This week the GAO recommended that the Defense Dept. develop a strategy to address the material weaknesses surrounding government furnished property (GFP). Auditors have been reporting on the GFP-related material weakness for decades. This recent GAO report acknowledged that greater accountability is needed for government property in the possession of contractors and that a comprehensive strategy is needed.
The US Government Accountability Office Report states:
“DOD’s lack of accountability over government property in the possession of contractors has been reported by auditors for decades. This long-standing issue affects the accounting and reporting of GFP and is one of the reasons DOD is unable to produce auditable financial statements. DOD estimated the value of its GFP at over $220 billion”
Need for a Comprehensive Strategy
The GAO acknowledges that over the years the DOD has made progress to address the GFP-related material weakness; however, the efforts have not been comprehensive or detailed enough. Encouraging the DOD to develop a comprehensive department-wide strategy to identify “root causes of deficiencies… and clearly defining detailed procedures for achieving tasks and meeting target dates.”
GAO Recommendations
The GAO made three specific recommendations in this report for DOD. First, they wanted the Defense Agency to document and implement a process for memorandum distribution and for reviewing components’ compliance. Second, they requested that procedures for how oversight groups (like the Property Functional Council) be properly documented. And lastly, the GAO recommended that the DOD develop a comprehensive strategy to articulate the department-wide efforts to address this GFP material weakness.
What this means for GovCon
As we have previously mentioned on this blog, contractors who manage government property should see this GAO report as another warning sign, along with the annual financial reports (including the most recent 2022 report). Government property in the possession of contractors has been repeatedly recognized as an “Audit Priority” and is getting more and more attention as the annual Defense Audits increase in intensity.
Defense contractors should be taking a hard look at their programs and making sure that their processes with government property are meeting their contract obligations. Furthermore, organizations should be looking for additional ways to position themselves favorably, and to reduce risk, for future DCMA audits. At the end of the day, this report is making a clear case that greater accountability is needed for government property under the possession of contractors.
If you have questions on the implications of this GAO report, or surrounding Government Property management and would like to speak with one of our experts please feel free to reach out to us here.
