DOD Business Systems Modernization
Billions Being Invested without Adequate Oversight Gao ID: GAO-05-381 April 29, 2005Despite its significant investment in business systems, the Department of Defense (DOD) continues to have long-standing financial and business management problems that preclude the department from producing reliable and timely information for making decisions and for accurately reporting on its billions of dollars of assets. GAO was asked to (1) identify DOD's fiscal year 2005 estimated funding for its business systems and (2) determine whether DOD has effective control and accountability over its business systems modernization investments.
DOD's business and financial management weaknesses have resulted in billions of dollars wasted annually in a time of increasing fiscal constraint. These weaknesses continue despite DOD requesting over $13 billion in fiscal year 2005--about $6 billion less than in fiscal year 2004--to operate, maintain, and modernize its existing duplicative business systems. The difference is more a reclassification of systems rather than an actual spending reduction. Some of the reclassifications appeared reasonable and others were questionable due to inconsistent information. At the same time, DOD reported an increase in the number of business systems to 4,150 as of February 2005--an increase of about 1,900 systems since April 2003. The duplicative and stovepiped nature of DOD's systems environment is illustrated by the numerous systems in the same business area. For example, DOD reported that it has over 2,000 logistics systems--an increase of approximately 255 percent since April 2003. DOD still does not have an effective departmentwide management structure for controlling business systems investments. Furthermore, DOD is not in compliance with the National Defense Authorization Act for Fiscal Year 2003, which requires the DOD Comptroller to determine that system improvements with obligations exceeding $1 million meet the criteria specified in the act. Based on limited information provided by DOD, system improvements totaling about $243 million of obligations over $1 million were not reviewed by the DOD Comptroller in fiscal year 2004. Cumulatively, based upon DOD's reported data, system improvements totaling about $651 million of obligations over $1 million were not reviewed by the DOD Comptroller before obligations were made since passage of the 2003 act. The 2005 defense authorization act directed that DOD put in place a management structure to improve the control and accountability over business systems investments by placing more responsibility with the domains. At the same time, each military service has its own investment review process. Absent an integrated management structure that clearly defines the relationship of the domains and the military services, DOD will be at risk that the parochialism contributing to the current problems will continue.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-05-381, DOD Business Systems Modernization: Billions Being Invested without Adequate Oversight
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Report to Congressional Requesters:
April 2005:
DOD Business Systems Modernization:
Billions Being Invested without Adequate Oversight:
GAO-05-381:
GAO Highlights:
Highlights of GAO-05-381, a report to congressional requesters:
Why GAO Did This Study:
Despite its significant investment in business systems, the Department
of Defense (DOD) continues to have long-standing financial and business
management problems that preclude the department from producing
reliable and timely information for making decisions and for accurately
reporting on its billions of dollars of assets. GAO was asked to (1)
identify DOD's fiscal year 2005 estimated funding for its business
systems and (2) determine whether DOD has effective control and
accountability over its business systems modernization investments.
What GAO Found:
DOD's business and financial management weaknesses have resulted in
billions of dollars wasted annually in a time of increasing fiscal
constraint. These weaknesses continue despite DOD requesting over $13
billion in fiscal year 2005--about $6 billion less than in fiscal year
2004--to operate, maintain, and modernize its existing duplicative
business systems. The difference is more a reclassification of systems
rather than an actual spending reduction. Some of the reclassifications
appeared reasonable and others were questionable due to inconsistent
information. At the same time, DOD reported an increase in the number
of business systems to 4,150 as of February 2005--an increase of about
1,900 systems since April 2003. The duplicative and stovepiped nature
of DOD's systems environment is illustrated by the numerous systems in
the same business area. For example, DOD reported that it has over
2,000 logistics systems--an increase of approximately 255 percent since
April 2003.
DOD still does not have an effective departmentwide management
structure for controlling business systems investments. Furthermore,
DOD is not in compliance with the National Defense Authorization Act
for Fiscal Year 2003, which requires the DOD Comptroller to determine
that system improvements with obligations exceeding $1 million meet the
criteria specified in the act. Based on limited information provided by
DOD, system improvements totaling about $243 million of obligations
over $1 million were not reviewed by the DOD Comptroller in fiscal year
2004. Cumulatively, based upon DOD's reported data, system improvements
totaling about $651 million of obligations over $1 million were not
reviewed by the DOD Comptroller before obligations were made since
passage of the 2003 act.
DOD Business Systems with Obligations in Excess of $1 Million for
Modernizations Not Submitted to the DOD Comptroller (Dollars in
Millions):
Component: Army;
Fiscal year 2003: $78;
Fiscal year 2004: $40;
Total: $118.
Component: Navy;
Fiscal year 2003: $62;
Fiscal year 2004: $93;
Total: $155.
Component: Air Force;
Fiscal year 2003: $53;
Fiscal year 2004: $79;
Total: $132.
Component: Defense Logistics Agency;
Fiscal year 2003: $168;
Fiscal year 2004: $10;
Total: $178.
Component: TRICARE;
Fiscal year 2003: $6;
Fiscal year 2004: $17;
Total: $23.
Component: U.S. Transportation Command;
Fiscal year 2003: $1;
Fiscal year 2004: $1;
Total: $2.
Component: Defense Finance and Accounting Service;
Fiscal year 2003: $40;
Fiscal year 2004: $3;
Total: $43.
Component: Total;
Fiscal year 2003: $408;
Fiscal year 2004: $243;
Total: $651.
Source: GAO analysis of DOD reported information.
[End of table]
The 2005 defense authorization act directed that DOD put in place a
management structure to improve the control and accountability over
business systems investments by placing more responsibility with the
domains. At the same time, each military service has its own investment
review process. Absent an integrated management structure that clearly
defines the relationship of the domains and the military services, DOD
will be at risk that the parochialism contributing to the current
problems will continue.
What GAO Recommends:
GAO makes four recommendations to DOD: (1) review the reclassified
systems to determine how these should be properly reported, (2) review
the reported business systems inventory so systems are defined in
accordance with the definition specified in the fiscal year 2005
defense authorization act, (3) develop and implement a comprehensive
plan that addresses GAO's previous recommendations related to the
business enterprise architecture and the control and accountability
over business systems investments, and (4) submit the plan to the
congressional defense committees.
DOD concurred with the recommendations and described efforts to address
them.
www.gao.gov/cgi-bin/getrpt?GAO-05-381.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory Kutz at (202) 512-
9095 or Keith A. Rhodes at (202) 512-6412.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD Lacks Accurate Information on the Costs and Number of Business
Systems:
Limited Progress Made in DOD's Efforts to Control Its Business Systems
Investments:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: DOD Business Systems Modernizations with Obligations in
Excess of $1 Million Approved by the DOD Comptroller in Fiscal Year
2004:
Appendix IV: Modernizations with Obligations in Excess of $1 Million
Not Submitted for the Required DOD Comptroller Review:
Appendix V: Modernizations with Obligations in Excess of $1 Million Not
Reviewed by DOD Comptroller per July 2004 Memorandum:
Appendix VI: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Distribution of DOD's $13.3 Billion IT Budget Request for
Fiscal Year 2005 for Business Systems and Related Infrastructure:
Table 2: Comparison of DOD Business Systems Inventories by Domain:
Table 3: Reported DOD Business Systems by Domain and Component:
Table 4: Identification of Business Systems Modernizations by DOD
Component That Did Not Have DOD Comptroller Review as Required by the
Fiscal Year 2003 National Defense Authorization Act:
Letter April 29, 2005:
Congressional Requesters:
The Department of Defense (DOD) continues to confront pervasive decades-
old financial management and business system problems. These problems
continue despite the department spending billions of dollars annually
to operate, maintain, and modernize its business systems.[Footnote 1]
Additionally, our reports[Footnote 2] continue to show that the
department's stovepiped and duplicative systems contribute to fraud,
waste, and abuse. Of the 25 areas on GAO's governmentwide "high-risk"
list, 8 are DOD program areas, and the department shares responsibility
for 6 other high-risk areas that are governmentwide in scope.[Footnote
3] These problems also preclude the department from producing reliable,
timely, and useful information to make sound decisions and to
accurately report on its trillions of dollars of assets and
liabilities.
This report is a continuation of our reviews to provide Congress
information on DOD's continuing significant investments in its business
systems and its control and accountability over these investments. More
specifically, as agreed with your offices, our objectives were to (1)
identify the amount of funding DOD requested for fiscal year 2005 to
operate, maintain, and modernize its business systems and (2) determine
whether DOD has effective control and accountability over its business
systems modernizations investments.
To determine how much DOD plans to spend on the operation, maintenance,
and modernization of its business systems in fiscal year 2005, we
analyzed DOD's information technology (IT) budget request and met with
officials in the office of the DOD Chief Information Officer (CIO) and
military service representatives to obtain an overview of how the IT
budget request was developed. To determine the effectiveness of the
department's efforts to control and account for its business systems
investments, we met with officials in DOD's office of the Business
Management Modernization Program (BMMP)[Footnote 4] and the business
domains[Footnote 5] and reviewed available documentation. Further, we
asked the military services and defense agencies for a list of fiscal
year 2004 reported obligations[Footnote 6] exceeding $1 million for
business systems modernizations, which we used in determining if the
obligations were reviewed by the DOD Comptroller to ascertain whether
financial systems improvements met the criteria specified in the fiscal
year 2003 defense authorization act.[Footnote 7]
Our work was performed from August 2004 through February 2005 in
accordance with U.S. generally accepted government auditing standards.
