Department of Defense
Financial and Business Management Transformation Hindered by Long-standing Problems Gao ID: GAO-04-941T July 8, 2004GAO has previously reported on the Department of Defense's (DOD) financial management and business related problems and key elements necessary for successful reform. Although the underlying conditions remain fundamentally unchanged, DOD continues to be confronted with pervasive problems related to its systems, processes (including internal controls), and people (human capital). These problems impede DOD's ability to operate its numerous business operations in an efficient and effective manner. Congress asked GAO to provide its views on (1) the impact that long-standing financial management and related business process weaknesses continue to have on DOD, (2) the underlying causes of DOD business transformation challenges, and (3) DOD's business transformation efforts. In addition, GAO reiterates the key elements to successful reform: (1) an integrated business management transformation strategy, (2) sustained leadership and resource control, (3) clear lines of responsibility and accountability, (4) results-oriented performance measures, (5) appropriate incentives and consequences, (6) an enterprise architecture to guide reform efforts, and (7) effective monitoring and oversight.
DOD's senior civilian and military leaders are committed to transforming the department and improving its business operations and have taken positive steps to begin this effort. However, overhauling the financial management and related business operations of one of the largest and most complex organizations in the world represents a daunting challenge. Six DOD program areas are on GAO's "high risk" list, and the department shares responsibility for three other governmentwide high-risk areas. DOD's substantial financial and business management weaknesses adversely affect not only its ability to produce auditable financial information, but also to provide accurate and timely information for management and Congress to use in making informed decisions. Further, the lack of adequate accountability across all of DOD's major business areas results in billions of dollars in annual wasted resources in a time of increasing fiscal constraint. Four underlying causes impede reform: (1) lack of sustained leadership, (2) cultural resistance to change, (3) lack of meaningful metrics and ongoing monitoring, and (4) inadequate incentives and accountability mechanisms. To address these issues, GAO offers two suggestions for legislative action. First, a senior management position should be established to manage and oversee DOD's financial and business management transformation efforts. Second, in a recent report GAO proposes that Congress shift the control and accountability for business systems investments from the DOD components to the recently created functional areas known as domains. DOD disagrees and stated that its portfolio management process would provide the needed control over business system investments. In GAO's view, providing the funding to the domains would be one way of overcoming DOD's parochial operations and help preclude spending billions on nonintegrated systems.
GAO-04-941T, Department of Defense: Financial and Business Management Transformation Hindered by Long-standing Problems
This is the accessible text file for GAO report number GAO-04-941T
entitled 'Department of Defense: Financial and Business Management
Transformation Hindered by Long-standing Problems' which was released
on July 08, 2004.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
United States General Accounting Office:
GAO:
Testimony:
Subcommittee on Financial Management, the Budget, and International
Security, Committee on Governmental Affairs, U. S. Senate:
For Release on Delivery:
Expected at 10:30 a.m. EDT:
Thursday, July 8, 2004:
Department of Defense:
Financial and Business Management Transformation Hindered by Long-
standing Problems:
Statement of Gregory D. Kutz:
Director, Financial Management and Assurance:
GAO-04-941T:
GAO Highlights:
Highlights of GAO-04-941T, a testimony before the Subcommittee on
Financial Management, the Budget, and International Security, Committee
on Governmental Affairs, United States Senate
Why GAO Did This Study:
GAO has previously reported on the Department of Defense‘s (DOD)
financial management and business related problems and key elements
necessary for successful reform. Although the underlying conditions
remain fundamentally unchanged, DOD continues to be confronted with
pervasive problems related to its systems, processes (including
internal controls), and people (human capital). These problems impede
DOD‘s ability to operate its numerous business operations in an
efficient and effective manner. The Subcommittee asked GAO to provide
its views on (1) the impact that long-standing financial management
and related business process weaknesses continue to have on DOD, (2)
the underlying causes of DOD business transformation challenges, and
(3) DOD‘s business transformation efforts.
In addition, GAO reiterates the key elements to successful reform: (1)
an integrated business management transformation strategy, (2)
sustained leadership and resource control, (3) clear lines of
responsibility and accountability, (4) results-oriented performance
measures, (5) appropriate incentives and consequences, (6) an
enterprise architecture to guide reform efforts, and (7) effective
monitoring and oversight.
What GAO Found:
DOD‘s senior civilian and military leaders are committed to
transforming the department and improving its business operations and
have taken positive steps to begin this effort. However, overhauling
the financial management and related business operations of one of the
largest and most complex organizations in the world represents a
daunting challenge. Six DOD program areas are on GAO‘s ’high risk“
list, and the department shares responsibility for three other
governmentwide high-risk areas. DOD‘s substantial financial and
business management weaknesses adversely affect not only its ability
to produce auditable financial information, but also to provide
accurate and timely information for management and Congress to use in
making informed decisions. Further, the lack of adequate
accountability across all of DOD‘s major business areas results in
billions of dollars in annual wasted resources in a time of increasing
fiscal constraint.
Impact of Weaknesses in Human Capital Management, Internal Control,
and Systems:
Business area affected: Military pay;
Problem identified: Ninety-four percent of mobilized Army National
Guard soldiers GAO investigated had pay problems. These problems
distracted soldiers from their missions, imposed financial hardships on
their families, and had a negative impact on retention.
Business area affected: Logistics;
Problem identified: Asset visibility and other logistical support
problems hampered mission readiness during Operation Iraqi Freedom,
resulting in a discrepancy of $1.2 billion between the materiel
shipped and the acknowledgement by the activity that the materiel was
received.
Business area affected: Travel;Problem identified: Seventy-two percent
of the over 68,000 premium class airline tickets DOD purchased for
fiscal years 2001 and 2002 were not properly authorized and 73 percent
were not properly justified.
Business area affected: Property;
Problem identified: New JSLIST chem-bio suits sold on the Internet for
$3 while at the same time DOD was buying them for over $200. Further,
thousands of defective suits declared excess by DOD were improperly
issued to local law enforcement agencies”which are likely to be first
responders in case of a terrorist attack.
Business area affected: Contract payments;
Problem identified: Some DOD contractors were abusing the federal tax
system, with little or no consequence. As of September 2003, DOD had
collected only $687,000 of unpaid federal taxes through a mandated
levy program. GAO estimated that at least $100 million could be
collected annually through effective implementation of the levy on DOD
contract payments.
Business area affected: Systems;
Problem identified: The department invested $179 million on two failed
system efforts that were intended to resolve its long-standing
disbursement problems.
Source: GAO.
[End of table]
Four underlying causes impede reform: (1) lack of sustained leadership,
(2) cultural resistance to change, (3) lack of meaningful metrics and
ongoing monitoring, and (4) inadequate incentives and accountability
mechanisms. To address these issues, GAO offers two suggestions for
legislative action. First, a senior management position should be
established to manage and oversee DOD‘s financial and business
management transformation efforts. Second, in a recent report GAO
proposes that Congress shift the control and accountability for
business systems investments from the DOD components to the recently
created functional areas known as domains. DOD disagrees and stated
that its portfolio management process would provide the needed control
over business system investments. In GAO‘s view, providing the funding
to the domains would be one way of overcoming DOD‘s parochial
operations and help preclude spending billions on nonintegrated
systems.
www.gao.gov/cgi-bin/getrpt?GAO-04-941T
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory Kutz, (202) 512-
9505 (kutzg@gao.gov)
[End of section]
Mr. Chairman and Members of the Subcommittees:
It is a pleasure to be here to discuss key aspects of business
transformation efforts at the Department of Defense (DOD). At the
outset, we would like to thank the Subcommittee for having this hearing
and acknowledge the important role hearings such as this one serve. The
involvement of this Subcommittee is critical to ultimately assuring
public confidence in DOD as a steward that is accountable for its
finances. DOD continues to confront pervasive decades-old financial
management and business problems related to its systems, processes
(including internal controls), and people (human capital). Of the 25
areas on GAO's governmentwide "high risk" list, 6 are DOD program
areas, and the department shares responsibility for 3 other high-risk
areas that are governmentwide in scope.[Footnote 1] These problems
preclude the department from producing accurate, reliable, and timely
information to make sound decisions and to accurately report on its
trillions of dollars of assets and liabilities. Further, DOD's
financial management deficiencies, taken together, continue to
represent the single largest obstacle to achieving an unqualified
opinion on the U.S. government's consolidated financial statements.
Today, we will provide our perspectives on (1) the impact that long-
standing financial management and related business process weaknesses
continue to have on DOD, (2) the underlying causes that have impeded
the success of prior reform efforts, and (3) DOD's business systems
transformation efforts. In addition, we will offer two suggestions for
legislative consideration, which we believe improve the chances that
DOD business systems transformation efforts will succeed. Our statement
is based on previous GAO reports and testimonies.
Summary:
DOD's substantial long-standing business management systems and related
problems adversely affect the economy, efficiency, and effectiveness of
its operations, and have resulted in a lack of adequate accountability
across all major business areas. These problems have left the
department vulnerable to billions of dollars of fraud, waste, and abuse
annually, at a time of increasing fiscal constraint. Secretary Rumsfeld
has estimated that successful improvements to DOD's business operations
could save the department 5 percent of its budget a year, which equates
to over $20 billion a year in savings. The following examples indicate
the magnitude and severity of the problems.
