What the GAO found
The Department of Defense (DOD) has failed to issue department-wide guidance with actionable steps for the military services – Air Force, Army, Navy and Marine Corps – and other Defense Organizations (ODOs) to follow to identify and record real property reporting of transfers of responsibility shall be made in accordance with updated DOD policy. Without department-wide instructions, the military services have independently developed written instructions and implemented inconsistent approaches to identifying and recording asset transfers.
The GAO has previously reported issues with inconsistent approaches across military services when implementing a DOD-wide directive requiring existence and completeness checks. The GAO recommended that the DOD develop and implement a department-wide strategy to address real property control issues.
For real estate transfers, the DOD and military services did not have adequately designed control activities, such as (1) performing reconciliations to help ensure that the entity losing responsibility for the information property and the acquiring entity is responsible for accurately reporting and completely recording all transfers and (2) maintaining sufficient supporting documentation for all transfers. For example, the military services have attempted, in some cases, to compare the details of individual ODO real estate assets to the information in the military service real estate systems for transferred assets and identify any differences. But the critical steps of finding and resolving differences and recording necessary adjustments were not entirely complete.
Three stages of the reconciliation process
Because the components have not completed all steps of the reconciliation process, the GAO noted discrepancies between the military services’ and ODO’s lists of transferred assets. Further, the DOD has not designed adequate monitoring activities to ensure that winning entities receive sufficient supporting documentation in accordance with the updated policy.
In the absence of detailed department-wide instructions and adequate internal control activities, the accuracy and completeness of the transactions that the losing and winning entities recorded when transferring responsibility for financial reporting to the real estate cannot be reasonably assured.
Why GAO Did This Study
The DOD manages one of the largest real estate portfolios in the federal government. This engagement was initiated as part of the GAO’s legal obligation to audit the US government’s consolidated financial statements.
The DOD remains the only major federal agency that has been unable to obtain a financial audit opinion, in part because of its significant weakness in internal control over real property financial reporting.
To help the department transition to an unmodified (“clean”) audit opinion, DOD updated its policy, in March 2019, to assign financial reporting responsibility for real estate to the host of the audit. installation, which is usually military service or Washington headquarters services. facility or base on which the property is located.
This report examines the instructions, approaches, and internal controls that DOD components used to identify and record real property for transfer. The GAO interviewed the Office of the Secretary of Defense (comptroller) and component officials, reviewed instructions, and analyzed key data to determine the approaches and internal controls the military services followed to identify and record transfers .