U.S. GAO – Department of Protection: Steps Needed to Make improvements to Accounting of Intradepartmental Transactions

What GAO Found

The Section of Protection (DOD) has a lengthy-standing material weak spot relevant to intradepartmental transactions. Intradepartmental transactions come about when trading partners within the identical division have interaction in business enterprise activities—such as the Section of the Military as a seller and the Section of the Navy as a consumer inside of DOD. As section of the conventional method of making ready section-broad fiscal statements, intradepartmental transaction amounts are eradicated to stay clear of overstating accounts for DOD. For the fourth quarter of fiscal 12 months 2019, DOD removed close to $451 billion of net intradepartmental action. Auditors continue on to report a substance weak spot relevant to DOD’s processes for recording and reconciling intradepartmental transaction quantities that are necessary to get rid of the transactions and prepare responsible consolidated financial statements.

DOD has discovered implementation of the Govt Invoicing (G-Invoicing) program as its long-term option to account for and guidance its intradepartmental functions. In fiscal year 2020, DOD issued a policy demanding all DOD elements to use G-Invoicing’s Standard Phrases and Conditions (GT&C) features for initiating and approving GT&C agreements—a needed move for using subsequent G-Invoicing functionalities (see determine). GAO discovered the use of this performance various amid picked DOD factors due to the fact of difficulties these types of as inconsistency in DOD procedures and many variations to G-Invoicing program technical specs. If DOD factors do not put into action the GT&C operation, there is an greater chance of delay in entire implementation of G-Invoicing to help remediate the intradepartmental eliminations content weak point.

Normal Terms and Conditions Agreement Procedure in Government Invoicing

General Terms and Conditions Agreement Process in Government Invoicing img src=

Although DOD has discovered G-Invoicing as its extended-term remedy, GAO discovered that DOD has not executed an all round section-vast approach to deal with its intradepartmental eliminations product weak spot in the quick expression. Further, GAO located that while DOD issued a division-vast plan in May perhaps 2019 with new demands for reconciling intradepartmental transactions, the Defense Finance and Accounting Services and picked DOD factors have not updated their policies or implemented several of the new specifications. Without the need of a small-time period method that consists of determining the leads to of challenges and continually applying division-large insurance policies throughout DOD, DOD’s attempts to resolve discrepancies in intradepartmental transaction amounts—including its initiatives in the long term—will possible be inefficient and ineffective.

Why GAO Did This Study

Because 1995, GAO has designated DOD fiscal administration as high danger since of pervasive weaknesses in its economical management systems, controls, and reporting. DOD’s extensive-standing intradepartmental eliminations substance weakness displays DOD’s incapability to adequately document and reconcile its intradepartmental transactions, and has affected DOD’s capacity to prepare auditable money statements.

GAO was questioned to appraise DOD’s approach for performing intradepartmental eliminations. This report examines the extent to which DOD has (1) discovered and taken techniques to tackle troubles related to intradepartmental eliminations and (2) proven and implemented guidelines and techniques associated to intradepartmental eliminations.

GAO interviewed DOD officers about intradepartmental eliminations processes and reviewed DOD procedures and strategies to identify the extent to which processes have been implemented to report and reconcile intradepartmental transactions.

What GAO Endorses

GAO is generating 5 recommendations to DOD, together with that DOD really should (1) take steps to assure that its factors comply with its policy for making use of G-Invoicing’s GT&C performance and (2) acquire quick-expression answers that tackle results in for buying and selling husband or wife variances right before G-Invoicing is totally executed. DOD agreed with all 5 suggestions and cited steps to address them.

For extra data, get in touch with Kristen Kociolek at (202) 512-2989 or [email protected].