Financial Management: Army Real Property Accounting and Reporting
Weaknesses Impede Management Decision-making (Letter Report, 11/02/93,
GAO/AIMD-94-9).

The Army has had continuing problems in obtaining reliable accounting
and management information on its real property at installation.
Although progress has been slow, efforts under way in the continental
United States and Europe could help ensure the accuracy of the real
property data used to support real property operations and facility
maintenance budgeting.  However, these measures only address the
accuracy of the data as of the date reviews are completed.  Without
correcting systemic problems and establishing an effective financial
oversight mechanism to maintain data accuracy, these efforts may be
wasted.  GAO believes that achieving the institutional discipline to
obtain reliable databases can be achieved by (1) establishing procedures
and monitoring accounting for construction-in-progress at installations,
(2) promptly reporting and transferring completed Corps construction
projects to receiving installations, and (3) reconciling general ledger
balances with the Facilities System.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-94-9
     TITLE:  Financial Management: Army Real Property Accounting and 
             Reporting Weaknesses Impede Management Decision-making
      DATE:  11/02/93
   SUBJECT:  Accounting procedures
             Financial records
             Financial management systems
             Federal agency accounting systems
             Internal controls
             Federal property management
             Military bases
             Real property
             Federal agency reorganization
             Data integrity
IDENTIFIER:  Army Facilities System
             Army Integrated Facilities System
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to the Acting Secretary of the Army and the Acting Chief
Financial Officer of the Department of Defense

November 1993

FINANCIAL MANAGEMENT - ARMY REAL
PROPERTY ACCOUNTING AND REPORTING
WEAKNESSES IMPEDE MANAGEMENT
DECISION-MAKING

GAO/AIMD-94-9

Army Real Property


Abbreviations
=============================================================== ABBREV

  CFO - Chief Financial Officers Act
  DOD - Department of Defense
  STANFINS - Standard Finance System

Letter
=============================================================== LETTER


B-253657

November 2, 1993

General Gordon R.  Sullivan, USA
Acting Secretary of the Army

Mr.  Alvin Tucker
Acting Chief Financial Officer
Department of Defense

We were unable to express an opinion on the Army's fiscal year 1991
financial statements,\1 in part because of significant uncertainties
about the reasonableness of the Army's reported $61 billion in real
property and $34 billion in construction-in-progress.  This report
discusses the continuing problems with the Army's accounting and
reporting of real property and construction-in-progress noted during
our audit of the Army's fiscal year 1992 financial statements.\2


--------------------
\1 Financial Audit:  Examination of the Army's Financial Statements
for Fiscal Year 1991 (GAO/AFMD-92-83, August 7, 1992). 

\2 Financial Audit:  Examination of the Army's Financial Statements
for Fiscal Year's 1992 and 1991 (GAO/AIMD-93-1, June 30, 1993). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Army's Facilities System, used at each installation and at
headquarters to record and report real property at installations,
could not provide complete and accurate information on the quantity
and type of Army structures and facilities.  This information is
needed to (1) develop real property maintenance budgets and (2)
provide readily available accurate information for use in the base
realignment and closure process.  As a result, real property
maintenance budget requests were unreliable, and additional
verification was required for real property status information used
in the Army's base realignment and closure evaluation process. 

While the Army has efforts underway in the continental United States
and Europe to improve Facility System management and accounting
information, these initiatives are proceeding slowly.  However, many
of the problems with cost information in the Facilities System and in
the Corps' construction-in-progress accounting cited in our fiscal
year 1991 audit remained uncorrected at the end of fiscal year 1992. 
For example, a $3.6 billion unreconciled difference existed between
the Facilities System and the Army's consolidated general ledger, and
an estimated $276 million of completed projects cost was improperly
reported as construction-in-progress. 

In addition, onetime efforts, such as the reviews in Forces Command
and Europe, do not address the underlying problems or build
confidence that data accuracy can be sustained over the long term. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Facilities System is the Army's standard real property management
and accounting system.  The system is composed of two components--the
Integrated Facilities System used at Army installations throughout
the world\3 (Installation Facilities System), and the
Headquarters-Integrated Facilities System operated at Army
headquarters (Headquarters Facilities System).  The Facilities System
contains different kinds of data, including accounting information
(such as costs to buy land and construct or procure buildings or
other structures) and management information (such as building square
footage, land acreage, and category codes identifying facility type). 
Quarterly, installations' engineering and housing directorates
prepare a tape to update real property information in the
Headquarters Facilities System.  The Facilities System maintains
records for over 207,000 buildings and 12.7 million acres of land. 