* Ninety-four percent of mobilized Army National Guard soldiers from
the six units we reviewed had pay problems. According to the
individuals we interviewed, these problems distracted from the soldiers
missions, imposed financial hardships on their families, and had a
negative impact on retention.[Footnote 2] For example, the commander of
an Army National Guard Special Forces unit stated in January 28, 2004,
testimony that 25 soldiers left his unit as a direct result of the pay
problems they experienced and that another 15 asked for transfers to
the inactive National Guard.
* DOD sold new Joint Service Logistics Integrated Suit Technology--
chem-bio suits--on the Internet for $3 while at the same time DOD was
buying them for over $200.[Footnote 3] Ineffective supply chain
management resulted in thousands of defective suits being declared
excess by DOD and then improperly issued to local law enforcement
agencies--which are likely to be first responders in case of a
terrorist attack.[Footnote 4]
* Asset visibility and other logistical support problems hampered
mission readiness during Operation Iraqi Freedom, including
cannibalization of vehicles for parts and duplication of
requisitions.[Footnote 5]
Further evidence of DOD's problems is the long-standing inability of
any military service or major defense component to pass the test of an
independent financial audit because of pervasive weaknesses in
financial management systems, operations, and controls.
Over the years, the department has initiated several broad-based reform
efforts intended to fundamentally reform its business operations.
However, these efforts have not resulted in the fundamental reform
necessary to resolve the department's long-standing management
challenges because the department has not addressed the four underlying
causes that have impeded meaningful reform:
* lack of sustained leadership and management accountability;
* deeply embedded cultural resistance to change, including military
service parochialism and stovepiped operations;
* lack of results-oriented goals and performance measures and
monitoring; and:
* inadequate incentives and accountability mechanisms for business
transformation efforts.
These four issues, to a large degree, have impeded DOD's efforts to
modernize its business systems--a critical factor in its transformation
efforts. DOD's stovepiped, duplicative, and nonintegrated systems
environment contributes to its operational problems and costs the
taxpayers billions of dollars each year. For fiscal year 2004, DOD
requested approximately $19 billion to operate, maintain, and modernize
its reported 2,274 business systems. The existing systems environment
evolved over time as DOD components--each receiving their own funding-
-developed narrowly focused parochial solutions to their business
problems. Unfortunately, however, these system solutions have not been
implemented on time, within budget, and delivered the promised
capability. Two systems discussed in our recent report[Footnote 6]--the
Defense Logistics Agency's Business Systems Modernization (BSM) effort
and the Army's Logistics Modernization Program (LMP)--are no exception.
Successful reform of DOD's fundamentally flawed financial and business
management operations must simultaneously focus on its systems,
processes, and people. While DOD has made some encouraging progress in
addressing specific challenges, it is still in the very early stages of
a departmentwide reform that will take many years to accomplish.
Secretary Rumsfeld has made business transformation a priority. For
example, through its Business Management Modernization Program (BMMP),
DOD is continuing its efforts to develop and implement a business
enterprise architecture (BEA) and establish effective management
oversight and control over its business systems modernization
investments. However, after about 3 years of effort and over $203
million in reported obligations, we have not seen significant change in
the content of DOD's architecture or in its approach to investing
billions of dollars annually in existing and new systems. We have made
numerous recommendations aimed at improving DOD's plans for developing
the next version of the architecture and implementing controls for
selecting and managing business systems investments.[Footnote 7] To
date, DOD has not addressed 22 of our 24 recommendations.
The seriousness of DOD's business management weaknesses underscores the
importance of no longer condoning "status quo" business operations at
DOD. To improve the likelihood that the department's current business
transformation efforts will be successful, we have previously
suggested[Footnote 8] that a chief management official[Footnote 9]
position be created. The individual would be responsible for overseeing
key areas such as strategic planning, performance and financial
management, and business systems modernization, while also facilitating
the overall business transformation effort within the department.
Further, in a recent report[Footnote 10] we also suggest that to
improve management oversight, accountability, and control of the
department's business system funding, Congress may wish to consider
providing the funds to operate, maintain, and modernize DOD's business
systems to the functional areas, known as domains, rather than the
military services and the defense agencies. Currently, each military
service and defense agency receives its own funding and is largely
autonomous in deciding how to spend these funds, thereby hindering the
development of broad-based, integrated corporate system solutions to
common DOD-wide problems. Transforming DOD's business operations and
making them more efficient would free up resources that could be used
to support the department's core mission, enhance readiness, and
improve the quality of life for our troops and their families.
Background:
Because DOD is one of the largest and most complex organizations in the
world, overhauling its business operations represents a huge management
challenge. In fiscal year 2003, DOD reported that its operations
involved over $1 trillion in assets, nearly $1.6 trillion in
liabilities, approximately 3.3 million military and civilian personnel,
and disbursements of over $416 billion. For fiscal year 2004, the
department was appropriated more than $425 billion, which included
approximately $65 billion for contingency operations. Execution of DOD
operations spans a wide range of defense organizations, including the
military services and their respective major commands and functional
activities, numerous large defense agencies and field activities, and
various combatant and joint operational commands that are responsible
for military operations for specific geographic regions or theaters of
operation. To execute these military operations, the department
performs an assortment of interrelated and interdependent business
processes, including logistics management, procurement, healthcare
management, and financial management.
Transformation of DOD's business systems and operations is critical to
the department providing Congress and DOD management with accurate and
timely information for use in decision making. One of the key elements
we have reported[Footnote 11] as necessary to successfully execute the
transformation is establishing and implementing an enterprise
architecture. In this regard, the department has undertaken a daunting
challenge to modernize its existing business systems environment
through the development and implementation of a business enterprise
architecture (BEA)--a modernization blueprint. This effort is an
essential part of the Secretary of Defense's broad initiative to
"transform the way the department works and what it works on."
Pervasive Financial and Business Management Problems Affect DOD's
Efficiency and Effectiveness:
For several years, we have reported that DOD faces a range of financial
management and related business process challenges that are complex,
long-standing, pervasive, and deeply rooted in virtually all business
operations throughout the department. As the Comptroller General
testified in March 2004 and as discussed in our latest financial audit
report,[Footnote 12] DOD's financial management deficiencies, taken
together, continue to 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 has passed
the test of an independent financial audit because of pervasive
weaknesses in internal control and processes and fundamentally flawed
business systems.
In identifying improved financial performance as one of its five
governmentwide initiatives, the President's Management Agenda
recognized that obtaining a clean (unqualified) financial audit opinion
is a basic prescription for any well-managed organization. At the same
time, it recognized that without sound internal control and accurate
and timely financial and performance information, it is not possible to
accomplish the President's agenda and secure the best performance and
highest measure of accountability for the American people. The Joint
Financial Management Improvement Program (JFMIP)[Footnote 13]
principals have defined certain measures, in addition to receiving an
unqualified financial statement audit opinion, for achieving financial
management success. These additional measures include (1) being able
to routinely provide timely, accurate, and useful financial and
performance information; (2) having no material internal control
weaknesses or material noncompliance with laws and regulations; and
(3) meeting the requirements of the Federal Financial Management
Improvement Act of 1996 (FFMIA).[Footnote 14] Unfortunately, DOD does
not meet any of these conditions. For example, for fiscal year 2003,
the DOD Inspector General (DOD IG) issued a disclaimer of opinion on
DOD's financial statements, citing 11 material weaknesses in internal
control and noncompliance with FFMIA requirements.
Pervasive weaknesses in DOD's financial management and related business
processes and systems have (1) resulted in a lack of reliable
information needed to make sound decisions and report on the status of
DOD activities, including accountability of assets, through financial
and other reports to Congress and DOD decision makers; (2) hindered its
operational efficiency; (3) adversely affected mission performance;
and (4) left the department vulnerable to fraud, waste, and abuse, as
the following examples illustrate.
* Of the 481 mobilized Army National Guard soldiers from six GAO case
study Special Forces and Military Police units,[Footnote 15] 450 had at
least one pay problem associated with their mobilization. According to
the individuals we interviewed, DOD's inability to provide timely and
accurate payments to these soldiers, many of whom risked their lives in
recent Iraq or Afghanistan missions, distracted them from their
missions, imposed financial hardships on the soldiers and their
families, and has had a negative impact on retention.[Footnote 16] More
specifically, in January 28, 2004, testimony, the commander of a
special forces unit stated that 25 soldiers left the unit as a direct
result of the pay problems they experienced and that another 15 asked
for transfers to the inactive National Guard. He also stated that
because it would take an estimated 2 years and $250,000 to train each
replacement, these losses have had a significant negative impact on the
unit's mission capability--one of only six such units in the nation.
* DOD incurred substantial logistical support problems as a result of
weak distribution and accountability processes and controls over
supplies and equipment shipments in support of Operation Iraqi Freedom
activities, similar to those encountered during the prior Gulf War.
These weaknesses resulted in (1) supply shortages, (2) backlogs of
materials delivered in theater but not delivered to the requesting
activity, (3) a discrepancy of $1.2 billion between the amount of
materiel shipped and that acknowledged by the activity as received, (4)
cannibalization of vehicles, and (5) duplicate supply requisitions.
