Financial Management: Army Real Property Accounting and Reporting Weaknesses Impede Management Decision-making (Letter Report, 11/02/93, GAO/AIMD-94-9). The Army has had continuing problems in obtaining reliable accounting and management information on its real property at installation. Although progress has been slow, efforts under way in the continental United States and Europe could help ensure the accuracy of the real property data used to support real property operations and facility maintenance budgeting. However, these measures only address the accuracy of the data as of the date reviews are completed. Without correcting systemic problems and establishing an effective financial oversight mechanism to maintain data accuracy, these efforts may be wasted. GAO believes that achieving the institutional discipline to obtain reliable databases can be achieved by (1) establishing procedures and monitoring accounting for construction-in-progress at installations, (2) promptly reporting and transferring completed Corps construction projects to receiving installations, and (3) reconciling general ledger balances with the Facilities System. --------------------------- Indexing Terms ----------------------------- REPORTNUM: AIMD-94-9 TITLE: Financial Management: Army Real Property Accounting and Reporting Weaknesses Impede Management Decision-making DATE: 11/02/93 SUBJECT: Accounting procedures Financial records Financial management systems Federal agency accounting systems Internal controls Federal property management Military bases Real property Federal agency reorganization Data integrity IDENTIFIER: Army Facilities System Army Integrated Facilities System ************************************************************************** * This file contains an ASCII representation of the text of a GAO * * report. 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We are unable to accept electronic orders * * for printed documents at this time. * ************************************************************************** Cover ================================================================ COVER Report to the Acting Secretary of the Army and the Acting Chief Financial Officer of the Department of Defense November 1993 FINANCIAL MANAGEMENT - ARMY REAL PROPERTY ACCOUNTING AND REPORTING WEAKNESSES IMPEDE MANAGEMENT DECISION-MAKING GAO/AIMD-94-9 Army Real Property Abbreviations =============================================================== ABBREV CFO - Chief Financial Officers Act DOD - Department of Defense STANFINS - Standard Finance System Letter =============================================================== LETTER B-253657 November 2, 1993 General Gordon R. Sullivan, USA Acting Secretary of the Army Mr. Alvin Tucker Acting Chief Financial Officer Department of Defense We were unable to express an opinion on the Army's fiscal year 1991 financial statements,\1 in part because of significant uncertainties about the reasonableness of the Army's reported $61 billion in real property and $34 billion in construction-in-progress. This report discusses the continuing problems with the Army's accounting and reporting of real property and construction-in-progress noted during our audit of the Army's fiscal year 1992 financial statements.\2 -------------------- \1 Financial Audit: Examination of the Army's Financial Statements for Fiscal Year 1991 (GAO/AFMD-92-83, August 7, 1992). \2 Financial Audit: Examination of the Army's Financial Statements for Fiscal Year's 1992 and 1991 (GAO/AIMD-93-1, June 30, 1993). RESULTS IN BRIEF ------------------------------------------------------------ Letter :1 The Army's Facilities System, used at each installation and at headquarters to record and report real property at installations, could not provide complete and accurate information on the quantity and type of Army structures and facilities. This information is needed to (1) develop real property maintenance budgets and (2) provide readily available accurate information for use in the base realignment and closure process. As a result, real property maintenance budget requests were unreliable, and additional verification was required for real property status information used in the Army's base realignment and closure evaluation process. While the Army has efforts underway in the continental United States and Europe to improve Facility System management and accounting information, these initiatives are proceeding slowly. However, many of the problems with cost information in the Facilities System and in the Corps' construction-in-progress accounting cited in our fiscal year 1991 audit remained uncorrected at the end of fiscal year 1992. For example, a $3.6 billion unreconciled difference existed between the Facilities System and the Army's consolidated general ledger, and an estimated $276 million of completed projects cost was improperly reported as construction-in-progress. In addition, onetime efforts, such as the reviews in Forces Command and Europe, do not address the underlying problems or build confidence that data accuracy can be sustained over the long term. BACKGROUND ------------------------------------------------------------ Letter :2 The Facilities System is the Army's standard real property management and accounting system. The system is composed of two components--the Integrated Facilities System used at Army installations throughout the world\3 (Installation Facilities System), and the Headquarters-Integrated Facilities System operated at Army headquarters (Headquarters Facilities System). The Facilities System contains different kinds of data, including accounting information (such as costs to buy land and construct or procure