Summary

GAO reviewed the implementation of the Department of Defense (DOD) Asset Capitalization Program (ACP) to evaluate its progress and problems after 2 years of operation.

GAO found that: (1) although ACP is in its fourth year of operation, DOD accounting procedures do not separate ACP funds from those generated through charges to customers for goods or services; (2) DOD does not have the financial data to ensure that funds will be available for equipment acquisition when needed; (3) information on ACP is not sufficient to assure Congress that program requirements are being met; and (4) since fiscal year 1983, the funds available for industrial fund purchases have increased. GAO also found that: (1) although DOD has not updated its industrial fund regulations to provide for ACP accounting procedures, it has developed internal accounting reporting requirements, which will include ACP; (2) cash generated through ACP, if not separately accounted for, is used to finance operating costs other than ACP purchases; (3) the influx of ACP cash has enhanced the position of the industrial funds and avoided cash shortages; (4) DOD does not track the status or use of ACP funds; and (5) the establishment of separate cash accounts, reflecting ACP revenues, is one way that DOD can provide the controls necessary to ensure the availability of ACP funds.