GAO

United States General Accounting Office

Testimony

Before the Subcommittee on Government Management, 

Information and Technology, Committee on Government 

Reform, House of Representatives

For Release on Delivery 

Expected at 

10 a.m. 

Tuesday,

May 4, 1999

DEPARTMENT OF 

DEFENSE

Status of Financial 

Management Weaknesses 

and Actions Needed to 

Correct Continuing 

Challenges

Statement of Gene L. Dodaro

Assistant Comptroller General

Accounting and Information Management Division

GAO/T-AIMD/NSIAD-99-171

Page 1 GAO/T-AIMD/NSIAD-99-171

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to discuss the status of financial management 

at the Department of Defense (DOD). This discussion is particularly 

timely in light of our recent report1 on the fiscal year 1998 Financial Report 

of the U.S. Government. Material financial management deficiencies 

identified at DOD, taken together, represent the single largest obstacle 

that must be effectively addressed to achieve an unqualified opinion on 

the U.S. government’s consolidated financial statements. DOD’s vast 

operations—with an estimated $1 trillion in assets, nearly $1 trillion in 

liabilities, and a net cost of operations of $280 billion in fiscal year

1998—have a tremendous impact on the government’s consolidated 

reporting. 

DOD has created and maintains the world’s most powerful fighting force 

and its effectiveness in protecting the safety and security of our nation and 

national interests is unparalleled. Yet, without more reliable financial and 

other management information, DOD cannot ensure adequate 

accountability to the President, the Congress, and the American public. In 

addition, decisionmakers and managers are deprived of valuable tools to 

control costs and address pressing management issues that drain resources 

that could be better used to increase readiness and meet other priorities, 

such as weapon systems modernization.

While in the past we have questioned the department’s commitment to 

fixing these long-standing problems, DOD has started to devote additional 

resources to correct its financial management weaknesses. The 

atmosphere of “business as usual” at DOD has changed to one of marked 

effort at real reform. DOD is working on short-term actions to improve 

financial accountability and to help support the President’s goal of 

obtaining an unqualified opinion on the federal government’s financial 

statements. In addition, DOD has recently submitted to the Congress a 

Biennial Financial Management Improvement Plan. This plan presents, for 

the first time, the department’ strategies, including a concept of operations 

for modernizing its financial management activities. The plan, which DOD 

has now committed to updating annually, is an ambitious undertaking that 

represents an important step toward long-term improvements.

1

Financial Audit: 1998 Financial Report of the United States Government

(GAO/AIMD-99-130, March 31, 1999).

Letr
Page 2 GAO/T-AIMD/NSIAD-99-171

These initiatives are all very important steps in the right direction, but it is 

essential to keep in mind the magnitude of DOD’s financial management 

problems. These problems are pervasive and entrenched in an extremely 

large decentralized organization. It will take considerable effort, time, and 

sustained top management attention to turn reform efforts into day-to-day 

management reality. 

No major part of DOD has been able to pass the test of an independent 

audit; auditors consistently have issued disclaimers of opinion because of 

pervasive weaknesses in DOD’s financial management operations. Such 

problems led us in 1995 to put DOD financial management on our list of 

high-risk areas vulnerable to waste, fraud, abuse, and mismanagement, a 

designation that continued in our recent high-risk update.2

 The audits of 

DOD’s and individual military services’ financial statements for fiscal year 

1998 performed by the DOD Inspector General (IG) and the military service 

audit agencies, as well as our audit of the U.S. government’s financial 

statements, have provided further clarification of the scope and magnitude 

of the department’s problems, and recommendations to correct them.

My testimony outlines DOD’s most serious financial management 

weaknesses, describes the resulting impact on the department’s ability to 

effectively carry out its programs and operations, and highlights the efforts 

underway to address these deficiencies. These actions must be 

implemented effectively for DOD to be able to

• properly account for and report (1) billions of dollars of inventory and 

property, plant, and equipment and (2) national defense assets, primarily 

weapon systems and support equipment;

• estimate and report material amounts of environmental and disposal 

liabilities and their related costs;

• determine the liability associated with post-retirement health benefits 

for military employees;

• accurately report the net costs of its operations;

• produce accurate budget data; and 

• determine the full extent of improper payments.

2

High-Risk Series: An Overview (GAO/HR-95-1, February 1995), High-Risk Series: Defense Financial 

Management (GAO/HR-97-3, February 1997), and Major Management Challenges and Program Risks: A 

Governmentwide Perspective (GAO/OCG-99-1, January 1999).

Letr
Page 3 GAO/T-AIMD/NSIAD-99-171

Short-term improvement strategies for DOD are imperative. Also, 

enhancements are needed in updating DOD’s Financial Management 

Improvement Plan—its long-term blueprint for financial management 

reform.

Control and 

Accountability Over 

Assets Impaired

As discussed in our recent report on the fiscal year 1998 consolidated 

financial statements, the federal government—one of the world’s largest 

holders of physical assets—does not have accurate information about the 

amount of assets held to support its domestic and global operations. DOD 

primarily relies on various logistical systems to carry out its important 

stewardship responsibility over an estimated $1 trillion in physical assets, 

ranging from enormous inventories of ammunition, stockpile materials, 

and other military items to buildings and facilities to multimillion dollar 

weapon systems. These logistics systems are the primary source of 

information for (1) maintaining visibility over assets to meet military 

objectives and readiness goals and (2) financial reporting. However, as we 

testified last year,3

 these systems have material weaknesses that, in 

addition to hampering central visibility and financial reporting, impair 

DOD’s ability to safeguard those assets from physical deterioration, theft, 

or loss or to prevent the purchase of assets already on hand in sufficient 

quantities. 

Overall, these weaknesses can seriously diminish the efficiency and 

economy of the military services’ support operations. For example, as 

noted in our recent report,4

 DOD’s lessons-learned studies from Operation 

Desert Storm found that better asset tracking could have saved $2 billion. 

In response to this problem, the department initiated programs or renewed 

its emphasis on implementing existing measures that would improve asset 

visibility and tracking. The Global Combat Support System (GCSS), led by 

the Defense Information Systems Agency, was established in September 

1995 to reengineer processes and procedures and provide a technological 

base, including a common environment and shared infrastructure, needed 

to rapidly deploy support to the warfighter. In addition, DOD renewed its 

Total Asset Visibility (TAV) initiative to provide department-level access to 

timely, accurate information on the status, location, and movement of 

3Department of Defense: Financial Audits Highlight Continuing Challenges to Correct Serious Financial 

Management Problems (GAO/T-AIMD/NSIAD-98-158, April 16, 1998).

4

Defense Inventory: DOD Could Improve Total Asset Visibility Program With Results Act Framework

(GAO/NSIAD-99-40, April 12, 1999).
Page 4 GAO/T-AIMD/NSIAD-99-171

units, personnel, equipment, and supplies—including weapon systems, 

secondary inventory,5

 and ammunition. The effectiveness of these 

programs in achieving their common objectives of supporting the 

warfighter will depend on the accuracy and timeliness of information 

provided by the underlying systems. 

As discussed in the following sections, because DOD’s asset accountability 

systems and processes remain largely unchanged since last year, audit 

findings continue to indicate serious weaknesses in controls over 

inventory; general property, plant and equipment; and national defense 

assets.

Continuing Control 

Weaknesses Over Inventory 

As part of the fiscal year 1998 financial statement audits, auditors 

continued to find that DOD’s inventory management and control systems 

and practices are plagued with serious problems that affect its ability to 

maintain accurate and complete inventory data. DOD inventory6

 includes 

ammunition (such as machine gun cartridges, rocket motors, and 

grenades), repairable items (such as navigational computers, landing gear, 

and hydraulic pumps), consumables (such as clothing, bolts, and medical 

supplies), and stockpile materials (such as industrial diamonds, rubber, 

and tungsten). DOD’s inability to effectively account for and control its 

reported $122 billion investment in inventories has been an ongoing area of 

major concern. Audit findings for fiscal year 1998 include problems in 

verifying inventory quantities and value, reporting all inventory, and 

accounting for in-transit inventory. The sheer volume of DOD’s on-hand 

inventories also impedes the Department’s efforts to accumulate and report 

accurate inventory data.

On-hand Quantities Not in Agreement With Records. The Defense Logistic 

Agency (DLA) distribution depots’ inventory records, which account for 

approximately 75 percent of DOD’s reported inventory, supply much of the 

information for management and financial reporting. Over the years, 

auditors have repeatedly found problems with the accuracy of DOD’s 

perpetual inventory records, although recent improvements in reported 

5Secondary inventory includes spare parts, clothing, and medical supplies to support DOD operating 

forces worldwide.

6

Statement of Federal Financial Accounting Standards No. 3 defines several categories of inventory. 

DOD primarily has inventory held for sale, operating materials and supplies, and stockpile materials. 

For purposes of this testimony, we refer to all categories as inventory.
Page 5 GAO/T-AIMD/NSIAD-99-171

accuracy rates have been noted. For example, for 1996, the DOD IG 

reported a 24 percent error rate at DOD’s primary storage locations7 and, 

for 1997, Navy auditors reported a 23 percent error rate for the 13 major 

storage locations they visited.8

 For 1998, preliminary results from Navy 

auditors’ tests showed an improved error rate of 14 percent for the 

18 locations visited. Navy officials attributed much of the improvement in 

inventory record accuracy to extensive rewarehousing—a wall-to-wall 

physical inventory done to facilitate conversion to a new logistics system. 

However, preliminary results of tests we conducted for 1998, identified 

control weaknesses that indicate DOD’s reported rates cannot be relied 

upon to provide a true measure of physical inventory accuracy.

