Financial Management:

DOD's Efforts to Improve Operations of the Defense Business Operations Fund

T-AIMD/NSIAD-94-170: Published: Apr 28, 1994. Publicly Released: Apr 28, 1994.

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GAO discussed the Department of Defense's (DOD) operation and management of the Defense Business Operations Fund. GAO noted that: (1) DOD has not developed policies critical to the Fund's operations; (2) DOD cost accounting systems are fragmented, costly to maintain, and do not provide the cost information necessary for managers to better control costs; (3) although DOD has made some progress in improving fund operations, it has only completed 18 of the 44 tasks scheduled to be completed by December 31, 1993; (4) DOD has developed performance measures for the Fund, but it has not fully developed the required corresponding goals for some business areas; (5) DOD proposes to increase the prices of supply items and customers' budget requests by about $762 million in fiscal year (FY) 1995 to recover the full cost of the Fund's supply management operations; (6) establishing prices based on total operating costs is essential to meet the Fund's objectives; (7) DOD estimates that at the end of FY 1994, the Fund will have approximately $1.7 billion in accumulated losses, and revenue totalling about $77 billion in FY 1995; (8) DOD managers are not receiving accurate financial data on the Fund's capital asset program; and (9) DOD needs to pursue short-term efforts to improve the quality of the information used to manage and prepare financial reports.

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