We found that about $108 million of the adjustments resulted in charging appropriation accounts that had closed before the disbursements were made. Conclusion

Because DOD had not established the requisite systems, controls, and managerial attention required to properly account for its disbursements consistent with the 1990 account closing law, DOD made at least $615 million of illegal or otherwise improper adjustments during fiscal year 2000 alone. DOD was aware of the limitations the account closing law placed on the availability of canceled appropriations and that the law was enacted because of previous abuses by DOD’s use of old appropriations. The department also knew that a major system used to control its use of appropriations allowed for disbursements to be charged in a way that was inconsistent with that law. However, it did nothing to fix the system, although it estimated the cost to do so to be minimal. The $615 million of adjustments we identified in this report as illegal or otherwise improper must be immediately reversed. Furthermore, at a minimum, DOD will need to effect changes to its systems, policies, procedures, and the overall weak control environment that fostered these practices and served to perpetuate this problem.
Why GAO Did This Study

This report reviews the Department of Defense's (DOD) handling of appropriated funds from expired appropriation accounts. In 1990, Congress changed the law governing the use of appropriation accounts because it concluded that controls over them were not working. Without adequate controls, Congress was concerned that agencies could disburse money in amounts and for purposes that it had not approved.

What GAO Found

GAO found that DOD improperly charged appropriation accounts after they were closed. GAO also found that DOD did not establish the requisite systems, controls, and managerial attention required to properly account for its disbursements consistent with the 1990 account closing law. As a result, DOD made at least $615 million of illegal or otherwise improper adjustments during fiscal year 2000 alone. DOD was aware of the limitations the account closing law placed on the availability of canceled appropriations and that the law was enacted because of previous abuses by DOD. DOD also knew that a major system used to control its use of appropriations allowed for disbursements to be charged in a way that was inconsistent with the law. However, DOD did nothing to fix the system, even though the cost to do so was minimal. The $615 million of adjustments GAO identified as illegal or otherwise improper must be immediately reversed. Also, at a minimum, DOD will need to change its systems, policies, and procedures, along with the weak control environment that fostered these practices, and served to perpetuate the problem. GAO summarized this report in testimony before Congress (GAO-01-994T).