Defense Budget: Improved Reviews Needed to Ensure Better Management of Obligated Funds
Published: 2003-01-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As of September 30, 2001, the Navy's operating appropriations had $2.1 billion in unliquidated--or unpaid--funds that were obligated during fiscal years 1997-99. Unliquidated obligations that are no longer needed to pay for goods and services tie up funds that could be used for other permissible purposes. In addition, inaccurate obligation data result in misstatement of budgetary information. Because of the large dollar value, we examined the Navy's management of unliquidated obligations. Specifically, we reviewed a statistically representative sample of the Navy's $1.4 billion in unliquidated operating obligations valued at $50,000 or more for fiscal years 1997-99 to determine whether these obligations were (1) properly accounted for and (2) reviewed in accordance with DOD regulations.
section_title: What GAO Found
paragraphs: We estimated that $929 million of the $1.4 billion in unliquidated operating obligations valued at $50,000 or more for fiscal years 1997-99 was not properly accounted for (see table). Specifically, the Navy failed to deobligate $452 million of unliquidated operating obligations that was no longer needed and potentially available for other permissible purposes, such as contract modifications. In addition, $147 million of unliquidated operating obligations was inaccurately recorded because of problem disbursements--payments not properly matched to the correct obligation. A further $330 million was inaccurately recorded due to unresolved errors, such as bills that were not processed properly. The remaining $489 million in unliquidated operating obligations was properly accounted for and still needed for the original purpose. An estimated two-thirds of the unliquidated operating obligations over $50,000 were not properly accounted for as a result of the Navy's failure to review such obligations three times each year as required by DOD regulations. In addition, the Navy did not fully adhere to the regulation that unliquidated operating obligations of any value be reviewed at least once each year. Consequently, the Navy did not know how much money was tied up in unliquidated operating obligations that could potentially be used for other appropriate needs, and its budgetary reports to Congress and financial statements were inaccurate. Navy fund managers chose to selectively review their operating obligations, citing obstacles such as difficulties in obtaining accurate payment and billing data and the extensive length of time needed to review large numbers of obligations. Further, the Navy did not apply existing internal control activities to ensure that fund managers performed obligation reviews in accordance with DOD regulations, nor did it hold fund managers accountable for the accuracy and completeness of the reviews.

section_title: Letter
paragraphs: The Department of Defense (DOD) confronts pervasive and complex  financial management problems that can seriously diminish the efficiency  of the military services’ support operations. Recent audits of DOD’s  financial statements highlight ongoing financial management challenges  that affect the development of accurate and complete financial  information. Among the challenges facing DOD is the lack of accurate  obligation data needed for effective budget management and reliable  financial reporting.
To ensure accuracy, it is important for the services to liquidate obligations  if funds are no longer needed as originally planned and adjust their  financial records accordingly. Unliquidated obligations are those that have  not yet been paid. The unliquidated obligations that are no longer needed  to pay for goods and services tie up funds that could be used for other  permissible purposes. Inaccurate obligation data result in misstatement of  budgetary information on federal financial statements and in the  President’s budget and contribute to the failure to provide basic financial  accountability.
DOD has recognized the need for the services to identify and reduce the  number and amount of unliquidated obligations by requiring that fund  managers review these obligations. In 1996, the DOD Office of the Under  Secretary of Defense (Comptroller) issued a memorandum directing DOD  components to review three times each year the accuracy of unliquidated  operating obligations valued at $50,000 or more. DOD also directed  agencies to review all other unliquidated operating obligations at least  once a year. In reviewing service obligation data, we noted that the Navy  has significantly large amounts of unliquidated obligations. As of  September 30, 2001, the Navy’s operating appropriations had $2.1 billion  in unliquidated funds that were obligated during fiscal years 1997-99, of  which $1.4 billion (67 percent) represented unliquidated operating  obligations of $50,000 or more. Also, in 1999 and 2000, Navy auditors  reported inaccuracies in the Navy’s obligation data and found that fund  managers were not fully complying with DOD review regulations.
