United States General Accounting Office

GAO Testimony

Before the Subcommittee on Government Management,

Information and Technology, Committee on Government

Reform and Oversight, House of Representatives

For Release on Delivery

Expected at

10 a.m.

Thursday,

April 16, 1998

DEPARTMENT OF

DEFENSE

Financial Audits Highlight

Continuing Challenges to

Correct Serious Financial

Management Problems

Statement of Gene L. Dodaro

Assistant Comptroller General

Accounting and Information Management Division

GAO/T-AIMD/NSIAD-98-158

Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to participate in this important hearing to

discuss the status of financial management at the Department of Defense

(DOD). This discussion is timely in light of our recent report on the

first-ever consolidated financial statements of the U.S. government

subjected to audit.1

 The Chief Financial Officers (CFO) Act of 1990, as

expanded by the Government Management Reform Act of 1994, also

requires annual audited financial statements for DOD, along with other

major individual departments and agencies across the executive branch.

The goals of these acts are to promote greater accountability in managing

government finances by improving financial systems, strengthening

financial personnel qualifications, and generating more reliable, timely

information on the costs and financial performance of government

operations.

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 encompass a

reported over $1 trillion in assets, nearly $1 trillion in liabilities, 3 million

military and civilian personnel, and outlays of $262 billion in fiscal year

1997, or about 48 percent of total discretionary spending for the entire

government. Consequently, DOD’s operations have a tremendous impact on

the government’s consolidated reporting.

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.2

The audits of DOD’s and individual military services’ financial statements

for fiscal year 1997 performed by the DOD Inspector General (IG) and the

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. These problems range from an inability to properly account for

1

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

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

2

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

Financial Management (GAO/HR-97-3, February 1997).

Page 1 GAO/T-AIMD/NSIAD-98-158
billions of dollars in assets, to not properly estimating the full extent of the

government’s liabilities, to not being able to accurately report

disbursements and account for basic transactions. Collectively, these

problems leave DOD highly vulnerable to the loss of assets and inefficient

operations.

Expenditures on wasteful or inefficient operations divert scarce resources

from defense priorities such as weapon systems modernization and

readiness. Financial management weaknesses also greatly impede DOD’s

ability to have reliable and timely information needed to make sound

resource decisions. Moreover, such weaknesses prevent DOD from

routinely generating the type of management information needed to

effectively and efficiently manage its day-to-day operations.

DOD recognizes these problems and has many efforts underway or planned

to address them. However, the Department is struggling to meet the many

challenges brought about by decades of neglect and an inability to fully

institute sound financial management practices. Achieving the financial

management goals established by the CFO Act, particularly in light of the

serious and widespread nature of DOD’s long-standing financial

management problems, will only be possible with the sustained,

demonstrated commitment of the Department’s top leaders.

I will focus my remarks today on the serious material weaknesses now

confronting the Department, the resulting impact on DOD’s ability to

effectively carry out its programs and operations, and the efforts

underway to address these deficiencies. These material deficiencies

include DOD’s inability to

• properly account for and report billions of dollars of property, equipment,

inventory, and supplies;

• estimate and report material amounts of environmental and disposal

liabilities and related costs;

• determine the liability associated with the future cost of post-retirement

health benefits for military employees;

• accurately report the net costs of its operations;

• properly account for billions of dollars of basic transactions, especially

those between DOD component organizations and between DOD and other

federal government entities; and

• ensure that all disbursements are properly recorded and reconciled.

Page 2 GAO/T-AIMD/NSIAD-98-158
I will also discuss two key areas that affect the ultimate resolution of DOD’s

long-standing financial management deficiencies: financial management

personnel training and financial systems improvement. Finally, my

statement touches upon two serious governmentwide problems that are

critical areas at DOD—preparations to handle the Year 2000 problem and

actions needed to address computer security threats.

Deficiencies Related

to Property, Plant and

Equipment and

Inventories

As discussed in our recent report on the fiscal year 1997 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.

Hundreds of billions of dollars of the more than $1.2 trillion of these

reported assets are not adequately supported by financial and/or logistical

records.

With an estimated $1 trillion in physical assets, DOD is by far the largest

holder of physical assets in the federal government. DOD relies primarily on

various logistical systems both to maintain accountability and visibility

over its assets to meet its military objectives and readiness goals, as well

as to report information on these assets in its financial statements. As part

of the fiscal year 1997 financial statement audit work, auditors tested the

reliability of the information in these systems. As discussed in the

following sections, serious material weaknesses were found in DOD

systems and processes relied on to maintain accountability and to control

physical assets under its purview, including military equipment; general

property, plant and equipment (PP&E); and inventories. In addition,

included in these physical assets is a reported $90 billion of government

material in the hands of contractors. Accurately accounting for and

controlling these contractor-held assets has been a long-standing issue in

DOD. The DOD IG has issued numerous reports on this problem and is

actively working with the agency to develop controls and processes to

improve the accuracy of this information.

Overall, these problems impair DOD’s ability to (1) know the location and

condition of all its assets, including those used for deployment,

(2) safeguard assets from physical deterioration, theft, or loss, (3) prevent

the purchase of assets already on hand, and (4) determine the full costs of

the programs that use these assets. DOD’s deficiencies in these areas will

also have an adverse affect on its ability to measure progress against the

indicators set out in its recent Performance Plan, covering fiscal year 1999,

Page 3 GAO/T-AIMD/NSIAD-98-158
prepared in response to the requirements of the Government Performance

and Results Act. For example, in its plan, DOD sets out indicators of

(1) achieving a 90 percent visibility rate for materiel and (2) reducing

secondary inventories3

 from $70 billion to $48 billion. Weaknesses

identified in DOD’s logistical systems, as well as its inability to accurately

determine costs, may hamper its ability to reliably determine its

performance against either of these and other indicators.

Military Equipment

Accountability and

Visibility

DOD’s investment in military weapons systems represents an estimated

$635 billion of the federal government’s total property, plant, and

equipment reported at about $1 trillion. Accountability over these critical

assets entails knowing, for each asset category, how many exist, where

they are located, and their value. Overall, the auditors found that DOD’s

logistical systems could not be relied upon to provide this basic

information. DOD relies on these systems to support not only the services’

financial reports, but also to provide data on the number and location of

military equipment and support operational requirements as well.

As a result, senior DOD officials did not have accurate information to use in

making operational decisions or for financial reporting. To further test the

accuracy of this critical logistical information, GAO, along with auditors

from the offices of the DOD Inspector General and the military service audit

agencies jointly conducted tests of logistical systems supporting about

80 percent of DOD’s reported military equipment, by attempting to trace

selected military equipment items recorded in those systems to the assets

in the field. Because of the sensitive nature of the equipment selected from

the systems for these existence tests, the tests were designed to either

“pass” or “fail.” For a number of critical systems being tested, it was

agreed with the military leaders who use those systems, that a “pass”

would result 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 up to two errors could be identified with the

system still receiving a passing grade. The results of auditors’ reviews and

tests of the reliability of information on the numbers and locations of

military equipment and each of the military service’s key logistical systems

are described below.

Navy The Navy does not have a central system that supports both financial

reporting and worldwide visibility over various categories of military

equipment. Instead, it relies on various systems and publications to

3

Secondary inventories are repairable and consumable items in storage at depots and installations.

Page 4 GAO/T-AIMD/NSIAD-98-158
provide this information. As part of the joint tests, described previously, of

DOD’s reported military equipment, these systems and publications were

tested to determine if reported assets actually existed.

Auditors tested recorded information for 11 categories of Navy military

equipment. The Navy’s systems failed for three of the 11 categories of

tested military equipment—active boats, inactive service craft, and

uninstalled engines. This means that the systems used to provide visibility

over these mission critical items were not reliable.

• Active boats. The Combatant Craft and Boat Support System (CBSS), is

used to provide senior Navy military officials visibility over the number

and location of the Navy’s “boats.” These boats range in value up to

$8 million and include landing craft and other boats used to assist in

carrying out activities such as amphibious operations, aircraft rescues,

drone recoveries, and mine countermeasures. The tests for these mission

critical assets— for which a “pass” allowed zero errors—found that 2 of

the 45 boats selected for examination were included in CBSS as available

for use, even though they had been disposed of or sold.

• Uninstalled engines. The Navy uses information from its logistical system

for engines—Aircraft Engine Management System—to track all Navy

aircraft engines, both installed and uninstalled. In testing this system—for

which a “pass” allowed up to two errors—auditors were unable to verify

the existence of 10 of the 105 sampled uninstalled engines. These 10

engines were valued at up to $4 million each.