buildings or other structures) and management information (such as building square footage, land acreage, and category codes identifying facility type). Quarterly, installations' engineering and housing directorates prepare a tape to update real property information in the Headquarters Facilities System. The Facilities System maintains records for over 207,000 buildings and 12.7 million acres of land. The Army uses the Installation Facilities System data to develop two reports on real property--the Unconstrained Requirements Report (requirements report) and the Technical Data Report. These reports are used to prepare and support the Army's budget request for real property maintenance funds. Army Regulation 420-16 requires each installation to prepare an annual requirements report that specifies the installation's funding needs for operating and maintaining real property during the next fiscal year. Each major command is responsible for consolidating its installations' requirements reports; then, the Assistant Chief of Engineers' office at Army headquarters summarizes the command reports and forwards them to the Army budget office for preparation of budget requests. The Technical Data Report provides prior year operating costs for all real property maintenance at Army installations as a baseline. The Army includes information from both the requirements report and the Technical Data Report in the detailed supplemental information submitted to the Congress in support of the President's Budget. The Installation Facilities System is the subsidiary ledger supporting real property account balances in each installation's general ledger. Installations send summary financial information to the Defense Finance and Accounting Service at Indianapolis, which is responsible for maintaining the departmental-level general ledger for the Army and preparing the Army's overall financial statements and reports. Because the Headquarters Facilities System is a consolidation of Installation Facilities System data, the dollar value recorded in the Headquarters Facilities System should equal the Army's total dollar value of real property assets as reported in the Army's general ledger and financial statements. The Headquarters Facilities System contains real property management information, such as facility type and building square footage that are factors considered in the Army's base realignment and closure analysis. For example, the Army uses this system data to analyze whether an installation has the capacity and types of physical structures needed to support another unit if reassigned to that installation. The Army also uses the recorded costs in the Facilities System as a starting point in negotiating how much the German government should pay the United States for facilities turned over to Germany. -------------------- \3 At smaller installations, real property data may be maintained on the Desktop Resource for Real Property. OBJECTIVES, SCOPE, AND METHODOLOGY ------------------------------------------------------------ Letter :3 We reviewed Army real property accounting and reporting as part of our audit of the Army's fiscal year 1992 financial statements under the Chief Financial Officers (CFO) Act of 1990 (Public Law 101-576). The overall objectives of that audit were to opine on the Army's financial statements, internal controls, and compliance with laws and regulations, and to evaluate key controls over the Army's financial operations. This report presents the results of our evaluation of (1) the effect of inaccuracies in the Facilities System on managerial decision-making and (2) the Army's progress toward correcting Facilities System and construction-in-progress data inaccuracies. To evaluate the effect of inaccuracies in the Army's real property data, we interviewed cognizant Army officials at installations, major commands, and Army headquarters. We reviewed Army guidance and procedures to understand and assess the process for developing real property maintenance budget requests and exhibits as presented in the Army's budget justifications supporting the President's fiscal year 1992 budget (the last justification prepared at the time of our review). We also analyzed Army procedures for using the Facilities System information in developing its base realignment and closure recommendations. To determine the status of the Army's progress in correcting previously reported inaccuracies in Facilities System cost information, we interviewed cognizant Army departmental, command, and installation-level officials; Corps staff; and Defense Finance and Accounting Service personnel who maintain the Facilities System and prepare and report real property financial information. We reviewed the results of both the U.S. Army Europe and the Forces Command efforts to improve the accuracy of information recorded in the Installation Facilities System. Also, we judgmentally selected six installations at which to evaluate the status of real property reporting deficiencies found in our fiscal year 1991 audit. We did not audit the accuracy of the $29 billion in real property at the Corps civil works locations because Corps officials told us that the conditions we found during our fiscal year 1991 audit,\4 which then precluded an audit, remained largely unchanged. We did, however, review the Corps efforts to improve the construction-in-progress accounting deficiencies identified during the fiscal year 1991 audit. Specifically, we randomly selected 300 projects from 22 locations--100 military construction projects and 200 civil construction projects--which, based on our review of available accounting records, appeared to be substantially complete at