Defense Business Operations Fund:

Management Issues Challenge Fund Implementation

AIMD-95-79: Published: Mar 1, 1995. Publicly Released: Mar 1, 1995.

Additional Materials:

Contact:

Jack L. Brock, Jr
(202) 512-4841
contact@gao.gov

 

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

Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) progress in implementing the Defense Business Operations Fund Improvement Plan, focusing on: (1) the policies essential to the Fund's operations; and (2) DOD ongoing efforts to correct problems that hinder Fund operations.

GAO found that: (1) DOD has no systematic process in place to ensure consistent implementation of the Fund's policies; (2) Fund managers lack guidance to execute daily Fund operations; (3) DOD lacks the financial systems necessary to provide for successful Fund operations; (4) DOD has been unable to improve the accuracy and reliability of its financial systems; and (5) DOD has reversed its cash management policy to return cash control to DOD components, however, there is no assurance that this policy change will enhance DOD cash accountability.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The congressional defense committees did not address this issue during their review of the fiscal year 1997 defense budget. DOD nonconcurred with this recommendation.

    Matter: Congress should enact legislation to prohibit DOD from including amounts in the Fund's prices for recovering prior year losses.

  2. Status: Closed - Not Implemented

    Comments: The congressional defense committees did not address this issue during their review of the fiscal year 1997 defense budget. DOD nonconcurred with this recommendation. DOD acknowledged that the military personnel pricing policy of using the civilian equivalency rate to cost military personnel does not reflect the total cost of the military. However, due to the complexity of military pay systems, DOD plans to continue to use the civilian equivalency rate.

    Matter: Congress should enact legislation to require that the Fund's prices recover the full costs of using military personnel in providing goods and service.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD concurred with the recommendation and believes that such a process exists. Specifically, the Under Secretary of Defense (Comptroller) issues Fund accounting and reporting policies and, when appropriate, DFAS issues operating procedures to ensure that the Fund's policies are correctly implemented. DFAS has a group that issues procedures on a case-by-case basis to address individual issues.

    Recommendation: The Under Secretary of Defense (Comptroller) should develop a systematic process to ensure the uniform implementation of the Fund's policies.

    Agency Affected: Department of Defense: Office of the Comptroller

  2. Status: Closed - Not Implemented

    Comments: Based on additional work, GAO determined that the decentralization of the Fund's cash management responsibilities has resulted in the individual Defense components being accountable for their decisions affecting their Fund cash balance, including any violation of the Antideficiency Act. Each Defense component is now directly accountable for its respective cash balance, and one Defense component cannot spend money generated by another Defense component.

    Recommendation: The Under Secretary of Defense (Comptroller) should reverse the decision to transfer the management of the Fund's cash to the military services and DOD components.

    Agency Affected: Department of Defense: Office of the Comptroller

  3. Status: Closed - Implemented

    Comments: DOD has completed performing all the cost and economic analyses for the systems selected to account for the Fund's resources.

    Recommendation: The Under Secretary of Defense (Comptroller) should ensure that a functional economic analysis is prepared for each of the recommended Fund interim migratory systems prior to authorizing the expenditure of funds to enhance and implement the systems.

    Agency Affected: Department of Defense: Office of the Comptroller

  4. Status: Closed - Not Implemented

    Comments: DOD nonconcurred with this recommendation. DOD believes that revenue recognition and management headquarters policies are adequate. DOD policy requires that the percentage-of-completion method for recognizing revenue be used on long-term projects. However, DOD is still using the completed contract method for short-term projects. DOD also believes that its policy on management headquarters is adequate and does not need any further clarification.

    Recommendation: The Under Secretary of Defense (Comptroller) should revise the revenue recognition policy to require that the percentage of completion method be used for work done on orders that cross fiscal years, and clarify the management headquarters policy to specifically identify the costs to be included in the prices.

    Agency Affected: Department of Defense: Office of the Comptroller

 

Explore the full database of GAO's Open Recommendations »

Dec 19, 2014

Dec 16, 2014

Dec 12, 2014

Dec 11, 2014

Dec 1, 2014

Nov 21, 2014

Nov 20, 2014

Nov 19, 2014

Nov 18, 2014

Looking for more? Browse all our products here