United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office Accounting and Information Management Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1997-12-24 monographic deposited born digital 16 p. GA 1.13:AIMD-98-16 https://www.govinfo.gov/app/details/GAOREPORTS-AIMD-98-16 P0b002ee180373e43 f:ai98016 DGPO 2010-08-12 2011-03-24 GAOREPORTS-AIMD-98-16 machine generated eng fdlp REPORT GAOREPORTS-AIMD-98-16 AIMD-98-16 Reporting requirements Military materiel Military inventories Financial statements General fund accounts Accounting procedures Spare parts Materiality Noncompliance Letter Report AIMD GAO reviewed the Department of Defense's (DOD) fiscal year (FY) 1996 financial statements, focusing on whether its approach to reporting inventory and operating materials and supplies complied with the Statement of Federal Financial Accounting Standards (SFFAS) No. 3 requirements, both in individual military service financial statements and those at the consolidated DOD-wide level.<p/>GAO noted that: (1) DOD did not fully comply with SFFAS No. 3 in FY 1996; (2) its consolidated and component financial statements misclassified operating materials and supplies and some equipment as inventory and did not include all operating materials and supplies; (3) for FY 1996, the Army, Navy, and Air Force general fund financial statements collectively reported $115.6 billion of inventory; (4) the Army and Air Force did not report any amounts for operating materials and supplies and the Navy reported only $27,000; (5) one reason for these errors is that DOD's "Guidance on Form and Content of Financial Statements for FY 1996 Financial Activity" and its accounting policy misinterpreted and were not consistent with the accounting standard; (6) as a result, DOD's FY 1996 financial statements overstated inventory, understated operating materials and supplies, and overstated expenses; (7) about $113.7 billion out of the $115.6 billion reported as inventory by the general funds consisted of munitions and equipment that met the SFFAS No. 3 definition of inventory and should have been classified as operating materials and supplies or plant, property, and equipment; (8) at the same time, other items warehoused by service activities, such as repair parts and consumables, that met the SFFAS No. 3 definition of operating materials and supplies were not reported at all; (9) GAO, the DOD Inspector General, and the military service auditors have reported that the military services have warehoused billions of dollars of items at bases and on ships that meet the SFFAS No. 3 definition of operating materials and supplies; (10) however, these items were not considered as capitalized assets as required, but were instead expensed on the financial statements when purchased; (11) the $113.7 billion of misclassified assets represents 9 percent of total assets reported and therefore was material to DOD's FY 1996 financial statements; (12) continued material misclassification and underreporting will negatively affect the reliability and usefulness of the military services' and DOD's financial statements and also the auditors' opinions on those statements; and (13) DOD's guidance and accounting policies must comply with accounting standards so that inventory and operating materials and supplies are properly classified and reported in its future financial statements. https://www.govinfo.gov/content/pkg/GAOREPORTS-AIMD-98-16/html/GAOREPORTS-AIMD-98-16.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-AIMD-98-16/pdf/GAOREPORTS-AIMD-98-16.pdf GAO/AIMD-98-16 https://www.govinfo.gov/app/details/GAOREPORTS-AIMD-98-16 Letter Report GAO/AIMD-98-16; Financial Reporting: DOD's Fiscal Year 1996 Financial Statements Inventory Reporting Does Not Meet Standards; Reporting requirements Military materiel Military inventories Financial statements General fund accounts Accounting procedures Spare parts Materiality Noncompliance