the end of fiscal year 1992. The 300 projects represent $2.9 billion of the Army's reported $32 billion of construction-in-progress. Using a structured questionnaire we developed, we asked the commanders of the 22 Corps locations whether the costs associated with completed projects remained in the construction-in-progress accounts as of September 30, 1992. As of the completion of fieldwork in April 1993, we had received questionnaire responses from 20 of the 22 locations on 76 military and 131 civil construction projects. We conducted our audit work from September 1992 through April 1993 in accordance with generally accepted government auditing standards. As listed in appendix I, we performed our work at 10 Army and Corps locations and contacted 44 other Army and Corps locations. The Department of Defense (DOD) provided written comments on a draft of this report. These comments are evaluated in the Agency Comments and Our Evaluation section of this report and are reprinted in appendix II. -------------------- \4 As part of our fiscal year 1991 financial statement audit, we reported that the Corps of Engineers real property at civil works programs was unauditable because no subsidiary records supporting the balance existed. UNRELIABLE REAL PROPERTY MANAGEMENT INFORMATION IMPEDED DECISION-MAKING ------------------------------------------------------------ Letter :4 Inaccurate management information in the Army's Facilities System resulted in unreliable budget requests and necessitated extra efforts to verify certain data used in the Army's base realignment and closure process. Inadequate guidance and inconsistent reporting requirements for reports used in the budget development process added to the unreliability of the budget requests. Inaccurate information in the Installation Facilities System adversely affects the reliability of the Army's requirements and Technical Data reports used to develop and support budgets submitted to the Office of the Secretary of Defense, the Office of Management and Budget, and the Congress. Also, in fiscal year 1992, responsible Forces Command and Training and Doctrine Command officials stated that requirements and Technical Data Reports were inaccurate. Army officials at the Engineering and Housing Support Center, the organization with primary responsibility for the Facilities System operations, acknowledged that the reports were inaccurate, but they told us that these reports were the only available source of real property data. Army budget justification books provided to the Congress in January 1992 as part of the President's Budget for fiscal year 1993 contain exhibits supporting the amounts requested for real property maintenance. The Assistant Chief of Engineers prepared justifications using work load information (such as square feet) obtained from the Army's requirements and Technical Data Reports. On March 12, 1993, the Secretary of Defense recommended 165 bases, including 7 Army bases, to the Defense Base Closure and Realignment Commission for closure, realignment, or other action. In April 1993, we reported\5 that the recommendations and selection process were generally sound, that the Army's process was well documented, and that the data upon which recommendations were based were audited by the Army Audit Agency. While the data used in the final decision process were accurate, weakness in the Facilities System database caused the Army to perform additional data validation reviews. The recommendations were the second of three rounds required by the Defense Base Closure and Realignment Act of 1990 (Public Law 101-510, Title XXIX, Part A). The final round is scheduled for 1995. More accurate Facilities System management information would help make future base closures and realignment analysis more efficient. To improve the accuracy of this information, Forces Command initiated an internal evaluation of the accuracy of the Installation Facilities System databases at its 22 major installations. As of February 28, 1993, the teams had completed 18 of the 22 reviews. Forces Command graded 16\6 of the Installation Facilities System operations it reviewed by comparing the system data with real property actually at the installations, and rated 11 as either fair or poor. Appendix III shows the grades assigned to those installations. The review identified significant errors at each of the bases visited. For example, One installation had an off-base family housing facility with over 675,000 square feet not reported in the Facilities System. This resulted in a $663,779 underestimate of maintenance requirements for fiscal year 1993.\7 Another installation misclassified unit support buildings (brigade, battalion, and company headquarters) as general purpose administrative space, resulting in an understatement of the installation's operational capacity and overstatement of its administrative capacity. Also, because of different recurring maintenance factors for these two types of facilities, as prescribed by Army Regulation 420-16, maintenance requirements would be overstated by $610.44 per thousand square feet. Real property inventory at Forces Command locations represents approximately one-third of the Army's 859 million square feet of real property in the continental United States. Army officials told us that the other major commands had not yet initiated reviews because of resource constraints. -------------------- \5 Military Bases: Analysis of DOD's Recommendations and Selection Process for Closures and Realignments (GAO/NSIAD-93-173, April 15, 1993). \6 A grading system had not been developed at the time of the Fort Stewart and Fort Irwin reviews. \7 Army Regulation 420-16 prescribes