Our objective was to determine whether
selected budget submitting offices (BSOs)
within the Department of the Navy (DoN)
performed the triannual review (TAR) of
unliquidated obligations and unfilled orders
in accordance with applicable regulations.
This is the second of a series of reports on
the Navy’s TAR.
Naval Air Systems Command (NAVAIR),
U.S. Marine Corps (USMC), and Naval
Facilities Engineering Command (NAVFAC)
did not support the validity and accuracy
of obligations reviewed during the TAR.
Specifically, of the 209 nonstatistically
selected obligations reviewed, BSO personnel
did not have documentation that supported
the accuracy and validity of 200 obligations,
valued at $201.7 million, for:
- 59 NAVAIR obligations valued at $123.1 million;
- 60 USMC obligations valued at $27.5 million; and
- 81 NAVFAC obligations valued at $51.1 million.
This occurred because the Navy Office of
Budget did not issue standard operating
procedures for the TAR. NAVAIR, USMC, and
NAVFAC did not have standard operating
procedures to perform and document the
TAR. Each BSO performed its triannual
review differently and used different types
of documentation that did not support its
review. The DoD Financial Management
Regulation (DoD FMR) does not specify what
documents support the TAR. In addition, the Navy Office of
Budget did not perform quality assurance reviews to confirm
the accuracy and validity of obligations.
As a result of NAVAIR, USMC, and NAVFAC’s inability to
perform a reliable TAR, DoN may lose the opportunity to use
funds for other purposes. The TAR is a key internal control
to ensure management has reliable budget information. The
auditability of DoN’s financial statements could be impaired.
When the TAR is not well executed and documented, DoN does
not have assurance that the financial reports appropriately
reflected the status of the obligations and financial reports
including the Schedule of Budgetary Activity currently under
audit and information used by management to make decisions
is accurate. Until DoN can demonstrate an effective TAR
process for which supporting documentation is maintained, its
material weaknesses for financial reporting will remain.
The Director, Office of the Under Secretary of
Defense (Comptroller) should update DoD FMR, volume 3,
chapter 8, to specify what documents are sufficient to
support the performance of the TAR.
The Director, Office of the Assistant Secretary of the
Navy (Financial Management and Comptroller) Office of
Budget should create and implement procedures based
on updates to the DoD FMR; train funds holders on their
responsibilities; perform quality assurance reviews; and
identify corrective actions and train noncompliant BSOs.
and Our Response
Comments from Deputy Chief Financial Officer, Office of
the Under Secretary of Defense (Comptroller); and the
Assistant Secretary of the Navy (Financial Management and
Comptroller), responding for the Director of the Office of
Budget, addressed the specifics of the recommendations,
and no further comments are required.