Millions in Stock Funds Mismanaged at Defense Personnel Support Center

GAO reviewed the inability of the Defense Personnel Support Center to control hundreds of millions of stock fund dollars because of its ineffective accounting systems. The Center could not accurately determine amounts paid and amounts of unliquidated obligations. In an attempt to correct its records, the Center made financial adjustments during fiscal years 1978 and 1979. However, the validity of most of these adjustments could not be determined because they were not supported by adequate documentation. Even after the adjustments, many of the records were still inaccurate.

In its review, GAO found that the chaotic condition of the Center's funds control systems and records prevented it from systematically detecting fraudulent contract payments. Additionally, the Center's problems were compounded when erroneous account balances were certified as correct. The balances were certified even though the Center was aware that it had serious funds control problems. In addition, full disclosure was not made in financial statements of either the Center's funds control problems or the large amount of adjustments that were made without adequate supporting documentation. Although the Defense Logistics Agency (DLA) was aware of the Center's problems, it did not require withdrawal or adequate qualification of certification statements. Moreover, DLA certified the Center's accounts as correct despite knowledge of the Center's problems and unsupported adjustments. The Center's funds control problems occurred because its two major commodities are managed under ineffective financial accounting systems. The systems lack adequate controls to ensure timely, accurate processing and recording of financial transactions. Further, the Center's operational problems included problems in funds control system procedures, practices, and documentation.

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: Accounting and Financial Management Division Phone: (202) 275-1581