Navy Working Capital Fund: Backlog of Funded Work at the Space and Naval Warfare Systems Command Was Consistently Understated Page: 2 of 48
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- GAO
' Accountability* Integrity* Reliability
Highlights
Highlights of GAO-03-668, a report to the
Chairman, Subcommittee on Defense,
Committee on Appropriations, House of
Representatives
Why GAO Did This Study
The Space and Naval Warfare
Systems Command (SPAWAR) has
hundreds of millions of dollars of
funded work that its working
capital fund activities did not
complete before the end of the
fiscal year. Reducing the amount
of workload carryover at fiscal
year-end is a key factor in the
effective management of
Department of Defense (DOD)
resources and in minimizing the
"banking" of funds for work to be
performed in subsequent years.
GAO was asked to analyze
SPAWAR's carryover balances.
GAO assessed the accuracy of the
budgeted amounts, the accuracy of
the reported actual carryover
balance, and the reliability of
underlying financial data on which
reported actual carryover is based.
GAO is making several
recommendations aimed at
improving the accuracy and
reliability of SPAWAR's and other
working capital fund activities'
budgeted and reported actual year-
end carryover amounts. GAO is
also making recommendations to
improve SPAWAR's tri-annual
review process so that these
reviews can serve to verify the
reliability of underlying financial
data. DOD concurred with 12 of
the 14 recommendations and
partially concurred with 2. For
these 2 recommendations, DOD
agreed with GAO's intent to ensure
that obligated and unobligated
balances are reviewed regularly to
ensure effective use of funds.
www.gao.gov/cgi-bin/getrpt?GAO-03-668.
To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Gregory D.
Kutz at (202) 512-9505 or kutzg@gao.gov.NAVY WORKING CAPITAL FUND
Backlog of Funded Work at the Space
and Naval Warfare Systems Command
Was Consistently UnderstatedWhat GAO Found
The budgeted and reported actual amounts of SPAWAR gross carryover
were consistently understated, resulting in the Congress and DOD decision
makers not having reliable information to decide on funding levels for
working capital fund customers. First, GAO found that SPAWAR centers'
budgeted gross carryover for fiscal years 1998 through 2002 was significantly
less than the reported actual year-end gross carryover.
SPAWAR Systems Centers' Budgeted and Reported Actual Gross Workload Carryover
Dollars in millionsFiscal year
1998
1999
2000
2001
2002Budgeted
carryover
$377
332
358
567
610Actual
carryover
$530
563
613
875Actual exceeds
budgeted carryover
$153
231
255
308
286Sources: Navy budget and accounting reports.
Note: Gross carryover is the dollar value of work that has been ordered and funded (obligated) by
customers but not completed by working capital fund activities at the end of the fiscal year.
Budgeted gross carryover was understated primarily due to problems with
estimating the underlying customer order data. For example, for fiscal year
2002, SPAWAR's budgeted amount for customer orders was 88 percent less
than the reported actual orders received.
Second, SPAWAR's reported actual carryover balances were also unreliable
and adjusted downward by hundreds of millions of dollars. These
adjustments understated carryover and resulted in Navy reports to the
Congress showing that SPAWAR carryover balances for fiscal years 1998
through 2002 did not exceed DOD's 3-month carryover standard. SPAWAR
was able to report reduced carryover balances for the following reasons.
* As GAO previously reported, the DOD guidance for calculating the
number of months of carryover allowed carryover to be adjusted and
understated. DOD agreed with GAO's previous recommendation and in
December 2002 changed its carryover guidance.
* SPAWAR centers used accounting entries to manipulate the amount of
customer orders for the sole purpose of reducing reported carryover
below the 3-month standard. For example, the centers did this for at
least $50 million at the end of fiscal year 2001. SPAWAR officials issued
guidance in September 2002 discontinuing this practice.
Finally, SPAWAR had not taken key steps to verify the underlying financial
data on which reported actual carryover is based. The SPAWAR centers had
only recently begun conducting the required tri-annual reviews of such data,
which DOD has required since 1996. However, the reviews were ineffective,
including the exclusion of slightly less than half of their reported actual
carryover from the review process.
United States General Accounting Office
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United States. General Accounting Office. Navy Working Capital Fund: Backlog of Funded Work at the Space and Naval Warfare Systems Command Was Consistently Understated, report, July 1, 2003; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc294199/m1/2/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.