oversight

Financial Management: An Overview of Finance and Accounting Activities in DOD

Published by the Government Accountability Office on 1997-02-19.

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

                       United States General Accounting Office

GAO                    Report to the Chairman, Subcommittee
                       on Defense, Committee on
                       Appropriations, U.S. Senate


February 1997
                       FINANCIAL
                       MANAGEMENT
                       An Overview of
                       Finance and
                       Accounting Activities
                       in DOD




GAO/NSIAD/AIMD-97-61
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   National Security and
                   International Affairs Division

                   B-275755

                   February 19, 1997

                   The Honorable Ted Stevens
                   Chairman, Subcommittee on Defense
                   Committee on Appropriations
                   United States Senate

                   Dear Mr. Chairman:

                   As you are aware, the Department of Defense (DOD) continues to
                   experience significant problems in managing its financial operations. This
                   report, as you requested, provides information to assist the Subcommittee
                   in its oversight of these operations. More specifically, it addresses
                   (1) DOD’s rationale for creating the Defense Finance and Accounting
                   Service (DFAS), (2) the current size of DOD’s finance and accounting
                   infrastructure (e.g., locations, personnel, and systems) as compared with
                   its size when DFAS was created, and (3) the various finance and accounting
                   activities performed by DOD personnel.

                   For the most part, the report presents data as of September 30, 1996,
                   which was provided by DOD. We did not attempt to independently verify
                   the accuracy or reliability of the data. In addition, as agreed with your
                   office, this report does not discuss the specific problems DOD is
                   encountering when performing finance and accounting activities or the
                   actions it is pursuing to correct them. Included, however, is a list of
                   reports we have issued over the past several years detailing DOD’s financial
                   management problems (see “Related GAO Products” at the end of this
                   report). In addition, we recently issued a “High-Risk Series,” report
                   entitled Defense Financial Management (GAO/HR-97-3, Feb. 1997). That
                   report summarizes DOD’s problems in this area and provides our general
                   assessment of DOD’s approach for correcting them. We also have a number
                   of assignments underway looking at DOD’s actions to correct weaknesses
                   in the following six areas: (1) lack of integrated systems, (2) lack of
                   reliable cost information, (3) problem disbursements, (4) workforce
                   competencies, (5) poor internal controls, and (6) antiquated business
                   practices. We will report separately on these assignments.


                   As with any major corporation in the private sector, DOD must carry out
Results in Brief   financial management functions such as recording, tracking, and reporting
                   the value of its assets, liabilities, changes in equity or capital, and
                   expenses. This type of accounting information not only helps disclose




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DOD’s financial position and results of operations but also provides DOD and
the Congress with information to effectively allocate resources and assess
DOD’s performance. In addition, DOD must monitor, control, and report on
the obligation and expenditure of appropriations. This is to ensure that
DOD does not violate spending limitations established in legislation.


Before fiscal year 1991, the military services and defense agencies
independently managed their finance and accounting operations.
According to DOD, these decentralized operations were highly inefficient
and failed to produce reliable information for decisionmakers. On
November 26, 1990, DOD created DFAS as its accounting agency to
consolidate, standardize, and integrate finance and accounting
requirements, functions, procedures, operations, and systems. Between
1991 and 1994, DFAS assumed control of 6 large finance and accounting
centers, many of the people at 332 installation-level finance and
accounting offices, and over 300 systems used to perform specific finance
and accounting operations. The military services and defense agencies
began paying for finance and accounting services provided by DFAS using
their operations and maintenance appropriations. The military services
and defense agencies also kept some people at most of the 332
installation-level offices and maintained responsibility for hundreds of
feeder systems that are the source of most finance and accounting
information. Table 1 shows the changes that DOD has reported in its total
finance and accounting network since 1991 and targets DFAS and the
military services hope to meet by the year 2000.




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Table 1: Reported Changes in DOD’s Finance and Accounting Network Since 1991
1991(pre-DFAS)                            1996 (current)                                         2000 (vision)
                                             DFAS                                                DFAS
                                             5 centers                                           5 centers
                                             17 operating locations                              Not more than 21 operating locations
                                             102 installation-level offices                      No installation-level offices
                                             23,500 employees                                    20,000 employeesa
                                             217 finance and accounting systems                  110 finance and accounting systems
                                             Budget: $1.64 billion                               Budget: $1.47 billion (in constant 1996
                                                                                                 dollars)

Military services                            Military services                                   Military services
6 centers                                    No centers                                          According to military service financial
332 installation-level offices               332 installation-level offices                      management officials, there are no plans
46,000 employees                             17,300 employees                                    to centrally assess or reduce the size of
331 finance and accounting systems           Budget - not precisely known because                the military service finance and accounting
Budget - not precisely known because many    finance and accounting activities are               network. These decisions are the
finance and accounting operations were       financed through command and                        responsibility of local base or installation
financed through major command and           installation budgets (estimated personnel           commanders.
installation budgets.                        budget: $598 million).
                                            a
                                              According to DFAS officials, reducing personnel levels to 20,000 is their current goal. They said,
                                            however, that the number of employees could be reduced by an additional 30 percent if ongoing
                                            economy and efficiency initiatives are successful.



                                            As this table shows, DOD is working toward streamlining its finance and
                                            accounting infrastructure (locations, personnel, and systems). Most of the
                                            reductions, however, are anticipated to occur in DFAS operations as it
                                            moves toward consolidating its activities. For example, DFAS initially
                                            inherited 28,000 of the 46,000 employees that were working in finance and
                                            accounting in 1991. As of September 30, 1996, it had reported a reduction
                                            in this workforce to 23,500 and had plans to eliminate another 3,500
                                            positions by the year 2000. Likewise, DFAS operations were initially spread
                                            over 332 installation-level offices and 6 centers. By the year 2000, DFAS
                                            expects that the 332 installation-level offices will be closed and all its
                                            finance and accounting activities will be performed at 5 centers and no
                                            more than 21 operating locations.

                                            The military services (which were left with 18,000 of the 46,000
                                            employees) continue to perform certain finance and accounting activities
                                            at each military installation. These activities vary by military service
                                            depending on what the services wanted to maintain in-house and the
                                            number of personnel they were willing to transfer to DFAS. In making travel
                                            payments, for example, DFAS disburses funds to Army and Air Force
                                            travelers while the Navy retained this function for most of its travelers.
                                            Because the number of personnel and the activities they perform are



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                                        controlled and budgeted for at the installation level, the military services
                                        have no specific plans to centrally assess or reduce the size of their
                                        networks.

                                        Significantly improving financial management operations in DOD is an
                                        enormous task, involving the replacement of many antiquated systems and
                                        processes. The enormity of this task is made even more difficult by the
                                        need to continue paying millions of military and civilian employees and
                                        thousands of defense contractors as improvements are being made. In this
                                        respect, table 2 illustrates the scope of DFAS’ fiscal year financial operation,
                                        which, by any standard, is unparalleled in either the private or public
                                        sector.

Table 2: Magnitude of DFAS’ Financial
Operation for Fiscal Year 1996
                                        * Disbursed a reported $266 billion on
                                        17 million invoices,
                                        6 million payroll accounts, and
                                        2 million travel vouchers.
                                        * Collected a reported $238 million from
                                        116,000 debtors.

                                        As DOD’s accounting agency, DFAS records these transactions in the
                                        accounting records, prepares thousands of reports used by managers
                                        throughout DOD and by the Congress, and prepares DOD-wide and
                                        service-specific financial statements required by the Chief Financial
                                        Officers Act. The military services play a vital role in that they authorize
                                        the expenditure of funds and are the source of most of the financial
                                        information that allows DFAS to make payroll and contractor payments.
                                        The military services also maintain stewardship over all DOD assets and
                                        provide asset, liability, and equity information needed by DFAS to prepare
                                        annual financial statements.




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Rationale for Creating
DFAS                       Before 1991, the military services maintained separate finance
                           and accounting operations that were duplicative and inefficient.

                           DFAS was created to standardize DOD finance and accounting
                           policies, procedures, and systems.

                           Military services and defense agencies generally use operations
                           and maintenance appropriations to pay for DFAS services.




                         Before fiscal year 1991, the military services and defense agencies each
                         had their own financial management structure, consisting of a
                         headquarters comptroller organization; finance and accounting centers;
                         and accounting, finance, and disbursing offices at military bases. Each
                         service and agency developed its own processes and systems that were
                         geared to its particular mission. In many instances, the military services
                         and defense agencies interpreted governmentwide and DOD-level finance
                         and accounting policies differently. According to DOD, these variances
                         sometimes resulted in managers being provided conflicting information.

                         Over the years as greater emphasis was placed on joint operations,
                         financial management system incompatibility and lack of standardization
                         (even within a military service) became more apparent. For example, there
                         was only one pay schedule for military personnel, yet DOD maintained and
                         operated dozens of different pay systems. These types of conditions
                         produced business practices that were complex, slow, and error prone.
                         According to DOD officials, no matter how skilled the people operating
                         them, DOD’s financial management systems and processes were inherently
                         handicapped in their efficiency and effectiveness. Furthermore, DOD
                         officials stated that there was an inherent inefficiency in having multiple
                         organizations perform virtually identical functions.

                         Given these problems; changes in the economic, political, and
                         management environments; and advances in technology, DOD officials
                         became convinced they needed to improve the economy and efficiency of
                         their finance and accounting operations. After assessing how finance and




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    accounting activities were performed, DOD determined that consolidating
    these activities offered a number of potential advantages, including

•   increasing DOD-wide oversight;
•   improving consistency in the application of accounting principles, policies,
    procedures, systems, and standards throughout DOD;
•   eliminating the costs of maintaining and operating multiple financial
    operations and systems;
•   improving decision making by providing DOD managers with more timely,
    meaningful, and accurate financial information; and
•   accelerating the implementation of standard DOD-wide financial systems.

