Unresolved Cost Accounting Standard 409 Noncompliance Issues at FMC and Northrop Corporation

NSIAD-83-13: Published: Jul 26, 1983. Publicly Released: Jul 26, 1983.

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GAO summarized its review of certain unresolved issues involving Cost Accounting Standard (CAS) 409, the depreciation of tangible assets, at FMC's Ordnance Division and Northrop Corporation's Aircraft Division.

GAO found that: (1) FMC Corporation's Ordnance Division is improperly using a depreciation method which does not reasonably reflect the expected consumption of services for its buildings and it is failing to estimate asset service lives as supported by historical records; and (2) Northrop's Aircraft Division is improperly using a method which does not reasonably reflect the expected consumption of services for its new aircraft and new buildings. GAO noted that these practices are not in compliance with CAS 409, and they have negatively affected the contracting processes at these locations since 1978. GAO also noted that these problems have often caused the Government to reimburse the contractors for excess depreciation charges.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should take action to resolve these issues.

    Agency Affected: Department of Defense

 

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