Report | April 9, 2014

Improvements to Controls Over Cash Are Needed at Army Disbursing Stations in Kuwait and Saudi Arabia

DODIG-2014-057

Objective

We determined whether the controls at the Army disbursing stations in Kuwait (Disbursing Station Symbol Numbers [DSSNs] 8550 and 8748) and Saudi Arabia (DSSN 5588) were adequate to safeguard, account for, document, and report cash held at those sites. In addition, we evaluated whether the U.S. Army Financial Management Command (USAFMCOM) effectively implemented technical oversight and provided assistance to the Army disbursing station in Saudi Arabia. The three disbursing stations we reviewed had $4.9 million in cash on hand at the time of our cash counts.

Findings

Controls at Kuwait (DSSN 8550) and Saudi Arabia (DSSN 5588) disbursing stations were not adequate to safeguard, account for, document, and report cash. For example, we found that the disbursing officer (DO) and the deputy disbursing officer (DDO) for DSSN 8550 did not segregate confiscated funds from public funds, accurately prepare a shipment of funds form, timely prepare an agent’s accountability form, properly account for funds in transit, and retain quarterly cash verification reports. The DO for DSSN 5588 did not properly transfer accountability from the predecessor DO to himself, properly appoint a DDO, timely reconcile the Limited Depository Account, properly report cash with agents, and require agents to prepare daily accountability summaries.

These conditions occurred because the DOs and DDOs were not aware of these requirements and were not properly trained to perform these duties. As a result of these inadequate controls over cash, the Army increases its risk of loss because of errors, theft, and fraud.

In addition, the DO for DSSN 8550 did not report a loss of funds of about $6.5 million when the Al-Warka bank in Baghdad, Iraq, failed. This occurred because the DO believed that the Army would recover these funds in the future. As a result, the risk of losing the remaining balance of $5.4 million has increased.

Recommendations

Among other recommendations, we recommend the Army conduct staff assistance visits when a new DO or DDO is appointed to the Army disbursing stations in Kuwait. In addition, we recommend that the Army revise the training curriculum for DOs and DDOs and certify that DOs and DDOs have taken this training. We also recommend that the DO for DSSN 8550 report a loss of funds of $5.4 million, conduct an investigation and prepare a report, inform senior officials at the Departments of State and Treasury of the loss of funds, and request assistance from these officials in recovering the lost funds. Furthermore, we recommend that senior officials review the actions of the DOs for DSSN 8550 and DSSN 5588 regarding the deficiencies identified in this report and take appropriate management action, including holding the necessary officials accountable.

Management Comments and Our Response

Management comments adequately addressed 26 of 33 recommendations. We request the Army provide comments in response to the report.

This report is a result of Project No. D2011-D000FP-0260.001.