Financial Audit:

Military Retirement System's Financial Statements for Fiscal Year 1985

AFMD-87-35: Published: Sep 30, 1987. Publicly Released: Sep 30, 1987.

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Dennis J. Duquette
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Pursuant to a congressional request, GAO audited the financial statements of the U.S. Military Retirement System for fiscal year 1985.

GAO found that, except for an understatement and a lack of disclosure of about $75 million in accounts payable, the financial statements presented fairly the System's financial position for the fiscal year then ended, and the results of its operations, in conformity with generally accepted accounting principles applied on a consistent basis. GAO also found that: (1) internal controls were adequate for proper benefit claims processing and payment, actuarial data collection and processing, accounting for appropriations and monthly contributions, and investment and cash transactions; (2) there were internal accounting control weaknesses in the recording and reporting of financial information at finance centers regarding accounts receivable; (3) the Department of Defense (DOD) did not charge interest on accounts receivable for overpayments of benefits; (4) DOD managed the Defense Military Retirement Fund properly and in conformity with legal requirements; (5) the System will be self-sufficient by the end of its 75-year capitalization period; and (6) except for the omission of interest charges on certain accounts receivable, the System complied with the terms and provisions of laws and regulations for transactions that could have had a material effect on the financial statements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Chapter 33 of DOD 7220.9-M has been upgraded to include the standards of title 2. The publish date was March 18, 1987. In addition, chapter 94, DOD 7220.9-M, is now scheduled for delivery to the publisher prior to December 31, 1987. These chapters expand the applicable standards governing the recording and reporting of all accounts receivable.

    Recommendation: The Secretary of Defense should direct the Fund managers to develop policies and procedures specifically addressing the recording and reporting of all accounts receivable.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: On August 27, 1987, the Military Pay and Allowance Committee issued Change 1 to the DOD Military Retirement Pay Manual. This change prescribes the circumstances for charging interest and administrative costs and penalties, in conformance with 4 C.F.R. 101-105.

    Recommendation: The Secretary of Defense should direct the finance centers to charge interest on accounts receivable in accordance with the Debt Collection Act of 1982.

    Agency Affected: Department of Defense


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