Financial Management

DOD Improvement Plan Needs Strategic Focus Gao ID: GAO-01-764 August 15, 2001

Defense operations involve about $1 trillion in assets, $310 billion in annual budgetary authority, $24 billion in monthly disbursements, and three million military and civilian employees. Moreover, execution of DOD's operations spans a wide range of defense organizations, including the military services and their respective major commands and numerous defense agencies. Effectively managing DOD's finance and accounting operations across this complex array of organizations is both a formidable challenge and a prerequisite for effective and efficient departmental performance and accountability. Without reliable financial management information, DOD cannot make informed decisions among competing spending priorities and cannot effectively identify opportunities for reducing costs and reallocating resources to pressing needs. Because of congressional concern with DOD's financial management difficulties, Section 1008 of the National Defense Authorization Act for Fiscal Year 1998 directed the Secretary of Defense to submit to Congress a biennial strategic plan for the improvement of financial management. The National Defense Authorization Act for Fiscal Year 2000 established additional reporting requirements that were to be addressed in DOD's Financial Management Improvement Plan. This report reviews whether the plan (1) represents an effective tool for helping resolve DOD's longstanding financial management problems and (2) addresses the reporting requirements stipulated in the National Defense Authorization Act for Fiscal Year 2000. GAO found that the fiscal year 2000 Financial Management Improvement Plan represents a significant effort and an improvement over prior plans. The plan highlights the financial management challenges facing DOD and identifies actions underway or planned to address the acknowledged weaknesses. However, the plan is not an effective management tool that establishes a departmentwide strategic approach that can be used to guide and direct DOD's financial management reform efforts. In addition to not being an effective management tool, the plan does not fully comply with legislative requirements in the National Defense Authorization Act for Fiscal Year 2000.

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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