As part of our audit effort for the fiscal year 1998 financial statements, we 

evaluated DOD procedures for verifying the accuracy of its perpetual 

inventory records and found significant weaknesses. We have provided our 

draft report on these issues to DOD officials for their review and comment 

prior to its release. Although DLA established a record accuracy goal of 

95 percent for fiscal year 1998, we found that, at the 14 distributions depots 

we visited, reported accuracy rates fell below that goal. For fiscal year 

1998 counts, only two depots had inventory accuracy rates above 

90 percent. In addition, several significant control weaknesses in the 

inventory count process affected the integrity of the counts and these 

accuracy rates. For example, at all of the depots we visited, counters could 

access the inventory system to determine the expected number of 

inventory items on hand. At one depot, we observed counters obtaining 

system quantities for some of the sample items and recording these 

amounts as the physical count for the items. When we requested an actual 

physical count of these items, all had variances. One of the items—night 

image intensifiers, a controlled item9 commonly referred to as “night vision 

goggles” with a unit price of about $1,300—had a variance of 1,018 items, 

which resulted in a $1.3 million loss adjustment to the inventory records.

7

Inventory Record Accuracy and Management Controls at the Defense Logistics Agency Distribution 

Depots (DOD IG Report 98-019, November 10, 1997).

8Fiscal Years 1997 and 1996 Consolidated Financial Statements of the Department of the Navy Working 

Capital Fund Reportable Conditions (NAS 049-98, September 28, 1998).

9

Controlled inventory items are those designated as having characteristics that require that they be 

identified, accounted for, secured, segregated, or handled in a special manner to ensure their safeguard 

or integrity. They include classified, sensitive, and pilferable items.
Page 6 GAO/T-AIMD/NSIAD-99-171

In addition, at many depots, warehouse personnel—whose duties include 

storing, rewarehousing, and issuing items—were used to perform inventory 

counts of these items. Because these warehouse personnel had such dual 

responsibilities, this arrangement did not ensure adequate segregation of 

duties. These physical count weaknesses prevented DOD’s reported 

accuracy rates from providing a reliable measure of its record accuracy 

and, as a result, DOD cannot be assured that (1) inventory it has paid for 

has been received, (2) inventory is not subject to theft, and (3) inventory 

balances used to determine requirements reflect all acquired and on-hand 

quantities. 

We also noted that DLA’s current sampling methodology could be 

improved. The sample process used in fiscal year 1998 considered each 

type of item equally in selecting those to be physically counted. For 

example, an error for a $1 item was counted the same as an error for a 

$50,000 item and common hardware items were counted the same as 

controlled items. In addition, this sample process results in the selection of 

more items representing insignificant dollar amounts. For example, at one 

location, an estimated $49.5 million of items were counted out of a total of 

the reported $4.5 billion of items on hand, accounting for about 1 percent of 

the total inventory stored there. This type of sampling and the resulting 

accuracy rates do not give management the opportunity to respond 

appropriately to errors that reflect more serious problems in accountability 

over high dollar or more sensitive, controlled items. Our draft report on 

inventory accuracy includes specific recommendations to address the 

weaknesses identified.

Inventory Values Questionable. Federal accounting standards require 

inventories to be valued based on historical cost or a method that will 

approximate historical cost. Further, excess, unserviceable, or obsolete 

inventory is required to be written down to net realizable value. Valuation 

at historical cost is particularly important to capture the cost of operations 

of the supply funds, which are required to recover their inventory and 

overhead costs through the prices they charge their internal customers. 

However, DOD values its inventories at standard cost or latest acquisition 

cost and does not capture the data necessary to value inventory at 

historical cost. 

As a result, DOD developed an agencywide model in 1994 for the purpose 

of estimating historical cost for inventories. The valuation model uses 

general ledger data to adjust recorded inventory values to arrive at an 

estimate of historical costs and to calculate costs of goods sold. However, 
Page 7 GAO/T-AIMD/NSIAD-99-171

due to concerns about the accuracy of general ledger data, and weak 

internal control over the development and operation of the valuation 

model, auditors have been unable to evaluate the effectiveness of the 

model, or the estimates of historical cost and cost of goods sold.

Frequent, large adjustments raise concern about the accuracy of general 

ledger data used in the valuation model. For example, according to DOD IG 

preliminary results, DOD recorded over $30 billion of individual gain and 

loss adjustments for fiscal year 1998 to bring the value of inventory in the 

general ledger into agreement with the value of inventory in the supply 

activities’ logistical records. Most of these adjustments were made without 

sufficient investigation to determine the underlying causes of differences. 

Further, to minimize fluctuations in operating results, DOD is reluctant to 

treat these adjustments as current period gains and losses. However, such 

treatment does not comply with accounting standards because it defers 

recognition of gains and losses from activities such as inventory counts, 

rewarehousing of inventory, and shipping transactions and, therefore, 

results in a misstatement of inventory and cost of operations. 

In addition to concerns about the accuracy of the data used in the model, 

insufficient controls surrounding the development and operation of the 

valuation model have resulted in application errors, and further 

misstatements of reported inventory and cost of goods sold. During 

1997, DFAS identified a $3.9 billion error in how the model was applied to 

the Navy’s fiscal year 1996 inventory balances, resulting in an 

understatement in reported inventory by the same amount. In 1998, Navy 

auditors discovered an error in a 1997 calculation of estimated repair costs 

that resulted in a $2.3 billion overstatement of reported fiscal year 

1997 cost of goods sold. Fiscal year 1998 preliminary audit results indicate 

that an application error in a reversing entry resulted in an overstatement 

of Navy’s reported inventory of $420 million.

DOD’s reported $62.5 billion of operating materials and supplies for fiscal 

year 1998, including ammunition, were also not valued properly at 

historical cost, or net realizable value, as required. For example, the Air 

Force has acknowledged that an estimated $28 billion in operating 

materials and supplies are inappropriately valued at latest acquisition cost. 

The Army also reported about $20 billion of ammunition at latest 

acquisition cost and indicated that almost none of this ammunition was 

excess, unserviceable, or obsolete. Similarly, the Navy reported over 

$11 billion of ammunition without identifying any as excess, unserviceable, 
Page 8 GAO/T-AIMD/NSIAD-99-171

or obsolete. However, we have previously reported that in 1996 about 

39 percent of DOD’s total ammunition stockpile was excess and that about 

27 percent was unserviceable. 10

Inventories Not Reported. Our report on our audit of the fiscal year 

1997 government financial statements disclosed that an estimated $9 billion 

of known military operating materials and supplies were not reported, 

including inventories on Army installations, at Navy facilities, and on Navy 

ships.11 Similarly, fiscal year 1998 financial statement audit work found that 

DOD generally excludes information in several inventory accountability 

systems from financial reports, including reports provided to the Congress 

on inventory levels, and from overall visibility systems. For example, Navy 

omissions, which primarily relate to spare and repair parts, included an 

estimated (1) $9 billion in items warehoused onboard ships, (2) $3 billion of 

inventory items held by engineering and ordnance activities, and 

(3) $650 million of items at redistribution centers. In addition, an estimated 

$19 billion of government owned material held by contractors is omitted 

from inventory reports provided to the Congress. These kinds of omissions 

adversely affected the department’s financial reporting and its reporting to 

the Congress on inventory reductions. Further, the lack of complete 

visibility over inventories increases the risk that responsible inventory item 

managers may request funds to obtain additional, unnecessary items that 

may be on-hand but not reported. For example, in February 1997, we 

reported that DOD had ordered $11.3 million in items such as hydraulic 

pump valves and circuit card assemblies that were already in excess 

supply.12

In-transit Inventories. The vulnerability of in-transit inventory to waste, 

fraud, and abuse is another area of concern. Similar to last year’s results, 

auditors were not able to confirm the in-transit inventory, which is included 

in the reported overall inventory balance on hand. For example, auditors 

could not determine the reasonableness of almost $600 million of the 

Army’s reported inventory in-transit from procurement. In addition, 

preliminary audit results indicate that the Navy’s reported in-transit 

10Defense Ammunition: Significant Problems Left Unattended Will Get Worse

(GAO/NSIAD-96-129, June 21, 1996).

11Financial Audit: 1997 Consolidated Financial Statements of the United States Government

(GAO/AIMD-98-127, March 31, 1998).

12Defense Logistics: Much of the Inventory Exceeds Current Needs

(GAO/NSIAD-97-71, February 28, 1997).
Page 9 GAO/T-AIMD/NSIAD-99-171

inventory differed from subsidiary records by about $2 billion and that the 

Navy had not determined the cause for the difference between the detail 

records and the reported amount. We also recently testified on the Navy’s 

problems with controlling in-transit items.13 Specifically, we reported that 

Navy activities were not adhering to control procedures to ensure that intransit items are accounted for and that responsible commands had not 

been performing adequate oversight. As a result, the Navy wrote off as lost 

over $3 billion of in-transit inventory over the last 3 years, including some 

classified and sensitive items such as aircraft guided-missile launchers, 

military night vision devices, and communications equipment. This lack of 

control leaves enormous amounts of inventory at risk of undetected theft 

or misplacement.

Excess Inventories. The sheer size and volume of DOD’s on-hand 

inventories also impedes the Department’s efforts to accumulate and report 

accurate inventory data. We reported in our January 1999 high-risk report 

on defense inventory management that the department needs to avoid 

burdening its supply system with large unneeded inventories.14 In April 

1999, we reported15 that about 60 percent of on-hand items, or an estimated 

$39.4 billion of DOD’s reported secondary inventory, exceeded DOD’s 

requirements. The DOD IG has also reported16 that about $3 billion of 

DLA’s reported $9.8 billion of consumable inventory was inactive and of 

uncertain future utility. As a result, DOD is incurring unneeded inventory 

holding costs. In 1997, we estimated17 that the military services could save 

about $382 million annually in inventory holding costs by eliminating 

inventory at nonmajor locations that is not needed to meet current 

requirements. DOD has also acknowledged the need to reduce its 

inventories and has established goals to reduce supply inventory by 

$12 billion by 2000.

