Internal Controls:

DOD Records Retention Practices Hamper Accountability

AIMD/OSI-00-48R: Published: Feb 4, 2000. Publicly Released: Feb 4, 2000.

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GAO reviewed the Navy's records retention and financial disbursements, focusing on the Navy's application of a Department of Defense (DOD) Financial Management Regulation (FMR) which calls for copies of disbursing officer records to be destroyed after 1 year.

GAO noted that: (1) GAO's January 1999 report on problems in accounting for Navy transactions focused on in-transit disbursements that had not been matched to a Navy obligation within 120 days of the transaction; (2) these unmatched disbursements prevent accurate funds control and financial accounting and create opportunities for fraud and improper payments; (3) to resolve problem in-transit disbursements, accurate, detailed accounting data for each in-transit disbursement must be identified and matched with the correct obligation and appropriation; (4) as part of GAO's effort to assess the feasibility of resolving unmatched disbursements, GAO reviewed a sample of 140 Navy transactions at the Defense Finance and Accounting Service Norfolk Operating Location; (5) these transactions related to payroll amounts deposited in automated teller machine (ATM) accounts for service members stationed on ships; (6) Navy disbursing officers were able to provide vouchers for 135 of 140 sample transactions; (7) however, these vouchers consisted of summary totals and did not contain necessary detailed supporting information; (8) detailed transaction records were not available for 119 of the 135 vouchers because, according to disbursing officers, DOD regulations require that disbursing offices maintain copies of transaction records, including original records, for only 1 year; (9) federal records retention policy calls for different records retention periods for original transaction records and copies of transaction records; (10) title 8 of GAO's Policy and Procedures Manual for Guidance of Federal Agencies calls for records to be retained in conformance with the minimum applicable General Records Schedule requirements established by the National Archives and Records Administration; (11) General Records Schedule 6 covers accountable officers' records and defines an accountable officer to include disbursing officers; (12) General Records Schedule 6 states that original records of accountable officers should be held for audit by GAO and calls for these records to be destroyed 6 years and 3 months after the period covered by the accounts; (13) of much greater concern, the FMR provides incomplete guidance for the retention of disbursing office records, resulting in original transaction records not being maintained after 1 year; and (14) the lack of specific guidance distinguishing between copies--meaning duplicates--and original records results in confusion as to the proper retention period for original disbursing office records.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In DOD's April 2000 response to the report, DOD stated that it was revising the DOD Financial Management Regulation (FMR) chapters cited in the recommendations and will publish the revised chapters later this year. Following the issuance of the revised DOD Financial Management Regulation chapters, the Office of the Under Secretary of Defense (Comptroller) will issue a memorandum to the Military Departments and the Defense Finance and Accounting Service requesting that their internal review organizations validate proper implementation of the records retention regulations during fiscal year 2001. In May 2000, DOD revised chapter 20 of the FMR consistent with GAO's recommendation. One month later, DOD revised chapter 21 of the FMR.

    Recommendation: To ensure records retention guidance is consistent with the National Archives and Records Administration's General Records Schedule 6 and GAO's Policy and Procedures Manual for Guidance of Federal Agencies, Title 8, the Under Secretary of Defense (Comptroller) should revise DOD's FMR. Specifically, the records retention guidance provided in DOD's FMR, volume 5, chapters 20 and 21, should be revised to clarify that disbursing officers must maintain original records for the 6-year and 3-month period prescribed in General Records Schedule 6, and that copies of records that may be destroyed after 1 year are limited to duplicate records. Also, chapter 21 should be revised to give specific guidance for the retention of original disbursing office records, including transaction detail for amounts deposited in ATM accounts for service members on ships, and provide guidance to differentiate original records from copies. In addition, the Under Secretary of Defense (Comptroller) should validate that disbursement offices have properly implemented the revised DOD records retention regulations.

    Agency Affected: Department of Defense: Under Secretary of Defense (Comptroller)

 

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