Details on our scope and methodology are included in appendix I. We
requested comments on a draft of this report from the Secretary of
Defense or his designee. Written comments from the Under Secretary of
Defense for Acquisition, Technology and Logistics are reprinted in
appendix II.
Results in Brief:
DOD has made limited progress in putting in place the management
structure and controls that will help eliminate its continual spending
of billions of dollars on systems that do not address corporate
solutions to long-standing financial and business-related problems.
Over the past several years, we have made numerous recommendations
aimed at improving the department's control and accountability over its
business systems investments. DOD has made some efforts to address our
recommendations, but has not yet implemented key corrective actions to
fully address them.
For fiscal year 2005, DOD requested over $13 billion to operate,
maintain, and modernize its existing business systems environment. On
its face, this is about $6 billion less than the $19 billion requested
in fiscal year 2004. But we found the difference reflects more a
reclassification of systems than a reduction in spending on business
systems. Also, the number of business systems reported by DOD continued
to increase--from 2,274 systems in April 2003 to 4,150 systems in
February 2005. The duplicative and stovepiped nature of DOD's systems
environment is illustrated by the numerous systems it has in the same
business areas. For example, DOD reported in its BMMP systems inventory
that it has over 2,000 logistics systems--which is an increase of
approximately 255 percent in the reported number since April 2003.
These systems are not integrated and thus have multiple points of data
entry, which can result in data integrity problems. Some business
domains advised us that not all of the reported systems are included in
the IT budget request. This has been a continuing problem as we have
previously reported concerns with the accuracy and reliability of DOD's
IT budget submission.[Footnote 8]
Regarding the reclassified spending in DOD's fiscal year 2005 budget
request, we found that DOD reclassified 56 systems, totaling about $6
billion, from business systems in its fiscal year 2004 budget to
national security systems[Footnote 9] in its fiscal year 2005 budget
request. Some of the reclassifications appeared reasonable, while for
others it is unclear how the system should be classified. For example,
in the case of the Transportation Coordinators' Automated Information
for Movements System II, the program management office stated that the
DOD CIO reclassified the system as a national security system, even
though it had been classified as a business system since at least
fiscal year 1999. In addition, the Navy's Enterprise Resource Planning
(ERP)[Footnote 10]--first reported as a new program in the fiscal year
2005 IT budget request--was incorrectly classified as a national
security system even though its forerunners, four ERP pilot projects,
have been classified as business systems since their inception. Navy
ERP program officials agreed with us that the program was misclassified
and stated that it would be changed to a business system in the fiscal
year 2006 budget request. Incorrect reclassification of business
systems obscures visibility over spending for these systems and can
preclude scrutiny by Congress and the DOD business domains, including
the fiscal year 2004 DOD Comptroller statutory review, and hinders the
department's ability to develop a comprehensive list of its business
systems.
Given that DOD does not yet know how many business systems it has or
whether all business system funding is reflected in the IT budget, it
is not surprising that DOD continues to struggle to establish an
effective DOD-wide management oversight structure and processes to
control its ongoing and planned investments. In analyzing the list of
business systems modernizations with reported obligations exceeding $1
million provided to us by DOD, we found that the department is not in
compliance with the fiscal year 2003 defense authorization act
provision requiring the DOD Comptroller to review financial system
improvements. Based upon information reported to us by the military
services and DOD components, obligations totaling about $243 million
were made by the military services and defense agencies for system
modernizations in fiscal year 2004 that under DOD's definition of
modernization and DOD's representation of functionality, constitute
financial system improvements that were not referred to the DOD
Comptroller for the required review. In addition, given the reliability
problems with DOD information, there is no certainty that the
information reported to us is complete or accurate.
To improve the control and accountability over business systems
investments, we have previously proposed that Congress appropriate
funding for DOD's business systems to business domain leaders rather
than the military services and defense agencies. While provisions in
the fiscal year 2005 defense authorization act have given the domains
responsibility to oversee the department's business systems
investments, the domains have not been given the resource control
necessary to carry out these responsibilities. Currently, DOD
components control budget authority from multiple appropriations and
continue to make their own parochial investment decisions with little
or no control by the domains. The domains acknowledged that they had
virtually no input into the fiscal year 2006 IT budget request.
We are making four recommendations to the Secretary of Defense aimed at
improving the department's control and accountability of business
systems investments. In its written comments on a draft of this report,
DOD agreed with our recommendations and briefly outlined its actions
for addressing them. We have reprinted DOD's written comments in
appendix II.
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 2004, DOD reported that its operations
involved $1.2 trillion in assets, $1.7 trillion in liabilities, over
3.3 million military and civilian personnel, and over $605 billion in
net cost of operations. For fiscal year 2005, the department received
appropriations of about $417 billion. Execution of DOD's 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 support DOD's operations, the department performs an
assortment of interrelated and interdependent business processes,
including logistics management, procurement, health care 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 the decision-making process. 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."
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.
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 November 2004,[Footnote 11] 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 controls 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 controls 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 12]
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 13] DOD does not meet any of
these conditions. In September 2004, the DOD Comptroller identified 11
major deficiencies that would affect the department's ability to
prepare accurate and reliable financial statements for fiscal year
2004. Subsequently, the DOD Inspector General issued a disclaimer of
opinion on DOD's fiscal year 2004 financial statements, citing material
weaknesses in internal controls 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.
* Mobilized Army National Guard soldiers have experienced significant
problems getting accurate, timely, and consistent reimbursement for out-
of-pocket travel expenses. These weaknesses were more glaring in light
of the sustained increase in mobilizations for Army National Guard
soldiers over the last 3 years. Our case study units experienced a
broad range of travel reimbursement problems, including disputed
amounts for meals that remained unpaid at the end of our review and
vouchers that were submitted five or more times before being paid. One
of the primary causes for these problems is rooted in the paper-
intensive process used by DOD to reimburse Army National Guard soldiers
for their travel expenses.[Footnote 14]
* Manual processes and nonintegrated pay and personnel systems affect
the Army's ability to generate timely active duty medical extension
orders and ensure that soldiers are paid correctly. The current
stovepiped, nonintegrated systems are labor-intensive and require
extensive error-prone manual entry and reentry. The inadequate control
resulted in some soldiers being removed from active duty status in the
automated systems that control pay and access to benefits, including
medical care. In addition, because these soldiers no longer had valid
active duty orders, they did not have access to the commissary and post
exchange--which allows soldiers and their families to purchase
groceries and other goods at a discount. In one case we reviewed,
during a 12-month period, while attempting to obtain care for injuries
sustained from a helicopter crash in Afghanistan, one Special Forces
soldier fell out of active duty status four times. During the times he
was not recorded in the system as being on active duty, he was not paid
and he and his family experienced delays in receiving medical
treatment. In all, he missed payments for 10 pay periods--totaling
$11,924.[Footnote 15]
* The processes and automated systems relied on to provide active duty
payments to mobilized Army Reserve soldiers are so error-prone,
cumbersome, and complex that neither DOD nor, more importantly, the
Army Reserve soldiers themselves could be reasonably assured of timely
and accurate payments. Specifically, at eight Army Reserve units that
we reviewed, 332 of 348 soldiers (95 percent) experienced at least one
problem with the active duty pay and allowances they were entitled to
receive. Many of the soldiers experienced multiple pay problems
associated with their active duty mobilizations. Some of the pay
problems soldiers experienced often lingered unresolved for
considerable lengths of time, some for over a year. Of the $375,000 in
active duty pay and allowance problems identified in our case studies,
the majority were overpayments. We referred one individual for criminal
investigation because he did not mobilize with his unit, but he
erroneously received over $36,000 in active duty pay and did not report
this overpayment. We also identified 294 soldiers who were underpaid a
total of about $51,000 in active duty pay and allowances.[Footnote 16]
Efforts to Modernize DOD Business Systems:
Transformation of DOD's business systems and operations is critical to
the department having the ability to provide Congress and DOD
management with accurate and timely information for use in the decision-
making process. One of the key elements we have reported[Footnote 17]
as necessary to successfully execute the transformation is establishing
and implementing a business enterprise architecture (BEA). In this
regard, the department has undertaken a daunting challenge to modernize
its existing business systems environment through the development,
maintenance, and implementation of the BEA, or modernization blueprint.
As previously noted, the department has designated six domain owners to
be responsible for implementing the BEA. The importance of developing,
maintaining, and implementing an enterprise architecture is a basic
tenet of both organizational transformation and IT management. Managed
properly, an enterprise architecture can clarify and help optimize the
interdependencies and relationships among an organization's business
operations and the underlying IT infrastructure and applications that
support these operations. Employed in concert with other important
management controls, such as portfolio-based capital planning and
investment control practices, architectures can greatly increase the
chances that organizations' operational and IT environments will be
configured to optimize mission performance. Our experience with federal
agencies has shown that investing in IT without defining these
investments in the context of an architecture often results in systems
that are duplicative, not well integrated, and unnecessarily costly to
maintain and interface.[Footnote 18]
A key element of an enterprise architecture is the development and
implementation of a transition plan. According to relevant guidance and
best practices, the transition plan should provide a road map for
moving from the "As Is" to the "To Be" environment. An important step
in the development of a well-defined transition plan is an analysis
that compares the "As Is" and "To Be" architectures to identify
differences. Options are explored and decisions are made regarding
which legacy systems to retain, modify, or retire, and which new
systems either to introduce on a temporary basis or to pursue as
strategic solutions. Accordingly, transition plans identify legacy,
migration, and new systems, and sequence them to show, for example, the
phasing out and termination of systems and capabilities and the timing
of the introduction of new systems and capabilities. Furthermore, they
do so in light of resource constraints, such as budget, people,
acquisition/development process maturity, and associated time frames.