13Defense Inventory: Continuing Challenges in Managing Inventories and Avoiding Adverse Operational 

Effects (GAO/T-NSIAD-99-83, February 25, 1999).

14Major Management Challenges and Program Risks: Department of Defense

(GAO/OCG-99-4, January 1999).

15Defense Inventory: Status of Inventory and Purchases and Their Relationship to Current Needs

(GAO/NSIAD-99-60, April 16, 1999).

16Valuation and Presentation of Inactive Inventory on the FY 1997 Defense Logistics Agency Working 

Capital Fund Financial Statements (DOD IG Report 98-195, August 27, 1998).

17Defense Inventory: Spare and Repair Parts Inventory Costs Can be Reduced

(GAO/NSIAD-97-47, January 17, 1997).
Page 10 GAO/T-AIMD/NSIAD-99-171

Short-term Improvements Underway. To begin addressing the inventory 

accuracy issues raised by financial statement audits, in March 1999, the 

Principal Deputy Under Secretary of Defense (Acquisition and Technology) 

directed the military services and DLA to evaluate how all transactions 

impacting inventory are processed into financial management systems, 

determine the sources and causes of processing errors, and develop a 

remedial plan for correcting those errors. The military services and DLA 

are tasked with ensuring that changes and corrective actions are 

implemented by September 30, 1999. Further, the Comptroller and the 

Under Secretary of Defense for Acquisition and Technology have 

committed to (1) improve DOD’s physical count procedures to address the 

weaknesses we identified, (2) implement risk-based physical inventory 

measures that demonstrate a greater concern for sensitive items and high 

dollar items, (3) work with DFAS and the audit community to determine 

the proper treatment of inventory gains and losses, (4) continue refining 

current formulas for valuing inventory at historical cost, and (5) develop 

procedures to properly account for and report operating materials and 

supplies.

Unreliable Amounts 

Reported for General 

Property, Plant and 

Equipment

DOD is responsible for almost one-half of the government’s general 

property, plant and equipment (PP&E).18 For fiscal year 1998, DOD 

reported $126 billion of general property assets, including $71.3 billion in 

real property (land, buildings, facilities, capital leases, and improvements 

to those assets); $34.7 billion in personal property (such as vehicles, 

equipment, telecommunications systems, and computers); and $20.3 billion 

in construction-in-progress, the largest portion of which belongs to the 

Corps of Engineers. For fiscal year 1998, DOD auditors found that real 

property databases were generally accurate for recorded items; however, 

they did identify significant problems with unrecorded items valued at less 

than $100,000. In addition, DOD’s dollar threshold for capitalizing its 

property, plant and equipment needs to be reexamined to ensure that the 

department accurately assesses the full cost of its operations, carries out 

its fiduciary responsibility over its assets, and prepares accurate and 

complete financial reports.

18Statement of Federal Financial Accounting Standards No. 6 states that general PP&E is any property, 

plant and equipment used in providing goods and services. It typically has one or more of the following 

characteristics: (1) it could be used for alternative purposes (e.g., by other Federal programs, state, or 

local governments, or non-governmental entities) but is used to produce goods or services, or to 

support the mission of the entity, (2) it is used in business-type activities, or (3) it is used by entities in 

activities whose costs can be compared to those of other entities performing similar activities 

(e.g., Federal hospital services in comparison to other hospitals).
Page 11 GAO/T-AIMD/NSIAD-99-171

Real Property. DOD’s real property accounts represented approximately 

56 percent of DOD’s reported PP&E for fiscal year 1998. In fiscal year 

1998, DOD auditors performed a departmentwide effort to test the 

reliability of each military service’s real property logistical databases for 

existence and completeness. Based upon preliminary results of statistical 

samples, DOD auditors concluded that assets in the databases with a unit 

value greater than $100,000 existed at the audit date. However, there were 

errors identified that may represent systemic problems that will need to be 

addressed. For example, the Naval Audit Service identified 17 sampled 

items, with a total reported value of $20.1 million, that were inappropriately 

included in the database. These assets included a building valued at 

$7 million that was planned but never constructed, a communication 

antenna valued at $1.9 million that could not be located, and buildings that 

were demolished but not removed from the database. Army and Air Force 

auditors also found demolished assets that had not been removed from the 

databases. 

In addition, tests of Air Force assets reportedly valued at less than 

$100,000 indicated potential accountability issues. For example, based 

upon the preliminary results of a statistically selected sample of 176 assets 

with recorded unit values of less than $100,000, Air Force auditors 

concluded that the Air Force’s real property database had a 8.62 percent 

error rate for assets valued at less than $100,000. Furthermore, Navy 

auditors could not locate 32 of 478 judgmentally selected items with a 

reported unit value of less than $100,000.

While evaluating the accuracy of assets included in DOD’s real property 

databases, auditors also performed limited tests on whether all assets at 

DOD installations were included in the databases, i.e., whether the 

databases were complete. Auditors judgmentally selected assets on the 

installations and attempted to trace them to the real property databases. 

For example, at the 62 Army locations reviewed, 48 of 161 items selected 

were not recorded in the Army’s real property databases. Most of the 

unrecorded assets were support facilities and included parking lots, fences, 

utilities, and storage sheds. In addition, when the Corps of Engineers 

converted to a new property accounting system this year, it did not transfer 

to the system approximately $4 billion of assets. 

Valuation of real property assets in the databases is perhaps the greatest 

hurdle the department must overcome. What the department paid for its 

assets is an important component of determining costs for operating its 

facilities. For fiscal year 1998, DOD auditors found numerous valuation 
Page 12 GAO/T-AIMD/NSIAD-99-171

errors due to duplications, misclassifications, omissions, and lack of 

supporting documentation. Examples of audit finding of errors in reported 

values include

• approximately $9.9 million in capital improvements made at three Army 

base support battalions, which were not recorded,

• approximately 29,000 real property records that were in the Army Corps 

of Engineers’ financial system but had no recorded book value, and

• an estimated $95 million overstatement of real property because the 

same 48 buildings were included on both Air Force and Navy real 

property databases. 

Ensuring the accuracy of asset valuation can usually be done primarily by 

verifying acquisitions and disposals during the year but DOD’s beginning 

balances have never been validated. Because DOD acquired many of its 

assets years ago, adequate documentation is not generally available. 

Therefore, DOD and the audit community have been working with a 

contractor to develop an alternative method for supporting its asset values.

Personal Property. Because auditors focused on real property testing for 

fiscal year 1998, only limited work was performed on DOD personal 

property. However, auditors found that

• The Navy improperly excluded from its reported general PP&E 

approximately $1.5 billion in equipment identified as military trainer 

devices and inadvertently omitted an additional $739 million in 

equipment. 

• The Air Force Working Capital Fund did not report 155 equipment items 

costing about $108 million that had been furnished to contractors.

• An Army equipment pricing error had resulted in a $1.2 billion 

overstatement of personal property because computer monitors valued 

at $1,345 were in the equipment database at a value of $134.5 million 

each.

DOD has also hired a contractor to assist it in assessing the existence, 

completeness, and valuation of assets recorded in its personal property 

databases. It is expected that this effort may take over a year to complete 

departmentwide, due to the large number of DOD databases used to 

maintain accountability. 

Capitalization Threshold Needs Evaluation. As we testified last year, DOD’s 

ability to accurately report its property, plant and equipment values has 
Page 13 GAO/T-AIMD/NSIAD-99-171

been further hampered by the 20-fold increase in its capitalization 

threshold from $5,000 in 1991 to $100,000 in 1996, and by the retroactive 

application of the $100,000 threshold in 1998 to all DOD components, 

except working capital fund activities. As a result of the higher 

capitalization threshold, DOD has expensed billions of dollars of assets, 

which has effectively removed them from accounting control. These assets 

have useful lives of more than 2 years. For example, over 100,000 vehicles 

costing approximately $2.6 billion that are held by the Army, Air Force, and 

Navy, do not meet the $100,000 capitalization threshold. In addition, 

financial audits have repeatedly found that DOD’s detailed property 

records are not accurate. For example, based on a statistical sample, Air 

Force auditors concluded that the Air Force’s real property database did 

not provide accountability over assets valued at less than $100,000. 

Use of high capitalization thresholds can adversely affect the measurement 

of operating costs. Because assets are expensed in their year of acquisition, 

as opposed to the costs of the assets being allocated over their useful lives, 

the costs associated with their acquisition and use may not be adequately 

considered in decision-making. In addition, by not accounting for all its 

costs, DOD’s ability to capture the data needed to make valid cost 

comparisons for decisions, such as outsourcing, is hampered. 

The Army Corps of Engineers, which accounts for approximately 

26 percent of DOD’s total reported PP&E, has requested a waiver from 

implementing the threshold because of its expected impact on the Corps’ 

budget and customers. Corps of Engineers’ assets that do not meet the new 

threshold include “other floating plant equipment” (e.g., barges, boats, 

launches, and pumps) valued at more than $31 million and “mobile land 

plant equipment” (e.g., tractors, cranes, and bulldozers) totaling over 

$48 million. 

Short-term Improvements Underway. The DOD Comptroller and the Under 

Secretary of Defense for Acquisition and Technology are responsible for 

actions directed at developing more credible valuation data for the 

department’s plant, property and equipment. To help, the DOD Comptroller 

has obtained contractor support in addressing both real and personal 

property issues. 

DOD has also directed that its components have or expeditiously develop 

fully operational property accountability systems that meet federal 

accounting and systems requirements, including the capability to capture 

and maintain historical cost data and calculate depreciation for general 
Page 14 GAO/T-AIMD/NSIAD-99-171

PP&E assets. Although the DOD Comptroller has designated the Defense 

Property and Accountability System (DPAS) as DOD’s real property 

accounting system, the department has encouraged but not mandated that 

components migrate to DPAS. DPAS databases accounted for 

approximately $23 billion, or 18 percent, of DOD’s general PP&E reported 

for fiscal year 1998. As of March 1999, DOD had approximately 115 DPAS 

databases operational throughout DOD and an additional 220 scheduled for 

implementation through May 2000. In our 1997 report on DPAS,19 we made 

several recommendations to ensure that financial control and 

accountability over general property is attained. These recommendations 

included developing an implementation plan with milestones for DPAS, 

revising the handbook accompanying the system, and modifying the 

software to update it for new accounting standards. Actions have been 

taken to address our recommendations, although DOD has still not 

developed a detailed DPAS implementation plan. 

