Financial Management

Weak Financial Accounting Controls Leave Commodity Command Assets Vulnerable to Misuse Gao ID: AFMD-92-61 September 4, 1992

As part of its comprehensive review of the U.S. Army's financial systems and operations, GAO evaluated the Army commodity commands' internal accounting controls. GAO discovered that the commodity commands did not effectively control and report on billions of dollars in assets for which they were responsible, nor did they accurately track and monitor billions of dollars in government-owned materials and equipment that had been furnished to contractors. The Army has continued to have a problem with large amounts of negative unliquidated obligations that occur when expended appropriations exceed recorded obligations for contractors or other purchases. GAO also noted a major problem at the commodity commands' disbursing offices where blank checks and check-signing machines were not secured, were accessible to anyone in the disbursing office, and were thereby vulnerable to misuse.

GAO found that: (1) the commodity commands do not effectively control government-furnished property, due partially to continuing management oversight weaknesses and failure to follow required procedures; (2) the Army has not yet implemented an accounting system that would identify how much government-furnished material contractors have on hand and how they use it; (3) the Army has large negative unliquidated obligations which continue to increase despite Army attempts to control them; (4) the negative unliquidated obligations are due to overpayments to contractors, accounting and processing errors, and AMC failure to correct ineffective communication of contract and payment information between the commodity commands' system and the Defense Finance and Accounting Service's (DFAS) systems; (5) AMC has not recorded the overpayments as accounts receivable as required, and has not otherwise attempted to collect the overpayments; and (6) the commodity commands' controls over blank checks and check signing machines were weak, and the commands took corrective actions to comply with regulations.

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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