What GAO Uncovered
The Section of Protection (DOD) has a very long-standing content weakness relevant to intradepartmental transactions. Intradepartmental transactions take place when investing associates in just the exact section engage in business enterprise activities—such as the Office of the Military as a seller and the Division of the Navy as a buyer within DOD. As part of the regular system of getting ready office-huge monetary statements, intradepartmental transaction amounts are removed to avoid overstating accounts for DOD. For the fourth quarter of fiscal year 2019, DOD removed roughly $451 billion of internet intradepartmental activity. Auditors carry on to report a substance weakness connected to DOD’s procedures for recording and reconciling intradepartmental transaction amounts that are important to remove the transactions and put together responsible consolidated financial statements.
DOD has identified implementation of the Governing administration Invoicing (G-Invoicing) technique as its prolonged-term resolution to account for and aid its intradepartmental actions. In fiscal 12 months 2020, DOD issued a plan requiring all DOD factors to use G-Invoicing’s Common Phrases and Conditions (GT&C) operation for initiating and approving GT&C agreements—a required step for employing subsequent G-Invoicing functionalities (see figure). GAO found the use of this features varied among chosen DOD factors simply because of challenges these kinds of as inconsistency in DOD procedures and a lot of improvements to G-Invoicing method specs. If DOD components do not put into practice the GT&C operation, there is an greater possibility of hold off in complete implementation of G-Invoicing to help remediate the intradepartmental eliminations product weak point.
General Terms and Situations Agreement System in Governing administration Invoicing
While DOD has discovered G-Invoicing as its very long-time period remedy, GAO identified that DOD has not implemented an over-all division-large system to tackle its intradepartmental eliminations materials weakness in the short time period. Even more, GAO located that while DOD issued a department-large policy in May perhaps 2019 with new prerequisites for reconciling intradepartmental transactions, the Defense Finance and Accounting Services and selected DOD components have not current their procedures or implemented numerous of the new demands. Devoid of a short-phrase tactic that includes figuring out the triggers of issues and persistently employing office-extensive insurance policies throughout DOD, DOD’s endeavours to take care of distinctions in intradepartmental transaction amounts—including its initiatives in the lengthy term—will most likely be inefficient and ineffective.
Why GAO Did This Research
Considering that 1995, GAO has specified DOD fiscal management as higher risk simply because of pervasive weaknesses in its fiscal administration programs, controls, and reporting. DOD’s extended-standing intradepartmental eliminations content weak spot demonstrates DOD’s lack of ability to sufficiently file and reconcile its intradepartmental transactions, and has affected DOD’s means to prepare auditable financial statements.
GAO was requested to examine DOD’s course of action for carrying out intradepartmental eliminations. This report examines the extent to which DOD has (1) discovered and taken methods to address troubles relevant to intradepartmental eliminations and (2) founded and implemented procedures and treatments connected to intradepartmental eliminations.
GAO interviewed DOD officers about intradepartmental eliminations procedures and reviewed DOD procedures and techniques to establish the extent to which strategies have been applied to document and reconcile intradepartmental transactions.
What GAO Recommends
GAO is generating 5 recommendations to DOD, which include that DOD should (1) take steps to make sure that its factors follow its policy for employing G-Invoicing’s GT&C functionality and (2) establish brief-phrase solutions that deal with causes for buying and selling husband or wife distinctions right before G-Invoicing is totally implemented. DOD agreed with all 5 suggestions and cited actions to address them.
For a lot more information, call Kristen Kociolek at (202) 512-2989 or [email protected].