recurring maintenance factors to determine the annual recurring requirement for facilities. Family housing buildings require $983.05 per thousand square feet. TECHNICAL DATA AND REQUIREMENTS REPORTS PREPARED INCONSISTENTLY ---------------------------------------------------------- Letter :4.1 We found inconsistencies in (1) how installations and major commands prepared the Technical Data and requirements reports, (2) the sources used to report costs, and (3) the presentation of information in the reports. These inconsistencies, which were primarily attributable to a lack of specific guidance, increased the difficulty and inefficiency of the reporting process. As a result, comparison of reports among major commands was not necessarily meaningful, and the consolidated reports to support Army-wide budget requests were unreliable. While Army Regulation 420-16 establishes responsibilities and procedures for preparing the Technical Data and requirements reports, this regulation does not provide specific guidance for preparing these reports. For example, the guidance did not provide details on how to identify and report annually recurring requirements versus onetime requirements.\8 We contacted six installations and two major commands and found the following inconsistencies in the way reports were prepared: Five installations adjusted their reporting for real property maintenance requirements based on existing real property assets and expected real property additions and deletions, while one location based its requirements only on existing real property assets. One major command consolidated the amounts the installations reported, while another did not use these data but rather calculated requirements based on quantities recorded in the Facilities System and standard maintenance factors it had developed. Although the Installation Facilities System was designed to record costs, such as utility expenses and costs to maintain and repair facilities, Army Regulation 420-16 does not specify the source for obtaining this cost information. The six installations we contacted obtained repair and maintenance cost information from three different sources because of lack of guidance. Four of the six installations we contacted obtained repair and maintenance costs from the Standard Finance System,\9 one obtained it from the Installation Facilities System, and one obtained it from a database separate from either of those systems. Also, inconsistencies in how required information was accumulated in the Facilities System and how it was reported on the Technical Data Report added to the inefficient and cumbersome report preparation process. For example, the Technical Data Report used the number of lights as the exterior lighting measurement, while the Facilities System presented exterior lighting in linear feet. -------------------- \8 Recurring requirements represent the annual level of operations, maintenance and repair, and services funding needed to sustain occupant activities and avoid deterioration of real property. Onetime requirements are generally related to a specific action such as changes in mission, programs, and operational needs. \9 The Standard Finance System (STANFINS) is the Army's standard accounting system for posts, camps, and stations. Installations' general ledgers are maintained in this system. INACCURACIES IN REAL PROPERTY ACCOUNTING INFORMATION CONTINUE ------------------------------------------------------------ Letter :5 Many of the previously reported problems with the Facilities System cost information and construction-in-progress accounting continued. Our review of a judgmental sample of six installations showed that the same control problems that we reported in our fiscal year 1991 audit continued to exist. Also, the Corps made limited progress in removing costs of completed projects from it's construction-in-progress accounts. During our fiscal year 1991 financial audit, we identified deficiencies in the Army's Facilities System database and construction-in-progress accounting. For example, we reported that the Facilities System records were incomplete and inaccurate at installations in Forces Command, Training and Doctrine Command, Pacific Command, and the Military District of Washington because of (1) not reconciling the Facilities System's real property cost information with the Army's general ledger, (2) not always recording the costs of completed construction projects, and (3) data entry errors. Also during this review, we found that costs associated with installation projects under construction that were the responsibility of the engineering and housing directorate were not accumulated in a construction-in-progress account as required by Army Regulation 37-1. MANY FACILITIES SYSTEM COST INFORMATION INACCURACIES REMAIN ---------------------------------------------------------- Letter :5.1 Our review of cost information in the Facilities System at Forts Stewart, Irwin, Carson, Meade, Lee, and Dix, as of September 30, 1992, revealed the following problems: Army installations did not reconcile balances of their Installation Facilities System with their general ledger real property balances to verify accuracy. Unexplained differences existed between the Installation Facilities System and the Headquarters Facilities System. The Army did not reconcile the $3.6 billion difference between the $24.2 billion in real property shown in the Army's general ledger and the $27.8 billion shown in the Headquarters Facilities System for Army installations in the United States at the end of fiscal year 1992. In response to our fiscal year 1991 financial statement audit, in July 1991, the Defense Finance and Accounting