The Army uses the Installation Facilities System data to develop two
reports on real property--the Unconstrained Requirements Report
(requirements report) and the Technical Data Report.  These reports
are used to prepare and support the Army's budget request for real
property maintenance funds.  Army Regulation 420-16 requires each
installation to prepare an annual requirements report that specifies
the installation's funding needs for operating and maintaining real
property during the next fiscal year.  Each major command is
responsible for consolidating its installations' requirements
reports; then, the Assistant Chief of Engineers' office at Army
headquarters summarizes the command reports and forwards them to the
Army budget office for preparation of budget requests.  The Technical
Data Report provides prior year operating costs for all real property
maintenance at Army installations as a baseline.  The Army includes
information from both the requirements report and the Technical Data
Report in the detailed supplemental information submitted to the
Congress in support of the President's Budget. 

The Installation Facilities System is the subsidiary ledger
supporting real property account balances in each installation's
general ledger.  Installations send summary financial information to
the Defense Finance and Accounting Service at Indianapolis, which is
responsible for maintaining the departmental-level general ledger for
the Army and preparing the Army's overall financial statements and
reports.  Because the Headquarters Facilities System is a
consolidation of Installation Facilities System data, the dollar
value recorded in the Headquarters Facilities System should equal the
Army's total dollar value of real property assets as reported in the
Army's general ledger and financial statements. 

The Headquarters Facilities System contains real property management
information, such as facility type and building square footage that
are factors considered in the Army's base realignment and closure
analysis.  For example, the Army uses this system data to analyze
whether an installation has the capacity and types of physical
structures needed to support another unit if reassigned to that
installation.  The Army also uses the recorded costs in the
Facilities System as a starting point in negotiating how much the
German government should pay the United States for facilities turned
over to Germany. 


--------------------
\3 At smaller installations, real property data may be maintained on
the Desktop Resource for Real Property. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

We reviewed Army real property accounting and reporting as part of
our audit of the Army's fiscal year 1992 financial statements under
the Chief Financial Officers (CFO) Act of 1990 (Public Law 101-576). 
The overall objectives of that audit were to opine on the Army's
financial statements, internal controls, and compliance with laws and
regulations, and to evaluate key controls over the Army's financial
operations.  This report presents the results of our evaluation of
(1) the effect of inaccuracies in the Facilities System on managerial
decision-making and (2) the Army's progress toward correcting
Facilities System and construction-in-progress data inaccuracies. 

To evaluate the effect of inaccuracies in the Army's real property
data, we interviewed cognizant Army officials at installations, major
commands, and Army headquarters.  We reviewed Army guidance and
procedures to understand and assess the process for developing real
property maintenance budget requests and exhibits as presented in the
Army's budget justifications supporting the President's fiscal year
1992 budget (the last justification prepared at the time of our
review).  We also analyzed Army procedures for using the Facilities
System information in developing its base realignment and closure
recommendations. 

To determine the status of the Army's progress in correcting
previously reported inaccuracies in Facilities System cost
information, we interviewed cognizant Army departmental, command, and
installation-level officials; Corps staff; and Defense Finance and
Accounting Service personnel who maintain the Facilities System and
prepare and report real property financial information.  We reviewed
the results of both the U.S.  Army Europe and the Forces Command
efforts to improve the accuracy of information recorded in the
Installation Facilities System.  Also, we judgmentally selected six
installations at which to evaluate the status of real property
reporting deficiencies found in our fiscal year 1991 audit. 

We did not audit the accuracy of the $29 billion in real property at
the Corps civil works locations because Corps officials told us that
the conditions we found during our fiscal year 1991 audit,\4 which
then precluded an audit, remained largely unchanged.  We did,
however, review the Corps efforts to improve the
construction-in-progress accounting deficiencies identified during
the fiscal year 1991 audit.  Specifically, we randomly selected 300
projects from 22 locations--100 military construction projects and
200 civil construction projects--which, based on our review of
available accounting records, appeared to be substantially complete
at the end of fiscal year 1992.  The 300 projects represent $2.9
billion of the Army's reported $32 billion of
construction-in-progress.  Using a structured questionnaire we
developed, we asked the commanders of the 22 Corps locations whether
the costs associated with completed projects remained in the
construction-in-progress accounts as of September 30, 1992.  As of
the completion of fieldwork in April 1993, we had received
questionnaire responses from 20 of the 22 locations on 76 military
and 131 civil construction projects. 

We conducted our audit work from September 1992 through April 1993 in
accordance with generally accepted government auditing standards.  As
listed in appendix I, we performed our work at 10 Army and Corps
locations and contacted 44 other Army and Corps locations.  The
Department of Defense (DOD) provided written comments on a draft of
this report.  These comments are evaluated in the Agency Comments and
Our Evaluation section of this report and are reprinted in appendix
II. 


