DOD FINANCIAL 

MANAGEMENT

Ongoing Challenges 

with Reconciling Navy 

and Marine Corps 

Fund Balance with 

Treasury

Report to Congressional Requesters

December 2011

GAO-12-132

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-132, a report to 

congressional requesters 

December 2011 

DOD FINANCIAL MANAGEMENT

Ongoing Challenges with Reconciling Navy and 

Marine Corps Fund Balance with Treasury

Why GAO Did This Study

In November 2010, the Department of 

Defense (DOD) Inspector General (IG) 

issued a disclaimer of opinion on the 

Department of the Navy’s financial 

statements because of pervasive, longstanding material internal-control 

weaknesses, including Fund Balance 

with Treasury (FBWT). In the federal 

government, an agency’s FBWT 

account is similar in concept to a 

corporate bank account. The difference 

is that instead of a cash balance, 

FBWT represents unexpended 

spending authority in appropriations. 

Because DOD relies heavily on budget 

information for day-to-day 

management decisions, in August 

2009, the DOD Comptroller designated 

the Statement of Budgetary Resources 

(SBR) as an audit priority. FBWT will 

need to be auditable in order for the 

SBR to be reliable. GAO was asked to 

determine whether the Navy and the 

Marine Corps have implemented 

effective FBWT reconciliation 

processes. To assess these 

processes, GAO analyzed Navy and 

Marine Corps policies and procedures

for FBWT reconciliations, and met with

Navy, Marine Corps, and Defense 

Finance and Accounting Service 

(DFAS) officials. GAO also tested 

nongeneralizable samples of FBWT 

transactions and adjustments and 

reviewed associated supporting 

documentation.

What GAO Recommends

GAO is making six recommendations 

to improve Navy and Marine Corps 

policies and procedures to guide the 

FBWT reconciliation process, provide 

training to communicate these policies 

and procedures to staff, and resolve 

system deficiencies. DOD concurred 

with GAO’s recommendations. 

What GAO Found

Neither the Navy nor the Marine Corps have implemented effective processes for 

reconciling their FBWT. The Treasury Financial Manual and DOD’s Financial 

Management Regulation require DOD components to perform monthly FBWT 

reconciliations and maintain detailed reconciliation worksheets and 

documentation to provide an adequate audit trail for the resolution of differences. 

GAO’s Standards for Internal Control in the Federal Government states that the 

supervisory review and approval process is a key control activity for federal 

agencies. The Navy and the Marine Corps rely on the Defense Finance and 

Accounting Service located in Cleveland (DFAS-CL) to perform their FBWT 

reconciliation steps; however, GAO found numerous deficiencies in the FBWT 

process that impair the Navy’s and the Marine Corps’s ability to reconcile their 

FBWTs with Treasury records, including the following:

• The Navy and Marine Corps rely on the data from Defense Cash 

Accountability System (DCAS) to reconcile their FBWT to Treasury’s records; 

however, they have not taken the necessary actions to ensure that the data 

are reliable. Specifically, DOD has not tested the application controls over 

DCAS since its implementation to determine if the system is processing data 

as intended. The Navy, the Marine Corps, and DFAS have identified a list of 

over 650 DCAS system change requests that needed to be addressed in 

order to correct DCAS data reliability and security problems or process 

required system updates; over 200 of these system change requests are 

deficiencies that affect audit readiness and 20 require immediate attention. 

• DFAS did not maintain adequate documentation for the nongeneralizable 

sample of items GAO tested to enable an independent evaluation of its 

efforts to research and resolve differences. In addition, there was no 

evidence of supervisory review and approval.

• DFAS records forced-balance entries (plugs) to account for differences 

between Navy and Marine Corps appropriation balances and Treasury’s. 

DFAS is unable to reconcile the cash activity recorded in the Navy’s general 

ledger accounting systems to that recorded in DCAS. DFAS officials stated they

acquired the Business Activity Monitoring (BAM) tool to perform this 

reconciliation; however, after 4 years of effort and $29 million, the BAM tool does 

not yet provide the information needed to identify and resolve the underlying 

causes of differences between DCAS and Navy general ledger systems. As of 

April 2011, there were more than $22 billion unmatched disbursements and 

collections affecting more than 10,000 lines of accounting. DOD IG officials

stated they were performing substantive testing to confirm the balance of the 

Marine Corps FBWT as part of their audit of the Marine Corps’s Fiscal Year 2011 

Statement of Budgetary Resources. This testing did not include internal control 

and did not provide assurance on the effectiveness of the Marine Corps’ FBWT 

reconciliation process. Navy, Marine Corps, and DFAS-CL officials agreed

existing FBWT policies and procedures are inadequate. DFAS-CL and Navy 

officials stated the base realignment and closure changes 2006–2008 resulted in

loss of experienced DFAS-CL personnel and that remaining staff have not 

received needed training. The Navy is developing a plan of action and milestones 

(POAM) to address weaknesses in audit readiness. 

View GAO-12-132. For more information, 

contact Asif A.Khan at (202) 512-9869 or 

khana@gao.gov. 
Page i GAO-12-132 Fund Balance Reconciliations 

Letter 1 

Background 3

Navy and Marine Corps Processes for Reconciling FBWT Are 

Ineffective 9

Conclusions 16

Recommendations 16

Agency Comments and Our Evaluation 17

Appendix I Objective, Scope, and Methodology 21

Appendix II Comments from the Department of Defense 24

Appendix III GAO Contact and Staff Acknowledgments 28

Figure 

Figure 1: Overview of the Navy and the Marine Corps FBWT 

Reconciliation Processes 8

Contents
Page ii GAO-12-132 Fund Balance Reconciliations 

Abbreviations

ADS Automated Disbursing System 

BAM Business Activity Monitoring 

DCAS Defense Cash Accountability System

DCRM Defense Check Reconciliation Module 

DDRS–B Defense Departmental Reporting System– 

 Budgetary

DFAS Defense Finance and Accounting Service

DFAS–CL Defense Finance and Accounting Service– 

 Cleveland

DOD Department of Defense

DSSN Disbursing Station Symbol Number

FBWT Fund Balance with Treasury

FIAR Financial Improvement and Audit Readiness

FMO Office of Financial Operations 

FMR Financial Management Regulation

GOALS Government On-Line Accounting Link 

GWA Government-Wide Accounting 

IEEE Institute of Electrical and Electronics Engineers 

IG Inspector General

IPAC Intra-Governmental Payment and Collections 

NDAA National Defense Authorization Act

NERP Navy Enterprise Resource Planning 

NSMA Navy Systems Management Activity 

POAM Plans of Action and Milestones

RFA Accounting and Financial Systems Branch 

SABRS Standard Accounting, Budgeting, and Reporting 

 System

STAR Central Accounting System

STARS–FL Standard Accounting and Reporting System–Field 

 Level 

STARS–HCM Standard Accounting and Reporting System– 

 Headquarters Level 

SOP standard-operating procedure 

TCIS Treasury Check Information System 

UVT User Validation Testing

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Page 1 GAO-12-132 Fund Balance Reconciliations 