    The establishment of DFAS in January 1991 was the first step taken by DOD
    directed at fundamentally reforming finance and accounting operations.
    DFAS was formed by consolidating into a single agency under DOD’s
    Comptroller, the large finance and accounting centers that belonged to the
    military services and the Defense Logistics Agency. Recognizing that
    additional economies and efficiencies could be achieved, the Deputy
    Secretary of Defense, in December 1991, directed DFAS to assume control
    of existing finance and accounting operations and personnel at the
    command and installation levels within the military services.1 By 1994,
    DFAS had assumed responsibility for many of the finance and accounting
    activities at 332 offices (in the continental United States, Alaska, Hawaii,
    Guam, Puerto Rico, and Panama) and had announced plans to consolidate
    these activities at a limited number of DFAS locations.

    To focus DOD management’s attention on managing the cost of finance and
    accounting activities, DFAS was designated a Defense Business Operations
    Fund (DBOF)2 business area in fiscal year 1992. The concept of DBOF is to
    promote total cost visibility by charging customers (primarily the military
    services and defense agencies) for the full cost of providing goods and
    services. By doing this, DOD hoped that all levels of management would
    focus their attention on the total costs of carrying out certain critical DOD
    business operations. DOD anticipated that this would encourage managers
    to become more conscious of operating costs and make fundamental

    1
     DOD refers to this as “capitalization.” In this instance, it means the transfer of ownership and
    command and control of the people, resources, and assets (supplies, equipment, personal computers,
    etc.) involved in performing DOD finance and accounting functions or directly supporting these
    functions.
    2
     DBOF is a revolving fund that was created by DOD in October 1991 by consolidating DFAS and
    several other defense business activities with the nine industrial and stock funds operated by the
    military services and defense agencies. DBOF centralized the cash management operations of these
    business activities, but the military services and defense agencies continued to manage the day-to-day
    operations of the activities much as they had before DBOF was created.



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                   improvements in how DOD conducts business. In fulfilling DBOF’s concept,
                   DFAS sets the prices it charges the military services and defense agencies
                   and bills them to cover the full cost of its operations. The military services
                   and defense agencies pay for these services primarily with funds from
                   their operations and maintenance appropriations.

                   The 1997 Defense Authorization Act required DOD to conduct a
                   comprehensive study of DBOF and present an improvement plan to the
                   Congress for approval. Pending the results of this study, DOD’s
                   Comptroller, on December 11, 1996, dissolved DBOF and created four
                   working capital funds: (1) Army Working Capital Fund, (2) Navy Working
                   Capital Fund, (3) Air Force Working Capital Fund, and (4) Defense-wide
                   Working Capital Fund. DFAS is part of the Defense-wide Working Capital
                   Fund. The four working capital funds will continue to operate under the
                   revolving fund concept—using the same policies, procedures, and systems
                   as they did under DBOF—and charge customers the full costs of providing
                   goods and services to them.


                   Over the past few years, DOD’s finance and accounting organization and
Changes in DOD’s   management structure has undergone major changes. For example, DFAS
Finance and        and the military services now share the finance and accounting
Accounting         responsibilities that previously belonged to the military services. Most
                   significantly, however, DFAS has developed a new concept of operations
Infrastructure     that involves performing most of its finance and accounting operations at
                   consolidated sites rather than at local bases and installations. This has
                   allowed it to reduce the number of locations and personnel needed to
                   perform these operations and to begin standardizing its accounting
                   systems and processes. This section describes the current organizational
                   structure of DOD’s finance and accounting activities and the status of
                   various changes with respect to finance and accounting locations,
                   personnel, budgets, and systems.




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DFAS and the Military
Services Share Finance
and Accounting              DFAS and the military services are jointly responsible for
Responsibilities            carrying out DOD finance and accounting activities.

                            DFAS negotiated a division of responsibility with each military
                            service.


                         Finance and accounting operations are performed by two chains of
                         command within DOD. On one side is DFAS, which reports to the Under
                         Secretary of Defense Comptroller/Chief Financial Officer within the Office
                         of the Secretary of Defense. On the other side are the military services,
                         which are headed by their respective secretary. Each service secretary has
                         an assistant secretary for financial management who directs and manages
                         financial management activities consistent with policies prescribed by the
                         Chief Financial Officer and the service’s implementing directives.

                         As shown in figure 1, the Under Secretary has no direct line of authority to
                         any of the financial management staff within the military services, defense
                         agencies, and DOD field activities. Those staff report through their own
                         organizational structure to their respective unit heads. The Under
                         Secretary and the unit heads report to the Secretary of Defense. The Under
                         Secretary, however, does issue policies, instructions, regulations, and
                         procedures relating to financial management matters and the production
                         of financial statements, which are binding on all DOD activities.




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Figure 1: Organizational Structure of DOD’s Finance and Accounting Activities



                                                     Office of the
                                               Secretary of Defense



    Under Secretary of
         Defense
    Comptroller/Chief
     Financial Officer
                                  Secretary of the                   Secretary of the             Secretary of the
                                       Army                               Navy                       Air Force


  Defense Finance and
   Accounting Service
                                Assistant Secretary             Assistant Secretary              Assistant Secretary
                                        for                             for                              for
                                    Financial                        Financial                       Financial
                                   Management                     Management                        Management



                                            Note: There are a number of additional offices at the Under Secretary of Defense level. This chart
                                            shows only the high-level relationship between the Secretary of Defense and DFAS and the
                                            military services.

                                            Source: Our analysis of DOD data.




                                            The National Defense Authorization Act for Fiscal Year 1994 designated
                                            the Comptroller as DOD’s Chief Financial Officer. Specific duties of the
                                            Comptroller/Chief Financial Officer as specified in the Chief Financial
                                            Officers Act include

                                        •   directing, managing, and providing policy guidance and oversight of
                                            agency financial management personnel, activities, and operations;
                                        •   developing and maintaining integrated accounting and financial
                                            management systems;
                                        •   monitoring the financial execution of the agency budgets in relation to
                                            actual expenditures and preparing and submitting timely performance
                                            reports; and




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•   overseeing the recruitment, selection, and training of personnel to carry
    out agency financial management functions.

    As mentioned, each service secretary has an assistant secretary for
    financial management who reports to the service secretary and directs and
    manages financial management activities consistent with policies
    prescribed by the Chief Financial Officer and the service’s implementing
    directives. The assistant secretary for financial management position in
    each service was established in the National Defense Authorization Act for
    Fiscal Year 1989. The act delineated many of the responsibilities of the
    office, including

•   managing financial management activities and operations;
•   directing the preparation of budget estimates;
•   approving any asset management systems, including cash and credit
    management;
•   collecting debts; and
•   accounting for property and inventory systems.

    Because of potentially overlapping responsibilities, DFAS met several times
    with the military services’ financial managers and their staffs during 1994
    to reach agreement on their respective finance and accounting roles.
    These meetings resulted in “responsibility matrices” that identify the
    specific activities that will be performed by DFAS and each military service.
    According to DFAS, the responsibility matrix agreements were driven, to a
    large extent, by the number of finance and accounting personnel each
    service had transferred to DFAS. Prior to the negotiations in 1994, for
    example, the Army had transferred about 75 percent of its finance and
    accounting people to DFAS. According to Army officials, it kept only a small
    contingent of managerial accountants at each installation and major
    command location to interpret accounting reports provided by DFAS to the
    installation or major command and provide advice to the commander on
    proper stewardship of public funds. As a result, DFAS and the Army agreed
    that DFAS would perform just about all of the Army’s financial activities. On
    the other hand, Air Force and Navy officials stated that they transferred
    smaller percentages of their staffs (50 and 29 percent, respectively). They
    took this approach to maintain control of activities they felt were essential
    to providing service to their military personnel and families, such as
    computing travel pay or helping uniformed personnel solve pay-related
    problems.




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                                           Travel payment, a finance function, is an example where DFAS provides
                                           different levels of service to its military customers. In this case,
                                           authorization, computation, disbursement, and accounting are performed
                                           by either the military services or DFAS. Table 3 identifies the responsible
                                           party for each of these steps.


Table 3: Division of Responsibility for Travel Payments
                                                     Computation of travel              Disbursement of travel         Accounting for travel
Military service           Authorization of travel entitlement                          payment                        funds disbursed
Air Force                 Air Force                      Air Force                      DFAS                           DFAS
Army                      Army                           DFAS and Armya                 DFAS                           DFAS
                                                                                                          b
Navy                      Navy                           Navy                           DFAS and Navy                  DFAS
Marine Corps              Marine Corps                   DFAS and Marine Corpsc DFAS and Marine Corpsd DFAS
                                           a
                                               The Army computes travel entitlement for all tactical and overseas units.
                                           b
                                            The Navy disburses the majority of travel pay today; however, with the implementation of
                                           standard travel system and the subsequent conversion of Navy accounts to this system, DFAS
                                           will assume this responsibility for all Navy travelers. This conversion is expected to be completed
                                           in fiscal year 1997.
                                           c
                                             DFAS computes travel entitlement for 22,000 of 174,000 (about 13 percent) Marines who are
                                           stationed at installations that are too small to have their own finance office.
                                           d
                                            DFAS disburses the funds for about 109,000 (about 63 percent) Marines out of all Marine Corps
                                           personnel.




DFAS Is Consolidating Its
Activities
                                                DFAS assumed control over the military services' finance centers
                                                and some of the activities at 332 military installations.

                                                DFAS is currently consolidating all its activities into 5 centers and
                                                not more than 21 operating locations.

                                                The military services continue to perform their remaining
                                                activities at most of the 332 installations.



                                           When DFAS was established, it opened a headquarters office in Arlington,
                                           Virginia, and assumed management control over the six large finance



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centers that belonged to the military services and defense agencies. One of
these centers was subsequently closed,3 but the others continue to support
the military service or defense agency they supported prior to the
formation of DFAS. According to the Director of DFAS, this was done
primarily to ensure that support levels to the military services and defense
agencies remained at an acceptable level.

DFAS also assumed control over many of the people and functions at 332
small finance and accounting offices around the world. To improve
operational efficiencies and reduce costs, DFAS has focused a great deal of
attention on consolidating the personnel and workload at a small number
of locations. In May 1994, for example, the Deputy Secretary of Defense
announced plans to move the DFAS workload and many of the people at
these 332 locations to either the existing 5 centers or 20 new operating
locations.4 As of September 1996, DFAS had closed 230 (or about
70 percent) of the small accounting offices and opened 17 operating
locations.5 Figure 2 shows the number of finance and accounting offices
that DFAS plans to close through fiscal year 1998, when the consolidation is
now expected to be completed.