Because of the large dollar value of unliquidated obligations and Navy  audit findings, we reviewed the Navy’s management of its unliquidated  operating obligations. More specifically, we determined whether these  unliquidated operating obligations were (1) properly accounted for and   (2) periodically reviewed in accordance with DOD regulations. We  reviewed a statistically representative sample of the Navy’s unliquidated  operating obligations of $50,000 or more for fiscal years 1997-99. We also  analyzed documentation related to DOD’s obligation review regulations  and the Navy’s guidance to adhere to the regulations, and interviewed  Navy officials. A more detailed description of our scope and methodology  is included in appendix I.
subsections: section_title: Background
paragraphs: Obligations are recorded when an authorized agent of the federal  government enters into a legally binding agreement to purchase specific  goods or services. As bills are received and payments are made, the  recorded obligation is reduced by the amount of the payments made.  When all services or goods have been received and paid for, the obligation  is considered “liquidated,” and any remaining amount of the unliquidated  (unpaid) obligation should be deobligated and reduced to zero. Operating  funds must be obligated in the fiscal year for which they are appropriated.  However, obligated funds may be spent over a period of 5 additional years,  as bills for goods and services are received and paid. If the goods and  services are received and paid for in the first year of the obligation, the  remaining unliquidated obligation can be reused for other needs consistent  with the source appropriation. If the goods and services are received and  paid for in the subsequent 5 years, the remaining unliquidated obligation  can still be used, if permissible, to modify contracts or to increase existing  obligations that might need more funds.
Accurate obligation information is essential for reliable budgeting reports  to Congress, agency financial statements, performance measurements, and  funds control. Inaccurate obligation data misstates the amount of funds  available from the appropriation, contributes to inaccuracies in the Navy’s  budget and financial reports, and subsequently leads to inaccuracies in  federal financial statements. For example, the Navy’s unliquidated  obligations are reported in the Navy Statement of Budgetary Resources,  which are in turn incorporated in other DOD and federal budget reports  and financial statements.
We have documented weaknesses in DOD’s accounting practices and Navy  auditors have documented inaccuracies in the Navy’s obligations data. In  our 2001 Performance and Accountability Series report, we stated that  because of weaknesses in DOD’s budget execution accounting, the  department does not know with certainty the amount of funding it has  available. Naval Audit Service reports published in February 1999 and  January 2000 reported that Navy fund managers were not complying with  obligation review regulations and documented inaccuracies in the Navy’s  obligation data. In July 2000 we reported that such inaccuracies in  obligation data not only hamper DOD’s ability to produce timely and  accurate financial information, but also significantly impair efforts to  improve the economy and efficiency of its operations.
To ensure that obligation data are tracked and accurately reported, the  DOD Financial Management Regulations (FMR) require that the services,  including the Navy, review their unliquidated operating obligations valued  $50,000 or more three times a year to ensure that they are accurate and  that the funds are still needed. All unliquidated operating obligations,  regardless of dollar value, must be reviewed at least once a year. Also,  Congress specifically established in chapter 15 of title 31, United States  Code, a framework for reviewing, adjusting, certifying to, and reporting  on, among other items, the status and amounts of unliquidated  obligations. In addition, for many interagency obligations entered under  specific statutory authority, such as the Economy Act, the authorizing  statute may mandate the deobligation of appropriations at specific times  or when certain conditions arise.
