Financial Audit: Financial Reporting and Internal Controls at the Air Logistics Centers
AFMD-91-34
Published: Apr 05, 1991. Publicly Released: Apr 05, 1991.
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Highlights
GAO reviewed the Air Force Logistics Command's (AFLC) financial management operations related to its five Air Logistics Centers' (ALC) inventories, focusing on internal control and financial reporting improvements.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Air Force Logistics Command | The Commander, AFLC, should direct ALC Commanders to increase management emphasis on the identification and correction of the major causes of inaccurate perpetual inventory records. |
Closed – Implemented
In June 1991, AFLC established a full-time team to study AFLC inventory problems and provide resolutions on a timely and priority basis.
|
| Air Force Logistics Command | The Commander, AFLC, should direct ALC Commanders to require the thorough and prompt completion of research on known inventory problems. |
Closed – Implemented
The Commander, AFLC, directed ALC commanders to require thorough and prompt completion of research of known inventory problems, as stipulated in AFLC Regulation 67-9.
|
| Air Force Logistics Command | The Commander, AFLC, should direct ALC Commanders to ensure that physical inventories are not cancelled to avoid high-dollar adjustments. |
Closed – Implemented
Circumstances under which an inventory may be cancelled are outlined in AFLC Regulation 67-9. Compliance with the stated policy was reiterated at an ALC Directors Conference in December 1990.
|
| Air Force Logistics Command | The Commander, AFLC, should direct ALC Commanders to ensure that required recounts are made during the physical inventory process with an emphasis on surveying the area for mislocated material. |
Closed – Not Implemented
The Department of Defense (DOD) noted that quality checks were routinely made to preserve integrity of counts and that areas were surveyed material through the location audit survey program. DOD indicated no additional actions to be taken.
|
| Air Force Logistics Command | The Commander, AFLC, should direct ALC Commanders to require reports, based on physical inventory findings, to top management on the amount of reversals made to correct erroneous perpetual inventory records. |
Closed – Not Implemented
DOD did not concur in this recommendation and plans no action. The Air Force Audit Agency is now covering inventory issues in its financial audits of the Air Force conducted pursuant to the Chief Financial Officers Act.
|
| Air Force Logistics Command | The Commander, AFLC, should instruct ALC Commanders to reconcile general ledger accounts with subsidiary systems. |
Closed – Implemented
In a letter dated March 12, 1990, the AFLC Comptroller directed all ALC to reconcile and validate all general ledger account balances, as required by Air Force regulations.
|
| Air Force Logistics Command | The Commander, AFLC, should instruct ALC Commanders to research the accuracy of questionable high-dollar transactions identified through regular system edits. |
Closed – Not Implemented
DOD concurred in this recommendation but stated that the Air Force's Financial Inventory Accounting System already had edits identifing probable high-dollar errors to be researched.
|
| Air Force Logistics Command | The Commander, AFLC, should instruct ALC Commanders to review general ledger accounts for large variances. |
Closed – Implemented
On October 1, 1989, the Defense Finance and Accounting Service, Denver Center, (formerly the Air Force Accounting and Finance Center) established criteria for acceptable variances and requested command involvement to correct unacceptable variances.
|
| Air Force Logistics Command | The Commander, AFLC, should instruct ALC Commanders to disclose in financial reports obsolete and unserviceable inventories along with related costs to repair. |
Closed – Implemented
The new Reparable Stock Fund Division was implemented on October 1, 1992, and values inventory at serviceable and unserviceable prices along with cost of repair. Also, DOD has established a policy for valuing unserviceable items.
|
| Air Force Logistics Command | The Commander, AFLC, should instruct ALC Commanders to review inventory values to ensure that all ALC comply with Air Force policy. |
Closed – Not Implemented
DOD stated that adequate policy covering the pricing of inventory already existed in "Air Force Manual 67-1" and that any errors were the result of noncompliance with existing policy. The Air Force Audit Agency is now covering inventory issues in its financial audits of the Air Force conducted pursuant to the Chief Financial Officers Act.