Service issued guidance on reconciling the Installation Facilities System with the general ledger. The guidance required that each installation reconcile its Facilities System balance with its general ledger balance as of September 30, 1991. However, it did not provide detailed guidance on conducting reconciliations and whether installations' real property reconciliations should be performed on an ongoing basis for fiscal year 1992 and subsequent periods. Without more detailed guidance, Army installations may not make appropriate reconciliations. For example, in its response to our management letter,\10 Fort Shafter--not one of the six locations we reviewed as part of our fiscal year 1992 financial audit--stated that it reconciled its general ledger and Installation Facilities System by adjusting the general ledger "in favor" of the balance in the Installations Facilities System. However, without verifying supporting documentation for the amounts shown in the Installation Facilities System, the installation would have no assurance which, if either, balance were complete and accurate. -------------------- \10 GAO/AFMD-92-77ML, July 8, 1992. CONSTRUCTION-IN-PROGRESS ACCOUNTING DID NOT PROVIDE ADEQUATE DATA FOR EFFECTIVE FINANCIAL MANAGEMENT OVERSIGHT ---------------------------------------------------------- Letter :5.2 The Army's accounting for construction-in-progress did not provide complete and accurate cost and financial management information for billions of dollars in construction costs. While the Corps carries out the majority of the Army's major construction projects, some projects are carried out by installations.\11 Although required by Army Regulation 37-1, at the six installations reviewed, construction projects are not accounted for in construction-in-progress accounts. Also, the Corps did not compare and reconcile accounting records with engineer records. As a result of not establishing or maintaining effective construction-in-progress accounting procedures at the Corps and installations, the Army could not effectively ensure that all projects, their costs, and other associated information were properly recorded. Maintaining a construction-in-progress account would allow installations to reconcile completed construction project information with quarterly updates from the Installation Facilities System to help ensure that management information is accurate for all completed projects. Specifically, if construction projects were monitored through the use of construction-in-progress accounts, the Corps could help ensure the accuracy of the documents transferring ownership of completed projects from the Corps to an installation. Upon completion of construction projects, project managers responsible for the work--either the Corps, or an installation's directorate of engineering and housing--are to prepare documentation showing total project costs and related descriptive management information. An installation's directorate of engineering and housing is required to use this documentation to update real property records in the Installation Facilities System. Quarterly, each installation's engineering and housing directorate is required to submit real property cost information from the Installation Facilities System to the finance and accounting office for use in preparing the Army's financial statements and other financial reports. Army Regulation 37-1 requires capitalization of construction costs in a construction-in-progress account. However, Army regulations governing engineering and housing directorates do not require them to inform, until after construction, the finance and accounting office of construction projects that should be accounted for as assets. Consequently, the finance and accounting offices record these costs as expenses, rather than as construction-in-progress as required by Army Regulation 37-1. As a result, installation engineering and housing officials were unable to use construction-in-progress records to identify whether cost or management information in the Facilities System was complete and accurate. In 1991, we reported\12 that the Corps did not routinely remove completed military and civil works construction projects and associated costs from its construction-in-progress account. In response, DOD stated that the Corps would verify whether its construction-in-progress account was purged of completed projects and whether completed projects were properly accounted for in the accounting records. To determine the status of these efforts, we distributed a structured survey to 22 Corps accounting offices, inquiring about the accounting status of 300 projects. The 20 offices responding told us that 87 completed civil projects with costs of $79.2 million and 47 completed military projects with costs of $196.7 million remained in the Corps' construction-in-progress account as of September 30, 1992. Also, because the Corps did not monitor and properly maintain construction-in-progress records, real property assets may have been reported twice in the Army's financial statements. For example, a $560,000 building addition reported on an installation's general ledger as real property was also reported in the Corps' general ledger as construction-in-progress because the Corps did not remove the cost of the completed project when it transferred it to an Army installation. As a result, the suggestions in our April 23, 1991, letter to the Corps are still appropriate. Specifically, we suggested that the Corps review the construction-in-progress account and establish procedures to ensure the prompt removal of costs for completed projects from the Corps general ledger. -------------------- \11 Construction