DOD Financial Management
Important Steps Underway But Reform Will Require a Long-term Commitment Gao ID: GAO-02-784T June 4, 2002The Department of Defense (DOD) faces complex financial and management problems that are deeply rooted in DOD's business operations and management culture. During the past 12 years, DOD has begun several broad-based departmentwide reform efforts to overhaul its financial operations and other key business areas. These efforts have been unsuccessful. GAO identified several key elements that are essential to the success of any DOD financial management reform effort. These include (1) addressing the department's financial management challenges as part of a comprehensive, integrated, DOD-wide business reform; (2) providing for sustained leadership and resource control to implement needed reforms; (3) establishing clear lines of responsibility, authority, and accountability for such reform; (4) incorporating results-oriented performance measures and monitoring tied to the reforms; (5) providing appropriate incentives or consequences for action or inaction; (6) establishing and implementing an enterprise architecture to guide and direct financial management and modernization investments, and (7) ensuring effective oversight and monitoring.
GAO-02-784T, DOD Financial Management: Important Steps Underway But Reform Will Require a Long-term Commitment
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United States General Accounting Office:
GAO:
Testimony:
Before the Subcommittee on National Security, Veterans Affairs, and
International Relations, Committee on Government Reform, House of
Representatives:
For Release on Delivery:
Expected at 10:00 a.m.
Tuesday, June 4, 2002:
DOD Financial Management:
Important Steps Underway But Reform Will Require a Long-term
Commitment:
Statement of Gregory D. Kutz:
Director, Financial Management and Assurance:
Randolph C. Hite:
Director, Information Technology Architecture and Systems Issues:
David R. Warren:
Director, Defense Capabilities and Management:
GAO-02-784T:
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss financial management at the
Department of Defense (DOD). Today, DOD faces financial and related
management problems that are pervasive, complex, long-standing, and
deeply rooted in virtually all business operations throughout the
department. DOD‘s financial management deficiencies, taken together,
represent the single largest obstacle to achieving an unqualified
opinion on the U.S. government‘s consolidated financial statements. To
date, none of the military services or major DOD components has passed
the test of an independent financial audit because of weaknesses in
financial management systems, operations, and controls.
Overhauling DOD‘s financial management represents a major challenge
that goes far beyond financial accounting to the very fiber of the
department‘s range of business operations and management culture.
Previous administrations have tried to address these problems in various
ways but have been unsuccessful. In this regard, on September 10, 2001,
Secretary of Defense Rumsfeld announced a broad initiative intended to
’transform the way the department works and what it works on“ which he
estimated could save 5 percent of DOD‘s budget”or about $15 billion to
$18 billion annually. Secretary Rumsfeld recognized that transformation
would be difficult and expected the needed changes would take 8 or more
years to complete. Our experience with other federal agency business
transformation efforts supports the Secretary‘s position.
The President has made financial management and the use of technology
integral to his fiscal year 2002 Management Agenda for making the
federal government more focused on citizens and results. The President‘s
Management Agenda notes, ’Without accurate and timely information, it is
not possible to accomplish the President‘s agenda to secure the best
performance and highest measure of accountability for the American
people.“
With the events of September 11, and the federal government‘s short- and
long-term budget challenges, it is more important than ever that DOD
effectively transform its business operations to ensure that it gets
the most from every dollar spent. The department must be able to
effectively carry out its stewardship responsibilities for the funding
it receives and for the vast amount of equipment and inventories used
in support of military operations. Even before the events of September
11, increased globalization, changing security threats, and rapid
technological advances were prompting fundamental changes in the
environment in which DOD operates. These trends place a premium on
increasing strategic planning, enhancing results orientation, ensuring
effective accountability, maintaining transparency, and using
integrated approaches. Of the 22 areas on GAO‘s governmentwide ’high-
risk“ list, 6 are DOD program areas, and DOD shares responsibility for
2 other high-risk areas that are government wide in scope.[Footnote 1]
Central to effectively addressing DOD‘s financial management problems
will be the understanding that these eight areas are interrelated and
cannot be addressed in an isolated, stovepiped, or piecemeal fashion.
The excellence of our military forces is unparalleled. This same level
of excellence is not yet evident in the department‘s financial
management and other related business areas. This is particularly
problematic because effective financial and related management
operations are critical to achieving the department‘s mission in a
reasonably economical, efficient, and effective manner and to providing
reliable, timely financial information on a routine basis to support
management decision making at all levels throughout DOD. Transforming
DOD‘s business operations would free up resources that could be used to
enhance readiness, improve the quality of life for our troops and their
families, and reduce the gap between ’wants“ and available funding in
connection with major weapon systems.
Today, we will provide our perspectives on the (1) department‘s
longstanding inability to effectively reform its financial management
and other business systems and processes and (2) keys to successfully
carrying out the Secretary‘s business process transformation. Last
summer, the Comptroller General shared a business transformation paper
with Secretary Rumsfeld and Comptroller Zakheim. This paper provided an
overview of our views on the challenges facing the department, the keys
to effective reform, and detailed one option for addressing these
challenges. Our testimony today highlights the keys to success included
in that paper.
Long-standing Financial Management Problems and Attempts at Reform:
History is a good teacher. To solve the problems of today, it is
important to avoid repeating past mistakes. Over the past 12 years, the
department has initiated several broad-based departmentwide reform
efforts intended to fundamentally reform its financial operations as
well as other key business areas, including the Defense Reform
Initiative, the Defense Business Operations Fund, and the Corporate
Information Management initiative. These efforts, which are highlighted
below, have proven to be unsuccessful despite good intentions and
significant effort. The conditions that led to these previous attempts
at reform remain largely unchanged today.
Defense Reform Initiative (DRI). In announcing the DRI program in
November 1997, the then Secretary of Defense stated that his goal was
’to ignite a revolution in business affairs.“ DRI represented a set of
proposed actions aimed at improving the effectiveness and efficiency of
DOD‘s business operations, particularly in areas that had been long-
standing problems”including financial management. In July 2000, we
reported[Footnote 2] that while DRI got off to a good start and made
progress in implementing many of the component initiatives, it did not
meet expected time frames and goals, and the extent to which savings
from these initiatives would be realized was yet to be determined. We
noted that a number of barriers had kept the department from meeting
its specific time frames and goals. The most notable barrier was
institutional resistance to change in an organization as large and
complex as DOD, particularly in such areas as acquisition, financial
management, and logistics, which transcend most of the department‘s
functional organizations and have been long-standing management
concerns. We also pointed out that DOD did not have a clear road map to
ensure that the interrelationships between its major reform initiatives
were understood and addressed and that it was investing in its highest
priority requirements. We are currently examining the extent to which
DRI efforts begun under the previous administration are continuing.
