Report | Jan. 14, 2015

U.S. Military Academy, West Point, Controls Over Gift Funds Need Improvements

DODIG-2015-066

Objective

Our objective was to assess the controls over U.S. Military Academy, West Point (West Point) and the West Point Museum monetary and nonmonetary gift processes for FY 2012 and FY 2013. Specifically, we reviewed controls for accepting, recording, reporting, and disbursing West Point monetary gifts. We also reviewed controls for accepting, recording, reporting, and use of selected West Point nonmonetary gifts.

Findings

West Point and Museum controls for accepting monetary and nonmonetary gifts and recording monetary gifts were generally effective; however, the controls for recording nonmonetary gifts, reporting monetary and nonmonetary gifts, and disbursing monetary gifts were not effective. Specifically, West Point did not:

  • record $3.9 million of the $6.1 million of real and personal nonmonetary gifted property on the property books.
  • report $8.6 million of the $26.2 million received in monetary and nonmonetary gifts on Army’s financial statements.

Museum personnel did not record the appraised or acquisition amounts for $132,114 in nonmonetary gifts into the Army Museum Information System. These conditions occurred because West Point did not have policies and procedures in place to ensure gifts were recorded as required by Army regulations and did not use the General Fund Enterprise Business System, to record gifts received or expensed. As a result, West Point property books are not complete, and asset amounts on the balance sheet are misstated.

In addition, West Point used a commercial checking account instead of the General Fund Enterprise Business System to manage and disburse funds and appointed 108 disbursing officers without proper authority. These conditions occurred because West Point did not have approval to operate a disbursing office and did not appoint disbursing officers in accordance with the DoD Financial Management Regulation. As a result, disbursing officers made unauthorized gift fund disbursements for which the Army had no oversight, leaving the Army susceptible to improper payments, fraud, waste, and abuse.

Furthermore, the Army had statutory authority to accept 17 houses as “gifts-in-kind” totaling $7.7 million. However, Army regulations for these types of gifts did not address requirements for insurance, maintenance, and liability before the acceptance of the gift or after its conversion to Government property. Without a formal policy in place, the Army could be held liable for unanticipated expenses for these gifts, including destruction, defective materials, and poor workmanship, without any available recourse.

Recommendations

We provided recommendations to the Secretary of the Army; the Chief of Staff of the Army; the Assistant Secretary of the Army (Financial Management and Comptroller); the Administrative Assistant to the Secretary of the Army; the Deputy Chief of Staff, G-1; the Superintendent, U.S. Military Academy, West Point; and the Director, Center of Military History.

Management Comments

The Army responses generally addressed the specifics of the recommendations; however, the Superintendent, U.S. Military Academy, West Point comments on Recommendation A.2.a only partially addressed the specifics of the recommendation. Therefore, we request additional comments on Recommendation A.2.a by February 17, 2015.

This report is a result of Project No. D2014-D000FE-0097.000.