UNITED STATESGENERALACCQUNTING OFFICE REGIONAL OFFICE 434 WALNUT STREET - ELEVENTH FLOOR PHILADELPHIA PENNSYLVANIA 19106 0 September 26, 1977 oqo m Malor General J.K. Stoner, Jr , USA Commander 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 BACKGROUND 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 c -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. CUSTOMER ORDER PRICE INCREASCS UNRECORDED 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. NEGATIVE UNFILLED ORDER AND ACCOUNTS RECEIVABLE BALANCES 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. CONCLUSION AND RECOMMENDATION 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. -2- 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 recurrence. 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 -3-
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)