Defense Business Operations Fund. In October 1991, DOD established
a new entity, the Defense Business Operations Fund by consolidating
nine existing industrial and stock funds and five other activities
operated throughout DOD. Through this consolidation, the fund was
intended to bring greater visibility and management to the overall cost
of carrying out certain critical DOD business operations. However, from
its inception, we reported that the fund did not have the policies,
procedures, and financial systems to operate in a businesslike manner.
In 1996, DOD announced the fund‘s elimination. In its place, DOD
established four working capital funds. DOD estimated that for fiscal
year 2003 these funds would account for and control about $75 billion.
These new working capital funds inherited their predecessor‘s
operational and financial reporting problems. Our reviews of these
funds have found that they still are not in a position to provide
accurate and timely information on the results of operations. As a
result, working capital fund customers cannot be assured that the prices
they are charged for goods and services represent actual costs.
Corporate Information Management (CIM). The CIM initiative began
in 1989 and was expected to save billions of dollars by streamlining
operations and implementing standard information systems to support
common business operations. CIM was expected to reform all of DOD‘s
functional areas”including finance, procurement, material management,
and human resources”through consolidating, standardizing, and
integrating information systems. DOD also expected CIM to replace
approximately 2,000 duplicative systems. Over the years, we made
numerous recommendations to improve CIM‘s management to help
preclude the wasteful use and mismanagement of billion of dollars.
However, these recommendations were generally not addressed. Instead,
DOD spent billions of dollars with little sound analytical
justification. Rather than relying on a rigorous decision-making
process for information technology investments”as used in leading
private and public organizations we studied, DOD made systems decisions
without (1) appropriately analyzing cost, benefits, and technical risks;
(2) establishing realistic project schedules; or (3) considering how
business process improvements could affect information technology
investments. For one effort alone, DOD spent about $700 million trying
to develop and implement a single system for the material management
business area”but this effort proved unsuccessful. We reported in
1997[Footnote 3] that the benefits of CIM had yet to be widely achieved
after 8 years of effort and spending about $20 billion. The CIM
initiative was eventually abandoned.
DOD‘s long-standing financial management difficulties have adversely
affected the department‘s ability to control costs, ensure basic
accountability, anticipate future costs and claims on the budget (such
as for health care, weapon systems, and environmental liabilities),
measure performance, maintain funds control, prevent fraud, and address
pressing management issues.
In this regard, I would like to briefly highlight three of our recent
products that exemplify the adverse impact of DOD‘s reliance on
fundamentally flawed financial management systems and processes and a
weak overall internal control environment.
* In March of this year, we testified[Footnote 4] on the continuing
problems with internal controls over approximately $64 million in
fiscal year 2001 purchase card transactions involving two Navy
activities. Consistent with our testimony[Footnote 5] last July on
fiscal year 2000 purchase card transactions at these locations, our
follow-up review demonstrated that continuing control problems
contributed to fraudulent, improper, and abusive purchases and theft
and misuse of government property. We are currently auditing purchase
and travel card usage across the department.
* In July 2001, we reported[Footnote 6] that DOD did not have adequate
systems, controls, and managerial attention to ensure that the $2.7
billion of adjustments affecting closed appropriation accounts made
during fiscal year 2000 were legal and otherwise proper. Our review of
$2.2 billion of these adjustments found about $615 million (28 percent)
of the adjustments should not have been made, including about $146
million that violated specific provisions of appropriations law and
were thus illegal. For example, the stated purpose of one adjustment
was to charge a $79 million payment made in February 1999 to a fiscal
year 1992 research and development appropriation account to correct
previous payment recording errors. However, the fiscal year 1992
research and development appropriation account closed at the end of
fiscal year 1998”4 months before the $79 million payment was made.
Therefore, the adjustment had the same effect as using canceled funds
from a closed appropriation account to make the February 1999
expenditure, which is prohibited by the 1990 law. As of April 2002, DOD
had reversed 140 of the 162 transactions and provided additional
contract documentation for the remaining 22 transactions. However, DOD
has yet to complete the reconciliation for the contracts associated with
these adjustments and make the correcting entries. DOD has indicated
that it will be later this year before the correct entries are made.
* In June 2001, we reported[Footnote 7] that DOD‘s financial systems
could not adequately track and report on whether the $1.1 billion in
earmarked funds that the Congress provided to DOD for spare parts and
associated logistical support were actually used for their intended
purpose. The vast majority of the funds”92 percent”were transferred to
the military services operation and maintenance accounts. Once the
funds were transferred into the operation and maintenance accounts, the
department could not separately track the use of the funds. As a result,
DOD lost its ability to assure the Congress that the funds it received
for spare parts purchases were used for, and only for, that purpose.
Problems with the department‘s financial management operations go far
beyond its accounting and finance systems and processes. The department
continues to rely on a far-flung, complex network of finance, logistics,
personnel, acquisition, and other management information systems”80
percent of which are not under the control of the DOD Comptroller”to
gather the financial data needed to support the day-to-day management
decision making. This network was not designed to be, but rather has
evolved into, the overly complex and error-prone operation that exists
today, including (1) little standardization across DOD components,
(2) multiple systems performing the same tasks, (3) the same data
stored in multiple systems, (4) manual data entry into multiple
systems, and (5) a large number of data translations and interfaces
that combine to exacerbate problems with data integrity.
Many of the department‘s business operations are mired in old,
inefficient processes and legacy systems, some of which go back to the
1950s and 1960s. For example, the department still relies on the
Mechanization of Contract Administration Services (MOCAS) system”which
dates back to 1968”to process a substantial portion of the contract
payment transactions for all DOD organizations. In fiscal year 2001,
MOCAS processed an estimated $78 billion in contract payments. Past
efforts to replace MOCAS have failed and the current effort has been
delayed. As a result, for the foreseeable future, DOD will continue to
be saddled with MOCAS.
In the 1970s, we issued numerous reports detailing serious problems with
the department‘s financial management operations. Between 1975 and
1981, we issued more than 75 reports documenting serious problems with
DOD‘s cost, property, fund control, and payroll accounting systems. In
the 1980s, we found that despite the billions of dollars invested in
individual systems, these efforts, too, fell far short of the mark,
with extensive schedule delays and cost overruns. For example, our 1989
report[Footnote 8] on eight major DOD system development
efforts”including two major accounting systems”under way at that time,
showed that system development cost estimates doubled, two of the eight
efforts were abandoned, and the remaining six efforts experienced
delays of 3 to 7 years.
Two recent specific system endeavors that have fallen short of their
intended goals are the Standard Procurement System and the Defense Joint
Accounting System. Both of these efforts were aimed at improving the
department‘s financial management and related business operations.