United States Government Accountability Office 

Washington, DC 20548

December 20, 2011

Congressional Requesters:

In November 2010, the Department of Defense (DOD) Inspector General 

(IG) issued a disclaimer of opinion1

on the Department of the Navy’s fiscal 

year 2010 general fund2 financial statements because of pervasive longstanding material internal-control weaknesses, including Fund Balance 

with Treasury (FBWT).3 In the federal government, an agency’s FBWT 

account is similar in concept to a corporate bank account. The difference 

is that instead of a cash balance, FBWT represents remaining spending 

authority in appropriations.4 The DOD IG reported deficiencies associated 

with FBWT that included unmatched collections and disbursements,5

In August 2009, the DOD Comptroller designated the Statement of 

Budgetary Resources as an audit priority because DOD relies heavily on 

budget information for day-to-day management decisions. In May 2010, 

undistributed disbursements, and the Department of the Navy’s inability to 

reconcile its fund records to the Department of the Treasury’s records. 

The Navy and the Marine Corps, both of which are armed services that 

are components of the Department of the Navy, disclosed that they made 

unsupported reconciling adjustments to balance their FBWT records to 

Treasury’s records.

 

1 In a disclaimer of opinion, the auditor does not express an opinion on the financial 

statements. A disclaimer of opinion is appropriate when the audit scope is not sufficient to 

enable the auditor to express an opinion, or when there are material uncertainties 

involving a “scope limitation”—a situation where the auditor is unable to obtain sufficient 

appropriate audit evidence. 

2 General Fund accounts in the U.S. Treasury holding all federal money not allocated by 

law to any other fund account.

3 A material weakness is a significant deficiency, or combination of significant deficiencies, 

that results in more than a remote likelihood that a material misstatement of the financial 

statements will not be prevented or detected.

4 An appropriation provides an agency with budgetary authority to incur obligations and 

make payments from the Treasury for specified purposes.

5 Unmatched collections and disbursements are transactions that have been received and 

accepted by an accounting office, but have not been matched to the correct detail 

obligation or appropriation.

 
 

Page 2 GAO-12-132 Fund Balance Reconciliations 

DOD revised its Financial Improvement and Audit Readiness (FIAR) plan6

to focus the department’s efforts on two priorities, one of which is to 

improve the reliability of budgetary information and processes to obtain 

unqualified (clean) opinions on the Statement of Budgetary Resources. 

The Statement of Budgetary Resources is designed to provide 

information on authorized budgeted spending authority as outlined in the 

Budget of the United States Government (President’s Budget), including 

budgetary resources, availability of budgetary resources, and how 

budgetary resources have been used.7

In May 2011, the Navy reported that it will have the capability to conduct 

FBWT reconciliations by the fourth quarter of fiscal year 2012, in 

anticipation for having its Statement of Budgetary Resources audit ready 

in the first quarter of fiscal year 2013. However, the DOD IG’s first-ever 

audit of the Marine Corps’s General Fund Fiscal Year 2010 Combined 

Statement of Budgetary Resources resulted in a disclaimer of opinion for 

several reasons, including the DOD IG’s inability to audit FBWT because 

of the Marine Corps’s inability to provide supporting documentation for 

accounting transactions and disbursements. Because the reliability of 

FBWT is a very basic element of effective and reliable financial 

management information, the DOD IG’s findings raise concerns about 

whether DOD will be able to validate [certify] that its consolidated financial 

statements are ready for audit by September 30, 2017, as required by the 

National Defense Authorization Act (NDAA) for Fiscal Year 2010.

Assurance over the reliability of 

FBWT transactions and the resulting balances will be necessary in order 

for the Statement of Budgetary Resources to be auditable. Effective 

reconciliation of the FBWT account with Treasury accounts—a process 

similar in concept to a checkbook reconciliation—represents a key control 

over the reliability of FBWT.

8

 

6 The FIAR Plan, which was first prepared in 2005, is DOD’s strategic plan and 

management tool for guiding, monitoring, and reporting on the department’s financialmanagement improvement efforts. As such, the plan communicates incremental progress 

in addressing the department’s financial management weaknesses and achieving financial 

statement auditability.

7 Budgetary resources include the amount available to enter into new obligations and to 

liquidate them. Budgetary resources are made up of new budget authority (including direct 

spending authority provided in existing statute and obligation limitations) and unobligated 

balances of budget authority provided in previous years.

8 Pub. L. No. 111-84, § 1003(a),(b), 123 Stat. 2190, 2439-40 (Oct. 28, 2009).
 

Page 3 GAO-12-132 Fund Balance Reconciliations 

This report responds to the request that we determine whether the Navy 

and the Marine Corps have implemented effective reconciliation 

processes for FBWT. To perform our assessment, we analyzed Navy and 

Marine Corps policies and procedures, and met with officials from the 

Navy, the Marine Corps, and the Defense Finance and Accounting 

Service (DFAS). To further understand the effect of identified design 

control weaknesses, we selected several nongeneralizable samples and 

reviewed supporting documentation. Because the Marine Corps is 

currently undergoing an audit of its fiscal year 2011 Statement of 

Budgetary Resources and the DOD IG plans to test its FBWT, we did not 

test the Marine Corps’s reconciliation of FBWT transactions to its general 

ledger. We conducted our performance audit from October 2010 through 

October 2011 in accordance with generally accepted government-auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. Appendix I provides further 

details on our scope and methodology.

The United States Navy and the United States Marine Corps are both 

armed services and components of the Department of the Navy. The 

Navy’s mission is to maintain, train, and equip combat-ready Naval forces 

capable of winning wars, deterring aggression, and maintaining freedom 

of the seas. The Marine Corps performs a multifaceted mission of air, 

land, and sea support to the Navy and across all U.S. joint forces. The 

Department of the Navy reported $225.6 billion in fiscal year 2010 total 

budgetary resources and $165.3 billion in net outlays (spending).9 The 

amounts reported include Marine Corps’s budgetary resources of $37.5 

billion and $32.1 billion in net outlays.10 The Navy and Marine Corps 

disbursing offices11

 

9 Department of the Navy, Fiscal Year 2010 Department of the Navy Annual Financial 

Report, Statement of Budgetary Resources (November 2010).

are responsible for collecting and disbursing funds on 

10 U.S. Marine Corps, Financial Report, Fiscal Year 2010, Statement of Budgetary 

Resources (November 2010).