|
| Air Force Logistics Command | To improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, Systems Support Division (SSD), to revise that organization's policies and procedures to provide for effective internal controls at the source of sales transactions, including testing of source data for accuracy, full documentation of transactions, and computer edits to reject transactions with errors and omissions. |
Closed – Implemented
DOD partially concurred in this recommendation and stated that the new Financial Inventory Accounting and Billing System (FIABS), expected to be operational in 1993, would provide more stringent controls. However, the Air Force Audit Agency reported on June 30, 1994, that FIABS' general and application controls were not always effective and that, therefore, the system could not be relied upon.
|
| Air Force Logistics Command | To improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, SSD, to revise that organization's policies and procedures to provide for disclosure of unbillable sales transactions with missing or erroneous information. |
Closed – Implemented
DOD stated that the new FIABS would provide edits to identify unbilled balances. The Air Force Audit Agency reported on June 30, 1994, that the Air Force did not have adequate assurance that FIABS has been designed and was operating in accordance with GAO accounting standards. Management could not provide the audit agency a complete, current, and accurate matrix detailing all the transactions processed by FIABS and how they translated to general ledger account codes.
|
| Air Force Logistics Command | In order to improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, SSD, to revise that organization's policies and procedures to provide for disclosure of write-offs of specific bills or receivable balances, including an explanation of cause. |
Closed – Not Implemented
DOD stated that a general ledger account already existed to disclose the required information and Air Force regulations prescribed criteria for writing off of receivables.
|
| Air Force Logistics Command | To improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, SSD, to revise that organization's policies and procedures to provide for a review of inventory disposals, including an examination of requirements computations for questionable items. |
Closed – Not Implemented
DOD did not concur in the recommendation and stated that existing policies and procedures for disposals were adequate. The Air Force Audit Agency is now covering inventory issues in its financial audits of the Air Force pursuant to the Chief Financial Officers Act.
|
| Air Force Logistics Command | To improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, SSD, to revise that organization's policies and procedures to provide for consolidated written guidance and consistent training on accounting principles and practices for transactions at the ALC level, including detailed illustrations and examples. |
Closed – Implemented
DOD partially concurred in this recommendation and stated that Air Force Regulation 170-25 explained the pertinent accounting principles for the related accounts and transactions. Also, the new FIABS, when implemented, was to provide detailed transaction data for AFLC trial balances. But the Air Force Audit Agency reported on June 30, 1994, that Air Force management did not have adequate assurance that FIABS has been designed and operating in accordance with GAO accounting standards. Management could not provide the audit agency a complete, current and accurate matrix detailing all the transactions processed by the system.
|
| Air Force Logistics Command | In order to improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, SSD, to revise that organization's policies and procedures to provide for increased analysis and followup on abnormal procurement, inventory, and billing data generated by source computer systems prior to provision of the data to accounting personnel for inclusion in trial balance reports. |
Closed – Not Implemented
DOD stated that DOD and Air Force regulations and policies provided guidance on analysis and followup on abnormal procurement, inventory, and billing data. In a September 1991 letter to ALC, AFLC headquarters reemphasized adherence to these regulations and policies.
|
| Air Force Logistics Command | In order to improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, SSD, to revise that organization's policies and procedures to provide for recording and prompt reporting of data on the value of SSD material actually in transit from procurement sources each month. |
Closed – Not Implemented
DOD stated that DOD and Air Force regulations and policies provided guidance on the recording and the prompt reporting of data and that management would reemphasize them.
|
| Air Force Logistics Command | In order to improve the collection of revenues from sales, and thereby reduce stock fund surcharge rates, and to ensure that trial balance reports are accurate, complete, and sufficiently reliable to be useful to stock fund managers, the Commander, AFLC, should direct the Manager, SSD, to revise that organization's policies and procedures to provide for prompt and consistent adjustments to accounts reflecting differences between inventory account amounts recorded in ALC supply and accounting systems. |
Closed – Not Implemented
DOD stated that DOD and Air Force regulations and policy provided guidance on the recording of adjustments and that management would reemphasize adherence to them.
|
| Air Force Logistics Command | The Commander, AFLC, should direct the Comptroller, AFLC, to establish and maintain consistent billing practices and procedures for SSD. |
Closed – Not Implemented
DOD stated Air Force Regulation 170-25 required monthly billing.
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Air Force procurementFederal agency accounting systemsFederal property managementFinancial management systemsFinancial recordsFinancial statement auditsInternal controlsInventory control systemsMilitary inventoriesRecords managementReporting requirements