[Footnote 17]
* Our analysis of data on more than 50,000 maintenance work orders
opened during the deployments of six battle groups indicated that about
29,000 orders (58 percent) could not be completed because the needed
repair parts were not available on board ship. This condition was a
result of inaccurate ship configuration records and incomplete,
outdated, or erroneous historical parts demand data. Such problems not
only have a detrimental impact on mission readiness, they may also
increase operational costs due to delays in repairing equipment and
holding unneeded spare parts inventory.[Footnote 18]
* Inadequate asset visibility and accountability resulted in DOD
selling new Joint Service Lightweight Integrated Suit Technology--the
current chemical and biological protective garment used by our military
forces--on the Internet for $3 each (coat and trousers) while at the
same time buying them for over $200 each.[Footnote 19] DOD has
acknowledged that these garments should have been restricted to DOD
use only and therefore should not have been available to the public.
* DOD sold excess biological laboratory equipment, including a
biological safety cabinet, a bacteriological incubator, a centrifuge,
and other items that could be used to produce biological agents. Using
a fictitious company and fictitious individual identities, we were able
to purchase a large number of new and usable equipment items and
protective gear over the Internet from DOD. Although the production of
biological warfare agents requires a high degree of expertise, the
ease with which these items were obtained through public sales
increases the risk that terrorists could obtain and use them to
produce biological agents that could be used against the United States.
[Footnote 20]
* Some DOD contractors have been abusing the federal tax system with
little or no consequence, and DOD is not collecting as much in unpaid
taxes as it could. Under the Debt Collection Improvement Act of 1996,
DOD is responsible--working with the Treasury Department--for
offsetting payments made to contractors to collect funds owed, such as
unpaid federal taxes. However, we found that DOD had collected only
$687,000 of unpaid taxes as of September 2003. We estimated that at
least $100 million could be collected annually from DOD contractors
through effective implementation of levy and debt collection programs.
We also found numerous instances of abusive or potentially criminal
activity[Footnote 21] related to the federal tax system during our
audit and investigation of 47 DOD contractor case studies. The 34 case
studies involving businesses with employees had primarily unpaid
payroll taxes, some dating to the early 1990s and some for as many as
62 tax periods.[Footnote 22] The other 13 case studies involved
individuals who had unpaid income taxes dating as far back as the
1980s. Several of these contractors provided parts or services
supporting weapons and other sensitive military programs.[Footnote 23]
* Based on statistical sampling, we estimated that 72 percent of the
over 68,000 premium class airline tickets DOD purchased for fiscal
years 2001 and 2002 were not properly authorized and that 73 percent
were not properly justified. During fiscal years 2001 and 2002, DOD
spent almost $124 million on airline tickets that included at least one
leg in premium class--usually business class. Because each premium
class ticket costs the government up to thousands of dollars more than
a coach class ticket, unauthorized premium class travel resulted in
millions of dollars of unnecessary costs being incurred annually.
[Footnote 24]
* Control breakdowns resulted in DOD paying for airline tickets that
were not used and not processed for refund--amounting to about 58,000
tickets totaling more $21 million for fiscal years 2001 and 2002. DOD
was not aware of this problem before our audit and did not maintain any
data on unused tickets. Based on limited data provided by the airlines,
it is possible that the unused value of the fully and partially unused
tickets DOD purchased from fiscal years 1997 through 2003 with DOD's
centrally billed account could be at least $115 million.[Footnote 25]
* We found that DOD sometimes paid twice for the same airline ticket--
first to the Bank of America for the monthly credit and bill, and
second to the traveler, who was reimbursed for the same ticket. Based
on our mining of limited data, the potential magnitude of the improper
payments was 27,000 transactions for over $8 million. For example, DOD
paid a Navy GS-15 civilian employee $10,000 for 13 airline tickets he
had not purchased.[Footnote 26]
* We found[Footnote 27] that 38 of 105 travel cardholders we reviewed
who had their accounts charged-off due to nonpayment still had active
secret or top-secret clearances as of June 2002. Some of the Army
personnel holding security clearances who have had difficulty paying
their travel card bills may present security risks to the Army. Army
regulations provide that an individual's finances are one of the key
factors to be considered in determining whether an individual should
continue to be entrusted with a secret or top-secret clearance.
However, we found that Army security officials were unaware of these
financial issues and consequently could not consider their potential
effect on whether these individuals should continue to have security
clearances.
* Our review of fiscal year 2002 data revealed that about $1 of every
$4 in contract payment transactions in DOD's MOCAS system was for
adjustments to previously recorded payments--$49 billion of adjustments
out of $198 billion in disbursement, collection, and adjustment
transactions. According to DOD, the cost of researching and making
adjustments to accounting records was about $34 million in fiscal year
2002, primarily to pay hundreds of DOD and contractor staff.[Footnote
28]
* Tens of millions of dollars are not being collected each year by
military treatment facilities from third-party insurers because key
information required to effectively bill and collect from third-party
insurers is often not properly collected, recorded, or used by the
military treatment facilities.[Footnote 29]
* DOD cannot provide reasonable assurance to the Congress that its IT
budget request includes all funding for the department's business
systems. We have reported[Footnote 30] that DOD's IT budget submission
to Congress for fiscal year 2004 contained material inconsistencies,
inaccuracies, or omissions that limited its reliability. We identified
discrepancies totaling about $1.6 billion between two primary parts of
the submission--the IT budget summary report and the detailed capital
investments reports on each IT initiative. These problems were largely
attributable to insufficient management attention and limitations in
departmental policies and procedures, such as guidance in DOD's
Financial Management Regulation, and to shortcomings in systems that
support budget-related activities.
These examples clearly demonstrate not only the severity of DOD's
current problems, but also the importance of business systems
modernization as a critical element in the department's transformation
efforts to improve the economy, efficiency, and effectiveness of its
operations, and to provide for accountability to Congress and American
taxpayers.
Underlying Causes of Financial and Related Business Process
Transformation Challenges:
Since May 1997,[Footnote 31] we have highlighted in various reports and
testimonies what we believe are the underlying causes of the
department's inability to resolve its long-standing financial
management and related business management weaknesses and fundamentally
reform its business operations. We found that one or more of these
causes were contributing factors to the financial management and
related business process weaknesses previously discussed. Over the
years, the department has initiated several broad-based reform efforts
intended to fundamentally reform its business operations and improve
the reliability of information used in the decision-making process.
Unfortunately, these initiatives have generally proven to be less
successful than anticipated because DOD has not addressed the
following four underlying causes:
* 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;
* lack of results-oriented goals and performance measures and
monitoring; and:
* inadequate incentives and accountability mechanisms relating to
business transformation efforts.
If not properly addressed, these root causes, which I will now
highlight, will likely result in the failure of current DOD
transformation efforts and continue to hinder the department's ability
to produce accurate, reliable, and timely information to make sound
decisions and to accurately report on its billions of dollars of
assets, such as inventory.
Lack of Sustained Leadership and Adequate Accountability:
Historically, DOD has not routinely assigned accountability for
financial management performance to specific organizations or
individuals who have sufficient authority to accomplish desired goals.
For example, under the Chief Financial Officers Act of 1990,[Footnote
32] it is the responsibility of the agency Chief Financial Officer
(CFO) to establish the mission and vision for the agency's future
financial management and to direct, manage, and provide oversight of
financial management operations. 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 remaining 80 percent
comes from DOD's other business areas such as acquisition and
personnel, which are not under the control and authority of the DOD
Comptroller.
Further, DOD's past experience has suggested that top management has
not had a proactive, consistent, and continuing role in integrating
daily operations for achieving business transformation performance
goals. It is imperative that major improvement initiatives have the
direct, active support and involvement of the Secretary and Deputy
Secretary of Defense to ensure that daily activities throughout the
department remain focused on achieving shared, agencywide outcomes and
success. While DOD leadership has demonstrated its commitment to
reforming the department's business operations, the magnitude and
nature of day-to-day demands placed on these leaders, given the
current world events associated with fighting the war on terrorism,
clearly affect the level of oversight, commitment, and involvement
they can devote to the transformation efforts. Given the importance of
DOD's business transformation efforts, it is imperative that it
receives the sustained leadership needed to improve the economy,
efficiency, and effectiveness of DOD's business operations. Based on
our surveys of best practices of world-class organizations,[Footnote
33] strong executive CFO and Chief Information Officer (CIO) leadership
and centralized control over systems investments are essential to
(1) making financial management an entitywide priority, (2) providing
meaningful information to decision makers, (3) building a team of
people that delivers results, and (4) effectively leveraging technology
to achieve stated goals and objectives.
Cultural Resistance and Parochialism:
Cultural resistance to change, military service parochialism, and
stovepiped operations have all contributed significantly to the failure
of 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.
Recent audits reveal that DOD has made only small inroads in addressing
these challenges. For example, as discussed in our May 2004 report,
[Footnote 34] DOD does not have the processes and controls in place to
provide reasonable assurance that it is in compliance with the fiscal
year 2003 defense authorization act,[Footnote 35] which requires the
DOD Comptroller to review all system improvements with obligations
exceeding $1 million. As a result, DOD was not able to satisfy our
request for information on all obligations in excess of $1 million for
system modernizations since passage of the act. Based upon a
comparison of limited information provided by the military services
and defense agencies for fiscal years 2003[Footnote 36] and 2004, as
of December 2003, we identified a total of $863 million in obligations
that exceeded $1 million for system improvements that were not
submitted to the DOD Comptroller for required review.
Additionally, as discussed in our recent report,[Footnote 37] DOD
continued to use a stovepiped approach to develop and fund its business
system investments. As shown in table 1, DOD requested approximately
$18.8 billion for fiscal year 2004 to operate, maintain, and modernize
its reported 2,274 nonintegrated, duplicative, stovepiped business
systems. The table also shows how business system funding is spread
across various DOD components.