Standard Procurement System (SPS). In November 1994, DOD began the SPS
program to acquire and deploy a single automated system to perform all
contract management-related functions within DOD‘s procurement process
for all DOD organizations and activities. The laudable goal of SPS was
to replace 76 existing procurement systems with a single departmental
system. DOD estimated that SPS had a life-cycle cost of approximately
$3 billion over a 10-year period. According to DOD, SPS was to support
about 43,000 users at over 1,000 sites worldwide and was to interface
with key financial management functions such as payment processing.
Additionally, SPS was intended to replace the contract administration
functions currently performed by MOCAS. Our July 2001 report[Footnote 9
and February 2002 testimony[Footnote 10] before this Subcommittee
identified weaknesses in the department‘s management of its investment
in SPS. Specifically:
* The department had not economically justified its investment in the
program because its latest (January 2000) analysis of costs and benefits
was not credible. Further, this analysis showed that the system, as
defined, was not a cost-beneficial investment.
* The department was not accumulating actual program costs and
therefore, did not know the total amount spent on the program to date,
yet life-cycle cost projections had grown from about $3 billion to $3.7
billion.
* Although the department committed to fully implementing the system
by March 31, 2000, this target date had slipped by over 3 ½ years to
September 30, 2003, and program officials have recently stated that this
date will also not be met.
We recommended that the Secretary of Defense make additional
investments in SPS conditional upon first demonstrating that the
existing version of SPS is producing benefits that exceed costs and
that future investment decisions, including those regarding operations
and maintenance beyond fiscal year 2001, be based on complete and
reliable economic justifications.
Defense Joint Accounting System (DJAS). In 1997, DOD selected DJAS
[Footnote 11] to be one of three general fund accounting systems.
[Footnote 12] As originally envisioned, DJAS would perform the
accounting for the Army and the Air Force as well as the DOD
transportation and security assistance areas. Subsequently, in February
1998, Defense Finance and Accounting Service (DFAS) decided that the
Air Force could withdraw from using DJAS. DFAS made the decision
because either the Air Force processes or the DJAS processes would need
significant reengineering to allow for the development of a joint
accounting system. As a result, the Air Force was allowed to start
development of its own general fund accounting system”General Fund and
Finance System”which resulted in the development of a fourth general
fund accounting system.
In June 2000, the DOD Inspector General reported[Footnote 13] that DFAS
was developing DJAS at an estimated life-cycle cost of about $700
million without demonstrating that the program was the most cost-
effective alternative for providing a portion of DOD‘s general fund
accounting. More specifically, the report stated that DFAS had not
developed a complete or fully supportable feasibility study, analysis
of alternatives, economic analysis, acquisition program baseline, or
performance measures, and had not reengineered business processes.
According to data provided by DFAS, for fiscal years 1997-2000
approximately $120 million was spent on the development and
implementation of DJAS. However, today DJAS is only being operated at
two locations”Ft. Benning, Georgia, and the Missile Defense Agency.
According to a DFAS official, DJAS is considered to be fully
deployed”which means it is operating at all intended locations.
Significant resources”in terms of dollars, time, and people”have been
invested in these two efforts, without demonstrated improvement in DOD‘s
business operations. It is essential that DOD ensure that its
investment in systems modernization results in more effective and
efficient business operations, since every dollar spent on ill-fated
efforts such as SPS and DJAS is one less dollar available for other
defense spending priorities.
Underlying Causes of Financial and Related Business Process Reform
Challenges:
As part of our constructive engagement approach with DOD, the
Comptroller General met with Secretary Rumsfeld last summer to provide
our perspectives on the underlying causes of the problems that have
impeded past reform efforts at the department and to discuss options for
addressing these challenges. There are four underlying causes:
* a lack of sustained top-level leadership and management accountability
for correcting problems;
* deeply embedded cultural resistance to change, including military
service parochialism and stovepiped operations;
* a lack of results-oriented goals and performance measures and
monitoring; and;
* inadequate incentives for seeking change.
Lack of Sustained Leadership and Accountability:
Historically, DOD has not routinely assigned accountability for
performance to specific organizations or individuals who have sufficient
authority to accomplish desired goals. For example, under the CFO Act,
it is the responsibility of agency CFOs to establish the mission and
vision for the agency‘s future financial management. However, at DOD,
the Comptroller”who is by statute the department‘s CFO”has direct
responsibility for only an estimated 20 percent of the data relied on
to carry out the department‘s financial management operations.
* The department has learned through its efforts to meet the Year 2000
computing challenge that to be successful, major improvement
initiatives must have the direct, active support and involvement of the
Secretary and Deputy Secretary of Defense. In the Year 2000 case, the
then Deputy Secretary of Defense was personally and substantially
involved and played a major role in the department‘s success. Such top-
level support and attention helps ensure that daily activities
throughout the department remain focused on achieving shared, agencywide
outcomes. A central finding from our report on our survey of best
practices of world-class financial management organizations” Boeing;
Chase Manhattan Bank; General Electric; Pfizer; Hewlett-Packard; Owens
Corning; and the states of Massachusetts, Texas, and Virginia” was that
clear, strong executive leadership was essential to (1) making
financial management an entitywide priority, (2) redefining the role of
finance, (3) providing meaningful information to decision makers, and
(4) building a team of people that delivers results.[Footnote 14]
DOD‘s past experience has suggested that top management has not had a
proactive, consistent, and continuing role in building capacity,
integrating daily operations for achieving performance goals, and
creating incentives. Sustaining top management commitment to
performance goals is a particular challenge for DOD. In the past, the
average 1.7-year tenure of the department‘s top political appointees
has served to hinder long-term planning and follow-through.
Cultural Resistance and Parochialism:
Cultural resistance to change and military service parochialism have
also played a significant role in impeding previous attempts to
implement broad-based management reforms at DOD. The department has
acknowledged that it confronts decades-old problems deeply grounded in
the bureaucratic history and operating practices of a complex,
multifaceted organization, and that many of these practices were
developed piecemeal and evolved to accommodate different organizations,
each with its own policies and procedures.
For example, as discussed in our July 2000 report,[Footnote 15] the
department encountered resistance to developing departmentwide
solutions under the then Secretary‘s broad-based DRI. In 1997, the
department established a Defense Management Council”including high-
level representatives from each of the military services and other
senior executives in the Office of the Secretary of Defense”which was
intended to serve as the ’board of directors“ to help break down
organizational stovepipes and overcome cultural resistance to change
called for under DRI. However, we found that the council‘s
effectiveness was impaired because members were not able to put their
individual military services‘ or DOD agencies‘ interests aside to focus
on departmentwide approaches to long-standing problems.
Cultural resistance to change has impeded reforms not only in financial
management, but also in other business areas, such as weapon system
acquisition and inventory management. For example, as we reported
[Footnote 16] last year, while the individual military services conduct
considerable analyses justifying major acquisitions, these analyses can
be narrowly focused and do not consider joint acquisitions with the
other services. In the inventory management area, DOD‘s culture has
supported buying and storing multiple layers of inventory rather than
managing with just the amount of stock needed.