3
 The Navy Center in Arlington, Virginia, was closed in September 1992 and its functions distributed to
other centers.
4
 On July 1, 1994, a 21st site was added at Ford Island, Hawaii, to support DOD’s finance and
accounting operations in the Pacific theater.
5
 See our reports on the DFAS consolidation issue: DOD Infrastructure: DOD Is Opening Unneeded
Finance and Accounting Offices (GAO/NSIAD-96-113, Apr. 24, 1996) and DOD Infrastructure: DOD’s
Planned Finance and Accounting Structure Is Not Well Justified (GAO/NSIAD-95-127, Sept. 18, 1995).



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Figure 2: Status of Closing DFAS’ 332
Finance and Accounting Offices
                                         Closed/consolidated
                                         through fiscal year 1996


                                                   230
                                                                       25      To be completed by
                                                           77                  end of fiscal year 1998



                                                        Announced for
                                                        fiscal year 1997


                                        Source: DFAS Plans and Management Deputate.




                                        Three of the planned operating locations—Lexington, Kentucky; Newark,
                                        Ohio; and Rantoul, Illinois—have not been formally scheduled for opening
                                        at this time. The fourth planned operating location, at Memphis,
                                        Tennessee, will be under the cognizance of the U.S. Army Corps of
                                        Engineers until the Corps completes its consolidation of finance and
                                        accounting operations around fiscal year 1999. At that time, the Corps will
                                        transfer the activity to DFAS.

                                        Except for Honolulu, Hawaii; Norfolk, Virginia; Orlando, Florida; and San
                                        Antonio, Texas, each operating location provides services to a single
                                        military service. Honolulu serves all of the military services; Norfolk
                                        serves Navy and Army customers; and both Orlando and San Antonio
                                        serve Army and Air Force customers. In addition, Charleston, South
                                        Carolina; Pensacola, Florida; and Omaha, Nebraska, provide civilian pay
                                        service to all military services and defense agencies. Figure 3 shows the
                                        locations of the 5 centers and 21 existing or planned operating locations as
                                        of September 30, 1996. The primary customer (military service or defense
                                        agency) of each center is shown in parentheses in the figure.




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Figure 3: Locations of DFAS Centers and Operating Locations as of September 30, 1996


                                                             DFAS
                                                        Headquarters




                         Columbus Center                                          Indianapolis
   Cleveland Center                                     Denver Center                                     Kansas City Center
                        (Defense Logistics                                           Center
       (Navy)                                            (Air Force)                                        (Marine Corps)
                             Agency)                                                 (Army)




                                        a                                                                                      a
   Charleston, SC        Newark, OH                    Dayton, OH                Lawton, OK                Memphis, TN


   Honolulu, HI                                        Lexington, KY a           Orlando, FL               Rantoul, IL   a



   Norfolk, VA                                         Limestone, ME             Rock Island, IL


   Oakland, CA                                         Omaha, NE                 Rome, NY


   Pensacola, FL                                       San Antonio, TX           Seaside, CA

                                                       San Bernardino,
   San Diego, CA                                                                 St. Louis, MO
                                                        CA



                                             a
                                                 Not opened as of September 30, 1996.

                                             Source: DFAS Plans and Management Deputate.




                                             As discussed in the previous section, each of the military services retained
                                             certain functions (e.g., managerial accounting, travel claim computation,
                                             and customer service) in order to support local commanders and
                                             customers. To do this, the services have maintained some staff at most of
                                             the 332 installation-level finance offices. Although there are interfaces and
                                             exchanges of information between the staff at these offices and DFAS,




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                           organizationally they are not part of DOD’s Comptroller or DFAS’
                           communities. Rather, they report to and receive budgetary support from
                           the base or installation commander. Civilian and military personnel at
                           these activities are paid from operations and maintenance and military
                           personnel appropriations, respectively.


Number of People
Performing Finance and
Accounting Activities Is     DOD estimated it had 46,000 people performing finance and
Not Tracked                  accounting activities in 1994 and has 40,800 performing these
                             today.

                             28,000 people were transferred into DFAS, leaving the military
                             services with 18,000 people.

                             DFAS currently has 23,500 employees.

                             The military services do not track the number of finance and
                             accounting personnel they employ, but estimate there are about
                             17,300.



                           In May 1994, when the Deputy Secretary of Defense announced plans to
                           consolidate finance and accounting operations, he said that the number of
                           people performing these activities should drop from about 46,000 to 23,000
                           by 1999. As of September 1996, DOD estimates show that there were about
                           40,800 people performing finance and accounting activities—about 5,200
                           less than estimated in 1994. However, there is some uncertainty about
                           these numbers primarily because the military services do not centrally
                           budget for or manage finance and accounting operations.

                           As a DBOF entity that is now part of the new Defense-wide Working Capital
                           Fund, DFAS tracks the number of personnel it employs so that it can
                           accurately charge its customers for the full cost of operations. Therefore,
                           it generally knows how many people it inherited from the military services
                           and its current on-board strength. DFAS officials told us, for example, that
                           by 1994 DFAS had assumed control of 28,000 personnel—about 10,000 at




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the 5 large finance centers and about 18,000 at the 332 small,
installation-level finance and accounting offices.6 As of September 1996,
this workforce had been reduced to 23,500 and DFAS has plans to eliminate
another 3,500 positions by the year 2000. According to DOD, most of these
reductions are (or will be) made possible by economies of scale achieved
by closing the 332 small finance and accounting offices and consolidating
activities at the 5 centers and 21 operating locations.

Finance and accounting personnel and activities in the military services,
however, are budgeted for and controlled at the installation level.
Consequently, service representatives said there were no specific plans to
centrally assess or reduce the size of their finance and accounting
network. For this reason, they were also uncertain of the number of
people that remained after DFAS assumed control of resources in 1994 or
that are currently onboard. According to DOD, however, there should have
been about 18,000 finance and accounting personnel left with the military
services in 1994. In 1992, DFAS and the military services issued a data call
to all installation-level finance offices, and in 1994, estimated that the total
number of people in DOD’s network was about 46,000.7 On the basis of this
estimate, DFAS assumed control of 28,000 people, leaving about 18,000
people in the military services.

To determine the number of people in the current military service
network, the services (at our request) either issued another data call to
their installations or prepared an estimate based on other available
information. They reported to us that, as of September 30, 1996,
approximately 17,300 people were performing finance and accounting
activities in the military services.8 On the basis of a comparison of the
original data call and the current estimate, about 700 fewer people are
performing finance and accounting activities now than DOD officials
believe were doing so when DFAS completed its transfer process in 1994.
Figure 4 shows the number of finance and accounting personnel reported
to us by DFAS and the military services as of September 30, 1996.

6
 According to DFAS officials, the actual number of people it inherited by 1994 was 30,700. About 2,700
of these people, however, were computer operators and software developers who were quickly
transferred to the Defense Information Technology Services Office, which is now part of the Defense
Information Systems Agency.
7
 DFAS originally determined that the total number of people that had a finance and accounting
position description was approximately 62,000. However, about 16,000 were excluded from possible
transfer to DFAS for a variety of reasons. For example, audit personnel and personnel stationed
overseas or belonging to a tactical unit that would deploy with troops in time of war were not
considered part of DOD’s finance and accounting network.
8
 In an attempt to get information that would be comparable with the 1992 data call, we asked the
services to exclude the same type of personnel excluded from consideration in 1992.



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Figure 4: Reported Number of
Personnel Performing DOD Finance
and Accounting Activities as of
                                   25,000
September 30, 1996


                                   20,000



                                   15,000



                                   10,000



                                        5,000



                                             0
                                                         Army               Air Force           Navya           DFAS
                                                         4,547               4,723              8,025           23,464

                                                                 Military services -- 17,295

                                   a
                                       This includes 589 personnel in the Marine Corps.


                                   Source: Our analysis of data provided by the DFAS Resource Management Deputate and the
                                   military services’ financial management offices.




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Budget to Perform Finance
and Accounting Activities
Exceeds $2 Billion            The total budget for DOD finance and accounting activities is
                              unknown but exceeds $2 billion.

                              DFAS' 1996 budget was $1.64 billion.

                              The military services estimate their personnel costs for fiscal
                              year 1996 at $598 million.

                              The vast majority of the funds come from operations and
                              maintenance appropriations.




                            Information that was provided by DFAS and the military services indicates
                            that DOD budgeted at least $2 billion in fiscal year 1996 to support finance
                            and accounting activities. This estimate includes all DFAS costs plus
                            estimated personnel costs in the military services. Because military service
                            finance and accounting activities are budgeted at local installations and
                            bases in various appropriation accounts, the military services were unable
                            to estimate other finance and accounting-related costs such as training,
                            equipment, supplies, and overhead.

                            As part of the new Defense-wide Working Capital Fund, DFAS does not
                            receive an appropriation. Instead, it bills customers, primarily the military
                            services, for the cost of operations. These bills include charges for direct
                            labor costs related to the performance of finance and accounting
                            functions; indirect costs, such as systems support and depreciation
                            expenses; and overhead costs, such as management support and
                            electricity bills. The bills may also include additional charges or reductions
                            to make up for prior year losses or gains. The military services use their
                            operations and maintenance appropriations to pay the bills. Figure 5
                            shows DFAS’ financial operations budget from fiscal years 1991 through
                            1996 and the projected budget for fiscal years 1997 through 2000—the
                            numbers are in constant 1996 dollars.




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Figure 5: DFAS’ Budget From Fiscal
Years 1991 Through 2000 in Constant
1996 Dollars                          Dollars in millions
                                      1,800

                                      1,600

                                      1,400

                                      1,200

                                      1,000

                                       800

                                       600

                                       400

                                       200
                                         1991     1992      1993    1994     1995 1996          1997    1998    1999    2000
                                                                              Fiscal year

                                                                    Dollars Projected dollars




                                      Source: DFAS Resource Management Deputate.




