Financial Audit

Two years after GAO revealed that weak accounting systems caused the Air Force to misstate by billions of dollars the actual costs of buying and operating weapons and maintaining inventories--more than 70 percent of the Air Force's noncash assets were unauditable--a followup review has found little progress in correcting problems. The Air Force's accounting systems generate unreliable and inaccurate financial information that is of little value for either internal management purposes or external reporting. Billions of dollars of budgetary outlays are inaccurately recorded in the accounting system because budgeting and accounting systems are not integrated. Further, the Air Force's inventory systems do not correctly report either the quantities or values of high-dollar investment item inventories at the Air Force Logistics Centers. GAO also found that deficiencies in stock fund operations have reduced incentives for good inventory management and have contributed to sharply increased prices. The Defense Department, almost without exception, has agreed with GAO's findings and recommendations and has expressed a strong commitment to implementing corrective action. But GAO's current audits of Air Force financial systems show that initiatives planned or started at higher levels have not yet had a great deal of impact at the working level, where transactions are made and data is generated. The Comptroller General summarized this report in testimony before Congress; see: Financial Audit: Aggressive Actions Needed for Air Force to Meet Objectives of the CFO Act, by Charles A. Bowsher, Comptroller General of the United States, before the Senate Committee on Governmental Affairs. GAO/T-AFMD-92-5, Feb. 19 (23 pages).

GAO found that: (1) the Air Force and DOD have made limited progress in implementing previous GAO recommendations regarding financial management; (2) the Air Force's accounting and financial management systems are not integrated and generate unreliable and inaccurate financial information that was of little value for either internal management purposes or external reporting; (3) in FY 1989, approximately $20 billion of budgetary expenditures for capital assets were not recorded or could not be traced to accounts in the general ledger system; (4) the Air Force and DOD rely on long-term initiatives to solve financial management problems, but short-term actions are needed to meet objectives of the Chief Financial Officers Act; (5) it will take billions of dollars in adjustments to correct errors and improve the accuracy of the Air Force's FY 1989 financial reports and records; (6) DOD requires the Air Force to record and report the actual costs invested in weapons systems, but it uses unit costs instead; (7) weaknesses in inventory management and control have resulted in $11 billion of unreported inventory and inaccurate inventory records and accounts; (8) the Air Force's internal control system was not adequate to safeguard all assets or ensure the reliability and accuracy of account balances and financial reports; and (9) the Air Force did not report internal control weaknesses identified by GAO to DOD pursuant to the Federal Managers' Financial Integrity Act.

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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