The DOD regulation also directs the services to implement effective  internal controls to ensure that the required reviews are completed and  that identified corrective actions are completed in a timely manner.  Further, the Federal Managers’ Financial Integrity Act of 1982 requires  that agencies’ controls reasonably ensure that (1) obligations and costs  comply with applicable law and (2) revenues and expenditures applicable  to agency operations are properly recorded and accounted for so that  agency accounts and reliable financial and statistical reports may be  prepared and the accountability of assets may be maintained.
section_title: Navy Did Not Properly Account for Large Portion of Unliquidated Operating Obligations
paragraphs: An estimated two-thirds of the Navy’s unliquidated operating obligations  valued at $50,000 or more from the fiscal years 1997-99 operating  appropriations was not properly accounted for. Specifically, we estimated  that $929 million of the $1.4 billion in unliquidated operating obligations  was not properly accounted for. As shown in table 1, $452 million of the  unliquidated operating obligations was no longer needed for its original  purpose. These funds could have been used for other permissible purposes  of the same appropriation and fiscal year, such as contract modifications.  In addition, $477 million was not properly accounted for due to billing and  recording errors, including $147 million in problem disbursements and  $330 million in unresolved accounting and recording errors. Finally,   $489 million in unliquidated operating obligations was properly accounted  for and still needed for the original purpose.
The Navy failed to deobligate an estimated $452 million that was no longer  needed for the original obligated purpose. According to DOD regulations,  these unliquidated funds should have been deobligated once services had  been performed, final payment issued, and the funds made available for  other purposes consistent with the appropriation. In many of our sample  cases, the entire amount of an obligation was not required to meet billing  needs and resulted in funds remaining over. For example, in one of the  cases we reviewed, $4.7 million had been disbursed from a 1997  obligation, valued at $6 million, to support the San Diego Harbor Tug  Charter; however, the last disbursement was made in October 1999. We  discovered that the remaining unliquidated funds were no longer needed  and the Navy subsequently deobligated the unliquidated $1.3 million.  Similarly, we reviewed a 1996 (fiscal year 1997) obligation to fund systems  development at the Bureau of Naval Personnel. When the responsible  Navy fund manager reviewed the unliquidated obligation at our request, he  determined that the outstanding balance of $1.4 million attached to this  obligation was no longer required and deobligated it. In both of these  cases, if Navy personnel had reviewed these obligations in accordance  with DOD regulations, they would have detected the error and deobligated  the funds years ago, thereby possibly allowing Navy to use the funds for  other permissible purposes, including contract modifications, or other  obligation needs of the same appropriation and fiscal year.
The Navy had also not properly accounted for an estimated $147 million in  unliquidated operating obligations due to expenditures that were not  properly matched to a specific obligation recorded in the Navy’s records— problem disbursements. We previously reported that the Navy’s financial  control policy and procedures do not ensure that the Navy can match  payments to corresponding obligations before or at the time a payment is  made. Consequently, if the Navy cannot resolve these problem  disbursements by matching the disbursement to the original obligation, it  must record a new obligation to cover the disbursement after a payment is  made. For example, one of our sample items had an unliquidated  obligation balance of $1,362,790 on September 30, 2001. The fund manager  of this 1998 obligation stated that all of the funds had been disbursed;  however, the Navy’s Standard Accounting and Reporting System indicated  that no disbursements had been made. We discovered that in fact all of the  funds had been disbursed for this obligation, but the disbursements had  been posted to the wrong obligation in the accounting system. Funds that  remain unliquidated due to a problem disbursement may not be  deobligated and used for other purposes because the funds are still needed  to reimburse the obligation that was erroneously charged for the  disbursement.
The Navy had not properly accounted for an estimated $330 million due to  unresolved accounting and recording errors. These obligations remained  unliquidated for several reasons. Most unresolved errors in our sample  occurred because fund managers were unable to identify whether the  providers of goods or services had been paid in full for services rendered.  The fund managers claimed that providers were often slow to bill or had  not sent a final bill. For example, we reviewed a 1997 obligation for  aircraft maintenance that had an unliquidated balance of $14.4 million. The  fund managers said that they had not received a bill from the Air Force,  which provided the maintenance service. In this case, the $14.4 million  remained on the books as unresolved, because the fund managers still  expected to receive a bill for the services. An example of a recording error  is illustrated in a $12 million obligation to support alterations on the USS  LaSalle. A disbursement was input twice and then reversed twice instead  of once. The second reversal of the disbursement left an unliquidated  balance on the obligation that should have been disbursed. Funds that  remain unliquidated due to unresolved accounting and recording errors  cannot be deobligated and used for other purposes, because the Navy  needs to have funds available to pay providers after the errors have been  resolved.
