Financial ManagementStatus of Defense Efforts to Correct Disbursement Problems Gao ID: AIMD-95-7 October 5, 1994
Despite numerous audit reports during the past 14 years that repeatedly cited internal control weaknesses, the Defense Department (DOD) continues to experience problems in accounting for disbursements. Not being able to properly match a disbursement to an obligation is a serious, fundamental breakdown in internal controls and DOD's fund control systems. Although DOD has taken some initial steps to overcome its disbursement problems, serious weaknesses still plague DOD's systems, as evidenced by the nearly $25 billion in problem disbursement transactions identified as of June 1994. Intensified and sustained top-level management commitment, as called for by the DOD Comptroller, will be needed to resolve the disbursement problems. In the short term, DOD's efforts, such as its manual research of problem disbursement transactions to correct errors, will likely reduce the amount of disbursement not properly matched to obligations. However, the disbursement problem will not be adequately resolved until weaknesses in control procedures that allow problem disbursement to occur are corrected and improvements are made to DOD's contract pay and accounting systems.
GAO found that: (1) as of June 30, 1994, DOD reduced its $19.1 billion of reported problem disbursements by $9.4 billion; (2) the $3.6 billion that DOD reclassified as negative unliquidated obligations still need to be resolved; (3) the DOD $19.1-billion benchmark for problem disbursements was understated because DOD criteria for identifying and reporting disbursements did not include all types of problem disbursements; (4) as of June 30, 1994, DOD records contained at least $24.8 billion in problem disbursements, including $5 billion in unreconciled "M" account balances; (5) DOD plans to revise its benchmark figure to reflect its disbursement problems more accurately, but it has not set a date for reporting the revised data; (6) DOD needs to maintain current and accurate disbursement records to justify using current appropriations to pay for obligations from closed accounts; (7) in March 1994, the DOD Inspector General issued guidance to stop DOD from disbursing funds in excess of recorded obligations and account balances; (8) DOD initiatives to resolve its disbursement problems include identifying the extent of the problem and improving its contract pay and accounting systems; and (9) DOD needs to emphasize and enforce sound accounting principles and internal controls to properly match disbursements with obligations.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: