Financial Management:

Status of the Defense Business Operations Fund

AIMD-94-80: Published: Mar 9, 1994. Publicly Released: Mar 9, 1994.

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Pursuant to a legislative requirement, GAO provided information on the financial status of the Department of Defense's (DOD) Defense Business Operations Fund, focusing on: (1) the Fund's cash management; (2) DOD efforts to address problems through its comprehensive plan; and (3) the DOD approach to managing the Fund.

GAO found that: (1) although DOD has made progress toward improving the Fund's operational problems, the Fund continues to be hindered by DOD inability to manage cash, develop policies and procedures, enhance financial systems, and produce accurate financial reports on the results of operations; (2) DOD will need long- and short-term efforts to improve the Fund's operation and financial information systems; (3) DOD needs to implement all of the Fund's policies, select and implement reliable accounting systems, and improve the accuracy of existing financial data systems by the end of 1994 so that it can continue to make progress in resolving the Fund's problems and build a foundation for further improvement; (4) although DOD admits that its past financial management practices were inadequate, the Fund's current operational problems reflect its overall financial management operations and a growing threat to the nation's combat readiness; (5) DOD recognition of the Fund's financial management problems is viewed as a fundamental change in DOD management philosophy and can contribute to the ultimate success of DOD reform initiatives; and (6) the Fund will continue to experience operational problems unless DOD provides strong leadership, implements corrective actions, and successfully upgrades its systems.

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