section_title: Navy Did Not Fully Adhere to DOD Review Regulations
paragraphs: The Navy did not fully adhere to DOD regulations to review all  unliquidated operating obligations, including those obligations valued at  $50,000 or more three times per year and those obligations valued at less  than $50,000 once every year. Furthermore, the Navy did not utilize  internal controls to determine the accuracy of the review process or the  outcomes of the reviews. As a result, the Navy did not know how much  money was tied up in unliquidated operating obligations that could  potentially be used for other permissible needs.
According to DOD regulations, obligation reviews are to be conducted by  fund managers within 14 days following the end of January, May, and  September. DOD regulations also require the services to implement  effective internal controls to ensure that the reviews are completed and  corrective actions are implemented in a timely manner. The purpose of  these reviews is to ensure that the unliquidated balances are accurate and  still needed. The Navy issued implementing guidance that (1) restates the  three deadlines provided in the DOD regulations, (2) requires that internal  controls be implemented by each entity as described in DOD regulations,  and (3) requires each fund manager to complete a checklist of the review  steps performed. For example, one required step is to follow up and  ensure the obligation is still needed. The guidance also requires the  comptroller of each major command to consolidate the review results  from the fund managers and include a list of all fund managers who did  not fully adhere to DOD regulations and the reason why. The major  command confirmation statement is to be forwarded to the Assistant  Secretary of the Navy (Financial Management and Comptroller), Office of  Budget.
Although DOD regulations require Navy fund managers to review all  operating obligations once annually and those $50,000 and above three  times each year, fund managers have not fully adhered. Fund managers  stated that they selectively reviewed some unliquidated operating  obligations, but were unable to make all the required reviews or complete  all the steps on some of the cases they reviewed. For example, fund  managers first prioritize for review the high-value unliquidated operating  obligations in the current fiscal year to accommodate immediate funding  requirements. That frees the funds for reobligation during the same fiscal  year. Unliquidated operating obligations that are approximately 5 years old  and, based on appropriations that will cancel at the end of the fiscal year,  are also a high priority for review in order to pay outstanding bills while  funds are available. As a result of prioritized and selective obligations  review, some operating obligations are not reviewed three times a year as  required by DOD regulations and some are not reviewed at all.
Navy fund managers provided several reasons why they selectively  reviewed obligations and did not review all of them. They stated that the  process of reviewing an obligation can be time-consuming due to a lack of  automated tools and, often, a lack of accurate billing information needed  to assess the validity of an obligation, especially for older obligations.  Officials acknowledged that the Navy’s Standard Accounting and  Reporting System provides users with the capability to conduct ad hoc  queries of the obligation database, but they claim these tools are not user- friendly because users must be familiar with the system’s database- programming code to take full advantage of its capabilities. Few of the  staff assigned to perform obligation reviews had the required computer  training or knowledge to write queries. Some of the fund managers also  told us that they were reluctant to review the large volume of low dollar  unliquidated operating obligations because they felt the expected rate of  return was not cost beneficial given the magnitude of resources required  to conduct the review. To illustrate the large volume, Atlantic Fleet  officials reported that they had 579,904 unliquidated operating obligations  valued $50,000 or less, and officials at the Pacific Fleet reported 724,266  such unliquidated operating obligations. Further, some fund managers  stated that it was impossible for them to comply with the requirement to  review all such unliquidated operating obligations even once a year,  because they did not have enough staff to review the large number of such  obligations.