Finally, DOD has recently asked its contractors to evaluate its current 

capitalization policy. We have offered to work with DOD, its contractors, 

and the DOD IG to arrive at an approach for reviewing DOD’s capitalization 

policy that will lead to a mutually acceptable conclusion.

Accountability Lacking Over 

National Defense Assets

The new Stewardship Reporting accounting standard,20 which was 

effective for the first time for fiscal year 1998, required that DOD remove 

military equipment (now called national defense property, plant and 

equipment and reported at more than $600 billion in fiscal year 1997) from 

its balance sheet and report it on a separate stewardship statement. 

Although the reporting standards were new, the fiscal year 1998 audit 

results were similar to last year’s because many of the military services’ 

logistics systems used to track and support weapon systems and other 

military equipment were still unable to provide accurate information to 

support DOD’s asset visibility objectives and financial reporting.

For fiscal year 1997, auditors performed specific tests to validate the data 

in the logistics systems reporting military equipment. Because of the 

sensitive nature of the equipment items selected, auditors’ audit tests were 

19Financial Management: DOD’s Approach to Financial Control Over Property Needs Structure

(GAO/AIMD-97-150, September 30, 1997).

20Statement of Federal Financial Accounting Standards No. 8, Supplementary Stewardship Reporting, 

was effective for federal agencies’ financial reporting beginning after September 30, 1997. 
Page 15 GAO/T-AIMD/NSIAD-99-171

designed to either “pass” or “fail” the accuracy of logistical system 

information. For a number of critical systems tested, it was agreed with the 

military leaders who used those systems that a system would “pass” only 

where all assets selected from the system were found. For other systems, 

which generally carry information on less critical assets, it was agreed that 

the system could still receive a passing grade with up to two errors 

identified. 

Auditors tested recorded information for 11 categories of Navy military 

equipment. Fiscal year 1997 testing of critical Navy logistics systems 

showed that the Navy’s systems failed for 3 of 11 categories of military 

equipment tested. Specifically, auditors determined that the Navy’s systems 

relied on for visibility or accountability over active boats, service craft, and 

uninstalled engines failed because the data were either incomplete or 

included assets that no longer existed. For example, tests of these mission 

critical systems found the following.

• Of 45 boats selected for examination, 2 were included in the Combatant 

Craft and Boat Support System even though they had been disposed of 

or sold.

• Of 79 inactive service craft reported in the Naval Vessel Register (NVR) 

and tested by auditors, 6 could not be located. Fifteen other service craft 

had been sold or disposed of but were still included in the NVR as 

inactive, indicating their availability to meet rapid mobilization 

requirements.

• Of 105 uninstalled engines sampled, 10 valued at up to $4 million could 

not be found.

Because of the severity of these problems, a working group was 

established in 1998 to begin addressing them. Navy officials indicated that 

not adhering to established policies and procedures—for example, those 

related to the disposal of assets—coupled with disincentives to accurately 

report asset activity, significantly contributed to these inaccuracies. 

Officials stated that steps have been taken, including training personnel in 

existing procedures, and that weapon systems activity is expected to be 

accurately reported in fiscal year 1999. However, because the problems had 

not been addressed at the time of their audit, Navy auditors did not repeat 

tests of national defense assets for fiscal year 1998.

For fiscal year 1997, the Air Force logistics systems tested, including those 

supporting aircraft, missiles, and uninstalled engines, passed auditors’ tests 

and auditors made recommendations to correct the minimal number of 
Page 16 GAO/T-AIMD/NSIAD-99-171

inaccuracies found during the tests. However, as part of the fiscal year 

1998 financial statement audit work, auditors were unable to verify the 

reported data on 8,387 uninstalled engines, with an estimated value in 

excess of $8 billion. This occurred because the Comprehensive Engine 

Management System (CEMS), which is used to report data on these assets, 

could not separately identify additions and deletions of engines during the 

fiscal year—a basic control for ensuring accountability over assets.

Audit tests for fiscal year 1997, using the pass-fail approach previously 

discussed, found that the Army’s property books maintained by the local 

units were generally accurate for major equipment items held by those 

units. However, CBS-X, which is intended to provide Army leadership with 

worldwide visibility over the Army’s reportable equipment items, has 

significant accuracy problems. For example, we have reported21 that 

CBS-X was inaccurate because it (1) does not effectively capture data on 

equipment transactions from all Army units, (2) reflects software errors, 

and (3) contains transaction posting errors. In addition, like the Air Force’s 

CEMS, CBS-X does not provide accountability and control over Army 

assets by tracking additions and deletions to asset quantities on hand. Our 

January 1998 report included over 20 specific recommendations, with 

which the Army generally concurred, directed towards improving CBS-X 

accuracy. 

Recognizing that CBS-X could not provide effective visibility over 

equipment maintained by Army units, the Army used a data call to 

complete its financial reporting for fiscal year 1998 of this equipment and to 

correct inaccuracies in CBS-X. Army Audit reported that this data call and 

other procedures identified 1,837 items, which included 10 Army 

reconnaissance aircraft, 81 Tow missile launchers, and 174 Javelin 

command-launch units that were not reported to CBS-X. Because these 

results were based on only 78 percent of the units reporting, as of 

October 28, 1998, the Army continued to follow up with units that had not 

reported, and by mid-December, 90 percent of the units had reported. For 

example, as a result of these additional units reporting, the Army identified 

another 43 reconnaissance aircraft that were not reported in CBS-X.

Short-term Improvements Underway. The Army and Navy have established 

working groups to develop plans for addressing problems related to 

21Army Logistics Systems: Opportunities to Improve the Accuracy of the Army’s Major Equipment Item 

System (GAO/AIMD-98-17, January 23, 1998).
Page 17 GAO/T-AIMD/NSIAD-99-171

national defense asset accountability. In addition, the Air Force has hired a 

contractor to assist in implementing accounting standards by developing 

definitions for differentiating national defense assets from general plant, 

property and equipment assets.

Reported 

Environmental/

Disposal Liability 

Significantly 

Understated

As we testified last year, DOD has not yet fully implemented the federal 

accounting standard22 that requires it to recognize and report liabilities 

associated with environmental cleanup and/or disposal of its assets. DOD 

reported $34 billion in estimated liabilities in its fiscal year 1998 financial 

statements for environmental restoration of active and inactive bases, 

cleanup of formerly used sites, and cleanup and disposal of certain 

chemical weapons. However, it did not estimate environmental cleanup 

and disposal costs associated with military weapon systems (such as 

aircraft, missiles, ships, and submarines), and ammunition. Further, DOD 

reported only a small portion of the total cost, estimated to be over 

$10 billion, for removing unexploded ordnance from its training ranges. As 

a result, DOD’s undisclosed liability in this area is likely understated by 

tens of billions of dollars. This was a significant factor contributing to our 

conclusion that the government’s environmental and disposal liabilities 

were understated in its financial statements.23

The Congress has also recognized the importance of accumulating and 

considering such liability information. The National Defense Authorization 

Act for Fiscal Year 1995 requires the Secretary of Defense to determine, as 

early in the acquisition process as feasible, the life-cycle environmental 

costs for major defense acquisition programs, including the materials to be 

used and methods of disposal. These life-cycle cost estimates are required 

before proceeding with a major acquisition since reliable information on 

disposal activity can contribute to the ongoing dialogue on funding 

comparable weapon systems.

22Statement of Federal Financial Accounting Standards No. 5, Accounting for Liabilities of the Federal

Government. 

23Financial Management: Factors to Consider in Estimating Environmental Liabilities for Removing 

Hazardous Materials in Nuclear Submarines and Ships (GAO/AIMD-97-135R, August 7, 1997), Financial

Management: DOD's Liability for Aircraft Disposal Can Be Estimated (GAO/AIMD-98-9, November 20, 

1997), Financial Management: DOD's Liability for the Disposal of Conventional Ammunition Can Be 

Estimated (GAO/AIMD-98-32, December 19,1997), Financial Management: DOD's Liability for Missile

Disposal Can Be Estimated (GAO/AIMD-98-50R, January 7, 1998).
Page 18 GAO/T-AIMD/NSIAD-99-171

Short-term Improvements Underway. The DOD Comptroller has been 

working with the Under Secretary of Defense for Acquisition and 

Technology to develop and issue policy guidance regarding the recognition 

and reporting of environmental cleanup and asset disposal liabilities. Final 

guidance has not been issued to DOD components because DOD and the 

audit community have not reached agreement on when to recognize 

nonenvironmental disposal costs. Meanwhile, DOD components have been 

tasked with developing plans that identify specific actions, with expected 

completion dates, needed to properly estimate and report liability amounts 

in accordance with the expected policy guidance.

Reported Liability for 

Post-Retirement Health 

Care Unsupported

Last year, we reported that DOD did not accumulate the data necessary to 

accurately estimate its military post-retirement health benefits liability, and 

this remained a problem for fiscal year 1998. Instead of the required cost 

data, DOD used budget obligations to calculate its $223 billion estimated 

liability. However, budget obligations may not capture the full costs of 

treatment facilities or some personnel costs, such as pension benefits. In 

addition, the costs represented by budget obligations differed significantly 

from the costs in DOD’s official medical cost accounting system, the 

Medical Expense and Performance Reporting System, and the two were 

not reconcilable. DOD needs reliable cost data to estimate its future retiree 

health care liability but, more importantly, to properly allocate its 

resources, decide whether to provide services internally or through an 

outside party, set third-party billing rates, and benchmark its health care 

delivery system with those of other providers. 

