Some Real Property Was Counted Twice

At September 30, 1994, the Navy’s reported real property account balance was overstated by at least $24.6 billion because DFAS personnel had erroneously double counted $23.9 billion of structures and facilities and $700 million of land. The DFAS, Cleveland Center, personnel compiling these data did not realize that the Center had received some of the same land and building accounting information from two separate sources and had incorrectly included the information from both of them in the consolidated financial reports. The Navy and DFAS, Cleveland Center, did not have effective processes in place to ensure that all financial information on plant property from only general fund activities was included in the Navy’s consolidated financial reports on general fund operations or that plant property from DBOF operations was excluded. The DAOs did not compare the listings of reporting activities with those listed in the Navy Comptroller Manual when accumulating the data. Nor did DFAS, Cleveland Center, consult the listings when consolidating the Navy’s fiscal year 1994 financial reports on its general fund operations. Thus, both the Navy and DFAS are now required to verify the accuracy and completeness of financial reports. Recommendations

We recommend that the Navy Assistant Secretary for Financial Management and Comptroller and the DFAS Director require that by September 30, 1996, the Navy Comptroller Manual provision that lists the Navy’s activities engaged in general fund operations and DBOF operations be updated and accurately maintained; the Navy and DFAS, Cleveland Center, use this listing as one analytical procedure to help ensure that the plant property account balances reported in the Navy’s financial reports are complete and include information from only general fund activities;
Navy activities and DFAS routinely monitor plant property work-in-progress accounts and promptly review and resolve large balances;
Navy activities promptly request, and DFAS expeditiously provide, information to assist in transferring plant property work-in-progress items to on-hand accounts and in correcting errors; and
Navy activities and DFAS personnel be trained to identify and resolve work-in-progress and other plant property problems. GAO Comment

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Why GAO Did This Study

GAO reviewed the Navy's fiscal year (FY) 1994 consolidated financial reports, focusing on the areas contributing to the inaccurate financial reporting of the Navy's plant property account balance.

What GAO Found

GAO found that: (1) substantial weaknesses in the Navy's financial reporting systems caused the Navy to submit inaccurate FY 1994 financial reports; (2) the Defense Finance and Accounting Service (DFAS) erroneously counted $23.9 billion of structures and facilities and $700 million of land twice because it received the information from two separate sources and incorrectly included the information from both sources in the consolidated reports; (3) the Navy failed to ensure that all plant property from general fund activities was included in or that plant property from Defense Business Operations Fund (DBOF) activities was excluded from the reports because the list of general fund activities was outdated; (4) DFAS did not compare the activities included in the reports with the list of general fund activities when it consolidated the Navy's 1994 financial reports; (5) the Navy's reporting of the $291 million plant property work-in-progress balance was highly questionable because not all transactions were properly recorded, and Navy activities found it difficult to resolve in-transit property transactions; (6) the Navy did not reconcile all of its logistics, custodial, and accounting records on a timely basis; and (7) the Navy and DFAS have taken actions to improve their internal controls, verify the accuracy and completeness of financial information, and reconcile plant property accounts.