Potential Overobligations in Army Procurement Appropriations

Published by the Government Accountability Office on 1977-09-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                REGIONAL          OFFICE
                              434 WALNUT          STREET        - ELEVENTH   FLOOR
                                 PHILADELPHIA              PENNSYLVANIA       19106            0

                                                                      September       26,   1977
                                                                                                   oqo   m

 Malor General   J.K. Stoner,  Jr , USA
 U.S Army Elictronlcs     Command
 Fort Wonmouth, New Jersey      07703
  Dear General      Stone].
          In recent       years there has been a serious              breakdown   in
  financial       control      over Army procutement         approprlatlons      which
  resulted      In violations        of the Anti-Deficiency           Act.    The Chairman,
*use        Appropriations         Committee,      in November 1975, requested
  us -to review        certain     aspects    of this   situation       and we did so
  at numerous ALmy locations,               including     the U S Army ElectronI.cs
L-C mmand (ECOM).
        On November 5, 1976, we issued a report                to the Chairman
  (FGMSD-16-74)     on the overall     results    of the first        phase of our
 review   which dealt     with the amounts and causes of vlolatlons
 Since then, we have concentrated            on evaluating        the Army's      efforts
 to improve     its financial      management   system.        OUL final      report
  to the Chairman     1s currently     being prepared        and will      summarize
 the results      of our review     at all locations       visited,      including
 your command
         The purpose of this     letter    is to inform    you of several
 matters    we noted at ECOM which will         not be included         in our final
 report.     These  matters   affect    the   accuracy   and  reliability      of
 ECOM' s fxnancral    records    arid reports     and can be corrected        by
 your staff
         ECOM and the other commodity           commands report       customer      orders
 received      to the U S Army Materiel          Development       and Readiness
 Command (DARCOM) and Army Headquarters                   Since the dollar        amounts
 w          orders    are treated     as increases     to the Army's      obllgatlonal
 authotlty,       accurate   tecordlng     and reporting      of customer      orders
  is essential         The Army's breakdown        in financial      management
  included     loss of control       ovel the recording       of customer      orders
 at ECOM and other commands                                      I

      -3                                                                                      I

            In January     1975, DARCOIvl Inltlated        a commandwlde    program to
    verify     and correct    the financial       records    for all Its procurement
    appropriations.         In January      1976, and again in April,,       the Army
    Audit     Agency reported       on reviews    It had made of the status
    and effectlvcness        of the reconciliation          effort  at each command.
    The audit       agency identified       a numoer of financial       Items requiring
    resolution       to assure the accuracy         and reliability     of financial
    records.        We noted that the following          two items pertaining
    only to ECON had not been resolved               as of June 1977.
            In April     1976, the audit           agency reported         (report     N6-Ml43)
     that recorded       values      for at least         58 customer      orders     were $7.4
    Irl13_lon less than re lated             obllgatnons        in five    approprnatlons.
     ECOM personnel        initiated       review     work to determine           if additional
    reimbursements         could be obtained,             thus IncreasIng         funds avall-
     able to the procurement              appropriations.          By December 1976,
     they had only partially              completed       review   of an initial        group
    of nine cases and we were informed                      that further      work was
     suspended,      prlmarlly,        because of personnel            constraints      and
    workload.        Work had not been resumed by June 1977.
           The audit   agency also reported         In April       1976, that ECOM's
    February   29, 1976, report       on customer       otder    flnanclal     status
    contained   numerous negative        balances     totaling       $15.7 mllllon
    for the value of unfilled         orders    or accounts        receivable.
    We found that,     at December 31, 1976, negative                balances    existed
    in 17 approprlatlons        and totaled     $11 1 million.           For example,
    the fiscal    year 1973 Other Procurement,              Army appropriation
    had an overall     negative    receivable     balance      of over $5 million.
            Negative     balances     usually     indicate      the existence    of problems
    In accounting        for customer       orders     which could include       under-
    stating     the value of orders           received.       Research    is necessary
    to identify       what caused the negative             balances    and correct     the
    financial      records.       Because     of higher     priority     work, however,
    ECOM had not acted on this problem                  as of June 1977.
           The above items have been open for some time and prolonged
    delays    in their     resolution      make it mote dlfflcult      to (1) ascertain
    whether     addltlonal     approprlatlon      reimbursements   can be obtained
    and (2) track        down the causes for errors         in the financial   records.

Therefore,    we recommend that a suffaclently       high prqrlty"be
assigned    to these items in order that they may be Lesolved              in
the near future     and appropriate action     taken to prevent      their
       A copy of this     letter   1s being sent     to the   Offlce%f
Assistant    Secretary    of the   Army (IL&FM).

         The item's described     aDove were discussed       at an exit
-conference     -with the Acting     Comptroller     and other ECOPI personnel
 at the conclusion        of our review.       We appreciate   the fine
 cooperation      and courtesy    extended     to our staff   during   this
 review,     Please   lnfozm    bs of actions     taken In the matrels
 dlscussed     above.
                                       Sincerely   ypurs,

                                       Allen    R. Voss
                                       Regional    Manager