11 The disbursing offices are identified by a unique four-digit disbursing station symbol 

number (DSSN), which is assigned by the Department of the Treasury. The disbursing 

offices utilize the DSSN identification to report its collections and disbursements data to 

DFAS. 

Background
 

Page 4 GAO-12-132 Fund Balance Reconciliations 

behalf of the Department of the Navy as well as obtaining, maintaining, 

and providing sufficient supporting documentation for such transactions.

Disbursing offices also are responsible for reporting disbursements and 

collections to the paying center—the Defense Finance and Accounting 

Service located in Cleveland, Ohio, (DFAS-CL). DFAS–CL provides 

accounting, disbursing, and financial reporting services and performs the 

FBWT reconciliation for the Navy and the Marine Corps.

FBWT account reflects the available budget spending authority of federal 

agencies. Collection and disbursement activity increase or decrease the 

balance in this account. Navy and Marine Corps accounting processes for 

collections and disbursements are complex, involving a large volume of 

transactions that are handled by several disbursing and accounting 

offices and DFAS personnel. The accounting process for collections and 

disbursements begins when military commanders or other unit managers 

or their designees deposit collected funds or authorize a payment. These 

personnel submit deposit tickets to their disbursing offices to prepare 

collection vouchers for collections, such as fees collected by military 

hospitals. For disbursement transactions, payment authorization 

information is entered by the program and operations personnel into the 

appropriate DOD entitlement system, such as STARS-One Pay for Navy 

vendor payments. The entitlement system certifies the payment files and 

passes the information to the appropriate Disbursing System, such as the 

DOD’s Automated Disbursing System (ADS). The Disbursing System 

initiates the payment via the Federal Reserve Bank and produces a daily 

statement of accountability. The disbursing officers input the daily 

statement of accountability and the collections and disbursements 

transaction level data daily into the Defense Cash Accountability System 

(DCAS), which feeds this information into the Navy’s and the Marine 

Corps’s general ledger accounting systems.12

 

12 The Navy has four general ledger accounting systems: the Standard Accounting and 

Reporting System–Field Level (STARS-FL), the Standard Accounting and Reporting 

System–Headquarters Level (STARS-HCM), the Navy Enterprise Resource Planning 

(NERP) system, and the Navy Systems Management Activity (NSMA). The Marine 

Corps’s general ledger accounting system is the Standard Accounting, Budgeting, and 

Reporting System (SABRS). 

At month-end, DFAS-CL 

generates the Statements of Transactions (Standard Form 1220) and 

Statement of Accountability (Standard Form 1219) reports from DCAS 

and provides them to the Department of Treasury to report Navy and 

Navy and Marine Corps 

Accounting Process
 

Page 5 GAO-12-132 Fund Balance Reconciliations 

Marine Corps cash collections and disbursements, which the Treasury 

uses to generate the Statements of Differences by itemizing differences 

between their records and the information reported by the agencies. The 

Statement of Differences is then used by the agencies as part of their 

FBWT reconciliation.

Reconciling FBWT activity records with Treasury records—a process 

similar to reconciling a check book to a bank statement—helps determine 

amounts spent as well as unexpended balances and is important to funds 

control. DOD’s Financial Management Regulation (FMR) notes that 

reconciliation is a key control for maintaining the accuracy and reliability 

of the entity’s FBWT records.13 The FMR defines reconciliation as a 

process that compares two sets of records (usually the balances of two 

accounts) and identifies, and explains the differences between the 

records or account balances. Differences, or reconciling items, may be 

caused by the timing of transactions, an invalid line of accounting, or 

insufficient detail. The FMR states that reconciliation is not complete until 

all differences are identified, accountability is assigned, differences are 

explained, and appropriate adjustments are made to records.14 Effective 

reconciliations are also important in preventing entity disbursements from 

exceeding appropriated amounts and providing an accurate 

measurement of the status of available budgetary resources.15

DFAS–CL executes the following five steps to perform the Navy and the 

Marine Corps monthly FBWT reconciliations:

1. Defense Cash Accountability System (DCAS) To Treasury’s 

Forms.16

 

13 DOD Financial Management Regulation 7000.14R (FMR), Volume 4, Chapter 2, 

Accounting for Cash and Fund Balances with Treasury, Section 020701 (Dec. 2009).

This reconciliation step is intended to ensure that the 

transaction-level detail for cash activity recorded in DCAS (i.e., collections 

and disbursements) and reported on the Statement of Transactions 

(Standard Form 1220) is in balance with the summary-level cash activity 

14 DOD FMR, Vol. 4, Ch. 2, Sec. 020102.B.7.

15 DOD FMR, Vol. 4, Ch. 2, Sec. 020701.

16 DCAS is the central repository of DOD cash activity that is reported to the Department 

of Treasury.

FBWT Reconciliation 

Process
 

Page 6 GAO-12-132 Fund Balance Reconciliations 

data reported on the Statement of Accountability (Standard Form 1219). 

DFAS-CL relies on an automated control in DCAS to ensure that the 1219 

and 1220 Statements are in balance before transmitting the forms to 

Treasury.

2. DCAS to Treasury’s Governmentwide Accounting (GWA) System.

This reconciliation step is intended to ensure that the cash activity records 

are reliable (i.e., complete and accurate). DFAS-CL accesses Treasury’s 

GWA and downloads the Agency Location Code Activity Report, which 

provides comparable transaction information to the Standard Form 1220 

by line of accounting.17

3. Defense Departmental Reporting System–Budgetary (DDRS–B)

DFAS-CL compares the Treasury report to the 

Standard Form 1220 generated in the first step of the reconciliation 

process to identify differences, if any, that will require resolution.

18

to GWA System. This reconciliation step is intended to ensure that the 

appropriation balances are reliable. DFAS-CL accesses DDRS-B and 

generates the Standard Form 133, Report on Budget Execution and 

Budgetary Resources (which contains appropriation and fund account 

summary data).19

4. Statement of Differences Resolution. This reconciliation step is 

intended to resolve differences identified by Treasury between the military 

services (i.e., Navy and the Marine Corps), and financial institutions’ and 

other agencies’ reporting for checks issued,

DFAS-CL accesses Treasury’s GWA system and 

downloads the Account Statement Report, which provides the balance for 

each line of accounting. DFAS-CL compares the reports to identify 

differences, if any, that will require resolution.

20 deposits-in-transit,21

 

17 DOD uses a line of accounting to accumulate appropriation, budget, and management 

information, such as (1) department code, and (2) fiscal year and appropriation account.

and 

18 DDRS-B is a Web-based application that replaced many of the legacy departmental 

budgetary reporting systems.

