Financial Management

DOD Needs to Expedite Plans to Implement Deferred Maintenance Accounting Standard Gao ID: AIMD-97-159R September 30, 1997

GAO reviewed the status of the Department of Defense's (DOD) efforts to develop agencywide policies to address the deferred maintenance standard for mission assets and to emphasize the importance of developing timely DOD-wide guidance.

GAO noted that: (1) the development of DOD policy and implementing guidance for deferred maintenance is essential to ensure consistent reporting among the services and to facilitate the preparation of accurate DOD-wide financial statements, particularly since the new accounting standard provides extensive management flexibility in implementing the disclosure requirement; (2) during GAO's ongoing work on identifying and disclosing deferred maintenance on mission assets, both Army and Navy officials stated that they were reluctant to develop procedures to implement the required accounting standard until DOD issues overall policy guidance; (3) accounting policy officials within the Office of the Under Secretary of Defense, Comptroller (OUSD(C)), stated that they plan to issue DOD-wide policy guidance in the DOD Financial Management Regulation after OUSD(C) and the Under Secretary of Defense (Acquisition and Technology) review the results of a study by a nonprofit organization; (4) this study is expected to identify and evaluate alternative reporting approaches; (5) the officials then plan to provide financial management and logistic policy guidance as appropriate for deferred maintenance; (6) OUSD (Acquisition and Technology) maintenance policy staff plan to award the task order for this study in October 1997 and expect the results in 6 to 9 months; and (7) however, under this time frame, the military services may not have the DOD-wide guidance in time to develop service-specific policies and procedures for collecting deferred maintenance data for the fiscal year (FY) 1998 financial statements.

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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