Industrial Funds: Weaknesses Remain in the Department of Defense's Capital Equipment Program
NSIAD-91-175
Published: Apr 17, 1991. Publicly Released: Apr 17, 1991.
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Highlights
Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) management of its Asset Capitalization Program (ACP) to determine: (1) DOD plans to request that Congress transfer funding for industrial and depot maintenance equipment back to the industrial funds; (2) the extent to which DOD industrial fund accounting allowed it to use unexpended ACP funds to pay for losses in the industrial funds; and (3) whether DOD appropriately computed unliquidated ACP obligations as liabilities in its reporting of net budgetary resources for its industrial funds.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| If Congress approves the DOD proposal to fund capital equipment through DBOF, Congress may wish to consider requiring DOD to reserve unexpended equipment funds to pay for future disbursements associated with unobligated balances and unliquidated obligations. |
Closed – Implemented
|
The conference report approving capital budgeting for DBOF requires a separate account to fund capital purchases. DOD has complied with this requirement. |
| If Congress approves the DOD proposal to fund capital equipment through DBOF, Congress may wish to consider requiring DOD to establish appropriate accounting and reporting procedures for the capital equipment included in DBOF. |
Closed – Implemented
|
The conference report approving capital budgeting for DBOF requires DOD to submit quarterly reports on capital purchase obligations and expenditures. |
| If Congress approves the DOD proposal to fund capital equipment through DBOF, Congress may wish to consider requiring DOD to include in the DOD annual budget submission to Congress a financial summary identifying the status of the capital equipment program. This financial summary should provide all appropriate data elements needed to facilitate congressional oversight, including: (1) unobligated balances and unliquidated obligations at the beginning and end of the fiscal year; (2) equipment obligations during the fiscal year; (3) disbursements for capital equipment during the fiscal year; and (4) amount of the total cash balance in DBOF that should be placed in a reserve account to fund future disbursements associated with unobligated balances and unliquidated obligations. |
Closed – Not Implemented
|
Subject data elements are not required by Congress in its legislative approval of DBOF. DOD largely complied for the 1992 budget, but it includes only disbursements and cash balance of the separate account for 1993. DOD cites congressional desire for just these two items. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should revise the policies and guidance for the capital equipment program, regardless of how it is funded, to address the ACP weaknesses GAO reported in August 1989 by establishing clear guidance to ensure that: (1) capital investments are consistent with strategic plans; (2) project planning addresses timely installation and operation of equipment upon receipt at industrial fund activities; and (3) adequate internal control procedures are followed. |
Closed – Implemented
DOD considers the final DBOF policy statement as completely meeting this recommendation. The GAO follow-on review will address this issue.
|
| Department of Defense | The Secretary of Defense should revise the policies and guidance for the capital equipment program, regardless of how it is funded, to address the ACP weaknesses GAO reported in August 1989 by requiring post-investment analyses or other measures to determine if anticipated benefits are realized and if changes in program management are needed. |
Closed – Implemented
The DBOF policy statement addresses most of the recommendation. DOD is drafting more detailed guidance to implement the policy. The GAO follow-on review will monitor progress. Close monitoring is under a separate assignment.
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Topics
Budget obligationsBudgetary reservesCapitalDefense industryDefense procurementFederal agency accounting systemsIndustrial fundsInternal controlsReporting requirementsUnexpended budget balances