• Service craft. Service craft are waterborne utilitarian craft not classified as

ships or boats, which provide services to the fleet in harbors, ports, and at

sea. The Navy uses the Naval Vessel Register—an electronic publication

updated weekly that includes custodian, fleet assignment, and condition

information on the Navy’s ships and service craft. This publication is relied

on to maintain visibility of these assets. Auditors’ tests—for which a “pass”

allowed up to two errors—revealed that 6 of the 79 inactive service craft

tested could not be located. Fifteen other service craft were sold or

otherwise disposed of prior to the audit testing, but remained in the Naval

Vessel Register coded as “Inactive.” An “Inactive” coding indicates that an

item was taken out of active service but was retained for possible use in

meeting rapid mobilization requirements. An asset may also be placed in

this category pending disposal. Table 1 shows the service craft that were

no longer in the Navy’s possession.

Page 5 GAO/T-AIMD/NSIAD-98-158
Table 1: Service Craft Erroneously

Included in the Naval Vessel Register

Type of Service Craft

Reported Value

(in thousands)

Number Sold

or Disposed

Harbor Tugs $583 - $873 3

Barges and Lightersa $20 - $414 16

Ferry Boat or Launch $843 1

Floating Crane $468 1

Total 21

aLighters are barges which are used in port to transport personnel, goods, etc., from ship to ship

or ship to shore.

In addition, auditors’ tests of systems supporting inactive ships and boats,

which were permitted up to two errors before the systems failed due to

the less critical nature of these military equipment categories, showed that

these systems included one inactive cargo ship and two inactive boats

which had been disposed of or sold. The Naval Audit Service is in the

process of developing a report containing recommendations for actions to

address these critical issues.

Army The Army relies on a central logistics system, the Continuing Balance

System-Expanded (CBSX), to maintain worldwide visibility for all military

equipment, including the Army’s most critical war fighting equipment

(national defense assets including tanks, cannons, armored personnel

carriers, and aircraft). The system is intended to provide accurate, timely,

and auditable equipment status information necessary for direct troop

support. The central system should mirror the official accountable records

of equipment balances, such as property book records maintained by

various Army activities, including Army divisions that may be deployed,

depots that repair or upgrade equipment, and storage sites.

The Army calculates a compatibility rate to measure the extent to which

the central system and the property book records agree—with a

98 percent compatibility rate as a goal.4

 As of July 1997, the Army reported

an Army-wide compatibility rate of about 92 percent. However, in

January 1998, we reported that the 92 percent rate is overstated because

Army does not include all the adjustments that are made to records.5

 If

these adjustments were included in the calculation, the Army-wide rate

would fall to about 87 percent.

4

Army calculates the compatibility rate as a ratio of the total number of adjusted equipment items to

the total number of equipment items on hand, expressed as a percentage.

5

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

System (GAO/AIMD-98-17, January 23, 1998).

Page 6 GAO/T-AIMD/NSIAD-98-158
In addition, we reported that the compatibility rate calculation does not

provide a complete indicator of the central system’s accuracy because it

does not include errors associated with equipment that is in-transit

between locations. These in-transit errors are significant—when they

occur, the Army loses visibility over this equipment. In June 1996, the

Army Audit Agency reported that as of July 31, 1995, 69 percent of the

1,135 open in-transit records in the central system it analyzed were invalid.

The auditors identified a number of reasons for the invalid in-transit

records, including system interface problems, use of duplicate unit

identification codes, and shipments that were redirected to another

destination after the shipment was initiated.6

We recently analyzed a statistically projectable sample of adjustments

made to data in the central system to bring it into agreement with data in

the Army’s primary property book system. Our analysis showed that over

40 percent of the adjustments were needed because of transactions that

had been recorded in unit level property books, but not received by the

central system. Until these adjustments were made, assets including

Howitzer cannons, M-16 rifles, and cargo trucks were not reflected in the

central system. For example, one of the adjustments was for a Howitzer

M-119 cannon, used for firing shells at a high angle of elevation to reach a

target behind cover or in a trench and valued at approximately $423,000,

that had been recorded in a deployed unit’s property book, but the

transaction was not received by the central logistical system.

These problems are long-standing. In a 1993 study,7

 we found that the

Army did not maintain reliable information on the types, quantities, and

locations of its equipment. For example, we found that one unit’s

equipment records indicated having 220 more tanks than were being

reported in the central system. In another instance, a unit reported 18

advanced attack helicopters which were not recorded in the central

system. Such discrepancies not only result in financial reporting

misstatements, but, as DOD acknowledged in its “Lessons Learned” report

following Desert Storm, inaccurate or unreliable central system data can

impair equipment distribution decisions. As a result, some units received

equipment in excess of their authorized levels, while other units were not

provided critically needed equipment. Our recent report identified specific

reasons for discrepancies between central system and unit accountability

records and made nearly 20 detailed recommendations, including

6

Financial Reporting of Equipment In Transit (U.S. Army Audit Agency, AA 96-156, June 17, 1996).

7

Financial Management: Army Lacks Accountability and Control Over Equipment (GAO/AIMD-93-31,

September 30, 1993).

Page 7 GAO/T-AIMD/NSIAD-98-158
suggestions to (1) ensure that the central system receives applicable

property book transactions, (2) correct software problems, (3) improve

the transaction audit trail, and (4) enhance the training of property book

officers.8

Because of the known problems with the Army’s central system, the

auditors focused the existence tests, described previously, of the Army’s

recorded assets on its unit-level property books which are used to provide

information to the central system, and on other logistical systems

containing asset information. The tests were designed to validate the

existence of assets for the five categories of military equipment that

comprised 70 percent of the reported value of Army mission assets. These

categories are aircraft, combat tracked vehicles, communication

equipment, missiles, and missile support equipment. The data in the

Army’s property books passed the auditors’ tests for existence for each of

the five asset categories. However, the auditors found two errors in the

missile support category, one of which was a critical military equipment

item.

Specifically, one missile launcher for an AVENGER weapon system could not

be located. The AVENGER weapon system is a lightweight, highly mobile

surface-to-air missile/gun system which can be mounted on a High

Mobility MultiPurpose Wheeled Vehicle (HMMWV). Each AVENGER launch

system costs approximately $1 million. Army officials’ explanation for

problems in locating the missile launcher was that the serial number listed

in the Army’s records for the AVENGER missile launcher was in fact the

serial number of the HMMWV and that the launcher had been removed from

the HMMWV. As of April 9, 1998, this launcher had not been located. The

Army Audit Agency’s draft report on “Accountability for Army Mission

Equipment” recommends that the Deputy Chief of Staff for Logistics

establish specific criteria and procedures for recording serial numbers in

unit property books for high-dollar value components of equipment items.

Air Force Our recent work identified problems with the Air Force’s Reliability and

Maintainability Information System (REMIS), which is intended to provide

worldwide visibility over its equipment, such as aircraft and missiles, and

timely maintenance and logistical information. This central logistical

system is used to support Air Force field and operational commanders.

Over 1,700 users have access to various modules of the central system to

support a variety of activities including strategic planning, asset

8

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

System (GAO/AIMD-98-17, January 23, 1998).

Page 8 GAO/T-AIMD/NSIAD-98-158
accountability, and budgeting. As with the Army’s central logistical system,

the accuracy of the data in the Air Force system is important not only for

financial reporting, but also for effective asset control and program

management. The Air Force central system includes three databases:

(1) an inventory table, which identifies equipment by serial number and

type, (2) an assignment table, which shows the assigned command and

mission for aircraft and missiles by serial number, and (3) a possession

table, which identifies the physical location of aircraft and missiles by

serial number. These databases generally should be consistent. However,

we reported9

 in August 1997 that our analyses of these three databases

identified a number of inconsistencies in the number of aircraft and

missiles reported. For example, our findings included the following.

• Over 200 ground launched cruise missiles were identified in the

assignment table that were not included in either of the other central

system databases. According to the system program office, these missiles

were destroyed years ago as part of a treaty with the Soviet Union.

• Twelve aircraft and missile records were erroneously included in the

inventory table (they did not appear in the assignment or possession

table). It was determined that these records did not represent actual

equipment and therefore should have not been in the central system

inventory table.

• Twenty-five aircraft and eight air-launched cruise missiles were included

in the central system inventory and assignment tables, but were not in the

possession table. These assets were not reflected in the possession table

because the table had not been updated to reflect asset transfers from one

location to another.

• Duplicate records for 10 helicopters were included in the central system

inventory database. This error occurred as the result of improper data

entry when making modifications to type/model/series information.

We recommended short-term actions the Air Force could take to improve

the accuracy of aircraft and missile data in its central logistical system.

Such actions included making regular comparisons and analyses of the

central system databases and researching and correcting any

inconsistencies, such as the mismatches we identified.

In addition, the systems the Air Force relied on to account for and control

military equipment “passed” the existence tests described previously.