projects performed by the Corps of Engineers are usually those with both estimated costs over $200,000 and funding by the military construction appropriation. Construction projects that are the responsibility of an installation's engineering and housing directorate are typically those with estimated costs of less than $200,000 and funding by the operation and maintenance appropriation. \12 GAO/AFMD-91-62ML, April 23, 1991. EFFORTS TO IMPROVE FACILITIES SYSTEM DATABASE PROCEEDING SLOWLY ------------------------------------------------------------ Letter :6 The Army is trying to improve the accuracy of both management and cost information in the Facilities System and its construction-in-progress accounting. Its review of the records of all facilities in Germany, which the Army estimates account for 82 percent of the Army's reported 371 million square feet of overseas real property inventory, is expected to be completed in 1995. Also, as previously discussed, a review of the accuracy of the Installation Facilities System management and cost information at Forces Command's installations is almost complete. However, Forces Command accounts for only about one-third of the Army's real property in the continental United States. Between 1990 and 1992, the Army began ensuring the accurate recording of all facilities and the associated costs for facilities scheduled to be returned to Germany's possession. The Army initiated the review because the Status of Forces Agreement between the United States and Germany allows the United States to obtain the residual value\13 of Army investments in real property turned over to the host country. The Army expanded the review to include all Army facilities in Europe. As a result of this review, the value of real property in the Installation Facilities System database for Army facilities in Germany increased from $1.9 billion as of September 30, 1990, to $3.2 billion as of July 31, 1992. For example, the review found that the Installation Facilities System had not recorded $1.2 million for an officers club and $9 million in costs associated with the Wiley Barracks in Neu Ulm, Germany. Army officials estimate that by the completion of the review of real property records for all 858 Army facilities in Germany, the total value for buildings and structures could reach $5.25 billion.\14 Also, although the Forces Command review of the Installations Facilities System is nearly complete, data on about two-thirds of the Army's real property in the continental United States has not been reviewed. Other major commands with most of the remaining real property in the United States, primarily the Training and Doctrine Command and the Army Materiel Command, have not initiated similar reviews. -------------------- \13 The Army estimates residual value by taking facility investments and adjusting them for appreciation due to inflation and for depreciation due to age or condition. The actual amount of residual value, if any, is what the German government pays the United States after negotiations. \14 See U.S. Military Presence In Europe: Issues Related to the Drawdown (GAO/T-NSIAD-93-3, April 23, 1993) for a discussion on the status of negotiations with Germany on residual value of U.S. investments. CONCLUSIONS ------------------------------------------------------------ Letter :7 The Army has had continuing problems in obtaining reliable accounting and management information on its real property at installations. Although progress has been slow, completion of efforts like those in Europe and at the Forces Command can help ensure the accuracy of the real property data used to support real property operations and facility maintenance budgeting. However, these actions will only address the accuracy of the data as of the date reviews are completed. Without correcting systemic problems and establishing an effective financial oversight mechanism to maintain data accuracy, these efforts may be wasted. We believe that achieving the institutional discipline to obtain reliable databases, and hence a solid foundation for decision-making can be achieved through (1) establishing procedures and monitoring accounting for construction-in-progress at installations, (2) prompt reporting and transfer of completed Corps construction projects to receiving installations, as recommended in our prior report, and (3) reconciliation of general ledger balances with the Facilities System. RECOMMENDATIONS ------------------------------------------------------------ Letter :8 We recommend that the Acting Secretary of the Army: Direct the other major commands to conduct reviews, similar to the reviews in Europe and Forces Command, on the accuracy of the financial and management information in the Facilities System database. Each review should include identifying and correcting any errors in recorded facility classifications, costs, and units of measurement. These reviews for continental United States bases should be completed in time to upgrade the reliability of data available for the 1995 base realignment and closure process. Direct the Chief of Engineers to clarify existing guidance on preparing the requirements and Technical Data reports. Determine and allocate the resources needed to effectively maintain the Facilities Systems. We also recommend that the Acting Chief Financial Officer of the Department of Defense direct the Defense Finance and Accounting Service and the Acting Secretary of the Army to: Provide guidance on how to perform a quarterly reconciliation of the general ledger real property accounts with the Facilities System or with other supporting detailed records at those installations not using the Facilities