DOD IG Cites Control Issues

By Michael Fabey

The Pentagon has been a little too loose with procedural controls over certain cash reporting accounts, a recent Pentagon Inspector General (IG) report says.

Specifically, the IG questions internal controls over DOD Statements of Accountability (SOA) and the reporting of Cash and Other Monetary Assets (COMA) on the department’s Agency-Wide financial statements.

“Overall, DOD did not have effective controls over the reporting of COMA,” the IG reports. “DOD disbursing officers do not charge an appropriation when they obtain operating cash from the U.S. Treasury, as required by regulations,” the IG says. This has been the DOD practice since the 1950s, the IG points out. As of Sept. 30, 2007, the cash balance held outside of the U.S. Treasury was $2.6 billion.

“As a result, DOD is increasing the risk of augmenting its appropriations and causing Antideficiency Act violations,” the IG reports. “DOD disbursing officers continued to obtain large amounts of cash to use in their daily operations. The persistent use of cash by disbursing officers perpetuated the significant administrative costs of using and holding cash and increased the potential for loss of funds.”

In addition, the Defense Finance and Accounting Service (DFAS) did not identify and track the number and dollar amount of cash collections and disbursements made by DOD disbursing stations, the IG says.

As a result, DFAS was not compliant with DOD Financial Management Regulation (DOD FMR) provisions that require audit trails to have sufficient detail to trace transactions from DFAS to their source. In addition, DFAS could not provide complete records of cash collections and disbursements for internal reviews and independent external audits, the IG says. “DFAS incorrectly posted SOA line items that were not COMA to the DOD Agency-Wide Balance Sheet. As a result, the DOD Agency-Wide Consolidated Balance Sheet overstated COMA by $11.1 million as of September 30, 2007,” the IG says.

The IG recommended that the appropriate DOD financial officials do the following:

• Charge a proper appropriation to obtain cash, or coordinate with the Office of Management and Budget and the U.S. Treasury to obtain a waiver or develop an alternative process.

• Develop a policy for specific circumstances that would allow cash disbursements to be made to contractors in Iraq and other countries instead of another payment method.

• Revise the DOD FMR to require DFAS to identify and track the number and dollar amounts of cash collections and disbursements it makes.

• Revise the DOD FMR to specify which SOA line items should be reported as COMA on the balance sheet.

DOD officials agreed with some of the findings and recommendations.

Photo: Wikipedia

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