19 The Standard Form 133 Report on Budget Execution and Budgetary Resources fulfills 

the requirement in 31 U.S.C. §§ 1511-1514 that the President review federal expenditures 

at least four times a year. An agencywide Standard Form 133 should generally agree with 

an agency's Statement of Budgetary Resources.

20 Checks-issued differences are discrepancies between the check-issued data from the 

financial institutions and the check-issued detail information submitted by the Navy and 

the Marine Corps to Treasury through the Defense Check Reconciliation Module (DCRM) 

system, and the Navy’s and Marine Corps’s Standard From 1219.
 

Page 7 GAO-12-132 Fund Balance Reconciliations 

Intra-Governmental Payment and Collections (IPAC).22 Treasury mails 

DFAS-CL a hard copy of the Statement of Differences for checks issued. 

DFAS-CL accesses the Government On-Line Accounting Link System 

(GOALS)23

5. DCAS to General-Ledger Accounting Systems. This reconciliation 

step is intended to ensure that the cash activity at the transaction level 

recorded in DCAS has been captured in the general-ledger accounting 

systems. For the Navy, DFAS-CL uses the Business Activity Monitoring 

(BAM) tool

and downloads the Statement of Differences for the depositsin-transit and IPAC transactions. DFAS-CL coordinates with the various 

Navy and Marine Corps disbursing offices, which are responsible for 

researching and resolving any differences identified. The Disbursing 

Offices are also responsible for maintaining all supporting documentation.

24

Figure 1 provides an overview of the Navy and Marine Corps FBWT 

reconciliation processes.

to upload and compare cash collections and disbursements 

recorded in DCAS and the general-ledger accounting systems by line of 

accounting. DFAS-CL uses BAM to research and resolve identified 

differences, if any. The Marine Corps’s Accounting and Financial Systems 

Branch (RFA) runs a query in the general-ledger system—Standard 

Accounting, Budgeting, and Reporting System (SABRS)—that generates 

a report that identifies differences between the daily cash activity 

recorded in DCAS and SABRS. The Marine Corps forwards the report to 

DFAS-CL to research and resolve any identified reconciliation 

differences.

 

21 Deposits in transit differences are discrepancies between the deposit information on the 

Navy’s and Marine Corps’s Standard Form 1219 and the deposit data reported by the 

financial institutions to Treasury through the CA$HLINK II system.

22 IPAC differences are discrepancies between the data on the Navy’s and Marine Corps’s 

Standard Forms 1219 and 1220, and the interagency transactions reported by other 

federal agencies to Treasury through the IPAC system.

23 GOALS is the governmentwide network that provides automated financial reporting 

directly to the Financial Management Services, within the Department of Treasury and the 

Office of Management and Budget. GOALS also provides agencies with reports on 

collection and disbursement activity and FBWT transactions. 

24 The BAM tool will be used to monitor and reconcile the Navy’s general fund 

transactions. However, since NSMA contains classified information, DFAS–CL has not 

determined if it will use the BAM tool to reconcile this information.
 

Page 8 GAO-12-132 Fund Balance Reconciliations 

Figure 1: Overview of the Navy and the Marine Corps FBWT Reconciliation Processes

a

STAR—Treasury’s accounting and reporting system—is used to record cash collections and 

disbursements activity reported by the Navy and Marine Corps, deposit transactions reported by 

financial institutions via CA$HLINK II, and interagency transactions reported through the IPAC 

system. 
 

Page 9 GAO-12-132 Fund Balance Reconciliations 

b

TCIS is used to record all U.S. Treasury checks issued by the Navy and Marine Corps, and the 

clearance of those checks by the financial institutions. 

Neither the Navy nor the Marine Corps have implemented effective 

processes for reconciling their FBWT. We found numerous deficiencies in 

the 5-step process that impair their abilities to reconcile their FBWT with 

Treasury records. DOD’s Financial Management Regulation (FMR) and 

the Treasury Financial Manual require every Defense component with 

FBWT accounts to perform detailed monthly reconciliations at a level of 

detail sufficient for specific identification of differences to establish that 

the entity’s FBWT general ledger accounts and the Treasury control totals 

are accurately stated.25,

26 The FMR further requires DOD components to 

ensure that written standard-operating procedures are put into place to 

direct and document that a detailed FBWT reconciliation process is 

operating effectively.27 The FMR also states that a “forced-balance 

entry”28 is not an adequate reconciliation and requires DOD components 

to maintain detailed reconciliation worksheets and documentation to 

provide an adequate audit trail.29 Further, the GAO’s Standards for 

Internal Control in the Federal Government state the supervisory review 

and approval process is a key control activity for federal agencies.30

 

25 DOD FMR, Vol. 4, Ch. 2, Sec. 0207, and Treasury Financial Manual, Volume I, Part 2, 

Chapter 5100, Reconciling Fund Balance with Treasury Accounts (Oct. 18, 1999).

Without effective reconciliations of FBWT collection and disbursement 

activity, the amount of funds available for expenditure may contain 

material misstatements; related accounting information may also be 

26 DOD, FMR, Vol. 4, Ch. 2, Sec. 020705.

27 DOD, FMR, Vol. 4, Ch. 2, Sec. 020708.

28 A “forced-balance entry” represents any amount posted, usually at a summary level, to 

eliminate differences between the component agency’s general ledger balance and the 

Treasury’s control total.

29 DOD FMR, Vol. 4, Ch. 2, Sec. 020706, and 020102, B.4 and B.5.

30 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

Navy and Marine 

Corps Processes for 

Reconciling FBWT 

Are Ineffective
 

Page 10 GAO-12-132 Fund Balance Reconciliations 

misstated, and the Department of the Navy is at increased risk of 

Antideficiency Act violations.31

• The Navy and Marine Corps rely on the data from DCAS to reconcile 

their FBWT to Treasury’s records; however, they have not taken the 

necessary actions to ensure that the data are reliable. Specifically, 

DOD has not tested the application controls over DCAS since its 

implementation to determine if the system is processing data as 

intended.

Specifically, we found that:

• DFAS-CL did not maintain adequate documentation for the 

nongeneralizable sample of items we tested to enable an independent 

evaluation of its efforts to research and resolve differences. There 

was also no evidence of supervisory review and approval.

• DFAS-CL currently records forced-balance entries to account for any 

differences between the Navy’s and Marine Corps’s appropriations 

balances to those reported by Treasury. These types of adjustments, 

made without supporting documentation but to force items into 

balance, are commonly referred to as “plugs” and can mask much 

larger problems in the accounting data.