To improve DOD's control and accountability over business systems
investments, Congress included provisions in the Ronald W. Reagan
National Defense Authorization Act for Fiscal Year 2005.[Footnote 19]
The act directs that a management structure be put in place that (1)
makes domains responsible for the control and accountability over
business systems investments, (2) requires domains to establish a
hierarchy of investment review boards from across the department, and
(3) directs the boards to use a standard set of investment review and
decision-making criteria to ensure compliance and consistency with the
BEA. The act also directs the establishment of a departmental review
board called the Defense Business Systems Management Committee that is
to be chaired by the Deputy Secretary of Defense.
DOD Lacks Accurate Information on the Costs and Number of Business
Systems:
Until DOD has complete, reliable information on the costs and number of
business systems operating within the department, its ability to
effectively control the money it spends on these systems will be
limited. DOD's fiscal year 2005 budget request for its business systems
was $13.3 billion, which on its face is about $6 billion, or 29
percent, less than its fiscal year 2004 budget request. We found that
this decrease can be attributed to DOD's reclassification of some
business systems to national security systems, not to a reduction in
spending on its systems. While some of the reclassifications appeared
reasonable, our analysis showed that others were questionable or
inconsistencies exist, which hinders DOD's ability to develop a
definitive business systems inventory. DOD CIO officials acknowledged
that there were inconsistencies in the classifications of systems as
either business systems or national security systems and stated that
they were working to improve the classification criteria.
DOD CIO officials also stated that they are working toward a single
system repository for the department that will include information to
be used in developing the budget. At the same time the amount of
requested business system funding declined, the reported number of
business systems increased by about 1,900--from 2,274 in April 2003 to
4,150 in February 2005. Given the ever-changing numbers--for both
funding and systems--the department continues to lack reasonable
assurance that all business systems are included within the reported
inventory and that all business system funding is accurately detailed
in the budget.
Fiscal Year 2005 Budget Request for DOD's Business Systems Environment
Is $13.3 Billion:
For fiscal year 2005, DOD requested approximately $28.7
billion[Footnote 20] in IT funding to support a wide range of military
operations as well as DOD business systems operations. Of the $28.7
billion, our analysis showed that about $13.3 billion was for business
applications and related infrastructure. Of the $13.3 billion, our
analysis of the budget request disclosed that about $8.4 billion was
for infrastructure and related costs. Business applications include
activities that support the business functions of the department, such
as personnel, health, travel, acquisition, finance and accounting, and
logistics. The remaining $15.4 billion was classified as being for
national security systems. Of that amount, our analysis ascertained
that about $7.5 billion was for infrastructure and related costs.
Of the $13.3 billion, $10.7 billion was for the operation and
maintenance of the existing systems and $2.6 billion was for the
modernization of existing systems, the development of new
systems,[Footnote 21] or both. The Office of Management and Budget
requires that funds requested for IT projects be classified as either
steady state (referred to by DOD as "current services") or as
development/modernization. Current services funds are to be for
operating and maintaining systems at current levels (i.e., without
major enhancements), while development/modernization funds are to be
for developing new IT systems or making major enhancements to existing
systems. Table 1 shows the distribution, by DOD component, of the
reported $13.3 billion between current services and modernization
funding.
Table 1: Distribution of DOD's $13.3 Billion IT Budget Request for
Fiscal Year 2005 for Business Systems and Related Infrastructure:
Dollars in millions.
Component: Navy;
Current services: $3,278;
Development/modernization: $206;
Total: $3,484.
Component: Air Force;
Current services: $2,630;
Development/modernization: $726;
Total: $3,356.
Component: Army;
Current services: $1,780;
Development/modernization: $607;
Total: $2,387.
Component: TRICARE Management Agency (TRICARE);
Current services: $803;
Development/modernization: $255;
Total: $1,058.
Component: Defense Logistics Agency (DLA);
Current services: $602;
Development/modernization: $179;
Total: $781.
Component: Defense Finance and Accounting Service (DFAS);
Current services: $407;
Development/modernization: $59;
Total: $466.
Component: Defense Information Systems Agency;
Current services: $157;
Development/modernization: $34;
Total: $191.
Component: Other DOD components;
Current services: $1,074;
Development/modernization: $566;
Total: $1,640.
Total;
Current services: $10,731;
Development/modernization: $2,632;
Total: $13,363.
Source: GAO analysis of DOD information.
Note: Based on information DOD reported in its fiscal year 2005 IT
budget request.
[End of table]
As an example of how a component applies funding for current services
and modernization, the budget request for the Standard Procurement
System, which is one of the department's standard systems, will use a
combination of current services and modernization funding. The fiscal
year 2005 budget request for the Standard Procurement System identified
about $56 million in total--$30 million for current services and $26
million for development and modernization.
Reclassification Limits Oversight of Business Systems:
Incorrect system classification hinders the department's efforts to
improve its control and accountability over its business systems
investments. For instance, the incorrect reclassification of business
systems to national security systems precludes scrutiny by the business
domains, including the process utilized to obtain the DOD Comptroller's
determination that authorizes the components to obligate amounts over
$1 million for the improvement of financial management systems. Our
comparison of the fiscal years 2004 and 2005 budget requests disclosed
that DOD reclassified 56 systems in the fiscal year 2005 budget request
from business systems to national security systems. The net effect of
the reclassifications was a decrease of approximately $6 billion in the
fiscal year 2005 budget request for business systems and related
infrastructure. The reported amount declined from about $19 billion in
fiscal year 2004 to over $13 billion in fiscal year 2005.
In some cases, we found that the reclassification appeared reasonable.
For example, in the fiscal year 2005 budget request, the Defense
Message System was classified as a national security system. In our May
2004 report,[Footnote 22] we noted the inconsistent classification of
this system among the military services. The Navy classified the
Defense Message System as a business system but the Army and Air Force
classified it as a national security system. Similarly, the
reclassification of the Defense Information System Network initiative
as a national security system appeared reasonable. For example, the
Defense Information System Network is used to provide a secure
telecommunication network--voice, data, and video--to the President,
the Secretary of Defense, the Joint Chiefs of Staff, and military
personnel in the field. These two systems account for over $2.6 billion
of the $6 billion.
However, our analysis of the 56 systems that were reclassified as
national security systems also identified instances for which the
reclassification was questionable. For example, Base Level
Communication Infrastructure--initiative number 254--for several DOD
entities was shown as a national security system in the fiscal year
2005 budget request. Our review of the fiscal year 2005 budget found
that within the Air Force there were numerous other initiatives
entitled Base Level Communication Infrastructure that were classified
as business systems, not national security systems. The nomenclature
describing these different initiatives was the same. Therefore, it was
difficult to ascertain why certain initiatives were classified as
national security systems while others, with the same name, were
classified as business systems. The following are examples of the
inconsistencies in the department's classification of systems.
* The Joint Total Asset Visibility System had been classified as a
business system since at least fiscal year 1999 and was identified as a
business system in the department's original list of 2,274 business
systems in April 2003 and is still being reported as a business system
in the department's systems inventory. We found nothing in our review
of the fiscal year 2005 budget request that warranted a change in
classification.
* The Transportation Coordinators' Automated Information for Movements
System II was identified as a business system in the department's
original inventory of business systems in April 2003 and has been shown
as a business system in the budget request since 1999. Furthermore,
BMMP currently reports it as one of the department's business systems.
Yet it was reclassified as a national security system in the fiscal
year 2005 budget request even though its functionality had not changed.
According to the program management office, the DOD CIO classified the
system as a national security system, but the program management office
was informed by the DOD Comptroller that the system needed to be
submitted to the DOD Comptroller for review in accordance with section
1004(d) of the fiscal year 2003 defense authorization act. However, the
section of the act relating to the DOD Comptroller review does not
apply to national security systems. In our May 2004 report,[Footnote
23] we noted that the Army reported that it obligated almost $22
million for modernization of the system in fiscal year 2003 without its
having been subject to review by the DOD Comptroller for consistency
with DOD's BEA.
* The Army's Global Combat Support System was reclassified as a
national security system in the fiscal year 2005 budget, even though it
is still being reported as a business system in the department's
current inventory. Furthermore, BMMP officials stated that
reclassification was incorrect and the system was submitted to the DOD
Comptroller for review in accordance with section 1004(d) of the fiscal
year 2003 defense authorization act. The DOD Comptroller approved
investment in the system in August 2003 and January 2004.
In addition, this is the first year in which the Navy ERP was listed in
the budget and incorrectly classified as a national security system.
Its forerunners, four pilot ERP projects, have been classified as
business systems since their inception. DOD officials were not able to
provide a valid explanation why the program was classified as a
national security program. For the fiscal year 2006 budget request, the
Navy has requested that the DOD CIO reclassify the program from a
national security system to a business system.
