Industrial Funds: DOD Should Improve its Accounting for Asset Capitalization Program Funds
Abstract
Pursuant, to the National Security Act of 1947, as amended in 1949, DOD established industrial funds to finance industrial-and commercial-type activities that provide goods and common services within and among the military services and defense agencies. The Congress provided industrial funds with initial appropriations. Activities, such as shipyards and depots, are typically financed with industrial funds. When the Congress approved the industrial fund concept, it expected the funds to result in advantages, such as encouraging activities to use businesslike cost accounting that would focus attention on the cost of performing a job, providing management greater freedom from the appropriations cycle to achieve economies and efficiencies, and establishing a buyer-seller relationship between customers and producers. Because industrial funds are intended to be self-sustaining, most of their resources are generated by charging customers (generally military services and Defense agencies) for costs incurred in producing or contracting for goods and services. Before ACP, depreciation was not included in the funds' operating costs, nor was it charged to customers. In June 1982, the Surveys and Investigations Staff, House Committee on Appropriations, reported that DOD's obsolete and inefficient industrial fund equipment had resulted from previous inadequate levels of funding which was caused by equipment purchases competing with the procurement of ships, aircraft, and other weapons systems in the annual appropriation process. The Staff also reported that DOD could only estimate the amount of appropriated money used to purchase industrial fund equipment. This occurred because industrial fund equipment requirements were consolidated with similar equipment requirements from other sources (i.e., installations, military units, etc.). Accordingly, industrial fund equipment requirements and procurements were inseparable from other requirements and procurements.
Document Details
- Document Type
- Technical Report
- Publication Date
- May 01, 1986
- Accession Number
- AD1171559
Entities
People
- Frank Conahan
Organizations
- United States Government Accountability Office