Table 1: DOD Fiscal Year 2004 Information Technology Budget Request for
Business Systems by DOD Component:
(Dollars in millions):
Component: Army;
Total: $3,652.
Component: Navy;
Total: $3,778.
Component: Air Force;
Total: $3,737.
Component: DISA[A];
Total: $3,938.
Component: TRICARE[B];
Total: $980.
Component: DLA[C];
Total: $774.
Component: DFAS[D];
Total: $502.
Other DOD components[E];
Total: $1,440.
Total: $18,801.
Source: GAO analysis based on DOD's fiscal year 2004 IT budget request.
[A] The Defense Information Systems Agency provides DOD and other
organizations with a wide range of information services, such as data
processing, telecommunications services, and database management.
[B] TRICARE is the health care system for DOD's active duty personnel,
their dependents, and retirees.
[C] DLA is DOD's logistics manager for all consumable and some repair
items; its primary business function is providing supply support to
sustain military operations and readiness.
[D] Defense Finance and Accounting Services is the centralized
accounting agency for DOD.
[E] Other DOD components include entities such as the Office of the
Secretary of Defense and the Defense Contract Management Agency.
[End of table]
The existing systems environment evolved over time as DOD components--
each receives its own system funding and follows decentralized
acquisition and investment practices--developed narrowly focused
parochial solutions to their business problems. DOD's ability to
address its current "business-as-usual" approach to business system
investments is further hampered by its lack of:
* a complete inventory of business systems--a condition we first
highlighted in 1998. In fact, the DOD Comptroller testified in March
2004[Footnote 38] that the size of DOD's actual systems inventory could
be twice the size currently reported;
* a standard definition of what constitutes a business system;
* a well-defined BEA; and:
* an effective approach for the control and accountability over
business system modernization investments.
Until DOD develops and implements an effective strategy for overcoming
resistance, parochialism, and stovepiped operations, its
transformation efforts will not be successful. Further, there can be
little confidence that it will not continue to spend billions of
dollars on stovepiped, duplicative, and nonintegrated systems that do
not optimize mission performance and support the warfighter.
Lack of Results-Oriented Goals and Performance Measures:
At a programmatic level, the lack of clear, linked goals and
performance measures handicapped DOD's past reform efforts. As a
result, DOD managers lacked straightforward road maps showing how their
work contributed to attaining the department's strategic goals, and
they risked operating autonomously rather than collectively. As of
March 2004, DOD formulated departmentwide performance goals and
measures and continued to refine and align them with the outcomes
described in its strategic plan--the September 2001 Quadrennial
Defense Review (QDR). The QDR outlined a new risk management
framework, consisting of four dimensions of risk--force management,
operational, future challenges, and institutional--to use in
considering trade-offs among defense objectives and resource
constraints. According to DOD's Fiscal Year 2003 Annual Report to the
President and the Congress, these risk areas are to form the basis for
DOD's annual performance goals. They will be used to track performance
results and will be linked to resources. As of March 2004, DOD was
still in the process of implementing this approach on a departmentwide
basis.
DOD currently has plans to institutionalize performance management by
aligning management activities with the President's Management Agenda.
As part of this effort, DOD linked its fiscal year 2004 budget
resources with metrics for broad program areas, e.g., air combat,
airlift, and basic research in the Office of Management and Budget's
(OMB) Program Assessment Rating Tool.[Footnote 39] We have not reviewed
DOD's efforts to link resources to metrics; however, some of our
recent work notes the lack of clearly defined performance goals and
measures in the management of such areas as defense inventory and
military pay.[Footnote 40] Further, without modern integrated systems
and streamlined business processes, the accuracy and reliability of
DOD's performance data will be questionable.
One program that has yet to establish measurable, results-oriented
goals is the BMMP.[Footnote 41] The BMMP is the department's business
transformation initiative encompassing defense policies, processes,
people, and systems that guide, perform, or support all aspects of
business management, including development and implementation of the
BEA. A key element of any major program is its ability to establish
clearly defined goals and performance measures to monitor and report
its progress to management. Since DOD has yet to develop performance
measures for the BMMP, it is difficult to evaluate and track, on an
ongoing basis, specific program progress, outcomes, and results, such
as explicitly defining performance measures to evaluate the
architecture's quality, content, and utility of subsequent major
updates. Given that DOD has reported obligations of over $203 million
since architecture development efforts began 3 years ago, this is a
serious performance management weakness.
DOD recognizes that it needs to develop detailed plans and establish
performance metrics to measure and track program progress to determine
what it planned to accomplish by a certain point in time, what it
actually accomplished at that point in time, and what has been spent
thus far. In its March 15, 2004, progress report on the implementation
of the BEA, DOD reported that it plans to establish an initial approved
program metrics baseline to evaluate the cost, schedule, and
performance of the BMMP and that, beginning with the fourth quarter of
fiscal year 2004, it plans to begin formal tracking and reporting of
specific program goals, objectives, and measures. Without explicitly
defined program baselines, detailed plans, and performance measures, it
is difficult to validate or justify the $122 million requested for
fiscal year 2005 and the $494 million estimated to be needed for fiscal
years 2006 through 2009.
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"
operations, systems, and organizational structures. Traditionally, DOD
has focused on justifying its need for more funding rather than on the
outcomes its programs have produced. DOD has historically measured its
performance by resource components such as the amount of money spent,
people employed, or number of tasks completed.
The lack of incentive to change is evident in the business systems
modernization area. Despite DOD's acknowledgement that many of its
systems are error prone, duplicative, and stovepiped, DOD continues to
allow its component organizations to make their own investments
independently of one another and implement different system solutions
to solve the same business problems. These stovepiped decision-making
processes have contributed to the department's current complex, error-
prone environment. For example, our March 2003 report[Footnote 42]
noted that DOD had not effectively managed and overseen its planned
investment of over $1 billion in four Defense Finance and Accounting
Service (DFAS) system modernization efforts. One project's estimated
cost had increased by as much as $274 million, while the schedule
slipped by almost 4 years. For each of these projects, DOD oversight
entities--DFAS, the DOD Comptroller, and the DOD CIO--could not provide
documentation that indicated they had questioned the impact of the cost
increases and schedule delays, and allowed the projects to proceed in
the absence of the requisite analytical justification. Such analyses
provide the requisite justification for decision makers to use in
determining whether to invest additional resources in anticipation of
receiving commensurate benefits and mission value. Two of the four
projects--the Defense Procurement Payment System and the Defense
Standard Disbursing System--were terminated in December 2002 and
December 2003, respectively, after an investment of approximately $179
million that did not improve the department's business operations.
GAO and the DOD IG have identified numerous business system
modernization efforts that are not economically justified on the basis
of cost, benefits, and risk; take years longer than planned; and fall
short of delivering planned or needed capabilities. Despite this track
record, DOD continues to invest billions of dollars in business systems
modernization, while at the same time it lacks the effective management
and oversight needed to achieve results. Without appropriate incentives
to improve their project management, ongoing oversight, and adequate
accountability mechanisms, DOD components will continue to develop
duplicative and nonintegrated systems that are inconsistent with the
Secretary's vision for reform.
Keys to Successful Reform:
Successful reform of DOD's fundamentally flawed financial and business
management operations must simultaneously focus on its systems,
processes, and people. While DOD has made some encouraging progress in
addressing specific challenges, it is still in the very early stages of
a departmentwide reform that will take many years to accomplish. At
this time, it is not possible to predict when--or even whether--DOD's
reform effort will be successful. 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. These elements, which
we believe are key to any successful approach to transforming the
department's business operations, include:
* addressing the department's financial management and related business
operational challenges as part of a comprehensive, integrated, DOD-wide
strategic plan for business reform;
* providing for sustained and committed leadership by top management,
including but not limited to the Secretary of Defense;
* establishing resource control over business systems investments;
* establishing clear lines of responsibility, authority, and
accountability;
* incorporating results-oriented performance measures and monitoring
progress tied to key financial and business transformation objectives;
* providing appropriate incentives or consequences for action or
inaction;
* establishing an enterprise architecture to guide and direct business
systems modernization investments; and:
* ensuring effective oversight and monitoring.
These elements, which should not be viewed as independent actions but
rather as a set of interrelated and interdependent actions, are
reflected in the recommendations we have made to DOD and are consistent
with those actions discussed in the department's April 2001 financial
management transformation report.[Footnote 43] The degree to which DOD
incorporates them into its current reform efforts--both long and short
term--will be a deciding factor in whether these efforts are
successful. Thus far, the department's progress in implementing our
recommendations has been slow. Further, as will be discussed in more
detail later, we have not yet seen a comprehensive, cohesive strategy
that details how some of the ongoing efforts are being integrated. For
example, we have not seen how the department plans to integrate its
objective of obtaining an unqualified audit opinion in fiscal year 2007
with the BMMP. It appears as if these two key efforts are being
conducted in a stovepiped manner.
DOD Business Transformation Efforts:
Over the years, we have given DOD credit for beginning numerous
initiatives intended to improve its business operations. Unfortunately,
most of these initiatives failed to achieve their intended objective in
part, we believe, because they failed to incorporate key elements that
in our experience are critical to successful reform. Today, we would
like to discuss one very important broad-based initiative--the BMMP--
that DOD currently has underway and, if properly developed and
implemented, will result in significant improvements in DOD's business
systems and operations.