Officials in the Navy Comptroller Office acknowledged that fund managers  have reported difficulties performing obligation reviews. Navy officials  also acknowledged that inaccurate obligation data compromises the  reliability of their financial statements, and therefore it is reasonable that  they review their obligations according to the regulations. Consequently,  the Navy has not sought relief from DOD obligation review regulations.
The Navy did not utilize internal control activities necessary to ensure that  fund managers performed thorough obligation reviews in accordance with  DOD regulations. Although some major commands had developed written  standard operating procedures or checklists to track whether fund  managers had reviewed their unliquidated operating obligations, they did  not hold managers accountable for the accuracy and completeness of the  reviews. Fund managers submitted obligation-review confirmation  statements to their major commands, but often the commands could not  determine specific details about the obligations, including the number of  unliquidated operating obligations reviewed, the amount of the obligations  reviewed, and the resolution of any problems identified during the review.  For example, one major command has a process to review whether fund  managers submit the required obligation review paperwork. However, the  command does not spot-check obligations to determine if they are valid as  claimed by the fund managers and accepts the fund managers obligations  review paperwork as is.
Officials in the Navy Comptroller Office stated that fund managers should  place more emphasis on reviewing obligations in accordance with DOD  regulations. However, they did not think it would be productive to  discipline fund managers for failure to adhere to the regulations. Rather,  they believe that the Navy should rely on financial system upgrades to  improve the accuracy of obligation data.
section_title: Conclusions
paragraphs: As highlighted in our 2001 Performance and Accountability Series reports,  financial management is one of the major management challenges facing  DOD. The large dollar value of unliquidated Navy obligations that were  not properly accounted for contributes to inaccuracies in the Navy’s  budget and financial reports, and subsequently leads to inaccuracies in  federal financial statements and the President’s budget. Moreover, the  Navy will not be able to pass the test of an independent financial audit  until it corrects inaccurate obligation data.
DOD regulations and Navy guidance provide for unliquidated obligations  to be reviewed by fund managers on a regular basis. The fund managers’  ability to deobligate or resolve the errors on many of our sample items  demonstrates that the review process could be effective. But the fund  managers have chosen to only selectively follow the requirements for  review because they said they were constrained by too little time to review  the large number of transactions, inaccurate billing information, and the  lack of automated tools. Although the Navy recognized the potential  benefits of timely identification of funds that are no longer needed or in  error, its internal controls have not ensured that required reviews were  made and corrective action taken. We note that fund managers were able  to successfully resolve nearly all of the unliquidated operating obligations  in our sample even though the resolution of some of the obligations  required an extensive amount of time and effort. Therefore, it is likely that  many of the unliquidated obligations in our sample that were not properly  accounted for could have been identified and accounting errors could  have been corrected prior to our review had fund managers performed  obligation reviews in accordance with the DOD regulations.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense direct the Secretary of Navy  to:    adhere to DOD unliquidated operating obligation review regulations; and    better apply existing internal control activities to ensure adherence to  these regulations, and to hold fund managers accountable for the accuracy  and completeness of their reviews.
As you know, 31 U.S.C. requires the head of a federal agency to submit a  written statement of the actions taken on our recommendations to the  Senate Committee on Government Affairs and the House Committee on  Government Reform not later than 60 days after the dare of this report. A  written statement must also be sent to the House and Senate Committees  on Appropriations with the agency’s first request for appropriations made  more than 60 days after the date of this report.
section_title: Agency Comments and Our Evaluation
paragraphs: The Director, Office of the Budget, Department of the Navy provided  DOD’s written comments on a draft of this report, which are provided in  their entirety in appendix II. The Navy partially concurred with our  recommendations and noted that more thorough efforts dedicated to the  review of obligations would increase the accuracy and reliability of  financial reports. It also plans to make the review process a part of its  management structure and stress the importance of accurate financial  statements. The Navy, however, commented that because numerous  factors contribute to problems in financial reports, it has to prioritize its  remedial efforts. Specifically, the Navy places a premium on reviewing  unliquidated obligations in available appropriations, correcting systemic  problems, and pursuing broad improvements in financial management. For  example, the Navy stated it made significant improvements in correcting  systemic issues—such as problem disbursements—and is working to  provide automated tools and correct systemic issues that would positively  impact the fund managers’ ability to conduct obligation reviews. While it  noted validating unliquidated obligations is desirable and important, the  Navy emphasized that systemic improvement of its financial information  offers the better opportunity for success.