--------------------
\4 As part of our fiscal year 1991 financial statement audit, we
reported that the Corps of Engineers real property at civil works
programs was unauditable because no subsidiary records supporting the
balance existed. 


   UNRELIABLE REAL PROPERTY
   MANAGEMENT INFORMATION IMPEDED
   DECISION-MAKING
------------------------------------------------------------ Letter :4

Inaccurate management information in the Army's Facilities System
resulted in unreliable budget requests and necessitated extra efforts
to verify certain data used in the Army's base realignment and
closure process.  Inadequate guidance and inconsistent reporting
requirements for reports used in the budget development process added
to the unreliability of the budget requests. 

Inaccurate information in the Installation Facilities System
adversely affects the reliability of the Army's requirements and
Technical Data reports used to develop and support budgets submitted
to the Office of the Secretary of Defense, the Office of Management
and Budget, and the Congress.  Also, in fiscal year 1992, responsible
Forces Command and Training and Doctrine Command officials stated
that requirements and Technical Data Reports were inaccurate.  Army
officials at the Engineering and Housing Support Center, the
organization with primary responsibility for the Facilities System
operations, acknowledged that the reports were inaccurate, but they
told us that these reports were the only available source of real
property data. 

Army budget justification books provided to the Congress in January
1992 as part of the President's Budget for fiscal year 1993 contain
exhibits supporting the amounts requested for real property
maintenance.  The Assistant Chief of Engineers prepared
justifications using work load information (such as square feet)
obtained from the Army's requirements and Technical Data Reports. 

On March 12, 1993, the Secretary of Defense recommended 165 bases,
including 7 Army bases, to the Defense Base Closure and Realignment
Commission for closure, realignment, or other action.  In April 1993,
we reported\5 that the recommendations and selection process were
generally sound, that the Army's process was well documented, and
that the data upon which recommendations were based were audited by
the Army Audit Agency.  While the data used in the final decision
process were accurate, weakness in the Facilities System database
caused the Army to perform additional data validation reviews.  The
recommendations were the second of three rounds required by the
Defense Base Closure and Realignment Act of 1990 (Public Law 101-510,
Title XXIX, Part A).  The final round is scheduled for 1995.  More
accurate Facilities System management information would help make
future base closures and realignment analysis more efficient. 

To improve the accuracy of this information, Forces Command initiated
an internal evaluation of the accuracy of the Installation Facilities
System databases at its 22 major installations.  As of February 28,
1993, the teams had completed 18 of the 22 reviews.  Forces Command
graded 16\6

of the Installation Facilities System operations it reviewed by
comparing the system data with real property actually at the
installations, and rated 11 as either fair or poor.  Appendix III
shows the grades assigned to those installations. 

The review identified significant errors at each of the bases
visited.  For example,

  One installation had an off-base family housing facility with over
     675,000 square feet not reported in the Facilities System.  This
     resulted in a $663,779 underestimate of maintenance requirements
     for fiscal year 1993.\7

  Another installation misclassified unit support buildings (brigade,
     battalion, and company headquarters) as general purpose
     administrative space, resulting in an understatement of the
     installation's operational capacity and overstatement of its
     administrative capacity.  Also, because of different recurring
     maintenance factors for these two types of facilities, as
     prescribed by Army Regulation 420-16, maintenance requirements
     would be overstated by $610.44 per thousand square feet. 

Real property inventory at Forces Command locations represents
approximately one-third of the Army's 859 million square feet of real
property in the continental United States.  Army officials told us
that the other major commands had not yet initiated reviews because
of resource constraints. 


--------------------
\5 Military Bases:  Analysis of DOD's Recommendations and Selection
Process for Closures and Realignments (GAO/NSIAD-93-173, April 15,
1993). 

\6 A grading system had not been developed at the time of the Fort
Stewart and Fort Irwin reviews. 

\7 Army Regulation 420-16 prescribes recurring maintenance factors to
determine the annual recurring requirement for facilities.  Family
housing buildings require $983.05 per thousand square feet. 


      TECHNICAL DATA AND
      REQUIREMENTS REPORTS
      PREPARED INCONSISTENTLY
---------------------------------------------------------- Letter :4.1

We found inconsistencies in (1) how installations and major commands
prepared the Technical Data and requirements reports, (2) the sources
used to report costs, and (3) the presentation of information in the
reports.  These inconsistencies, which were primarily attributable to
a lack of specific guidance, increased the difficulty and
inefficiency of the reporting process.  As a result, comparison of
reports among major commands was not necessarily meaningful, and the
consolidated reports to support Army-wide budget requests were
unreliable. 

