Internal Controls

Defense Fuel Supply Center's Recording and Reporting of Accounts Payable Gao ID: AFMD-87-30 May 13, 1987

In response to a congressional request, GAO assessed the adequacy of the Defense Fuel Supply Center's (DFSC) financial and management information system in controlling, accounting for, and reporting on its fuel program, specifically its accounts payable.

During fiscal year 1986, DFSC purchased over $4.3 billion in fuels and, as of September 30, 1986, had over 17,500 accounts-payable balances, totalling about $416 million. GAO found that DFSC: (1) did not have adequate controls to ensure the proper recording and reporting of accounts payable resulting from its fuel purchases; (2) inaccurately reported the amounts it owed contractors; and (3) conducted inaccurate reviews of accounts-payable balances and did not know if the balances that remained outstanding for long periods were correct. GAO also found that DFSC improperly recorded and reported overpayments to contractors as negative accounts payable rather than accounts receivable, which understated both balances and caused management to lose control over collections. GAO noted that DFSC manually processes contractors' requests for payments and relies on documentary evidence to validate these payments, but it plans to implement an automated disbursing system which will interface with the Defense Fuel Automated System (DFAM) and rely primarily on DFAM data to validate payment information.

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.

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