Department of Defense's Progress in Implementing the Federal Managers' Financial Integrity Act

NSIAD-85-147: Published: Sep 27, 1985. Publicly Released: Sep 27, 1985.

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GAO reviewed the Department of Defense's (DOD) efforts to implement and comply with the Federal Managers' Financial Integrity Act (FMFIA), which is aimed at strengthening management controls and accounting systems.

GAO found that DOD has established a basic framework to allow for implementation of the act, but its management controls evaluation program has not progressed to the point where it can provide an adequate basis for drawing conclusions about overall DOD compliance with the act because: (1) a number of portions of the overall evaluation program are not yet operational; (2) DOD has not identified and reported some material weaknesses as departmentwide conditions; (3) there is a wide variance in the specificity of material weaknesses reported by DOD components; and (4) the Office of the Secretary of Defense (OSD) does not have an adequate ability to recognize systemic weaknesses. In addition, GAO found that DOD did not have an adequate basis for reporting that its accounting systems were in conformance with the act and the Comptroller General's requirements for accounting systems because it: (1) only performed limited transaction testing for a small number of its accounting systems; (2) has not issued an accounting systems evaluation policy directive or timely reporting instructions to its components; and (3) does not have a tracking system to ensure that timely and corrective actions are taken in response to reported material weaknesses.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In a March 1, 1985 memo, the Deputy Secretary of Defense directed the undersecretaries of Defense and ASD to work with ASD(C) on corrective actions for material weaknesses in their functional area. A monitoring and reporting system will oversee the actions.

    Recommendation: The Secretary of Defense should assign key OSD officials responsibility for certifying the adequacy of internal management controls within their functional areas. The designated officials should then consider adopting either the Army or the Air Force process for functional managers to use in determining the operational adequacy of controls within their areas of responsibility.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD believes that assurances can be provided by alternatives to FMFIA, such as agency and GAO reports, internal review organizations, and DOD/OSD guidance and instructions. It believes that this combination of factors, and not the results of the FMFIA program alone, provide reasonable assurance that adequate internal controls exist. This position is consistent with OMB reporting guidance for 1986.

    Recommendation: The Secretary of Defense's future annual statements on systems of internal and administrative controls should not report that the systems, taken as a whole, provide reasonable assurance that the requirements of the act have been met until such time as the revised evaluation program provides an adequate basis to make such a determination.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD issued change No. 2 to DOD 7220.9M, DOD Accounting Manual, on October 11,1985.

    Recommendation: The Secretary of Defense should implement a policy directive for evaluating accounting systems' conformance with the Comptroller General's requirements. At a minimum, the directive should establish the objectives, criteria, methodology, testing and documentation requirements, and reporting deadlines for DOD components' accounting systems evaluation programs.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: DOD believes that evaluations performed were adequate to provide reasonable assurance. Instructions were issued to DOD components recognizing the need to test accounting systems to ensure that they are operating as designed and are in accordance with prescribed accounting principles, standards, and related requirements.

    Recommendation: Until necessary evaluations of DOD accounting systems have been performed, the Secretary of Defense should not report the systems as: (1) being in conformance with the Comptroller General's requirements; and (2) providing basic accountability over resources.

    Agency Affected: Department of Defense

 

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