Financial Management: Navy Industrial Fund Has Not Recovered Costs
AFMD-93-18
Published: Mar 23, 1993. Publicly Released: Mar 23, 1993.
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Highlights
Pursuant to a congressional request, GAO reviewed the Navy Industrial Fund's operating losses and the appropriateness of fiscal year (FY) 1993 practices.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should direct the Defense Comptroller to: (1) set prices based on realistic estimates of the costs that will be incurred in providing the goods and services to Navy Industrial Fund customers; and (2) adjust prices only by factors directly related to the costs expected to be incurred. |
Closed – Implemented
GAO has continually stated that increasing prices to recover prior year losses is inconsistent with a basic intent of the Fund--that prices should reflect the actual cost incurred in providing goods and services. DOD does not agreed with this recommendation and currently recoups losses through increasing prices it will charge Fund customers. As a result, in our March 1995 report, Defense Business Operations Fund: Management Issues Challenge Fund Implementation (GAO/AIMD-95-79), March 1, 1995, we recommend that the Congress enact legislations to prohibit DOD from including amounts in the Fund's prices for recovering prior year losses.
|
| Department of Defense | The Secretary of Defense should direct the Secretary of the Navy to review and update work standards in accordance with the Variance Improvement Program for Expenditure Reconciliation. |
Closed – Implemented
In commenting on the report, Defense concurred with the recommendation. A Naval Air Systems Command Instruction requires the Naval Aviation Depots to submit quarterly process and productivity enhancement status reports which contain a section for reporting variance analysis efforts and results. Adherence to the instruction is audited by the Naval Air Systems Command as part of Naval Air Systems Command Inspector General inspections. All variances from previously approved workload standards must be justified before they are approved.
|
| Department of Defense | The Secretary of Defense should direct the Comptroller of Defense to implement a policy stating that the prices charged by the Defense Business Operations Fund are not to include depreciation expense for military construction facilities, which are financed by appropriated funds. |
Closed – Implemented
The National Defense Authorization Act for Fiscal Year 1994 directed the Secretary of Defense not to include the costs of military construction projects in the prices charged Defense Business Operations Fund customers. An accomplishment was approved by the Director for Planning and Reporting on June 28, 1994 (A-AIMD-94-16).
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| Department of Defense | The Secretary of Defense should direct the Comptroller of Defense to develop a cash management policy that prescribes the minimum and maximum amount of cash the Defense Business Operations Fund needs to operate. |
Closed – Implemented
In October 1994, the Deputy Comptroller approved a cash management policy for the Fund. The policy (1) specifies a minimum and maximum amount of cash needed to support the Fund, (2) requires the development of cash plans, and (3) provides that deviations from the plan will be examined monthly to emphasize timely submission and collection of bills and disbursement of funds. An accomplishment report (A-AIMD-95-4), was approved by the Director for Planning and Reporting on March 2, 1995.
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Topics
Accounting proceduresCost accountingDefense budgetsDefense procurementFederal agency accounting systemsFinancial management systemsIndustrial fundsInternal controlsMilitary cost controlMilitary forces