The misclassification of systems in DOD's budget hinders the
department's ability to develop a comprehensive list of its business
systems, thereby affecting its ability to develop a well-defined "As
Is" component of its BEA and a viable transition plan. In addition,
improper classification diminishes Congress's ability to effectively
monitor and oversee the billions of dollars spent annually to maintain,
operate, and modernize the department's business systems environment.
DOD Is Working to Develop a Single Systems Inventory:
DOD CIO officials acknowledged that there were inconsistencies within
the department in the classification of a system as either a business
system or a national security system, which hinder its ability to
develop a single comprehensive business systems inventory. DOD CIO
officials also stated that with the implementation of the DOD
Information Technology Portfolio Data Repository (DITPR)--the new
systems inventory repository--they are working to improve the criteria
governing the classification of systems, and these criteria are being
incorporated into the new systems inventory repository.
As discussed in our May 2004 report,[Footnote 24] DOD has several
databases that contain information on its systems--business and
national security--and these databases have not been reconciled and
therefore inconsistencies exist. We recommended that the department
establish a single database for its inventory of business systems.
Subsequently, on July 13, 2004, the DOD CIO directed establishment of
the DITPR. According to BMMP officials, the department is working
toward one database that will contain information for use in developing
the annual budget request and will be considered the single system
repository for the department. Additionally, all existing databases
will be eliminated. Furthermore, the DITPR will automatically classify
each system based on selected information entered for each. For
example, all intelligence, science and technology, and logistics-
warfighting systems are to be classified as national security systems.
In addition, to help identify and properly categorize its business
systems, we recommended in May 2004[Footnote 25] that DOD develop a
standard definition for business systems. In July 2004, DOD established
a definition of a system, but not specifically of a business system.
DOD broadly defined a system as a set of information resources
organized for the collection, storage, processing, maintenance, use,
sharing, dissemination, disposition, display, or transmission of
information. DOD's definition also clarifies what should not be
reported as a system. For example, it excludes such things as
commercial office automation packages, information assurance
initiatives, and architecture initiatives. Additionally, DOD's
definition is aimed at identifying all systems that would obligate $1
million or more for modernization in any year of the department's 5-
year defense plan.
While DOD did not develop a specific definition of a business system,
the fiscal year 2005 defense authorization act[Footnote 26]
subsequently provided a definition. The act defines a defense business
system as an information system, other than a national security system,
operated by, for, or on behalf of the department that is used to
support business activities, such as acquisition, financial management,
logistics, strategic planning and budgeting, installations and
environment, and human resources management. The act states that such
systems are to include financial systems, mixed systems,[Footnote 27]
financial data feeder systems, and IT and information assurance
infrastructure. It is incumbent upon the department to ensure that the
definition specified in the act is used consistently throughout the
department and becomes the basis for entering information into the
DITPR. As previously discussed, the accurate and complete
identification of DOD's business systems is crucial for developing a
credible "As Is" component and transition plan for the BEA and ensuring
that obligations for modernizations are reviewed and approved as
required by the act. Furthermore, such information is needed in order
to provide complete and accurate data to Congress for use in monitoring
the department's business systems investments.
DOD Reports Significant Increase in the Number of Existing Business
Systems:
The department's reported number of business systems continues to
fluctuate, and DOD does not yet have reasonable assurance that the
currently reported number of business systems is complete. As of
February 2005, DOD reported that its business systems inventory
consisted of 4,150 systems, which is an increase of approximately 1,900
reported business systems since April 2003. Table 2 presents a
comparison of the April 2003 and February 2005 reported business
systems inventories by domain.
Table 2: Comparison of DOD Business Systems Inventories by Domain:
Domain: Acquisition;
April 2003: 143;
February 2005: 179;
Difference: 36.
Domain: Financial management;
April 2003: 752;
February 2005: 600;
Difference: (152).
Domain: Human resources;
April 2003: 665;
February 2005: 713;
Difference: 48.
Domain: Installations and environment;
April 2003: 128;
February 2005: 473;
Difference: 345.
Domain: Logistics;
April 2003: 565;
February 2005: 2,005;
Difference: 1,440.
Domain: Enterprise information environment;
April 2003: 21;
February 2005: 40;
Difference: 19.
Domain: No domain[A];
April 2003: 0;
February 2005: 140;
Difference: 140.
Domain: Total;
April 2003: 2,274;
February 2005: 4,150;
Difference: 1,876.
Source: GAO analysis.
Note: Based on analysis of BMMP's reported inventory of business
systems as of April 2003 and February 2005.
[A] A specific domain was not assigned to these systems.
[End of table]
The largest increase is due to the logistics domain increasing its
reported inventory of business systems from 565 in April 2003 to the
current 2,005. We reported[Footnote 28] in May 2004 that the logistics
domain had validated about 1,900 business systems but had not yet
entered most of them into the BMMP systems inventory. Logistics domain
officials informed us that they completed that process and this
increase was the result. According to the logistics domain officials,
in making this determination, they considered an initiative as a
business system if it (1) is used by at least 50 people, (2) costs at
least $50,000 annually to operate, and (3) runs on a network. The
criteria used by the logistics domain are stricter than those developed
by the DOD CIO. As previously noted, the department needs to ensure
that the same criteria are used by all the domains in defining business
systems in order to ensure that it develops a complete and accurate
inventory of its business systems.
As shown in table 2, the reported inventory of business systems for
most of the other domains increased, except for the financial
management domain, whose inventory declined. Domain officials
attributed the increases to additional data calls and working closely
with the components to identify systems. The financial management
domain attributed the declines to eliminating nonsystems and duplicate
entries in the inventory. For example, its analysis showed that
previously spreadsheets, reports, or both were incorrectly reported as
being systems. For the current inventory, some of the domains indicated
that they used the definition of a system that was issued by DOD's CIO
in the July 2004 DITPR data call.
Table 3 shows the distribution of the 4,150 business systems among the
components and domains.
Table 3: Reported DOD Business Systems by Domain and Component:
Domain: Acquisition;
Air Force: 20;
Army: 16;
Navy: 122;
DFAS: 2;
Other defense agencies: 15;
Multiple owner: 2;
Not determined: 2;
Total: 179.
Domain: Financial management;
Air Force: 41;
Army: 88;
Navy: 233;
DFAS: 93;
Other defense agencies: 59;
Multiple owner: 15;
Not determined: 71;
Total: 600.
Domain: Human resources;
Air Force: 84;
Army: 332;
Navy: 151;
DFAS: 30;
Other defense agencies: 65;
Multiple owner: 26;
Not determined: 25;
Total: 713.
Domain: Installations and environment;
Air Force: 36;
Army: 63;
Navy: 259;
DFAS: 1;
Other defense agencies: 12;
Multiple owner: 6;
Not determined: 96;
Total: 473.
Domain: Logistics;
Air Force: 166;
Army: 193;
Navy: 1,512;
DFAS: 4;
Other defense agencies: 76;
Multiple owner: 39;
Not determined: 15;
Total: 2,005.
Domain: Enterprise information environment;
Air Force: 4;
Army: 17;
Navy: 10;
DFAS: 0;
Other defense agencies: 8;
Multiple owner: 0;
Not determined: 1;
Total: 40.
Domain: No domain;
Air Force: 18;
Army: 18;
Navy: 66;
DFAS: 13;
Other defense agencies: 18;
Multiple owner: 2;
Not determined: 5;
Total: 140.
Domain: Total;
Air Force: 369;
Army: 727;
Navy: 2,353;
DFAS: 143;
Other defense agencies: 253;
Multiple owner: 90;
Not determined: 215;
Total: 4,150.
Source: GAO analysis.
Note: Based on analysis of BMMP reported business system inventory as
of February 2005.
[End of table]
The table shows the stovepiped, duplicative nature of DOD's business
systems. For example, there are 713 human resources systems across all
components whose reported funding for fiscal year 2005 includes
approximately $223 million for modernization and over $656 million for
operation and maintenance. According to DOD officials, the Defense
Integrated Military Human Resources System (DIMHRS)[Footnote 29] is
intended to totally or partially replace 113 of these systems. We were
informed that the remaining 600 human resources systems are to be
reviewed in the context of the BEA as it is developed.
Furthermore, a human resources domain official acknowledged that for
two of the systems that are to be replaced by DIMHRS--the Army's
Electronic Military Personnel System and the Air Force Military
Personnel Data System--continuing to spend money to modernize these
systems was questionable. We also reported in June 2004[Footnote 30]
that the fiscal year 2005 IT budget request did not provide sufficient
information to identify or justify the specific current services and
modernizations for 97 of the 113 systems. Because, as noted in table 1,
the funding is distributed to and controlled by the military services
and DOD components, the domains have minimal influence over system
funding. As a result, DOD continues to fund the modernization of
systems that it intends to totally or partially replace. As discussed
later, the new requirements and authorities included in the fiscal year
2005 defense authorization act are aimed at ensuring that the domains
have a vital decision-making role in the control and accountability of
the investments being made in the department's business systems.
