Nonappropriated Funds:

Opportunities to Improve DOD's Concessions Committee

NSIAD/AIMD-98-119: Published: Apr 30, 1998. Publicly Released: Apr 30, 1998.

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Pursuant to a legislative requirement, GAO reviewed the Department of Defense (DOD) Concessions Committee's operations, focusing on the Committee's: (1) financial operations; (2) oversight and management; and (3) contributions to morale, welfare, and recreation (MWR) funds.

GAO noted that: (1) the Concessions Committee's financial statements are audited by an independent public accounting firm, and those financial statements have consistently received unqualified opinions; (2) as a result, GAO did not independently review the Committee's financial operations; (3) GAO reviewed an independent public accounting firm's work for the last 2 fiscal years; (4) GAO's review disclosed no instances where the firm did not comply in all material respects with generally accepted government auditing standards; (5) the Committee is not subject to the reporting and oversight requirements of other nonappropriated fund instrumentalities; (6) although the Committee's operations are reviewed by a senior official in the Office of the Secretary of Defense, the Committee has not been required to submit financial information to Force Management and Policy; (7) therefore, Congress does not receive information on its activities; (8) also, the Committee's governing directive does not specify the procedures by which the Committee is to manage its day-to-day operations or criteria for determining the types of sales activities it may engage in; (9) in the absence of specific operating procedures, the Committee has followed Army regulations for nonappropriated fund instrumentalities; (10) while GAO did not find any instances where the Committee deviated from the Army regulations, the absence of mandatory operating regulations represents a weakness in management controls; (11) although the Committee has chosen to follow these regulations, it is not required to do so and therefore cannot be held accountable for deviations; (12) although the amount available for MWR contributions is directly linked to the Committee's decisions to retain earnings for reserves and equipment, there is no written policy to guide its members in making these decisions, and GAO could find no documentation supporting how the decisions were reached; (13) although the Committee has a capital expenditure budget, it does not have a long-term operating budget for use in making these decisions; (14) at GAO's suggestion, the Committee has indicated it will prepare a 5-year operating budget that will identify the minimum level of cash reserves that are needed to cover current operations; (15) the Committee also plans to review its long-term capital expenditure budget in light of the ongoing Pentagon renovations; and (16) these actions may result in identifying additional resources that could be made available to MWR funds.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: According to DOD officials, when this inconsistency was brought to the attention of the Chairman of the Concessions Committee, the Committee voluntarily complied with the reporting requirement imposed on other DOD nonappropriated fund instrumentalities. The Committee submitted, to the Office of the Assistant Secretary of Defense (Force Management and Policy), a copy of its most recent annual financial statement.

    Recommendation: The Secretary of Defense should require the Concessions Committee to comply with the same reporting requirements of other nonappropriated fund instrumentalities, thereby ensuring that Congress has the opportunity to review the Committee's activities.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Concessions Committee republished its revised governing guidance on January 13, 1999, explicitly incorporating and addressing policies to be followed in the day-to-day operations of the Committee, to include guidance on the types of goods and services to be offered.

    Recommendation: The Secretary of Defense should specify operating regulations to be followed by the Concessions Committee in its day-to-day operations, including guidance on the types of goods and services that can be offered.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Department concurred with this recommendation. According to the Department of Defense Concessions Committee Chairman, a long-term operating budget has been developed.

    Recommendation: The Secretary of Defense should require the Concessions Committee to develop a policy and a long-term operating budget to guide members in making MWR contributions and cash reserve decisions and to document in its minutes the rationale for those decisions.

    Agency Affected: Department of Defense


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