Unclear Goals and Performance Measures:
DOD‘s past reform efforts have been handicapped by the lack of clear,
linked goals and performance measures. As a result, DOD managers lack
straightforward road maps showing how their work contributes to
attaining the department‘s strategic goals, and they risk operating
autonomously rather than collectively. In some cases, DOD had not yet
developed appropriate strategic goals, and in other cases, its
strategic goals and objectives were not linked to those of the military
services and defense agencies.
As part of our assessment of DOD‘s Fiscal Year 2000 Financial
Management Improvement Plan, we reported[Footnote 17] that, for the
most part, the plan represented the military services‘ and defense
components‘ stovepiped approaches to reforming financial management and
did not clearly articulate how these various efforts would collectively
result in an integrated DOD-wide approach to financial management
improvement. In addition, we reported that the department‘s plan did
not include performance measures that could be used to assess DOD‘s
progress in resolving its financial management problems. DOD officials
have informed us that they are now working to revise the department‘s
approach to this plan so that future years‘ updates will reflect a more
strategic, departmentwide vision and provide a more effective tool for
financial management reform.
As it moves to modernize its systems, the department faces a formidable
challenge in responding to technological advances that are changing
traditional approaches to business management. For fiscal year 2003,
DOD‘s information technology budgetary request of approximately $26
billion will support a wide range of military operations as well as DOD
business functions. As we have reported,[Footnote 18] while DOD plans
to invest billions of dollars in modernizing its financial management
and other business support systems, it does not yet have an overall
blueprint”or enterprise architecture”in place to guide and direct these
investments. As we recently testified,[Footnote 19] our review of
practices at leading organizations showed they were able to make sure
their business systems addressed corporate”rather than individual
business unit”objectives by using enterprise architectures to guide and
constrain investments. Consistent with our recommendation, DOD is now
working to develop a financial management enterprise architecture,
which is a very positive development.
Lack of Incentives for Change:
The final underlying cause of the department‘s long-standing inability
to carry out needed fundamental reform has been the lack of incentives
for making more than incremental change to existing ’business-as-usual“
processes, systems, and structures. Traditionally, DOD has focused on
justifying its need for more funding rather than on the outcomes its
programs have produced. DOD generally measures its performance by the
amount of money spent, people employed, or number of tasks completed.
Incentives for its decision makers to implement changed behavior have
been minimal or nonexistent. Secretary Rumsfeld perhaps said it best in
announcing his planned transformation at DOD: ’There will be real
consequences from, and real resistance to, fundamental change.“
This lack of incentive has perhaps been most evident in the department‘s
acquisition area. In DOD‘s culture, the success of a manager‘s career
has depended more on moving programs and operations through the DOD
process than on achieving better program outcomes. The fact that a given
program may have cost more than estimated, taken longer to complete, and
not generated results or performed as promised was secondary to
fielding a new program. To effect real change, actions are needed to
(1) break down parochialism and reward behaviors that meet DOD-wide and
congressional goals; (2) develop incentives that motivate decision
makers to initiate and implement efforts that are consistent with
better program outcomes, including saying ’no“ or pulling the plug on a
system or program that is failing; and (3) facilitate a congressional
focus on results-oriented management, particularly with respect to
resource-allocation decisions.
Independent Assessment Calls for the Reform of DOD‘s Financial
Operations:
Recognizing the need for improved financial data to effectively manage
the department‘s vast operations, Secretary Rumsfeld commissioned an
independent study to recommend a strategy for financial management
improvements. The report[Footnote 20] recognized that the department
would have to undergo ’a radical financial management transformation“
and that it would take more than a decade to achieve. The report also
noted that DOD‘s current financial, accounting, and feeder systems do
not provide relevant, reliable, and timely information. Further, the
report pointed out that the ’support of management decision-making“ is
generally not an objective of the financially based information
currently developed or planned for future development. Additionally,
the report stated that although the department had numerous system
projects underway, they were narrowly focused, lacked senior management
leadership, and were not part of an integrated DOD-wide strategy. The
report also noted that the systemic problems discussed were not
strictly financial management problems and could not be solved by DOD‘s
financial community. Rather, the solution would require the ’concerted
effort and cooperation of cross-functional communities throughout the
department.“
The report recommended an integrated approach to transform the
department‘s financial operations. The report noted that its proposed
framework would take advantage of certain ongoing improvement actions
within the department and provide specific direction for a more
coordinated, managed, and results-oriented approach. The proposed
course of action for transforming the department‘s financial management
centered around six broad elements: (1) leadership, (2) incentives, (3)
accountability, (4) organizational alignment, (5) changes in certain
rules, and (6) changes in enterprise practices.
The report referred to its approach as a ’twin-track“ course of action.
The first track employs a DOD-wide management approach to developing
standard integrated systems; obtaining relevant, reliable, and timely
financial data; and providing incentives for the department to utilize
financial data in an efficient and effective way. This track will
require a longer time frame and will include establishing a centralized
oversight process under the DOD Comptroller for incrementally
implementing the recommended structural changes and developing
standard, integrated financial systems.
The second track focuses on targeting, selecting, and overseeing
implementation of a limited number of intraservice/cross-service
projects for major cost savings or other high-value benefits under a
process led by the DOD Comptroller and assisting the Secretary of
Defense in establishing and managing a set of metrics. Prime tools of
such improvements would include activity-based costing and
benchmarking/best practices analysis to identify cost-saving
opportunities.
A July 19, 2001, departmental memorandum from Secretary Rumsfeld
confirmed that the department needs to develop and implement an
architecture for achieving integrated financial and accounting systems
in order to generate relevant, reliable, and timely information on a
routine basis. Secretary Rumsfeld further reiterated the need for a
fundamental transformation of DOD in his ’top-down“ Quadrennial Defense
Review. Specifically, his September 30, 2001, Quadrennial Defense
Review Report concluded that the department must transform its outdated
support structure, including decades-old financial systems that are not
well interconnected. The report summed up the challenge well in stating:
’While America‘s businesses have streamlined and adopted new business
models to react to fast-moving changes in markets and technologies, the
Defense Department has lagged behind without an overarching strategy to
improve its business practices.“
Keys to Fundamental DOD Financial Management Reform:
Our experience has shown there are several key elements that
collectively would enable the department to effectively address the
underlying causes of its inability to resolve its long-standing
financial management problems. For the most part these elements are
consistent with those discussed in the department‘s April 2001
financial management transformation report. These elements, which we
believe are key to any successful approach to financial management
reform, include:
* addressing the department‘s financial management challenges as part
of a comprehensive, integrated, DOD-wide business reform;
* providing for sustained leadership by the Secretary of Defense and
resource control to implement needed financial management reforms;
* establishing clear lines of responsibility, authority, and
accountability for such reform tied to the Secretary;
* incorporating results-oriented performance measures and monitoring
tied to financial management reforms;
* providing appropriate incentives or consequences for action or
inaction;
* establishing and implementing an enterprise architecture to guide and
direct financial management modernization investments; and;
* ensuring effective oversight and monitoring.
