DOD Consulting Services: Erroneous Accounting and Reporting of Costs
(Letter Report, 05/18/98, GAO/NSIAD-98-136).
Congress has had long-standing concerns about the accuracy and the
reliability of the costs reported by the Pentagon for consulting
services, also known as advisory and assistance services. In a June 1997
report (GAO/NSIAD-97-166R), GAO noted that although the President's
budget had reported Defense Department (DOD) expenditures of $3 billion
for these services, GAO had identified $12 billion of DOD expenditures
that could be advisory and assistance services. This report provides
additional information on DOD's underreporting of advisory and
assistance service costs and whether costs for these services may be
included in a miscellaneous budget category. GAO also summarizes earlier
audit reports and studies on DOD's reporting of these costs.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-98-136
TITLE: DOD Consulting Services: Erroneous Accounting and Reporting
of Costs
DATE: 05/18/98
SUBJECT: Budget obligations
Contract costs
Federal agency accounting systems
Technical assistance
Reporting requirements
Object classifications
Service contracts
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Cover
================================================================ COVER
Report to the Chairman and Ranking Minority Member, Subcommittee on
Defense, Committee on Appropriations U.S. Senate
May 1998
DOD CONSULTING SERVICES -
ERRONEOUS ACCOUNTING AND REPORTING
OF COSTS
GAO/NSIAD-98-136
DOD Consulting Services
(707273)
Abbreviations
=============================================================== ABBREV
AMC - Army Material Command
DOD - Department of Defense
FASA - Federal Acquisition and Streamlining Act
NAVSEA - Naval Sea Systems Command
OMB - Office of Management and Budget
Letter
=============================================================== LETTER
B-277895
May 18, 1998
The Honorable Ted Stevens
Chairman
The Honorable Daniel K. Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate
Long-standing congressional concerns exist regarding the accuracy and
reliability of costs reported by the Department of Defense (DOD) for
consulting services, also known as advisory and assistance services.
In an earlier report, we noted that while the President's budget had
reported DOD expenditures of $3 billion for these services, we had
identified $12 billion of DOD expenditures that could be advisory and
assistance services.\1 This report responds to your request for
additional information on DOD's underreporting of advisory and
assistance services costs and whether costs for these services may be
included in a miscellaneous budget category. You also asked that we
provide you a summary of previous audit reports and studies on DOD's
reporting of these costs.
--------------------
\1 Defense Advisory and Assistance Service Contracts (GAO/NSIAD
97-166R, June 13, 1997).
BACKGROUND
------------------------------------------------------------ Letter :1
Congress enacted legislation requiring that the Office of Management
and Budget (OMB) establish a separate object class for reporting
actual and planned obligations for advisory and assistance
services.\2 \3 Congress mandated that the separate advisory and
assistance services object class include three categories of
services: (1) management and professional support services; (2)
studies, analyses, and evaluations; and (3) engineering and technical
services.\4
To implement this congressional mandate, OMB established object class
25.1 and included definitions for each of the three categories. As
seen in figure 1, there are also other object classes for reporting
service contracts' costs, including object classes for research and
development contracts and interagency transactions. OMB retained
object class 25.2 for other or miscellaneous services. OMB describes
other services as those services that are not otherwise classified.
In fiscal year 1996, DOD reported a total of $96 billion in
contractual services (object class series 25), including $47 billion
for miscellaneous contract services (object class 25.2) and about $3
billion for advisory and assistance services (object class 25.1).
Figure 1: DOD's Other
Contractual Services: Object
Class Series 25 Fiscal Year
1996 Obligations (dollars in
billions)
(See figure in printed
edition.)
\a Includes various other categories such as operation and
maintenance of facilities and equipment and medical care.
\b Purchases from government accounts.
Source: Federal Budget, fiscal year 1998.
To implement these special reporting requirements, DOD developed
enhanced management and oversight guidance for advisory and
assistance services. For example, DOD's directive for acquiring and
managing such services requires the appointment of a DOD advisory and
assistance services director to provide (1) coordination with other
DOD functional areas and (2) guidance for the identification,
acquisition, management, and use of these services. In addition, the
head of each DOD component is to designate its own advisory and
assistance services director responsible for ensuring proper
identification, accounting, and reporting of these services.
