Financial Management

Internal Control Weaknesses Impede Air Force's Budgeting for Repairable Items Gao ID: AFMD-92-47 August 26, 1992

GAO reviewed how the Air Force accounts for repairable items, including spare parts for landing gears, engines, and radar sets. These items constitute about $31 billion--more than 75 percent--of all Air Force inventory. The Air Force's key financial management systems do not generate reliable inventory balances needed to make sound budget estimates and purchase decisions for repairable items. Managers have no explanation for $182 million in differences between automated and manual records for 82 of 104 items examined. The Air Force lacks an overall strategy to minimize inconsistencies between the manual and automated inventory balances. Planned system enhancements will not provide managers the data needed to resolve differences between two sets of records. The continued use of inaccurate inventory data could jeopardize two new financial improvement measures undertaken by the Pentagon--the Air Force stock fund and the Defense Business Operations Fund. In addition, the Air Force's annual reports to the Defense Department have not disclosed problems in budgeting for repairables so that the problems can receive top management attention.

GAO found that: (1) the Air Force has duplicate automated and manual worldwide inventory records that do not provide accurate and reliable data for estimates and decisions because the automated system has inadequate internal controls, and the manual system is subject to errors and unsupported adjustments; (2) managers could not resolve discrepancies between the two systems due to lack of data and noncompliance with reconciliation procedures and regulations; (3) continuing system problems and internal control weaknesses could adversely affect two Department of Defense (DOD) initiatives to improve financial accountability and management; (4) Air Force efforts to correct system problems have been fragmented and incomplete; (5) the Air Force's plan to automate the manual records system will not resolve the problem of maintaining two parallel systems; (6) the Air Force may benefit from considering the inventory management practices followed by private-sector airlines, which have similar needs and problems; and (7) the Air Force failed to report its internal control weaknesses in its budgeting process in its 1991 Federal Managers' Financial Integrity Act report.

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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