Actions on many of the key areas central to successfully achieving
desired financial management and related business transformation goals”
particularly those that rely on longer term systems improvements”will
take a number of years to fully implement. Secretary Rumsfeld has
estimated that his envisioned transformation may take 8 or more years to
complete. Our research and experience with other federal agencies have
shown that this is not an unrealistic estimate. Additionally, these keys
should not be viewed as independent actions, but rather, a set of
interrelated and interdependent actions that are collectively critical
to transforming DOD‘s business operations.
Consequently, both long-term actions focused on the Secretary‘s
envisioned business transformation and short-term actions focused on
improvements within existing systems and processes will be critical
going forward. Short-term actions in particular will be critical if the
department is to achieve the greatest possible accountability over
existing resources and more reliable data for day-to-day decision
making while longer term systems and business process reengineering
efforts are under way. Beginning with the Secretary‘s recognition of a
need for a fundamental transformation of the department‘s business
operations and building on some of the work begun under past
administrations, DOD has taken a number of positive steps in many of
these key areas, but these steps are only a beginning. Challenges
remain in each of these key areas that are formidable.
Integrated Business Reform Strategy:
As we previously reported,[Footnote 21] establishing the right goal is
essential for success. Central to effectively addressing DOD‘s
financial management problems will be the recognition that they cannot
be addressed in an isolated, stovepiped, or piecemeal fashion separate
from the other high-risk areas facing the department.[Footnote 22]
Further, successfully reforming the department‘s operations”which
consist of people, business processes, and technology”will be critical
if DOD is to effectively address the deep-rooted organizational
emphasis on maintaining business-as-usual across the department.
Financial management is a crosscutting issue that affects virtually all
of DOD‘s business areas. For example, improving its financial management
operations so that they can produce timely, reliable, and useful cost
information is essential to effectively measure its progress toward
achieving many key outcomes and goals across virtually the entire
spectrum of DOD‘s business operations. At the same time, the
department‘s financial management problems”and, most importantly, the
keys to their resolution”are deeply rooted in and dependent upon
developing solutions to a wide variety of management problems across
DOD‘s various organizations and business areas. For example, we have
reported[Footnote 23] that many of DOD‘s financial management
shortcomings were attributable in part to human capital issues. The
department does not yet have a strategy in place for improving its
financial management human capital. This is especially critical in
connection with DOD‘s civilian workforce, since DOD has generally done
a much better job in conjunction with human capital planning for its
military personnel. In addition, DOD‘s civilian personnel face a
variety of size, shape, skills, and succession-planning challenges that
need to be addressed.
As we mentioned earlier, and it bears repetition, the department has
reported that an estimated 80 percent of the data needed for sound
financial management comes from its other business operations, such as
its acquisition and logistics communities. DOD‘s vast array of costly,
nonintegrated, duplicative, and inefficient financial management
systems is reflective of its lack of an integrated approach to
addressing management challenges. DOD has acknowledged that one of the
reasons for the lack of clarity in its reporting under the Government
Performance and Results Act has been that most of the program outcomes
the department is striving to achieve are interrelated, while its
management systems are not integrated.
As we discussed previously, the Secretary of Defense has made the
fundamental transformation of business practices throughout the
department a top priority. In this context, the Secretary established a
number of top-level committees, councils, and boards, including the
Senior Executive Committee, Business Initiative Council, and Defense
Business Practices Implementation Board. The Senior Executive Committee
was established to help guide efforts across the department to improve
its business practices. This committee”chaired by the Secretary of
Defense, and with membership to include the Deputy Secretary, the
military service secretaries, and the Under Secretary of Defense for
Acquisition, Technology and Logistics”was established to function as
the ’board of directors“ for the department. The Business Initiative
Council”comprising the military service secretaries and headed by the
Under Secretary of Defense for Acquisition, Technology and Logistics”was
established to encourage the military services to explore new money-
saving business practices to help offset funding requirements for
transformation and other initiatives.
Our research of successful public and private sector organizations shows
that such entities, comprised of enterprisewide executive leadership,
provide valuable guidance and direction when pursuing integrated
solutions to corporate problems. Inclusion of the department‘s top
leadership should help to break down the cultural barriers to change and
result in an integrated DOD approach for business reform.
Sustained Leadership and Resource Control:
The department‘s successful Year 2000 effort illustrated, and our
survey of leading financial management organizations[Footnote 24]
captured, the importance of strong leadership from top management. As
we have stated many times before, strong, sustained executive
leadership is critical to changing a deeply rooted corporate
culture”such as the existing ’business-as-usual“ culture at DOD”and to
successfully implementing financial management reform. In the case of
the Year 2000 challenge the personal, active involvement of the Deputy
Secretary of Defense played a key role in building entitywide support
and focus. Given the long-standing and deeply entrenched nature of the
department‘s financial management problems”combined with the numerous
competing DOD organizations, each operating with varying, often
parochial views and incentives”such visible, sustained top-level
leadership will be critical.
In discussing their April 2001 report to the Secretary of Defense on
transforming financial management,[Footnote 25] the authors stated
that, ’unlike previous failed attempts to improve DOD‘s financial
practices, there is a new push by DOD leadership to make this issue a
priority.“ Strong, sustained executive leadership”over a number of
years and administrations”will be key to changing a deeply rooted
culture. In addition, given that significant investments in information
systems and related processes have historically occurred in a largely
decentralized manner throughout the department, additional actions will
likely be required to implement centralized information technology
investment control.
In our May 2001 report[Footnote 26] we recommended that DOD take action
to provide senior departmental commitment and leadership through
establishment of a enterprisewide steering committee sponsored by the
Secretary, that could guide development of a transformation blueprint
and provide for centralized control over investments to ensure funding
is provided for only those proposed investments in systems and business
reforms that are consistent with the blueprint. Absent such a control,
DOD runs the serious risk that the fiscal year 2003 information
technology budgetary request of approximately $26 billion and future
years‘ requests will not result in marked improvement in DOD‘s business
operations. Without such an approach, DOD runs the risk of spending
billions of dollars on systems modernization, which continues to
perpetuate the existing systems environment that suffers from
duplication of systems, limited interoperability, and unnecessarily
costly operations and maintenance and will preclude DOD from achieving
the Secretary‘s vision of improved financial information on the results
of departmental operations.
