DFAS: During fiscal year 2016, DFAS reported total revenue of   $1.4 billion. The DWWCF’s Reported Monthly Cash Balances Were Outside Upper and Lower Cash Requirements for More Than 12 Consecutive Months Three Times during Fiscal Years 2007 through 2016

The monthly cash balances were above or below the cash requirements  more than 12 consecutive months on three separate occasions from fiscal  years 2007 through 2016. Without this  guidance, DOD risks not taking prompt action to bring the monthly cash  balances within the cash requirements. Fourth, in fiscal year 2008, DLA disbursed about $1.3 billion more for,  among other things, the purchase, refinement, transportation, and  storage of fuel than it collected for the sale of fuel to its customers  because of higher fuel costs. Specifically,  DOD transferred $1.4 billion into the DWWCF from various defense  appropriations accounts to mitigate cash shortfalls that resulted from DLA  Energy Management paying higher costs for refined fuel products. As a result, DLA Energy  Management collected about $3.7 billion more than it disbursed for  fuel during the year. The DWWCF’s Revised Monthly Cash Balances Are Projected to Be within the Upper and Lower Cash Requirements for Fiscal Year 2017

Initially, the DWWCF monthly cash plan that supports the fiscal year 2017  President’s Budget, dated February 2016, showed the monthly cash  balances were projected to be above the upper cash requirement for  most of fiscal year 2017. According to DOD officials, the DWWCF changed its plan after the  President’s Budget was issued because (1) DOD made unplanned cash  transfers out of the DWWCF in the second half of fiscal year 2016 and   (2) DOD reduced the fiscal year 2017 standard fuel price in September  2016, leading to lower projected cash balances. Although the DOD Financial Management Regulation provides guidance  on tools DOD managers can use to help bring the monthly cash balances  within the upper and lower cash requirements, the regulation does not  provide guidance on the timing of when DWWCF managers should use  these tools to help ensure that the monthly cash balances are within the  cash requirements. When DWWCF monthly cash balances are below  the lower cash requirements for long periods of time, the DWWCF is at  greater risk of either (1) not paying its bills on time or (2) making a  disbursement in excess of available cash, which would potentially result  in an Antideficiency Act violation. In cases of cash balances above the  upper requirement, the DWWCF may restrict funds that could be used for  other higher priorities. Appendix I: Scope and Methodology

To determine to what extent the Defense-wide Working Capital Fund’s  (DWWCF) reported monthly cash balances were within the Department of  Defense’s (DOD) upper and lower cash requirements from fiscal years  2007 through 2016, we (1) obtained the DWWCF’s reported monthly cash  balances for fiscal years 2007 through 2016, (2) used the DOD Financial  Management Regulation that was in effect at that time to determine the  upper and lower cash requirements, and (3) compared the upper and  lower cash requirements to the month-ending reported cash balances. If  the cash balances were not within the upper and lower requirement  amounts, we met with the Defense Logistics Agency (DLA), the Defense  Information Systems Agency (DISA), and the Defense Finance and  Accounting Service (DFAS) officials and reviewed DWWCF budgets and  other documentation to ascertain the reasons.
Why GAO Did This Study

The Defense Finance and Accounting Service, the Defense Information Systems Agency, and DLA use the DWWCF to charge for goods and services provided to the military services and other customers. The DWWCF relies primarily on sales revenue rather than annual appropriations to finance its continuing operations. The DWWCF reported total revenue of $45.7 billion in fiscal year 2016 from (1) providing finance, accounting, information technology, and energy solution services to the military services and (2) managing inventory items for the military services.
GAO was asked to review issues related to DWWCF cash management. GAO's objectives were to determine to what extent (1) the DWWCF's reported monthly cash balances were within DOD's upper and lower cash requirements from fiscal years 2007 through 2016 and (2) the DWWCF's projected monthly cash balances were within the upper and lower cash requirements for fiscal year 2017. To address these objectives, GAO reviewed relevant DOD cash management guidance, analyzed DWWCF actual reported and projected cash balances and related data, and interviewed DWWCF officials.

What GAO Found

The Defense-wide Working Capital Fund's (DWWCF) reported monthly cash balances were outside the upper and lower cash requirements as defined by the Department of Defense's (DOD) Financial Management Regulation (FMR) for 87 of 120 months, and more than 12 consecutive months on three separate occasions during fiscal years 2007 through 2016. Reasons why the balances were outside the requirements at selected periods of time include the following:
The Defense Logistics Agency (DLA) disbursed about $1.3 billion more in fiscal year 2008 for, among other things, the purchase of fuel than it collected from the sale of fuel because of higher fuel costs.
DOD transferred $1.4 billion to the DWWCF in fiscal year 2013 because of cash shortfalls that resulted from DLA paying higher costs for fuel.
DLA collected about $3.7 billion more from the sale of fuel than it disbursed for fuel in fiscal year 2015 because of lower fuel costs.
Although the DOD FMR contains guidance on tools DOD managers can use to help ensure that the monthly cash balances are within the requirements, the regulation does not provide guidance on when to use the tools. Without this guidance, DOD risks not taking prompt action to bring the monthly cash balances within requirements. When monthly cash balances are outside requirements for long periods of time, the DWWCF is at further risk of not paying its bills on time or holding funds that could be used for other higher priorities.
Initially, the DWWCF's cash plan that supports the fiscal year 2017 President's Budget, dated February 2016, showed the monthly balances were projected to be above the upper cash requirement for most of fiscal year 2017. However, its October 2016 revised plan showed that the monthly cash balances were projected to be within the requirements for all 12 months. The plan changed because (1) DOD made unplanned cash transfers out of the DWWCF in the second half of fiscal year 2016 and (2) DOD reduced the standard fuel price in September 2016, leading to lower projected cash balances for fiscal year 2017.

What GAO Recommends

GAO recommends that DOD update the FMR to include guidance on the timing of when DOD managers should use available tools to help ensure that monthly cash balances are within the upper and lower cash requirements. DOD concurred with GAO's recommendation and cited related actions planned.