DOD also did not accumulate current or complete historical claims data, 

which are necessary to determine the type of health care services provided, 

to support its fiscal year 1998 calculation; instead, 1994 claims and service 

data were used. For outpatient services, which are estimated to comprise 

over 40 percent of the dollar value of all claims and services, data were 

available from only 15 of 121 military treatment facilities. Finally, while 

DOD relies on data from its Composite Health Care System (CHCS) to 

determine the number of retiree outpatient visits to military treatment 

facilities, and therefore retiree outpatient costs, auditors found that CHCS 

data are often not supported by documentation in medical records. In 

addition, auditors found that visits were double counted and that invalid 

telephone conversations were counted as visits.

Short-term Improvements Underway. DOD has made progress in 

addressing the issues noted in prior years and has additional improvements 
Page 19 GAO/T-AIMD/NSIAD-99-171

underway or planned to support its reporting in this area. DOD has 

(1) established a working group to identify changes needed in its medical 

cost accounting system, (2) gathered outpatient data from all of its military 

treatment facilities that are now operating, (3) obtained claims data as 

recent as fiscal year 1997 to be used in the calculation, and (4) established a 

working group to develop standardized management controls for the 

Military Health System’s automation systems. DOD also reports that 

detailed information on the nature of outpatient visits, including the actual 

medical procedures performed, may be available through a recently 

implemented DOD outpatient data system to support its reporting for this 

area beginning with fiscal year 1999. Auditors have been and will continue 

working with DOD to improve its cost accounting for health care.

Cost of DOD 

Operations Not 

Accurate

Our audit of the U.S. government’s consolidated financial statements found 

that the government was unable to support significant portions of the more 

than $1.8 trillion reported as the total net cost of government operations. 

DOD accounts for about $280 billion of that amount but its financial 

management systems do not capture the full cost of its activities and 

programs. The accuracy of the department’s reported operating costs was 

affected by DOD’s inability to properly value and capitalize its facilities and 

equipment, properly account for and value its inventory, identify its 

environmental and disposal costs, determine its costs associated with postretirement health care for military personnel, and reconcile its records with 

those of Treasury and other agencies. In addition, DOD does not have the 

basic, transaction driven, double-entry accounting systems that are 

necessary to properly control assets and accumulate costs. 

To effectively, efficiently, and economically manage DOD’s programs, its 

managers need reliable cost information for (1) evaluating programs, such 

as, for example, measuring actual results of management’s actions against 

expected savings or determining the effect of long-term liabilities created 

by current programs, (2) making economic choices, such as whether to 

outsource specific activities and how to improve efficiency through 

technology choices, (3) controlling costs for its weapon systems and 

business activities funded through working capital funds, and 
Page 20 GAO/T-AIMD/NSIAD-99-171

(4) measuring performance. As we recently testified, the lack of reliable, 

cost-based information hampers DOD in each of these areas.24 For 

example: 

• DOD has acknowledged that the lack of a cost accounting system is the 

single largest impediment to controlling and managing weapon systems 

costs, including costs of acquiring, managing, and disposing of weapon 

systems.

• DOD is unable to provide actual data on the costs associated with 

functions to be considered for A-76 outsourcing competitions, including 

the capital costs associated with its operations.

• DOD has long-standing problems accumulating and reporting the full 

costs associated with working capital fund operations, which provide 

goods and services in support of the military services. As a result, there 

have been large fluctuations in working capital fund surcharges and, 

therefore, in the prices charged to customers. 

• As part of its Results Act Performance Plan for fiscal year 2000, DOD 

has developed 43 unclassified performance measures and indicators to 

measure a wide range of activities—from force levels to asset visibility, 

but these measures and indicators contain few efficiency measures 

based on cost.25

Short-term Improvements Underway. As discussed in earlier sections, DOD 

has begun addressing problems with assets and liabilities that affect the 

reliability of its reported net costs. However, developing the needed basic, 

double-entry accounting systems and cost accounting systems is a longterm effort towards which DOD has taken only the first steps. 

Reliability of Budget 

Data Impaired

For fiscal year 1998 reporting, federal accounting standards required 

agencies to prepare a new Statement of Budgetary Resources that would 

reconcile their reported net costs to budget information. As part of the 

DOD fiscal year 1998 financial statement audit, auditors found several 

areas in which the systems and controls over DOD’s use of its budgetary 

resources were ineffective: (1) DOD does not know the true amount of 

funds that are available to obligate and spend in its appropriation accounts 

24DOD Financial Management: More Reliable Information Key to Assuring Accountability and 

Managing Defense Operations More Efficiently (GAO/T-AIMD/NSIAD-99-145, April 14, 1999).

25Results Act: DOD’s Annual Performance Plan for Fiscal Year 1999 (GAO/NSIAD-98-188R, 

June 5, 1998).
Page 21 GAO/T-AIMD/NSIAD-99-171

because obligated balances are not always correct or supported, 

(2) reconciliations between DOD and Treasury records are not being 

adequately performed, (3) interagency transactions are not being identified 

and reconciled, and (4) certain disbursements are not being recorded 

promptly in DOD’s accounting records. As a result, the Congress cannot be 

assured that DOD did not overexpend its budget authority for individual 

appropriation accounts or spend more for specific programs for which the 

Congress established spending limits. Conversely, these fund control 

weaknesses also result in the department‘s inability to properly identify 

and manage remaining budget authority, so that funds the Congress 

intended for specific DOD programs may be unused and eventually 

cancelled. 

Some Recorded Obligations Are Incorrect. Auditors found that recorded 

obligations included amounts that were no longer correct or were 

unsupported. Specifically, at the Air Force, the only DOD component 

performing a full financial audit of its obligated balances, an estimated 

$4.3 billion of a $34 billion balance in obligations was found to be incorrect 

or unsupported. For example, obligated balances may not have been 

adjusted when goods or services were delivered at a lesser cost or when 

contracts were modified. In limited tests, the Naval Audit Service found 

that $101 million of $592 million of unliquidated Navy contract obligations, 

or approximately 17 percent, were incorrect. Army auditors also found 

evidence of unsupported obligations but were unable to quantify the extent 

of the problem.

Reconciliations Not Adequately Performed. Comparable to an individual 

reconciling his or her checkbook to a bank statement, DOD’s records on its 

available funds should be reconciled to Treasury records. An effective 

reconciliation of DOD’s and Treasury’s records requires not only identifying 

differences but also determining the appropriate adjustments to resolve the 

differences. As important as these reconciliations are to all federal 

agencies, they are critical for DOD. This is because authorized transactions 

are often charged to DOD’s appropriation accounts by entities not directly 

responsible for the appropriations; for example, the Army may write a 

check to pay a Navy vendor and cite a Navy appropriation account. 

As of September 30, 1998, a comparison of DOD’s and Treasury’s records 

showed that the absolute value of unresolved differences amounted to 

$9.6 billion, of which $7.4 billion related to checks disbursed and the 

remainder to deposits, electronic funds transfers, and interagency 

transactions. These unresolved differences could significantly affect the 
Page 22 GAO/T-AIMD/NSIAD-99-171

status of budget authority available to be obligated and expended. 

Differences between DOD and Treasury records can result from one or 

more of the following: (1) DOD delays in reporting transactions to 

Treasury, (2) Treasury delays in posting transactions to DOD accounts, and 

(3) errors or fraud. 

Reconciliations are a key control for detecting errors or fraud. For 

example, in 1991, an Army disbursing station made a deposit for nearly 

$2.1 million, but the bank mistakenly recorded the deposit for only 

$3,458.89—the deposit ticket number. Because the Army failed to reconcile 

its records with Treasury’s records, this error went undetected until 

auditors found it during 1998. The bank subsequently repaid the 

government the correct deposit amount plus $640,000 in interest.

DOD’s records also show that an estimated $823 million held in suspense 

accounts at the end of fiscal year 1998 have not been properly reported to 

Treasury and are not reflected in the differences between Treasury and 

DOD records noted above. Until these transactions are posted to the 

proper appropriation account, the department will have little assurance 

that the collections and adjustments recorded in these accounts are 

authorized transactions and that its disbursements do not exceed 

appropriated amounts. Moreover, the reported $823 million represents the 

offsetting (netting) of collections and adjustments against disbursements, 

thus understating the magnitude of the unreported amounts. For example, 

audit work for fiscal year 1997 found that, while the Navy had a net balance 

of $464 million in suspense accounts recorded in its records for fiscal year 

1997, the individual transactions, collections as well as disbursements, 

totaled about $5.9 billion.

Inter- and Intra-agency Transactions Not Properly Reconciled. In order to 

portray DOD as a single entity and the federal government as a single 

economic unit, certain transactions that occur between DOD and its 

components and DOD and other federal agencies must be identified and 

eliminated. If interagency transactions are not properly reconciled and 

eliminated, both the costs and revenues of DOD and the government are 

overstated. In addition, agency payables and receivables, when not 

reconciled, can lead to agencies exceeding their total budget resources. For 

example, a DOD receivable from another federal agency represents an 

increase in net budget authority to DOD. If the agency that owes DOD does 

not record a corresponding payable or obligation and the amounts are not 

reconciled, then both agencies have overstated their available budgetary 

resources.
Page 23 GAO/T-AIMD/NSIAD-99-171

To make the fiscal year 1998 consolidated governmentwide financial 

statements balance, Treasury had to record a net $24 billion item on the 

Statement of Changes in Net Position, which it labeled unreconciled 

transactions. This out-of-balance amount was the net of more than 

$250 billion of unreconciled transactions—both positive and negative 

amounts—which Treasury attributed largely to the government’s inability 

to properly identify and eliminate transactions between federal 

government entities. DOD’s inability to identify and eliminate activity and 

balances resulting from transactions among DOD entities and DOD and 

other federal agencies significantly contributed to this problem. 

