Defense's Accounting for Its Contracts Has Too Many Errors--Standardized Accounting Procedures Are Needed

The Department of Defense (DOD) devised the Military Standard Contract Administration Procedures in 1966 to facilitate uniform contract administration of DOD contracts by exchanging contract administration data in automated form among the military services and Defense Contract Administration Services regions. It is the responsibility of these regions to administer most DOD contracts and to ensure that the unnecessary duplication of contract management functions are eliminated. As of March 30, 1979, the regions were acting as the middle manager between the government buyer and DOD contractor for 250,000 contracts valued at $73 billion. A review of 8 of the 48 DOD organizations heavily involved with contract management focused on the Standard Procedures which required uniform coding and processing of financial data.

Although the Administration Procedures were to have been implemented by 1970, this goal has still not fully been achieved, thus resulting in numerous clerical errors in interpreting a variety of nonstandard forms, codes, and financial transactions. Nonstandard contract accounting procedures used by DOD components cause substantial errors in reporting, recording, and controlling contract financial data, at a cost of millions of dollars in unnecessary personnel and other costs due to duplication of accounting functions. While DOD officials have resisted implementation of the Procedures, GAO estimated that their full implementation and elimination of duplicate operations at the eight locations alone could reduce DOD costs by up to $2.7 million annually. Accounting errors of over $90 million were identified on 286 of the 856 transactions reviewed for 26 contracts.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: John F. Simonette Team: General Accounting Office: Financial and General Management Studies Division Phone: (202) 275-1581