                                      As shown in figure 5, DFAS’ budget for finance and accounting increased
                                      from $339 million (in 1996 dollars) in fiscal year 1991 to about $1.64 billion
                                      in fiscal year 1996, primarily as a result of an increase in its scope of
                                      operations. In fiscal year 1991, for example, DFAS was in operation for only
                                      9 months and was only supporting the finance centers. In fiscal year 1992,
                                      DFAS became a DBOF entity and began to identify and charge the military
                                      services for the full cost of its operations. For example, system support
                                      (e.g., computer hardware and software) costs that had been part of the
                                      Defense Information Systems Agency budget in the past were included in
                                      the DFAS budget. In fiscal year 1993, DFAS began to assume control of the
                                      332 installation-level finance and accounting offices, and in 1994, DFAS
                                      began renovating buildings at the new operating locations.




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Between fiscal years 1996 and 2000, DFAS estimates its budget will
decrease by about 10 percent—from $1.64 billion in fiscal year 1996 to
$1.47 billion in 2000 in constant 1996 dollars. According to DFAS officials,
the decrease reflects a leveling off of depreciation expenses associated
with capital expenditures (such as new computer systems), a drop in
workload as DOD continues to downsize its military force structure, and
the completion of personnel and workload consolidations from the small
finance and accounting offices to DFAS centers and operating locations.

The military services’ finance and accounting activities are funded through
annual operation and maintenance appropriations. Because these
appropriations are allocated to many different budget categories at the
installation level, military service officials were not able to estimate the
total amount budgeted to support their finance and accounting activities.
On the basis of the estimated number of personnel that are currently
performing finance and accounting activities, the services estimated that
for fiscal year 1996 they budgeted about $598 million in personnel costs.
Figure 6 shows the personnel costs each of the military services estimated
it incurred during fiscal year 1996.




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Figure 6: Estimated Military Services’
Finance and Accounting Personnel         Dollars in millions
Costs During Fiscal Year 1996




                                               Marine Corps         $22                          Air Force   $191


                                            Army      $128




                                                                                         Navy $257



                                                                Total personnel costs -- $598 million

                                         Sources: Military services’ financial management offices.




DFAS Is Reducing the
Number of Finance and
Accounting Systems                         DFAS is responsible for reducing the number of finance and
                                           accounting systems used throughout DOD.

                                           Since 1991, the number of DOD's reported finance and
                                           accounting systems has been reduced from 324 to 217.

                                           The military services continue to operate hundreds of feeder
                                           systems for which DFAS has no responsibility.




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As part of its mission, DFAS is responsible for standardizing the finance and
accounting systems used throughout DOD. When it was established, for
example, DFAS reported that it inherited 127 finance and 197 accounting
systems that were in use throughout DOD. In general, DOD defines finance
systems as those used to process payments to DOD personnel, retirees,
annuitants, and contractors, and accounting systems as those relied on to
track appropriations and record operating and capital expenses. In
accordance with DOD Financial Management Regulations (DOD 7000.14-R,
Volume 1), DFAS, however, does not recognize or include in its inventory
several hundred “feeder systems”—systems used to initially record
financial data, such as logistics, inventory, and personnel systems—as
finance and accounting systems. Yet these feeder systems, which are
under the control and operations of the military services and defense
agencies, are the source of much of the information that is needed to
adequately account for DOD’s assets and operations.9

DFAS  embarked on what it calls a migration system strategy to reduce the
number of DFAS finance and accounting systems. Under this strategy,
which is depicted in figure 7, DFAS plans to gradually reduce the number of
systems used in each functional area (e.g., civilian payroll, military payroll,
and accounting) until it eventually arrives at systems that would be used
DOD-wide for each finance and accounting area. While the completion of
this strategy varies by system and functional area, DFAS estimates that
about 49 percent of its current systems (107 of 217) will be eliminated by
2000.




9
 See our reports on DOD systems: DOD Accounting Systems: Efforts to Improve System for Navy Need
Overall Structure (GAO/AIMD-96-99, Sept. 30, 1996) and Financial Management: DOD Inventory of
Financial Management Systems Is Incomplete (GAO/AIMD-97-29, Jan. 31, 1997).



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Figure 7: DOD Migration System Strategy for Each Finance and Accounting Area


                  Legacy                      Interim                 Migratory          Target
                  Systems                    Migratory                 System            System
                                             Systems

Air Force
                                                         .
Army
                                                         .                      .                  .
Navy                                                     .
Marine Corps                                             .

                                         Source: DFAS Financial Systems Plan.




                                         This migration strategy typically involves (1) selecting one of the legacy
                                         systems from each service, (2) implementing the system servicewide,
                                         (3) selecting the best interim migratory system to be DOD’s standard
                                         migratory system, and (4) enhancing the migratory system until it meets all
                                         DOD requirements.


                                         As shown in table 4, DFAS has reduced the reported number of finance
                                         systems from 127 to 67 (a 47-percent reduction) and accounting systems
                                         from 197 to 150 (a 24-percent reduction). By the year 2000, DFAS estimates
                                         that the number of systems will be further reduced to 110—43 finance and
                                         67 accounting systems. Table 4 also shows the number of finance and
                                         accounting locations where these systems were used as of September 30,
                                         1996.




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Table 4: Change in Number of Reported Finance and Accounting Systems Since Fiscal Year 1991
                                                                               Number of systems
                                           Locations as of               Fiscal year                Fiscal year                Fiscal year
Activity                                    Sept. 30, 1996                     1991                       1996                 2000 (est.)
Finance systems
  Civilian payroll
    Domestic                                             5                         27                         10                         1
    Foreign nationala                                   28                         37                         21                        21
  Military payroll                                       4                         32                         13                         6
  Retiree and annuitant payroll                          2                          5                          1                         1
  Travel payments                                      124                          5                          3                         1
  Contract payments                                      1                          2                          1                         1
  Vendor payments                                      124                          8                          6                         5
  Transportation payments                                3                          3                          4                         3
  Debt management                                        5                          2                          1                         1
  Disbursing                                           536b                         6                          7                         3
Total finance systems                                                             127                         67                        43
Accounting systems                                     124                        197                        150                        67
Total systems                                                                     324                        217                        110
                                       a
                                        Foreign national systems are unique to specific countries and will continue to be used to pay
                                       foreign nationals as long as DOD maintains a presence in the respective country.
                                       b
                                        The 536 locations consist of 256 ships and 280 disbursing stations where a disbursing officer
                                       has both the authority to disburse payments and access to one of the seven disbursing systems.



                                       Source: DFAS Plans and Management Deputate.


                                       On the basis of the information presented in table 4, DFAS has been
                                       successful in reducing the number of systems in several areas, particularly
                                       those where the military services had already consolidated activities at a
                                       small number of locations. When DFAS was formed, for example, each of
                                       the military services was already operating standard retiree and annuitant
                                       pay systems at its respective finance centers. After evaluating the relative
                                       capabilities of these systems, DFAS selected the Navy’s retiree pay system
                                       and the Air Force’s annuitant pay system as DOD-wide migratory systems.
                                       DFAS subsequently integrated these two systems into one system and pays
                                       all retirees from the Cleveland center and all annuitants from the Denver
                                       center.




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DOD Finance and
Accounting Activities     DFAS and the military services account for monies from four
                          primary sources.

                          Finance and accounting operations are divided into nine
                          functional areas.


                        DOD’s $240-billion appropriation for fiscal year 1996 was used to pay about
                        6 million people and about 17 million invoices charged to nearly 12 million
                        contracts. The appropriation also supported the operation of 13 DBOF (now
                        working capital fund) business areas such as depot maintenance,
                        commissaries, distribution depots, and DFAS. In addition, in fiscal year
                        1996, DOD received about $10 billion through its foreign military sales
                        programs and about $12 billion through the operation of base activities
                        such as child care facilities, golf courses, and the Armed Forces
                        Exchanges.

                        To process financial transactions and account for the receipt and
                        expenditure of funds, DFAS and military services’ finance and accounting
                        operations are generally divided into nine functional activities. Table 5
                        lists these activities, the reported number of DFAS personnel involved in the
                        activity, and the reported total cost for DFAS to process the transactions in
                        fiscal year 1996. The military services were unable to provide us with
                        comparable information.




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Table 5: Reported Number of DFAS
Personnel Performing Finance and        Dollars in thousands
Accounting Functions and the                                                                                    Fiscal year 1996 cost to
Associated Costs for Fiscal Year 1996   Activity                                 Number of personnel                   perform function
                                        Accounting                                                  8,006                         $673,498
                                        Finance activities
                                            Civilian payroll                                        1,184                            98,906
                                            Military payroll                                        3,079                          253,240
                                            Retiree and annuitant                                      899                           64,125
                                            payroll
                                            Travel payments                                         1,423                            83,246
                                            Contractor payments                                     1,625                          108,231
                                            Vendor payments                                         4,823                          268,230
                                            Transportation payments                                    438                           29,749
                                            Debt management                                            327                           24,678
                                                                                                                                             a
                                        Information technology                                      1,469
                                        support
                                        Other                                                          191b                          36,886
                                        Total                                                      23,464                       $1,640,789
                                        a
                                          The 1,469 people maintain DFAS’ technological infrastructure and provide systems maintenance,
                                        systems development, and software training to the DFAS activities listed above. For the most part,
                                        the costs of their services are charged to the DFAS activities on a reimbursable basis and are
                                        already included in the costs listed above.
                                        b
                                         The 191 people are not involved in the finance and accounting activities listed. Rather they
                                        provide reimbursable support (e.g., base operations and human resource support), primarily to
                                        other DOD units, which are collocated at DFAS facilities.

                                        Source: Our analysis of DFAS data.



                                        A more detailed description of the sources and uses of DOD funds and the
                                        finance and accounting responsibilities of DFAS and the military services is
                                        presented in appendix I.


                                        We requested comments on a draft of this report from the Secretary of
Agency Comments                         Defense. On January 15, 1997, officials from the Office of the Under
                                        Secretary of Defense Comptroller/Chief Financial Officer and
                                        representatives of DFAS, the Air Force, the Army, and the Navy met with us
                                        to discuss the report. In general, DOD officials agreed with our description
                                        of DOD’s finance and accounting structure and organization. They provided
                                        us with some suggested changes, which we have incorporated in our final
                                        report where appropriate.




