Financial Management:

Reporting of Army Conventional Ammunition as Operating Materials and Supplies

GAO-01-45R: Published: Oct 24, 2000. Publicly Released: Oct 24, 2000.

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The Army's current accounting practices and manual procedures for calculating operating materials and supplies (OM&S) balances caused accounting errors that understated the Army's fiscal year 1999 OM&S balance by at least $1.5 billion. In addition, ammunition held at retail-level installations for training purposes was excluded from the financial reports.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Army's Aviation and Missile Command documented the revised policies and procedures used to compute the year-end adjustment to the Operating Materials and Supplies (OM&S) account for fiscal year 2000. These policies and procedures provide for removing the value for Army missiles and avoid double reporting of the same missile assets as both OM&S and National Defense Equipment (NDE). Officials of both Army Headquarters and the Defense Finance and Accounting Service Indianapolis Center approved the revised policies and procedures. This revised process should correct timing errors and other inconsistencies we found in prior year calculations that caused understatements of the Balance Sheet account.

    Recommendation: To improve the current manual processes for the financial reporting of OM&S, the Army's Assistant Secretary for Financial Management and Comptroller, in coordination with the Commanding General of the U.S. Army Materiel Command and the Director of the Defense Finance and Accounting Service (DFAS), should develop and implement formal written policies and procedures to properly calculate and record year-end adjustments to the OM&S account. Such policies and procedures should address properly and consistently calculating the adjustment to remove national defense equipment missiles, including reducing the value for reparable and salvage items, eliminating timing errors, and including in-transit assets.

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

  2. Status: Closed - Implemented

    Comments: In a January 2001 memorandum, the Army Materiel Command (AMC) issued guidance formalizing interim workaround procedures for calculating the value for ammunition and missiles stored at Army installations worldwide. This guidance, intended to remain in effect until the fielding of the Wholesale Logistics Modernization and the Global Combat Support System-Army development programs, required reporting as Operating Materials and Supplies (OM&S) the value for assets stored at the end of the fiscal year for future training purposes as well as for combat readiness purposes. Thus, for the first time, the Defense Finance and Accounting Service (DFAS) included the value for ammunition held for future training purposes when it computed the year-end adjustment for ammunition stored at installations in Army's Fiscal Year 2000 financial statements. This change added $1.1 billion to the reported value for OM&S on the Army's Fiscal Year 2000 Balance Sheet. In addition, in a December 2000 memorandum, the Assistant Secretary of the Army for Financial Management and Comptroller notified us that procedures for proper accounting of Army OM&S were being considered in the development and implementation of long-term system solutions.

    Recommendation: The Army Assistant Secretary for Financial Management and Comptroller, the Army Materiel Command, and DFAS should address two additional matters. First, as the Army moves toward implementing the consumption method of accounting for OM&S, the offices should apply the manual work-around procedures used to capitalize assets held for combat readiness purposes to items held for training as well. Second, the three offices should consider the issues discussed in this letter in the development and implementation of the long-term system solutions for proper accounting of the Army's OM&S.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: In a January 2001 memorandum, the Army Materiel Command (AMC) issued guidance formalizing interim workaround procedures for calculating the value for ammunition and missiles stored at Army installations worldwide. This guidance, intended to remain in effect until the fielding of the Wholesale Logistics Modernization and the Global Combat Support System-Army development programs, required reporting as Operating Materials and Supplies (OM&S) the value for assets stored at the end of the fiscal year for future training purposes as well as for combat readiness purposes. Thus, for the first time, the Defense Finance and Accounting Service (DFAS) included the value for ammunition held for future training purposes when it computed the year-end adjustment for ammunition stored at installations in Army's Fiscal Year 2000 financial statements. This change added $1.1 billion to the reported value for OM&S on the Army's Fiscal Year 2000 Balance Sheet. In addition, in a December 2000 memorandum, the Assistant Secretary of the Army for Financial Management and Comptroller notified us that procedures for proper accounting of Army OM&S were being considered in the development and implementation of long-term system solutions.

    Recommendation: The Army Assistant Secretary for Financial Management and Comptroller, the Army Materiel Command, and DFAS should address two additional matters. First, as the Army moves toward implementing the consumption method of accounting for OM&S, the offices should apply the manual work-around procedures used to capitalize assets held for combat readiness purposes to items held for training as well. Second, the three offices should consider the issues discussed in this letter in the development and implementation of the long-term system solutions for proper accounting of the Army's OM&S.

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

 

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