CFO Act Financial Audits

Navy Plant Property Accounting and Reporting Is Unreliable Gao ID: AIMD-96-65 July 8, 1996

In March 1996, GAO reported that the Navy's fiscal year 1994 consolidated financial reports on general fund operations--which included $78 billion for the Navy's plant property--were substantially inaccurate because of at least $225 billion in errors, including upwards of $25.6 billion in errors involving the Navy's plant property account balances. (See GAO/AIMD-96-7.) GAO made more than a dozen recommendations to avoid the mistakes made in preparing the Navy's fiscal years 1994 consolidated financial reports on general fund operations. This report describes in greater detail the factors contributing to inaccurate reporting of the Navy's plant property account balance. The report also recommends additional measures to ensure that the Navy has reliable information with which to effectively manage and control the billions of dollars the government has invested in Navy plant property.

GAO found that: (1) substantial weaknesses in the Navy's financial reporting systems caused the Navy to submit inaccurate FY 1994 financial reports; (2) the Defense Finance and Accounting Service (DFAS) erroneously counted $23.9 billion of structures and facilities and $700 million of land twice because it received the information from two separate sources and incorrectly included the information from both sources in the consolidated reports; (3) the Navy failed to ensure that all plant property from general fund activities was included in or that plant property from Defense Business Operations Fund (DBOF) activities was excluded from the reports because the list of general fund activities was outdated; (4) DFAS did not compare the activities included in the reports with the list of general fund activities when it consolidated the Navy's 1994 financial reports; (5) the Navy's reporting of the $291 million plant property work-in-progress balance was highly questionable because not all transactions were properly recorded, and Navy activities found it difficult to resolve in-transit property transactions; (6) the Navy did not reconcile all of its logistics, custodial, and accounting records on a timely basis; and (7) the Navy and DFAS have taken actions to improve their internal controls, verify the accuracy and completeness of financial information, and reconcile plant property accounts.

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.

Director: Team: Phone:


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.