Furthermore, each proposed contract action for these services must
undergo close scrutiny and be planned and justified by senior
officials.\5 To implement DOD's guidance, each service has issued
detailed regulations to manage and control these services.
--------------------
\2 The object classification structure is one of several ways to
present financial data in budgetary presentations and is used to
report obligations for each government account according to the
nature of the services or articles acquired.
\3 In 1992, section 512 of P.L. 102-394 directed that OMB create a
new object class for reporting actual and planned obligations for
advisory and assistance services. This provision was to become
effective beginning in fiscal year 1994. In 1994, the Federal
Acquisition Streamlining Act (FASA), section 2454, put into law the
three categories to be included in the advisory and assistance
services object class and also included three exemptions.
\4 31 U.S.C. 1105 (g).
\5 The DOD directive requires that each component maintain an
advisory and assistance services management plan that includes a
summary of planned actions and dollars for each of the three
categories.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
DOD's directives and instructions require increased scrutiny of
advisory and assistance services and affirm the need for enhanced
management and oversight of these services. Despite DOD's guidance
to properly identify and report advisory and assistance services
costs, our analysis of selected contract actions shows that costs for
these services are being reported as miscellaneous contract services.
A limited analysis of costs included in the Army's miscellaneous
budget category showed that some advisory and assistance costs were
erroneously shown as miscellaneous costs. Army officials agreed that
these costs should have been recorded as advisory and assistance
services costs. The Navy's and the Air Force's accounting systems
did not have the capability of generating information on contracts
included in the miscellaneous budget category. However, discussions
with Navy officials and prior Air Force audits indicate similar
underreporting concerns. DOD officials also indicated that there is
a tendency to report costs for these services in the miscellaneous
category to avoid the closer scrutiny and spending limitations on
contract services identified as advisory and assistance services.
DOD-wide problems with the management of advisory and assistance
services, including accurate identification and reporting of costs,
have been documented since 1985.\6 Despite congressional action
requiring detailed reporting of advisory and assistance services
costs,\7 problems continue. Officials in the DOD Comptroller's
office stated that there is no incentive for accurate reporting of
advisory and assistance services costs due to past congressional
funding cuts in this area.
--------------------
\6 Appendix I provides information on selected previous audits of DOD
advisory and assistance services.
\7 31 U.S.C. 1105 (g).
ADVISORY AND ASSISTANCE COSTS
ARE ERRONEOUSLY INCLUDED IN
MISCELLANEOUS BUDGET CATEGORY
------------------------------------------------------------ Letter :3
Advisory and assistance services costs are being included in a
miscellaneous budget category, but there was insufficient descriptive
information in the Army, the Navy, and the Air Force accounting
systems for us to determine the full amount of advisory and
assistance services costs reported as miscellaneous costs. Such a
determination could only be made by reviewing each individual
contract file. The Army's accounting system uses codes to classify
the types of services acquired, but this system, as used, provides
only limited information. For example, in fiscal year 1996, the Army
Materiel Command (AMC) reported $1.1 billion in miscellaneous
services and $130.5 million in advisory and assistance services, but
little descriptive information on the $1.1 billion in miscellaneous
services was provided (see app. II). At our request, AMC identified
specific contract actions associated with the costs included in the
miscellaneous category. As a result, we were able to review selected
AMC contract actions. This review showed that obligations for
advisory and assistance services were being reported as miscellaneous
contract services, thereby avoiding the scrutiny and administrative
controls associated with advisory and assistance services. We could
not make an accurate and reliable estimate of the total advisory and
assistance services included in the $47 billion reported as
miscellaneous services, in part, because DOD's accounting system
provided little descriptive information on miscellaneous services.
