Financial Audit

Financial Reporting and Internal Controls at the Air Logistics Centers Gao ID: AFMD-91-34 April 5, 1991

GAO reviewed the Air Force Logistics Command's (AFLC) financial management operations related to its five Air Logistics Centers' (ALC) inventories, focusing on internal control and financial reporting improvements.

GAO found that: (1) as of September 30, 1989, overstatements in ALC inventory records totalled $1.5 billion and understatements totalled $0.8 billion; (2) $7 billion in errors in general ledger inventory accounts showed that inventory records and accounts did not accurately portray either the quantities or values of ALC inventories; (3) improper inventory transaction processing, inadequate accounting and reconciliation procedures, poorly integrated information collection systems, and limited management attention to data quality caused duplicate inventory reporting of billions of dollars; (4) 34 percent of inventoried items reviewed were not priced in accordance with Air Force policy, resulting in $464 million worth of overpricing; (5) the stock fund lost from $30 million to $60 million in revenues in fiscal year (FY) 1989 due to billing problems, causing the fund to impose a 20-percent surcharge on sales to add about $180 million to sales revenues to stay solvent; and (6) the fund's poor financial condition was caused by poor cash collection practices, excess inventories, and mistakes in processing accounting transactions.

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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