Financial Management

GAO commented on the Defense Finance and Accounting Service's (DFAS) draft federal accounting standards and requirements, focusing on: (1) additional needed requirements not presently included in the draft; (2) suggested changes to information now in the draft; and (3) where GAO believes the draft document should fit into the Department of Defense's (DOD) overall strategic planning and financial management systems architecture processes.

GAO noted that: (1) there are specific financial management requirements that GAO did not find in the draft document, which DFAS should consider adding that are essential to ensuring an integrated financial management system, critical to ensuring an effective internal control system, or misstated in the draft document; (2) the draft document does not include travel, loans, acquisition, military retirees and related retirement fund investments, and budget formulation functional areas; (3) not all information flows among the document's major financial management functions are identified; (4) however, in the payroll section, the draft document only contains a draft standard that calls for the system to interface with the general ledger and cost accounting systems regarding the collection of items such as health and insurance premiums from employees on unpaid leave; (5) DFAS could choose to develop these information flows in a separate document, but such a document should be completed prior to evaluating DOD's financial management systems to enable an assessment of whether the appropriate information exchanges among DOD's financial management systems are taking place; (6) DFAS did not include GAO's Title 7, "Fiscal Procedures", in the reference section; (7) DFAS should clarify that the requirements in the document would apply to DOD's financial management systems, using the definitions of financial management systems contained in the Federal Financial Management Improvement Act of 1996; (8) DFAS should include definitions of each of the functional areas, and the processes within each area, to clarify the scope of each of the sections; (9) in addition, the distinction between the funds control and budgetary accounting sections is unclear; (10) the draft document places the establishment of an account classification code structure standard in the accounts receivable and advances section; (11) GAO would suggest including it in the general ledger and financial reporting section; (12) the draft document does not contain high-level requirements necessary to support other DOD initiatives such as the standard data elements initiative; and (13) the draft document misstates which parts of GAO's Title 2, "Accounting", are still in effect.