Our review of 21 contract actions at AMC revealed that 16 were
erroneously classified as other or miscellaneous services when a more
appropriate classification code should have been selected. The
misclassified contract actions totaled $12.3 million, of which
approximately $11.6 million was erroneously identified and coded as
other or miscellaneous services instead of advisory and assistance
services. These miscellaneous services included advisory and
assistance services, such as technical assistance to develop market
strategies and to support engineering and business planning
functions. We asked AMC personnel to reassess the coding of these
contract actions and, after careful review, the officials agreed with
our findings. Appendix II provides more detailed information on the
Army's contract file review.
We found that the Navy's accounting system does not have the
capability to generate information on the types of services included
in the miscellaneous category and on contracts associated with that
category. Also, each naval command maintains a different accounting
and classification system for such costs. In a March 1996 report, we
noted that although the Navy's finance and accounting system used
expense element codes to record transactions, a large number of the
transactions analyzed did not have expense element codes or the
recorded codes were invalid.\8
Furthermore, our interviews with officials at two major naval
commands revealed that different management interpretations of
advisory and assistance services definitions could result in
underreporting of costs for such services. For example, in the Naval
Sea Systems Command (NAVSEA), the Comptroller's office uses a
management approach to identify and report advisory and assistance
services that, in our view, is inconsistent with OMB's definitions.
Officials told us that definitions for advisory and assistance
services contracts are read in the context of potential management
concerns. Thus, services for engineering and technical support would
be identified as advisory and assistance services only when the
nature of the task raises management concerns. One such concern
would be placing the contractor in a situation where there is a
perceived "risk" of influencing government decision-making.
We requested information from the Air Force Comptroller's office on
the types of services included in the miscellaneous category, but we
were informed that this information could only be obtained with
extensive base level research into each individual contract. We,
therefore, did not conduct any additional work at the Air Force.
However, as discussed later, several recent Air Force Audit Agency
reports have discussed problems with accurate identification and
reporting of advisory and assistance services costs.
--------------------
\8 CFO Act Financial Audits: Increased Attention Must be Given to
Preparing Navy's Financial Reports (GAO/AIMD-96-7, Mar. 27, 1996).
In February 1997, the Navy started to implement the OMB object class
system in its Standard Accounting and Reporting System. Prior to
that date, each command used different codes and there was no way to
associate accounting data with object classification data.
UNDERREPORTING OF ADVISORY AND
ASSISTANCE SERVICES COSTS IS A
LONG-STANDING CONCERN
------------------------------------------------------------ Letter :4
There are long-standing concerns about DOD's accuracy, reliability,
and underreporting of costs associated with advisory and assistance
services. Since 1985, over 30 reports have identified problems with
DOD's management and reporting of these services, including (1)
inadequate accounting systems to identify advisory and assistance
services expenditures, (2) inaccurate reporting of advisory and
assistance services expenditures, (3) improper justification of
advisory and assistance services contracts, and (4) improper use or
administration of advisory and assistance services contracts. For
example, the DOD Inspector General has issued several reports
outlining difficulties with accurate reporting of advisory and
assistance services expenditures. One report estimated that $4
billion to $9 billion in advisory and assistance services costs was
underreported in fiscal year 1987.\9 This underreporting was
attributed, in part, to unclear terminology. Other reasons included
difficulties with the finance and accounting systems; lack of
consistency in identifying, recording, and reporting advisory and
assistance services costs; and opportunities for flexible
interpretation of definitions. Air Force, Army, and Navy
organizations have also performed various audits. For example, the
Air Force Audit Agency has issued nine audit reports since 1991
dealing with advisory and assistance services contracting issues,
including inaccurate reporting of costs for such services. One
recent Air Force Audit Agency report identified weaknesses in the Air
Force's accounting systems that limited the collection of advisory
and assistance services costs at laboratory and test centers.\10 (See
app. I for a list of these reports and related findings.)
Governmentwide reports on advisory and assistance services were
issued by the President's Council on Integrity and Efficiency and
OMB's Office of Federal Procurement Policy. For example, one of
these reports summarized the results of audits made by 21 Inspectors
General to fulfill the requirement for an annual evaluation of the
progress made in establishing effective management controls and
improving the accuracy and completeness of advisory and assistance
services data in the Federal Procurement Data System.\11 The report
stated that the management and oversight of advisory and assistance
services were long-standing problems and that improvements were
needed in the accuracy and completeness of reporting of advisory and
assistance services.