However, the auditors identified errors, which, although within the

9

Financial Management: Accuracy of Air Force and Missile Data Could Be Improved

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

Page 9 GAO/T-AIMD/NSIAD-98-158
acceptable limits of the auditors’ tests for a passing mark on the

equipment reported in the system, may raise concerns over the reliability

of location information on critical items in the Air Force’s arsenal of

military equipment. Specifically, as part of the auditors’ tests, they

determined that (1) two engines included in the logistical system records

as uninstalled engines were actually installed in aircraft several years ago,

and (2) an older model C-130 cargo plane remained in the logistical

records even though the aircraft had been destroyed a few years ago at a

contractor facility during corrosion testing. In addition, while not

specifically part of the auditors’ financial audit testing, they noted that the

Air Force’s logistical records on the location of 46 engines, valued at

$91,000 each, were incorrect. Air Force officials informed the auditors that

erroneous information was included in the logistical systems primarily

because the contractors had not updated the records when these assets

were transferred from the contractor’s facility. The auditors offered

specific suggestions to correct these deficiencies noted as part of their

audit tests.

Improvement Efforts Both the Army and Air Force have indicated that they either have taken, or

are taking, actions to address auditor concerns and improve these critical

systems. To improve its central logistical system, the Army established an

Improvement Team to develop initiatives related to data accuracy in its

central logistical system and hired a contractor to carry out those

initiatives. Defense Finance and Accounting Service and Air Force officials

indicated that they had completed actions to address our

recommendations on specific actions to improve the Air Force system. We

plan to follow up the effectiveness of these actions as part of our fiscal

year 1998 financial audit work at DOD. The Navy has not yet indicated what

actions it will take.

Equipment Valuation Auditors have had long-standing concerns that the reported value of DOD’s

military weapons systems was inaccurate. Recent audit results

demonstrate that DOD continues to experience problems in this area. For

example, Army auditors recently reported that limited testing of the

recorded value of selected military equipment items revealed an

understatement of more than $10 billion as a result of the Army not

updating unit price information to reflect standard price. The Army

adjusted its financial statements for that amount, but Army auditors

reported that the account balance was still misstated by an unknown

amount for the equipment items that were not tested.

Page 10 GAO/T-AIMD/NSIAD-98-158
The Department’s most recent annual report to the President and the

Congress describes the significance of DOD’s inability to develop reliable

cost information. Specifically, the report cited the lack of a cost

accounting system as the single, largest impediment to controlling and

managing weapon system life-cycle costs, which include acquisition costs,

as part of DOD’s acquisition reform initiative to acquire products “that work

better and cost less.” In this regard, DOD identified as a specific goal,

establishing an implementation plan for a cost accounting system that

provides visibility over weapon system life-cycle costs. Without accurate

information on the acquisition costs of weapon systems, neither DOD

officials nor the Congress can make fully-informed decisions about which

weapons or how many to buy. Moreover, DOD management needs accurate

cost information to monitor costs as weapon systems are being built,

especially for those weapons for which Congress imposes cost limits.

Unreliable Amounts

Reported for General

Property, Plant and

Equipment

In addition to military equipment, DOD is responsible for almost one-half of

the government’s general property, plant and equipment (PP&E).10

Long-standing issues affecting the reliability of reported general property

amounts include DOD’s inability to ensure that all its assets are properly

reported and valued. DOD auditors restated again in recent audit reports

that the billions of dollars reported for real property (land, buildings,

facilities, capital leases, and improvements to those assets) and

non-military equipment, such as trucks, telecommunications systems, and

computers, were unreliable due to valuation errors, omissions of assets,

system deficiencies, or other recording errors, such as duplicate reporting.

With regard to valuation, auditors were unable to verify the reported

amount of DOD’s property. In general, documentation supporting these

values no longer exists or cannot be located. In addition, obviously

erroneous valuation data are not being corrected. For example

• At one location tested, Navy auditors identified 49 buildings valued at a

total of $25 million that were recorded at a zero or one dollar value in the

system used to obtain the plant property values for the Navy’s fiscal year

1997 financial statements.

10Statement 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-98-158
• The Air Force’s fiscal year 1997 financial statements were understated by

$189 million because of pricing errors entered into the system for fire

trucks. The fire truck amounts were based on a unit price of $1.03 instead

of the actual cost of over $470,000.

In certain cases, some DOD general property is being omitted from reports.

For example, DOD auditors reported problems at each military service

related to DOD’s inability to properly identify and report its capital leases.

Air Force and Navy auditors determined that capital leases with an

estimated total value at $493 million were omitted from Air Force and

Navy fiscal year 1997 financial statements.

Finally, DOD auditors have identified the lack of integration of financial

accounting and property accounting systems as a major factor

contributing to unreliable general property reporting. Accordingly, the DOD

Comptroller designated the Defense Property and Accountability System

(DPAS) as the property accounting system for all DOD real and personal

property in order to bring DOD assets under proper accountability and

financial control. We recently reported11 that the DOD-wide system, as

functionally designed, can provide financial control and generate

information to account for most general property. However, we also

reported that if not properly implemented, as was the situation at the

Defense agency we reviewed, the DOD-wide system would not ensure

financial control and accurate reporting of general property. Furthermore,

while the DOD Comptroller has stated that this system must be

implemented across DOD by the year 2000, no specific plans to accomplish

this goal have been developed. The responsibility for implementing this

system was recently turned over to the Defense Logistics Agency. Our

report made 10 detailed recommendations to ensure that financial control

and accountability over general property is attained. These include

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.

Capitalization Threshold DOD’s ability to accurately report its property, plant, and equipment values

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

threshold from $5,000 in 1991 to $100,000 in 1996. Prior to fiscal year 1998,

DOD policy required DOD components to capitalize an asset when its

acquisition cost or similar cost exceeded the capitalization threshold in

11Financial Management: DOD’s Approach to Financial Control Over Property Needs Structure

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

Page 12 GAO/T-AIMD/NSIAD-98-158
effect at the time of acquisition. Beginning in fiscal year 1998, however,

DOD components—other than working capital fund activities—are required

to apply a single $100,000 capitalization threshold to assets, irrespective of

the threshold that existed at the time of purchase. Under this policy, all

general PP&E assets, previously capitalized by non-working capital fund

activities at thresholds less than $100,000, will be expensed in fiscal year

1998. Recognizing the effect this policy would have on operations, working

capital fund activities are required to apply the capitalization threshold

only to newly acquired assets, beginning in fiscal year 1998, and to retain,

on their financial records, existing capitalized assets even though the

assets may have been capitalized at a level of less than $100,000.

Prior audit reports have disclosed that higher capitalization thresholds

have not been uniformly applied throughout DOD, resulting in

inconsistencies in asset reporting and the omission of billions of dollars in

assets from DOD financial reports. As a result of the higher capitalization

threshold, billions of dollars of assets have been expensed—effectively

removing them from accounting control. For example, Navy auditors

estimate that if the $100,000 capitalization threshold were applied to the

Navy’s March 1996 nonmilitary equipment balance of $6 billion, over

$1 billion would be eliminated. In a letter to DOD in March 1997, we

estimated that at least $5 billion of the Army’s equipment would have been

excluded from the Army’s fiscal year 1996 financial statements if the

$100,000 threshold was retroactively applied. Eliminating these items from

financial control and the accountability imposed by annual audits is

particularly detrimental because, as discussed earlier, financial audits have

repeatedly found that DOD’s detailed property records are not accurate.

Further, use of this high capitalization threshold adversely affects the

measurement of operating costs. Billions of dollars of assets are expensed

in their year of acquisition, as opposed to the cost of those assets being

allocated over the life of the asset. For example, as a result of

implementation of high capitalization thresholds, thousands of tractors

costing at least $70,000 each and numerous types of industrial equipment

have been written off in the year of acquisition. In addition, expensing

these costs makes it harder for DOD to compare its cost to the private

sector, which is required to capitalize such items. For example, this

impairs the ability of DOD and oversight officials to make informed

decisions on issues where comparative costs are a significant factor, such

as in deciding whether to outsource specific functions.

Page 13 GAO/T-AIMD/NSIAD-98-158
We are analyzing the effect of DOD’s capitalization policy on its operational

and program costs and asset accountability and will be continuing to

discuss our views with DOD managers.