                                        Page 26                                          GAO/NSIAD/AIMD-97-61 Financial Management
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We performed our review from July 1996 through January 1997 in
accordance with generally accepted government auditing standards.
Appendix II contains a description of our scope and methodology.


We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate and House Committees on
Appropriations; Senate Committee on Armed Services; House Committee
on National Security; Senate Committee on Governmental Affairs; House
Committee on Government Reform and Oversight; the Director, Office of
Management and Budget; the Secretary of Defense; and other interested
parties. We will make copies available to others on request.

If you or your staff have any questions concerning this report, please
contact either James E. Hatcher on (513) 258-7959 or Geoffrey B. Frank on
(202) 512-9518. Major contributors to this report are listed in appendix III.

Sincerely yours,




David R. Warren
Director, Defense Management Issues
National Security and International
  Affairs Division




Lisa G. Jacobson
Director, Defense Financial Audits
Accounting and Information
  Management Division




Page 27                              GAO/NSIAD/AIMD-97-61 Financial Management
Contents



Letter                                                                                            1


Appendix I                                                                                       30
                        Accounting in the Department of Defense                                  30
Finance and             Finance Activities in DOD                                                34
Accounting in the
Department of
Defense
Appendix II                                                                                      48

Objective, Scope, and
Methodology
Appendix III                                                                                     50

Major Contributors to
This Report
Related GAO Products                                                                             53


Tables                  Table 1: Reported Changes in DOD’s Finance and Accounting                 3
                          Network Since 1991
                        Table 2: Magnitude of DFAS’ Financial Operation for Fiscal Year           4
                          1996
                        Table 3: Division of Responsibility for Travel Payments                  11
                        Table 4: Change in Number of Reported Finance and Accounting             24
                          Systems Since Fiscal Year 1991
                        Table 5: Reported Number of DFAS Personnel Performing                    26
                          Finance and Accounting Functions and the Associated Costs for
                          Fiscal Year 1996

Figures                 Figure 1: Organizational Structure of DOD’s Finance and                   9
                          Accounting Activities
                        Figure 2: Status of Closing DFAS’ 332 Finance and Accounting             13
                          Offices
                        Figure 3: Locations of DFAS Centers and Operating Locations as           14
                          of September 30, 1996




                        Page 28                            GAO/NSIAD/AIMD-97-61 Financial Management
Contents




Figure 4: Reported Number of Personnel Performing DOD                    17
  Finance and Accounting Activities as of September 30, 1996
Figure 5: DFAS’ Budget From Fiscal Years 1991 Through 2000 in            19
  Constant 1996 Dollars
Figure 6: Estimated Military Services’ Finance and Accounting            21
  Personnel Costs During Fiscal Year 1996
Figure 7: DOD Migration System Strategy for Each Finance and             23
  Accounting Area
Figure I.1: Types of DOD Funds                                           32
Figure I.2: Overview of Civilian and Military Payroll Process            36
Figure I.3: Overview of Retiree and Annuitant Payroll Process            38
Figure I.4: Overview of Travel Payment Process                           40
Figure I.5: Overview of Contractor, Vendor, and Transportation           43
  Payment Process
Figure I.6: Overview of Debt Management Process                          46




Abbreviations

CFO        Chief Financial Officer
DBOF       Defense Business Operations Fund
DFAS       Defense Finance and Accounting Service
DOD        Department of Defense
GAO        General Accounting Office


Page 29                            GAO/NSIAD/AIMD-97-61 Financial Management
Appendix I

Finance and Accounting in the Department
of Defense

                    This appendix provides an overview of the Department of Defense’s (DOD)
                    finance and accounting operations.


                    DOD has focused its accounting operations primarily on monitoring and
Accounting in the   controlling the obligation and expenditure of budgetary resources. As
Department of       discussed in the following sections, DOD carries out these accounting
Defense             operations for four types of funds —general, working capital,
                    nonappropriated, and security assistance.

                    With the enactment of the Chief Financial Officers Act (CFO) of 1990, the
                    Congress called for audited agency financial statements that would more
                    fully disclose a federal entity’s financial position and results of operations
                    beginning with fiscal year 1996. Such statements are intended to provide
                    for (1) better information for more informed decisions on allocation of
                    budgetary resources and (2) an annual assessment of an agency’s financial
                    performance, including the effectiveness of its execution of its
                    stewardship responsibilities.

                    DOD  officials have forthrightly acknowledged that serious financial
                    management problems severely hamper their ability to effectively carry
                    out the full range of accounting and financial reporting responsibilities
                    called for in the CFO Act.1 DOD has struggled to put in place the financial
                    management operations and controls required to produce the information
                    it needs to ensure adequate accountability and to support decision making.
                    For example, few of DOD’s accounting systems are now integrated with its
                    finance systems or with other systems or databases relied on to carry out
                    its accounting and financial reporting responsibilities. Consequently, DOD
                    prepares required financial reports to account for an estimated 80 percent
                    of its physical assets based on management systems that were not
                    intended for such accounting and financial reporting. The absence of a
                    fully integrated general ledger-controlled system necessitates DOD’s
                    reliance on labor-intensive, error-prone processes to ascertain whether all
                    required items are accounted for and reported.

                    Largely as a result of the CFO Act and other recent legislative initiatives
                    directed at increasing financial management discipline throughout the
                    federal government, DOD has recently begun efforts to broaden the focus of
                    and to bring greater discipline to its accounting operations. DOD’s Chief
                    Financial Officer stated that the CFO Act “has contributed to the

                    1
                    See our related report on DOD and the CFO Act: Financial Management: Challenges Facing DOD in
                    Meeting the Goals of the Chief Financial Officers Act (GAO/T-AIMD-96-1, Nov. 14, 1995).



                    Page 30                                       GAO/NSIAD/AIMD-97-61 Financial Management
                         Appendix I
                         Finance and Accounting in the Department
                         of Defense




                         recognition and understanding of the scope and depth of the financial
                         management problems that DOD faces and has defined a standard by which
                         the Department can measure its progress.” DOD has characterized its
                         blueprint for financial management reform as the most comprehensive
                         reform of financial management systems and practices in its history.

                         In its efforts to improve its accounting activities, DOD is guided by a set of
                         comprehensive standards that were developed by the Federal Accounting
                         Standards Advisory Board. This Board, which was established in
                         October 1990 by the Comptroller General of the United States, the Director
                         of the Office of Management and Budget, and the Secretary of the
                         Treasury Department, recommends accounting standards after
                         considering the financial and budgetary information needs of the
                         Congress, executive agencies, and other users and comments from the
                         public. The Office of Management and Budget, Treasury, and GAO then
                         decide whether to adopt the recommended standards; if they do, the
                         standards are published by the Office of Management and Budget and GAO
                         and become effective. Recently, a set of comprehensive accounting
                         standards was approved by the three agencies. The new accounting
                         standards and accompanying reporting concepts are central to effectively
                         meeting the financial management improvement goals of the CFO Act of
                         1990, as amended. Also, improved financial information is necessary to
                         support the strategic planning and performance measurement
                         requirements of the Government Performance and Results Act of 1993.


DOD Accounting Focuses   DOD accounting personnel are responsible for accounting for funds
on Four Types of Funds   received through congressional appropriations, the sale of goods and
                         services by working capital fund businesses, revenue generated through
                         nonappropriated fund activities, and the sales of military systems and
                         equipment to foreign governments or international organizations.
                         Figure I.1 shows the types of funds and the sources and uses of the funds.




                         Page 31                                    GAO/NSIAD/AIMD-97-61 Financial Management
                                              Appendix I
                                              Finance and Accounting in the Department
                                              of Defense




Figure I.1: Types of DOD Funds

             General Funds                                                        Nonappropriated Funds


                          Source:                                                                Source:
                           Appropriated dollars                                                   Self-sustaining program
                          Use:                                                                    dollars
                           Civilian and military pay                                             Use:
                           Retiree and annuitant pay                                              Golf courses
                           Travel payments                                                        Officers' messes
                           Contractor, vendor, and                                                Child care
                           transportation payments                                                Libraries
                           Debt management




             Working Capital Funds                                                Security Assistance Funds


                          Source:                                                               Source:
                           Dollars from goods and                                                Sales dollars
                           services provided to DOD                                             Use:
                           customers                                                             To procure specified items
                          Use:                                                                   (through the U.S. military
                           To procure goods needed                                               services) to fill orders from
                            to satisfy customers' needs                                          foreign governments or
                                                                                                 international organizations




                                              Source: Our analysis of DOD data.




General Funds                                 General funds, the largest category of funds the Defense Finance and
                                              Accounting Service (DFAS) must account for, involve monies provided to
                                              DOD through congressional appropriations for military personnel;
                                              operation and maintenance; military construction; procurement; and
                                              research, development, test and evaluation. The Congress appropriated
                                              over $240 billion to DOD for fiscal year 1996. Because some of these
                                              appropriations involve multiyear funds, DFAS accounted for $338.5 billion



                                              Page 32                                    GAO/NSIAD/AIMD-97-61 Financial Management
                        Appendix I
                        Finance and Accounting in the Department
                        of Defense




                        in obligated and unobligated balances in general funds monies during
                        fiscal year 1996.


Working Capital Funds   As of September 30, 1996, DFAS was required to account for $74.6 billion in
                        obligated and unobligated balances generated by 13 working capital fund
                        (formally DBOF) business areas. These business areas include such
                        activities as depot maintenance, commissaries, distribution depots, and
                        DFAS. In general, these business activities are intended to operate by selling
                        goods and services to the military services and defense agencies at the
                        cost incurred in providing the good or service. Many of the services
                        provided through these business areas, such as the overhaul of ships,
                        tanks, and aircraft, are essential to maintaining the military readiness of
                        our country’s weapon systems. Working capital fund customers pay for the
                        goods and services, primarily, with operations and maintenance funds
                        appropriated by the Congress.2


Nonappropriated Funds   DOD’s  nonappropriated funds result primarily from the sale of goods and
                        services to DOD military personnel, their dependents, and other qualified
                        persons. Nonappropriated fund activities are divided into two major
                        types—morale, welfare, and recreation activities and the Armed Forces
                        Exchanges. In fiscal year 1995, DOD reported morale, welfare, and
                        recreation activities and Armed Forces Exchanges revenues of $2.5 billion
                        and $9.4 billion, respectively (according to a DOD official, 1996 revenues
                        are expected to be about the same). DFAS, however, has accounting
                        responsibility for only a limited portion of the nonappropriated activities.
                        In fiscal year 1996, DFAS accounted for about $500 million in
                        nonappropriated funds.

