DFAS, a component of DOD, has responsibility for providing finance and accounting services to all other DOD components, including the Air Force, Army, Navy, and Marine Corps. The Office of the Under Secretary of Defense (Comptroller) issues the DOD Financial Management Regulation containing DOD’s policies and procedures in the area of financial management. Objectives, Scope, and Methodology

Our objectives were to determine (1) the progress DFAS Denver has made in improving its processes for reconciling the transaction activity in the Air Force General Funds and (2) whether any of DFAS Denver’s reconciliation concepts or policies could be used in reconciling the Fund Balance with Treasury activity of the other DOD components. Over the past few years, by increasing management attention on the reconciliation process, DFAS Denver has made improvements in both parts of the process and has reported a corresponding reduction in its unreconciled differences. Without first identifying the transactions, DFAS Denver cannot reconcile the activity. DFAS Denver’s Process Improvements Transferable to Other DFAS Centers

The FBWT reconciliation concepts, policies, and procedures developed at DFAS Denver could be used by other DFAS centers, which have not made as much progress in reconciling their FBWT activity, according to DFAS reports and officials. Recommendations for Executive Action

To further improve the reconciliation of the activity in Air Force Fund Balance with Treasury General Fund accounts and to ensure that the process is comprehensive and institutionalized with continuity of effort, we recommend that the Director, DFAS, direct the Director, DFAS Denver, to further refine the reconciliation process to identify and include all transactions that make up the differences between Air Force and Treasury records and resolve these differences within established time frames; and   document the entire Fund Balance with Treasury General Funds activity reconciliation process, including specific procedures for the various reconciliations within the overall process. Financial Audit: Issues Regarding Reconciliations of Fund Balances With Treasury Accounts (GAO/AIMD-99-3, October 14, 1998).
Why GAO Did This Study

The Department of Defense (DOD) has had longstanding problems in reconciling the transaction activity in its Fund Balance with Treasury accounts. These reconciliation problems hamper DOD's ability to prepare auditable financial statements and have prompted GAO to place DOD financial management on its list of government activities at high risk for waste, fraud, abuse, and mismanagement. In August 1998, DOD developed a strategic plan to improve the reconciliation process for the activity in its Fund Balance with Treasury accounts. DOD reported that the Defense Finance and Accounting Service's (DFAS) Denver Center, which provides support for the Air Force, has made the most progress in implementing this plan and that its process for reconciling the activity in the Air Force General Funds is more comprehensive than that of the other DOD components. This report reviews the Denver center's reconciliation processes to determine (1) the progress the Denver center has made in reconciling the transaction activity in the Air Force General Funds and (2) whether the Denver center's reconciliation concepts, policies, and practices could be used in reconciling the Fund Balance with Treasury activity of other DOD components.

What GAO Found

GAO found that (1) the Denver center has made progress in developing a comprehensive reconciliation process for the Air Force General Funds' transaction activity in the Fund Balance with Treasury accounts, primarily by increasing management attention. GAO also found that the concepts and policies developed by the Denver center to identify and resolve transaction differences could improve the reconciliation processes of the other DFAS centers that have not made as much progress.