Recently, the Comptroller requested from all DOD components, 

information on transactions between organizational entities and between 

the department and other federal agencies. The Comptroller has stated his 

intention to use the gathered information to develop departmentwide 

guidance and procedures for reporting elimination entries for the fiscal 

year 1999 financial statements. However, DOD components have indicated 

that it is unlikely that reliable information will be forthcoming for both the 

buyer and the seller side of DOD transactions to permit intra-DOD and 

interagency transactions to be properly eliminated next year.

Disbursements Not Properly Recorded. The auditors’ concerns raised 

about the reliability of the department’s budget information are further 

exacerbated by the department’s problem disbursements—disbursements 

that are not properly matched to specific obligations recorded in the 

department’s records. DOD’s continuing problems with its complex and 

inefficient payment processes generally result in transactions not being 

recorded until long after they have occurred. This is because DOD’s 

payment and accounting processes are generally separate functions carried 

out by separate offices in different locations without integrated systems. As 

a result, accounting for a payment does not occur until after a disbursing 

station has issued a payment and has forwarded the payment information 

to the accounting station. Problems in transaction processing arise when 

the accounting stations are not provided the information or documentation 

that permits them to properly record transactions. 

DOD reported problem disbursements at $17.3 billion as of 

September 30, 1998. To the extent that these disbursements cannot be 

matched to existing recorded obligations, DOD would be required to
Page 24 GAO/T-AIMD/NSIAD-99-171

record a new obligation, which could create an Antideficiency Act26

violation if the available unobligated balances in the department’s 

applicable appropriation accounts were insufficient to cover the amount 

of the obligation.

Overspending/Cancellation of Funds Can Occur. Recent audit reports have 

described the consequences of the department’s inability to keep track of 

its obligations and expenditures. Specifically, auditors found several 

instances in which the department may have spent more than authorized 

amounts. For example, the Air Force Audit Agency reported that the Air 

Force’s Depot Maintenance Activity—a component of one of the 

department’s working capital funds—may have incurred obligations of 

$1.1 billion in excess of available budgetary resources as of 

September 30, 1998. In addition, as we previously reported,27 according to 

Navy records, as of September 30, 1997, obligations in 29 canceled and 

expired appropriations may have exceeded available budget authority by a 

total of $290 million.

DOD’s inability to properly identify and manage its remaining budget 

authority can result in funds that the Congress intended for specific DOD 

programs being unused and eventually canceled. For example, at the end of 

fiscal year 1998, the department had $4.3 billion in expired budget authority 

that canceled.

Short-term Improvements Underway. DOD has not yet developed a 

short-term action plan to address problems with incorrect and unsupported 

obligation data that were identified as a result of auditing this information 

for the first time as part of the fiscal year 1998 financial statement audit. 

However, DOD has acknowledged that these issues cannot be resolved 

without the underlying process and systems improvements identified in its 

long-term financial management improvement strategy. 

DOD has a number of initiatives to address problem disbursements, 

including (1) implementation of a single cash accountability system that 

will be used to report disbursements to the U.S. Treasury and 

26The Antideficiency Act provides that an officer or employee of the United States government may not 

"make or authorize an expenditure or obligation exceeding an amount available in an appropriation or 

fund" or enter into a contract or other obligation for the payment of money "before an appropriation is 

made." (31 U.S.C. 1341 (a)) 

27Financial Management: Problems in Accounting for Navy Transactions Impair Fund Control and 

Financial Reporting (GAO/AIMD-99-19, January 19, 1999).
Page 25 GAO/T-AIMD/NSIAD-99-171

(2) prevalidation. The prevalidation initiative requires that obligations be 

matched to disbursements before the payment is made.

In addition, DOD has been taking actions to improve its processes for 

reconciling its records with those of Treasury. The Defense Finance and 

Accounting Service (DFAS) has drafted standardized procedures for its 

centers to follow in reconciling DOD and Treasury accounts monthly, 

including researching and resolving any differences. DFAS centers are also 

required to begin reconciling balances in budget clearing accounts and 

suspense accounts with the transaction-level detail maintained for each 

military service. 

Extent of Improper 

Payments Not Fully 

Determinable

While our work continues to identify numerous examples of improper and 

unsupported DOD payments, such as the problem disbursement issues 

previously discussed, the true magnitude of DOD’s payment problems is 

unknown. Significant weaknesses have been identified in contractor and 

vendor payments as well as health care provider payments.

Improper Contract and Vendor Payments. We have long reported on DOD’s 

problems in making accurate payments to defense contractors.28 Our work 

continues to identify problems with overpayments and erroneous 

payments to contractors. For example, in the 5 fiscal years 1994 through 

1998, defense contractors returned about $4.6 billion to the DFAS 

Columbus Center, including $746 million in fiscal year 1998, due to 

overpayments caused by contract administration actions and payment 

processing errors.

In compiling the Navy’s fiscal year 1998 financial statements, DFAS 

identified a negative (debit) accounts payable balance of $3.6 billion. 

Typically, such negative accounts payable balances would represent 

duplicate or overpayments to vendors or contractors; however, DFAS did 

not conduct an investigation to determine the cause of this negative 

balance. Instead, DFAS and the Navy made unsupported adjustments of 

more than $6 billion to bring the accounts payable balance to the reported 

credit balance of $2.4 billion.

28DOD Procurement: Funds Returned by Defense Contractors (GAO/NSIAD-98-46R, October 28, 1997) 

and DOD Procurement: Millions in Overpayments Returned by DOD Contractors (GAO/NSIAD-94-106, 

March 14, 1994).
Page 26 GAO/T-AIMD/NSIAD-99-171

In addition to the amounts voluntarily returned by defense contractors, the 

Defense Contract Audit Agency (DCAA) also identifies funds for recovery 

from major defense contractors. Defense contractors submit bills for goods 

and services to DOD for payment. Prior to the submission of these bills, the 

contractor certifies that the bills are proper and payment is warranted. 

DOD pays these bills pending an audit by DCAA. DCAA contract audits 

determine whether the billed amounts comply with prescribed overhead 

rates, contract ceilings, or certain Federal Acquisition Regulations. If 

DCAA determines that the amount billed and paid was not warranted, 

DCAA disallows the costs and DOD recovers the funds. For fiscal years 

1994 through 1998, the Defense Contract Audit Agency disallowed 

$6.8 billion—$1 billion or more per year—in certified bills from defense 

contractors. 

DOD also has problems with improper and fraudulent vendor 

payments—payments for goods and support services.

• An August 1998 Naval Audit Service report29 identified $6.2 million in 

duplicate and erroneous Navy vendor payments out of $369.2 million 

tested. Naval Audit concluded that these improper payments were 

caused by a lack of written policies and procedures for certifying and 

processing vendor invoices, certifying officer errors, accounting 

technician data input errors, and payment by two different paying 

activities for the same goods and/or services.

• In September 1998, we reported30 on internal control and systems 

weaknesses that contributed to two cases of Air Force vendor payment 

fraud—one resulting in the embezzlement of over $500,000 and the other 

resulting in the embezzlement of $435,000 and attempted theft of over 

$500,000. We found that the lack of segregation of duties and other 

control weaknesses, such as weak controls over remittance addresses, 

created an environment where employees were given broad authority 

and the capability, without compensating controls, to perform functions 

that should have been performed by separate individuals under proper 

supervision. We also found that over 1,800 DFAS and Air Force 

employees had a level of access to the vendor payment system that 

allowed them to submit all the information necessary to create 

fraudulent and improper payments.

29Duplicate and Erroneous Payments (Naval Audit Service Report No. 041-98, August 7, 1998).

30Financial Management: Improvements Needed in Air Force Vendor Payment Systems and Controls

(GAO/AIMD-98-274 and related testimony GAO/T-AIMD-98-308, September 28, 1998).
Page 27 GAO/T-AIMD/NSIAD-99-171

Health Care Fraud. In February 1999, the DOD IG reported31 that the 

Defense Criminal Investigative Service (DCIS) had about 500 open criminal 

investigations on health care fraud. DCIS efforts over the last 5 fiscal years 

have resulted in 343 convictions and $1 billion in recoveries. Generally, the 

health care fraud cases investigated by DCIS cover defective and 

fraudulent claims—the same issues as Medicare fraud. Under DOD’s 

fee-for-services health care programs, most provider fraud was 

accomplished through ordering and billing for unnecessary care, 

laboratory tests, durable medical equipment, or x-rays. For example, a 

pharmaceutical company submitted greatly inflated insurance billings 

through the unbundling of clinical test profiles, fabricating test codes, and 

double billing for tests not performed. The company agreed to pay 

$325 million to resolve issues of civil false claims to Medicare and military 

and other federal and state health care programs.

Short-term Improvements Underway. Due to the seriousness of DOD 

vendor and contractor payment systems and control weaknesses, DOD has 

initiated corrective actions to strengthen system and internal controls over 

its payment operations. In the area of contractor overpayments, DOD has 

developed procedures intended to help identify and collect such amounts 

promptly. Other actions include revising internal control guidance to better 

assure separation of duties for all its financial operations and limiting 

access to payment and accounting systems. To address health care fraud, 

DCIS is participating in national Department of Justice-sponsored working 

groups to identify emerging trends in health care fraud and coordinate 

activities of members conducting investigations involving new schemes in 

managed care fraud.

Critical Areas to Be 

Addressed to Meet 

Financial Reform 

Goals

On May 26, 1998, the President directed the head of each agency designated 

by OMB to identify corrective actions to resolve financial reporting 

deficiencies and to make quarterly progress reports to OMB. The 

administration’s goal is to have individual agencies, as well as the 

government as a whole, complete audits and gain unqualified opinions on 

their financial statements. In response, the DOD Comptroller has been 

developing and implementing short-term steps in collaboration with DOD’s 

functional and audit communities, OMB, and GAO, as discussed in the 

previous sections.

