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Ineffective Fund Balance With Treasury Reconciliation Process for Army General Fund

DODIG-2017-069

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Objective

We determined whether the Defense Finance and Accounting Service–Indianapolis (DFAS-IN), in coordination with the Army, effectively reconciled the Fund Balance With Treasury (FBWT) between the Army General Fund (AGF) and the Treasury records.

At the request of the Office of the Assistant Secretary of the Army (Financial Management and Comptroller) (OASA[FM&C]) management, we limited our review to one AGF appropriation, the FY 2016 Army Reserve Operations and Maintenance (O&M) appropriation, which was 1.1 percent of the AGF FBWT balance as of March 31, 2016.

Background

FBWT is an asset account that reflects a Federal agency’s available spending authority.  Appropriations and collections increase FBWT and disbursements reduce it.  At the agency level, FBWT is similar to a corporation’s cash account.  The Army FBWT Reconciliation Tool identifies AGF FBWT differences between Army and Treasury records.

Finding

OASA(FM&C) and DFAS-IN personnel did not have an effective AGF FBWT reconciliation process for the FY 2016 Army Reserve O&M FBWT Funds.  OASA(FM&C) and DFAS-IN personnel improved the Reconciliation Tool by adding the capability to identify a universe of AGF FBWT differences between Army and Treasury records.  However, based on the results of our statistical sample, OASA(FM&C) and DFAS-IN personnel did not identify and resolve all differences completely and timely with adequate support, as required by Federal and DoD guidance.  This occurred because OASA(FM&C) and DFAS-IN personnel did not design their AGF FBWT reconciliation process to:

  • identify, age,1  assign accountability for, and explain all differences within 10 workdays of the end of the month;
  • resolve a projected 7,789 of the 11,359 differences in records for FY 2016 Army Reserve O&M FBWT (or 68.6 percent) within 60 days;
  • ensure standardized data is transmitted between the Army’s accounting and financial systems; and
  • prevent the creation of unsupported manual and system-generated AGF FBWT adjustments.

OASA(FM&C) and DFAS-IN personnel’s inability to identify and resolve all AGF FBWT differences completely and timely with adequate support demonstrates the continuation of the Army’s longstanding FBWT and unsupported adjustment material control weaknesses that Army first identified in FY 2008. These weaknesses increase the risk of materially misstated AGF FBWT financial statement disclosures and the Army not being audit ready by September 30, 2017.

Recommendations

We recommend that the Assistant Secretary of the Army (Financial Management and Comptroller) and Director, DFAS-IN, reengineer the AGF FBWT reconciliation process to:

  • meet the 10-workday requirement established by DoD regulation or coordinate with the Under Secretary of Defense (Comptroller)/Chief Financial Officer, DoD, to determine whether the requirement needs to be revised;
  • correct system deficiencies known to cause FBWT differences;
  • research and resolve all differences within 60 days, as required;
  • document business rules that create system-generated adjustments; and
  • support all AGF FBWT adjustments with transaction-level detail.

Additionally, we recommend that the Assistant Secretary of the Army (Financial Management and Comptroller) develop and implement:

  • system changes to ensure AGF FBWT transaction data are standardized for non-legacy accounting and financial systems;
  • a methodology for standardizing data from legacy accounting and financial systems; and
  • system functionality to demonstrate posting logic for all non-legacy accounting and financial systems.

Management Comments and Our Response

The Deputy Assistant Secretary of the Army (Financial Operations) (DASA[FO]), responding on behalf of the Assistant Secretary of the Army (Financial Management and Comptroller), and Director, DFAS-IN, agreed with our finding and recommendations.

The DASA(FO) and Director, DFAS-IN, agreed to work with OUSD(C)/CFO personnel to review the number of days required to perform the AGF FBWT reconciliation and update the DoD regulation.  Therefore, the recommendation is resolved but remains open.  We will close this recommendation once we verify either OASA(FM&C) and DFAS-IN personnel have complied with the current DoD regulation requirement to perform the AGF FBWT reconciliation within 10 workdays or OUSD(C)/CFO personnel have updated the DoD regulation. The estimated completion date is December 31, 2017.

The DASA(FO) and Director, DFAS-IN, agreed to identify root causes of the AGF FBWT differences between Army and Treasury records; identify corrective actions needed to resolve those differences within 60 days; and develop supporting documentation for system-generated adjustments, including system posting logic, applicable system change requests, oversight requirements, process details, and applicable controls.  Therefore, the recommendation is resolved but remains open. We will close this recommendation once we verify that OASA(FM&C) and DFAS-IN personnel have documentation of an aging report showing that AGF FBWT differences were resolved within 60 days; business rules that create system-generated adjustments for differences between Army and Treasury records; and system-generated adjustments supported at the transaction-level, with causes identified.  The estimated completion dates are between May 31, 2017, and October 31, 2018.

The DASA(FO) agreed to review system issues and identify system changes necessary to resolve differences between Army and Treasury records and review posting logic for all transaction types.  Therefore, the recommendation is resolved but remains open.  We will close this recommendation once we verify that OASA(FM&C) personnel have evidence that system changes to standardize data have been implemented and system posting logic has been documented.  The estimated completion date is September 30, 2019.


1    The amount of time elapsed between when an activity identifies and resolves a record difference.

This report is a result of Project No. D2016-D000FL-0168.000.