Inventory Cannot Be

Verified

DOD inventory12 includes ammunition (such as machine gun cartridges,

rocket motors, and grenades), consumables (such as clothing, bolts, and

medical supplies), stockpile materials (such as industrial diamonds,

rubber, and tungsten), and repairable items (such as navigational

computers, landing gear, and hydraulic pumps). DOD’s inability to

effectively account for and control its reported $170 billion investment in

inventories has been an ongoing area of major concern. We are continuing

to monitor DOD inventory management as one of the areas that we

consider as high risk because of its vulnerability to waste, fraud, and

abuse. One area of inventory management that has been a long-standing

concern is excess inventories. In February 1997, we reported our estimate

that about half of DOD’s $70 billion in secondary item inventories13 at the

end of fiscal year 1995 was excess to current operating requirements and

war reserves.14

Auditors continue to find that DOD’s inventory management and control

systems and practices are plagued with serious problems, including

• on-hand quantities that do not agree with the records,

• an inability to reliably determine inventory values,

• deficiencies in information on the condition of inventories,

• a significant amount of inventory excluded from overall logistics

management visibility as well as financial reporting, and

• an inability to effectively account for and control in-transit inventories.

On-Hand Quantities Do Not

Agree With Records

Auditors have issued a number of reports over the past several years

detailing extensive discrepancies between the results of physical counts of

inventories actually on hand and quantity information recorded in

inventory records. For example, in their fiscal year 1997 audit opinion on

the Army’s Working Capital Fund, Army auditors cited unacceptable error

12Statement 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.

13Secondary inventories are repairable and consumable items in storage at depots and installations.

14High-Risk Series: Defense Inventory Management (GAO/HR-97-5, February 1997).

Page 14 GAO/T-AIMD/NSIAD-98-158
rates in prior years’ testing of inventory records.15 The DOD IG reported an

overall 24 percent error rate at DOD’s primary storage locations as a result

of physical counts it performed in fiscal year 1996.16 The auditors’

examination of inventories in the fiscal year 1997 financial statements

found this condition continued. For example:

• Navy auditors performed physical counts at 13 major Navy storage

locations. Their preliminary results indicate that the quantities actually on

hand differed from inventory records 23 percent of the time. Out of 652

stock numbers tested, 150 had count quantities that differed from the

inventory record quantities.

• Air Force auditors found that Air Force records showed $4.5 billion of Air

Force ammunition was stored at Army locations as of the end of fiscal

year 1997, but Army records showed only $2.5 billion.17 Of the $2 billion

difference, the auditors could only resolve $864 million, which was the

result of Air Force records showing that it had 14.5 million smoke rockets

(used to mark targets) at an Army storage location, while only 1,450 were

actually on hand at that location. The item manager was not aware of this

difference until the auditors pointed it out.

As a result of these deficiencies in recorded inventory quantities, DOD

managers do not have reliable information to make purchase decisions or

to fully recognize and eliminate excess inventories and related storage

costs. For example, in February 1997, we reported that DOD had ordered

$11.3 million in additional items, such as circuit card assemblies,

computers, and hydraulic pump valves, that already were in excess

supply.18 In June 1996, we reported that about $31 billion of DOD’s reported

$80 billion of ammunition was excess.19 In January 1997, we reported that

DOD could save about $382 million annually in holding costs by eliminating

an estimated $2.7 billion in inventories not needed to meet current

operating and war reserve requirements.20

15Army Working Capital Fund Principal Financial Statements for Fiscal Year 1997 (AAA Report No. AA

98-111, February 13, 1998).

16Inventory Record Accuracy and Management Controls of the Defense Logistics Agency Distribution

Depots (DOD IG Report No. 98-019, November 10, 1997).

17Opinion on Fiscal Year 1997 Air Force Consolidated Financial Statements (AFAA Report No.

97053009, February 27, 1998).

18Defense Logistics: Much of the Inventory Exceeds Current Needs (GAO/NSIAD-97-71, February 28,

1997).

19Defense Ammunition: Significant Problems Left Unattended Will Get Worse (GAO/NSIAD-96-129,

June 21, 1996).

20Defense Inventory: Spare and Repair Parts Inventory Costs Can Be Reduced (GAO/NSIAD-97-47,

January 17, 1997).

Page 15 GAO/T-AIMD/NSIAD-98-158
Inventory Values Questionable Federal accounting standards require inventories to be valued based on

historical cost or a method that will approximate historical cost. DOD does

not have historical cost data on inventories. Accordingly, DOD developed

an agencywide model in 1994 to approximate historical cost. The model

requires adjustments to recorded inventory values to arrive at the

estimated historical cost. These adjustments are a key factor in

determining the working capital funds’ cost of operations.

Auditors have been unable to evaluate the reasonableness of reported

inventory values due to errors and wide swings in the dollar value of

adjustments made to value inventory at historical cost using this model.

For example, the application of the model in Navy for its fiscal year 1996

financial statement reporting resulted in about an $8 billion adjustment to

Navy’s Working Capital Fund inventory and in a net loss of $3.4 billion.

However, during 1997, DFAS later identified a $3.9 billion error in how the

model was applied to the fiscal year 1996 inventory balances, which

caused that year’s ending inventory balance to be understated by the same

amount.

Further, the model has undergone frequent changes that have not been

well documented and, therefore, the impact of the changes has been

difficult to follow. Nevertheless, the changes could have been one reason

that the Navy’s reported inventory balances fluctuated significantly

between fiscal years 1995 and 1997. For example, the Navy’s Working

Capital Fund reported inventory balances were about $13 billion in fiscal

year 1995, $10 billion in fiscal year 1996, and $13 billion again in fiscal year

1997.

As a result, the model DOD is using to value inventories has yet to

demonstrate that it can reliably approximate historical cost as required by

standards. DOD’s September 1997 working capital funds improvement plan

recognized the need to properly value inventories at historical cost.

However, until DOD can develop and validate such a model or capture its

inventory costs, DOD will continue to have little assurance that it can

develop and report accurate net operating result information—a key factor

in setting the prices DOD’s working capital fund operations charge their

customers. Auditors are working with DOD to determine if the model can

be modified to provide more accurate estimates as an interim measure

until DOD obtains actual inventory costs.

Assets With Unknown

Condition

DOD’s financial statements are required to provide information on the

condition of inventories. For example, items held for repair should be

Page 16 GAO/T-AIMD/NSIAD-98-158
segregated and reported at values reduced by the costs of bringing those

assets up to serviceable condition. However, Army auditors reported that

the Army’s fiscal year 1997 Working Capital Fund financial statements did

not properly report inventory held for repair.21 In addition, we reported in

December 1997 that the Air Force had over 400,000 secondary items

valued at $2.4 billion for which it had not determined the usability or

condition.22 For about 64 percent of the almost 2,000 items we reviewed,

we found that Air Force records were not updated to reflect the item

condition for over 1 year and in some instances had not been updated for

over 6 years. Lacking reliable information on inventory condition, DOD may

not have an accurate picture of the amount needed to bring these items to

a serviceable state, which could affect readiness or may result in DOD

incurring unnecessary storage costs for those items for which it is not

economically feasible to repair and should be disposed of.

Inventories Not Reported As disclosed in our recent report on the results of our audit of the U.S.

government’s consolidated financial statements, 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. Further, as part of their fiscal year 1997 audit, Army auditors found

that Army records were understated by $248.9 million because munitions

balances in Kuwait and those held by a contractor were not reported.23 In

the case of the contractor, the auditors confirmed that the contractor’s

records showed 3,873 more rocket pods (a rocket pod contains 12

surface-to-surface rockets and is part of a mobile rocket launching system)

than the Army’s records. This variance, representing about 14 percent of

the total 27,766 rocket pods the Army has in its inventory, occurred

because the Army relied on manual reporting procedures from the

contractor. This is not a new problem. For example, in its fiscal year 1996

audit, the Naval Audit Service found that the Navy’s reported ammunition

balances were understated by $20.4 billion because the source Navy used

to prepare its financial statements did not include all ammunition owned

by the Navy.24

21Army Working Capital Fund Principal Financial Statements for Fiscal Year 1997 (AAA Report No.

98-111, February 13, 1998).

22Defense Inventory: Inadequate Controls Over Air Force Suspended Stocks (GAO/NSIAD-98-29,

December 22, 1997).

23Army’s Principal Financial Statements for Fiscal Year 1997 and 1996—Financial Reporting of

Wholesale Munitions (AAA Report No. 98-98, February 5, 1998).

24Department of the Navy Fiscal Year 1996 Annual Financial Report: Report on Internal Controls and

Compliance With Laws and Regulations (NAS Report No. 029-97, April 5, 1997).

Page 17 GAO/T-AIMD/NSIAD-98-158
The adverse effect of not having information on these inventories was

highlighted in our March 1998 report on our analysis of Navy financial data

deficiencies.25 We discussed a number of areas in which logistics systems’

financial deficiencies not only adversely affected the reliability and

usefulness of the Navy’s financial reporting but also had significant

programmatic or budgetary implications. For example, to determine

Navy-wide inventory requirements, responsible managers must have

accurate, reliable information on the quantities of inventories on ships,

including any quantities in excess of needs. However, we reported that

information on almost $8 billion of inventories on-board ships were

omitted from the data used from financial statement reporting and as the

starting point for the development of budget requests for additional

inventories.