While Army Regulation 420-16 establishes responsibilities and
procedures for preparing the Technical Data and requirements reports,
this regulation does not provide specific guidance for preparing
these reports.  For example, the guidance did not provide details on
how to identify and report annually recurring requirements versus
onetime requirements.\8

We contacted six installations and two major commands and found the
following inconsistencies in the way reports were prepared: 

  Five installations adjusted their reporting for real property
     maintenance requirements based on existing real property assets
     and expected real property additions and deletions, while one
     location based its requirements only on existing real property
     assets. 

  One major command consolidated the amounts the installations
     reported, while another did not use these data but rather
     calculated requirements based on quantities recorded in the
     Facilities System and standard maintenance factors it had
     developed. 

Although the Installation Facilities System was designed to record
costs, such as utility expenses and costs to maintain and repair
facilities, Army Regulation 420-16 does not specify the source for
obtaining this cost information.  The six installations we contacted
obtained repair and maintenance cost information from three different
sources because of lack of guidance.  Four of the six installations
we contacted obtained repair and maintenance costs from the Standard
Finance System,\9 one obtained it from the Installation Facilities
System, and one obtained it from a database separate from either of
those systems. 

Also, inconsistencies in how required information was accumulated in
the Facilities System and how it was reported on the Technical Data
Report added to the inefficient and cumbersome report preparation
process.  For example, the Technical Data Report used the number of
lights as the exterior lighting measurement, while the Facilities
System presented exterior lighting in linear feet. 


--------------------
\8 Recurring requirements represent the annual level of operations,
maintenance and repair, and services funding needed to sustain
occupant activities and avoid deterioration of real property. 
Onetime requirements are generally related to a specific action such
as changes in mission, programs, and operational needs. 

\9 The Standard Finance System (STANFINS) is the Army's standard
accounting system for posts, camps, and stations.  Installations'
general ledgers are maintained in this system. 


   INACCURACIES IN REAL PROPERTY
   ACCOUNTING INFORMATION CONTINUE
------------------------------------------------------------ Letter :5

Many of the previously reported problems with the Facilities System
cost information and construction-in-progress accounting continued. 
Our review of a judgmental sample of six installations showed that
the same control problems that we reported in our fiscal year 1991
audit continued to exist.  Also, the Corps made limited progress in
removing costs of completed projects from it's
construction-in-progress accounts. 

During our fiscal year 1991 financial audit, we identified
deficiencies in the Army's Facilities System database and
construction-in-progress accounting.  For example, we reported that
the Facilities System records were incomplete and inaccurate at
installations in Forces Command, Training and Doctrine Command,
Pacific Command, and the Military District of Washington because of
(1) not reconciling the Facilities System's real property cost
information with the Army's general ledger, (2) not always recording
the costs of completed construction projects, and (3) data entry
errors. 

Also during this review, we found that costs associated with
installation projects under construction that were the responsibility
of the engineering and housing directorate were not accumulated in a
construction-in-progress account as required by Army Regulation 37-1. 


      MANY FACILITIES SYSTEM COST
      INFORMATION INACCURACIES
      REMAIN
---------------------------------------------------------- Letter :5.1

Our review of cost information in the Facilities System at Forts
Stewart, Irwin, Carson, Meade, Lee, and Dix, as of September 30,
1992, revealed the following problems: 

  Army installations did not reconcile balances of their Installation
     Facilities System with their general ledger real property
     balances to verify accuracy. 

  Unexplained differences existed between the Installation Facilities
     System and the Headquarters Facilities System. 

The Army did not reconcile the $3.6 billion difference between the
$24.2 billion in real property shown in the Army's general ledger and
the $27.8 billion shown in the Headquarters Facilities System for
Army installations in the United States at the end of fiscal year
1992. 

In response to our fiscal year 1991 financial statement audit, in
July 1991, the Defense Finance and Accounting Service issued guidance
on reconciling the Installation Facilities System with the general
ledger.  The guidance required that each installation reconcile its
Facilities System balance with its general ledger balance as of
September 30, 1991.  However, it did not provide detailed guidance on
conducting reconciliations and whether installations' real property
reconciliations should be performed on an ongoing basis for fiscal
year 1992 and subsequent periods. 

Without more detailed guidance, Army installations may not make
appropriate reconciliations.  For example, in its response to our
management letter,\10 Fort Shafter--not one of the six locations we
reviewed as part of our fiscal year 1992 financial audit--stated that
it reconciled its general ledger and Installation Facilities System
by adjusting the general ledger "in favor" of the balance in the
Installations Facilities System.  However, without verifying
supporting documentation for the amounts shown in the Installation
Facilities System, the installation would have no assurance which, if
either, balance were complete and accurate. 