                        Morale, welfare, and recreation activities are essentially small businesses
                        such as libraries, gyms, golf courses, child care centers, and officers’ clubs
                        that operate at numerous military installations worldwide. Armed Forces
                        Exchanges are located on military installations worldwide and operate
                        similarly to commercial retail outlets. The exchanges offer a variety of
                        goods and services from military uniforms to fast food. DFAS has
                        accounting responsibility only for a portion of the Army morale, welfare,
                        and recreation workload. The Air Force, the Navy, and the Marine Corps
                        account for these activities through their own nonappropriated fund

                        2
                         See our reports on DBOF, including Defense Business Operations Fund: DOD Is Experiencing
                        Difficulty in Managing the Fund’s Cash (GAO/AIMD-96-54, Apr. 10, 1996) and Defense Business
                        Operations Fund: Management Issues Challenge Fund Implementation (GAO/AIMD-95-79, Mar. 1,
                        1995).



                        Page 33                                        GAO/NSIAD/AIMD-97-61 Financial Management
                            Appendix I
                            Finance and Accounting in the Department
                            of Defense




                            organizations that are not part of the military service finance and
                            accounting offices. The Armed Forces Exchanges are not included in DFAS’
                            or the military services’ finance and accounting office workload.


Security Assistance Funds   DOD  also has responsibility for security assistance funds used for
                            congressionally approved sales of military weapon systems and equipment
                            to foreign governments. In some cases, funds accounted for in the security
                            assistance program are received from foreign governments. In addition,
                            the Congress appropriates funds that countries can use as loans or grants
                            to make these purchases. In fiscal year 1996, DOD reported that the security
                            assistance program generated almost $10 billion in new sales. Because
                            many foreign military sales involve procurements over a number of years,
                            in total, DFAS accounted for about $28 billion in obligated and unobligated
                            balances in security assistance funds in fiscal year 1996.


                            DOD’s finance activities generally involve paying the salaries of its
Finance Activities in       employees, paying retirees and annuitants, reimbursing its employees for
DOD                         travel-related expenses, paying contractors and vendors for goods and
                            services, and collecting debts owed to DOD.3 This section describes DFAS’
                            and the military services’ involvement in each of these activities.




                            3
                             See our related reports on DOD payroll: Financial Management: Control Weaknesses Increase Risk of
                            Improper Navy Civilian Payroll Payments (GAO/AIMD-95-73, May 8, 1995) and Financial Management:
                            Defense’s System for Army Military Payroll Is Unreliable (GAO/AIMD-93-32, Sept. 30, 1993).



                            Page 34                                         GAO/NSIAD/AIMD-97-61 Financial Management
                        Appendix I
                        Finance and Accounting in the Department
                        of Defense




Civilian and Military
Payroll
                                                                      Civilian payroll            Military payroll

                              Number of accounts                      826,000                     3 million
                                                                           a
                              DFAS locations                          33                          4

                              DFAS personnel                          1,184                       3,079
                                                                           a
                              Unique systems                          31                          13

                              Dollars disbursed                       $30.2 billion               $46.3 billion

                        a
                            Includes 28 locations and 21 Foreign National Civilian pay systems.


                        Currently, DFAS pays the salaries of 826,000 civilians and about 3 million
                        military personnel. In order for DFAS to pay DOD personnel, it receives
                        information from three sources—military and civilian personnel offices,
                        customer service representatives, and field finance offices or timekeepers
                        within the employee’s unit. Figure I.2 shows an overview of the process by
                        which DFAS obtains information to disburse and account for salary
                        payments made to all DOD employees.




                        Page 35                                            GAO/NSIAD/AIMD-97-61 Financial Management
                                            Appendix I
                                            Finance and Accounting in the Department
                                            of Defense




Figure I.2: Overview of Civilian and Military Payroll Process



        Military/civilian
          personnel
             offices




                                                           DFAS                          DFAS
                       Customer service
                                                           payroll                     accounting
                        representatives                     office                        unit




        Military service
         field finance
           offices or
         timekeepers



       Military service            DFAS
                                            Source: Our analysis of DFAS and military service data.




                                            The civilian and military pay processes begin with the military service’s
                                            personnel office establishing a record in its personnel system for a new
                                            hire or recruit by entering personal data such as name, address, and salary.
                                            Since the majority of the military services’ personnel systems are not
                                            integrated with the payroll systems DFAS uses, entitlement data are sent to
                                            DFAS payroll systems through an electronic interface. This interface allows
                                            DFAS to establish a pay account for the civilian or military employee.
                                            Throughout a person’s employment with DOD, timekeepers, who are
                                            usually administrative support personnel or supervisors in a military unit
                                            or office, or field finance office staff, submit time and attendance
                                            information directly to DFAS. This information is used by DFAS to compute
                                            the amount each employee should be paid. After payments are made, the
                                            payroll system transmits disbursement information to DFAS accounting



                                            Page 36                                         GAO/NSIAD/AIMD-97-61 Financial Management
                            Appendix I
                            Finance and Accounting in the Department
                            of Defense




                            units where accounting records are updated and management and
                            budgetary reports are distributed to DOD and external agencies.

                            DFAS also receives information that affects civilian and military pay from
                            customer service representatives. DFAS and the military services’ finance
                            personnel share the responsibility of providing customer service to civilian
                            employees and military members. Customer service duties include input of
                            employee initiated transactions such as bonds, tax withholdings, and
                            address changes; resolving pay-related problems; and responding to
                            inquiries on all aspects of the payment process, such as pay computation
                            and the recording and balancing of annual and sick leave.


Retiree/Annuitant Payroll

                               Number of accounts                        2 million

                               DFAS locations                            2

                               DFAS personnel                            899

                               Unique systems                            1

                               Dollars disbursed                         $26.2 billion



                            DFAS assumed retiree and annuitant pay responsibilities from the military
                            services upon its establishment in 1991. In fiscal year 1996, DFAS processed
                            payments to about 2 million retirees and annuitants. Figure I.3 provides an
                            overview of the retiree and annuitant payroll process, identifying duties
                            specific to DFAS and the military services.




                            Page 37                                    GAO/NSIAD/AIMD-97-61 Financial Management
                                           Appendix I
                                           Finance and Accounting in the Department
                                           of Defense




Figure I.3: Overview of Retiree and Annuitant Payroll Process




    Military service
    personnel office
                                                                Notification
        Transfers retiree personnel
        data electronically to DFAS                             of retiree death




     DFAS - Cleveland                                                     DFAS - Denver
        Receives data electronically                Upon death
                                                                             Receives records electronically
        from military service                    records transferred
                                                                             from DFAS - Cleveland
        Issues payment to retiree                                            Issues payment to annuitant
        Sends pay data to accounting unit                                    Updates accounting records




                                      DFAS accounting unit
                                         Updates accounting records
                                         Distributes management and
                                         budgetary reports to a variety
                                         of users



      Military service            DFAS
                                           Source: Our analysis of DFAS and military service data.




                                           The military services’ personnel offices process the paperwork required
                                           for establishing a retiree pay account. This information is sent
                                           electronically to the DFAS Cleveland center where personnel in retired pay
                                           operations verify that the retiree’s account has been deleted from the
                                           military pay systems (to avoid dual payments to the retiree); compute the
                                           retiree’s pay; disburse payment to the retiree; and forward pay information




                                           Page 38                                         GAO/NSIAD/AIMD-97-61 Financial Management
                  Appendix I
                  Finance and Accounting in the Department
                  of Defense




                  to a DFAS accounting unit that updates accounting records and distributes
                  management and budgetary reports.

                  Upon receipt of a death notice, retired pay operations personnel in
                  Cleveland will suspend or terminate the retirement pay account and
                  electronically transfer the case to the Denver center. Denver personnel in
                  the annuity pay office maintain the annuitant’s pay account, issue
                  surviving annuity payment, provide customer service support, and update
                  accounting records. These personnel also annually verify the annuitant’s
                  eligibility status. Factors that affect entitlement eligibility include, but are
                  not limited to, changes in Social Security benefits, remarriage, and age of
                  children.


Travel Payments

                      Number of travel settlements                     2.1 million

                      DFAS locations                                   124

                      DFAS personnel                                   1,423

                      Unique systems                                   3

                      Dollars disbursed                                $1.1 billion


                  The travel payment process for both DOD civilian and military employees
                  can be broken down into three stages—travel authorization, actual travel,
                  and travel settlement.4 Military service finance personnel are involved in
                  the travel authorization process and, in some cases, the travel settlement
                  process. DFAS performs the majority of the responsibilities in the travel
                  settlement step in which the traveler is reimbursed. Annually, DFAS
                  processes about 2.1 million travel settlements. Figure I.4 provides an
                  overview of the travel payment process, distinguishing between activities
                  performed by DFAS and the military services.




                  4
                   Travel settlement includes computing the traveler’s entitlement, disbursing funds, and accounting for
                  travel expenses as shown in table 3.



                  Page 39                                           GAO/NSIAD/AIMD-97-61 Financial Management
                                                         Appendix I
                                                         Finance and Accounting in the Department
                                                         of Defense




Figure I.4: Overview of Travel Payment Process




   Military Unit                                            -- Employee travels                      Military Unit
   -- Employee prepares travel request                                                               -- Employee submits travel voucher to
      and makes travel arrangements                                                                    supervisor
   -- Superior approves request                                                                      -- Supervisor approves travel voucher
   -- Administrative support staff reviews travel                                                      and submits travel voucher to DFAS
     request, obligates funds, and issues travel order                                                 travel pay office or the military
                                                                                                       service's finance office




                   DFAS                                                  DFAS or Military Unit
                    -- Updates accounting records                         -- Personnel compute travel pay and
                                                                             conduct pre-payment audit
                                                                          -- Personnel disburses payment




     Military service                      DFAS



                                                         Note: This chart represents travel pay that supports the military services. It does not reflect DFAS
                                                         travel service that is provided to other defense agencies.