Effectively managing and overseeing the department's $19 billion
investment in its business systems is key to the successful
transformation of DOD's business operations. The transformation also
depends on the ability of the department to develop and implement
business systems that provide users and department management with
accurate and timely information on the results of operations and that
help resolve the numerous long-standing weaknesses. As DOD moves
forward with BMMP, it needs to ensure that the department's business
systems modernization projects--such as BSM and LMP, discussed in our
recently issued report--are part of a corporate solution to DOD long-
standing business problems. To assist the department with it ongoing
efforts, we would like to offer two suggestions for legislative
consideration that we believe could significantly increase the
likelihood of a successful business transformation effort at DOD.
Business Management Modernization Program:
The BMMP, which the department established in July 2001 following our
recommendation that DOD develop and implement an enterprise
architecture,[Footnote 44] is vital to the department's efforts to
transform its business operations.[Footnote 45] The purpose of the BMMP
is to oversee development and implementation of a departmentwide BEA,
transition plan, and related efforts to ensure that DOD business
systems investments are consistent with the architecture and provide
world class mission support to the fighting force. A well-defined and
properly implemented BEA can provide assurance that the department
invests in integrated enterprisewide business solutions and,
conversely, can help move resources away from nonintegrated business
system development efforts.
However, we recently reported[Footnote 46] that since our last
review,[Footnote 47] and after about 3 years of effort and over $203
million in reported obligations, we have not seen significant change in
the content of DOD's architecture or in DOD's approach to investing
billions of dollars annually in existing and new systems. Few actions
have been taken to address the recommendations we made in our previous
reports,[Footnote 48] which were aimed at improving DOD's plans for
developing the next version of the architecture and implementing the
institutional means for selecting and controlling both planned and
ongoing business systems investments. To date, DOD has not yet
addressed 22 of our 24 recommendations.
Further, DOD has not yet developed either near-term or long-term plans
for developing the architecture that explicitly identify and establish
a baseline for the actions to be taken, milestones to be achieved, cost
estimates to be met, and targeted outcomes to be achieved. DOD has
adopted an incremental approach to developing the architecture,
including the transition plan, and plans to refine and extend the
architecture in three increments, the first of which includes in part
the department's efforts to obtain an unqualified audit opinion of
DOD's consolidated fiscal year 2007 financial statements.
However, it is unclear what the increments individually or collectively
mean, and what they will provide or allow DOD to achieve in the near
and long term, because, as previously discussed, DOD has yet to develop
detailed performance measures. Although the three increments were
identified in November 2003, program officials do not expect to have a
plan for increment one until the next version of the transition plan is
completed in August 2004. According to program officials, the goals and
scope for the second and third increments were only recently approved
and, therefore, detailed plans of action and milestones do not yet
exist.
Currently, DOD has three initiatives under way to support increment
one. First, the program office is developing a plan of action for
increment one and intends to complete the plan by August 2004. Second,
the accounting and finance domain is conducting workshops to develop
needed business rules and requirements for extending and evolving
version 2.0 of the architecture. Last, DOD components are developing
individual plans detailing their respective efforts for supporting
increment one. However, there is no evidence that the program office is
coordinating with the components and that the components are
coordinating amongst themselves. Because there are not yet detailed
plans guiding the program's activities, it is unclear whether and how
these activities support each other and whether they support the
department's goal of achieving an unqualified audit opinion in 2007.
As DOD moves forward with the BEA, it will be essential that the
department have the management structure and processes in place to (1)
improve the control and accountability over its billions of dollars of
business systems investments; (2) develop corporate solutions to common
business problems; and (3) implement system projects within budget, on
time, and deliver the promised capability. The failure of the
department to have the appropriate management structure and processes
could result in billions of dollars continuing to be at risk of being
spent on more systems that are duplicative, are not interoperable, cost
more to maintain than necessary, and do not optimize mission
performance and accountability.
Control and Accountability Over Business System Investments:
As previously discussed, DOD continues to lack adequate control and
accountability over its billions of dollars of business systems
investments. Each DOD component continues to make its own investment
decisions, which has led to the proliferation of systems. As shown in
table 2, the department has reported that it has at least 2,274
business systems. For example, the department reportedly has 665
systems to support human resource management, 565 systems to support
logistical functions,[Footnote 49] 542 systems to perform finance and
accounting functions, and 210 systems to support strategic planning and
budget formulation.
Table 2: Reported DOD Business Systems by Domain and Functional Area:
Domain: Acquisition;
Air Force: 27;
Army: 31;
Navy/Marine Corps: 61;
DFAS: 3;
Other: 21;
Total: 143.
Domain: Accounting and finance;
Air Force: 43;
Army: 88;
Navy/Marine Corps: 195;
DFAS: 165;
Other: 51;
Total: 542.
Domain: Human resource management;
Air Force: 71;
Army: 387;
Navy/Marine Corps: 86;
DFAS: 33;
Other: 88;
Total: 665.
Domain: Installations and environment;
Air Force: 12;
Army: 98;
Navy/Marine Corps: 9;
DFAS: 1;
Other: 8;
Total: 128.
Domain: Logistics;
Air Force: 180;
Army: 191;
Navy/Marine Corps: 104;
DFAS: 11;
Other: 79;
Total: 565.
Domain: Strategic planning and budgeting;
Air Force: 23;
Army: 63;
Navy/Marine Corps: 98;
DFAS: 15;
Other: 11;
Total: 210.
Domain: Enterprise information environment;
Air Force: 1;
Army: 5;
Navy/Marine Corps: 2;
DFAS: 3;
Other: 10;
Total: 21.
Total;
Air Force: 357;
Army: 863;
Navy/Marine Corps: 555;
DFAS: 231;
Other: 268;
Total: 2274.
Source: GAO analysis of BMMP data.
[End of table]
These numerous systems have 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. The
proliferation of systems has resulted because DOD components are
largely autonomous and each receives its own business system funding.
DOD has recognized the need to improve its control and accountability
of its business system investments and has various initiatives underway
and planned. For example, in response to our recommendations,[Footnote
50] DOD issued a policy in March 2004 that assigns the domains the
responsibility for IT portfolio management. However, the procedures to
be followed to implement the policy are currently being developed and
no time frames for completion have been provided. In addition, specific
roles and responsibilities of the domains have not yet been formalized,
standard criteria for performing the system reviews have not been
developed, and explicit authority for fulfilling roles and
responsibilities has not been assigned. Although DOD recognizes the
need to clarify the roles and responsibilities associated with managing
the domains' portfolios of business systems and ensuring compliance
with the architecture, it has not yet established time frames for
completing these activities.
While DOD is continuing to work toward establishing the structure and
processes to manage its business systems investments, it has not yet
conducted a comprehensive system review of its ongoing IT investments
to ensure that they are consistent with its BEA efforts. Additionally,
execution of a comprehensive review of all modernization efforts by DOD
before billions of dollars have been invested will reduce the risk of
continuing the department's track record of business systems
modernization efforts that cost more than anticipated, take longer than
expected, and fail to deliver intended capabilities.
Corporate Solutions to Common Problems:
The department's business transformation also depends on its ability to
develop and implement business systems that provide corporate solutions
to DOD's numerous long-standing problems. This approach should help
preclude the continued proliferation of duplicative, stovepiped systems
and reduce spending on multiple systems that are supposed to perform
the same function. However, as discussed in our recently released
report,[Footnote 51] DOD is still developing systems that are not
designed to solve corporatewide problems. BSM and LMP were initiated in
November 1999 and February 1998, respectively, prior to DOD undertaking
the BEA and establishing the domains. As such, they were not directed
towards a corporate solution to the department's long-standing
weaknesses in the inventory and logistics management areas, such as
total asset visibility. Rather, both projects are more focused on DLA's
and the Army's respective inventory and logistics management
operations. Today, I would like to focus on one of those issues--total
asset visibility, because of its significant impact on DOD's
operational effectiveness.
In October 2002, a DLA official testified[Footnote 52] that BSM would
provide improved control and accountability over the Joint Services
Lightweight Integrated Suit Technology (JSLIST), which is a
lightweight, two-piece garment--coat and trousers--designed to provide
maximum protection against chemical and biological contaminants. Total
asset visibility is critical for sensitive items such as the JSLIST.
For example, tracking the specific location of each suit by lot number
is necessary if for any reason they have to be recalled, as was the
case with the JSLIST predecessor the Battle Dress Overgarment (BDO).
Over 700,000 of the BDOs were found to be defective and were recalled.
Since DOD's systems did not provide the capability to identify the
exact location of each suit, a series of data calls were conducted,
which proved to be ineffective. We reported in September 2001[Footnote
53] that DOD was unable to locate approximately 250,000 of the
defective suits and therefore was uncertain if the suits were still in
the possession of the military forces, or whether they had been
destroyed or sold. Subsequently, we found that DOD had sold many of
these defective suits to the public as excess, including 379 that we
purchased in an undercover operation.[Footnote 54] In addition, DOD may
have issued over 4,700 of the defective BDO suits to local law
enforcement agencies. This is particularly significant because local
law enforcement agencies are most likely to be the first responders to
a terrorist attack, yet DOD failed to inform these agencies that using
these suits could result in death or serious injury.
