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    Federal Agency: "Department of Defense: Department of the Navy: Office of the Assistant Secretary of the Navy (Financial Management): Senior Civilian Official"

    1 publication with a total of 2 open recommendations
    Director: Williams, Mccoy
    Phone: (202)512-3000

    2 open recommendations
    Recommendation: The Senior Civilian Official for the Office of the Assistant Secretary of the Navy should develop a review process so that data call information on sponsor owned material is correctly reported.

    Agency: Department of Defense: Department of the Navy: Office of the Assistant Secretary of the Navy (Financial Management): Senior Civilian Official
    Status: Open

    Comments: According to Navy officials, sponsor owned material is a subset of Operating Materials and Supplies (OM&S) contained within the OM&S--Remainder (OM&S-R) category. The Navy's Office of Financial Operations (FMO) is providing direction to the various Navy budget submitting offices (BSOs) to guide the development of a complete, accurate, and validated population of the OM&S-R balances reported in the Navy's financial statements--to include sponsor owned material. Specifically, FMO is working with the BSOs to develop a review process in which the BSOs will reconcile their Accountable Property System of Record asset listings to the Navy's financial statements on a quarterly basis. FMO has performed a reconciliation for the third and fourth quarter of fiscal year 2016, and is currently performing a reconciliation for the first quarter of fiscal year 2017. However, FMO has yet to achieve a 100 percent accurate reconciliation. According to Navy FMO officials, the projected implementation date for this review process is expected to be after September 30, 2017. We will continue to follow-up on this recommendation.
    Recommendation: The Senior Civilian Official for the Office of the Assistant Secretary of the Navy should revise the Navy's policies for compiling its financial statements so that they are in accordance with federal accounting standards and the DOD Financial Management Regulation. Specifically: (1) ammunition items needing repair and those categorized as excess, obsolete, and unserviceable should be revalued appropriately to comply with SFFAS No. 3 and the DOD Financial Management Regulation; and (2) shipboard inventories aboard smaller combatant ships should be reported as operating materials and supplies in accordance with federal accounting standards.

    Agency: Department of Defense: Department of the Navy: Office of the Assistant Secretary of the Navy (Financial Management): Senior Civilian Official
    Status: Open

    Comments: Regarding the first part of this recommendation, Navy's procedures for financially reporting ammunition items deemed excess, obsolete, or unserviceable and ammunition items needing repair are not in compliance with federal accounting standards. The Statement of Federal Financial Accounting Standard Number 3 (SFFAS 3) states that excess, obsolete, and unserviceable operating material and supplies shall be valued at their net realizable value. The standard further states that repair costs for inventory held for repair must be accounted for and adjusted accordingly based on the method of accounting used. Specifically, for ammunition items needing repair, entities should revalue, or reduce, such items by the estimated repair costs for financial statement reporting purposes. However, the Navy is currently devaluing its excess, obsolete, and unserviceable ammunition to zero and reporting it as such on the financial statements. Further, although the Navy has identified an annual maintenance cost for ammunition items needing repair, the Navy currently does not devalue its ordnance, or ammunition, amounts by the estimated repair costs. The Navy contends that these are routine maintenance events and will elect to expense the ordnance maintenance cost as it is incurred in opposition to SFFAS 3. Regarding the second part of this recommendation, SFFAS 3 states that Operating Materials and Supplies (OM&S) should be accounted for using the consumption method; in that materials are to be reported as an asset until they are issued to an end user for consumption in normal operations, at which point they would be expensed. Navy acknowledges, in its fiscal year 2016 financial statements, that due to current system limitations, the consumption method of accounting for all of the Navy's OM&S is not feasible, although long-term efforts are underway to transition to the consumption method for the recognition OM&S expenses to address this previously identified material weakness. Until these efforts are completed, the Navy has granted the Fleet Forces Command and Pacific Fleet a waiver to account for OM&S utilizing the purchase method of accounting. Under the purchase method, the OM&S supplies are expensed upon purchase for the smaller combatant command ships, as opposed to federal accounting standards requiring them to be recognized as an asset on the balance sheet and then expensed when consumed in the normal course of operations. We will continue to follow-up on this recommendation and the related issues in future Navy Operating Material and Supplies audit work.