While DOD has reported that its inventory of business systems has
increased by about 1,900, the department continues to struggle with
developing a comprehensive inventory. As detailed in table 3, there are
215 business systems with no component identified--although they have
been assigned to a domain--and 140 business systems with no domain
assigned. BMMP officials stated that they are reviewing each system and
working with the domains to ascertain where each system should be
placed. Without the component being identified, it would be difficult
if not impossible to identify the DOD entity that is responsible for
investment reviews of the systems. Furthermore, it is essential that a
domain be identified for each system in order for the department to
meet the requirements set forth in the fiscal year 2005 defense
authorization act.
In discussing the increase in the number of systems identified in DOD,
some of the domains stated that many of the systems are not included in
the IT budget request. They said that some of these systems were likely
developed at the local level and financed by the operation and
maintenance funds received at that location and therefore were not
captured and reported as part of the department's annual IT budget
request. Financing business systems in this manner rather than within
the IT budget results in Congress and DOD management not being aware of
the total amount being spent to operate, maintain, and modernize the
department's business systems. As a result, Congress and DOD management
do not receive complete and accurate data for use in monitoring the
department's business systems investments.
In addition, according to Army officials, as part of its efforts to
develop the Army's enterprise architecture, the Army has identified
about 3,000 systems, and it believes some of these systems should be
categorized as business systems. At this time, the Army is uncertain
how many should be classified as business systems. As shown in table 3,
the BMMP inventory of Army business systems totaled 727 systems as of
February 2005. Army officials did not specify the anticipated time
frame for completing their analysis of these systems.
Limited Progress Made in DOD's Efforts to Control Its Business Systems
Investments:
Given that DOD does not know how many business systems it has or how
much is spent on them, it is not surprising that the department
continues to lack effective management oversight and control over
business systems investments. Since February 2003, the domains have
been given the responsibility to oversee the department's business
systems investments, yet the billions of dollars spent each year
continue to be spread among the military services and defense agencies,
enabling the numerous DOD components to continue to develop stovepiped,
parochial solutions to the department's long-standing financial
management and business operation challenges. Furthermore, the
department has testified[Footnote 31] that it does not know whether it
was in compliance with the fiscal year 2003 defense authorization act,
which provides that obligations in excess of $1 million for systems
improvements may not be made unless the DOD Comptroller determines that
the improvements are consistent with the criteria specified in the
act.[Footnote 32] In this regard, based upon data reported to us by the
military services and DOD components, obligations totaling about $243
million were made for systems modernizations in fiscal year 2004 that
were not referred to the DOD Comptroller for the required review.
Further, while the fiscal year 2005 national defense authorization act
directs that the domains are to have increasing oversight of the
department's business systems investments, each of the military
services has established its own management oversight structures. Thus,
DOD does not yet have a comprehensive strategy in place that delineates
the specific roles and responsibilities of the domains and military
services. Absent an integrated strategy, the domains' and military
services' efforts may be duplicative, resulting in the wasteful use of
resources and hindering the overall transformation of the department's
business systems and related operations.
Management Oversight Structure and Guidance Not Finalized:
DOD has not yet finalized guidance that clearly defines the roles and
responsibilities of domains or assigns explicit authority for
fulfilling these roles and responsibilities. It also has not
established common investment criteria for system reviews or conducted
a comprehensive review of its ongoing business systems investments.
Over the past several years, we have made numerous
recommendations[Footnote 33] aimed at improving the department's
control and accountability over its business systems investments. Many
of the actions that DOD planned to take remained incomplete as of
February 2005.
DOD officials acknowledged that the following actions have not been
completed:
* The March 2004 IT portfolio management policy memorandum signed by
the Deputy Secretary of Defense provides the basic structure of the
roles and responsibilities of the domains. In order for the guidance to
be institutionalized within the department, DOD planned to issue a
formal DOD directive to specify the roles and responsibilities of the
domains and how they are to be involved in the overall business systems
investment management process. As of February 2005, the DOD guidance
had not been finalized, and DOD CIO officials did not have a time frame
for its issuance.
* The domains are still working on developing standard and consistent
criteria for performing system reviews. The BMMP program director
recently acknowledged that the differing criteria are being used in the
system review process. Although the domains have used draft guidance
listing 27 critical questions[Footnote 34] since July 2004, this DOD
guidance has not been finalized, and a time frame for approval has not
been provided.
* The domains have not completed a comprehensive system review of their
ongoing IT investments. As discussed previously, the reported business
systems inventory has increased from 2,274 systems in April 2003 to
over 4,000 systems in February 2005. A target date for completing these
reviews has not been determined. We have previously reported that best
practices recommend that an organization review ongoing investments
periodically to ensure that they are consistent with its architectural
development efforts.
In a July 16, 2004, memorandum, the DOD Comptroller reiterated the
importance of having all business systems modernizations with
obligations exceeding $1 million approved. The memorandum expanded the
congressional requirements for DOD Comptroller certification to all
business systems and required business domains to submit a fiscal year
2005 system certification schedule to BMMP officials. Later, in
November 2004, the DOD Comptroller testified[Footnote 35] that the
department had started to take actions that would position it to meet
the new, similar review requirements of the fiscal year 2005 act. The
DOD Comptroller's testimony noted that the department had already
identified 132 business systems that represent 78 percent of fiscal
year 2005 modernization funding. These systems are scheduled to be
reviewed during the current fiscal year. However, as noted earlier, DOD
has not yet established specific criteria for investment reviews. Such
criteria would include elements to implement the definition of what
constitutes a business system modernization that would be subject to
the provisions in the fiscal year 2005 defense authorization act. While
the act provides a general definition for a business system
modernization,[Footnote 36] it is critical for DOD to issue specific
implementation guidance and criteria to explicitly define business
systems modernizations to ensure that the DOD components and the
domains use clear, consistent guidance in performing the system
reviews.
DOD Lacks Reasonable Assurance That It Is in Compliance with Statutory
Investment Management Controls:
We found that DOD is not in compliance with the fiscal year 2003
defense authorization act, which requires that all financial system
improvements with obligations exceeding $1 million be reviewed by the
DOD Comptroller. Based upon the reported obligational data provided to
us by the military services and the defense agencies for fiscal year
2004, we identified 30 modernizations with obligations totaling about
$243 million that were not submitted for the required review. As
previously noted, DOD defines a modernization as an enhancement to
existing systems or the development of new systems. For purposes of
this report, we treat modernizations as defined by DOD the same as
"system improvements" as that term is similarly defined in the fiscal
year 2003 defense authorization act. Additionally, the 2003 act defines
financial systems to include "budgetary, accounting, finance,
enterprise resource planning or mixed information system." We reviewed
DOD's representation of the functions performed by these systems made
in the department's fiscal years 2004 and 2005 budget requests.
DOD has acknowledged that it does not have a mechanism to identify
systems that should be reviewed in accordance with the statutory
requirements. Because DOD lacks a systematic means to identify the
systems that were subject to the requirements of the fiscal year 2003
defense authorization act, there is no certainty that the information
provided to us accurately identified all systems improvements with
obligations greater than $1 million during the fiscal year.
BMMP officials stated that the domains were responsible for working
with the components to make sure that business systems with obligations
for modernizations greater than $1 million were submitted for review as
required. There was also general agreement among the domains and BMMP
officials that systems owners were responsible for initiating the $1
million review process. In essence, compliance was achieved via the
"honor system," which relied on systems owners coming forward and
requesting approval. However, the approach did not work. During fiscal
year 2004, the number of systems reviewed was small when compared to
the potential number of systems that appeared to meet the obligation
threshold identified in the fiscal year 2004 budget request. We
analyzed the DOD IT budget request for fiscal year 2004 and identified
over 200 systems in the budget that could involve modernizations with
obligations of funds that exceed the $1 million threshold. However,
BMMP officials confirmed that only 46 systems were reviewed, of which
38 were approved as of September 30, 2004. The remaining 8 systems were
either withdrawn by the component/domain or were returned to the
component/domain because the system package submitted for review lacked
some of the required supporting documentation, such as the review by
the Office of Program Analysis and Evaluation, if necessary.
Moreover, although the modernizations of 38 business systems were
reviewed and approved by the DOD Comptroller as required, this does not
necessarily mean these were prudent resource investments or integrated
solutions to DOD's long-standing problems. Although the criteria for
the DOD Comptroller review included compliance with the BEA, we have
previously reported[Footnote 37] that the BEA did not include many of
the elements of a well-defined architecture. For example, DOD does not
have a comprehensive system inventory of its "As Is" environment and
has not developed a transition plan to identify those systems that
would not be part of the architecture. Further, the real value of a BEA
is that it provides the necessary context for guiding and constraining
systems investments in a way that promotes interoperability and
minimizes overlap and duplication. Without it, expensive rework is
likely to be needed to achieve these outcomes.
In an attempt to substantiate that financial system improvements with
over $1 million in obligations were reviewed by the DOD Comptroller, as
provided for in the fiscal year 2003 act, we requested that DOD
activities provide us with a list of obligations (by system) greater
than $1 million for modernizations for fiscal year 2004. We compared
the reported obligational data to the system approval data reported to
us by BMMP officials. Based upon this comparison and as shown in table
4, 30 business systems with obligations totaling about $243 million in
fiscal year 2004 for modernizations were not reviewed by the DOD
Comptroller.
Table 4: Identification of Business Systems Modernizations by DOD
Component That Did Not Have DOD Comptroller Review as Required by the
Fiscal Year 2003 National Defense Authorization Act:
Dollars in millions.