At the October 2002 hearing, the DLA official stated that JSLIST would
be included in BSM at the earliest practicable date, which was
estimated to be December 2003. BSM, however, is not designed to provide
the corporate total asset visibility necessary to locate and track the
suits throughout DOD's supply chain. While the suits are expected to be
included in a future deployment of BSM, at the time of our review
program officials had not yet specified a date when they will be
included. Even when the suits are included, BSM is designed to provide
visibility over the suits only within the DLA environment--something
DLA has stated already exists within its current system environment.
As we have previously reported,[Footnote 55] the lack of integrated
systems hinders DOD's ability to know how many JSLIST it has on hand
and where they are located once they leave the DLA warehouse. For
example, we found that military units that receive JSLIST from DLA
warehouses maintained inventory data in nonstandard, stovepiped systems
that did not share data with DLA or other DOD systems. The methods used
to control and maintain visibility over JSLIST at the units we visited
ranged from stand-alone automated systems, to spreadsheet applications,
to pen and paper. One military unit we visited did not have any
inventory system for tracking JSLIST. BSM does not address asset
visibility outside of DLA's supply chain for the JSLIST, and thus
cannot provide DOD with the capability to readily locate JSLIST for any
reason, including any potential need for a recall of defective suits.
Similarly, we recently reported[Footnote 56] that LMP will not provide
the Army with total asset visibility until a suite of other systems has
been developed and implemented. Specifically, Army officials have
stated that LMP will require integration with other Army systems that
are under development in order to achieve total asset visibility within
the Army. These additional systems are the Product Lifecycle Management
Plus (PLM+) and Global Combat Support System--Army (GCSS-A). According
to the Army, PLM+ is to integrate LMP and GCSS-A to create end-to-end
solution for Army logistics. However, time frames and cost estimates
have not been developed for these two additional system initiatives.
Further, to help provide for departmentwide total asset visibility, DLA
is undertaking the implementation of the Integrated Data Environment
(IDE) program. According to DLA, this initiative is intended to provide
the capability for routing data from multiple systems within DLA and
DOD into one system. According to DLA, IDE is expected to reach full
operational capability in August 2007, with a current estimated cost of
approximately $30 million. However, successfully meeting this
completion depends on other departmental efforts being completed on
time, such as PLM+, for which a completion date had not been
established.
Project Management and Oversight:
While the success of BMMP and improved control and accountability of
business system investments are critical aspects of the department's
transformation efforts, equally important is the ability of DOD to
implement chosen systems solutions on time, within budget, and with the
promised capability. The department has not demonstrated the ability to
achieve these goals.
As discussed in our recently released report,[Footnote 57] BSM and LMP
have experienced cost increases, schedule slippages, and did not
deliver planned system capabilities in their first release. Our
analysis indicated that many of the operational problems experienced by
BSM and LMP can be attributed to DOD's inability to effectively
implement the disciplined processes necessary to reduce the risks
associated with these projects to acceptable levels. Disciplined
processes have been shown to reduce the risks associated with software
development and acquisition efforts to acceptable levels and are
fundamental to successful systems acquisition.
Specifically, in the case of these two projects, they had significant
deficiencies in defining requirements and testing--two areas that form
the foundation for a project's success or failure. In fact, DLA and
Army program officials acknowledged that requirements and testing
defects were factors contributing to the operational problems and
stated that they are working to develop more effective processes. To
their credit, DLA and the Army have decided that future deployments of
BSM and LMP will not go forward until they have reasonable assurance
that the deployed systems will operate as expected for a given
deployment. Our analysis of selected BSM and LMP key
requirements[Footnote 58] and testing processes found that (1) the
functionality to be delivered was not adequately described or stated to
allow for quantitative evaluation; (2) the traceability among the
various process documents (e.g., operational requirements documents,
functional or process scenarios, and test cases) was not maintained;
and (3) system testing was ineffective.
In commenting on the report,[Footnote 59] the department acknowledged
that the initial implementation of BSM and LMP experienced problems
that could be attributed to the lack of adequate requirements
determination and system testing. To address these inadequacies, the
department noted that requirements analysis had been expanded to
include greater specificity and that the successful completion of
comprehensive testing would be required prior to further implementation
of either system.
Suggestions for Legislative Consideration:
We would like to offer two suggestions for legislative consideration
that we believe could contribute significantly to the department's
ability to not only address the impediments to DOD's success but also
to incorporate needed key elements to successful reform. These
suggestions would include the (1) creation of a chief management
official and (2) centralization of the funding business systems
investments with the domain leaders responsible for the department's
various business areas, such as logistics and human resource
management. We provided similar views in our testimonies on March 23,
2004,[Footnote 60] before the Subcommittee on Readiness and Management
Support, Senate Committee on Armed Services, on March 31, 2004,
[Footnote 61] before the Subcommittee on Terrorism, Unconventional
Threats, and Capabilities, House Committee on Armed Services, and
yesterday[Footnote 62] before a joint hearing of the Subcommittee on
National Security, Emerging Threats, and International Relations, the
Subcommittee on Technology, Information Policy, Intergovernmental
Relations, and the Census, and the Subcommittee on Government
Efficiency and Financial Management, House Committee on Government
Reform.
Chief Management Official:
I will now discuss our first matter for consideration. Previous failed
attempts to improve DOD's business operations illustrate the need for
sustained involvement of DOD leadership in helping to assure that DOD's
financial and overall business process transformation efforts remain a
priority.
While the Secretary and other key DOD leaders have demonstrated their
commitment to the current business transformation efforts, the long-
term nature of these efforts requires the development of an executive
position capable of providing strong and sustained executive leadership
over a number of years and various administrations.
However, 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 are needed to resolve
the management challenges facing DOD. For example, the former DOD
Comptroller, who was very supportive of the current transformation
effort, and one of its principal leaders, served as the DOD Comptroller
for slightly over 3 years. Further, within the office of the DOD
Comptroller, the current Principal Deputy/Deputy Under Secretary of
Defense for Management Reform will soon be leaving the department. He
also was in that position for slightly over 3 years. Additionally,
leadership voids have existed in other key positions such as the
program manager for BMMP. From May 2003 to February 2004, there was no
program manager to identify, direct, and execute program
activities.[Footnote 63] The resolution of the array of interrelated
business system management challenges that DOD faces is likely to span
several administrations and require sustained leadership to maintain
the continuity needed for success.
One way to ensure sustained leadership over DOD's business
transformation efforts would be to create a full-time executive level
II position for a chief management official[Footnote 64] who would
serve as the Principal Under Secretary of Defense for Management. This
position would provide the sustained attention essential for addressing
key stewardship responsibilities such as strategic planning,
performance and financial management, and business systems
modernization in an integrated manner. This position could be filled by
an individual, appointed by the President and confirmed by the Senate,
for a set term of 7 years with the potential for reappointment. Such an
individual should have a proven track record as a business process
change agent in large, complex, and diverse organizations--experience
necessary to spearhead business process transformation across the
department, and potentially administrations, and serve as an integrator
for the needed business transformation efforts. In addition, this
individual would enter into an annual performance agreement with the
Secretary that sets forth measurable individual goals linked to overall
organizational goals. Measurable progress towards achieving agreed-
upon goals would be a basis for determining the level of compensation
earned, including any related bonus. In addition, this individual's
achievements and compensation would be reported to Congress each year.
Functional Domain Control and Accountability Over Business System
Investments:
We have made numerous recommendations to DOD intended to improve the
management oversight and control of its business systems investments.
However, progress in achieving this control has been slow and, as a
result, DOD has little or no assurance that current business systems
investments are being spent in an economically efficient and effective
manner. DOD's current systems funding process has contributed to the
evolution of an overly complex and error-prone information technology
environment containing duplicative, nonintegrated, and stovepiped
systems. Given that DOD spends billions of dollars annually on business
systems and related infrastructure, it is critical that actions be
taken to gain more effective control over such business systems
funding.
The second suggestion we have for legislative action to address this
issue, as discussed in our report[Footnote 65] and consistent with our
open recommendations to DOD, is to establish specific management
oversight, accountability, and control of funding with the "owners" of
the various functional areas or domains. This legislation would define
the scope of the various business areas (e.g., accounting, acquisition,
logistics, and personnel) and establish functional responsibility for
management of the portfolio of business systems in that area with the
relevant Under Secretary of Defense for the six departmental domains
and the CIO for the Enterprise Information Environment Mission
(information technology infrastructure). For example, planning,
development, acquisition, and oversight of DOD's portfolio of
logistics business systems would be vested in the Under Secretary of
Defense for Acquisition, Technology and Logistics.
We believe it is critical that funds for DOD business systems be
appropriated to the domain owners in order to provide for
accountability and the ability to prevent the continued parochial
approach to systems investment that exists today. The domains would
establish a hierarchy of investment review boards with DOD-wide
representation, including the military services and defense agencies.
These boards would be responsible for reviewing and approving
investments to develop, operate, maintain, and modernize business
systems for the domain portfolio, including ensuring that investments
were consistent with DOD's BEA. All domain owners would be responsible
for coordinating their business systems investments with the chief
management official who would chair the proposed Defense Business
Systems Modernization Executive Committee and provide a cross-domain
perspective. Domain leaders would also be required to report to
Congress through the chief management official and the Secretary of
Defense on applicable business systems that are not compliant with
review requirements and to include a summary justification for
noncompliance.
