested the Commander of the Army Materiel Command to reconcile Form DD 1662 annual records of government-furnished material to AMCCOM auditable financial records in the commodity system. In addition, the October 1992 "Department of Defense Form and Content of Financial Statements for FY 1992 Financial Activity" includes in Annex A-1, "Lessons Learned From and Deficiencies Reported in FY 1991 Financial Statements," a discussion of the need to reconcile balances reported by contractors with DOD general ledger account balances. However, as discussed in the status of the previous recommendation, DOD does not intend to provide more detailed information on DD Form 1662. Consequently, reconciliations of the DD Forms 1662 with AMCCOM Commodity System records are of limited value.

    Recommendation: For contractor-owned facilities, the Secretary of the Army should direct the Commander, AMC, in conjunction with the Commander, AMCCOM, to reconcile Form DD 1662 annual reports of government-furnished material to AMCCOM auditable financial records in the Commodity System.

    Agency Affected: Department of Defense: Department of the Army

 

Explore the full database of GAO's Open Recommendations »

Sep 20, 2016

Sep 6, 2016

Aug 19, 2016

Aug 12, 2016

Jul 29, 2016

Jul 28, 2016

Jul 13, 2016

Jul 11, 2016

Jun 13, 2016

Looking for more? Browse all our products here