Financial Management:

DOD Needs to Clarify Its General Gift Fund Policies to Provide for Effective Oversight

GAO-09-486R: Published: May 27, 2009. Publicly Released: May 27, 2009.

Additional Materials:

Contact:

Brian J. Lepore
(202) 512-4523
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

From fiscal year 2005 through fiscal year 2008, the military services received about $295 million in monetary and nonmonetary gifts from individuals and organizations wishing to donate gifts to the Department of Defense (DOD). Section 2601(a) of Title 10, U.S. Code is a long-standing authority under which the secretaries overseeing DOD, the military services, and the Coast Guard may accept a gift on the condition that the gift be used for the benefit of or in connection with the establishment, operation, or maintenance of schools, hospitals, libraries, museums, cemeteries, or other institutions or organizations under the jurisdiction of the secretary concerned. In 2008, gifts to benefit such institutions or organizations included a monetary gift to construct an education center and nonmonetary gifts of a bronze statue and granite benches. In 2006, Congress enacted additional authority, under 10 U.S.C. 2601(b) to allow the acceptance of gifts and services to benefit certain members of the armed forces and civilian employees of DOD who incurred a wound, injury, or illness in the line of duty and to benefit the dependents and survivors of those who are killed or wounded. For example, an Army official stated that the Army had recently accepted Internet services for wounded servicemembers who are recovering in a military hospital. Under 10 U.S.C. 2601, DOD and the military services are bound by certain limitations on both the acceptance and appropriate use of gifts accepted into the general gift funds--individual accounts established within the Department of the Treasury into which proceeds from monetary and nonmonetary gifts are deposited. In addition, DOD and the military services have established rules that are intended, among other things, to ensure that monetary and nonmonetary gifts that are accepted into these funds do not reflect unfavorably on the ability of the department to carry out its responsibilities in a fair and objective manner. DOD's policy establishes requirements for accepting, reporting, and monitoring gifts so that the department has the information necessary to conduct effective oversight of the general gift funds. Oversight of the general gift funds is essential to ensure that proceeds from monetary gifts and the disposal of nonmonetary gifts are properly accounted for and used in accordance with DOD and military service policies. In May 2004, we reported instances in which the military services did not have effective oversight of nonmonetary gifts accepted under the general gift fund authority for the renovations of general officer quarters, and we concluded that the military services had no assurance that the nonmonetary gifts were still in their possession. Under 10 U.S.C. 2601(h), the Comptroller General is required to make periodic audits of gifts, devises, and bequests accepted under section 2601(a) or (b) and to submit a report of the results of such audits to Congress. As agreed with Congressional offices, we addressed this requirement by focusing our review on evaluating the extent to which the military services have implemented DOD's policy for (1) accepting, (2) reporting, and (3) monitoring gifts accepted under the general gift fund authority.

The military services are implementing DOD's policy for accepting gifts under 10 U.S.C. 2601(a) and are in the process of updating their policies to reflect the additional acceptance authority of section 2601(b), which became permanent in 2008. Military service policies for accepting gifts implement DOD's policy by specifying (1) who has the authority to accept gifts, (2) what dollar threshold each acceptance authority official is authorized to accept gifts, and (3) under which conditions these officials should accept or decline gifts. Who can accept gifts and at what dollar threshold vary by service. According to the military services' policies, each acceptance authority must consider the nature of a gift and its conditions, if any, when determining whether to accept or decline gifts, consulting legal counsel when appropriate. While the military services are implementing DOD's policy for accepting gifts, they have not implemented the reporting requirements outlined in DOD's policy under the general gift authority. DOD's policy identifies specific information that the military services are to report and directs that they submit their reports to the DFAS Trust Fund Accounting Division, which in turn is to submit a quarterly report to the Under Secretary of Defense (Comptroller). Since October 2007, when DOD's reporting requirement was first established, the Under Secretary of Defense (Comptroller) has not received the DFAS report on military services' monetary and nonmonetary gifts. Our discussions with DOD officials and review of individual military service policies revealed the following reasons for this absence of reporting: (1) the military services' policies do not consistently reflect the reporting requirements outlined in DOD's policy, (2) DOD's policy did not identify the appropriate DFAS organizations for the military services to send their monetary and nonmonetary gift fund records to, and (3) military service officials have indicated that the lack of a standardized format hampers their ability to consolidate the gift fund information to report to DFAS. Lastly, the military services' policies for monitoring nonmonetary gifts are insufficient to implement DOD's policy for monitoring gifts that fall under the general gift fund authority. According to DOD's policy, acceptance authorities shall keep auditable records of all monetary and nonmonetary gifts and provide this information for periodic audits. Our discussions with military service officials revealed that the military services maintain auditable records for money, but not for nonmonetary gifts. According to military service officials, the military services do not maintain a comprehensive listing of nonmonetary gifts and their current physical location. Service officials explained that once a nonmonetary gift is accepted, it loses its designation as a gift and is entered onto the applicable service's installation property records. Service officials told us that nonmonetary gifts are monitored during the military services' routine inventories of property. However, we believe that this property inventory is not sufficient to implement DOD's procedures for monitoring nonmonetary gifts because the military services do not track gifts to verify that once accepted they are added to the property records. Consequently, the routine inventory of property would not provide evidence of effective oversight of nonmonetary gifts as it is not clear whether the property records include these gifts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Under 10 U.S.C. Section 2601(h), the Comptroller General is required to make periodic audits of gifts, devises, and bequests accepted under section 2601(a) or (b). In response to this mandate, GAO evaluated the extent to which the military services have implemented DOD's policy for (1) accepting, (2) reporting, and (3) monitoring gifts accepted under the general gift fund authority. To facilitate implementation of DOD reporting requirements, during the course of our review, DOD took action to revise its gift fund policy to change to whom the services should submit their gift fund reports. DOD changed the policy from the services submitting gift information to the DFAS Trust Fund Accounting Division to the services submitting the information to the individual service DFAS point of contacts. In our May 27, 2009 report, we reported that while we were encouraged by this step, DOD's policy was still not clear as to what DFAS entity would be responsible for consolidating the individual service DFAS submissions into the quarterly report required by the Under Secretary of Defense (Comptroller). We recommended that the Secretary of Defense direct the Under Secretary of Defense (Comptroller) to revise its general gift fund policy to assign responsibility to a single DFAS entity to consolidate the service DFAS submissions into one quarterly report to the Under Secretary of Defense (Comptroller). As a result, the Under Secretary of Defense (Comptroller) revised its general gift fund policy 7000.14 and assigned responsibility to DFAS (Standards and Compliance) to develop and require standard reporting formats for reporting information and require each Service DFAS to report summary gift information no later than 30 days after the end of each quarter to the Under Secretary of Defense (Comptroller).