In commenting on our report, DOD stated that it did not agree with this
funding concept. The department stated that the portfolio management
process being established--to include investment review boards--would
provide the appropriate control and accountability over business system
investments. DOD also stated that beginning with the fiscal year 2006
budget review process, the domains will be actively involved in
business system investment decisions. DOD stated that the military
services implement their own statutory authorities for acquisition and
IT systems development in consultation with DOD. While the
establishment of the investment review boards is consistent with our
previous recommendations, we continue to believe that appropriating
funds for DOD business systems to the domains, rather than the various
DOD entities, will significantly improve accountability over business
system investments. DOD's comments indicate that the domains will be
more accountable for making business system investment decisions, but
unless they control the funding, they will not have the means to effect
real change. Continuing to provide business system funding to the
military services and defense agencies is an example of the
department's embedded culture and parochial operations. As a result of
DOD's intent to maintain the status quo, there can be little confidence
that it will not continue to spend billions of dollars on duplicative,
nonintegrated, stovepiped, and overly costly systems that do not
optimize mission performance and accountability and, therefore, do not
support the department's transformation goals.
Conclusion:
The excellence of our military forces is unparalleled. However, that
excellence is often achieved in the face of enormous challenges in
DOD's financial management and other business areas, which have serious
and far-reaching implications related to the department's operations
and critical national defense mission. Our recent work has shown that
DOD's long-standing financial management and business problems have
resulted in fundamental operational problems, such as failure to
properly pay mobilized Army Guard soldiers and the inability to provide
adequate accountability and control over supplies and equipment
shipments in support of Operation Iraqi Freedom. Further, the lack of
appropriate accountability across all business areas has resulted in
fraud, waste, and abuse and hinders DOD's attempts to develop world-
class operations and activities to support its forces. Additionally,
DOD cannot provide Congress reasonable assurance that the billions of
dollars spent annually on business systems modernizations are not being
wasted on projects that will perpetuate the current costly,
nonintegrated, duplicative systems environment. If DOD is unable to
address the underlying causes that have resulted in the failure of
previous broad-based reform efforts, improvements will remain marginal,
confined to narrowly defined incremental improvements.
As our nation continues to be challenged with growing budget deficits
and increasing pressure to reduce spending levels, every dollar that
DOD can save through improved economy and efficiency of its operations
is important. As previously noted, the Secretary has stated that the
department could save approximately 5 percent of its budget annually--
which equal about $20 billion--through improved business operations.
DOD's senior leaders have demonstrated a commitment to transforming the
department and improving its business operations and have taken
positive steps to begin this effort. We believe that implementation of
our open recommendations and our suggested legislative initiatives
would greatly improve the likelihood of meaningful, broad-based reform
at DOD.
The continued involvement and monitoring by congressional committees
will also be critical to ensure that DOD's transformation actions are
sustained and extended and that the department achieves its goal of
securing the best performance and highest measure of accountability for
the American people. We commend the Subcommittee for holding this
hearing and we encourage you to use this vehicle, on at least an annual
basis, as a catalyst for long overdue business transformation at DOD.
Mr. Chairman, this concludes our 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) 512-9505 or kutzg@gao.gov. The following individuals
contributed to the various reports and testimonies that were the basis
for this testimony: Beatrice Alff, Molly Boyle, Art Brouk, Cherry
Clipper, Mary Ellen Chervenic, Francine Delvecchio, Stephen Donahue,
Francis Dymond, Eric Essig, Gayle Fischer, Geoff Frank, John Kelly,
Randolph Hite, Cynthia Jackson, Neelaxi Lakhmani, Evelyn Logue, John
Martin, Elizabeth Mead, Mai Nguyen, Michael Peacock, David Plocher,
Gregory Pugnetti, Cary Russell, John Ryan, Katherine Schirano, Darby
Smith, Carolyn Voltz, Marilyn Wasleski, and Jenniffer Wilson.
Selected GAO Products Related to DOD's Business Systems Modernization:
U.S. General Accounting Office, DOD Business Systems Modernization:
Important Progress Made to Develop Business Enterprise Architecture,
but Much Work Remains, GAO-03-1018 (Washington, D.C.: Sept. 19, 2003).
U.S. General Accounting Office, Business Systems Modernization: Summary
of GAO's Assessment of the Department of Defense's Initial Business
Enterprise Architecture, GAO-03-877R (Washington, D.C.: July 7, 2003).
U.S. General Accounting Office, DOD Business Systems Modernization:
Longstanding Management and Oversight Weaknesses Continue to Put
Investments at Risk, MACROBUTTON HtmlResAnchor GAO-03-553T
(Washington, D.C.: Mar. 31, 2003).
U.S. General Accounting Office, DOD Business Systems Modernization:
Continued Investment in Key Accounting Systems Needs to be Justified,
MACROBUTTON HtmlResAnchor GAO-03-465 (Washington, D.C.: March 28,
2003).
U.S. General Accounting Office, DOD Business Systems Modernization:
Improvements to Enterprise Architecture Development and Implementation
Efforts Needed, GAO-03-458 (Washington, D.C.: Feb. 28, 2003).
U.S. General Accounting Office, DOD Financial Management: Integrated
Approach, Accountability, Transparency, and Incentives Are Keys to
Effective Reform, GAO-02-497T (Washington, D.C.: Mar. 6, 2002).
U.S. General Accounting Office, Information Technology: Architecture
Needed to Guide Modernization of DOD's Financial Operations, GAO-01-525
(Washington, D.C.: May 17, 2001).
(192138):
FOOTNOTES
[1] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
03-119 (Washington, D.C.: January 2003). The nine interrelated high-
risk areas that represent the greatest challenge to DOD's development
of world-class business operations to support its forces are: contract
management, financial management, human capital management,
information security, inventory management, real property, systems
modernization, support infrastructure management, and weapon systems
acquisition.
[2] U.S. General Accounting Office, Military Pay: Army National Guard
Personnel Mobilized to Active Duty Experienced Significant Pay
Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003).
[3] U.S. General Accounting Office, DOD Management: Examples of
Inefficient and Ineffective Business Processes, GAO-02-873T
(Washington, D.C.: June 25, 2002).
[4] U.S. General Accounting Office, DOD Excess Property: Risk
Assessment Needed on Public Sales of Equipment That Could Be Used to
Make Biological Agents, GAO-04-81TNI (Washington, D.C.: Oct. 7, 2003).
[5] U.S. General Accounting Office, Defense Logistics: Preliminary
Observations on the Effectiveness of Logistics Activities during
Operation Iraqi Freedom, GAO-04-305R (Washington, D.C.: Dec. 18, 2003).
[6] U.S. General Accounting Office, DOD Business Systems Modernization:
Billions Continue to Be Invested with Inadequate Management Oversight
and Accountability, GAO-04-615 (Washington, D.C.: May 27, 2004).
[7] See Related Reports.
[8] U.S. General Accounting Office, Department of Defense: Further
Actions Needed to Establish and Implement a Framework for Successful
Financial and Business Management Transformation, GAO-04-551T
(Washington, D.C.: Mar. 23, 2004) and U.S. General Accounting Office,
Department of Defense: Further Actions Needed to Establish and
Implement a Framework for Successful Business Transformation, GAO-04-
626T (Washington, D.C.: Mar. 31, 2004).
[9] On September 9, 2002, GAO convened a roundtable of executive branch
leaders and management experts to discuss the Chief Operating Officer
concept. For more information see U.S. General Accounting Office,
Highlights of a GAO Roundtable: The Chief Operating Officer Concept: A
Potential Strategy to Address Federal Governance Challenges, GAO-03-
192SP (Washington, D.C.: Oct. 4, 2002).
[10] GAO-04-615.
[11] U.S. General Accounting Office, Department of Defense: Status of
Financial Management Weaknesses and Progress Toward Reform, GAO-03-931T
(Washington, D.C.: June 25, 2003).
[12] U.S. General Accounting Office, Fiscal Year 2003 U.S. Government
Financial Statements: Sustained Improvement in Federal Financial
Management Is Crucial to Addressing Our Nation's Future Fiscal
Challenges, GAO-04-477T (Washington, D.C.: Mar. 3, 2004) and our report
contained in the U.S. Department of the Treasury, Financial Report of
the United States Government (Washington, D.C.: Feb. 27, 2004).
[13] JFMIP is a joint undertaking of the Office of Management and
Budget, GAO, the Department of Treasury, and the Office of Personnel
Management, working in cooperation with each other and with operating
agencies to improve financial management practices throughout the
government.
[14] FFMIA, Pub. L. No. 104-208, div. A., §101(f), title VIII, 110
Stat. 3009, 3009-389 (Sept. 30, 1996), requires the 23 major
departments and agencies covered by the Chief Financial Officers Act of
1990, Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990) (as amended),
to implement and maintain financial management systems that comply
substantially with (1) federal financial management systems
requirements, (2) applicable federal accounting standards, and (3) U.S.
Standard General Ledger (SGL) at the transaction level.
[15] The six case study units reviewed include the Colorado B Company
Special Forces, Virginia B Company Special Forces, West Virginia C
Company Special Forces, Mississippi 114TH Military Police Company,
California 49TH Military Police Headquarters and Headquarters
Detachment, and the Maryland 200TH Military Police Company. In
addition, our limited review of pay experiences of soldiers in the
Colorado Army Guard's 220TH Military Police Company, which recently
returned from Iraq, indicated that some of the same types of pay
problems that we found in our case studies had also affected soldiers
in this unit.
