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GAO discussed its audit of the Air Force's fiscal year 1988 financial statements. GAO noted that: (1) the Air Force's financial system did not provide accurate cost accounting data for nearly 80 percent of its materiel resources, which adversely affected the timeliness and accuracy of financial reporting; (2) the Air Force was not documenting cost adjustments to safeguard against fraud or abuse; (3) DOD 5-year spending plans were excessive and unrealistic, since Air Force reports understated actual costs for major weapons systems; (4) the Air Force had an estimated $10 billion in excessive inventories, resulting primarily from frequent aircraft and equipment modifications and use-rate overestimates; (5) the Air Force did not have reliable data to effectively manage its inventories and was inconsistently applying pricing policies in valuing its inventories; (6) the Air Force did not value inventory items to reflect their condition and, therefore, did not account for the costs of servicing unusable items; and (7) financial statements and audits should be required for all federal agencies.

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