--------------------
\9 Audit Report, Office of the Inspector General, Department of
Defense: DOD Reporting and Controls for Contracted Support Services,
Report No. 95-295, Aug. 21, 1995.
\10 Air Force Audit Agency Report of Audit: Laboratory and Test
Center Advisory and Assistance Services, Project 96064034, Aug. 28,
1997.
\11 President's Council on Integrity and Efficiency: Summary Report
on Audits of Contracted Advisory and Assistance Services Conducted
During FY 1989 in Compliance with United States Code, Title 31, Jan.
1990.
DOD CITES DISINCENTIVES TO
ACCURATE COST REPORTING
---------------------------------------------------------- Letter :4.1
DOD's directives and regulations require increased scrutiny of
advisory and assistance services and affirm the need for enhanced
management and oversight, yet problems continue. In part, DOD
officials attribute this situation to remaining ambiguities on how to
interpret advisory and assistance services definitions.\12 DOD
officials believe that problems with inaccurate identification of
advisory and assistance services continue because the enhanced
scrutiny and management controls have, in effect, become a
disincentive to accurately identifying these services, particularly
when alternatives exist. For example, while a contract identified as
advisory and assistance services has to undergo substantial
management and administrative oversight, contracts identified as
"other services" do not require such scrutiny.
DOD officials also suggested that congressional funding cuts for
advisory and assistance services are the most powerful disincentive
to accurately identifying and reporting these costs. DOD officials
pointed out that in fiscal year 1998 the defense appropriations act
reduced advisory and assistance services funding by $300 million and
that in the previous year Congress reduced advisory and assistance
services funding by $102.3 million.\13
--------------------
\12 Varying interpretations of what constitutes advisory and
assistance services was the matter at issue in the bid protest
resolved in the Matter of: Nations Inc., B-272455, 96-2 CPD 170,
Nov. 5, 1996.
\13 Public Law 105-56, section 8041, 111 Stat. 1230 and Public Law
104-208, section 8037, 110 Stat. 3009-96.
AGENCY COMMENTS
------------------------------------------------------------ Letter :5
In commenting on our draft report, DOD had no overall objections to
its content but did offer some additional perspectives. DOD's
comments are contained in appendix III. DOD stated that given its
increased emphasis on competition of noninherently governmental
functions for potential outsourcing to private industry, advisory and
assistance services will likely increase markedly over the next few
years. However, DOD sees little reason to continue to report
expenditures for these services in a separate budget account. The
issues raised in our report as well as the continued interest of
several congressional committees led us to an opposite perspective
than that reached by DOD and we do not endorse the elimination of a
separate budget account for these expenditures. DOD suggested that
we expand the historical background leading to the 1994 FASA
requirement for a separate object class. We have annotated the
report to provide an additional legal citation.
We agree with DOD's comment that until 1997 the Navy's accounting
system did not generate OMB object class information and the draft
report provided that information. We do not agree with DOD's view
that NAVSEA reports advisory and assistance services in a manner
consistent with OMB's object class definitions. As stated in our
draft report, NAVSEA officials' views are that a consideration of
management risk determines the nature of (and subsequent accounting
for) advisory and assistance services. We find nothing in the
specific language of either 31 U.S.C. 1105(g) or the OMB circular's
object class 25.1 descriptions of what are and are not advisory and
assistance services that supports NAVSEA's position. Management risk
is undoubtedly a significant consideration in contract management.
