CFO Act Financial Audits:

Navy Plant Property Accounting and Reporting Is Unreliable

AIMD-96-65: Published: Jul 8, 1996. Publicly Released: Jul 8, 1996.

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GAO reviewed the Navy's fiscal year (FY) 1994 consolidated financial reports, focusing on the areas contributing to the inaccurate financial reporting of the Navy's plant property account balance.

GAO found that: (1) substantial weaknesses in the Navy's financial reporting systems caused the Navy to submit inaccurate FY 1994 financial reports; (2) the Defense Finance and Accounting Service (DFAS) erroneously counted $23.9 billion of structures and facilities and $700 million of land twice because it received the information from two separate sources and incorrectly included the information from both sources in the consolidated reports; (3) the Navy failed to ensure that all plant property from general fund activities was included in or that plant property from Defense Business Operations Fund (DBOF) activities was excluded from the reports because the list of general fund activities was outdated; (4) DFAS did not compare the activities included in the reports with the list of general fund activities when it consolidated the Navy's 1994 financial reports; (5) the Navy's reporting of the $291 million plant property work-in-progress balance was highly questionable because not all transactions were properly recorded, and Navy activities found it difficult to resolve in-transit property transactions; (6) the Navy did not reconcile all of its logistics, custodial, and accounting records on a timely basis; and (7) the Navy and DFAS have taken actions to improve their internal controls, verify the accuracy and completeness of financial information, and reconcile plant property accounts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Navy Comptroller Manual has been replaced with the Department of the Navy Financial Management Policy Manual. This manual contains a listing of Unit Identification Codes (UICs) and associated commands and it was updated and published on December 1 1997. As part of its FY2000 financial audit work, GAO validated that the listing had been updated in October 1998 with the release of Version Number 71. Additionally, GAO validated that the listing was updated again in October 1999 with the release of Version Number 72.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that, by September 30, 1996, the Navy Comptroller Manual provision that lists the Navy's activities engaged in general fund operations and DBOF operations be updated and accurately maintained.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

  2. Status: Closed - Implemented

    Comments: The Navy Comptroller Manual has been replaced with the Department of the Navy Financial Management Policy Manual. This manual contains a listing of Unit Identification Codes (UICs) and associated commands and it was updated and published on December 1 1997. As part of its FY2000 financial audit work, GAO validated that the listing had been updated in October 1998 with the release of Version Number 71. Additionally, GAO validated that the listing was updated again in October 1999 with the release of Version Number 72.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that, by September 30, 1996, the Navy Comptroller Manual provision that lists the Navy's activities engaged in general fund operations and DBOF operations be updated and accurately maintained.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Assistant Secretary for Financial Management and Comptroller

  3. Status: Closed - Implemented

    Comments: The Navy Comptroller Manual has been replaced with the Navy Financial Management Policy Manual which includes the listing of Unit Identification Codes (UICs). GAO confirmed that the UIC listing is being used to validate and ensure the completeness of the data call information, to reconcile the various property account balances, and to develop the Navy's DPAS implementation schedule.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that the Navy and DFAS, Cleveland Center, use the Navy Comptroller Manual's listing as one analytical procedure to help ensure that the plant property account balances reported in the Navy's financial reports are complete and include information from only general fund activities.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

  4. Status: Closed - Implemented

    Comments: The Navy Comptroller Manual has been replaced with the Navy Financial Management Policy Manual which includes the listing of Unit Identification Codes (UICs). GAO confirmed that the UIC listing is being used to validate and ensure the completeness of the data call information, to reconcile the various property account balances, and to develop the Navy's DPAS implementation schedule.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that the Navy and DFAS, Cleveland Center, use the Navy Comptroller Manual's listing as one analytical procedure to help ensure that the plant property account balances reported in the Navy's financial reports are complete and include information from only general fund activities.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Assistant Secretary for Financial Management and Comptroller

  5. Status: Closed - Not Implemented

    Comments: With the Navy's decision to implement DPAS as its official personal property accountability system, there should no longer be any work-in-progress accounts being maintained by the DFAS Operating Locations (OPLOCs) for the Navy. The OPLOCs will no longer be a part of that process as the responsibility now resides with the accountable Navy activities.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that Navy activities and DFAS routinely monitor plant property work-in-progress accounts and promptly review and resolve large balances.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

  6. Status: Closed - Implemented

    Comments: With the Navy's decision to implement DPAS during FY2000, the DFAS OPLOCs will no longer be a part of the Navy's process for property accountability. The responsibility to routinely monitor plant property work-in-progress accounts and to promptly review and resolve large balances now resides with the accountable Navy activity. GAO's audit work in FY2000 has identified that as part of the DPAS training on the new system, activity personnel are being informed of the importance of monitoring work-in-progress accounts and resolving large balances in this account.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that Navy activities and DFAS routinely monitor plant property work-in-progress accounts and promptly review and resolve large balances.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Assistant Secretary for Financial Management and Comptroller

  7. Status: Closed - Not Implemented

    Comments: With the Navy's decision to implement DPAS as its official personal property accountability system, there should no longer be any work-in-progress accounts being maintained by the DFAS Operating Locations (OPLOCs) for the Navy. Further, the OPLOCs will no longer be part of the Navy's process of recording and reporting its personal property, work-in-progress, or in correcting the errors.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that Navy activities promptly request, and DFAS expeditiously provide, information to assist in transferring plant property work-in-progress items to on-hand accounts and in correcting errors.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

  8. Status: Closed - Implemented

    Comments: With the Navy's decision to implement DPAS during FY2000, the DFAS OPLOCs will no longer be a part of the process of recording and reporting plant property, work-in-process, or correcting errors. This responsibility now resides with the accountable Navy activity. GAO's audit work in FY2000 has identified that as part of the DPAS training on the new system, activity personnel are being trained to record and report plant property, work-in-progress, and to correct errors.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that Navy activities promptly request, and DFAS expeditiously provide, information to assist in transferring plant property work-in-progress items to on-hand accounts and in correcting errors.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Assistant Secretary for Financial Management and Comptroller

  9. Status: Closed - Not Implemented

    Comments: With the Navy's decision to implement DPAS as its official personal property accountability system, there should no longer be any work-in-progress accounts being maintained by the DFAS Operating Locations (OPLOCs) for the Navy. Further, the OPLOCs will no longer be part of the Navy's process of resolving work-in-progress and other plant property problems.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that Navy activities and DFAS personnel be trained to identify and resolve work-in-progress and other plant property problems.

    Agency Affected: Department of Defense: Defense Finance and Accounting Service

  10. Status: Closed - Implemented

    Comments: Since this recommendation was originally issued, the Navy decided to implement DPAS during FY2000 as its official personal property accountability system and to move away from using the DFAS Operating Locations (OPLOCs) for property accountability. Further, GAO's audit work in FY2000 has identified that the training called for in this recommendation is being provided as part of the DPAS training on the new system.

    Recommendation: The Navy Assistant Secretary for Financial Management and Comptroller and the Director, DFAS, should require that Navy activities and DFAS personnel be trained to identify and resolve work-in-progress and other plant property problems.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Assistant Secretary for Financial Management and Comptroller

 

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