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Financial Management: Problems in Accounting for Navy Transactions Impair Funds Control and Financial Reporting

AIMD-99-19 Published: Jan 19, 1999. Publicly Released: Jan 19, 1999.
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Highlights

Pursuant to a legislative requirement, GAO reviewed the effects of in-transit disbursements on the Navy's funds control and financial reporting.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of the Comptroller The DOD Comptroller should revise the problem disbursement policies and procedures to ensure that the Navy's funds control system maintains, on an ongoing and current basis, accurate and reliable unobligated and unexpended balances for the Navy's expired and cancelled appropriations consistent with the Antideficiency Act and requirements for accurate and timely financial reporting. The DOD Comptroller should monitor compliance with the revised policies and procedures.
Closed – Implemented
In response to GAO's recommendation, DoD stated that it has implemented various policies and procedures intended to ensure that the funds control systems of each of the DoD Components maintain accurate unobligated and unexpended balances. Additionally, the Department's policies are designed to better ensure compliance with Antideficiency Act requirements and to produce accurate financial reports. Further, the Department will monitor these policies to assess whether the policies are accomplishing their intended purpose. As a result of its assessment of these policies, the Department revised the DOD Financial Management Regulation, Volume 3, Chapter 8 in November 2000 to require the prompt recording of obligations in the official accounting records and, if a payment has been made and an obligation has not been recorded within the required timeframe, the Defense Finance and Accounting Service (DFAS) is to process an obligation within 10 days on behalf of the fund holder. The Department also revised the DOD Financial Management Regulation, Volume 3, Chapter 11 in January 2001 to establish milestones for recording obligations to resolve problem disbursements (disbursements that exceed or cannot be matched to an existing obligation). Under Chapter 11, if an obligation has not been recorded within the required timeframe, DFAS is to process an obligation within 10 days on behalf of the fund holder.
Defense Finance and Accounting Service The Navy's Assistant Secretary for the Financial Management (Comptroller), in concert with Defense Finance and Accounting Service (DFAS), should report any overobligations to Congress and the President pursuant to the Antideficiency Act and implementing guidance in Office of Management and Budget Circular A-34.
Closed – Implemented
At a March 30, 1999, meeting, DOD officials told GAO that they do not plan to report any overobligations as Antideficiency Act violations to the Congress and the President. They informed GAO that they were able to deobligate funds to achieve positive balances for 23 of the 29 potentially overobligated appropriations that GAO identified. However, they indicated that the resolution of the remaining six potentially overobligated appropriations would require additional research. In March 2000, the Navy concluded its research and processed a journal voucher that resulted in positive balances in the six remaining appropriations. Consequently, the DOD reports that it has no overobligations subject to legislative or OMB reporting requirements.
Office of the Assistant Secretary for Financial Management and Comptroller The Navy's Assistant Secretary for the Financial Management (Comptroller), in concert with Defense Finance and Accounting Service (DFAS), should report any overobligations to Congress and the President pursuant to the Antideficiency Act and implementing guidance in Office of Management and Budget Circular A-34.
Closed – Implemented
At a March 30, 1999, meeting, DOD officials told GAO that they do not plan to report any overobligations as Antideficiency Act violations to the Congress and the President. They informed GAO that they were able to deobligate funds to achieve positive balances for 23 of the 29 potentially overobligated appropriations that GAO identified in the report. However, they indicated that the resolution of the remaining six potentially overobligated appropriations would require additional research. In March 2000, the Navy concluded its research and processed a journal voucher that resulted in positive balances in the six remaining appropriations. Consequently, the DOD reports that it has no overobligations subject to legislative or OMB reporting requirements.
Defense Finance and Accounting Service The Navy's Assistant Secretary for Financial Management (Comptroller) in concert with the DFAS, should record obligations in the Navy's official accounting and funds control records for the 20 expired appropriations identified in the Navy's cuff records.
Closed – Not Implemented
DOD's Deputy Chief Finanical Officer advised GAO that the Navy determined that 23 of the 29 appropriations are not, in fact, overobligated and that the Navy is continuing to review the remaining six appropropriations. Navy officials said that they were able to deobligate funds to achieve positive balances for the 23 appropriations and that they were preparing the journal vouchers needed to record the obligations. The Navy is continuing to review the remaining six potentially overobligated appropriations. In March 2000, the Navy concluded their research and processed a journal voucher that resulted in positive balances in the six remaining appropriations. Consequently, the DOD reports that it has no overobligations subject to legislative or OMB reporting requirements.
Office of the Assistant Secretary for Financial Management and Comptroller The Navy's Assistant Secretary for Financial Management (Comptroller) in concert with the DFAS, should record obligations in the Navy's official accounting and funds control records for the 20 expired appropriations identified in the Navy's cuff records.
Closed – Not Implemented
DOD's Deputy Chief Financial Officer advised GAO that the Navy had determined that 23 of 29 appropriations are not, in fact, overobligated and the Navy is continuing to review the remaining six appropriations. Navy officials said that they were able to deobligate funds to achieve positive balances for the 23 appropriations and that they were preparing journal vouchers needed to record obligations. The Navy is continuing to review the remaining six potentially overobligated appropriations. In March 2000, the Navy concluded its research and processed a journal voucher that resulted in positive balances in the six remaining appropriations. Consequently, the DOD reports that it has no overobligations subject to legislative or OMB reporting requirements.
Defense Finance and Accounting Service The Navy's Assistant Secretary for Financial Management (Comptroller), in concert with DFAS, should immediately investigate any of the 9 cancelled appropriations and the 20 expired appropriations that are potentially overobligated.
Closed – Implemented
At a March 30, 1999 meeting, DoD officials told GAO that they were able to deobligate funds to achieve positive balances for 23 of the 29 potentially overobligated appropriations that GAO identified. The remaining six appropriations continued to be researched. In March 2000, the Navy concluded its research and processed a journal voucher which resulted in positive balances in the six remaining appropriations.
Office of the Assistant Secretary for Financial Management and Comptroller The Navy's Assistant Secretary for Financial Management (Comptroller), in concert with DFAS, should immediately investigate any of the 9 cancelled appropriations and the 20 expired appropriations that are potentially overobligated.
Closed – Implemented
At a March 30, 1999, meeting, DOD officials told GAO that they were able to deobligate funds to achieve positive balances for 23 of the 29 potentially overobligated appropriations that GAO identified. In March 2000, the Navy concluded their research and processed a journal voucher which resulted in positive balances in the six remaining appropriations.

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Topics

Accounting proceduresBudget obligationsExpired appropriationsFederal agency accounting systemsFinancial recordsFinancial statementsFunds managementInternal controlsMilitary appropriationsReporting requirements