However,  we found that the redistribution was illegal because it moved disbursement  charges back to an appropriation account that had closed several months  before the initial disbursement was made. However, the officials told  us that because there are so many contracts that may have to be reaudited  to correct the accounting, they do not plan to have the reaudits and  corrections for fiscal year 2001 closed account adjustments completed  until September 2004. Upgraded Controls Help Reduce Amount of Closed Account Adjustments

DOD’s reported closed account adjustments during the first 6 months of  fiscal year 2002 totaled about $200 million, or about 80 percent less than  the over $1 billion of closed account adjustments DOD reportedly made  during the same 6-month period of fiscal year 2001. We did not determine for each of these contracts why and for what purpose  the numerous ACRNs were being used. As noted earlier in this report, these  actions are beginning to produce positive short-term results while efforts to  address the long-term problems are still ongoing. If the Congress finds in the future that DOD top management does not  sustain its commitment to address its overall disbursement problems, the  Congress could require a combination of oversight and reporting by DOD  as to the validity of any closed account adjustments. If DOD could not correct the error, it would  not be able to make the current payment. This will require a  sustained commitment by DOD’s top management team over a number of  years. Recommendations for Executive Action

We recommend that the Secretary of Defense direct the Under Secretary of  Defense (Comptroller) to direct the Director of the Defense Finance and  Accounting Service to   help ensure that DFAS Columbus completes its review and correction of  the remaining fiscal year 2000 illegal and otherwise improper  adjustments,  reverse closed account adjustments made during fiscal year 2001  identified in this report as illegal or otherwise improper,  determine the entries necessary to correct the accounting for reversed  fiscal year 2001 transactions,   help ensure that DFAS Columbus completes the review and correction  of the additional $1.1 billion of fiscal year 2001 adjustments it has  scheduled for detailed review, and   continue with DFAS’s top-level management attention and monitoring of  the program for future adjustments to closed appropriation accounts.
What GAO Found

Congress changed the law governing the use of appropriation accounts in 1990 because it found that the Department of Defense (DOD) may have spent hundreds of millions of dollars for purposes that Congress had not approved. The 1990 law provided that, 5 years after the expiration of the period of availability of a fixed-term appropriation, the appropriation account be closed and all remaining balances canceled. After closing, the appropriation account could no longer be used for obligations or expenditures for any purpose. DOD has started the process of correcting the illegal or improper closed account adjustments made during fiscal year 2000. However, this will require substantial effort and, according to DOD, estimates will not be complete before the end of fiscal year 2002. DOD had upgraded its system control features by the end of fiscal year 2001 to preclude many of the wholesale adjustments that GAO had previously identified. Because its system enhancements were done in stages, including some near the end of fiscal year 2001, DOD continued to make large amounts of illegal and otherwise improper closed account adjustments during the year. However, given the intensity of staff efforts to address these issues, it did not expect to complete the correct accounting for transactions found to be in error until September 2004. A lack of fundamental controls and management oversight over the closed accounts was the primary reason DOD was making so many closed account adjustments. DOD's action to resolve its problems with closed account adjustments is beginning to produce positive short-term results. However, if DOD fails to sustain these positive results, Congress could require DOD to validate and report to the Congress all closed account adjustments.