--------------------
\10 GAO/AFMD-92-77ML, July 8, 1992. 


      CONSTRUCTION-IN-PROGRESS
      ACCOUNTING DID NOT PROVIDE
      ADEQUATE DATA FOR EFFECTIVE
      FINANCIAL MANAGEMENT
      OVERSIGHT
---------------------------------------------------------- Letter :5.2

The Army's accounting for construction-in-progress did not provide
complete and accurate cost and financial management information for
billions of dollars in construction costs.  While the Corps carries
out the majority of the Army's major construction projects, some
projects are carried out by installations.\11 Although required by
Army Regulation 37-1, at the six installations reviewed, construction
projects are not accounted for in construction-in-progress accounts. 
Also, the Corps did not compare and reconcile accounting records with
engineer records. 

As a result of not establishing or maintaining effective
construction-in-progress accounting procedures at the Corps and
installations, the Army could not effectively ensure that all
projects, their costs, and other associated information were properly
recorded.  Maintaining a construction-in-progress account would allow
installations to reconcile completed construction project information
with quarterly updates from the Installation Facilities System to
help ensure that management information is accurate for all completed
projects.  Specifically, if construction projects were monitored
through the use of construction-in-progress accounts, the Corps could
help ensure the accuracy of the documents transferring ownership of
completed projects from the Corps to an installation. 

Upon completion of construction projects, project managers
responsible for the work--either the Corps, or an installation's
directorate of engineering and housing--are to prepare documentation
showing total project costs and related descriptive management
information.  An installation's directorate of engineering and
housing is required to use this documentation to update real property
records in the Installation Facilities System.  Quarterly, each
installation's engineering and housing directorate is required to
submit real property cost information from the Installation
Facilities System to the finance and accounting office for use in
preparing the Army's financial statements and other financial
reports. 

Army Regulation 37-1 requires capitalization of construction costs in
a construction-in-progress account.  However, Army regulations
governing engineering and housing directorates do not require them to
inform, until after construction, the finance and accounting office
of construction projects that should be accounted for as assets. 
Consequently, the finance and accounting offices record these costs
as expenses, rather than as construction-in-progress as required by
Army Regulation 37-1.  As a result, installation engineering and
housing officials were unable to use construction-in-progress records
to identify whether cost or management information in the Facilities
System was complete and accurate. 

In 1991, we reported\12 that the Corps did not routinely remove
completed military and civil works construction projects and
associated costs from its construction-in-progress account.  In
response, DOD stated that the Corps would verify whether its
construction-in-progress account was purged of completed projects and
whether completed projects were properly accounted for in the
accounting records.  To determine the status of these efforts, we
distributed a structured survey to 22 Corps accounting offices,
inquiring about the accounting status of 300 projects.  The 20
offices responding told us that 87 completed civil projects with
costs of $79.2 million and 47 completed military projects with costs
of $196.7 million remained in the Corps' construction-in-progress
account as of September 30, 1992. 

Also, because the Corps did not monitor and properly maintain
construction-in-progress records, real property assets may have been
reported twice in the Army's financial statements.  For example, a
$560,000 building addition reported on an installation's general
ledger as real property was also reported in the Corps' general
ledger as construction-in-progress because the Corps did not remove
the cost of the completed project when it transferred it to an Army
installation. 

As a result, the suggestions in our April 23, 1991, letter to the
Corps are still appropriate.  Specifically, we suggested that the
Corps review the construction-in-progress account and establish
procedures to ensure the prompt removal of costs for completed
projects from the Corps general ledger. 


--------------------
\11 Construction projects performed by the Corps of Engineers are
usually those with both estimated costs over $200,000 and funding by
the military construction appropriation.  Construction projects that
are the responsibility of an installation's engineering and housing
directorate are typically those with estimated costs of less than
$200,000 and funding by the operation and maintenance appropriation. 

\12 GAO/AFMD-91-62ML, April 23, 1991. 


   EFFORTS TO IMPROVE FACILITIES
   SYSTEM DATABASE PROCEEDING
   SLOWLY
------------------------------------------------------------ Letter :6

The Army is trying to improve the accuracy of both management and
cost information in the Facilities System and its
construction-in-progress accounting.  Its review of the records of
all facilities in Germany, which the Army estimates account for 82
percent of the Army's reported 371 million square feet of overseas
real property inventory, is expected to be completed in 1995.  Also,
as previously discussed, a review of the accuracy of the Installation
Facilities System management and cost information at Forces Command's
installations is almost complete.  However, Forces Command accounts
for only about one-third of the Army's real property in the
continental United States. 