In the arena of accounting, however, it introduces a subjective
factor that compromises the attempt to capture the costs associated
with defined categories of advisory and assistance services.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :6
To analyze DOD obligations for contractual services in general, we
analyzed OMB data for fiscal year 1996.\14 To obtain information on
what types of services are being reported as other services (object
class 25.2), we contacted each of the military services to determine
what information was available in their databases. Data were not
available from the Navy's and Air Force's accounting systems, but
limited data were available from the Army's finance and accounting
system regarding obligations reported as other services. Thus, we
visited AMC and analyzed available data from the finance and
accounting system\15 and reviewed contract actions at one of its
subordinate commands, the Army Research Laboratory in Adelphi,
Maryland. At the laboratory, we judgmentally selected 21 contract
actions to review that were classified as other services. As part of
our methodology, we asked laboratory personnel to review 16 actions
that we thought were not correctly classified as other services.
After a careful review of the contracts by both budget and
procurement personnel, the officials concluded that in each case
there were alternatives to the "other" category that more
appropriately described the nature and type of services purchased.
Eleven of the 16 contract actions should have been classified as
advisory and assistance services instead of other services.
To determine the reasons for underreporting of advisory and
assistance services, we identified and reviewed selected prior audit
reports by the DOD Inspector General, the Air Force Audit Agency, and
the Army Audit Agency, the Center for Naval Analysis, the President's
Council on Integrity and Efficiency, and OMB's Office of Federal
Procurement Policy. We also met with DOD, Army, Navy, Air Force, and
Defense Logistics Agency officials with responsibility for managing
and reporting advisory and assistance services. We contacted OMB
officials regarding the advisory and assistance services budget
exhibit to Congress and object class reporting. We discussed
underreporting issues with DOD's advisory and assistance services
director and explored options for improving advisory and assistance
services cost reporting with DOD's Assistant Deputy Comptroller and
other officials. We conducted our review from June 1997 to March
1998 in accordance with generally accepted government audit
standards.
--------------------
\14 As part of their annual budget submissions to OMB, departments
and agencies are required to report actual and planned obligations.
OMB collects and processes this information through the MAX budget
system, which is used to prepare the President's annual budget
request. We extracted and accumulated DOD data and aggregated these
data into object class 25 series subcategories. We did not verify
the data submitted by DOD to OMB.
\15 The data provided by the Army and AMC were extracted from the
defense finance and accounting system, which uses four-digit
identification codes to identify the resources being used. The first
and second positions are usually related to an OMB object
classification. We did not verify the data submitted by the Army and
AMC.
---------------------------------------------------------- Letter :6.1
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Subcommittee on National Security, House
Committee on Appropriations, and to the House Committee on National
Security and the Senate Committee on Armed Services; the Director,
Office of Management and Budget; and the Secretary of Defense. We
will also provide copies to others on request.
Please contact me at (202) 512-4841 or Ralph Dawn, Assistant
Director, if you or your staffs have any questions concerning this
report. Other contributors to this report were Gretchen Bornhop, M.
Cristina Gobin, and Benjamin Mannen.
David E. Cooper
Associate Director, Defense Acquisitions Issues
SELECTED REPORTS ABOUT ADVISORY
AND ASSISTANCE SERVICES MANAGEMENT
AND REPORTING PROBLEMS
=========================================================== Appendix I
Date Report title Selected findings
-------------- ----------------------------- -- -----------------------------
10/31/97 Inspectors General: Concerns Improper use of other than
About Advisory and Assistance full and open competition
Service Contracts (GAO/T-
OSI/
AIMD-98-28)
08/28/97 Report of Audit, Laboratory (1) Inadequate accounting
and Test Center Advisory and systems to identify advisory
Assistance Services (Air and assistance services
Force Audit Agency Project expenditures
96064034) (2) Inaccurate reporting of