[16] GAO-04-89.
[17] GAO-04-305R.
[18] U.S. General Accounting Office, Defense Inventory: Opportunities
Exist to Improve Spare Parts Support Aboard Deployed Navy Ships, GAO-
03-887 (Washington, D.C.: Aug. 29, 2003).
[19] GAO-02-873T.
[20] U.S. General Accounting Office, DOD Excess Property: Risk
Assessment Needed on Public Sales of Equipment That Could Be Used to
Make Biological Agents, GAO-04-81TNI (Washington, D.C.: Oct. 7, 2003).
[21] We characterized as "potentially criminal" any activity related to
federal tax liability that may be a crime under a specific provision of
the Internal Revenue Code. Depending on the potential penalty provided
by statute, the activity could be a felony (punishable by imprisonment
of more than 1 year) or a misdemeanor (punishable by imprisonment of 1
year or less). Some potential crimes under the Internal Revenue Code
constitute fraud because of the presence of intent to defraud,
intentional misrepresentation or deception, or other required legal
elements.
[22] A "tax period" varies by tax type. For example, the tax period for
payroll and excise taxes is one quarter of a year. The taxpayer is
required to file quarterly returns with IRS for these types of taxes,
although payment of the taxes occurs throughout the quarter. In
contrast, for income, corporate, and unemployment taxes, a tax period
is 1 year.
[23] U.S. General Accounting Office, Financial Management: Some DOD
Contractors Abuse the Federal Tax System with Little Consequence, GAO-
04-95 (Washington, D.C.: Feb. 12, 2004).
[24] U.S. General Accounting Office, Travel Cards: Internal Control
Weaknesses at DOD Led to Improper Use of First and Business Class
Travel, GAO-04-229T (Washington, D.C.: Nov. 6, 2003), and U.S. General
Accounting Office, Travel Cards: Internal Control Weaknesses at DOD Led
to Improper Use of First and Business Class Travel, GAO-04-88
(Washington, D.C.: Oct. 24, 2003).
[25] U.S. General Accounting Office, DOD Travel Cards: Control
Weaknesses Led to Millions of Dollars of Wasted on Unused Airline
Tickets, GAO-04-398 (Washington, D.C.: Mar. 31, 2004).
[26] U.S. General Accounting Office, DOD Travel Cards: Control
Weaknesses Resulted in Millions of Dollars of Improper Payments, GAO-
04-576 (Washington, D.C.: June 9, 2004).
[27] U.S. General Accounting Office, Travel Cards: Control Weaknesses
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-03-169
(Washington, D.C.: Oct. 11, 2002).
[28] U.S. General Accounting Office, DOD Contract Payments: Management
Action Needed to Reduce Billions in Adjustments to Contract Payment
Records, GAO-03-727 (Washington, D.C.: Aug. 8, 2003).
[29] U.S. General Accounting Office, Military Treatment Facilities:
Improvements Needed to Increase DOD Third-Party Collections, GAO-04-
322R (Washington, D.C.: Feb. 20, 2004).
[30] U.S. General Accounting Office, Information Technology:
Improvements Needed in the Reliability of Defense Budget Submissions,
GAO-04-115 (Washington, D.C.: Dec. 19, 2003).
[31] U.S. General Accounting Office, DOD High-Risk Areas: Eliminating
Underlying Causes Will Avoid Billions of Dollars in Waste, GAO/T-NSIAD/
AIMD-97-143 (Washington, D.C.: May 1, 1997).
[32] Chief Financial Officers Act of 1990, Pub. L. No. 101-576, 104
Stat. 2838, 2843 (Nov. 15, 1990) (codified, as amended, in scattered
sections of title 31, United States Code).
[33] U.S. General Accounting Office, Executive Guide: Creating Value
Through World-class Financial Management, GAO/AIMD-00-134 (Washington,
D.C.: April 2000) and U.S. General Accounting Office, Executive Guide:
Maximizing the Success of Chief Information Officers: Learning From
Leading Organizations, GAO-01-376G (Washington, D.C.: February 2001).
[34] U.S. General Accounting Office, DOD Business Systems
Modernization: Limited Progress in Development of Business Enterprise
Architecture and Oversight of Information Technology Investments, GAO-
04-731R (Washington, D.C.: May 17, 2004).
[35] Subsection 1004 (d) of the Bob Stump National Defense
Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314, 116 Stat.
2629 (Dec. 2, 2002), provides that any amount in excess of $1 million
may be obligated for financial system improvements before approval of
its enterprise architecture and a supporting transition plan only if
the DOD Comptroller makes a determination that the improvement is
necessary for (1) critical national security capability or critical
safety and security requirements or (2) prevention of significant
adverse effect on a project that is needed to achieve an essential
capability. The act further provides that after the architecture is
approved, the DOD Comptroller must determine before making obligations
that exceed $1 million for system improvements that such improvements
are consistent with the enterprise architecture and the transition
plan.
[36] We requested obligational data for fiscal year 2003 for the period
December 2, 2002, the date of the enactment of the act, through
September 30, 2003.
[37] GAO-04-615.
[38] U.S. General Accounting Office, Department of Defense: Further
Actions Needed to Establish and Implement a Framework for Successful
Business Transformation, GAO-04-626T (Washington, D.C.: Mar. 31, 2004).
[39] OMB developed the Program Assessment Rating Tool to strengthen the
process for assessing the effectiveness of programs across the federal
government. For fiscal year 2004, OMB rated the following 12 defense
program areas: Air Combat; Airlift; Basic Research; Chemical
Demilitarization; Communications Infrastructure; Defense Health;
Energy Conservation Improvement; Facilities Sustainment, Restoration,
Modernization, and Demolition; Housing; Missile Defense; Recruiting;
and Shipbuilding. DOD linked metrics for these program areas, which
represent 20 percent of the department's fiscal year 2004 budget; it
linked another 20 percent in the 2005 budget and 30 percent in the 2006
budget, for a total of 70 percent.
[40] In July 2003 we reported that DOD and the military services do not
have an effective approach to prevent and mitigate equipment corrosion,
and that DOD's strategic plan should contain clearly defined goals,
measurable, outcome-oriented objectives, and performance measures.
(U.S. General Accounting Office, Defense Management: Opportunities to
Reduce Corrosion Costs and Increase Readiness, GAO-03-753 (Washington,
D.C.: July 7, 2003)). Similarly, in January 2004 we testified that
existing processes and controls used to provide pay and allowances to
mobilized Army Guard personnel prevented DOD from being able to
reasonably assure timely and accurate payroll payments. We stated that
DOD needs to establish a unified set of policies and procedures, as
well as performance measures in the pay area. (U.S. General Accounting
Office, Military Pay: Army National Guard Personnel Mobilized to Active
Duty Experienced Significant Pay Problems, GAO-04-413T (Washington,
D.C.: Jan. 28, 2004)).
[41] GAO-04-731R.
[42] GAO-03-465.
[43] Department of Defense, Transforming Department of Defense
Financial Management: A Strategy for Change (Washington, D.C.: Apr. 13,
2001).
[44] DOD has one Enterprise Information Environment Mission, and six
departmental domains including
(1) acquisition/procurement; (2) finance, accounting, and financial
management; (3) human resource management; (4) logistics; (5) strategic
planning and budgeting; and (6) installations and environment.
[45] GAO-01-525.
[46] GAO-04-731R.
[47] GAO-03-1018.
[48] GAO-03-458 and GAO-03-1018.
[49] According to logistics domain officials, there are currently about
3,000 systems just within the logistics domain. Of that amount, about
1,900 systems have been validated by the DOD components as logistics
systems--that is, they are not merely a spreadsheet or a report. Such a
determination has not been made for the other 1,100.
[50] GAO-01-525 and GAO-03-458.
[51] GAO-04-615.
[52] Chemical and Biological Equipment: Preparing for a Toxic
Battlefield: Hearing Before the House Committee on Government Reform,
Subcommittee on National Security, Veterans Affairs and International
Relations, 107TH Cong. 119 (Oct. 1, 2002) (statement of Deputy
Commander, Defense Supply Center Philadelphia, Mr. George H. Allen).
[53] U.S. General Accounting Office, Chemical and Biological Defense:
Improved Risk Assessment and Inventory Management Are Needed, GAO-01-
667 (Washington, D.C.: Sept. 28, 2001).
[54] U.S. General Accounting Office, DOD Excess Property: Risk
Assessment Needed on Public Sales of Equipment That Could Be Used to
Make Biological Agents, GAO-04-81TNI (Washington, D.C.: Oct. 7, 2003).
[55] GAO-02-873T.
[56] GAO-04-615.
[57] GAO-04-615.
[58] BSM and LMP have identified and documented 202 and 293 system
requirements, respectively. For BSM, we reviewed 13 requirements
related to finance, order fulfillment, planning, and procurement. For
LMP, we reviewed 12 requirements related to planning and budget
development, asset management, inventory management, and maintenance
analysis and planning.
[59] GAO-04-615.
[60] GAO-04-551T.
[61] GAO-04-626T.
[62] U. S. General Accounting Office, Department of Defense: Long-
standing Problems Continue to Impede Financial and Business Management
Transformation, GAO-04-907T (Washington, D.C.: July 7, 2004).
[63] GAO-04-731R.
[64] GAO-03-192SP.
[65] GAO-04-615.