Between 1990 and 1992, the Army began ensuring the accurate recording
of all facilities and the associated costs for facilities scheduled
to be returned to Germany's possession.  The Army initiated the
review because the Status of Forces Agreement between the United
States and Germany allows the United States to obtain the residual
value\13 of Army investments in real property turned over to the host
country.  The Army expanded the review to include all Army facilities
in Europe.  As a result of this review, the value of real property in
the Installation Facilities System database for Army facilities in
Germany increased from $1.9 billion as of September 30, 1990, to $3.2
billion as of July 31, 1992.  For example, the review found that the
Installation Facilities System had not recorded $1.2 million for an
officers club and $9 million in costs associated with the Wiley
Barracks in Neu Ulm, Germany.  Army officials estimate that by the
completion of the review of real property records for all 858 Army
facilities in Germany, the total value for buildings and structures
could reach $5.25 billion.\14

Also, although the Forces Command review of the Installations
Facilities System is nearly complete, data on about two-thirds of the
Army's real property in the continental United States has not been
reviewed.  Other major commands with most of the remaining real
property in the United States, primarily the Training and Doctrine
Command and the Army Materiel Command, have not initiated similar
reviews. 


--------------------
\13 The Army estimates residual value by taking facility investments
and adjusting them for appreciation due to inflation and for
depreciation due to age or condition.  The actual amount of residual
value, if any, is what the German government pays the United States
after negotiations. 

\14 See U.S.  Military Presence In Europe:  Issues Related to the
Drawdown (GAO/T-NSIAD-93-3, April 23, 1993) for a discussion on the
status of negotiations with Germany on residual value of U.S. 
investments. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

The Army has had continuing problems in obtaining reliable accounting
and management information on its real property at installations. 
Although progress has been slow, completion of efforts like those in
Europe and at the Forces Command can help ensure the accuracy of the
real property data used to support real property operations and
facility maintenance budgeting.  However, these actions will only
address the accuracy of the data as of the date reviews are
completed.  Without correcting systemic problems and establishing an
effective financial oversight mechanism to maintain data accuracy,
these efforts may be wasted. 

We believe that achieving the institutional discipline to obtain
reliable databases, and hence a solid foundation for decision-making
can be achieved through (1) establishing procedures and monitoring
accounting for construction-in-progress at installations, (2) prompt
reporting and transfer of completed Corps construction projects to
receiving installations, as recommended in our prior report, and (3)
reconciliation of general ledger balances with the Facilities System. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :8

We recommend that the Acting Secretary of the Army: 

  Direct the other major commands to conduct reviews, similar to the
     reviews in Europe and Forces Command, on the accuracy of the
     financial and management information in the Facilities System
     database.  Each review should include identifying and correcting
     any errors in recorded facility classifications, costs, and
     units of measurement.  These reviews for continental United
     States bases should be completed in time to upgrade the
     reliability of data available for the 1995 base realignment and
     closure process. 

  Direct the Chief of Engineers to clarify existing guidance on
     preparing the requirements and Technical Data reports. 

  Determine and allocate the resources needed to effectively maintain
     the Facilities Systems. 

We also recommend that the Acting Chief Financial Officer of the
Department of Defense direct the Defense Finance and Accounting
Service and the Acting Secretary of the Army to: 

  Provide guidance on how to perform a quarterly reconciliation of
     the general ledger real property accounts with the Facilities
     System or with other supporting detailed records at those
     installations not using the Facilities System. 

  Establish procedures for housing and engineering directorates to
     follow when projects are initiated, including informing finance
     and accounting offices of construction projects for which costs
     should be capitalized in a construction-in-progress account. 

  Establish procedures for reconciling and reporting Corp and
     installation construction-in-progress accounts with supporting
     detailed records. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :9

DOD concurred with all of our findings and with four of our
recommendations to improve accounting and reporting for Army's real
property.  DOD partially concurred with our two other
recommendations. 

DOD concurred with our recommendations concerning inaccuracies in the
Facilities System database and the need to allocate sufficient
resources to maintain the Facilities System.  DOD also cited
corrective actions taken or planned.  Specifically, in response to
our recommendation to review the accuracy of the Facilities System
database, DOD stated that the Army has requested installations to
update their information by September 30, 1993.  In response to our
recommendation to allocate the resources needed to maintain the
Facilities System, the Army stated that it has updated its funding
plans for fiscal years 1995 through 2000 and that it would address
additional funding needed for fiscal year 1994. 

In response to our recommendation to establish procedures for
reconciling construction-in-progress accounts with supporting
detailed records, DOD stated that the Army Corps of Engineers had
already established such procedures.  However, we found that existing
Corps procedures were not sufficiently detailed.  None of the
installations reviewed had performed the required reconciliations. 
Consequently, we continue to believe that more detailed procedures
are required. 