advisory and assistance
services
06/13/97 Defense Advisory and Inaccurate reporting of
Assistance Service Contracts advisory and assistance
(GAO/NSIAD-97-166R) services
11/26/96 Management Advisory Services, Inaccurate reporting of
Research, Development, Test advisory and assistance
and Evaluation Manpower services
Review, Kirtland AFB NM (Air
Force Audit Agency Project
96411026)
03/19/96 Project Manager Core Support (1) Improper justification of
Contracts (Army Audit Agency advisory and assistance
Report AA 96-140) services contracts
(2) Improper use of other
than full and open
competition
01/05/96 Acquisition Management Improper use of or
Staffing at the Ballistic administration of advisory
Missile Defense Organization and assistance services
(DOD Inspector General Report contracts
96-056)
08/21/95 DOD Reporting and Controls (1) Improper justification of
for Contracted Support advisory and assistance
Services (DOD Inspector services contracts
General Report 95-295) (2) Inaccurate reporting of
advisory and assistance
services
04/03/95 Pricing Orders for Contracted Improper use or
Advisory and Assistance administration of advisory
Services, Space and Missile and assistance services
Systems Center, Los Angeles contracts
AFB, CA (Air Force Audit
Agency Project 41295013)
12/30/94 Cost-Effectiveness of Improper justification of
Contracting for Services (DOD advisory and assistance
Inspector General Report 95- services contracts
063)
12/16/94 Pricing Orders for Contracted Improper use or
Advisory and Assistance administration of advisory
Services (CAAS), Aeronautical and assistance services
Systems Center (ASC), Wright- contracts
Paterson AFB, OH (Air Force
Audit Agency Report 44595014)
06/09/94 Cost-Effectiveness of Improper justification of
Contracted Advisory and advisory and assistance
Assistance Services at Space services contracts
and Missile Systems Center
(Air Force Audit Agency
Project 94064002)
05/27/94 Procurement of Support (1) Improper justification of
Services by the Air Force advisory and assistance
Electronic Systems Center, services contracts
Hansom Air Force Base, (2) Inaccurate reporting of
Massachusetts (DOD Inspector advisory and assistance
General Report 94-112) services
04/08/94 "Super" Scientific, Improper justification of
Engineering, and Technical advisory and assistance
Assistance Contracts at the services contracts
Ballistic Missile Defense
Organization (DOD Inspector
General Report 94-077)
03/10/94 Government Contractors: Improved guidance needed
Measuring Costs of Service
Contractors Versus Federal
Employees (GAO/GGD-94-95)
01/27/94 Price Reasonableness of Improper justification of
Contracted Advisory and advisory and assistance
Assistance Services, Space services contracts
and Missile Systems Center,
Los Angeles AFB, CA (Air
Force Audit Agency Report
41294006)
1/94 Summary Report of Agencies' Improved guidance needed
Service Contracting Practices
(OMB, Office of Federal
Procurement Policy)
08/17/92 Selected Service Contracts at Improper justification of
Wright-Paterson Air Force advisory and assistance
Base (DOD Inspector General services contracts
Report 92-128)
08/07/92 Review of Contracting for (1) Improper use of other
Advisory and Assistance than full and open
Services (CAAS), Warner competition
Robins Air Logistics Center, (2) Inaccurate reporting of
Robins AFB, GA (Air Force advisory and assistance
Audit Agency Report 91425101) services
06/04/92 Contracting for Advisory and (1) Improper justification of
Assistance Services (Air advisory and assistance
Force Audit Agency Project services contracts
91064041) (2) Inaccurate reporting of
advisory and assistance
services
12/16/91 Contracting for Advisory and (1) Inaccurate reporting of
Assistance Services, advisory and assistance
Aeronautical Systems Division services
(ASD), Wright-Paterson AFB, (2) Improper use or
OH (Air Force Audit Agency administration of advisory
Report 91445053) and assistance services
contracts
10/30/91 Consulting Services (DOD Inaccurate reporting of
Inspector General Report 92- advisory and assistance
010) services
08/22/91 Consulting Services Contracts Improper justification of
for Operational Test and advisory and assistance
Evaluation (DOD Inspector services contracts
General Report 91-115)
05/08/91 Consulting Services: Contract Inaccurate reporting of
Obligations for Fiscal Years advisory and assistance
1987, 1988, and 1989 (GAO/ services
GGD-91-62FS)
02/01/91 Contracted Advisory and (1) Improper justification of
Assistance Services Contracts advisory and assistance
(DOD Inspector General Report services contracts
91-041) (2) Inaccurate reporting of
advisory and assistance
services
08/20/90 Consulting Services: Role and Inaccurate reporting of
