Financial Data Reflect a Profitable Operation

The Concessions Committee does not receive appropriated funds. Independent Financial Statement Audits Performed

The Committee received unqualified opinions on its fiscal year 1997 and 1996 financial statements based on audits performed by the independent public accounting firm. The Committee does not engage in resale activities. Although the Committee’s operations are reviewed by a high level official within the Office of the Secretary of Defense, the Committee is not subject to the reporting and oversight requirements of other nonappropriated fund instrumentalities. Operating Procedures Are Not Specified

The Committee’s current operating guidance does not specify the procedures by which the Committee is to exercise its authority or the types of goods and services that can be offered by concessionaires. In the absence of specific operating procedures, the Committee has elected to follow Army regulations applicable to nonappropriated fund instrumentalities. While the Committee has chosen to follow these regulations, it is not required to do so and therefore cannot be held accountable for deviations. If the Committee’s need for reserves are overstated, additional resources could be made available to MWR funds. At our suggestion, the business manager agreed to request its independent public accountant’s assistance in preparing a 5-year operating budget that would identify the minimum level of cash reserves needed to cover normal operations. Its financial operations have been audited, and our review disclosed no instances where the independent public accounting firm did not comply in all material respects with generally accepted government auditing standards. Although the amount available for MWR contributions is directly linked to the Committee’s decisions to retain earnings for reserves and equipment, there is no written policy to guide its members in making these decisions, and we could find no documentation supporting how the decisions were reached. Furthermore, the Committee does not have a long-term operating budget for use in making these decisions. Recommendations

We recommend that the Secretary of Defense (1) require the Committee to comply with the same reporting requirements of other nonappropriated fund instrumentalities, thereby ensuring that the Congress has the opportunity to review the Committee’s activities; (2) specify operating regulations to be followed by the Committee in its day-to-day operations, including guidance on the types of goods and services that can be offered; and (3) require the Committee to develop a policy and a long-term operating budget to guide members in making MWR contributions and cash reserve decisions and to document in its minutes the rationale for those decisions.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Department of Defense (DOD) Concessions Committee's operations, focusing on the Committee's: (1) financial operations; (2) oversight and management; and (3) contributions to morale, welfare, and recreation (MWR) funds.

What GAO Found

GAO noted that: (1) the Concessions Committee's financial statements are audited by an independent public accounting firm, and those financial statements have consistently received unqualified opinions; (2) as a result, GAO did not independently review the Committee's financial operations; (3) GAO reviewed an independent public accounting firm's work for the last 2 fiscal years; (4) GAO's review disclosed no instances where the firm did not comply in all material respects with generally accepted government auditing standards; (5) the Committee is not subject to the reporting and oversight requirements of other nonappropriated fund instrumentalities; (6) although the Committee's operations are reviewed by a senior official in the Office of the Secretary of Defense, the Committee has not been required to submit financial information to Force Management and Policy; (7) therefore, Congress does not receive information on its activities; (8) also, the Committee's governing directive does not specify the procedures by which the Committee is to manage its day-to-day operations or criteria for determining the types of sales activities it may engage in; (9) in the absence of specific operating procedures, the Committee has followed Army regulations for nonappropriated fund instrumentalities; (10) while GAO did not find any instances where the Committee deviated from the Army regulations, the absence of mandatory operating regulations represents a weakness in management controls; (11) although the Committee has chosen to follow these regulations, it is not required to do so and therefore cannot be held accountable for deviations; (12) although the amount available for MWR contributions is directly linked to the Committee's decisions to retain earnings for reserves and equipment, there is no written policy to guide its members in making these decisions, and GAO could find no documentation supporting how the decisions were reached; (13) although the Committee has a capital expenditure budget, it does not have a long-term operating budget for use in making these decisions; (14) at GAO's suggestion, the Committee has indicated it will prepare a 5-year operating budget that will identify the minimum level of cash reserves that are needed to cover current operations; (15) the Committee also plans to review its long-term capital expenditure budget in light of the ongoing Pentagon renovations; and (16) these actions may result in identifying additional resources that could be made available to MWR funds.