Financial Management:

Army Real Property Accounting and Reporting Weaknesses Impede Management Decision-making

AIMD-94-9: Published: Nov 2, 1993. Publicly Released: Nov 2, 1993.

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Gregory D. Kutz
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GAO reviewed the Army's reporting and accounting of real property and construction in progress, focusing on the: (1) effects of inaccuracies in the Army's accounting system on managerial decisionmaking; and (2) Army's progress in correcting accounting system and construction-in-progress data inaccuracies.

GAO found that: (1) the Army's system for recording real property at its installations could not provide complete and accurate information on the quantity and type of Army structures and facilities; (2) real property maintenance budget requests are unreliable partly because of inadequate guidance and inconsistent reporting requirements for installation reports; (3) the Army's base realignment and closure evaluation process needs additional data verification on real property status information to ensure data accuracy; (4) inconsistent reporting of real property makes comparisons between major commands less meaningful; (5) many previously reported problems such as unreconciled balances and inaccurate property records remain uncorrected; (6) the Army has initiated efforts to improve its real property management and accounting system, but progress has been slow; and (7) the Army needs to establish an effective financial oversight mechanism to maintain data accuracy over the long-term.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD officials have stated that no further action is anticipated with respect to this recommendation. Although some installations are performing reviews, cognizant Army officials report that no standardized Army-wide policy direction is intended.

    Recommendation: The Acting Secretary of the Army should direct the other major commands to conduct reviews, similar to the reviews in Europe and Forces Command, on the accuracy of the financial and management information in the Facilities System Database. Each review should include identifying and correcting any errors in recorded facility classifications, costs, and units of measurement. These reviews for continental United States bases should be completed in time to upgrade the reliability of data available for the 1995 base realignment and closure process.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Not Implemented

    Comments: Technical data reporting was eliminated during the past year. Therefore, this recommendation is no longer applicable.

    Recommendation: The Acting Secretary of the Army should direct the Chief of Engineers to clarify existing guidance on preparing the requirements and technical data reports.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: The Army updated its 1995-1999 Program Objective Memorandum, and allocated the necessary resources to ensure proper maintenance of the facilities systems. The necessary fiscal year (FY) 1994 funds to maintain the system were received. Funds required for FY1995 have been programmed into the budget.

    Recommendation: The Acting Secretary of the Army should determine and allocate the resources needed to effectively maintain the Facilities Systems.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: DFAS developed procedures for reconciling real property balances with the financial records and construction in progress. On May 5, 1994, DFAS issued message guidance to Army field activities, according to the DOD IG. This guidance has been requested from AAA and DFAS to determine if it provides adequate instruction on performing the quarterly reconciliations. AAA's report on internal controls associated with the fiscal year 1996 financial statements, issued in June 1997, states that although improvement was noted in the audit test of real property records, guidance problems still exist, causing inconsistencies.

    Recommendation: The Acting Chief Financial Officer of the Department of Defense (DOD) should direct the Defense Finance and Accounting Service (DFAS) and the Acting Secretary of the Army to provide guidance on how to perform a quarterly reconciliation of the general ledger real property accounts with the Facilities System or with other supporting detailed records at those installations not using the Facilities System.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In its July 1996 Internal Control report accompanying its financial statement audit, the Army Audit Agency (AAA) reported that the Army Corps of Engineers has taken action to correct these conditions. Specifically, it made significant progress in removing costs for completed projects from the military construction-in-progress account, and in transferring costs to the appropriate account. In addition, AAA reported that the Corps made substantial progress in ensuring that design and engineering costs are included in the cost of military construction projects transferred to DOD customers.

    Recommendation: The Acting Chief Financial Officer, DOD, should direct DFAS and the Acting Secretary of the Army to establish procedures for housing and engineering directorates to follow when projects are initiated, including informing finance and accounting offices of construction projects for which costs should be capitalized in a construction-in-progress account.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: An August 8, 2001 report, to the Office of the Deputy UnderSecretary of Defense for Installations and Environment, by an independent contractor, provides that the Army now has independent quality control review procedures in place for all Army installation real property data. Apparent discrepancies in installation-level real property data are identified and sent to the cognizant installation for review and correction. While the Army's real property systems do not yet fully address the requirements of the CFO Act, the interim quality control review procedures that have now been implemented address the intent of GAO's recommendation.

    Recommendation: The Acting Chief Financial Officer, DOD, should direct DFAS and the Acting Secretary of the Army to establish procedures for reconciling and reporting Army Corps of Engineers and installation construction-in-progress accounts with supporting detailed records.

    Agency Affected: Department of Defense


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