The Air Force Has Incurred Numerous Overobligations in Its Industrial Fund

Gao ID: AFMD-81-53 August 14, 1981

GAO reviewed aspects of financial operations in the Air Force industrial fund to determine whether procedures for the financing of, accounting for, and reporting results of Air Force industrial fund operations were in accordance with existing statutes, the intent of Congress, and applicable federal guidance and regulations. GAO made this review pursuant to its responsibilities under the Accounting and Auditing Act for reviewing agency accounting systems from time to time.

The Air Force has incurred numerous overobligations in its industrial fund in recent years and failed to report the deficiencies to the President and Congress, as required by the Antideficiency Act. In addition, the Air Force illegally adjusted industrial fund account balances on year-end certified financial reports. Because of the adjustments, these violations of the act were not apparent on the year-end reports. The act provides for administrative control over funds by restricting obligations and expenditures to amounts appropriated by Congress and, where applicable, apportioned by the Office of Management and Budget (OMB). The Air Force industrial fund provides goods and services to customers on a cost-reimbursable basis. Fund obligations are limited to available budgetary resources which include balances on deposit with the Treasury, accounts receivable, and unfilled customer orders. The adjustments to the year-end reports have been approved each year by an Air Force internal financial management review committee, which contended that the practice of obligating the industrial fund against anticipated customer orders, and adjusting year-end balances accordingly, is supported by internal legal decisions. However, those rulings were based on the erroneous assumption that, because the Air Force industrial fund is exempt from the apportionment process, OMB provisions for administrative control of funds and restrictions on the use of reimbursements do not apply. Neither the Department of Defense (DOD) nor OMB have questioned the deficiencies in the Air Force monthly reports.


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Director: John F. Simonette Team: General Accounting Office: Accounting and Financial Management Division Phone: (202) 275-1581

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