    Recommendation: To assist DOD in overseeing the reporting of the general gift funds, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to revise its general gift fund policy to assign responsibility to a single DFAS entity to consolidate the service DFAS submissions into one quarterly report to the Under Secretary of Defense (Comptroller).

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: Under 10 U.S.C. Section 2601(h), the Comptroller General is required to make periodic audits of gifts, devises, and bequests accepted under section 2601(a) or (b). In response to this mandate, GAO evaluated the extent to which the military services have implemented DOD's policy for (1) accepting, (2) reporting, and (3) monitoring gifts accepted under the general gift fund authority. In May 2009 we reported that one of the reasons cited by the military services for not implementing the gift fund reporting requirements was that a lack of standardized format hampered their ability to consolidate the gift fund information to report to the Defense Finance and Accounting Service (DFAS). GAO recommended that the Secretary of Defense direct Under Secretary of Defense (Comptroller) to revise its general gift fund policy to assign responsibility to the appropriate organization for developing a standardized reporting format for the Services to use when assembling the reporting requirements outlined in DOD's policy and then develop and require use of the standardized format. DOD concurred and stated that the Office of the Under Secretary of Defense (Comptroller) revised its general gift fund policy and assigned responsibility to DFAS (Standards and Compliance) to develop a standardized reporting format for the Services to use when assembling the reporting requirements. DFAS (Standards and Compliance) were to develop and require use of the standardized format for the July 2009 reporting period. On June 18, 2009 DFAS issued a memorandum from the Office of the Under Secretary of Defense (Comptroller, Director of Finance and Accounting Policy which contained a standard operating procedure that identify the specific information to be reported and a template to be used for the reports. The implementation of this reporting requirement started in the third quarter of fiscal year 2009.

    Recommendation: To assist DOD in overseeing the reporting of the general gift funds, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to revise its general gift fund policy to assign responsibility to the appropriate organization for developing a standardized reporting format for the military services to use when assembling the reporting requirements outlined in DOD's policy and then develop and require use of the standardized format.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: Under 10 U.S.C. 2601(h), the Comptroller General is required to make periodic audits of gifts, devises, and bequests accepted under section 2601(a) or (b). In response to this mandate, GAO evaluated the extent to which the military services have implemented DOD's policy for (1) accepting, (2) reporting, and (3) monitoring gifts accepted under the general gift fund authority. We reported in May 2009, that the military services' policies for monitoring non-monetary gifts were not sufficient to implement DOD's policy for monitoring gifts that fell under the general gift fund authority. According to DOD's policy, acceptance authorities shall keep auditable records of non-monetary gifts and provide this information for periodic audit. However we found that according to service officials, the military services do not maintain comprehensive documentation of non monetary gifts accepted and their current physical locations. The service officials explained that the reason they do not maintain a listing of non monetary gifts and their physical locations is because once a non monetary gift is accepted it loses its designation as a gift and is entered onto the applicable service's installation property records. Service officials maintained that non monetary gifts are being monitored during the military services' routine inventories of property. However, we determined that this process was not sufficient to implement DOD's policy because the military services were unable to provide any documentation to verify that non monetary gifts had been added to the property records. We recommended that the Secretary of Defense direct the secretaries of the military services to maintain documentation in their gift fund records that non monetary gifts have been transferred to the property records in order to provide evidence that non monetary gifts are on the property records, which in turn are routinely audited. The Under Secretary of Defense (Comptroller) directed the services, in its revised general gift fund policy, to establish procedures for maintaining property accountability documentation in the gift fund records. This additional action will provide DOD the necessary assurance that non monetary gifts are included on the personal property records and that they are in turn being monitored as required during DOD's routine inventories of property.

    Recommendation: To assist DOD in overseeing the reporting of the general gift funds, the Secretary of Defense should direct the secretaries of the military services to maintain documentation in their gift fund records that nonmonetary gifts have been transferred to the property records in order to provide evidence that nonmonetary gifts are on the property records, which in turn are routinely audited.

    Agency Affected: Department of Defense

 

Explore the full database of GAO's Open Recommendations »

Jul 9, 2014

Jun 19, 2014

May 30, 2014

May 15, 2014

May 13, 2014

May 12, 2014

May 2, 2014

Mar 27, 2014

Mar 13, 2014

Looking for more? Browse all our products here