Financial Management

In October 1998, the Defense Department (DOD) submitted to Congress its biennial strategic plan to improve financial management in the military. Volume I of the plan includes three main sections: the concept of operations, the current environment, and the transition plan describing DOD's goals for achieving the target financial management environment and identifying the strategies and corrective actions needed to move through the transition. Volume II provides information on the specific financial management improvement initiatives intended to implement the transition plan. This report determines whether (1) the concept of operations included the critical elements necessary for producing sustainable financial management improvement over the long term and (2) the transition plan provided a strategic-level "road map" from the current environment to DOD's planned future financial management environment. GAO also discusses additional technical details needed to determine whether implementation of DOD's future financial management environment is practical, cost-effective, and feasible.

GAO noted that: (1) in developing this overall concept of its envisioned financial management environment, DOD has taken an important first step in improving its financial management operations; (2) the department's Biennial Plan also represents a significant landmark because it includes, for the first time, a discussion of the importance of the programmatic functions of personnel, acquisition, property management, and inventory management to the department's ability to support consistent, accurate information flows to all information users; (3) in addition, DOD's Biennial Plan includes an impressive array of initiatives intended to move the department from its current state to its envisioned financial management environment; (4) while the initiatives discussed should result in some improvements in DOD's financial management operations, the department's Biennial Plan lacks critical elements necessary for producing sustainable financial management improvement over the long term; (5) specifically, the Plan's discussion of how DOD's financial management operations will work in the future--its concept of operations--does not address: (a) how its financial management operations will effectively support not only financial reporting but also asset accountability and control; and (b) budget formulation; (6) in addition, the transition plan, while an ambitious statement of DOD's planned improvement efforts, has two critical flaws: (a) links are not provided between the envisioned future operations and the over 200 planned improvement initiatives to determine whether the proposed transition will result in the target financial management environment; and (b) actions to ensure feeder systems' data integrity are not addressed--an acknowledged major deficiency in the current environment; (7) without identifying specific actions that will ensure feeder system data integrity, it is unclear whether the department will be able to effectively carry out not only its financial reporting, but also its other financial management responsibilities; (8) additional detailed information would be necessary to determine whether implementation of the department's future financial management environment is practical, cost-effective, and feasible; (9) such details are appropriately not included in the strategic financial management improvement plan that DOD was asked to provide; and (10) DOD officials have stated that they recognize that additional information will be necessary and that they are developing further details on these issues.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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