As a result, there was a substantially increased risk that Navy may have

requested funds to obtain additional unnecessary inventories because

responsible managers did not receive information on excess inventories

that were already on hand in other locations. For example, in our

August 1996 report, we identified unnecessary Navy spending of at least

$27 million in fiscal year 1995 and forecasted spending which could result

in the Navy incurring another approximately $38 million in the future for

items already available at other locations.26

Poor Accounting for In-Transit

Inventories

In their audits of fiscal year 1997 working capital fund financial

statements, auditors were not able to confirm the in-transit inventory

balances, which are included in the reported overall inventory balance on

hand. For example, Army auditors found that a reported $598 million of

inventory in-transit from vendors was misstated by an unknown but

material amount due to problems with processing receipt notifications.27

Air Force auditors could not validate $11 billion of inventories at

contractor repair facilities and in transit between contractors and Air

Force installations because the systems did not maintain supporting

records.28

25CFO Act Financial Audits: Programmatic and Budgetary Implications of Navy Financial Data

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

26Navy Financial Management: Improved Management of Operating Materials and Supplies Could Yield

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

27Army Working Capital Fund Principal Financial Statements for Fiscal Year 1997 (AAA Report No.

98-111, February 13, 1998).

28Opinion on Fiscal Year 1997 Air Force Working Capital Fund Financial Statements (AFAA Report No.

97068043, February 27, 1998).

Page 18 GAO/T-AIMD/NSIAD-98-158
We also recently reported on problems with verifying in-transit inventory

balances. In February 1998, we reported that the $5.2 billion of in-transit

secondary item inventory shown in DOD’s fiscal year 1996 Supply System

Inventory Report is questionable because (1) the Air Force did not include

$1.3 billion of in-transit repairable items, and (2) DOD did not have receipt

notifications for 12.4 million shipments outstanding for an average of 145

days—approximately 1.4 billion items—out of 21 million shipments it

initiated.29 The logistical systems supporting this report also are the source

of financial information.

Taken together, these inventory control and accountability deficiencies

also serve to undermine the Department’s ability to reliably meet

established performance objectives. For example, performance indicators

were set out in the Department’s recent performance plan, including

reductions in retail-level inventories, such as repairable and consumable

items at bases, from $14 billion in fiscal year 1996 to $10 billion in fiscal

year 2001, and reductions in supply inventories, such as repairable and

consumable items in storage, from $70 billion in fiscal year 1995 to

$48 billion in 2003. These performance indicators do not address the

remaining balance of the reported $170 billion of inventory, including

ammunition and other operating supplies. Until DOD can reliably account

for both the quantity and value of its substantial investment in inventories,

its ability to assess its progress in meeting such goals will be impaired.

Reported

Environmental/

Disposal Liability Is

Significantly

Understated

DOD has not yet fully implemented the federal accounting standard that

requires it to recognize and report liabilities associated with

environmental cleanup and/or disposal of its assets, including ammunition,

national defense assets,30 military training ranges, and chemical weapons.

While DOD reported $38.7 billion in estimated environmental cleanup and

disposal liabilities in its fiscal year 1997 financial statements for

environmental restoration of active and inactive bases, cleanup of

formerly used sites, and cleanup and disposal of certain chemical

weapons, it did not estimate environmental cleanup and disposal costs

associated with military weapons systems or training ranges. As a result,

DOD’s undisclosed liability in this area is likely understated by tens of

billions of dollars.

29Department of Defense In-Transit Inventory (GAO/NSIAD-98-80R, February 27, 1998).

30Includes weapons systems such as submarines, ships, aircraft, missiles, and combat vehicles.

Page 19 GAO/T-AIMD/NSIAD-98-158
One of the new accounting standards31 requires recognition of a liability

for any probable and measurable future outflow of resources arising from

past transactions, if those costs can be reasonably estimated. These

requirements apply to many DOD assets, including its weapons systems,

which contain hazardous materials and waste that must be removed and

disposed of when inactivated. The new federal accounting standard was

issued more that 2 years ago to allow agencies ample time to develop

implementing policies and procedures prior to its fiscal year 1997

implementation date. The Congress has also recognized the importance of

accumulating and considering such 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 acquisitions programs, including

the materials to be used and methods of disposal. The life-cycle cost

estimates are required before proceeding with the major acquisition.

Because of the importance of this information and because of our

responsibility to audit the U.S. government’s consolidated financial

statements beginning with fiscal year 1997, we undertook a series of

reviews to assist DOD in its efforts to meet the requirements of the new

federal accounting standard. We found that, while DOD has not yet

estimated its disposal liability for all assets, including national defense

assets, information is available to estimate these costs. We have reported

the following.

• DOD regularly disposes of missiles and includes disposal costs for missiles

as part of its annual budget request. Using available information, the

military services were able to provide us with estimated disposal costs,

ranging from $102 to almost $500,000 per missile for each of four missile

types we selected for review.32

• Navy management information systems contain data on the costs to

inactivate and dispose of nuclear submarines and ships. For example,

these systems show that estimated environmental costs associated with

inactivation and disposal activities related to a nuclear submarine could

range, at a minimum, from $19 million to $61 million. Navy officials also

provided a cost estimate that ranged from $807 million to $942 million for

the inactivation and disposal of the first Nimitz-class nuclear carrier, if

31Statement of Federal Financial Accounting Standards No. 5, Accounting for Liabilities of the Federal

Government.

32Financial Management: DOD’s Liability for Missile Disposal Can Be Estimated (GAO/AIMD-98-50R,

January 7, 1998).

Page 20 GAO/T-AIMD/NSIAD-98-158
work was begun in fiscal year 1998.33 Subsequently, they stated that as the

Navy gains experience in defueling during the refueling cycles of

Nimitz-class carriers, they expect the cost estimate for inactivating and

disposing of Nimitz-class carriers could be reduced to about $500 million

for the tenth Nimitz-class carrier. Although the Navy has not provided a

basis for us to assess the reasonableness of the $500 million estimate, we

acknowledge that as the Navy gains experience in the inactivation and

disposal of aircraft carriers, cost efficiencies could occur. Ultimately, the

estimate will need to be adjusted to reflect actual experience.

• DOD’s designated aircraft storage, reclamation, and disposal facility could

provide data to compute estimated costs for the demilitarization (ranging

from about $7,000 to $105,000 for three of the aircraft we reviewed) and

hazardous material removal (ranging from $313 to $123,000 for the five

aircraft reviewed) for aircraft systems.34

• DOD can use historical cost information on ammunition disposal already

compiled as a starting point for estimating its ammunition disposal

liability. Using these data, along with inventory quantities provided by the

Army, we estimated that the Army’s ammunition disposal liability alone

could range from about $1.3 billion to $2.1 billion.35

DOD also faces significant cleanup and disposal costs for its military

training ranges. These costs, which are related to clearing the land of

unexploded ordnance and other chemical wastes, are also estimable. In a

July 1996 study, DOD estimated that $19.5 billion would likely be needed to

secure and/or clear inactive, closed, or transferring ranges under current

legal requirements; however, DOD did not include any estimate for these

costs in its fiscal year 1997 financial statements. Also, this amount should

have been, but was not, included in DOD’s 1996 Defense Environmental

Restoration Program Annual Report to the Congress.

In response to our reports, DOD has stated that, while it generally agreed

that estimates could be developed for certain assets, estimates covering all

assets would take some time. It added that it has delayed reporting of most

of these liabilities because of the time required to develop and implement

policy and specific application procedures and reporting guidance.

33Financial Management: Factors to Consider in Estimating Environmental Liabilities for Removing

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

34Financial Management: DOD’s Liability for Aircraft Disposal Can Be Estimated (GAO/AIMD-98-9,

November 20, 1997).

35Financial Management: DOD’s Liability for the Disposal of Conventional Ammunition Can Be

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

Page 21 GAO/T-AIMD/NSIAD-98-158
As the Department begins developing needed policy and specific guidance

for the military services on estimating and reporting the disposal liability

for assets, our reports identify certain factors that need to be addressed. In

addition, because environmental and disposal liabilities represent future

outlays, DOD should also consider ways to make this information even

more meaningful to decisionmakers. One way to provide a proper context

for environmental liabilities would be to provide a table showing

estimated outlays by budget period in a footnote to the financial

statements. Such a table would show congressional and other budget

decisionmakers the potential annual impact of DOD’s actions on various

budget periods, including those outside the annually submitted Future

Years Defense Program. This information could also provide a link

between budgetary and accounting information, one of the key objectives

of the CFO Act.

