Financial Management:

Air Force Systems Command Is Unaware of Status of Negative Unliquidated Obligations

AFMD-91-42: Published: Aug 29, 1991. Publicly Released: Aug 29, 1991.

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Pursuant to a congressional request, GAO examined the negative unliquidated obligations (ULO) associated with the purchase of weapon systems and equipment at the Air Force Systems Command (AFSC), focusing on: (1) the magnitude, age, and causes of negative ULO for contracts jointly administered by AFSC product divisions and the related Air Force payment activity handled by the Defense Finance and Accounting Service (DFAS); and (2) the adequacy of controls to ensure that any overpayments that could cause negative ULO are promptly recorded as receivables and collected.

GAO found that: (1) since the AFSC managers lacked information on the status of negative ULO they were responsible for, they were unable to determine the magnitude, age, and causes of negative ULO and could not ensure that they were promptly corrected; (2) the product divisions did not have routine reports on the magnitude and age of negative ULO in their accounting records; (3) a GAO analysis of $126 million in negative ULO disclosed that the causes for $69 million were unknown, and of the remaining $57 million, $54 million of negative ULO were caused by processing errors and $3 million were related to overpayments; (4) about $50 million of the $126 million in negative ULO were at least 2 years old, ranging to over 6 years; (5) since the Air Force did not record identified overpayments as receivables in its accounting records, it could not ensure prompt collection action or that reported receivable balances were accurate; and (6) not aggressively identifying and correcting the cause of negative ULO could result in obligations in excess of available appropriations, result in losses if caused by overpayments, and conceal availability of funds that could be used to meet other Air Force requirements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Reporting was implemented March 31, 1992; aging was implemented September 30, 1992; and system changes to improve processes are expected to be completed by late 1993. Based upon the result of field work, the Air Force is now aging negative unliquidated obligations. The Air Force has been doing the aging since at least June 1993. Monthly reports are provided to the Defense Senior Financial Management Oversight Council.

    Recommendation: The Secretary of Defense should direct the Secretary of the Air Force and the Director, DFAS, to establish and implement policies and procedures for identifying and reporting, at least quarterly, to AFSC management the magnitude, age, and causes of negative ULO.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: On September 1991, DFAS directed prompt resolution and immediate collection action for overpayments.

    Recommendation: The Secretary of Defense should direct the Secretary of the Air Force and the Director, DFAS, to promptly resolve identified negative ULO.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: On October 1991, DFAS requested DOD components to comply with existing accounting requirements for recording and collecting overpayments.

    Recommendation: The Secretary of Defense should direct the Secretary of the Air Force and the Director, DFAS, to comply with existing accounting requirements for recording and collecting overpayments to contractors.

    Agency Affected: Department of Defense

 

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