• DFAS-CL is currently unable to reconcile the cash activity recorded in 

the Navy’s general-ledger accounting systems to that recorded in 

DCAS. The DOD IG officials stated that they were performing 

substantive testing to confirm the balance of the Marine Corps’s 

FBWT as part of the fiscal year 2011 audit of the Marine Corps’s 

Statement of Budgetary Resources. However, this testing did not 

include internal control and did not provide assurance on the 

effectiveness of the Marine Corps’s FBWT reconciliation process.

We also found that existing policies and procedures did not contain 

detailed information on the roles and responsibilities of organizations and 

personnel and the process for identifying, researching, and resolving 

discrepancies, including the required supporting documentation. The 

policies and procedures also did not require supervisory review and 

approval of reconciliation efforts and results. Further, with the exception 

 

31 An Antideficiency Act violation occurs when one or more of the following happens: (1) 

overobligation or overexpenditure of an appropriation or fund account (31 U.S.C. § 

1341(a)); (2) entering into a contract or making an obligation in advance of an 

appropriation, unless specifically authorized by law (31 U.S.C. § 1341(a)); (3) acceptance 

of voluntary service, unless authorized by law (31 U.S.C. § 1342); or (4) overobligation or 

overexpenditure of (a) an apportionment or reapportionment, or (b) amounts permitted by 

the administrative control of funds regulations (31 U.S.C. § 1517(a)).
 

Page 11 GAO-12-132 Fund Balance Reconciliations 

of the recently issued Marine Corps procedures,32

Navy, Marine Corps and DFAS-CL officials agreed that existing policies 

and procedures are inadequate. DFAS-CL and Navy officials also stated 

that the base realignment and closure changes in 2006 through 2008 

resulted in a loss of experienced DFAS-CL personnel and that the 

remaining staff have not received the needed training. The standards for 

internal control state that training is key for management to ensure that 

staff maintain a level of competence that allow them to accomplish their 

assigned duties. Officials from the Department of the Navy’s Office of 

Financial Operations (FMO) stated that they are currently developing a 

Plans of Action and Milestones (POAM) to address weaknesses that 

affect the Navy’s audit readiness, including reconciling the Navy’s FBWT 

records. FMO officials stated that they plan to include in the POAM a 

requirement for the components to develop needed policies and 

procedures for the reconciliation of FBWT. The Navy expects to complete 

the initial version of its POAM by December 2011. With regard to DCAS 

testing and problems, DFAS-CL officials stated that the DOD Inspector 

General was reviewing the system as part of its audit of the Marine Corps 

Statement of Budgetary Resources. However, the IG stated that it was 

only focused on the design of the system and documented policies and 

procedures. As a result, its work would not be sufficient to assess the 

reliability of the system’s controls and whether they are operating as 

intended.

there was no evidence 

that the policies and procedures being followed had been reviewed and 

approved by management.

The following paragraphs provide more detail about the deficiencies we 

found in the 5-step FBWT reconciliation process.

Step 1: DCAS. The Navy’s and the Marine Corps’s ability to effectively 

reconcile their FBWT accounts is dependent upon the reliability (i.e., 

completeness and accuracy) of the data in DCAS. However, the reliability 

of the data in DCAS is questionable due to the lack of system testing and 

extensive system deficiencies. The Navy, the Marine Corps and DFAS 

rely upon the application controls in DCAS to ensure that the data are 

reliable. Although changes have been made to the system, the 

 

32 Marine Corps and DFAS, Fund Balance with Treasury (FBWT) Reconciliation Process 

(July 22, 2011).
 

Page 12 GAO-12-132 Fund Balance Reconciliations 

application controls33

Step 2: DCAS to Treasury’s GWA System. Our review of 3 reconciliation 

worksheets for October through December 2010 identified several 

deficiencies. For example, we found that the reconciliation spreadsheets 

showed the wrong journal voucher number for 2 of the adjustments and 

did not provide the journal voucher numbers for another 6 adjustments. 

From these reconciliation worksheets, we selected 15 journal vouchers 

that were created by DFAS–CL to resolve reconciliation differences and 

reviewed the related supporting documentation. Of the 15 journal 

vouchers, we found that only 2 were adequately supported. For the 13 

unsupported journal vouchers, we found that:

in DCAS have not been tested since the system 

was implemented. Therefore, the Navy, the Marine Corps, and DFAS do 

not have reasonable assurance that the system controls they are relying 

on to ensure that the data in DCAS are reliable and are working as 

intended. In addition, as of April 2011, the Navy, the Marine Corps, and 

DFAS had identified a list of 672 system change requests that needed to 

be addressed in order to correct DCAS’ data reliability and security 

problems or process required system updates; 362 of which were 

submitted by the Marine Corps and DFAS-CL. Navy and DFAS officials 

stated that over 200 of the identified system change requests are 

deficiencies that affect audit readiness and identified the top 20 

deficiencies that required immediate attention. For example, DCAS 

currently allows certain users to modify the dollar amount of previously 

posted transactions and other users to post transactions to invalid or 

closed appropriation accounts, and these transactions are being 

forwarded to Treasury for processing. In addition, DCAS users’ roles and 

responsibilities have not been defined thus resulting in segregation-ofduties issues. However, the officials stated that a time frame for 

addressing the top 20 issues had not yet been established.

• Ten journal vouchers did not have underlying support justifying the 

adjustment made to correct disbursement transactions. In one 

instance, it was initially determined that the correction may have 

caused an Antideficiency Act violation, which must be investigated 

 

33 Application controls, sometimes referred to as business controls, are incorporated 

directly into computer applications to help ensure the validity, completeness, accuracy, 

and confidentiality of data during application processing and reporting. For example, a 

system edit used to prevent or detect a duplicate entry is an application control. 
 

Page 13 GAO-12-132 Fund Balance Reconciliations 

and the results of the investigation documented.34

• Three journal vouchers were made to comply with Treasury’s 

guidance to clear transactions recorded in suspense accounts within 

60 business days.

DFAS-CL officials 

stated that they performed an investigation and determined that this 

was an accounting error, not an Antideficiency Act violation. However, 

DFAS-CL officials were unable to provide adequate documentation 

supporting their conclusions or that the required investigation was 

performed.

35 DFAS–CL employees told us that they routinely 

transfer disbursement transactions from suspense to canceled or 

invalid appropriation accounts to meet the 60-day metric and then 

transfer them back to suspense accounts the following month until 

such time as the issue is actually resolved.