Reported Liability for

Post-Retirement

Health Care Is

Unsupported

Under the new accounting standards, DOD is required to calculate and

report its estimated liability for providing health care benefits to military

retirees and their beneficiaries. DOD provides these benefits through free

care at Military Treatment Facilities and through the Tricare program,

which is comprised of fee-for-service (CHAMPUS), preferred provider, and

HMO plans.

DOD did not accumulate the data necessary to accurately estimate its

military post-retirement health benefits liability. Specifically, DOD used

unaudited budget information, instead of the required cost data, to

calculate its $218 billion estimated liability. In addition, DOD did not

accumulate current or complete historical claims data to support its

calculation. These problems significantly impair DOD’s ability to determine

the full cost of its current operations or the extent of its actual liabilities.

According to both DOD actuaries and independent actuaries under contract

to DOD, the current cost of providing health care cost is very significant to

the liability calculation—if costs are understated or overstated by a

percentage point, the liability will be understated or overstated by

approximately the same percentage. However, DOD did not accumulate

actual cost data for its Military Treatment Facilities. Instead, DOD

estimated health care spending using budget obligation data and used this

information in the calculation. While budget obligations represent funds

committed during a period, they are not equivalent to full cost data. For

example, the costs of the treatment facilities themselves may not be fully

captured nor some personnel costs such as future pension expenses.

Page 22 GAO/T-AIMD/NSIAD-98-158
DOD did not obtain a significant portion of health care claims data. For

outpatient claims, which comprise over one-third of the dollar value of all

claims, data were available from only 15 of the 121 Military Treatment

Facilities. The actuaries assumed that the 15 were representative of the

entire 121, which resulted in an unquantifiable error in the liability

calculation. Finally, the actuaries did not obtain the most current data

available; instead, claims data from fiscal year 1994 were the most recent

used in the calculations for the fiscal year 1997 liability.

Cost of DOD

Operations Not

Accurate

As stated in our report on the results of our audit of the U.S. government’s

consolidated financial statements, the government was unable to support

significant portions of the more than $1.6 trillion reported as the total net

costs of government operations. DOD accounts for about $250 billion of this

amount. The previously discussed material deficiencies in DOD’s ability to

report assets and liabilities and the lack of effective reconciliations, as

discussed later, all affect the department’s reported net costs. Specifically,

as previously discussed, the accuracy of DOD’s operating costs is materially

affected by DOD’s inability to (1) properly value and capitalize its facilities

and equipment, (2) properly value its inventory, (3) identify its

environmental and disposal costs, and (4) determine its costs associated

with post-retirement health care for military personnel. Further, as

discussed in the following sections, DOD’s inability to properly identify and

eliminate interagency transactions, reconcile balances with Treasury, and

record all of its disbursements are additional factors in the incomplete

picture of DOD’s costs.

DOD Cannot Identify

Interagency

Transactions

To make the consolidated governmentwide financial statements balance,

Treasury had to record a net $12 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 $100 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.

In order to portray DOD as a single entity and the federal government as a

single economic unit, certain transactions that occur between entity

components must be identified and eliminated. Without proper

eliminations, certain assets, liabilities, revenues and expenses are double

counted or otherwise misstated. However, DOD has acknowledged that it

cannot reliably identify and eliminate interagency transactions, whether

Page 23 GAO/T-AIMD/NSIAD-98-158
between individual DOD components or between DOD and other federal

government entities.

For the consolidated governmentwide financial statements, DOD identified

its side of interagency transactions for elimination without reconciling its

accounts with other federal government entities. Therefore, DOD had no

assurance that it had identified the correct amounts and that a

corresponding revenue, expense, asset or liability had been identified by

the transaction partner. Improper eliminations can result in significant

errors in financial statement reports. For example, as part of the nearly

$300 billion of interagency transactions reported to Treasury, DOD

identified $59 billion of program and operating expenses for elimination

but later could not justify $42 billion as interagency transactions. As a

result, Treasury had to adjust the consolidated net cost statement to

correct this error. If Treasury had not made the necessary adjustment, the

consolidated Statement of Changes in Net Position, which currently shows

the government’s costs exceeded its revenues by $15 billion, would have

indicated that the government’s revenues exceeded its costs by $27 billion

for fiscal year 1997.

Because improving DOD systems will be a long-term endeavor, we are

continuing to work with DOD, OMB, and Treasury to develop an acceptable

interim process to resolve problems in accurately accounting for and

reporting interagency transactions.

DOD Has Billions of

Unreconciled Cash

Activity

As discussed in our report on the results of our consolidated audit of the

federal government, several major agencies are not effectively reconciling

their transactions. DOD, with nearly half of the federal government’s

discretionary spending, is one of those agencies. These

reconciliations—similar in concept to individuals reconciling personal

checkbooks with a bank’s records each month—are a key control to

ensure that agencies’ and Treasury’s records agree on the amount of funds

spent and that remain available, as well as to ensure that all transactions

are recorded to capture the costs of an agency’s activities.

As important as these reconciliations are to all federal agencies, these 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.

Page 24 GAO/T-AIMD/NSIAD-98-158
An effective reconciliation of DOD’s and Treasury’s records requires not

only identifying differences, but researching and recording appropriate

adjustments in the accounting systems. DOD has been unable to carry out

these critical reconciliations because of

• at least $4 billion in differences between checks issued by DOD and

reported to Treasury,

• an indeterminable dollar amount of transactions in suspense accounts,

which are to be used to hold transactions temporarily until the agency can

determine the appropriate accounting treatment, and

• a reported $22 billion in problem disbursements.

Differences in Checks

Issued

DOD disbursing offices write thousands of checks daily to pay the

Department’s bills. Each month, the disbursing offices provide Treasury

with an accountability report that shows the total amount of checks

disbursed, by appropriation, for that reporting period. For the total

reported amount of checks disbursed, offices provide Treasury with

computer listings of individual checks written and their amounts

throughout the month and after each month end. Treasury compares the

accountability report totals to the total of the computer listings. Treasury

also compares the individual checks on the computer listings to the

individual checks that have been paid by the Federal Reserve System.

Treasury reports any discrepancies to DOD for follow-up and correction.

Discrepancies between DOD records and Treasury records can occur

because of the following situations: (1) the disbursing office makes an

error in the accountability report, (2) the computer tapes are incomplete

or are not processed by Treasury, and (3) DOD’s recorded amount for a

check is different from the amount that is paid by the Federal Reserve.

At September 30, 1997, DOD and Treasury records differed by more than

$4 billion—$1.4 billion for Army, $1.7 billion for Air Force, $0.7 billion for

Navy, and $0.4 billion for other DOD components. However, this $4 billion

represents only the net difference of all the positive and negative

discrepancies that existed at year-end. For example, any errors in

reporting on accountability reports have been offset against errors caused

by submission of incomplete computer check listings. Although auditors

were unable to determine the total value of the discrepancies, it is likely to

be much larger than the reported net amount.

Page 25 GAO/T-AIMD/NSIAD-98-158
Because DOD had not performed a proper reconciliation with Treasury

records, auditors were also unable to determine whose records needed to

be adjusted for the differences. While some of these discrepancies could

be timing differences, others could be due to errors in DOD recorded

amounts or result from an error by Treasury. Furthermore, until these

differences are identified, and it is determined whose records require

adjustment, DOD is not recording these differences or maintaining control

accounts to accumulate these amounts to ensure that all corrections are

made.

Indeterminable Amounts

Held in Suspense Accounts

In addition to the cash activity discussed above which is not being

properly reconciled to Treasury’s records, DOD is not properly reconciling

its suspense accounts. DOD maintains suspense accounts to record receipt

or disbursement transactions for which it is either unable to determine, or

has not yet attempted to determine, the correct fund or appropriation

citation. When the disbursing office cannot identify the correct fund or

appropriation account to provide to Treasury for a receipt or

disbursement transaction, the transaction is placed in a suspense account

in both DOD’s and Treasury’s records. These suspense accounts are to be

temporary holding accounts that are quickly cleared to permit proper

accounting. Until the individual transactions are properly recorded, DOD’s

budgetary accounts, which tell DOD the status of its available funds, and its

accounting records, which provide information on the cost of its programs

and activities as well as its assets and liabilities, do not include this

information and are therefore inaccurate.

At the end of fiscal year 1997, these suspense accounts totaled

$769 million when collections and adjustments were netted against all

disbursements. However, this significantly understates the magnitude of

the problem. For example, while the Navy had a net balance of

$464 million in suspense accounts recorded in its records, the individual

transactions, collections as well as disbursements, totaled about

$5.9 billion. As a result of not properly recording the $5.9 billion in

transactions, the cost of individual programs and activities may be

understated because of unprocessed disbursements, while the cost of

other programs and activities may be overstated by the unprocessed

collections. We have been working with DOD officials and auditors to

identify actions DOD should take effectively address this issue in fiscal year

1998.