31Statement of DOD Inspector General on Department of Defense Vulnerabilities to Waste, Fraud and 

Abuse, Before the Subcommittee on National Security, Veterans Affairs, and International Relations, 

Committee on Government Reform (February 25, 1999).
Page 28 GAO/T-AIMD/NSIAD-99-171

However, an unqualified audit opinion, while certainly important, is not an 

end in itself. Efforts to obtain reliable year-end data that are not backed up 

by fundamental improvements in DOD’s underlying financial management 

systems and operations to support ongoing program management and 

accountability, will not achieve the intended results of the Chief Financial 

Officers Act—fundamentally reforming financial operations to enable the 

production of reliable financial management information supporting 

day-to-day decision-making. In this context, it is essential that DOD also 

establish a well-trained cadre of financial management personnel, a 

short-term improvement action that will help address the financial 

management weaknesses previously identified as well as help ensure that 

the improvement actions cited are implemented as efficiently and 

effectively as possible. Longer term actions addressed in DOD’s first 

Biennial Plan also will be essential for the department to prepare reliable 

financial statements as well as to make planned major financial 

management system improvements throughout DOD’s large and complex 

organization. 

Enhanced Training for 

Financial Management 

Personnel 

One of the key issues facing DOD is the need to ensure that its financial 

management personnel have the knowledge and skills required to reliably 

carry out the basic transaction processing activities that were previously 

discussed throughout DOD’s large and complex organization. Our work32

has shown that state governments and private sector organizations place a 

strong emphasis on training as a means of upgrading financial workforce 

knowledge of accounting and financial management requirements. In 

contrast, the results of a survey we conducted of key DOD financial 

managers showed that over half of those surveyed had received no 

financial- or accounting-related training during 1995 and 1996.33

DOD leadership has acknowledged that it needs to improve the capabilities 

of its financial managers, and DFAS is developing a program intended to 

identify the kinds of skills and developmental activities needed to improve 

the competencies of its financial personnel. We have recommended that 

DOD modify its planned program to better ensure that financial 

management personnel throughout the department receive necessary 

32Financial Management: Profile of Financial Personnel in Large Private Sector Corporations and State 

Governments (GAO/AIMD-98-34, January 2, 1998).

33Financial Management: Training of DOD Financial Managers Could Be Enhanced

(GAO/AIMD-98-126, June 24, 1998).
Page 29 GAO/T-AIMD/NSIAD-99-171

training, including establishing minimum training requirements 

emphasizing technical accounting and related financial management 

courses. This recommended approach is similar in scope to the program 

recently put in place to improve the skills of the department’s acquisition 

workforce.

Updates to Long-term 

Improvement Plan Need to 

Incorporate Additional 

Elements

The National Defense Authorization Act for Fiscal Year 1998 (Public Law 

105-85) required the Secretary of Defense to biennially submit to the 

Congress a strategic plan for the improvement of financial management 

within DOD. The plans are to address all aspects of financial management 

within DOD, including the finance systems, accounting systems, and data 

feeder systems that support its financial functions, including the 

department’s concept of operations for financial management.

DOD submitted its first Biennial Plan to the Congress on October 26, 1998. 

The department has committed to update the plan annually rather than 

biennially as required by law. This first plan presents DOD’s concept of 

operations, the current environment, and the transition plan intended to 

describe the goals of the department for achieving the target financial 

management environment and to identify the strategies and corrective 

actions necessary to move through the transition. It also provides 

information on the specific financial management improvement initiatives 

intended to implement the transition plan.

We have analyzed DOD’s first plan and, in January 1999, reported34 the 

results of our analysis to the Senate and House Armed Services 

Committees. As we stated in our report, DOD’s plan represents a great deal 

of effort and provides a first-ever vision of the department’s future financial 

management environment. In developing this overall concept of its 

envisioned financial management environment, DOD has taken an 

important first step in improving its financial management operations. The 

department’s plan also represents a significant landmark because it 

includes, for the first time, a discussion of the importance of the 

programmatic functions of personnel, acquisition, property management, 

and inventory management to the department’s ability to support 

consistent, accurate information flows to all information users. In addition, 

DOD’s plan includes an extensive array of initiatives intended to move the 

34Financial Management: Analysis of DOD's First Biennial Financial Management Improvement Plan

(GAO/AIMD-99-44, January 29, 1999).
Page 30 GAO/T-AIMD/NSIAD-99-171

department from its current state to its envisioned financial management 

environment.

If effectively implemented, the initiatives discussed should result in 

improving DOD’s financial management operations. However, we also 

reported that modifications to the plan are needed if DOD is to achieve the 

full range of reforms needed. Specifically, the department’s planned update 

should include the following.

• A revised concept of operations. A revised concept of operations needs 

to reflect, at a high level, the full range of the department’s financial 

management operations, including (1) how it will support budget 

formulation and (2) how its financial management operations will 

effectively support not only financial reporting, but also asset 

accountability and control. In particular, including the role of 

department’s Planning, Programming, and Budgeting System (PPBS) in 

its concept of operations will be essential to the development of a fully 

integrated financial management system. Such an integrated system will 

help ensure that budgets consider financial implications and that policy 

decisions are based on sound financial information.

• Shared servicing and outsourcing strategies. Many leading organizations 

have used shared servicing strategies built on a three-staged process 

focused on (1) consolidation, (2) standardization, and (3) reengineering 

financial operations to reduce the cost of, and improve control over, 

day-to-day accounting operations. With respect to outsourcing, our 

October 1997 report35 on the results of our survey of selected private 

sector and nonfederal public organizations’ use of outsourcing showed 

that the following factors were fundamental to achieving projected cost 

savings, process cycle time reductions, and other expected financial 

management improvements: (1) developing a structured approach for 

identifying functional areas to be considered for outsourcing, 

(2) identifying the criteria to be used in determining whether or not to 

outsource a specific function, and (3) establishing effective controls to 

oversee outsourcing vendors.

• Clarification of Transition Plan. The transition plan needs to clarify the 

role that the 200 planned improvement initiatives will play in bridging 

the gap between the current environment and the envisioned future 

35Financial Management: Outsourcing of Finance and Accounting Functions (GAO/AIMD/NSIAD-98-43, 

October 17, 1997).
Page 31 GAO/T-AIMD/NSIAD-99-171

concept of operations and the steps the department will take to ensure 

that it will build reliability into the data provided by its feeder systems. 

• Concepts of Clinger-Cohen. The plan should include the concepts 

established in the Clinger-Cohen Act (40 U.S.C. 1401) for effectively 

implementing the technology improvement initiatives contained in the 

plan, including establishing processes to help ensure that such 

initiatives are implemented at acceptable costs, within reasonable and 

expected time frames, and are contributing to tangible, observable 

improvements in mission performance.

While these problems must be addressed over the long term, we recognize 

that in the short term, the department still must focus on the Year 2000 

computing challenge.36 However, DOD now has a unique opportunity to 

capitalize on the valuable lessons it has learned in addressing the Year 2000 

issue and apply them to its overall management of financial management 

and information technology. Doing so can enable the department to acquire 

high performing, cost-effective systems and to avoid repeating costly 

mistakes. For example: 

• Without the continuing, active involvement of top-level managers, major 

management reform efforts cannot succeed.

• Maintaining a reliable, up-to-date inventory of systems is fundamental to 

well-managed financial management and information technology 

programs.

• DOD has spent 3 years identifying system interfaces and implementing 

controls at the system level that should help prevent future data 

exchange problems in its systems and resolve conflicts between 

interface partners.

• Once the Year 2000 effort is completed, DOD can use the operational 

and functional evaluations to further identify and retire duplicative and 

unproductive systems. 

The Secretary of Defense has expressed the department’s commitment to 

financial management reform. He recently announced that he was 

expanding his Defense Reform Initiative to include financial management. 

Achieving effective reform will entail the involvement and dedication of top 

management. Working through the Defense Management Council or a 

similar structure of the department’s high-ranking leadership, such as that 

36Year 2000 Computing Crisis: Defense Has Made Progress, But Additional Management Controls Are 

Needed (GAO/T-AIMD-99-101, March 2, 1999).
Page 32 GAO/T-AIMD/NSIAD-99-171

used to address the Year 2000 computing crisis, is a key factor in achieving 

major change within the organization.

In closing, Mr. Chairman, sustained congressional attention to 

governmentwide financial management reform, such as that provided by 

this hearing, will be critical to instilling expected accountability in DOD 

and other agencies across government. 

Mr. Chairman, this concludes my statement. We will be glad to answer any 

questions you or the other Members of the Subcommittee may have at this 

time.
Page 33 GAO/T-AIMD/NSIAD-99-171
Page 34 GAO/T-AIMD/NSIAD-99-171
Page 35 GAO/T-AIMD/NSIAD-99-171

Related GAO Products

Property, Plant and 

Equipment

Financial Management: Accounting Implications of DOD’s Facilities

Demolition Programs (GAO/AIMD-98-194R, August 28, 1998).

Financial Audit: DOD Mission Asset Existence Verification

(GAO/AIMD-98-196R, May 29, 1998).

Army Logistics Systems: Opportunities to Improve the Accuracy of the

Army's Major Equipment Item System (GAO/AIMD-98-17, January 23, 

1998). 

Financial Management: DOD's Approach to Financial Control Over

Property Needs Structure (GAO/AIMD-97-150, September 30, 1997). 

Financial Management: Air Force Budget Request Could Be Enhanced

with More Complete Aircraft Data (GAO/AIMD-97-137R, August 21, 1997). 

Financial Management: Accuracy of Air Force Aircraft and Missile Data

Could Be Improved (GAO/AIMD-97-141R, August 15, 1997). 

