Objective:
We determined whether DoD had controls in place to record Department of the Air Force (Treasury Index 57) suspense account balances on the proper Component financial statements. In addition, we determined whether the accounts were being used for the intended purpose and whether transactions are resolved in a timely manner.
Findings:
Defense Finance and Accounting Service– Columbus (DFAS-CO) personnel did not have sufficient internal controls in place to record Air Force suspense account transactions on the proper Component financial statements. This occurred because DFAS-CO personnel did not analyze historical data to determine what portion of the balances should be posted to the Air Force General Fund Financial Statements and the portion that should be posted on other DFAS prepared financial statements. DFAS-CO also did not ensure that Air Force suspense account transactions were researched and cleared within 60 business days as required by the Treasury Financial Manual. This occurred because DFAS-CO did not have adequate processes in place to identify, track, monitor, age, and timely resolve suspense transactions. In addition, DFAS-CO did not report suspense account balances to the appropriate financial statement line items. This occurred because DFAS-CO personnel posted unsupported accounting entries that erroneously reported the suspense account balances to improper line items. As a result, DFAS-CO personnel misstated the FY 2014 and FY 2015 Air Force General Fund Financial Statements by an absolute value of $22.7 million and $7.6 million respectively and included $54.3 million in suspense account transactions older than 60 business days.
DFAS-CO incorrectly used suspense accounts to manage revenue-generating programs, Uniformed Services Thrift Savings Plan contributions, and payroll tax withholdings. This occurred because DFAS-CO followed the DoD Financial Management Regulation, required the use of suspense accounts for recording revenue generating program transactions, various payroll tax withholding transactions, and Uniformed Services Thrift Savings Plan contributions. As a result, DFAS-CO and Air Force personnel overstated the suspense account balances for revenue generating-programs, Uniformed Services Thrift Savings Plan contribution, and Federal income tax withholdings by $412.8 million in the FY 2014 Suspense Account Report and $442.1 million in the FY 2015 Suspense Account Report.
Recommendations We recommend that the Director, DFAS-CO:
- develop procedures for reporting only Air Force suspense accounts in the Air Force General Fund Financial Statements by allocating the portion of Air Force suspense account transactions reported by others, removing non-Air Force suspense account transactions;
- implement a formal process to track, monitor, age, and resolve Air Force suspense account transactions to ensure that the transactions are cleared within 60 business days;
- review the suspense accounts for errors, make the necessary entries to correct the reporting errors, and develop internal controls to prevent and detect future reporting errors;
- in coordination with the Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD, revise the DoD Financial Management Regulation; and
- establish special and deposit fund accounts to more appropriately record and report non-suspense account transactions.
Management Comments and Our Response:
Comments from the Deputy Director, DFAS-CO, addressed all specifics of the recommendations, and no further comments are required.
Specifically, the Deputy Director, DFAS-CO, stated that DFAS has implemented a process to allocate unidentified Mechanization of Contract Administration Services system collections by service and established a new control for all suspense accounts that ensures responsible personnel validate that transactions are cleared correctly and timely and that the documentation is maintained. The Deputy Director also stated that DFAS is developing interim solutions to allocate/remove non-Air Force suspense account transactions from Air Force financial statement reporting and will research and make adjusting entries to correct the Uniformed Services Thrift Saving Plan suspense account balances reported in Balance Sheet lines Accounts Receivable and Cumulative Results of Operations Accounts.
The Deputy Director, DFAS-CO, further indicated that DFAS will work with the Under Secretary of Defense (Comptroller) to update the DoD Financial Management Regulation to be consistent with the Treasury Financial Manual and Office of Management and Budget guidance. The Deputy Director also stated that DFAS began transitioning to newly created Thrift Savings Plan deposit accounts effective October 1, 2016. Lastly, the Deputy Director stated that DFAS is pursuing a legislative proposal to establish special fund accounts for revenue-generating programs.
This report is a result of Project No. D2015-D000FT-0206.000.