System. Establish procedures for housing and engineering directorates to follow when projects are initiated, including informing finance and accounting offices of construction projects for which costs should be capitalized in a construction-in-progress account. Establish procedures for reconciling and reporting Corp and installation construction-in-progress accounts with supporting detailed records. AGENCY COMMENTS AND OUR EVALUATION ------------------------------------------------------------ Letter :9 DOD concurred with all of our findings and with four of our recommendations to improve accounting and reporting for Army's real property. DOD partially concurred with our two other recommendations. DOD concurred with our recommendations concerning inaccuracies in the Facilities System database and the need to allocate sufficient resources to maintain the Facilities System. DOD also cited corrective actions taken or planned. Specifically, in response to our recommendation to review the accuracy of the Facilities System database, DOD stated that the Army has requested installations to update their information by September 30, 1993. In response to our recommendation to allocate the resources needed to maintain the Facilities System, the Army stated that it has updated its funding plans for fiscal years 1995 through 2000 and that it would address additional funding needed for fiscal year 1994. In response to our recommendation to establish procedures for reconciling construction-in-progress accounts with supporting detailed records, DOD stated that the Army Corps of Engineers had already established such procedures. However, we found that existing Corps procedures were not sufficiently detailed. None of the installations reviewed had performed the required reconciliations. Consequently, we continue to believe that more detailed procedures are required. In response to our recommendation to clarify existing guidance on preparing requirements and Technical Data reports, DOD stated that the Army is developing revised automated procedures for preparing the Technical Data Report. However, DOD did not state whether it would clarify guidance on preparing the requirements reports. We believe that without clarified guidance, requirements reports used to develop real property maintenance budgets will continue to be unreliable. DOD partially concurred with our recommendation to develop guidance on how to reconcile the general ledger with the Facilities System quarterly. DOD stated that while the reconciliations appear to have merit, it will determine whether such reconciliations are cost-beneficial. If so, it will develop and implement procedures to perform the reconciliations. However, DOD's response does not indicate whether such reconciliations will be performed quarterly or, as DOD policy requires for real property ledger accounts, "periodically." We continue to believe that without quarterly reconciliations, the Army cannot be sure of the accuracy of the quarterly updates the engineering and housing directorates send to the finance and accounting offices for the general ledger real property accounts. DOD also partially concurred with our recommendation to establish procedures for housing and engineering directorates to follow when projects are initiated. DOD stated that while it had procedures for recording construction in progress, it would strengthen those procedures for implementing departmental policy. DOD also stated that the U.S. Army Center for Public Works is working with the Defense Finance and Accounting Service to ensure that applicable Army installations receive appropriate guidance on collecting and reporting construction in progress quarterly. However, DOD did not state whether the revised procedures will include instructions for informing finance and accounting offices of construction projects for which costs should be capitalized. We believe that Army engineering and housing directorates, to ensure that cost and management information in the Facilities System is complete and accurate, need additional procedures clearly describing when and how construction projects should be accounted for as assets. ---------------------------------------------------------- Letter :9.1 We are sending copies of this report to the Director of the Defense Finance and Accounting Service; the Director of the Office of Management and Budget; the Chairmen and Ranking Minority Members of the Senate Committee on Governmental Affairs, House Committee on Government Operations, Senate Committee on Armed Services, and House Committee on Armed Services; and other interested parties. We will also make copies available to others upon request. This report was prepared under the direction of David M. Connor, Director, Defense Financial Audits, who may be reached at (202) 512-9095 if you or your staff have questions or wish to discuss matters in this report. Major contributors to this report are listed in appendix IV. Donald H. Chapin Assistant Comptroller General LOCATIONS VISITED AND CONTACTED =========================================================== Appendix I LOCATIONS VISITED Army Headquarters, Washington, D.C. Forces Command, Fort Gillem, Georgia Forces Command, Fort McPherson, Georgia Engineering and Housing Support Center, Fort Belvoir, Virginia U.S. Army, Europe, Frankfurt, Germany Defense Finance and Accounting Service, Indianapolis Fort Belvoir, Virginia Fort Meade, Maryland Corps of Engineers Headquarters, Washington, D.C. Corps of Engineers, Fort Worth District, Fort Worth, Texas LOCATIONS CONTACTED Training and Doctrine Command, Fort Monroe, Virginia Army Materiel Command, St. Louis, Missouri Fort Bliss, Texas Fort Benning, Georgia