Financial Management:

Weak Financial Accounting Controls Leave Commodity Command Assets Vulnerable to Misuse

AFMD-92-61: Published: Sep 4, 1992. Publicly Released: Sep 4, 1992.

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GAO evaluated the Army commodity commands' internal accounting controls, focusing on: (1) their accounting for government-furnished property; (2) the status of Army Materiel Command (AMC) efforts to reduce and prevent negative unliquidated obligations; and (3) controls over disbursement operations.

GAO found that: (1) the commodity commands do not effectively control government-furnished property, due partially to continuing management oversight weaknesses and failure to follow required procedures; (2) the Army has not yet implemented an accounting system that would identify how much government-furnished material contractors have on hand and how they use it; (3) the Army has large negative unliquidated obligations which continue to increase despite Army attempts to control them; (4) the negative unliquidated obligations are due to overpayments to contractors, accounting and processing errors, and AMC failure to correct ineffective communication of contract and payment information between the commodity commands' system and the Defense Finance and Accounting Service's (DFAS) systems; (5) AMC has not recorded the overpayments as accounts receivable as required, and has not otherwise attempted to collect the overpayments; and (6) the commodity commands' controls over blank checks and check signing machines were weak, and the commands took corrective actions to comply with regulations.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Army issued guidance on December 7, 1992, requiring that overpayments resulting from negative unliquidated obligations be recorded as refunds receivable in accounting reports. However, there has been no determination of whether this new guidance has been followed. With the capitalization of former Army accounting and reporting responsibilities under DFAS, this recommendation is no longer applicable to the Commander, AMC.

    Recommendation: The Commander, AMC, should require overpayments resulting from negative unliquidated obligations to be properly recorded in the accounting records as accounts receivable.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Command

  2. Status: Closed - Not Implemented

    Comments: DFAS and the services formed a joint review group to develop action plans to find, control, reduce, and correct the causes of negative unliquidated obligations. With the capitalization of former Army disbursing functions under DFAS, this recommendation is no longer applicable to AMC. However, as discussed in DOD's July 21, 1994, response to AIMD-94-12, DFAS centers are working to reduce outstanding balances of negative unliquidated obligations, and related unmatched/undistributed disbursements. DOD also pointed out in its July 1994 response that the solution to the unmatched disbursement problem is a system solution, which is expected to take several years to correct.

    Recommendation: The Commander, AMC, should direct AMC leadership to determine the specific reasons for the negative unliquidated obligations contained in existing balances, resolve each one of them, prepare a corrective action plan to address systems and operating deficiencies that allow negative unliquidated obligations, and monitor progress to help ensure that corrective actions are taken.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Command

  3. Status: Closed - Implemented

    Comments: Actions are expected to be completed under CIM. DOD has closed this and plans no further action.

    Recommendation: The Commander, AMC, should require periodic reconciliation of commodity command and contractor government-furnished material and equipment accounts at least annually.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Command

  4. Status: Closed - Implemented

    Comments: Actions are expected to be completed under CIM. DOD has closed this recommendation and plans no further action.

    Recommendation: The Commander, AMC, should require that contractor consumption data be certified by an authorized contractor representative, received by the command, and recorded in the general ledger.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Command

  5. Status: Closed - Implemented

    Comments: Actions are expected to be completed under the DOD CIM initiative. DOD has closed this recommendation and plans no further action.

    Recommendation: The Commander, AMC, should maintain separate ledgers for government-furnished material and equipment and record what is bought and provided.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Command

  6. Status: Closed - Not Implemented

    Comments: On August 17, 1992, the Army sent an audit alert to major commands to limit access to blank Treasury checks and check-signing machines. However, there has been no determination of whether the August 1992 guidance has been followed. With the capitalization of former Army disbursing responsibilities under DFAS, this recommendation is no longer applicable to the Commander, AMC.

    Recommendation: The Commander, AMC, should follow Army Regulation 37-103 procedures in each disbursing office to limit access to blank Treasury checks and check signing machines.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Command

 

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