Step 3: DDRS–B to Treasury’s GWA System. DFAS-CL posts 

unsupported adjustments when differences occur in order to make 

balances agree. During fiscal year 2010, DFAS–CL processed a total of 

$22.1 million in disbursement adjustments and $952.6 million in collection 

adjustments to force Navy account balances in DDRS–B to agree with 

Treasury GWA system balances. Also during fiscal year 2010, DFAS–CL 

processed $32.1 million in disbursement adjustments and $22.9 million in 

collection adjustments to force Marine Corps account balances in DDRS–

B to agree with GWA system balances. DFAS-CL officials stated that the 

discrepancies usually result from timing differences related to the posting 

of the transactions. However, these officials also stated that they do not 

confirm whether these were timing differences or actual errors.

Step 4: Statement of Differences Resolution. The supporting 

documentation maintained by DFAS-CL and Navy and Marine Corps 

disbursing offices does not provide a clear audit trail as to the cause and 

resolution of the differences identified by Treasury. DFAS-CL officials 

stated that there is no supervisory review and approval of the work 

 

34 Department of Defense, Financial Management Regulation, 7000.14R, Volume 14, 

Chapter 3, “Preliminary Reviews of Potential Violations” (November 2010).

35 Department of Treasury, Treasury Financial Manual, Bulletin No. 2007-07, “Suspense 

“F” Account Discontinuance and Waiver Policy” (June 20, 2007). As of June 15, 2011, this 

bulleting was rescinded and replaced with an updated bulletin, which retains the 60 

business days deadline. Department of Treasury, Treasury Financial Manual, Bulletin 

No. 2011-06, “Reporting Suspense Account Activity Using F3875 and F3885 and Using 

Default Accounts F3500 and F3502 as a Govrnementwide Accounting (GWA) Reporter” 

(June 15, 2011).
 

Page 14 GAO-12-132 Fund Balance Reconciliations 

performed to research and resolve the differences. For example, DFASCL maintains reconciliation worksheets; however, these reconciliation 

worksheets do not provide detailed information on the underlying cause of 

the differences or the actions taken to resolve the differences as required 

by the DOD FMR.36

Step 5: DCAS to General Ledger Accounting System(s). The Navy has 

not been able to reconcile the data in its general ledger accounting 

systems to DCAS. DFAS officials stated that they acquired the Business 

Activity Monitoring (BAM) tool to reconcile the Navy’s FBWT. DFAS–CL is 

in the process of implementing the first phase

DFAS-CL does not obtain from the Navy and Marine 

Corps disbursing officers the initial documents (e.g., copies of canceled 

checks or deposit tickets) that resulted in the original transaction to 

complete its records. Instead, DFAS–CL primarily maintains email 

correspondence from the disbursing officers stating that the differences 

were resolved or will be resolved in the next month’s Standard Form 1219 

report by processing an adjustment. Based on our field work at five 

disbursing offices, we also found that the disbursing offices lack an 

adequate trail for the resolution of the statement of differences. While the 

disbursing officers generally maintained the original documents (e.g., 

copies of canceled checks or deposit tickets), they did not maintain 

documentation showing the underlying causes and the actions taken to 

resolve the differences.

37 of the BAM tool to 

reconcile collection and disbursement information by appropriation from 

DCAS to the general ledger information uploaded to the BAM tool for 

three of the four general ledger accounting systems.38

 

36 DOD FMR, Vol. 4, Ch. 2, Sec. 020701 and 020706.

DFAS officials 

stated that after 4 years of effort, they had spent nearly $29 million to 

modify BAM, including about $13 million to facilitate Navy’s FBWT 

reconciliations. DFAS officials stated that there have been schedule 

delays in implementing the BAM tool, which have affected the 

37 DFAS officials told us that they were planning to implement the BAM tool in two phases; 

however, DFAS has not yet defined the system requirements for the second phase or 

developed an implementation schedule. DFAS has reported that the second phase of the 

BAM tool implementation will automate the Navy’s DCAS and DDRS-B reconciliations to 

the GWA system as well as other reconciliation capabilities.

38 The three systems being addressed in the first phase are the Standard Accounting and 

Reporting System-Field Level (STARS-FL), the Standard Accounting and Reporting 

System-Headquarters Level (STARS-HCM), and the Navy Enterprise Resource Planning 

(NERP). 
 

Page 15 GAO-12-132 Fund Balance Reconciliations 

functionality currently provided by the tool. For example, as of April 2011, 

there were over $22 billion of unmatched transactions that were either 

collections or disbursements affecting more than 10,000 lines of 

accounting identified in the BAM tool without the information needed to 

identify and resolve the underlying causes of the differences between 

DCAS and the Navy’s general-ledger accounting systems.

In our efforts to evaluate the implementation of the BAM tool, we found 

that DFAS did not have documentation of the system39 and user 

validation40 testing of the BAM tool. DFAS officials stated that they 

performed system and user validation testing of the BAM tool to help 

ensure that it would provide the required reconciliation functionality; 

however, they did not maintain supporting documentation for the testing 

plan, design, procedures, or results, as recommended by the Institute of 

Electrical and Electronics Engineers (IEEE).41 The standards for internal 

control also require agencies to clearly document significant events and 

have the documentation readily available for examination.42

 

39 System testing is a testing conducted on a complete, integrated system to evaluate the 

system's compliance with its specified requirements.

Because of 

the lack of supporting documentation, DFAS does not have evidence that 

an adequate testing methodology was designed and followed and that 

any deficiencies identified during testing were addressed. In addition, we 

found that the approved BAM tool system requirements cannot be traced 

to the system requirements that were tested during user validation 

testing. The BAM tool program manager agreed and stated that DFAS will 

need to develop a requirements-traceability matrix to map approved 

system requirements to the requirements tested. Because of the lack of 

traceability, DFAS-CL does not have reasonable assurance that all the 

BAM tool system requirements were tested and that the tool will function 

as intended.

40 User Validation Testing (UVT) is a process to obtain confirmation that a system meets 

mutually agreed-upon requirements. The results of these tests give confidence to the 

users as to how the system will perform in production.

41 IEEE, Standard for Software Verification and Validation, IEEE Std 1012TM-2004. The 

IEEE is a nonprofit, technical professional organization that develops standards for a 

broad range of global industries, including the information technology and information 

assurance industries, and is a leading source for defining best practices.

42 GAO/AIMD-00-21.3.1
 

Page 16 GAO-12-132 Fund Balance Reconciliations 

As stated earlier, DOD IG reported during the fiscal year 2010 Statement 

of Budgetary Resources audit effort that it was not able to audit the 

Marine Corps’s FBWT because of the lack of a FBWT reconciliation. DOD 

IG officials stated that they were performing substantive testing to confirm 

the balance of the Marine Corps’s FBWT as part of the fiscal year 2011 

Statement of Budgetary Resources audit. However, this testing did not 

include internal control testing and did not provide assurance on the 

effectiveness of the Marine Corps’s FBWT reconciliation process.