Page 26 GAO/T-AIMD/NSIAD-98-158
Problems in Accounting

for Disbursements

Problem disbursements is the term used to refer to specific DOD

disbursements that have not been matched with corresponding obligations

and include the suspense accounts previously discussed as well as

unmatched disbursements, in-transit disbursements, and negative

unliquidated obligations.36 Unlike suspense accounts, other problem

disbursement categories have been charged to a particular appropriation

account in Treasury and in DOD’s records when the disbursement is made.

However, as with suspense accounts, these other problem disbursement

categories may not be reflected in the cost of DOD’s programs and

activities, nor properly reflected in DOD’s status of funds because accurate

accounting information beyond the appropriation is not available. While

DOD has made progress in this area, it still faces a considerable challenge if

it is to effectively resolve long-standing deficiencies.

In February 1995, at the date of our 1995 High-Risk report,37 DOD reported

$25 billion of problem disbursements. In May of the following year, DOD

reported a reduction in that balance to $18 billion. Examining that

reported balance, we issued a report in May 1997 which showed that the

balance was understated by at least $25 billion and should actually have

been reported at over $43 billion.38 This occurred primarily because DOD

was not reporting all transactions that needed to be resolved, but instead

was offsetting collections and adjustments against unrelated

disbursements.

In June 1997, DOD began reporting all of its problem disbursements without

those offsets. At that time, it reported a balance of over $31 billion in

problem transactions. In its latest report, January 1998, DOD reported

$22.6 billion in problem transactions. DOD’s reports for problem

disbursements show that the decrease resulted primarily from actions to

clean up old problems. For example, as of January 31, 1998, the Navy had

discontinued research and recorded $2.6 billion in obligations to reduce

problem disbursements. While we have not tested DOD’s January 1998

problem disbursement report, our work on the financial audit has raised

questions about whether all problem disbursements are being reported.

36Unmatched disbursements occur when disbursement transactions are received by the accounting

station, but attempts to match them to an obligation are unsuccessful. In-transits are disbursements

that have been reported to Treasury but have either not been received or have not been processed by

the accounting station. Negative unliquidated obligations occur when disbursement transactions are

received, matched to an obligation, and posted to the appropriation by the accounting station, but the

recorded disbursements exceed recorded obligations.

37High-Risk Series: An Overview (GAO-HR-95-1, February 1995).

38Financial Management: Improved Reporting Needed for DOD Problem Disbursements

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

Page 27 GAO/T-AIMD/NSIAD-98-158
We have ongoing work in these areas to determine the extent to which this

is occurring and the effect on the financial and budgetary reports.

Because systems problems contribute to the volume of problem

disbursements, DOD has identified seven technological initiatives as key

elements of its efforts to improve the contract payment process.39

However, as we reported in our May 1997 report, DOD has not performed

the in-depth analysis necessary to fully determine the underlying causes of

these problems and therefore identify the most effective solutions and

rank specific reforms. As a result, as with its other initiatives, the extent to

which these seven technology initiatives will resolve DOD’s long-standing

disbursement problems is unclear.

Critical Areas Must Be

Addressed to Meet

Financial Reporting

Goals

We and the military service auditors have made hundreds of

recommendations in the last 2 years alone to help correct DOD’s

long-standing financial management deficiencies. These recommendations

have ranged from specific and detailed actions, such as system edits that

could be implemented to prevent certain errors, to broad suggestions to

reengineer entire segments of DOD’s operations, such as developing a

concept of operations for how the department plans to conduct its

financial management operations now and in the future. Going forward,

we believe that two key issues are critical to DOD’s ability to achieve the

wide-ranging reforms necessary to address its long-standing financial

management deficiencies. Until DOD upgrades the skills of its financial

personnel and successfully integrates and consolidates its information

systems, the Department may be able to accomplish some slow

incremental improvements as we have seen in the past, but the sweeping

changes needed to ultimately resolve its long-standing problems will

remain outside its grasp.

Establishing a Skilled

Financial Management

Workforce

One of the key issues facing DOD under the CFO Act is the need to ensure

that its financial management staff has the knowledge and skills required

to carry out the Department’s complex financial management operations.

DOD’s challenge in this area has been increased by the new set of federal

accounting standards and other recent legislative requirements, including

the mandate now in place for the development of performance measures

that will rely, in part, on financial data. These challenges have highlighted

the critical need for targeted technical financial- and accounting-related

39Financial Management: Seven DOD Initiatives That Affect the Contract Payment Process

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

Page 28 GAO/T-AIMD/NSIAD-98-158
training to supplement the on-the-job experiences of DOD’s financial

managers, if DOD is going to have the cadre of financial managers needed

to pass the test of a financial statement audit and comply with the CFO Act.

DOD estimates that it has about 32,000 financial management personnel.

The Defense Finance and Accounting Service (DFAS), which employs about

15,000 of these individuals and had a fiscal year 1998 budget exceeding

$1.6 billion, is primarily responsible for managing the accounting and

finance operations of one of the nation’s largest and most complex

entities. Adding to the difficulty of carrying out financial operations in DOD

is the continuing effort to downsize DOD.

Because DOD did not have reliable workforce profile information

(including formal education, professional work experience, training, and

professional certifications) available, we conducted a recent series of

studies to obtain information on key financial managers from five DOD

organizations.40 Our surveys covered over 1,400 financial managers

identified by DOD and military service officials as being their key financial

managers. They often served as (1) comptrollers, deputy comptrollers, or

budget officers at DOD and military service headquarters or field activities

and (2) managers of accounting or finance operations at the DFAS.

Over half (53 percent) of the key DOD financial managers who responded

to our surveys had received no financial or accounting-related training

during 1995 and 1996. One in five respondents had received no training at

all during that time. In contrast, many state government and private sector

organizations we surveyed placed a strong emphasis on training as a

means of upgrading workforce knowledge of current financial

management, accounting, and reporting requirements.41 It was also

noteworthy that some organizations set internal training requirements for

their personnel, while others stressed—and sometimes

required—professional certifications in their hiring and promotion

decisions—a vehicle which would help ensure that personnel holding such

certificates kept abreast of emerging financial management developments.

40Financial Management: Profile of DOD Comptroller/CFO Financial Managers (GAO/AIMD-97-97, June

27, 1997); Financial Management: Profile of Air Force Financial Managers (GAO/AIMD-98-4, November

28, 1997); Financial Management: Profile of Army Financial Managers (GAO/AIMD-98-58, February 25,

1998); and Financial Management: Profile of Navy and Marine Corps Financial Managers

(GAO/AIMD-98-86, April 15, 1998). We are finalizing our audit work on the profile of DFAS financial

managers.

41Financial Management: Profile of Financial Personnel in Large Private Sector Corporations and State

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

Page 29 GAO/T-AIMD/NSIAD-98-158
In October 1997, based on its audit of the department’s support operations

that are intended to operate on a business-like basis, the DOD Inspector

General reported42 continuing pervasive weaknesses in the personnel area,

including incomplete or no training, insufficient management oversight,

and an inability to respond to a rapidly changing accounting environment.

The Inspector General also pointed out the critical linkage between

training and the successful introduction and use of new accounting

systems. In addition, the DOD Inspector General’s report documented a

widespread failure of accounting personnel to understand basic

accounting theories and principles that support transaction entries.

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 financial personnel. In addition, officials with each of

the military services told us that they have implemented or are planning a

number of programs to enhance the skills and competencies of their

respective financial managers. However, DOD could enhance its plans to

improve the professional skills of its financial managers by taking actions

to ensure that (1) all critical competencies are addressed and applied, not

just to DFAS, but to all DOD financial personnel, (2) financial personnel

receive a minimum amount of annual financial management technical

training, and (3) a specific curriculum to support the competencies is

developed.

Developing Integrated

Financial Management

Systems

In our recent report, we stated that the U.S. government has ineffective

internal controls due in part to poorly designed financial systems. In

addition, we noted that widespread computer control weaknesses are

placing enormous amounts of federal assets at risk of fraud and misuse

and exposing agencies’ computer systems to exploitation by outside

intruders as well as authorized users with malicious intent. Nowhere in the

federal government are financial systems design and computer control

weaknesses more challenging and more serious than in DOD. Furthermore,

DOD’s approach to dealing with the Year 2000 issue is seriously hampering

DOD’s chances of successfully meeting the Year 2000 deadline for

mission-critical systems.

Financial Systems Design DOD has a vast number of financial management systems. In 1995, DOD had

identified and reported on 249 financial management systems in its annual

42A Status Report on the Major Accounting and Management Control Deficiencies in the Defense

Business Operations Fund for FY 1996, Audit Report of the Office of the Inspector General,

Department of Defense (Report No. 98-002, October 3, 1997).