Army;
Number of systems not reviewed: 2;
Fiscal year 2004 obligations: $40.5.
Navy;
Number of systems not reviewed: 10;
Fiscal year 2004 obligations: $92.8.
Air Force;
Number of systems not reviewed: 11;
Fiscal year 2004 obligations: $79.1.
DLA;
Number of systems not reviewed: 3;
Fiscal year 2004 obligations: $9.8.
U.S. Transportation Command (TRANSCOM);
Number of systems not reviewed: 1;
Fiscal year 2004 obligations: $1.1.
DFAS;
Number of systems not reviewed: 1;
Fiscal year 2004 obligations: $2.6.
TRICARE;
Number of systems not reviewed: 2;
Fiscal year 2004 obligations: $16.6.
Total;
Number of systems not reviewed: 30;
Fiscal year 2004 obligations: $242.5.
Source: GAO analysis of DOD reported information.
[End of table]
Examples of DOD business systems modernizations with obligations in
excess of $1 million included in table 4 that were not submitted to the
DOD Comptroller include the following.
* The Navy obligated about $57 million for the Navy Tactical Command
Support System in fiscal year 2004. We previously reported[Footnote 38]
that for fiscal year 2003, the Navy obligated about $22 million for
this system without submitting it to the DOD Comptroller for review.
* DFAS obligated about $3 million in fiscal year 2004 for the DFAS
Corporate Database/DFAS Corporate Warehouse (DCD/DCW). In fiscal year
2003, DFAS obligated approximately $19 million for DCD/DCW without
submitting it to the DOD Comptroller for review. Additionally, we
reported in May 2004[Footnote 39] that DFAS had yet to complete an
economic analysis justifying that continued investment in DCD/DCW would
result in tangible improvements in the department's operations. The
department has acknowledged that DCD/DCW will not result in tangible
savings to DOD. Continued investment is being based upon intangible
savings of man-hours reductions by DFAS.
* The Air Force obligated about $25 million for the Integrated
Maintenance Data System in fiscal year 2004. We previously
reported[Footnote 40] that for fiscal year 2003, the Air Force
obligated over $9 million for this system without it being submitted to
the DOD Comptroller for review.
* The Army obligated over $34 million for its Logistics Modernization
Program in fiscal year 2004. In fiscal year 2003, the Army obligated
over $52 million without the prerequisite review being performed by the
DOD Comptroller.
* DLA obligated about $5 million for the Defense Medical Logistics
Standard Support program in fiscal year 2004. We previously
reported[Footnote 41] that DLA obligated about $5 million in fiscal
year 2003 for this program.
The 2003 act placed limitations on the legal authority of individual
program and government contracting officials to obligate funds in
support of the financial systems improvements for which they are
responsible, but DOD did not proactively manage investments to avoid
violations of the limitations and did not review investments in any
meaningful way to enforce these statutory limitations.
Appendix III provides a list of obligations exceeding $1 million for
business systems modernizations for fiscal year 2004 that were reviewed
and approved by the DOD Comptroller as required by the 2003 act.
Appendix IV provides a list of the individual systems not submitted to
the DOD Comptroller and the related amount of the reported obligations
for fiscal year 2004, as required by the 2003 act. It should be noted
that since passage of the fiscal year 2003 defense authorization act in
December 2002 through the end of fiscal year 2004, based upon
information reported to us, the military services and defense
components obligated about $651 million for business systems
modernizations without the required review by the DOD Comptroller.
While this amount is significant, it is not complete or accurate
because it does not include any fiscal year 2005 obligations that
occurred prior to the enactment of the fiscal year 2005 defense
authorization act on October 28, 2004.
Additionally, our analysis also identified another 50 business systems
with obligations totaling over $258 million that were not submitted for
review as directed by the DOD Comptroller's July 16, 2004, memorandum.
The memorandum expanded the criteria set forth in the 2003 act to
include the modernization of all nonfinancial business systems that
support the operations of the business domains. Appendix V provides a
list of the business systems not submitted for review in accordance
with the July 2004 guidance and the related amount of obligation for
each system.
In an attempt to achieve compliance with the requirement of the 2003
act and the DOD Comptroller's July 2004 memorandum, as of January 2005,
the DOD Comptroller identified 48 business systems that had both fiscal
year 2004 and 2005 budgets each greater than $1 million in
modernization funding, but had not been reviewed and approved by the
DOD Comptroller. For the 48 business systems, the DOD Comptroller
withheld[Footnote 42] a funding amount equal to 50 percent of the
systems' fiscal year 2005 modernization funding, which amounts to over
$192 million. We discussed the withheld amounts with BMMP officials,
who told us they anticipated that virtually all of the systems would
come off of the "withhold" list by the end of the fiscal year.
According to BMMP officials, a system will be removed from the withhold
list as soon as the system owner, in conjunction with the domains, has
a business system certification package approved by the DOD
Comptroller, thereby showing compliance with the DOD Comptroller's July
2004 memorandum.
DOD's process of withholding funding is focused on meeting
documentation requirements related to compliance with the BEA, rather
than on the control of business systems investments. The "withhold"
process ultimately will have very little impact on DOD's control and
accountability over its business systems investment. The department
continues to perpetuate the proliferation of duplicative,
nonintegrated, and stovepiped business systems by spending billions of
dollars annually on the modernization of systems for which DOD lacks
reasonable assurance that the investment will add value to DOD's
operations. To gain more control and accountability over such business
systems funding, we have previously recommended[Footnote 43] that the
funding be vested with the "owners" of the various functional areas or
domains. We believe it is critical that funds for DOD business systems
be appropriated to the domain owners in order to prevent the continued
parochial approach to systems investment that exists today. While the
department has stated that the domains would be involved in the fiscal
year 2006 budget review process, as previously noted, we found this not
to be the case. Unless the domains control the funding, it will be
difficult for them to meet the requirements of the Ronald W. Reagan
National Defense Authorization Act for Fiscal Year 2005,[Footnote 44]
including control and accountability over business systems investments.
Congress Acts to Improve DOD's Control and Accountability over Business
Systems Investments:
The statutory requirements enacted as part of the Ronald W. Reagan
National Defense Authorization Act for Fiscal Year 2005 are aimed at
improving the department's business systems management practices. The
act directs DOD to put in place a definite management structure that is
responsible for the control and accountability over business systems
investments by establishing a hierarchy of investment review boards
from across the department and directs that the boards use a standard
set of investment review and decision-making criteria to ensure
compliance and consistency with the BEA.
More specifically, the act does the following:
* Directs DOD to establish specific management oversight and
accountability with the "owners" of the various functional areas or
domains. The legislation defined the scope of the various business
areas (e.g., acquisition, logistics, and finance and accounting) and
directed the establishment of functional approval authority and
responsibility for management of the portfolio of business systems with
the relevant under secretary of defense for the departmental domains
and the Assistant Secretary of Defense for Networks and Information
Integration and the CIO for the department.
* Stipulates that no later than March 15, 2005, the responsible
approval authorities, or domains, establish a hierarchy of investment
review boards with DOD-wide representation, including the military
services and defense agencies. The boards are responsible for reviewing
and approving investments to develop, operate, maintain, and modernize
business systems for their respective business areas, including
ensuring that investments are consistent with DOD's BEA.[Footnote 45]
* Directs the Secretary of Defense to establish the Defense Business
Systems Management Committee with representation including the Deputy
Secretary of Defense, the designated approval authorities, and
secretaries of the military services and heads of the defense agencies.
The Deputy Secretary of Defense is the chairman of the committee with
one of the designated approval authorities serving as the vice-
chairman.
* Directs that effective October 1, 2005, funds may not be obligated
for a defense business systems modernization that will have a total
cost in excess of $1 million unless the conditions specified in the act
are met.[Footnote 46] The Defense Business Systems Management Committee
must agree with the designated approval authorities'[Footnote 47]
certification before funds can be obligated. More important, the
obligation of funds without the requisite approval by the Defense
Business Systems Management Committee is deemed a violation of the Anti-
Deficiency Act.[Footnote 48]
* Requires that no later than March 15 of each year from 2005 through
2009, the Secretary of Defense shall submit a report to Congress that
describes how DOD plans to comply with the requirements of the act.
* Stipulates that all budget requests, starting with the budget request
for fiscal year 2006, include supporting information that (1)
identifies each defense business system for which funding is proposed
in that budget; (2) identifies all current services and modernization
funds, by appropriation, for each business system; (3) identifies the
designated approval authority for each business system; and (4)
describes the required certification for each business system.
While the success of BMMP and improved control and accountability of
business systems investments are critical aspects of the department's
transformation efforts, equally important is the department's ability
to develop and implement business systems that provide the promised
capabilities on time and within budget. As we have previously reported,
the department has not demonstrated the ability to achieve these
goals.[Footnote 49] Given that the domains have been designated as
being responsible for reviewing and approving business systems
investments, each of the domains' investment review boards needs to
provide effective management oversight of each system project's
performance and progress toward predefined cost and schedule
expectations as well as each project's anticipated benefits and risk
exposure. Further, each investment review board should also employ
early warning systems that enable it to take corrective action at the
first sign of cost, schedule, or performance slippages. Effective
project oversight requires having regular reviews of the project's
performance against stated expectations and ensuring that corrective
actions for each underperforming project are documented, agreed to,
implemented, and tracked until the desired outcome is achieved. We have
previously recommended[Footnote 50] that until DOD assesses its current
systems, investment should be limited to:
* deployment of systems that have already been fully tested and involve
no additional development or acquisition cost;
* stay-in-business maintenance needed to keep existing systems
operational;
* management controls needed to effectively invest in modernized
systems; and:
* new systems or existing system changes that are congressionally
directed or are relatively small, cost-effective, and low risk and can
be delivered in a relatively short time frame.