In response to our recommendation to clarify existing guidance on
preparing requirements and Technical Data reports, DOD stated that
the Army is developing revised automated procedures for preparing the
Technical Data Report.  However, DOD did not state whether it would
clarify guidance on preparing the requirements reports.  We believe
that without clarified guidance, requirements reports used to develop
real property maintenance budgets will continue to be unreliable. 

DOD partially concurred with our recommendation to develop guidance
on how to reconcile the general ledger with the Facilities System
quarterly.  DOD stated that while the reconciliations appear to have
merit, it will determine whether such reconciliations are
cost-beneficial.  If so, it will develop and implement procedures to
perform the reconciliations.  However, DOD's response does not
indicate whether such reconciliations will be performed quarterly or,
as DOD policy requires for real property ledger accounts,
"periodically." We continue to believe that without quarterly
reconciliations, the Army cannot be sure of the accuracy of the
quarterly updates the engineering and housing directorates send to
the finance and accounting offices for the general ledger real
property accounts. 

DOD also partially concurred with our recommendation to establish
procedures for housing and engineering directorates to follow when
projects are initiated.  DOD stated that while it had procedures for
recording construction in progress, it would strengthen those
procedures for implementing departmental policy.  DOD also stated
that the U.S.  Army Center for Public Works is working with the
Defense Finance and Accounting Service to ensure that applicable Army
installations receive appropriate guidance on collecting and
reporting construction in progress quarterly.  However, DOD did not
state whether the revised procedures will include instructions for
informing finance and accounting offices of construction projects for
which costs should be capitalized.  We believe that Army engineering
and housing directorates, to ensure that cost and management
information in the Facilities System is complete and accurate, need
additional procedures clearly describing when and how construction
projects should be accounted for as assets. 


---------------------------------------------------------- Letter :9.1

We are sending copies of this report to the Director of the Defense
Finance and Accounting Service; the Director of the Office of
Management and Budget; the Chairmen and Ranking Minority Members of
the Senate Committee on Governmental Affairs, House Committee on
Government Operations, Senate Committee on Armed Services, and House
Committee on Armed Services; and other interested parties.  We will
also make copies available to others upon request.  This report was
prepared under the direction of David M.  Connor, Director, Defense
Financial Audits, who may be reached at (202) 512-9095 if you or your
staff have questions or wish to discuss matters in this report. 
Major contributors to this report are listed in appendix IV. 

Donald H.  Chapin
Assistant Comptroller General


LOCATIONS VISITED AND CONTACTED
=========================================================== Appendix I

LOCATIONS VISITED

Army Headquarters, Washington, D.C.
Forces Command, Fort Gillem, Georgia
Forces Command, Fort McPherson, Georgia
Engineering and Housing Support Center, Fort Belvoir, Virginia
U.S.  Army, Europe, Frankfurt, Germany
Defense Finance and Accounting Service, Indianapolis
Fort Belvoir, Virginia
Fort Meade, Maryland
Corps of Engineers Headquarters, Washington, D.C.
Corps of Engineers, Fort Worth District, Fort Worth, Texas

LOCATIONS CONTACTED

Training and Doctrine Command, Fort Monroe, Virginia
Army Materiel Command, St.  Louis, Missouri
Fort Bliss, Texas
Fort Benning, Georgia
Carlisle Barracks, Pennsylvania
Fort A.P.  Hill, Virginia
Fort Stewart, Georgia
Fort Irwin, California
Fort Riley, Kansas
Fort Carson, Colorado
Fort McPherson, Georgia
Fort Lee, Virginia
Fort Lewis, Washington
Fort Campbell, Kentucky
Fort Drum, New York
Fort Pickett, Virginia
Fort McCoy, Wisconsin
Fort Sam Houston, Texas
The Presidio of San Francisco, California
Fort Ord, California
Fort Bragg, North Carolina
Fort Devens, Massachusetts
Fort Dix, New Jersey
Fort Rucker, Alabama
Corps of Engineers, Kansas City District Office, Kansas City,
Missouri
Corps of Engineers, Baltimore District Office, Baltimore, Maryland
Corps of Engineers, New York District Office, New York, New York
Corps of Engineers, Alaska District Office, Elmendorf Air Force Base,
 Alaska
Corps of Engineers, Louisville District Office, Louisville, Kentucky
Corps of Engineers, Japan District Office, Camp Zama, Japan
Corps of Engineers, Mobile District Office, Mobile, Alabama
Corps of Engineers, Savannah District Office, Savannah, Georgia
Corps of Engineers, Los Angeles District Office, Los Angeles,
California
Corps of Engineers, Sacramento District Office, Sacramento,
California
Corps of Engineers, St.  Louis District Office, St.Louis, Missouri
Corps of Engineers, Vicksburg District Office, Vicksburg, Mississippi
Corps of Engineers, St.  Paul District Office, St.  Paul, Minnesota
Corps of Engineers, Portland District Office, Portland, Oregon
Corps of Engineers, Huntington District Office, Huntington, West
Virginia
Corps of Engineers, Jacksonville District Office, Jacksonville,
Florida
Corps of Engineers, Wilmington District Office, Wilmington,
 North Carolina
Corps of Engineers, New Orleans District Office, New Orleans,
Louisiana
Corps of Engineers, Europe District, Frankfurt, Germany
Corps of Engineers, Huntsville Division, Huntsville, Alabama