CFO Act Financial Audits: Navy Plant Property Accounting and Reporting

Is Unreliable (GAO/AIMD-96-65, July 8, 1996). 

Inventory Defense Inventory: Status of Inventory and Purchases and Their

Relationship to Current Needs (GAO/NSIAD-99-60, April 16, 1999).

Defense Inventory: DOD Could Improve Total Asset Visibility Initiative

With Results Act Framework (GAO/NSIAD-99-40, April 12, 1999).

Defense Inventory: Navy’s Procedures for Controlling In-Transit Items Are

Not Being Followed (GAO/NSIAD-99-61, March 31, 1999).

Defense Inventory: Continuing Challenges in Managing Inventories and

Avoiding Adverse Operational Effects (GAO/NSIAD-99-83, 

February 25, 1999).

Department of Defense In-Transit Inventory (GAO/NSIAD-98-80R, 

February 27, 1998). 
Related GAO Products

Page 36 GAO/T-AIMD/NSIAD-99-171

Financial Reporting: DOD's Fiscal Year 1996 Financial Statements

Inventory Reporting Does Not Meet Standards (GAO/AIMD-98-16, 

December 24, 1997). 

Defense Inventory: Inadequate Controls Over Air Force Suspended Stocks

(GAO/NSIAD-98-29, December 22, 1997). 

Defense Logistics: Much of the Inventory Exceeds Current Needs

(GAO/NSIAD-97-71, February 28, 1997). 

Defense Inventory: Spare and Repair Parts Inventory Costs Can Be

Reduced (GAO/NSIAD-97-47, January 17, 1997). 

Navy Financial Management: Improved Management of Operating

Materials and Supplies Could Yield Significant Savings

(GAO/AIMD-96-94, August 16, 1996). 

Defense Ammunition: Significant Problems Left Unattended Will Get

Worse (GAO/NSIAD-96-129, June 21, 1996). 

Environmental/

Disposal Liability

Financial Management: DOD's Liability for Missile Disposal Can Be 

Estimated (GAO/AIMD-98-50R, January 7, 1998). 

Financial Management: DOD's Liability for the Disposal of Conventional

Ammunition Can Be Estimated (GAO/AIMD-98-32, December 19, 1997). 

Financial Management: DOD's Liability for Aircraft Disposal Can Be

Estimated (GAO/AIMD-98-9, November 20, 1997). 

Financial Management: Factors to Consider in Estimating Environmental

Liabilities for Removing Hazardous Materials in Nuclear Submarines and

Ships (GAO/AIMD-97-135R, August 7, 1997). 

Disbursements Financial Management: Problems in Accounting for Navy Transactions

Impair Funds Control and Financial Reporting

(GAO/AIMD-99-19, January 19, 1999).
Related GAO Products

Page 37 GAO/T-AIMD/NSIAD-99-171

Internal Controls: Reporting Air Force Vendor Payment System

Weaknesses Under the Federal Managers’ Financial Integrity Act

(GAO/AIMD-99-33R, December 21, 1998).

Financial Management: Improvements Needed in Air Force Vendor

Payment Systems and Controls (GAO/AIMD-98-274, September 28, 1998 

and GAO/T-AIMD-98-308, September 28, 1998).

Financial Management: Seven DOD Initiatives That Affect the Contract

Payment Process (GAO/AIMD-98-40, January 30, 1998). 

DOD Procurement: Funds Returned by Defense Contractors

(GAO/NSIAD-98-46R, October 28, 1997).

Financial Management: DOD Progress Payment Distribution Procedures

(GAO/AIMD-97-107R, June 21, 1997). 

Financial Management: The Prompt Payment Act and DOD Problem

Disbursements (GAO/AIMD-97-71, May 23, 1997). 

Financial Management: Improved Reporting Needed for DOD Problem

Disbursements (GAO/AIMD-97-59, May 1, 1997). 

DOD Problem Disbursements Contract Modifications Not Properly

Recorded in Payment System (GAO/AIMD-97-69R, April 3, 1997). 

Financial Management: Improved Management Needed for DOD

Disbursement Process Reforms (GAO/AIMD-97-45, March 31, 1997). 

DOD Problem Disbursements (GAO/AIMD-97-36R, February 20, 1997). 

Navy Anti-Deficiency Act Training (GAO/AIMD-96-53R, April 12, 1996). 

Navy Negative Undelivered Orders (GAO/AIMD-96-37R, January 12, 1996). 

Personnel Financial Management: Training of DOD Financial Managers Could Be

Enhanced (GAO/AIMD-98-126, June 24, 1998).

Financial Management: Profile of Defense Finance and Accounting Service

Financial Managers (GAO/AIMD-98-133, May 28, 1998).
Related GAO Products

Page 38 GAO/T-AIMD/NSIAD-99-171

Financial Management: Profile of Navy and Marine Corps Financial

Managers (GAO/AIMD-98-86, April 15, 1998). 

Financial Management: Profile of Army Financial Managers

(GAO/AIMD-98-58, February 25, 1998). 

Financial Management: Profile of Financial Personnel in Large Private

Sector Corporations and State Governments (GAO/AIMD-98-34, 

January 2, 1998). 

Financial Management: Profile of Air Force Financial Managers

(GAO/AIMD-98-4, November 28, 1997). 

Financial Management: Outsourcing Finance and Accounting

(GAO/AIMD/NSIAD-98-43, October 17, 1997). 

Financial Management: Profile of DOD Comptroller/CFO Financial

Managers (GAO/AIMD-97-97, June 27, 1997). 

Financial Management: Opportunities to Improve Experience and Training

of Key Navy Comptrollers (GAO/AIMD-97-58, May 5, 1997). 

Financial Management: An Overview of Finance and Accounting Activities

in DOD (GAO/AIMD/NSIAD-61, February 19, 1997). 

DFAS Hiring Opportunities (GAO/AIMD-96-916R, July 18, 1996). 

Systems Year 2000 Computing Crisis: Defense Has Made Progress, But Additional 

Management Controls Are Needed (GAO/T-AIMD-99-101, March 2, 1999).

Financial Management: Comments on DFAS's Draft Federal Accounting

Standards and Requirements (GAO/AIMD-97-108R, June 13, 1997). 

Financial Management: DOD Inventory of Financial Management Systems

Is Incomplete (GAO/AIMD-97-29, January 31, 1997). 

DOD Accounting Systems: Efforts to Improve System for Navy Need

Structure (GAO/AIMD-96-99, September 30, 1996). 

Information Security: Computer Attacks at Department of Defense Pose

Increasing Risks (GAO/AIMD-96-84, May 22, 1996). 
Related GAO Products

Page 39 GAO/T-AIMD/NSIAD-99-171

Other DOD Financial Management: More Reliable Information Key to Assuring

Accountability and Managing Defense Operations More Efficiently

(GAO/T-AIMD/NSIAD-99-145, April 14, 1999).

Financial Audit: 1998 Financial Report of the United States Government

(GAO/AIMD-99-130, March 31, 1999).

Auditing the Nation’s Finances: Fiscal Year 1998 Results Highlight Major

Issues Needing Resolution (GAO/T-AIMD-99-131, March 31, 1999).

Financial Management: Analysis of DOD’s First Biennial Financial

Management Improvement Plan (GAO/AIMD-99-44, January 29, 1999).

Major Management Challenges and Program Risks: A Governmentwide

Perspective (GAO/OGC-99-1, January 1999).

Major Management Challenges and Program Risks: Department of Defense

(GAO/OGC-99-4, January 1999).

Results Act: DOD’s Annual Performance Plan for Fiscal Year 1999

(GAO/NSIAD-98-188R, June 5, 1998).

Department of Defense: Financial Audits Highlight Continuing Challenges

to Correct Serious Financial Management Problems

(GAO/T-AIMD/NSIAD-98-158, April 16, 1998).

Financial Audit: 1997 Consolidated Financial Statements of the United

States Government (GAO/AIMD-98-127, March 31, 1998). 

CFO Act Financial Audits: Programmatic and Budgetary Implications of

Navy Financial Data Deficiencies (GAO/AIMD-98-56, March 16, 1998). 

Defense Management: Challenges Facing DOD in Implementing Defense

Reform Initiatives (GAO/T-AIMD/NSIAD-98-122, March 13, 1998).

Financial Management: Issues To Be Considered by DOD in Developing

Guidance for Disclosing Deferred Maintenance on Ships (GAO/AIMD-98-46, 

February 6, 1998). 
Related GAO Products

Page 40 GAO/T-AIMD/NSIAD-99-171

Financial Management: Issues to Be Considered by DOD in Developing

Guidance for Disclosing Deferred Maintenance on Aircraft

(GAO/AIMD-98-25, December 30, 1997). 

Financial Management: DOD Needs to Expedite Plans to Implement

Deferred Maintenance Accounting Standard (GAO/AIMD-97-159R, 

September 30, 1997). 

DOD High-Risk Areas: Eliminating Underlying Causes Will Avoid Billions

of Dollars in Waste (GAO/T-AIMD/NSIAD-143, May 1, 1997). 

High-Risk Area: Actions Needed to Solve Pressing Management Problems

(GAO/T-AIMD/GGD-97-60, March 5, 1997). 

High-Risk Series: Benefits to Be Gained by Continued Emphasis on

Addressing High-Risk Areas (GAO/T-AIMD-97-54, March 4, 1997). 

High-Risk Area: Update on Progress and Remaining Challenges

(GAO/T-HR-97-22, February 13, 1997). 

High-Risk Series: Defense Inventory Management (GAO/HR-97-5, 

February 1997). 

High-Risk Series: Defense Financial Management (GAO/HR-97-3, 

February 1997). 

CFO Act Financial Audits: Increased Attention Must Be Given to Preparing

Navy's Financial Reports (GAO/AIMD-96-7, March 27, 1996). 

High-Risk Series: An Overview (GAO/HR-95-1, February 1995).

(918964) Letr
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