Page 30 GAO/T-AIMD/NSIAD-98-158
financial systems inventory to OMB. By 1996, that number had declined to

217 financial systems. In the latest report for 1997, DOD indicated a

continued decline to 156 financial systems. DOD’s performance plan has a

long-term goal of reducing the number of finance systems to 9 and, by

fiscal year 2003, of reducing the number of accounting systems to no more

than 23.

However, DOD does not identify and report on the total number of financial

management systems it uses. Specifically, as we reported in January 1997,43

DOD excluded major financial management systems, such as acquisition,

logistics, and personnel systems, because they are generally not within the

CFO (Comptroller) organization . In fact, the Army’s (CBSX) and the Air

Force’s (REMIS) systems which provide information for financial reporting

on a large portion of DOD’s fiscal year 1997 $635.5 billion in military

equipment, are not included in those counts.

A comprehensive inventory of systems used to record, accumulate,

classify, and report on DOD’s financial management information is a critical

step if DOD is to (1) effectively manage its existing systems, (2) prioritize

and coordinate efforts to correct longstanding financial systems

deficiencies, and (3) develop a reliable, integrated financial management

system. Army and Air Force officials have indicated that they are in the

process of identifying the “critical” systems that provide information to the

finance and accounting systems owned and operated by DOD’s accounting

organization—the Defense Finance and Accounting Service.

In addition to not having a complete inventory of its financial management

systems, DOD has not documented how it conducts its financial

management operations now and plans to in the future. A concept of

operations is needed to provide the foundation upon which the rest of the

systems planning process is built. A concept of operations is a particularly

critical step at DOD because of the organizational complexity of its

financial management activities. According to the DFAS September 1996

Chief Financial Officer Financial Management 5-Year Plan, it is estimated

that the DOD financial community is reliant on data captured by other

functional areas, such as logistics and acquisition, for about 80 percent of

the data used in its processes. Without careful planning that includes these

other communities, system development efforts are likely to fail to meet

DOD’s needs. In recognition of this critical planning process, the 1998

Defense Authorization Act requires DOD to submit a concept of operations

43Financial Management: Comments on DFAS’ Draft Federal Accounting Standards and Requirements

(GAO/AIMD-97-108R, June 16, 1997).

Page 31 GAO/T-AIMD/NSIAD-98-158
as part of a biennial financial management improvement plan—the first of

which is to be submitted by September 30, 1998.

Without adequate financial management systems, DOD’s operations will

continue to be burdened with costly, error prone systems that do not

provide financial controls to ensure that DOD’s assets are safeguarded, its

resources appropriately used, or the cost of its activities accurately

measured. In fact, the DOD IG recently concluded that DOD’s financial

systems did not meet the requirements of the Federal Financial Managers

Improvement Act of 1996. DOD must, within 120 days of the DOD IG report,

submit a remediation plan to OMB to address these deficiencies.

Computer Security Also, serious concerns exist over the security of the Department’s

computer systems containing unclassified information. In a 1996 report,

which was limited in distribution because of the sensitive nature of the

specific findings, we reported serious weaknesses that would allow both

hackers and hundreds of thousands of legitimate users with valid access

privileges to improperly modify, steal, inappropriately disclose, and

destroy sensitive DOD data. That same year, we issued another report

which stated that DOD experienced as many as 250,000 hacker attacks on

its computer systems in 1995 and that 65 percent of the attacks were

successful.44 Based upon our work performed for fiscal year 1997, these

vulnerabilities continue to exist. Specifically, computer controls do not

provide adequate protection of significant financial applications involving

personnel, payroll, disbursements, and inventory information maintained

in DOD’s computer systems. While DOD has corrected some weaknesses

underlying our recommendations from prior reports—thereby improving

controls—responses to the recommendations remain incomplete. DOD has

announced its intention to develop and implement an integrated,

comprehensive information assurance program by August 1998.

Year 2000 DOD relies on computer systems for virtually all aspects of its operations,

including strategic and tactical operations, weaponry, intelligence, and

security. This reliance extends to its business operations that support the

Department including financial management. Most of Defense’s automated

information systems are vulnerable to the Year 2000 problem, which is

rooted in the way dates are recorded, computed, and transmitted in these

44Information Security: Computer Attacks at Department of Defense Pose Increasing Risks

(GAO/AIMD-96-84, May 22, 1996).

Page 32 GAO/T-AIMD/NSIAD-98-158
systems.45 Failure to successfully address the Year 2000 problem in time

could severely degrade or disrupt any of these operations.

DOD faces a formidable task in providing assurance that its thousands of

systems will be compliant and that the data exchanged among these

systems will be accurate. At your request, we have issued a number of

reports on the Year 2000 activities of several DOD components, and our

comprehensive report will be issued later this month. We are concerned

that the Department has not made adequate progress in addressing Year

2000 issues. While DOD has taken many positive steps to increase

awareness and promote information sharing, it lacks key management and

oversight controls to enforce good management practices, direct

resources, and establish a good picture of overall progress in fixing key

systems. As a result, the Department has increased its risk that errors will

be propagated from one organization’s systems to another’s, that all

system interfaces will not be thoroughly tested, and that all components

will not be prepared to carry on essential business and mission operations

in the event of system failures.

Future Prospects DOD has a number of financial management reform efforts planned or

underway. In our recent report on the first ever set of consolidated

financial statements of the U.S. government, we noted that DOD had stated

that it planned to complete a new accounting systems architecture, review

its inventory accounting processes, and develop a departmentwide

property accounting system. Also, OMB has recognized that resolving DOD’s

financial management difficulties is critical to the development of

auditable consolidated U.S. government financial statements. As part of

the President’s Budget of the United States Government, Fiscal Year 1999,

OMB identified, as one of its Priority Management Objectives, development

of “a plan with specific milestones to obtain an unqualified audit opinion

on Defense’s financial statement.” OMB’s continuing strong oversight and

support of DOD’s efforts to put together and implement a well thought out,

comprehensive plan for addressing DOD’s many, serious financial

management challenges is extremely important.

For our part, we will continue to work with DOD and OMB, as well as with

the DOD Inspector General and each of the military service audit agencies,

in further defining and identifying solutions for the many difficult financial

45For the past several decades, DOD systems have typically used two digits to represent the

year—such as 97 representing 1997—in order to conserve electronic data storage space. With this

format, the computer cannot distinguish the year 2000 from the year 1900. Any uncorrected system

using dates to compute or generate data will produce erroneous data or in some cases completely fail.

Page 33 GAO/T-AIMD/NSIAD-98-158
management challenges the Department faces. We also plan to follow up

on DOD’s efforts to implement the numerous recommendations we have

already made. For example, we have issued a series of reports on the

factors to be considered and the data that must be available to meet

accounting standards for Defense’s environmental and disposal liabilities.

Going forward, we plan to further evaluate Defense’s property and

logistical systems to recommend additional corrective actions to address

weaknesses in accounting for major asset categories on the financial

statements.

In closing, Mr. Chairman, sustained congressional attention to the

governmentwide implementation of financial management reform

legislation now in place, 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. I will be glad to answer any

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

time.

Page 34 GAO/T-AIMD/NSIAD-98-158
Page 35 GAO/T-AIMD/NSIAD-98-158
Related GAO Products

Property, Plant, and

Equipment

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).

Financial Management: Army Lacks Accountability and Control Over

Equipment (GAO/AIMD-93-31, September 30, 1993).

Inventory Department of Defense In-Transit Inventory (GAO/NSIAD-98-80R, February 27,

1998).

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).

Defense Ammunition: Significant Problems Left Unattended Will Get

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

Environment Financial Management: DOD’s Liability for Missile Disposal Can Be

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

Page 36 GAO/T-AIMD/NSIAD-98-158
Related GAO Products

Financial Management: DOD’s Liability for 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 8, 1997).

Disbursements Financial Management: Seven DOD Initiatives That Affect the Contract

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

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: 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).

Page 37 GAO/T-AIMD/NSIAD-98-158
Related GAO Products

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 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).

Other 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).

Page 38 GAO/T-AIMD/NSIAD-98-158
Related GAO Products

Financial Management: Issues To Be Considered by DOD in Developing

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

February 6, 1998).

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 & Progress & 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).

Navy Financial Management: Improved Management of Operating

Materials and Supplies Could Yield Significant Savings (GAO/AIMD-96-94,

August 16, 1996).

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

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

DFAS-Kansas City Financial Reporting (GAO/AIMD-96-34R, January 12, 1996).

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

(918931) Page 39 GAO/T-AIMD/NSIAD-98-158
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