Carlisle Barracks, Pennsylvania Fort A.P. Hill, Virginia Fort Stewart, Georgia Fort Irwin, California Fort Riley, Kansas Fort Carson, Colorado Fort McPherson, Georgia Fort Lee, Virginia Fort Lewis, Washington Fort Campbell, Kentucky Fort Drum, New York Fort Pickett, Virginia Fort McCoy, Wisconsin Fort Sam Houston, Texas The Presidio of San Francisco, California Fort Ord, California Fort Bragg, North Carolina Fort Devens, Massachusetts Fort Dix, New Jersey Fort Rucker, Alabama Corps of Engineers, Kansas City District Office, Kansas City, Missouri Corps of Engineers, Baltimore District Office, Baltimore, Maryland Corps of Engineers, New York District Office, New York, New York Corps of Engineers, Alaska District Office, Elmendorf Air Force Base, Alaska Corps of Engineers, Louisville District Office, Louisville, Kentucky Corps of Engineers, Japan District Office, Camp Zama, Japan Corps of Engineers, Mobile District Office, Mobile, Alabama Corps of Engineers, Savannah District Office, Savannah, Georgia Corps of Engineers, Los Angeles District Office, Los Angeles, California Corps of Engineers, Sacramento District Office, Sacramento, California Corps of Engineers, St. Louis District Office, St.Louis, Missouri Corps of Engineers, Vicksburg District Office, Vicksburg, Mississippi Corps of Engineers, St. Paul District Office, St. Paul, Minnesota Corps of Engineers, Portland District Office, Portland, Oregon Corps of Engineers, Huntington District Office, Huntington, West Virginia Corps of Engineers, Jacksonville District Office, Jacksonville, Florida Corps of Engineers, Wilmington District Office, Wilmington, North Carolina Corps of Engineers, New Orleans District Office, New Orleans, Louisiana Corps of Engineers, Europe District, Frankfurt, Germany Corps of Engineers, Huntsville Division, Huntsville, Alabama (See figure in printed edition.)Appendix II COMMENTS FROM THE DEPARTMENT OF DEFENSE =========================================================== Appendix I (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) (See figure in printed edition.) The following are GAO's comments on the Department of Defense's letter dated August 20, 1993. GAO COMMENTS 1. The Army's Acting Director, U.S. Army Center for Public Works, issued a memorandum to all major commands holding real property restating review, survey, and recording requirements on August 20, 1993. 2. On September 8, 1993, the U.S. Center for Public Works issued guidance, FY 93 Personal Computer Technical Data Reporting System, to all Army installations. 3. Discussed in "Agency Comments and Our Evaluation" section of the report. 4. DOD commented that the Headquarters and Installation Facilities System records are not categorized as official accounting records. However, we found that the Headquarters and Installation Facilities System provides the detail supporting the value of installations' and the Army's real property assets shown in their respective general ledgers. Neither DOD nor Army officials were able to identify records other than Installation Facilities System that represented "official accounting records" for Army's real property during the course of our review. 5. The Army's Engineering and Housing Support Center was renamed the U.S. Army Center for Public Works as a result of reorganization subsequent to the date of our draft report. This reorganization transferred the office from the Assistant Chief of Engineers to the Assistant Chief of Staff for Installation Management. GRADES GIVEN INSTALLATION FACILITIES SYSTEM OPERATIONS AT 16 FORCES COMMAND INSTALLATIONS ========================================================= Appendix III Excelle Installation nt Good Average Fair Poor ------------------------ ------- ---- ------- ---- ---- Fort Riley X Fort Carson X Fort McPherson X Fort Lewis X Fort Campbell X Fort Drum X Fort A.P. Hill X Fort Pickett X Fort Sam Houston X Fort McCoy X Presidio of San X Francisco Fort Ord X Fort Bragg X Fort Devens X Fort Hood X Fort Polk X ============================================================ Total 1 4 0 3 8 ------------------------------------------------------------ MAJOR CONTRIBUTORS TO THIS REPORT ========================================================== Appendix IV ACCOUNTING AND INFORMATION MANAGEMENT DIVISION, WASHINGTON, D.C. Lisa G. Jacobson, Acting Associate Director Geoffrey B. Frank, Assistant Director Matthew H. Johnson, Auditor-in-Charge Douglas A. Delacruz, Auditor Casey L. Keplinger, Auditor Laurie A. O'Connell, Auditor DALLAS REGIONAL OFFICE J. Paul Rodriguez, Jr., Assistant Director Jimmy Palmer, Jr., Evaluator Shannon Q. Cross, Evaluator RELATED GAO PRODUCTS Management letter to the Commander, Fort Wainwright, Alaska (GAO/AFMD-93-27ML, January 8, 1993). Management letter to the Commander-in-Chief, U.S. Army, Europe (GAO/AFMD-93-6ML, January 5, 1993). Management letter to the Commanders, U.S. Army Military District of Washington, U.S. Army Training and Doctrine Command, U.S. Army Forces Command, and U.S. Army Pacific Command (GAO/AFMD-93-4ML, October 7, 1992). Financial Management: Immediate Actions Needed to Improve Army Financial Operations and Controls (GAO/AFMD-92-82, August 7, 1992). Management letter to the Commander, Fort Shafter, Hawaii (GAO/ AFMD-92-77ML, July 8, 1992). Management letter to the Commander, Fort Leavenworth, Kansas (GAO/AFMD-91-91ML, September 30, 1991). Management letter to the Assistant Secretary of the Army for Financial Management; Director, Defense Finance and Accounting Service; Director, Directorate of Resource Management, Corps of Engineers (GAO/AFMD-91-62ML, April 23, 1991). Management letter to the Commander, Fort Devens, Massachusetts (GAO/AFMD-92-61ML, April 12, 1991).