Summary: The accounting system at Long Beach and Pearl Harbor Naval Shipyards has not been implemented in full accordance with the documented standard system design for Navy shipyards which was approved in June 1975. As a result, inventory values reported to Navy headquarters and Congress were incorrect, accounts receivable were not properly shown on financial statements, and control over appropriated funds was inadequate.
The shipyards' administrative control over customer funds was not adequate to insure that funds are used for only authorized purposes and obligations and expenditures do not exceed the amounts authorized. Project orders were combined, thereby, precluding the shipyards from matching expenditures incurred with funds received from the customer during the year. Adequate controls were not exercised to insure proper cost transfers between customer orders. Expired appropriations were used in renegotiating fixed price orders. Current operating procedures at the shipyards do not provide administrative control over funds. The balance of the direct material inventory account was not accurate because the general ledger and the subsidiary records were not reconciled as required. Although the approved system design requires the use of three separate accounts to classify accounts receivable, the shipyards were using only one account.