Additionally, as previously discussed, the tenure of the department‘s
top political appointees has generally been short in duration and as a
result it is sometimes difficult to maintain the focus and momentum
that is needed to resolve the management challenges facing DOD. The
resolution of the array of interrelated business system management
challenges previously discussed is likely to require a number of years
and therefore span several administrations. The Comptroller General has
proposed in congressional testimony that one option to consider to
address the continuity issue would be the establishment of the position
of chief operating officer. This position could be filled by an
individual appointed for a set term of 5 to 7 years with the potential
for reappointment. Such an individual should have a proven track record
as a business process change agent for large, diverse organizations and
would spearhead business process transformation across the department.
Clear Lines of Responsibility and Accountability:
Last summer, when the Comptroller General met with Secretary Rumsfeld,
he stressed the importance of establishing clear lines of
responsibility, decision-making authority, and resource control for
actions across the department tied to the Secretary as a key to reform.
As we previously reported,[Footnote 27] such an accountability
structure should emanate from the highest levels and include the
secretary of each of the military services as well as heads of the
department‘s various major business areas.
The Secretary of Defense has taken action to vest responsibility and
accountability for financial management modernization with the DOD
Comptroller. In October 2001, the DOD Comptroller, as previously
mentioned, established the Financial Management Modernization
Executive[Footnote 28] and Steering Committees as the governing bodies
that oversee the activities related to this modernization effort and
also established a supporting working group to provide day-to-day
guidance and direction in these efforts. DOD reports that the executive
and steering committees met for the first time in January 2002. At the
request of the Subcommittee on Readiness and Management Support, Senate
Committee on Armed Services, we are initiating a review of the
department‘s efforts to develop and implement an enterprise
architecture. As part of the effort, we will be assessing the
department‘s efforts to align current investments in financial systems
with the proposed architecture.
It is clear to us that the DOD Comptroller has the full support of the
Secretary and that the Secretary is committed to making meaningful
change. The key is to translate this support into a funding control
mechanism that ensures DOD‘s components information technology
investments are aligned with the department‘s strategic blueprint.
Addressing issues such as centralization of authority for information
systems investments and continuity of leadership is critical to
successful business transformation. To make this work, it is important
that the DOD Comptroller have sufficient authority to oversee the
investment decisions in order to bring about the full, effective
participation of the military services and business process owners
across the department.
Results-oriented Performance:
As discussed in our January 2001 report on DOD‘s major performance and
accountability challenges,[Footnote 29] establishing a results
orientation is another key element of any approach to reform. Such an
orientation should draw upon results that could be achieved through
commercial best practices, including outsourcing and shared servicing
concepts. Personnel throughout the department must share the common
goal of establishing financial management operations that not only
produce financial statements that can withstand the test of an audit
but more importantly, routinely generate useful, reliable, and timely
financial information for day-to-day management purposes.
In addition, we have previously testified[Footnote 30] that DOD‘s
financial management improvement efforts should be measured against an
overall goal of effectively supporting DOD‘s basic business processes,
including appropriately considering related business process system
interrelationships, rather than determining system-by-system compliance.
Such a results-oriented focus is also consistent with an important
lesson learned from the department‘s Year 2000 experience. DOD‘s
initial Year 2000 focus was geared toward ensuring compliance on a
system-by-system basis and did not appropriately consider the
interrelationships of systems and business areas across the department.
It was not until the department, under the direction of the then Deputy
Secretary, shifted to a core mission and function review approach that
it was able to achieve the desired result of greatly reducing its Year
2000 risk.
Since the Secretary has established an overall business process
transformation goal that will require a number of years to achieve,
going forward it is especially critical for managers throughout the
department to focus on specific metrics that, over time, collectively
will translate to achieving this overall goal. It is important for the
department to refocus its annual accountability reporting on this
overall goal of fundamentally transforming the department‘s financial
management systems and related business processes to include
appropriate interim annual measures for tracking progress toward this
goal.
In the short term, it is important to focus on actions that can be
taken using existing systems and processes. It is critical to establish
interim measures to both track performance against the department‘s
overall transformation goals and facilitate near-term successes using
existing systems and processes. The department has established an
initial set of metrics intended to evaluate financial performance, and
it reports that it has seen improvements. For example, with respect to
closed appropriation accounts, DOD reported during the first 6 months
of fiscal year 2002 a reduction in the dollar value of adjustments to
closed appropriation accounts of about 80 percent from the same 6-month
period in fiscal year 2001. Other existing metrics concern cash and
funds management, contract and vendor payments, and disbursement
accounting. We are initiating a review of DOD‘s short-term financial
management performance metrics and will provide the Subcommittee the
results of our review. DOD also reported that it is working to develop
these metrics into higher-level measures more appropriate for senior
management. We agree with the department‘s efforts to expand the use of
appropriate metrics to guide its financial management reform efforts.
Incentives and Consequences:
Another key to breaking down the parochial interests and stovepiped
approaches that have plagued previous reform efforts is establishing
mechanisms to reward organizations and individuals for behaviors that
comply with DOD-wide and congressional goals. Such mechanisms should
be geared to providing appropriate incentives and penalties to motivate
decision makers to initiate and implement efforts that result in
fundamentally reformed financial management and other business support
operations.
In addition, such incentives and consequences are essential if DOD is to
break down the parochial interests that have plagued previous reform
efforts. Incentives driving traditional ways of doing business, for
example, must be changed, and cultural resistance to new approaches
must be overcome. Simply put, DOD must convince people throughout the
department that they must change from business-as-usual systems and
practices or they are likely to face serious consequences,
organizationally and personally.
Enterprise Architecture:
Enterprise architecture development, implementation, and maintenance
are a basic tenet of effective information technology management. Used
in concert with other information technology management controls, an
architecture can increase the chances for optimal mission performance.
We have found that attempting to modernize operations and systems
without an architecture leads to operational and systems duplication,
lack of integration, and unnecessary expense. Our best practices
research of successful public and private sector organizations has
similarly identified enterprise architectures as essential to effective
business and technology transformation.[Footnote 31]
Establishing and implementing a financial management enterprise
architecture is essential for the department to effectively manage its
modernization effort. The Clinger-Cohen Act requires major departments
and agencies to develop, implement, and maintain an integrated
architecture. As we previously reported,[Footnote 32] such an
architecture can help ensure that the department invests only in
integrated, business system solutions and, conversely, will help move
resources away from non-value-added legacy business systems and
nonintegrated business system development efforts. Without an
enterprise architecture to guide and constrain information technology
investments, DOD runs the serious risk that its system efforts will
perpetuate the existing system environment that suffers from systems
duplication, limited interoperability, and unnecessarily costly
operations and maintenance.
In our May 2001 report,[Footnote 33] we pointed out that DOD lacks a
financial management enterprise architecture to guide and constrain the
billions of dollars it plans to spend to modernize its financial
management operations and systems. According, we recommended that the
department develop and implement an architecture in accordance with
DOD‘s policies and guidance and that senior management be involved in
the investment decision-making process.
