July 26, 2016 —
We determined whether adjustments made to Army General Fund (AGF) data
during the FY 2015 financial statement compilation process were adequately
documented and supported. In addition, we assessed the internal controls over the
The Office of the Assistant Secretary of the Army (Financial Management & Comptroller) (OASA[FM&C]) and the Defense Finance and Accounting Service Indianapolis (DFAS Indianapolis) did not adequately support $2.8 trillion in third quarter journal voucher (JV) adjustments and $6.5 trillion in yearend
JV adjustments1 made to AGF data during FY 2015 financial statement compilation.2
The unsupported JV adjustments occurred because OASA(FM&C) and DFAS Indianapolis
did not prioritize correcting the system deficiencies that caused errors resulting
in JV adjustments, and did not provide sufficient guidance for supporting
In addition, DFAS Indianapolis did not document or support why the Defense Departmental Reporting
Syst-Budgetary (DDRS-B), a budgetary reporting system, removed at least 16,513 of
1.3 million records during third quarter FY 2015. This occurred because DFAS Indianapolis did not have
detailed documentation describing the DDRS-B import process or have accurate or complete system reports.
As a result, the data used to prepare the FY 2015 AGF third quarter and yearend financial statements were unreliable and lacked an adequate audit trail. Furthermore, DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions. Until the Army and DFAS Indianapolis correct these control deficiencies, there is considerable risk that AGF financial statements will be materially misstated and the Army will not achieve audit readiness by the congressionally mandated deadline of September 30, 2017.
OASA(FM&C) should periodically review system-generated adjustments to understand the reasons for the adjustments and to verify the support for the adjustments. OASA(FM&C) and DFAS Indianapolis should provide resources to review system change requests to correct system deficiencies that caused errors resulting in JV adjustments, determine when the requests will be implemented, and develop new cost effective corrective actions if they will not be implemented; identify root causes of errors that result in unsupported JV adjustments, including system-generated adjustments; and develop corrective actions with milestones to correct the identified root causes. DFAS Indianapolis should revise the manual used to support system-generated adjustments, fully document the complete DDRS-B import process, and update the Army Report Data Type Management Report and Feeder File Inventory Control Report to ensure the information they contain is accurate and complete. See the full report for additional recommendations.
Management Comments and Our Response
The Deputy Assistant Secretary of the Army (Financial Operations), responding for the Assistant Secretary of the Army (Financial Management & Comptroller), and the Director, DFAS Indianapolis, agreed with the recommendations. Comments from the Deputy Assistant Secretary and the Director addressed all the specifics of the recommendations to provide the resources necessary to review system change requests, identify root causes of errors that result in unsupported JV adjustments, identify support for JV adjustments that cannot be eliminated and system-generated adjustments, and update system-generated reports. Therefore, we are not requesting additional comments for these recommendations. However, comments from the Deputy Assistant Secretary and the Director did not address all the specifics of the other recommendations. The actions proposed by the Army and DFAS Indianapolis will not:
- provide an understanding of the reasons for system-generated JV adjustments,
- address the prioritization of system change requests for correcting system deficiencies resulting in JV adjustments, and
- address the full scope of JV adjustments that may potentially be eliminated.
In addition, the Director, DFAS Indianapolis, comments do not address the DDRS-B import
process for general ledger files. Therefore, we request that the Assistant Secretary of the
Army (Financial Management & Comptroller) and the Director, DFAS Indianapolis, provide additional
comments to this report by August 25, 2016.
1 JV adjustments adjust errors identified during financial statement compilation; record accounting entries that, due to system limitations or timing differences, have not been otherwise recorded; and are used for month and yearend closing purposes.
2 Amounts are not cumulative and should not be added together.