Financial Management

The Pentagon's Defense Business Operations Fund, a consolidation of multiple military and stock funds, has assets valued at $126 billion and about 360,000 employees. The Fund has the potential to (1) reduce the amount of cash needed to support its operations, (2) permit better management of the investment in the Fund, and (3) reduce operating costs by highlighting the total costs of the Defense Department's (DOD) support operations. DOD continues to have difficulties in effectively implementing the Fund, however. Many important policies and procedures have yet to be developed for the Fund. Other serious problems, such as the accuracy of the Fund's financial and unit cost reports, have not been dealt with. GAO believes that delays in appointing experienced individuals to many key leadership positions have contributed to these continuing problems. GAO is encouraged by the Secretary of Defense's decision to review the Fund's operation. This review should be comprehensive and consider every aspect of the Fund's operations, such as its present management structure and progress in achieving the Fund's intended objectives. If the Secretary decides to continue with the Fund, he will need to develop an implementation strategy that (1) deals with personnel needs, (2) provides a focused and intensive effort, and (3) sets up an organizational framework to address the Fund's divided responsibilities.