Use in Acquiring Three Weapon advisory and assistance
Systems (GAO/NSIAD-90-119) services
1/90 Summary Report on Audits of Inaccurate reporting of
Contracted Advisory and advisory and assistance
Assistance Services Conducted services
During FY 1989 in Compliance
with United State Code, Title
31 (President's Council on
Integrity and Efficiency)
06/07/89 Use of Consulting Services in Inaccurate reporting of
Defense Acquisition (GAO/T- advisory and assistance
NSIAD-89-36) services
9/88 Report on the Government's (1) Inaccurate reporting of
Use of Contracted Advisory advisory and assistance
and Assistance Services (OMB, services
Office of Federal Procurement (2) Inadequate definition of
Policy) advisory and assistance
services
9/88 Summary Report on Contracted (1) Improper justification of
Advisory and Assistance advisory and assistance
Services (President's Council services contracts
on Integrity and Efficiency) (2) Inaccurate reporting of
advisory and assistance
services
11/22/85 Support Services: Actions to (1) Inaccurate reporting of
Gain Management Control Over advisory and assistance
DOD's Contract Support services
Services (GAO/NSIAD-86-8) (2) Inadequate accounting
systems to identify advisory
and assistance services
expenditures
9/85 The Problems of Budget Inaccurate reporting of
Presentation and Recording of advisory and assistance
Contracted Advisory and services
Assistance Services (CAAS)
(Center for Naval Analysis
Report CRM 85-65)
9/85 Proposed Solutions to the Inadequate definition of
Definitional Problems of advisory and assistance
Contracted Advisory and services
Assistance Services (Center
for Naval Analysis Report CRM
85-66)
8/85 The General Problems of Inadequate definition of
Contracted Advisory and advisory and assistance
Assistance Services (CAAS) services
(Center for Naval Analysis
Report CRM 85-63)
--------------------------------------------------------------------------------
ARMY CONTRACT FILES REVIEW
========================================================== Appendix II
Our review of data from the Army's finance and accounting database
disclosed that the accounting system had assigned descriptive codes
for less than half of the Army's fiscal year 1996 expenditures of
$11.6 billion reported as other, or miscellaneous, services (object
class 25.2). However, about $6 billion in expenditures had codes
that provided no descriptive information.
To determine whether advisory and assistance services were reported
as miscellaneous services, we examined expenditures data from the
Army Materiel Command's (AMC) finance and accounting system that
totaled $1.1 billion in direct obligations for miscellaneous
services.\1 As shown in figure II.1, the AMC's data contained little
descriptive information on the $1.1 billion.
Figure II.1: Army Materiel
Command: Object Class 25.2
Fiscal Year 1996 Obligations
(dollars in millions)
(See figure in printed
edition.)
Source: Army's Finance and Accounting System.
The Army Comptroller's Office and AMC both informed us that there was
no way to associate reported expenditures with specific contracts
without requesting such data from each subcommand. Accordingly, we
requested such data from AMC for all of its major subcommands, which
proved to be a labor intensive and slow process. The Army Research
Laboratory was the first to provide contract data to conduct our
analysis. For fiscal
year 1996, the laboratory provided a list of contract actions, with a
value of $113.5 million, that had been classified as other, with no
explanation or detail as to the type of expense.
Our review of contract actions at the laboratory disclosed that
advisory and assistance services such as technical assistance to
develop market strategies and engineering and business planning
support were being misclassified in the other category. Of 21
contract actions reviewed, 16 actions, with a value of $12.3 million,
were misclassified as miscellaneous services. The misclassified
actions included 11 actions, with a value of $11.6 million, that
should have been classified as advisory and assistance services.
Laboratory budget and procurement personnel agreed that the actions
should have been more appropriately described as advisory and
assistance services.
(See figure in printed edition.)Appendix III
--------------------
\1 We used fiscal year 1996 data because fiscal year 1997 data were
incomplete at the time of our review. The data provided by AMC were
"execution" or actual obligation data that contained expenditures by
major command, appropriation account, and element of resource. The
data were not disaggregated to the contract or contract action level.
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II
(See figure in printed edition.)
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