The Navy and the Marine Corps recognize the importance of reconciling 

their FBWT to improve their budgetary information and obtain an audit 

opinion on their Statement of Budgetary Resources, which is one of the 

main priorities of DOD’s current audit readiness strategy. However, the 

lack of (1) an effective FBWT reconciliation process, (2) adequate policies 

and procedures to guide the FBWT reconciliation processes, and (3) 

assurance over the reliability of the data in DCAS, all increase the risk 

that misstatements could occur in Navy and Marine Corps FBWT 

accounts and other related financial information and not be timely 

detected and addressed. These deficiencies also increase the risk of 

Antideficiency Act violations. Specifically, as of April 2011, the Navy and 

DFAS officials stated that they had identified over 200 deficiencies in 

DCAS related to audit-readiness problems. Navy officials stated that they 

are developing a plan to address the deficiencies affecting the Navy’s 

ability to achieve audit readiness, including reconciling their FBWT. 

Considering the deficiencies identified in this report can help inform these 

officials as they develop and implement their plan. If the Navy and the 

Marine Corps are unable to effectively reconcile their FBWT, the 

Department of the Navy’s ability to assert audit readiness for its 

Statement of Budgetary Resources by the first quarter of fiscal year 2013 

could be jeopardized.

We are making six recommendations to the Secretary of Defense to 

implement processes to reconcile the Navy’s and the Marine Corps’s 

FBWT. 

To help ensure that the Navy and Marine Corps implement effective 

FBWT reconciliation processes, we recommend that the Secretary of 

Defense direct the Under Secretary of Defense (Comptroller) and the 

Secretary of the Navy to take the following actions

Conclusions

Recommendations
 

Page 17 GAO-12-132 Fund Balance Reconciliations 

• develop and implement policies and standard-operating procedures to 

guide the FBWT reconciliation process—including the assignment of 

specific roles and responsibilities, supervisory review and approval, 

and documentation requirements—and

• develop and implement a training curriculum for staff performing 

FBWT reconciliations to communicate the policies and procedures.

To ensure that the data in DCAS are reliable, we recommend that the 

Secretary of Defense direct the Director of the Defense Logistics Agency 

to 

• perform periodic testing of the system and timely address any 

deficiencies identified; and

• prioritize the known deficiencies and address those that affect audit 

readiness, including the ability to reconcile FBWT accounts.

To ensure that the BAM tool system and user validation testing are 

adequately documented, we recommend the Under Secretary of Defense 

(Comptroller) direct the Director of the DFAS to

• maintain supporting documentation for the BAM tool system 

requirements and user-validation testing—including the methodology, 

performance, and detailed results of the testing—and

• develop and maintain a traceability matrix to track approved BAM tool 

system requirements to those tested by the contractor to ensure that 

all requirements are tested.

We received written comments from the DOD Deputy Chief Financial 

Officer, which are reprinted in appendix II. In commenting on the report, 

the Deputy Chief Financial Officer concurred with the six

recommendations in our draft report and also stated the view that the 

Marine Corps is further ahead in its Fund Balance with Treasury (FBWT) 

reconciliation process than the report suggests. Specifically, he 

commented that the independent auditors found the FBWT reconciliation 

process and universe of transactions to be satisfactory and began testing 

the balance for fiscal year 2011.

During fiscal year 2011, the Marine Corps demonstrated some progress 

on its FBWT reconciliation, as recognized in our report and in the Deputy 

Chief Financial Officer’s letter. For example, the Marine Corps developed 

a standard-operating procedure (SOP) for its FBWT reconciliation.

However, as discussed in our report, we found that the SOP lacked

certain key reconciliation controls, such as the documentation required to 

support the resolution of differences. We also reported deficiencies in the 

Agency Comments 

and Our Evaluation
 

Page 18 GAO-12-132 Fund Balance Reconciliations 

Marine Corps reconciliation, such as the lack of reliability of the DCAS 

system, which is used for recording daily cash activity, and deficiencies in 

documentation supporting the reconciliation steps. 

As part of the Marine Corps fiscal year 2011 audit of the Statement of 

Budgetary Resources, the auditor reported that it was comfortable with 

the completeness of the universe of FBWT transactions and so could

begin detailed testing. However, as discussed in our report, the auditor

could not test the effectiveness of the FBWT reconciliation controls due to 

the inadequate procedures and lack of documentation. 

On November 22, 2011, the DOD IG issued a disclaimer of opinion for the

Marine Corps fiscal year 2011 Statement of Budgetary Resources

because of the lack of relevant and timely supporting documentation. 

We are encouraged by the Department of the Navy’s efforts to develop a 

plan to address weaknesses related to the audit readiness and its 

projection that it will achieve FBWT auditability by fiscal year 2013.

We are sending copies of this report to the Secretary of Defense, the 

Under Secretary of Defense (Comptroller/Chief Financial Officer), the 

Secretary of the Navy; the Assistant Secretary of the Navy for Financial 

Management and Comptroller; the Commandant of the Marine Corps; 

Assistant Deputy Commandant, Programs and Resources Department of 

the Marine Corps; the Directors of DFAS, DFAS-Cleveland, DFASIndianapolis; and appropriate congressional committees. In addition, the 

report is available at no charge on the GAO Web site at 

http://www.gao.gov.
 

Page 19 GAO-12-132 Fund Balance Reconciliations 

If you or your staffs have any questions about this report, please contact 

me at (202) 512-9869 or khana@gao.gov. Contact points for our Office of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix III.

Asif A. Khan

Director, Financial Management and Assurance
 

Page 20 GAO-12-132 Fund Balance Reconciliations 

List of Congressional Requesters

The Honorable Thomas R. Carper

Chair

The Honorable Scott P. Brown

Ranking Member

Subcommittee on Federal Financial

 Management, Government Information,

 Federal Services, and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Claire McCaskill

Chair

Subcommittee on Contracting Oversight

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Tom Coburn

Ranking Member

Permanent Subcommittee on Investigations

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable John McCain

United States Senate

The Honorable Todd Platts

Chairman

The Honorable Edolphus Towns

Ranking Member

Subcommittee on Government Organization,

 Efficiency and Financial Management

Committee on Oversight and Government Reform

House of Representatives 
Appendix I: Objective, Scope, and 

Methodology

Page 21 GAO-12-132 Fund Balance Reconciliations 

To determine whether the Navy and the Marine Corps have effective 

Fund Balance with Treasury (FBWT) reconciliation processes, we 

analyzed Navy and Marine Corps policies and procedures using relevant 

criteria, including the Department of Defense’s (DOD) Financial 

Management Regulation, the Department of the Treasury’s Financial 

Manual, and GAO’s Standards for Internal Control in the Federal 

Government.

