DOD Bulk Fuel: Improved Management over Transactions Could Lead to More Reliable Financial Reporting
The Department of Defense is the government's largest purchaser and consumer of bulk fuel, which totaled $10.3 billion in FY 2022.
DOD purchases fuel in bulk and sells it to a variety of DOD agencies, as well as foreign governments and other federal agencies. This process is complex and includes many different stakeholders and transactions. Consequently, it is important for DOD to document every step of this process to ensure accountability.
However, we found that DOD's offices and agencies do not always fully document their process for purchasing, selling, and recording fuel transactions. We recommended that they do.
What GAO Found
The Department of Defense (DOD) is the U.S. government's largest purchaser and consumer of bulk fuel, expenditures for which totaled $10.3 billion in fiscal year 2022. DOD's fuel process is complex in that it includes a variety of process owners, stakeholders, locations, and systems and a large volume of transactions from a variety of entities. This complexity makes it important for management to create and maintain documentation that accurately depicts the end-to-end business process, including all relevant internal controls.
However, GAO found that the military services and selected DOD components have not fully documented their end-to-end business process for purchasing, selling, and recording fuel transactions in their financial accounting systems. The components have documented several aspects of the process in various procedure documents, but the existing documentation is outdated and incomplete. Without accurate bulk fuel end-to-end business process documentation, there is an increased risk that entities will not appropriately design and implement control activities for purchasing bulk fuel, affecting DOD's ability to ensure accountability and control costs. This could result in policy makers not having reliable information about how DOD is using the resources it is provided.
Complexities with DOD Bulk Fuel Process
The military services and the Defense Logistics Agency (DLA) have not established memorandums of agreement (MOA) in a number of cases to delineate the rights and responsibilities of the parties in using the military services' Defense Fuel Support Points to store and manage DLA-owned bulk fuel. A March 2019 policy required that the military installations establish MOAs with any DOD component (e.g., DLA) using the real property assets the military services owned. As of October 2022, though it needed MOAs with about 500 military installations that store fuel, DLA had established 10 MOAs and had no plan for establishing the additional MOAs. Having a plan to guide its work establishing MOAs with the different military installations would help DOD accomplish this effort, which will clarify the rights and responsibilities of the parties at each installation.
Why GAO Did This Study
DLA manages DOD's bulk fuel program. Auditors reported a material weakness in fiscal year 2022 relating to DLA's inability to provide documentation supporting the balances of fuel inventory held in pipelines and fuel in transit.
This report was developed in connection with GAO's audit of the U.S. government's consolidated financial statements. This report examines the extent to which DOD policies for recording and reporting bulk fuel purchase data are consistent with relevant guidance, and selected components' procedures for recording and reporting bulk-fuel purchase data are consistent with DOD policies.
GAO reviewed relevant reports, guidance, and documentation; interviewed DOD officials; conducted site visits; and selected four DOD components for the review: the Departments of the Air Force, Army, and Navy and the U.S. Transportation Command. These four components accounted for approximately 89 percent of DOD's total fuel purchased in fiscal year 2021.
Recommendations
GAO is making 21 recommendations to DOD, including that the components document their end-to-end business processes and that DOD develop a plan to delineate the rights and responsibilities of each party responsible for DOD bulk fuel functions. DOD concurred with all 21 recommendations and stated that it will ensure that the recommendations are addressed.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of the Air Force should fully document the Air Force's end-to-end fuel business process. (Recommendation 1) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
|
| Department of Defense | The Secretary of the Army should fully document the Army's end-to-end fuel business process. (Recommendation 2) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
|
| Department of Defense | The Secretary of the Navy should ensure that the Commandant of the Marine Corps fully documents the Marine Corps' end-to-end fuel business process. (Recommendation 3) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
|
| Department of Defense | The Secretary of the Navy should fully document the Navy's end-to-end fuel business process. (Recommendation 4) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
|
| Department of Defense | The Secretary of Defense should document the end-to-end process for purchasing fuel in the open market and selling to its customers. (Recommendation 5) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Commander of the U.S. Transportation Command should fully document the command's end-to-end fuel business process. (Recommendation 6) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of Defense should ensure that the roles and responsibilities of the organizations and personnel that manage and oversee the DOD fuel program at Defense Fuel Support Points are clearly defined and documented. (Recommendation 7) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Under Secretary of Defense (Comptroller) should update the guidance for the Fund-15 Fuel Data budget exhibit to clearly define the data inputs used in reconciling yearly fuel purchase and sale data. (Recommendation 8) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of Defense should develop a plan for implementing memorandums of agreement that delineate the rights and responsibilities of each party responsible for DOD fuel functions at all DOD sites where military service-owned real property assets are used to store bulk fuel. (Recommendation 9) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Air Force should establish a process to verify that Air Force military installations that purchase aviation fuel consistently perform the responsibilities outlined in Air Force Guidance Memorandum AFI 11- 253. (Recommendation 10) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Army should establish a process to review and validate the accuracy of fuel transactions recorded in the Army's financial accounting systems. (Recommendation 11) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Navy should establish a process for reviewing and validating the accuracy of fuel transactions recorded in the Navy's and Marine Corps' financial accounting systems. (Recommendation 12) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Army should establish a process, such as using a unique identifier, to readily trace a bulk fuel transaction from Army financial accounting systems to supporting documentation. (Recommendation 13) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Air Force should establish a process, such as using a unique identifier, to readily trace a fuel transaction from Air Force financial accounting systems to supporting documentation. (Recommendation 14) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Navy should establish a process, such using as a unique identifier, to readily trace a fuel transaction from Navy and Marine Corps financial accounting systems to supporting documentation. (Recommendation 15) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Commander of the U.S. Transportation Command should establish a process, such as using a unique identifier, to readily trace a fuel transaction from the command's financial accounting systems to supporting documentation. (Recommendation 16) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Under Secretary of Defense (Acquisition and Sustainment) should develop a process to verify that the yearly bulk fuel reconciliations are performed in accordance with volume 2B, chapter 9, of the DOD Financial Management Regulation. (Recommendation 17) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Air Force should develop a process to verify that (1) the Air Force consistently performs the monthly fuel reconciliations that Air Force guidance requires and (2) Air Force personnel retain and enter their own bulk fuel-purchase data in the Air Force's financial accounting systems. (Recommendation 18) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Army should develop a process to verify that Army personnel retain and enter their own fuel-purchase data in the Army's financial accounting systems. (Recommendation 19) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Secretary of the Navy should develop a process to verify that (1) the Navy consistently performs weekly reconciliations of fuel that its ships purchase and (2) Navy personnel retain and enter their own bulk fuelpurchase data in the Navy's financial accounting systems. (Recommendation 20) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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| Department of Defense | The Commander of the U.S. Transportation Command should develop a process to verify that the command performs monthly fuel reconciliations that Air Force guidance requires. (Recommendation 21) |
In its comments on our draft report, DOD stated that it concurred with this recommendation and that it will ensure it is addressed.
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