Practical Exercise

1
Practical Exercise

• The Wayward Purchase

2
Facts

• The ARNG has a BFN for a new copier in FY 1990
• A copier with the required capabilities costs
  675,000
• The command enters into a lease to own over a 5
  year period.
• The cost for the base period is 225,000

3
Facts

• The ARNG command uses 225,000 in FY 1990 OM.
• 150,000 in FY 91 OM
• 150,000 in FY 92 OM
• 150,000 in FY 92 OM

4

• What is an auditor likely to find?

5
The ANSWER

• An ADA
• Why?

6

• Purpose violation
• When over expense/investment threshold must use
  procurement , not OM
• Full funding policy must obligate full amount of
  procurement up front (OMB Cir A-11 app.
  7.C.)
• Is there more than one Purpose violation here?

7

• Yes. Each violation is fixed at the time it
  occurs. There are Purpose violations for each FY
  where OM were incorrectly obligated.
• Are the violations correctable?

8

• Yes, if there is sufficient procurement
  available in any one of the FY 88, 89 or 90
  accounts to reimburse all the OM accounts.
• Procurement is available for 3 years
• Choice of funds rule
• Must use ratification procedure
• If corrected, not a reportable ADA. BUT if it
  had been reported to OSD, OSD will decide if
  there was an ADA

9

• What happens if not enough procurement
  available in any one FY?
• Use other years?
• Use all 3 years?
• ADA reporting procedure (OMB Cir. A-11 sec. 145
  exhibit 145B).