1

• the reconciliation worksheets for October through December 2010 for 

the Defense Cash Accountability System (DCAS) to Treasury’s 

Government-Wide Accounting System reconciliation step (Based on 

our review of the reconciliation worksheets, we selected five journal 

vouchers related to adjustments from each month and requested 

supporting documentation. We focused on the first 3 months of fiscal 

year 2011 since the IG had recently conducted an audit of the 

Department of the Navy’s fiscal year 2010 financial statements.):

To further understand the effect of identified design control 

weaknesses, we selected several nongeneralizable samples from the 

Department of the Navy’s FBWT transactions and adjustments, and 

reviewed supporting documentation, such as journal vouchers, copies of 

canceled checks, and deposit tickets. Because the Marine Corps was

undergoing an audit of its fiscal year 2011 Statement of Budgetary 

Resources and the DOD IG planned to test its FBWT, we did not test the 

Marine Corps’s reconciliation of FBWT transactions to the general ledger.

Specifically, we obtained and reviewed

• the reconciliation worksheets and journal vouchers for September 

2010 fiscal year-end and February 2011, which was the most recently 

completed reconciliation at the time of our walkthrough for the 

Defense Departmental Reporting System-Budgetary to Treasury’s 

Government-Wide Accounting System reconciliation step. (Because 

the Defense Finance and Accounting Service (DFAS) resolves 

identified differences by posting forced-balance entries (plugs), we did 

not review reconciliation spreadsheets and journal vouchers for 

additional months.); and

 

1 DOD Financial Management Regulation 7000.14R (FMR), Volume 4, Chapter 2, 

“Accounting for Cash and Fund Balance with Treasury” (December 2009); Department of 

the Treasury, Treasury Financial Manual, vol. 1, part 2, chap. 5100, “Reconciling Fund 

Balance with Treasury Accounts (October 18, 1999); ”and GAO, Standards for Internal 

Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 

1999).

Appendix I: Objective, Scope, and 

Methodology 
Appendix I: Objective, Scope, and 

Methodology

Page 22 GAO-12-132 Fund Balance Reconciliations 

• the Statement of Differences reports for the months of October 2010 

through March 2011 because of aged differences identified by 

Treasury for checks issued and the large volume of transactions for 

deposits. We selected and reviewed available supporting 

documentation maintained by DFAS located at Cleveland (DFAS-CL) 

for discrepancies identified for 45 checks issued and 10 deposits. 

Because DFAS-CL officials informed us that the supporting 

documentation was maintained by the Navy and Marine Corps 

disbursing offices, we selected and reviewed available supporting 

documentation for an additional 27 checks issued and 61 deposits for 

the same period from five disbursing offices. We selected the three 

Navy disbursing offices located at DFAS–CL (disbursing location 

8522) and Norfolk, Virginia, (disbursing locations 6870 and 8371) 

because, according to the Navy Disbursing Officer in Norfolk, these 

three disbursing offices accounted for approximately 93 percent of the 

Navy’s disbursements and collections. In addition, we selected two 

Marine Corps disbursing offices located at DFAS–CL (disbursing 

location 6102) and Camp LeJeune, North Carolina, (disbursing 

location 6092) because they are two of the four largest Marine Corps 

disbursing stations.

To determine if the application controls2 over the DCAS3 were operating 

as intended, we interviewed Business Transformation Agency4

 

2 Application controls, sometimes referred to as business controls, are incorporated 

directly into computer applications to help ensure the validity, completeness, accuracy, 

and confidentiality of data during application processing and reporting. For example, a 

system edit used to prevent or detect a duplicate entry is an application control.

officials—

the system owner—to obtain an understanding of the DCAS application 

controls related to the Treasury reporting operations and the extent to 

which DOD has tested these controls. In addition, we obtained and 

reviewed the system change requests to determine whether any of the 

problems identified would significantly affect DFAS’ ability to reconcile the 

Navy’s and Marine Corps’s FBWT records.

3 Defense Cash Accountability System is the department’s central repository for cash 

collections and disbursement activity reported to the Treasury.

4 The Business Transformation Agency was recently disestablished, and its 

responsibilities as the DCAS system owner were reassigned to the Defense Logistic 

Agency.
Appendix I: Objective, Scope, and 

Methodology

Page 23 GAO-12-132 Fund Balance Reconciliations 

To determine the implementation status of the Business Activity 

Monitoring tool,5 we obtained and reviewed the managed services 

contract, Functional Requirements Document, and Initial Operating 

Capability6 reports, and available documentation on user validation tests.7

We met with Navy, Marine Corps, and DFAS officials throughout our work 

to assess FBWT reconciliation processes. We conducted our 

performance audit from October 2010 through October 2011 in 

accordance with generally accepted auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe the evidence obtained provides 

a reasonable basis for our findings and conclusions based on our audit 

objectives.

We interviewed DFAS officials located in Cleveland and Indiana, including 

the Business Activity Monitoring program manager regarding the 

implementation status, the scope and results of user validation tests, and 

limitations in the tool’s functionality.

 

5 DFAS-CL is implementing the Business Activity Monitoring tool to facilitate its 

reconciliation of the Defense Cash Accountability System to the Navy’s general ledger 

accounting systems.

6 Initial operational capability is achieved when a system is implemented with some 

minimal capabilities and additional capabilities are planned before the system is 

determined to have reached full operational capability.

7 User Validation Testing (UVT) is a process to obtain confirmation that a system meets 

mutually agreed-upon requirements. The results of these tests give confidence to the 

users as to how the system will perform in production.
Appendix II: Comments from the Department 

of Defense

Page 24 GAO-12-132 Fund Balance Reconciliations 

Appendix II: Comments from the Department 

of Defense
Appendix II: Comments from the Department 

of Defense

Page 25 GAO-12-132 Fund Balance Reconciliations 
Appendix II: Comments from the Department 

of Defense

Page 26 GAO-12-132 Fund Balance Reconciliations 
Appendix II: Comments from the Department 

of Defense

Page 27 GAO-12-132 Fund Balance Reconciliations 
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 28 GAO-12-132 Fund Balance Reconciliations 

Asif A. Khan, (202) 512-9869 or khana@gao.gov

In addition to the contact named above, Nabajyoti (Naba) Barkakati, Chief 

Technologist; Katherine Lenane, Assistant General Counsel; William 

(Tyler) Benson; Vanessa Estevez; Jason Kirwan; Richard D. Mayfield; 

Carol T. Nguyen; Omar V. Torres, Auditor in Charge; and Yiming I. (Ivy) 

Wu made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(198658)
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