Department of Defense

Journal Voucher Adjustments and Processing of Data for the FY 1998 Navy General Fund Financial Statements -- Report No. 99-180 (PDF)

Date: June 7, 1999


This is the second report on the Department of the Navy General Fund financial statements. Inspector General, DoD, Report No. 99-092, "Oversight of the Naval Audit Service Audit of the Navy General Fund Financial Statements for FY 1998," March 1, 1999, addressed our oversight of the financial statement audit conducted by the Naval Audit Service, and endorsed the disclaimer of opinion issued by the Naval Audit Service.

The Chief Financial Officers Act of 1990, as amended by the Federal Financial Management Act of 1994, requires the Inspector General, DoD, to audit the financial statements of DoD organizations in accordance with generally accepted Government auditing standards, but allows for the delegation of audit work. The Inspector General, DoD, delegated the audit of the FY 1998 Navy General Fund financial statements to the Naval Audit Service. We performed audit work on the compilation of the FY 1998 Navy General Fund financial statements at the Defense Finance and Accounting Service Cleveland Center, Cleveland, Ohio, where the Navy accounting records are maintained and financial statements are prepared. For FY 1998, the Navy General Fund reported assets of $104.6 billion and liabilities of $8.8 billion. The Navy also reported a net cost of operations of $73.4 billion and total outlays of $78.8 billion.

Our objective was to determine whether the Defense Finance and Accounting Service Cleveland Center and the Defense Finance and Accounting Service Kansas City Center, Kansas City, Missouri, consistently and accurately compiled financial data from field activities and other sources for the FY 1998 Navy General Fund Financial Statements. We reviewed internal controls and compliance with laws and regulations related to the objective.

The Defense Finance and Accounting Service Cleveland Center processed unsupported adjustments of $880 billion to the Navy budgetary and proprietary general ledgers. In an attempt to balance the Navy budgetary general ledger, the DFAS Cleveland Center made those adjustments; however, the adjustments did not correct the errors that caused the budgetary general ledger to be out of balance. As a result, financial data reported on the FY 1998 Navy General Fund financial statements were unsupported, and sources of data that did not meet financial statement reporting requirements were used to compile the Navy financial statements. For further details of the audit results, see the Finding section of the report. For a discussion of the internal control weakness identified, see Appendix A.

We recommend that the Director, Defense Finance and Accounting Service Cleveland Center, reverse the unsupported and inappropriate adjustments, correct erroneous data in the budgetary general ledger, and establish adequate controls over the adjustment process. We also recommend that action to correct errors in the Standard Accounting and Reporting System-Financial and Departmental Reporting be completed.

The draft report was issued on April 2, 1999. No comments were received. We request that the Director, Defense Finance and Accounting Service Cleveland Center, comment on this report by August 6, 1999.



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