The Navy did not agree that the difficulty the fund managers have had in  reviewing unliquidated obligations precluded the use of funds for other  appropriate needs. It noted that Congress has intentionally and  progressively limited the availability of funds from prior year  appropriations, clearly establishing that the appropriateness of use  outweighs the efficiency of use. When appropriate requirements for the  application of available funds from prior year appropriations have arisen,  the Navy commented that encumbrances for unliquidated obligations have  not been an impediment to obtaining necessary funds.
While we understand numerous factors, including systemic issues, affect  the accuracy of Navy financial reports, DOD regulations require that fund  managers annually review all unliquidated obligations and, as currently  written, do not provide for prioritization of such reviews. We recognize the  Navy has taken steps to significantly reduce the amount of outstanding  problem disbursements; however, as our report points out, problem  disbursements are only part of the reason for the significant amount of  unliquidated obligations. For example, about $782 million of the $929  million in unliquidated obligations in our sample were improperly  accounted for due to reasons unrelated to problem disbursements.  Specifically, the aggregate of these transactions involved funds that were  no longer needed for their original purpose or involved unresolved  accounting and recording errors. While we agree that focusing on systemic  issues offers opportunities to improve the Navy’s financial information, we  also note that the internal control procedures reflected in DOD’s  obligation review regulations are in fact designed to minimize systemic  problems such as problem disbursements. To the extent that the Navy’s  efforts to make systemic improvements include automated tools designed  to assist the fund managers in complying with obligation review  requirements, we believe these efforts represent a positive step.
We disagree with the Navy’s views regarding the impact of failing to  review all unliquidated obligations as required under current DOD  regulations. Regardless of whether the Navy is able to gain the funds  necessary from unliquidated obligations to satisfy appropriate  requirements as they arise, inaccurate obligation data in the Navy’s  financial system has broader implications, such as inaccurate financial  reports and misstatements of budgetary information on federal financial  statements and in the President’s budget. While we agree Congress has  placed statutory limitations on the availability of appropriated funds, DOD,  like all agencies, is responsible for effectively and efficiently implementing  its activities within the limitations applicable to the appropriations it  receives. Indeed, Congress specifically established in chapter 15 of title 31,  United States Code, a framework for reviewing, adjusting, certifying to,  and reporting on, among other items, the status and amounts of  unliquidated obligations. In addition, the Federal Managers’ Financial  Integrity Act of 1982 requires that agencies have controls to reasonably  ensure that revenues and expenditures applicable to agency operations are  recorded and accounted for properly so that accounts and reliable  financial and statistical reports may be prepared and accountability of  assets may be maintained. Finally, for many interagency obligations  entered under a specific statutory authority—such as the Economy Act— the authorizing statute may mandate the deobligation of appropriations at  specific times or when certain conditions arise. In this context, the ability  of the Navy to access funds encumbered by unliquidated obligations does  not relieve it of the responsibility to adhere to existing laws and  regulations governing sound financial management. We therefore are  making no changes to the recommendations in our report.
We are sending copies of this report to congressional committees with  jurisdiction over DOD’s budget and the Secretary of the Navy. We will also  make copies available to others upon request. In addition, the report will  be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please call me at  (202) 512-9619. Key contributors to this report are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: Our objective was to determine whether the Navy’s unliquidated operating  obligations were (1) properly accounted for and (2) periodically reviewed  in accordance with DOD regulations.