DOD also has not acted upon this recommendation and continues to invest
billions of dollars without effective oversight and control. With the
fiscal year 2005 act placing more responsibility on the domains, the
implementation of the above four limitations would be one means of
obtaining improved control over business systems investments.
We have previously reported[Footnote 51] that best practices recommend
that to achieve successful transformation, an organization must change
its culture so that it is more results-oriented, customer-focused, and
collaborative in nature. To transform its culture, an effective
performance management system can be a strategic tool to drive internal
changes and achieve desired results by using specific key practices to
create a clear link between individual performance and organizational
success. An effective performance management system pertaining to DOD's
business systems would help the department determine the effectiveness
of the domains and components in carrying out their responsibilities
for the control and accountability of business systems investments.
Although the requirements of the fiscal year 2005 defense authorization
act establish a management structure, each of the military services has
established its own business systems investment review process. At this
point, it is uncertain how they will be integrated with the roles and
responsibilities that are to be exercised by the domains. Given the
size and complexity of the business systems and related operations
transformation endeavor, it is critical that the military services and
domains are fully integrated into one cohesive business system
investment management strategy. However, it is not clear what specific
role the military services will play. If the military services' efforts
are simply viewed as one more level of review, that would be
counterproductive to the overall transformation goals and objectives.
Absent guidance that clearly articulates the relationship and the
related roles and responsibilities of the domains and military
services, each will continue to have stovepiped approaches to business
systems investment management that result in more duplicative efforts.
As a result, the department will continue to lack an overall
comprehensive corporate process for ensuring that the billions of
dollars spent on business systems are being spent efficiently and
economically.
Conclusion:
DOD's difficulty in simply identifying all of its business systems and
the money spent on them illustrates the enormity and complexity of
transforming the department's business operations. Since April 2003,
the reported inventory has increased by about 1,900 systems. Also, the
department is not aware of which DOD component controls all the systems
nor have all the systems been assigned to a domain. Given these
circumstances, the department has made limited progress in achieving
effective management control and accountability over the billions of
dollars invested annually in its business systems. The department
continues to lack reasonable assurance that the billions of dollars
spent annually on its business systems represent an efficient use of
resources. Because DOD lacks a well-defined BEA and transition plan,
billions of dollars continue to be at risk of being spent on systems
that are duplicative, are not interoperable, cost more to maintain than
necessary, and do not optimize mission performance and accountability.
While the fiscal year 2005 defense authorization act provides a
management structure to improve the control and accountability over the
department's business systems investments, the appropriate policies and
procedures still must be developed, implemented, and institutionalized
to allow the department to make informed systems investment decisions.
An integrated, comprehensive strategy will be critical to help ensure
the domains and military services do not proceed independently of one
another. By doing less, DOD will continue to waste billions of dollars
by perpetuating today's legacy business systems environment.
Recommendations for Executive Action:
To improve the department's control and accountability of business
systems investments, we are making the following four recommendations.
We recommend that the Secretary of Defense direct that the:
* DOD CIO, in consultation with the domains, review the 56 systems
reclassified from business systems to national security systems to
determine how these should be properly reported in the fiscal year 2007
IT budget request;
* Defense Business Systems Management Committee work with the domain
investment review boards to review the reported BMMP business systems
inventory so systems are defined in accordance with the definition
specified in the fiscal year 2005 defense authorization act;
* Defense Business Systems Management Committee develop a comprehensive
plan that addresses implementation of our previous recommendations
related to the BEA and the control and accountability over business
systems investments (at a minimum, the plan should assign
responsibility and estimated time frames for completion); and:
* comprehensive plan we recommend above be incorporated into the
department's second annual report due March 15, 2006, to the defense
congressional committees, as required by the fiscal year 2005 defense
authorization act, to help facilitate congressional oversight.
Agency Comments and Our Evaluation:
We received written comments on a draft of this report from the Under
Secretary of Defense for Acquisition, Technology and Logistics, which
are reprinted in appendix II. DOD concurred with our recommendations
and identified actions it planned to take to improve the department's
control and accountability of business systems investments. For
example, the Under Secretary of Defense for Acquisition, Technology and
Logistics, stated that the department will conduct a review of the 56
systems reclassified from business to national security systems to
determine the proper classification of these systems in the IT budget
requests. In addition, the Under Secretary of Defense for Acquisition,
Technology and Logistics, noted that on March 17, 2005, the department
designated the DITPR as the database for all DOD business systems and
that the DITPR has the capability to identify all reported BMMP
business systems in accordance with the definition specified in the
fiscal year 2005 defense authorization act. The Under Secretary of
Defense for Acquisition, Technology and Logistics, also stated that the
department is developing a plan and timeline to address our previous
recommendations and that this plan will be included in the department's
report due March 15, 2006, to the defense congressional committees.
In addition to the actions taken in response to our recommendations,
DOD implemented several other key steps after we provided a draft of
the report to the department for comment. Specifically, the department
acted to address certain provisions and requirements of the fiscal year
2005 defense authorization act. On March 19, 2005, the Deputy Secretary
of Defense delegated the authority for the review, approval, and
oversight of the planning, design, acquisition, development, operation,
maintenance, and modernization of defense business systems to the
designated approval authority for each business area.[Footnote 52]
Additionally on March 24, 2005, the Deputy Secretary of Defense
directed the transfer of program management, oversight, and support
responsibilities regarding DOD business transformation efforts from the
Office of the Under Secretary of Defense, Comptroller, to the Office of
the Under Secretary of Defense for Acquisition, Technology and
Logistics. According to the directive, this transfer of functions and
responsibilities will allow the Office of the Under Secretary of
Defense for Acquisition, Technology and Logistics to establish the
level of activity necessary to support and coordinate activities of the
newly established Defense Business Systems Management Committee. As
required by the act, the Defense Business Systems Management Committee,
with representation including the Deputy Secretary of Defense, the
designated approval authorities, and secretaries of the military
services and heads of the defense agencies, is the highest ranking
governance body responsible for overseeing DOD business systems
modernization efforts.
While these actions are important in establishing the administrative
framework for implementing management reform, we continue to believe
that a new executive position is needed to provide the strong and
sustained leadership to guide these efforts. We have testified on the
need for a chief management official (CMO) on numerous
occasions,[Footnote 53] including our most recent testimony on April
13, 2005.[Footnote 54] The CMO would serve as the Deputy Secretary of
Defense for Management and oversee the department's business
transformation efforts. The day-to-day demands placed on the Secretary
of Defense, the Deputy Secretary, and others make it difficult for
these leaders to maintain the oversight, focus, and momentum needed to
resolve the weaknesses in DOD's overall business operations. This is
particularly evident given the demands that the Iraq and Afghanistan
postwar reconstruction activities and the continuing war on terrorism
have placed on current leaders. Furthermore, the breadth and complexity
of the problems and the hierarchical nature of the department preclude
the under secretaries from asserting the necessary authority to resolve
these long-standing issues while continuing to fulfill their other
responsibilities. A CMO could provide the sustained and focused
leadership that these other top officials are unable to provide. On
April 14, 2005, a bill was introduced in the Senate that requires the
establishment of a CMO that would be appointed by the President and
confirmed by the Senate, for a set term of 7 years.[Footnote 55]
As agreed with your offices, unless you announce the contents of this
report earlier, we will not distribute it until 30 days after its
issuance date. At that time, we will send copies to the Chairmen and
Ranking Minority Members, Senate Committee on Armed Services; Senate
Committee on Homeland Security and Governmental Affairs; Subcommittee
on Defense, Senate Committee on Appropriations; House Committee on
Armed Services; Subcommittee on Defense, House Committee on
Appropriations; and Ranking Minority Member, House Committee on
Government Reform. We will also send copies to the Under Secretary of
Defense (Comptroller); the Under Secretary of Defense (Acquisition,
Technology and Logistics); the Under Secretary of Defense (Personnel
and Readiness); the Assistant Secretary of Defense (Networks and
Information Integration); and the Director, Office of Management and
Budget. Copies of this report will be made available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov]. If you or your staff
have any questions on matters discussed in this report, please:
contact Gregory D. Kutz at (202) 512-9095 or [Hyperlink, kutzg@gao.gov]
or Keith A. Rhodes at (202) 512-6412 or [Hyperlink, rhodesk@gao.gov].
GAO contacts and key contributors to this report are listed in appendix
VI.
Signed by:
Gregory D. Kutz:
Director:
Financial Management and Assurance:
Signed by:
Keith A. Rhodes:
Chief Technologist:
Applied Research and Methodology:
Center for Engineering and Technology:
List of Requesters:
The Honorable Tom Davis:
Chairman:
Committee on Government Reform:
House of Representatives:
The Honorable Christopher Shays:
Chairman:
Subcommittee on National Security, Emerging Threats and International
Relations:
Committee on Government Reform:
House of Representatives:
The Honorable Todd R. Platts:
Chairman:
Subcommittee on Government Management, Finance, and Accountability:
Committee on Government Reform:
House of Representatives:
The Honorable Adam H. Putnam:
House of Representatives:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
We reviewed the Department of Defense's (DOD) approximately $28.7
billion fiscal year 2005 information technology (IT) budget request to
determine what portion of the budget relates to DOD business systems.