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Department of Defense's
letter dated August 20, 1993. 

GAO COMMENTS

1.  The Army's Acting Director, U.S.  Army Center for Public Works,
issued a memorandum to all major commands holding real property
restating review, survey, and recording requirements on August 20,
1993. 

2.  On September 8, 1993, the U.S.  Center for Public Works issued
guidance, FY 93 Personal Computer Technical Data Reporting System, to
all Army installations. 

3.  Discussed in "Agency Comments and Our Evaluation" section of the
report. 

4.  DOD commented that the Headquarters and Installation Facilities
System records are not categorized as official accounting records. 
However, we found that the Headquarters and Installation Facilities
System provides the detail supporting the value of installations' and
the Army's real property assets shown in their respective general
ledgers.  Neither DOD nor Army officials were able to identify
records other than Installation Facilities System that represented
"official accounting records" for Army's real property during the
course of our review. 

5.  The Army's Engineering and Housing Support Center was renamed the
U.S.  Army Center for Public Works as a result of reorganization
subsequent to the date of our draft report.  This reorganization
transferred the office from the Assistant Chief of Engineers to the
Assistant Chief of Staff for Installation Management. 


GRADES GIVEN INSTALLATION
FACILITIES SYSTEM OPERATIONS AT 16
FORCES COMMAND INSTALLATIONS
========================================================= Appendix III


                          Excelle
Installation              nt       Good  Average  Fair  Poor
------------------------  -------  ----  -------  ----  ----
Fort Riley                X

Fort Carson                        X

Fort McPherson                                          X

Fort Lewis                                        X

Fort Campbell                                     X

Fort Drum                                         X

Fort A.P. Hill                     X

Fort Pickett                       X

Fort Sam Houston                                        X

Fort McCoy                                              X

Presidio of San                                         X
Francisco

Fort Ord                                                X

Fort Bragg                                              X

Fort Devens                                             X

Fort Hood                          X

Fort Polk                                               X

============================================================
Total                     1        4     0        3     8
------------------------------------------------------------

MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Lisa G.  Jacobson, Acting Associate Director
Geoffrey B.  Frank, Assistant Director
Matthew H.  Johnson, Auditor-in-Charge
Douglas A.  Delacruz, Auditor
Casey L.  Keplinger, Auditor
Laurie A.  O'Connell, Auditor

DALLAS REGIONAL OFFICE

J.  Paul Rodriguez, Jr., Assistant Director
Jimmy Palmer, Jr., Evaluator
Shannon Q.  Cross, Evaluator

RELATED GAO PRODUCTS

Management letter to the Commander, Fort Wainwright, Alaska
(GAO/AFMD-93-27ML, January 8, 1993). 

Management letter to the Commander-in-Chief, U.S.  Army, Europe
(GAO/AFMD-93-6ML, January 5, 1993). 

Management letter to the Commanders, U.S.  Army Military District of
Washington, U.S.  Army Training and Doctrine Command, U.S.  Army
Forces Command, and U.S.  Army Pacific Command (GAO/AFMD-93-4ML,
October 7, 1992). 

Financial Management:  Immediate Actions Needed to Improve Army
Financial Operations and Controls (GAO/AFMD-92-82, August 7, 1992). 

Management letter to the Commander, Fort Shafter, Hawaii (GAO/
AFMD-92-77ML, July 8, 1992). 

Management letter to the Commander, Fort Leavenworth, Kansas
(GAO/AFMD-91-91ML, September 30, 1991). 

Management letter to the Assistant Secretary of the Army for
Financial Management; Director, Defense Finance and Accounting
Service; Director, Directorate of Resource Management, Corps of
Engineers (GAO/AFMD-91-62ML, April 23, 1991). 

Management letter to the Commander, Fort Devens, Massachusetts
(GAO/AFMD-92-61ML, April 12, 1991). 