                                                         Source: Our analysis of DFAS and military service data.




                                                         Page 40                                            GAO/NSIAD/AIMD-97-61 Financial Management
Appendix I
Finance and Accounting in the Department
of Defense




The travel pay process begins when a DOD employee or supervisor
identifies a need for travel. The employee prepares and submits a travel
request and cost estimate to the appropriate superior for approval. The
administrative support staff within the organization reviews the approved
request, obligates funds, and issues a travel order. The administrative
support staff includes personnel who have authority to input obligations
into the record and may, for example, be personnel in the finance,
resource management, or budget offices. At this time, the employee makes
travel arrangements and may receive a travel advance through the use of
an official government travel card or, when no other means is available,
from the appropriate disbursement office.

Upon completion of travel, the employee submits a travel voucher to
his/her supervisor for reimbursement of expenses, attaching supporting
documentation such as receipts. Once the supervisor approves the claim,
it is sent to either a DFAS travel pay office or the military service’s finance
office where the traveler’s entitlement is computed and an audit is
conducted.5 After entitlement is computed, DFAS or the appropriate
military disbursement office makes payment, and DFAS updates the
accounting records to reflect the disbursement.6




5
DFAS computes travel pay for most of the Army and a small proportion of the Marine Corps, while the
Air Force and the Navy perform their own computations.
6
 Although DFAS disburses travel pay for all of DOD, the Navy and the Marine Corps also disburse
travel pay for some of their members.



Page 41                                          GAO/NSIAD/AIMD-97-61 Financial Management
                          Appendix I
                          Finance and Accounting in the Department
                          of Defense




Contractor, Vendor, and
Transportation Payments
                                                         Contractor            Vendor              Transportation
                                                         payments              payments            payments

                              Number of invoices         1 million             14 million          2 million
                              paid

                              DFAS locations             1                     124                 1

                              DFAS personnel             1,625                 4,823               438

                              Unique systems             1                     5                   4

                              Dollars disbursed          $67.1 billion         $94 billion         $1.5 billion




                          DOD  finance and accounting personnel are also responsible for making
                          payments to contractors for goods and services such as the production of
                          weapon systems, the purchase of computer equipment, and the shipment
                          of freight and personal property. DFAS has the primary responsibility for
                          processing the transactions, paying the contractor or vendor, and
                          accounting for the disbursement of funds. Military service finance
                          personnel are involved to the extent that they verify that funds are
                          available for use and they enter information into accounting systems to
                          show that funds have been committed or obligated for various goods and
                          services. In fiscal year 1996, DFAS employees made payments on
                          approximately 17 million invoices submitted by contractors and vendors.7

                          As shown in figure I.5, while variations exist, the process of acquiring
                          goods and services starts outside of the finance and accounting
                          community, usually with a program manager issuing a request for a
                          procurement of an item or the shipment of freight.




                          7
                           See our related reports on contractor pay, including Financial Management: DOD Needs to Lower the
                          Disbursement Prevalidation Threshold (GAO/AIMD-96-82, June 11, 1996) and DOD Procurement:
                          Millions in Contract Payment Errors Not Detected and Resolved Promptly (GAO/NSIAD-96-8, Oct. 6,
                          1995).



                          Page 42                                         GAO/NSIAD/AIMD-97-61 Financial Management
                                              Appendix I
                                              Finance and Accounting in the Department
                                              of Defense




Figure I.5: Overview of Contractor, Vendor, and Transportation Payment Process


                                                 Contractor or Vendor
                 e                                                                                  M
               ic                                                                                    ili
            erv ce                                                                                      ta
                                                                                                          ry
           S ffi                                                                                               Se
        ary e O                                                    Sends invoice                                 rv
       t                              Delivers item or
    ili nc                                                                                                         ic
   M ina                                                          to DFAS/military                                   e
      F                               provides service                                                                   Ac
                          n                                           service                                              tiv
                      atio                                                                                                    ity
               ts lig
             pu b
           In nt/o tion                                                                          Accepts
              e a
           itm m
          m nfor                                                                                deliveries
         m i
       co


                                                                                                                  Sends
                                                                                                                receiving
                                     Military Service Activity                                                  reports to
                                      Identifies a need for a                                                     DFAS
                                          good or service

           Re
       in po
    to for rts
      m ma p
        ilit           a                                                                           ct,
             ar tion ym                                                                        ntra
               y
                 se ba nt
                           e                                                                co      d
                   rv k  c                                                              hes s, an rts
                                                                                    t c      e      po
                     ice
                         s
                                 Pos
                                     ts                                           Ma nvoic g re
                                acc                                                   i ivin
                                    oun                                                   e
                               reco     tin         Pays                              rec
                                   rds g            invoices


                                                         DFAS



     Military service               DFAS



                                              Source: Our analysis of DFAS and military service data.




                                              Page 43                                         GAO/NSIAD/AIMD-97-61 Financial Management
                  Appendix I
                  Finance and Accounting in the Department
                  of Defense




                  Once a requirement for a good or service has been identified, personnel
                  from a military service finance office are contacted to ensure that funds
                  are available for use. If funds are available, the finance personnel set up a
                  commitment on their accounting system. If the supply office has the
                  needed item, it is issued to the requestor. If it is not available through a
                  supply office, the contracting office awards a contract for high-dollar value
                  items or the military service finance office establishes a purchase order for
                  lower value items. For the movement of freight and personal property, DOD
                  either provides the service using its own resources or generates a
                  government bill of lading for the service.

                  Once a supply item is ordered or service has been contracted for, the
                  vendor delivers or performs the service and sends an invoice to the
                  appropriate DFAS office for payment. A receiving report is sent by the
                  requestor to the same office to show that the delivery was received.
                  Personnel at each DFAS location are responsible for matching contract,
                  invoice, and receiving report information prior to making a payment to a
                  contractor/vendor. After a payment is made, accounting personnel at the
                  operating locations are responsible for activities such as matching
                  payment information against obligations and providing status of funds
                  information to the military services.


Debt Management

                                                 Individual                Contractor
                                                 out-of-service
                    Number of debtors            319,000                   2,500

                    Amount owed                  $464 million              $3.5 billion

                    DFAS locations               4                         1

                    DFAS personnel               317                       10

                    Unique systems               1                         1

                    Dollars collected            $55.6 million             $183 million




                  Page 44                                    GAO/NSIAD/AIMD-97-61 Financial Management
Appendix I
Finance and Accounting in the Department
of Defense




Federal law requires that all government agencies pursue collection action
against individuals or contractors that owe the government money. Within
DOD, these debts can result from a wide variety of transactions such as
defaulted loans (education or small business) or for various overpayments
of pay and benefits. If an individual is employed by DOD or receiving any
compensation payment, the military service finance offices attempt to
collect the money or process an offset against the individual’s pay account.
If the individual is no longer employed by DOD or is not receiving any
compensation payment, it is considered an out-of-service debt and DFAS
personnel are responsible for collecting the debt. DFAS is also responsible
for collecting all debts owed by contractors. As of September 30, 1996,
about 319,000 military and civilian debtors owed DOD $464 million and
approximately 2,500 contractors owed DOD about $3.5 billion.

DFAS personnel closed about 116,000 cases as of the end of fiscal year 1996
during which time they collected approximately $238 million. The military
services perform debt management activities at each of their installations.
However, we were unable to obtain information related to the number of
cases that were processed during fiscal year 1996. Figure I.6 provides an
overview of the process used by DOD to collect debts.




Page 45                                    GAO/NSIAD/AIMD-97-61 Financial Management
                               Appendix I
                               Finance and Accounting in the Department
                               of Defense




Figure I.6: Overview of Debt
Management Process


                                                  Individual or
                                                  contractor
                                                    Incurs debt




                                            Military installation
                                            activity
                                              Identifies debt
                                              Attempts to collect debt




                                    If debt is not collected and                         If debt is not collected and
                                    individual is currently                              contractor or individual is not
                                    employed by DOD, then                                currently employed by DOD, then




                                           Military service                                     DFAS center
                                           finance office                                        Collects debt, refers to
                                             Collects debt through a                             another agency for
                                             demand letter or payroll                            collection, or writes off
                                             offset                                              debt
                                                                                                 Adjusts accounting
                                                                                                 records



                                      Military service                 DFAS


                               Source: Our analysis of DFAS and military service data.




                               Upon the initial identification of a debt, many military installation-level
                               organizations, such as a hospital, attempt to collect the debt. If the debt is
                               determined to be uncollectible and is owed by a contractor or someone no
                               longer working for DOD, it is sent to a DFAS center for collection. DFAS is




                               Page 46                                         GAO/NSIAD/AIMD-97-61 Financial Management
Appendix I
Finance and Accounting in the Department
of Defense




required to send three letters—30 days apart—to debtors in an attempt to
collect the money. Then, if the money has not been collected, it can be
turned over to a private agency for collection or to the Internal Revenue
Service for a potential tax refund offset. The debt may also be sent to the
Department of Justice for legal action if research shows the debtor has the
ability to pay. If DFAS determines that an individual debtor is employed by
another federal agency, it can obtain payment for the outstanding debt
through payroll deductions. At any time during the process, the debt can
be collected in full, compromised to a lesser amount with the remainder
written off, or written off in total if the debt falls below established dollar
thresholds. DFAS updates its accounting records to reflect any of these
events and reports the information back to the military services. If any
debt is collected, it is refunded to the military service that incurred the
debt or deposited into the Treasury Miscellaneous Receipts Account.




Page 47                                    GAO/NSIAD/AIMD-97-61 Financial Management
Appendix II

Objective, Scope, and Methodology


              The Subcommittee on Defense, Senate Committee on Appropriations,
              asked us to provide an overview of DOD finance and accounting activities.
              We focused our work on describing how DOD is organized to perform
              finance and accounting, the size of the finance and accounting
              infrastructure, and the various activities that are performed by DFAS and
              the military services. To determine how DOD is organized to perform
              finance and accounting activities, we reviewed documents that discussed
              the rationale for centralizing accounting activities within DFAS and DFAS
              and military service finance and accounting organizational charts. We also
              discussed the organizational structure with officials at DFAS Headquarters
              and the military services’ Office of the Assistant Secretary for Financial
              Management.

