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)

                          DOCUMERIT RESUME

04562   - [B0185073]

(Potential Overobligtions in Army Procurement A.:opriations].
September 26, 1977 3 p.
Report to Maj. Gen. J. K. Stoner, Jr., Conmender, Department of
the Army: Army Electronics Command, Fort onmouth, NJ; by Allen
R. Voss, Regional Manager, ield Operations Div.; Regional
Office (Philadelphia).
Issue Area: Accounting and Financial Reporting (2800).
Contact: Field Operations Div.: Regional Office (Philadelphia).
Budget Function: Miscellaneous: Financial Management and
    Infcrmation Systems (1002).
Organization Concerned: Department o the Army; Depr:tment of
    the Army: Army Armament Materiel Readiness Ccmmad, Rock
    Island, IL.
Authority: Anti--Deficiency Act.

          Several matters were noied in a review of financial
records and reports at the U.S. Army Electronics Command (ECOB)
that affect the accuracy and reliability of these financial
records. Findings/Conclusions: One of the deficiencies noted
was a loss of control cver the rec=ording of customer orders. Inr.
April 1976, recorded values tor t least 58 custcmer rders ere
$7.4 million less than related cbligations in five
appropriations. ECOM initiated a review to determiue if
additional reimbursements could be obtained. By December 1976, a
partially completed review had been made of an initial group of
nine cases, and urther work was suspended, primarily because f
personnel constraints ad workload. ork had nct been resuied by
June 1977. It was also reported in April 1976 that ECOM's
February 29, 1976, report on customer crder financial status
contained numerous negative balances totaling S15.7 million for
unfilled rders or accounts receivable. As of ecember 31, 1976,
it was found that 17 appropriations had negative balances
totaling $11.1 million. ECOM had not acted n this prcblem as of
June 1977. Recommendations: ECOM should assign a sufficiently
high priority t these items so that they can e resolved in the
near future and appropriate action taken to prevent their
recurrence. (DB)
                                                . UNITED STATES GENERAL ACCOUNTING
                                            =   i~       -'          REGIONAL OFFICE
                                                              4- WALNUT STREET - ELEVENTH FLOOR
                                                              PHILADELPHIA. PENNSYLVANA    19106

                             L-r   --
                                                                                     September     26,        1977

        -iMajor General J.K. Stoner, Jr.
I           C'rmander                       USA
           -U.S. Army Electronics Command
         .--. ort Monmouth, New Jersey  07703
    _                                   .                              ''-                         -        ..   V
    --           Dear 'General SLoner-                                           -

                 -In recent years tnere has been a serious
           financial control over Army procurement          breakdown in
           resulted in violations of the Anti-Deficiency              which
           House Appropr iaticns Committee, in              At.    The Chairman,
           us to review certain aspects of thisNovember 1975, requested
                                                  situation and we did so
          _at numerous Army -locations, including
                                                   the U.S. Army Electronics
        _lCommand1 COM C )
            :        -
                F           5, -1976, --we -issued-a'report t
--,             (FGtSD-76-7.4)                                       theha irman
                      -nthe      oerall     result-s of t-h.- fir.-
       xeview-which dealt witn the amounts                             nh=,cn f    .
                                                    and causes of violations.
       Since then, we have concentrated on evaluating
     --to improve ts financial management                           the Army's efforts
                                                    system.     Cur   final report
-'     to the Chairman is currently
   -- the-results of our review at being           prepared ad will summarize
                                            all locations visited, including
     .*your command.

              - The purpose of this letter
                                               is to
        -:matters,we noted at ECO:-I which_ wili notinform you of .several
        - report. These maters affect the accuracye included in our final
        -ECOM 4 s financial
                                                          and reliability of
                               rezcors ann r-eports and can be corrected
          -     youtr
                staff.      .. -                                         by

            BACKGROUND                               -

             ECOM and the other commodity commands
                                                     report customer orders
     - received to the U.S. Army Materiel Development
       Command (DARCOMI) and Army headquarters.          and Feadiness
    .<of the orders   are treated as increases to Since  the dollar amounts
                                                   the Army's obligational
       authcrity, accurate recording and reporting
    -.is essential. -The Army's breakdown             of customer orders
                                            in financial management
    . included loss of control over the recording
      -at ECOM and other cojunmands.                  of customer orders
                :~       ,                                       …           \
          In January 1975, DARCO{i initiated a commandwide 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 effectiveness of the reconciliation effort at each command.
    The audit agency identified a number of financial items requiring
    resolution to assure the accuracy and reliability of financial
    records. We noted that the following two items pertaining
    .only to ECOil had not been resolved as of June 1977.


          In April 1976, the audit agency reported (report N6-M143)
     that recorded values for at least 58 customer orders were $7.4
    -million less than related obligations in five appropriations.
     ECOM personnel initiated rview work to determine if additional
     reimbursements could be obtained, thus increasing funds avail-
     able to the procurement appropriations.    By December 1976,
     they had only partially completed  review  of  an   .tial group
    ,of nine cases and we were informed  that  further  work was
     suspended, primarily, because of personnel    constraints and
     workload. Work had not been resuined by June 1977.        -

                                                                  -;-.   - ,

        -The audit   agency also LePUo Lu
                                        L  a 'L- A.r '',.      -
   February 29, 1976, report on customner   order   financial      status
-- contained numerous negative balances totaling         $15.7   million  -
   for the value of unfilled orders or accounts receivable.
   We found that, at December 31, 1976, negative balances existed
  -in'17 appropriations and totaled $11.1 nmillion.         For example,
   the fiscal   year  1973 Other Procurement, Army   appropriation
   had an overall negative receivable balance of over $5 million.
      -C -   -~----~   --   .   -   -   .   '   -   *

         'Negative balances usually indicate the existence- of 'pr ;o          ms
  .in accounting for customer orders which could include -under-
   tattnq    the value of orders received.  Research is necessary
   to identify what caused the negative-balances and correct the
..financia! records. Because of higher priority work, however,
   ECOMI had not acted on this problem as of June 1977.


        -----T'he above items have been open for some time and prolonged'
    'd6lays in their resolution make it more difficult to (1) asce'rtain
    'wh-'ther additional appropriation reimbursemients can be obtained
     nand- (2) track down the causes for errors in the financial--records.

                                                        -   2 -
Therefore, we recommend that a sufficiently high priority be
assigned to these items in order that they may be resolved in
the rear future and appropriate action taken to prevent their

     A copy of this letter is being sent to the Office of
Assistant Secretary of the Army (IL&FI).

      The item's described above were discussed at an exit
-conference with the Acting Comptroller and other ECOM personnel
 at the conclusion Jf our review. We appreciate the fine
 cooperation and courtesy extended to our staff during this
 review. Please inform us of actions taken in the matters
 discussed above.

                                          Sincerely yPurs,

                              -·   -      Allen R, Voss
   -    --- - ·   - - '-'-"                ...-
                                       -- Regional Manager

                                       ~ - 3-
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