Internal Controls

GAO reviewed the Navy's records retention and financial disbursements, focusing on the Navy's application of a Department of Defense (DOD) Financial Management Regulation (FMR) which calls for copies of disbursing officer records to be destroyed after 1 year.

GAO noted that: (1) GAO's January 1999 report on problems in accounting for Navy transactions focused on in-transit disbursements that had not been matched to a Navy obligation within 120 days of the transaction; (2) these unmatched disbursements prevent accurate funds control and financial accounting and create opportunities for fraud and improper payments; (3) to resolve problem in-transit disbursements, accurate, detailed accounting data for each in-transit disbursement must be identified and matched with the correct obligation and appropriation; (4) as part of GAO's effort to assess the feasibility of resolving unmatched disbursements, GAO reviewed a sample of 140 Navy transactions at the Defense Finance and Accounting Service Norfolk Operating Location; (5) these transactions related to payroll amounts deposited in automated teller machine (ATM) accounts for service members stationed on ships; (6) Navy disbursing officers were able to provide vouchers for 135 of 140 sample transactions; (7) however, these vouchers consisted of summary totals and did not contain necessary detailed supporting information; (8) detailed transaction records were not available for 119 of the 135 vouchers because, according to disbursing officers, DOD regulations require that disbursing offices maintain copies of transaction records, including original records, for only 1 year; (9) federal records retention policy calls for different records retention periods for original transaction records and copies of transaction records; (10) title 8 of GAO's Policy and Procedures Manual for Guidance of Federal Agencies calls for records to be retained in conformance with the minimum applicable General Records Schedule requirements established by the National Archives and Records Administration; (11) General Records Schedule 6 covers accountable officers' records and defines an accountable officer to include disbursing officers; (12) General Records Schedule 6 states that original records of accountable officers should be held for audit by GAO and calls for these records to be destroyed 6 years and 3 months after the period covered by the accounts; (13) of much greater concern, the FMR provides incomplete guidance for the retention of disbursing office records, resulting in original transaction records not being maintained after 1 year; and (14) the lack of specific guidance distinguishing between copies--meaning duplicates--and original records results in confusion as to the proper retention period for original disbursing office records.

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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