              To determine the current size of DOD’s finance and accounting
              infrastructure, we obtained and reviewed budget, personnel, workload,
              and cost figures provided by DFAS. The military services did not have
              comparable information readily available. Therefore, officials from the
              Army’s and the Marine Corps’ financial management offices sent out a data
              call to their respective installations to obtain information on the number of
              personnel currently performing finance and accounting activities. The Air
              Force updated personnel figures obtained from DOD’s central personnel
              database. The Navy updated its personnel figures using a variety of Navy
              reports and DOD’s central personnel database. From these numbers, each
              of the services estimated the amount of money it spends on personnel
              costs to perform finance and accounting activities. Given our overall
              assignment objectives and the descriptive nature of our report, we did not
              verify the data provided to us by either DFAS or the military services.

              For purposes of this report, we did not obtain information from defense
              agencies related to how many personnel are currently performing finance
              and accounting activities. This decision was based on the lack of a single
              focal point within DOD that could provide us with the needed information
              from approximately 24 defense agencies and the small number of
              personnel involved with defense agency finance and accounting activities
              prior to the establishment of DFAS in 1991.

              To determine the type of activities DOD finance and accounting personnel
              are responsible for performing, we reviewed DOD’s Chief Financial Officer
              Financial Management 5-Year Plan, the DFAS Customer Service Plan, the
              responsibility matrices negotiated by DFAS with each of the military
              services, and work flow descriptions for each finance and accounting




              Page 48                              GAO/NSIAD/AIMD-97-61 Financial Management
    Appendix II
    Objective, Scope, and Methodology




    activity. To supplement information included in formal reports, we
    interviewed headquarters and field officials at the following locations:

•   DFAS headquarters in Arlington, Virginia;
•   DFAS centers in Cleveland, Ohio; Columbus, Ohio; Denver, Colorado; and
    Indianapolis, Indiana;
•   the Army’s and the Navy’s Office of the Assistant Secretary for Financial
    Management in Arlington, Virginia;
•   the Air Force’s Secretary of the Air Force (Financial Management and
    Plans) in Arlington, Virginia; and
•   the Marine Corps’ Office of the Deputy Chief of Staff for Program and
    Resources in Arlington, Virginia.




    Page 49                              GAO/NSIAD/AIMD-97-61 Financial Management
Appendix III

Major Contributors to This Report


                        David R. Warren
National Security and   Brad H. Hathaway
International Affairs   James E. Hatcher
Division, Washington,   Cheryl K. Andrew
                        Leticia V. Bates
D.C.
                        Lisa G. Jacobson
Accounting and          Geoffrey B. Frank
Information             Galen L. Goss
Management Division,
Washington, D.C.




                        Page 50             GAO/NSIAD/AIMD-97-61 Financial Management
Appendix III
Major Contributors to This Report




Page 51                             GAO/NSIAD/AIMD-97-61 Financial Management
Appendix III
Major Contributors to This Report




Page 52                             GAO/NSIAD/AIMD-97-61 Financial Management
Related GAO Products


                   Financial Management: DOD Needs to Lower the Disbursement
Contractor Pay     Prevalidation Threshold (GAO/AIMD-96-82, June 11, 1996).

                   DODProcurement: Millions in Contract Payment Errors Not Detected and
                   Resolved Promptly (GAO/NSIAD-96-8, Oct. 6, 1995).

                   Financial Management: Status of Defense Efforts to Correct Disbursement
                   Problems (GAO/AIMD-95-7, Oct. 5, 1994).

                   DODProcurement: Overpayments and Underpayments at Selected
                   Contractors Show Major Problem (GAO/NSIAD-94-245, Aug. 5, 1994).

                   DOD Procurement: Millions in Overpayments Returned by DOD Contractors
                   (GAO/NSIAD-94-106, Mar. 14, 1994).

                   Financial Management: Navy Records Contain Billions of Dollars in
                   Unmatched Disbursements (GAO/AFMD-93-21, June 9, 1993).

                   Financial Management: Air Force Systems Command Is Unaware of Status
                   of Negative Unliquidated Obligations (GAO/AFMD-91-42, Aug. 29, 1991).


                   Defense Business Operations Fund: DOD Is Experiencing Difficulty in
Defense Business   Managing the Fund’s Cash (GAO/AIMD-96-54, Apr. 10, 1996).
Operations Fund
                   Defense Business Operations Fund: Management Issues Challenge Fund
                   Implementation (GAO/AIMD-95-79, Mar. 1, 1995).

                   Defense Business Operations Fund: Improved Pricing Practices and
                   Financial Reports Are Needed to Set Accurate Prices (GAO/AIMD-94-132,
                   June 22, 1994).

                   Financial Management: DOD’s Efforts to Improve Operations of the
                   Defense Business Operations Fund (GAO/T-AIMD/NSIAD-94-146, Mar. 24, 1994).

                   Financial Management: Status of the Defense Business Operations Fund
                   (GAO/AIMD-94-80, Mar. 9, 1994).

                   Financial Management: Opportunities to Strengthen Management of the
                   Defense Business Operations Fund (GAO/T-AFMD-93-6, June 16, 1993).




                   Page 53                             GAO/NSIAD/AIMD-97-61 Financial Management
             Related GAO Products




             Financial Management: Defense Business Operations Fund
             Implementation Status (GAO/T-AFMD-92-8, Apr. 30, 1992).

             Defense’s Planned Implementation of the $77 Billion Defense Business
             Operations Fund (GAO/T-AFMD-91-5, Apr. 30, 1991).


             Financial Management: DOD Inventory of Financial Management Systems Is
Financial    Incomplete (GAO/AIMD-97-29, Jan. 31, 1997).
Management
             DOD Accounting Systems: Efforts to Improve System for Navy Need Overall
             Structure (GAO/AIMD-96-99, Sept. 30, 1996).

             Navy Financial Management: Improved Management of Operating
             Materials and Supplies Could Yield Significant Savings (GAO/AIMD-96-94,
             Aug. 16, 1996).

             CFOAct Financial Audits: Navy Plant Property Accounting and Reporting Is
             Unreliable (GAO/AIMD-96-65, July 8, 1996).

             CFOAct Financial Audits: Increased Attention Must Be Given to Preparing
             Navy’s Financial Reports (GAO/AIMD-96-7, Mar. 27, 1996).

             Financial Management: Challenges Facing DOD in Meeting the Goals of the
             Chief Financial Officers Act (GAO/T-AIMD-96-1, Nov. 14, 1995).

             Financial Management: Challenges Confronting DOD’s Reform Initiatives
             (GAO/T-AIMD-95-146, May 23, 1995).

             Financial Management: Challenges Confronting DOD’s Reform Initiatives
             (GAO/T-AIMD-95-143, May 16, 1995).

             Financial Management: Control Weaknesses Increase Risk of Improper
             Navy Civilian Payroll Payments (GAO/AIMD-95-73, May 8, 1995).

             Financial Management: Financial Control and System Weaknesses
             Continue to Waste DOD Resources and Undermine Operations
             (GAO/T-AIMD/NSIAD-94-154, Apr. 12, 1994).

             Financial Management: Strong Leadership Needed to Improve Army’s
             Financial Accountability (GAO/AIMD-94-12, Dec. 22, 1993).




             Page 54                              GAO/NSIAD/AIMD-97-61 Financial Management
                        Related GAO Products




                        Financial Management: Army Real Property Accounting and Reporting
                        Weaknesses Impede Management Decision-Making (GAO/AIMD-94-9, Nov. 2,
                        1993).

                        Financial Management: Defense’s System for Army Military Payroll Is
                        Unreliable (GAO/AIMD-93-32, Sept. 30, 1993).

                        Financial Management: DOD Has Not Responded Effectively to Serious,
                        Long-Standing Problems (GAO/T-AIMD-93-1, July 1, 1993).

                        Financial Audit: Examination of the Army’s Financial Statements for Fiscal
                        Years 1992 and 1991 (GAO/AIMD-93-1, June 30, 1993).

                        Financial Audit: Examination of the Army’s Financial Statements for Fiscal
                        Year 1991 (GAO/AFMD-92-83, Aug. 7, 1992).

                        Financial Management: Immediate Actions Needed to Improve Army
                        Financial Operations and Controls (GAO/AFMD-92-82, Aug. 7, 1992).

                        Financial Audit: Aggressive Actions Needed for Air Force to Meet
                        Objectives of the CFO Act (GAO/AFMD-92-12, Feb. 19, 1992).

                        Financial Audit: Status of Air Force Actions to Correct Deficiencies in
                        Financial Management Systems (GAO/AFMD-91-55, May 16, 1991).

                        Financial Audit: Financial Reporting and Internal Controls at the Air
                        Logistics Centers (GAO/AFMD-91-34, Apr. 5, 1991).

                        Financial Audit: Air Force’s Base-Level Financial Systems Do Not Provide
                        Reliable Information (GAO/AFMD-91-26, Jan. 31, 1991).

                        Financial Audit: Financial Reporting and Internal Controls at the Air Force
                        Systems Command (GAO/AFMD-91-22, Jan. 23, 1991).


                        DOD Infrastructure: DOD Is Opening Unneeded Finance and Accounting
Locations Performing    Offices (GAO/NSIAD-96-113, Apr. 24, 1996).
Finance and
Accounting Activities   DOD Infrastructure: DOD’s Planned Finance and Accounting Structure Is Not
                        Well Justified (GAO/NSIAD-95-127, Sept. 18, 1995).




                        Page 55                              GAO/NSIAD/AIMD-97-61 Financial Management
           Related GAO Products




           Military Bases: Analysis of DOD’s 1995 Process and Recommendations for
           Closure and Realignment (GAO/NSIAD-95-133, Apr. 14, 1995).

           Defense Infrastructure: Enhancing Performance Through Better Business
           Practices (GAO/T-NSIAD/AIMD-95-126, Mar. 23, 1995).

           Military Bases: Analysis of DOD’s Recommendations and Selection Process
           for Closures and Realignments (GAO/NSIAD-93-173, Apr. 15, 1993).




(709207)   Page 56                            GAO/NSIAD/AIMD-97-61 Financial Management
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