To determine whether Navy’s unliquidated operating obligations were  properly accounted for, we requested that the Defense Finance  Accounting Office provide us with a database that identified all  unliquidated operating obligations outstanding on September 30, 2001. We  relied on the completeness and accuracy of that database based on the  office’s representations and did not independently test or reconcile the  validity of their database. For our review, we selected unliquidated  operating obligations for fiscal years 1997-99. Older obligations are more  likely to be in error and thus provided a better test of the Navy’s obligation  management practices. We then divided the individual unliquidated  operating obligations into two groups—those valued at less than $50,000  and those valued at $50,000 or more. Those valued at $50,000 or more  represented $1.4 billion, or 67 percent of the value of all outstanding  operating obligations for fiscal years 1997-99.
From the population of obligations valued at $50,000 or more, we drew a  stratified random sample of 205 unliquidated operating obligations to  review. For each transaction, we obtained the following documentation:  (1) documentary support describing each obligation, including  amendments and modifications for each sample transaction; (2) responses  from Navy officials regarding whether each unliquidated operating  obligation in our sample was still needed for its original purpose according  to the criteria in the DOD Financial Management Regulation (FMR); and  (3) support for how to classify each unliquidated operating obligation in  our sample as still needed, no-longer-needed, problem disbursement, or an  unresolved accounting and recording error.
The sample was selected from three strata defined by the dollar value of  the obligations, as shown in table 3.
To determine whether the amount of each unliquidated operating  obligation was properly accounted for, we reviewed support provided by  the Navy, discussed the status of the unliquidated obligation with the  primary Navy official responsible for the individual transaction, and used  the criteria set forth in DOD’s regulations. We classified unliquidated  operating obligation transactions as “still needed” and properly accounted  for when the Navy provided documentation to support that the contracted  goods or services were still needed; thus, the transaction passed a bona  fide needs test. Items not properly accounted for fell into three categories.  We classified the transaction “no longer needed for original purposes”  when the Navy could not provide support that a bona fide need existed.  We classified transactions as “problem disbursements” when specific  disbursements were not properly matched to corresponding obligations  recorded in the department’s records. We classified the remaining  unliquidated operating obligation transactions as “unresolved accounting  and recording errors” when they did not clearly meet the criteria for  needed, no-longer-needed, or problem disbursements.
To determine if the Navy’s unliquidated operating obligations were  periodically reviewed in accordance with DOD regulations, we requested  that the Navy provide documentation and guidance on the Navy’s  implementation of the regulations. We also interviewed officials at   12 locations to discuss (1) their procedures for performing obligation  reviews, (2) the magnitude of transactions involved to perform the review  as set forth in the DOD obligation review regulations, and (3) whether the  officials had difficulty meeting the obligation review requirements,  including the reasons why. We visited the Commander in Chief of the  Atlantic Fleet in Norfolk, Va.; the Commander, Navy Mid-Atlantic Region  in Norfolk, Va.; the Commander, Naval Sea Systems Command in  Washington, D.C.; the Naval Facilities Engineering Command in  Washington, D.C.; the Director of Strategic Systems Programs in  Washington, D.C.; the Commander in Chief of the Pacific Fleet in Pearl  Harbor, Hawaii; the Commander, Naval Region in Pearl Harbor, Hawaii;  the Commander, Naval Air Force Command of the Pacific Fleet in San  Diego, Calif.; the Commander, Naval Surface Force Command of the  Pacific Fleet in San Diego, Calif.; the Space and Naval Warfare Systems  Command in San Diego, Calif.; the Commander, Naval Air Systems  Command in Patuxent River, Md.; and the Bureau of Medicine and Surgery  in Washington, D.C.
We conducted our review from October 2001 through October 2002 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Agency Comments
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the individuals named above, Lori Adams, Linda Garrison,  Gregory Kutz, Steve L. Pruitt, Rhonda P. Rose, and R.K. Wild made key  contributions to this report.