Financial Audit

In its first audit of the Army's financial operations, GAO could not express an overall opinion for two reasons. First, material uncertainties exist about the reasonableness of amounts reported for most Army assets. Second, accounting system inadequacies and the failure to adhere to Defense Department and Army policies made an audit of the consolidated reports of operations, cash flows, and reconciliation impractical. Problems like the lack of an integrated general ledger system and weak internal controls prevented GAO from assessing the reliability of these reports. In addition to limiting the Army's ability to prepare reliable financial statements and other reports, the weak internal controls cannot be relied upon to safeguard the Army's assets or ensure material compliance with budget authority, laws, and regulations. Although it has not found instances of noncompliance with laws and regulations, GAO continues to examine the legal implications of (1) the Corps of Engineers not recording obligations for its Civil Works Revolving Fund equipment contracts and (2) a potential violation of the Anti-Deficiency Act at the Aviation Systems Command.

GAO found that: (1) it was unable to express an opinion on the Army's financial statements; (2) there were material uncertainties regarding the amounts reported for most of the Army's assets; (3) weak internal controls limit the Army's ability to prepare reliable financial statements, safeguard assets, and ensure material compliance with its budget authority; and (4) in two instances, the Army may not have complied with accounting regulations and applicable laws.