DOD has awarded a contract for the development of a DOD-wide financial
management enterprise architecture to ’achieve the Secretary‘s vision of
relevant, reliable and timely financial information needed to support
informed decision-making.“ In fiscal year 2002, DOD received
approximately $98 million and has requested another $96 million for
fiscal year 2003 for this effort. Consistent with the recommendations
contained in our January 1999[Footnote 34] and May 2001 reports, DOD
has begun an extensive effort to document the department‘s current ’as-
is“ financial management architecture by identifying systems currently
relied upon to carry out financial management operations throughout the
department. To date, the department has identified over 1,100 systems
that are involved in the processing of financial information. In
developing the ’as-is“ environment DOD has recognized that financial
management is broader than just accounting and finance systems. Rather,
it includes the department‘s budget formulation, acquisition, inventory
management, logistics, personnel, and property management systems.
In developing and implementing its enterprise architecture, DOD needs to
ensure that the multitude of systems efforts currently underway are
designed as an integral part of the architecture. As discussed in our
May 2001 report,[Footnote 35] the Army and the Defense Logistics Agency
(DLA) are investing in financial management solutions that are
estimated to cost about $700 million and $900 million, respectively.
Further, the Naval Audit Service has reported that the Navy has efforts
underway which are estimated to cost about $2.5 billion.[Footnote 36]
These programs”commercial enterprise resource planning (ERP)
products”are intended to implement different commercially available
products for automating and reengineering various operations within the
organization.[Footnote 37] Among the functions that these ERP programs
address is financial management. However, since DOD has yet to develop
and implement its architecture, there is no assurance that these
separate efforts will result in systems that are compatible with the
DOD designated architecture. For example, the Naval Audit Service
reported that there are interoperability problems with the four Navy
ERP efforts and the entire program lacks appropriate management
oversight.
The effort to develop a financial management architecture will be
further complicated as the department strives to develop multiple
architectures across its various business areas and organizational
components. For example, in June 2001, we recommended[Footnote 38] that
the DLA develop an architecture to guide and constrain its Business
Systems Modernization acquisition. Additionally, we recommended that
the department develop a DOD-wide logistics management architecture
that would promote interoperability and avoid duplication among the
logistics modernization efforts now under way in DOD component
organizations, such as DLA and the military services.
As previously discussed, control and accountability over investments are
critical. DOD can ill-afford another CIM, which invested billion of
dollars but did not result in systems that were capable of providing DOD
management and the Congress with more accurate, timely, and reliable
information of the results of the department‘s vast operations. To
better control DOD‘s investments we recommended in our May 2001 report,
[Footnote 39] that until the architecture is developed investments
should be limited to (1) deployment of systems that have already been
fully tested and involve no additional development or acquisition cost,
(2) stay-in-business maintenance needed to keep existing systems
operational, (3) management controls needed to effectively invest in
modernized systems, and (4) new systems or existing system changes that
are congressionally directed or are relatively small, cost effective,
and low risk and can be delivered in a relatively short time frame.
Monitoring and Oversight:
Ensuring effective monitoring and oversight of progress will also be
key to bringing about effective implementation of the department‘s
financial management and related business process reform. We have
previously testified[Footnote 40] that periodic reporting of status
information to department top management, the Office of Management and
Budget (OMB), the Congress, and the audit community is another key
lesson learned from the department‘s successful effort to address its
Year 2000 challenge.
Previous submissions of the department‘s Financial Management
Improvement Plan have simply been compilations of data call information
on the stovepiped approaches to financial management improvements
received from the various DOD components. It is our understanding that
DOD plans to change its approach and anchor the plan in the enterprise
architecture. If the department‘s future plans are upgraded to provide a
departmentwide strategic view of the financial management challenges
facing the department, along with planned corrective actions, these
plans can serve as an effective tool not only to help guide and direct
the department‘s financial management reform efforts, but also to help
maintain oversight of the department‘s financial management operations.
Going forward, this Subcommittee‘s oversight hearings, as well as the
active interest and involvement of the defense appropriations and
authorization committees, will continue to be key to effectively
achieving and sustaining DOD‘s financial management and related
business process reform milestones and goals.
In conclusion, we support Secretary Rumsfeld‘s vision for transforming
the department‘s financial and business related operations. The
continued leadership and support of the Secretary and other DOD top
executives will be essential to successfully change the DOD culture
that has over time perpetuated the status quo and been resistant to a
transformation of the magnitude envisioned by the Secretary.
Comptroller Zakheim, as the Secretary‘s leader for financial management
modernization, will need to have the authority to make the difficult
investment decisions involving the billions of dollars being spent on
systems across the department. DOD business operations”people,
processes, and technology”will have to be reengineered and stovepiped
and internally focused approaches will have to be put aside. The past
has taught us that well-intentioned initiatives will only succeed if
they are transparent and the incentives and accountability mechanisms
are in place.
The events of September 11 and other funding and asset accountability
issues associated with the war on terrorism, at least in the short
term, may dilute the focused attention and sustained action that are
necessary to fully realize the Secretary‘s transformation goal, which
is understandable given the circumstances. At the same time, the demand
for increased defense spending, when combined with the government‘s
long-range fiscal challenges, means that solutions to DOD‘s business
systems problems are even more important. As the Secretary has noted,
billions of dollars of resources could be freed up for national defense
priorities by eliminating waste and inefficiencies in DOD‘s existing
business processes. Only time will tell if the Secretary‘s current
transformation efforts will come to fruition. Others have attempted
well-intentioned reform efforts in the past. Today, the momentum exists
for reform. But, the real question remains, will this momentum continue
to exist next month, next year, and throughout the years to make the
necessary cultural, systems, human capital, and other key changes a
reality? For our part, we will continue to work constructively with the
department and the Congress in this important area.
Mr. Chairman, this concludes my statement. We would be pleased to
answer any questions you or other members of the Subcommittee may have
at this time.
Contacts and Acknowledgments:
For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-9095 or kutzg@gao.gov, Randolph C. Hite at (202) 512-
3439 or hiter@gao.gov, or David R. Warren at (202) 512-8412 or
warrend@gao.gov. Other key contributors to this testimony include
Geoffrey Frank, Paul Francis, Cynthia Jackson, John Ryan, Darby Smith,
and Jenniffer Wilson.
[End of section]
Footnotes:
[1] U.S. General Accounting Office, High-Risk Series: An Update,
[hyperlink, http://www.gao.gov/products/GAO-01-263] (Washington, D.C.:
Jan. 2001).
[2] U.S. General Accounting Office, Defense Management: Actions Needed
to Sustain Reform Initiatives and Achieve Greater Results, [hyperlink,
http://www.gao.gov/products/GAO/NSIAD-00-72] (Washington, D.C.: July
25, 2000).
