Financial Management

As far back as 1990, the Pentagon acknowledged that inaccurate reporting on its real and personal property was a significant problem. Recent financial statement audits continue to find unreliable financial balances for real and personal property. Federal accounting standards identify general property, plant, and equipment as a separate category of assets to be accounted for and reported in the Defense Department's (DOD) financial statements. In its fiscal year 1996 financial statements, DOD reported more than $182 billion worth of these assets, which range from mainframe computers to office equipment to vehicles. The Defense Property and Accountability System has been assigned responsibility for accounting for real and personal property throughout the military in order to bring DOD's assets under proper accountability and financial control, to remedy inaccurate financial reporting, and to meet the objectives of recent financial management reform legislation. This report discusses whether the Defense Property and Accountability System was (1) designed to meet the functional accounting requirements for general property, plant, and equipment and (2) implemented at the Defense Information System Agency's Defense Megacenters in a way that helps ensure that it meets functional accounting requirements for general property, plants, and equipment.

GAO noted that: (1) as functionally designed, DPAS can provide financial control and generate information to account for most general PP&E; however, DPAS cannot yet meet requirements that become effective for accounting periods beginning after September 30, 1997; (2) DPAS does not contain the information needed to meet new federal accounting standards for deferred maintenance and environmental clean-up costs; (3) the DPAS design does not meet several current Department of Defense (DOD) accounting requirements for certain minor types of PP&E; for example, DPAS does not have the information to meet the requirements for recording depletion of natural resources, which represent 1.2 percent of DOD's total general PP&E; (4) DPAS needs to be modified with the addition of data elements and financial transactions to meet new standards and requirements as well as the current ones not yet covered; (5) implementation of DPAS at DISA did not ensure financial control and accurate reporting of general PP&E; (6) DPAS was not correctly interfaced with the accounting system due to errors in the interface program used to translate DPAS data to data understandable to DISA's general ledger; (7) this caused transactions to be recorded incorrectly in the general ledger, resulting in a material difference of over $118 million in property values between DPAS detailed records and the general ledger summary records; (8) the problem with the interface program could have been mitigated if transactions using the standard general ledger accounts were created in DPAS; (9) in addition, compensating controls, such as routine reconciliations between the two systems, were in place; (10) many of the problems with the accuracy of property data experienced at DISA can be linked to several issues that affect DOD-wide implementation of DPAS; (11) DOD, as part of its DPAS strategic planning process, has not defined the roles, responsibilities, and relationships among the various DOD entities involved, interfaces, and related controls; (12) this part of the strategic planning has not developed a detailed DPAS implementation schedule that identifies at what sites and when the system will be implemented; and (13) DOD has left it up to each military service to determine where, when, and how DPAS is to be implemented without providing adequate implementation guidance or ensuring that the implementation schedule includes all sites, making it unlikely that DPAS will be implemented across DOD by the Comptroller's target date of 2000.

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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