[3] U.S. General Accounting Office, High-Risk Series: Information
Management and Technology, [hyperlink,
http://www.gao.gov/products/GAO/HR-97-9] (Washington, D.C.: Feb. 1997).
[4] U.S. General Accounting Office, Purchase Cards: Continued Control
Weaknesses Leave Two Navy Units Vulnerable to Fraud and Abuse,
[hyperlink, http://www.gao.gov/products/GAO-02-504T] (Washington, D.C.:
Mar. 13, 2002).
[5] U.S. General Accounting Office, Purchase Cards: Control Weaknesses
Leave Two Navy Units Vulnerable to Fraud and Abuse,[hyperlink,
http://www.gao.gov/products/GAO-01-995T] (Washington, D.C.: July 30,
2001).
[6] U.S. General Accounting Office, Canceled DOD Appropriations: $615
Million of Illegal or Otherwise Improper Adjustments, [hyperlink,
http://www.gao.gov/products/GAO-01-994T] (Washington, D.C.: July 26,
2001).
[7] U.S. General Accounting Office, Defense Inventory: Information on
the Use of Spare Parts Funding Is Lacking, [hyperlink,
http://www.gao.gov/products/GAO-01-472] (Washington, D.C.: June 11,
2001).
[8] U.S. General Accounting Office, Automated Information Systems:
Schedule Delays and Cost Overruns Plague DOD Systems, [hyperlink,
http://www.gao.gov/products/GAO/IMTEC-89-36] (Washington, D.C.: May 10,
1989).
[9] U.S. General Accounting Office, DOD Systems Modernization:
Continued Investment in the Standard Procurement System Has Not Been
Justified, [hyperlink, http://www.gao.gov/products/GAO-01-682]
(Washington, D.C.: July 31, 2001).
[10] U.S. General Accounting Office, DOD‘s Standard Procurement System:
Continued Investment Has Yet to Be Justified, [hyperlink,
http://www.gao.gov/products/GAO-02-392T] (Washington, D.C.: Feb. 7,
2002).
[11] The original name of the system was the Corps of Engineers
Financial Management System (CEFMS). After it was determined that CEFMS
could be modified to satisfy Army customers and had the potential for
supporting the Defense Working Capital Funds, DFAS selected CEFMS to
meet the DJAS requirements.
[12] The other two general fund systems were the Standard Accounting
and Reporting System and the Standard Accounting and Budgetary
Reporting System.
[13] Department of Defense Office of the Inspector General, Acquisition
of the Defense Joint Accounting System, Report No. D-2000-151
(Arlington, VA.: June 16, 2000).
[14] U.S. General Accounting Office, Executive Guide: Creating Value
Through World-class Financial Management, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-134] (Washington, D.C.: Apr.
2000).
[15] [hyperlink, http://www.gao.gov/products/GAO/NSIAD-00-72].
[16] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Defense, [hyperlink,
http://www.gao.gov/products/GAO-01-244] (Washington D.C.: Jan. 2001).
[17] U.S. General Accounting Office, Financial Management: DOD
Improvement Plan Needs Strategic Focus, [hyperlink,
http://www.gao.gov/products/GAO-01-764] (Washington D.C.: Aug. 17,
2001).
[18] U.S. General Accounting Office, Information Technology:
Architecture Needed to Guide Modernization of DOD‘s Financial
Operations, [hyperlink, http://www.gao.gov/products/GAO-01-525]
(Washington, D.C.: May 17, 2001).
[19] U.S. General Accounting Office, Defense Acquisitions: DOD Faces
Challenges in Implementing Best Practices, [hyperlink,
http://www.gao.gov/products/GAO-02-469T] (Washington, D.C.: Feb. 27,
2002).
[20] Department of Defense, Transforming Department of Defense
Financial Management: A Strategy for Change (Washington, D.C.: Apr. 13,
2001).
[21] U.S. General Accounting Office, Department of Defense: Progress in
Financial Management Reform, [hyperlink,
http://www.gao.gov/products/GAO/T-AIMD/NSIAD-00-163] (Washington, D.C.:
May 9, 2000).
[22] The eight interrelated high-risk areas that represent the greatest
challenge to DOD‘s developing world-class business operations
supporting its forces are: contract management, financial management,
human capital, information security, infrastructure management,
inventory management, systems modernization, and weapon system
acquisition.
[23] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Defense, [hyperlink,
http://www.gao.gov/products/GAO-01-244] (Washington, D.C.: Jan. 2001).
[24] U.S. General Accounting Office, Executive Guide: Creating Value
Through World-class Financial Management, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-134] (Washington, D.C.: Apr.
2000).
[25] Department of Defense, Transforming Department of Defense
Financial Management: A Strategy for Change (Washington, D.C.: Apr. 13,
2001).
[26] U.S. General Accounting Office, Information Technology:
Architecture Needed to Guide Modernization of DOD‘s Financial
Operations, [hyperlink, http://www.gao.gov/products/GAO-01-525]
(Washington, D.C.: May 2001).
[27] [hyperlink, http://www.gao.gov/products/GAO/NSIAD-00-72].
[28] The structure and responsibilities of the Executive Committee as
outlined in the October 2001 memorandum are consistent with the
provisions of Section 1009 of Public Law 107-107.
[29] [hyperlink, http://www.gao.gov/products/GAO-01-244].
[30] [hyperlink, http://www.gao.gov/products/GAO/T-AIMD/NSIAD-00-163].
[31] U.S. General Accounting Office, Executive Guide: Improving Mission
Performance through Strategic Information Management and Technology,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-94-115] (Washington,
D.C.: May 1994).
[32] [hyperlink, http://www.gao.gov/products/GAO/T-AIMD/NSIAD-00-163].
[33] [hyperlink, http://www.gao.gov/products/GAO-01-525].
[34] U.S. General Accounting Office, Financial Management: Analysis of
DOD‘s First Biennial Financial Management Improvement Plan, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-99-44] (Washington, D.C.: Jan.29,
1999).
[35] [hyperlink, http://www.gao.gov/products/GAO-01-525].
[36] Naval Audit Service, Department of the Navy Implementation of
Enterprise Resource Planning Solutions, N2002-0024 (Washington, D.C.:
Jan. 25, 2002).
[37] ERP products consist of multiple, integrated functional modules
that do different tasks, such as track payroll, keep a standard general
ledger, manage supply chains, and organize customer data.
[38] U.S. General Accounting Office, Information Technology: DLA Should
Strengthen Business Systems Modernization Architecture and Investment
Activities, [hyperlink, http://www.gao.gov/products/GAO-01-631]
(Washington, D.C.: June 29, 2001).
[39] [hyperlink, http://www.gao.gov/products/GAO-01-525].
[40] [hyperlink, http://www.gao.gov/products/GAO-01-244].
[End of section]
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