We reviewed the budget to determine, of the approximately $13.3 billion
related to the department's business systems, the amount allocated for
operation, maintenance, and development/modernization. We also met with
the domains to obtain an understanding of the process followed in
determining the specific number of business systems applicable to each
respective domain.
In addition, we compared the fiscal year 2004 and 2005 IT budget
requests to determine the systems that were reclassified from business
systems to national security systems. We analyzed the 56 system
reclassifications by using information in the budget requests, the
Business Management Modernization Program (BMMP) systems inventory, and
the list of business systems modernizations with obligations approved
by the DOD Comptroller to determine if they were reasonable and
consistent. For certain systems that had inconsistent information, we
inquired of system program and BMMP officials about the appropriateness
of the reclassifications.
To determine the effectiveness of DOD's control and accountability over
its business systems investments, we met with DOD officials to obtain
an update on the status of our prior recommendations. We also met with
appropriate officials in the DOD Comptroller and DOD Chief Information
Officer (CIO) offices to discuss the status of various draft policies
and guidance that are aimed at improving the department's control and
accountability over business systems investments. We also reviewed and
analyzed the DOD budget request for fiscal year 2004 to identify the
business systems investments that could be subject to the requirements
of the Bob Stump National Defense Authorization Act for Fiscal Year
2003,[Footnote 56] which requires the DOD Comptroller to review all
financial system improvements with obligations exceeding $1 million and
determine whether each improvement is in accordance with criteria
specified in the act. To assess DOD's compliance with the act, we
obtained and reviewed obligational data on modernizations in excess of
$1 million for business systems for fiscal year 2004. We compared the
obligational data provided by the military services and defense
agencies with information obtained from BMMP officials to determine if
the modernizations were reviewed by the DOD Comptroller as stipulated
in the fiscal year 2003 act. We did not review the accuracy and
reliability of the obligational data reported by DOD. Given the
department's previously reported problems related to financial
management, we have no assurance that the data provided were complete,
but the obligational data reported by DOD are the only data available
that can be used for determining the specific amount of modernization
funding spent on each business system.
To augment our document reviews and analyses, we interviewed officials
from various DOD organizations, including the Office of the Under
Secretary of Defense (Comptroller); the DOD CIO; and the Office of the
Under Secretary of Defense (Acquisition, Technology and Logistics). We
conducted our work from August 2004 through February 2005 in accordance
with U.S. generally accepted government auditing standards.
We requested comments on a draft of this report from the Secretary of
Defense or his designee. We received written comments on a draft of the
report from the Under Secretary of Defense for Acquisition, Technology
and Logistics, which are reprinted in appendix II.
[End of section]
Appendix II: Comments from the Department of Defense:
THE UNDER SECRETARY OF DEFENSE:
ACQUISITION, TECHNOLOGY AND LOGISTICS:
3010 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3010:
APR 15 2005:
Mr. Gregory D. Kutz:
Director, Financial Management and Assurance:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Kutz:
Enclosed is the Department of Defense (DoD) response to the Government
Accountability Office (GAO) Draft Report, GAO-05-381, "DoD Business
Systems Modernization: Billions Being Invested Without Adequate
Oversight," dated March 16, 2005. This report is based upon the GAO
review of the state of business system governance in November of 2004.
The Department concurs with all four of the GAO's executive
recommendations and has initiated specific actions to address each one.
Our comments on the recommendations are enclosed.
The Business Transformation effort of the Department of Defense, and
the activities of the Business Management Modernization Program (BMMP)
have been restructured to accelerate the transformation effort,
establish effective oversight of department-wide system modernization
investments, and ensure continued senior leadership engagement in the
transformation effort. The focus of the BMMP is to drive greater
innovation and higher levels of efficiency throughout the Business
Mission Area of the Department. This will be achieved by implementing
DoD enterprise-level capabilities to accelerate broader, Department-
wide improvements in business processes while continuously improving
our financial management discipline and financial transparency.
To ensure program discipline is applied to achieving these objectives,
I am designating the BMMP an ACAT ID Special Interest Acquisition
Program. In February, the Department established a Defense Business
Systems Management Committee, chaired by the Deputy Secretary of
Defense to oversee and approve all investments in business systems
modernization. The Deputy designated me as the Vice Chair in the
enclosed memorandum. In March, the Deputy Secretary of Defense gave me
responsibility for the Department's business transformation efforts
(see enclosure). The Comptroller and I have jointly designated two
senior leaders with industry experience in business transformation to
directly manage the transformation program. The 2005 Annual Report to
the Congressional Defense Committees, "Status of the Department of
Defense's Business Management Modernization Program, " dated March 15,
2005, provides further details regarding the status and realignment of
our transformation effort.
I look forward to continued engagement and discussion with the GAO as
we continue our effort to transform the business operations of the
Department.
Sincerely,
Signed by:
Michael W. Wynne:
Enclosures: As stated:
GAO Draft Report - Dated March 16, 2005 GAO CODE 192141/GAO-05-381:
"DoD Business Systems Modernization: Billions Being Invested Without
Adequate Oversight"
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
direct that the DOD Chief Information Officer, in consultation with the
domains, review the 56 systems reclassified from business systems to
national security systems, to determine how these should be properly
reported in the Fiscal Year 2007 Information Technology budget request.
(p. 44/GAO Draft Report):
DOD RESPONSE: Concur. The DoD Chief Information Officer will conduct a
review of the 56 systems that were reclassified from Business Systems
to National Security Systems to determine if they were correctly
reported and to address how to properly reflect these systems in future
year Information Technology budget request.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
direct that the Defense Business Systems Management Committee work with
the domain investment review boards to review the reported Business
Management Modernization Program (BMMP) business systems inventory so
systems are defined in accordance with the definition specified in the
Fiscal Year 2005 National Defense Authorization Act. (p. 44/GAO Draft
Report):
DOD RESPONSE: Concur. On March 17, 2005, the DoD Deputy Chief
Information Officer (DCIO) designated the DoD Information Technology
Portfolio Registry (DITPR) as the interim solution Enterprise Shared
Space for IT Portfolio Management data for all DoD business IT systems
and, further, directed that the DoD Information Technology Registry be
consolidated with DITPR by October 31, 2005. DITPR has the capability
to identify all reported BMMP business systems in accordance with the
definition specified in the FY 2005 Defense Authorization Act.
Additionally, DITPR will also have the capability to store all other
reported IT and National Security Systems.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
direct that the Defense Business Systems Management Committee to
develop a comprehensive plan that addresses implementation of our
previous recommendations related to the BEA and the control and
accountability over business system investments. At a minimum, the plan
should assign responsibility and estimated timeframes for completion.
DOD RESPONSE: Concur. Transformation leadership is developing a plan
and timeline for closing out all of GAO's open recommendations. BMMP
staff has met with GAO staff to confirm steps needed to bring each
recommendation to closure.
RECOMMENDATION 4: The GAO recommended that the Secretary of Defense
direct that the comprehensive plan we recommend above be incorporated
into the Department's second annual report due March 15, 2006 to the
defense congressional committees, as required by the fiscal year 2005
defense authorization act, to help facilitate congressional oversight.
DOD RESPONSE: Concur. We will include plans to address GAO's
recommendations in our next report to Congress.
THE DEPUTY SECRETARY OF DEFENSE:
WASHINGTON, D.C. 20301:
MAR 24 2005:
MEMORANDUM FOR SECRETARIES OF THE MILITARY DEPARTMENTS:
CHAIRMAN OF THE JOINT CHIEFS OF STAFF:
UNDER SECRETARIES OF DEFENSE:
ASSISTANT SECRETARIES OF DEFENSE:
GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE:
INSPECTOR GENERAL OF THE DEPARTMENT OF DEFENSE:
DIRECTOR, OPERATIONAL TEST AND EVALUATION:
ASSISTANTS TO THE SECRETARY OF DEFENSE:
DIRECTOR, ADMINISTRATION AND MANAGEMENT:
DIRECTOR, PROGRAM ANALYSIS AND EVALUATION:
DIRECTOR, NET ASSESSMENT:
DIRECTOR, FORCE TRANSFORMATION:
DIRECTORS OF THE DEFENSE AGENCIES:
DIRECTORS OF THE DOD FIELD ACTIVITIES:
SUBJECT: Implementation Guidance on the Realignment of the Department
of Defense (DoD) Business Transformation Program Management Office:
Effective today, I am directing the transfer of program management,
oversight and support responsibilities regarding DoD business
transformation efforts from the Office of the Under Secretary of
Defense Comptroller (OUSD(C)) to the Office of the Under Secretary of
Defense for Acquisition, Technology and Logistics (OUSD(AT&L)). This
transfer is necessary to support the newly established Defense Business
Systems Management Committee (DBSMC). The Under Secretary of Defense
for Acquisition, Technology and Logistics (USD(AT&L)) serves as the
Vice Chair of the DBSMC. Transferring these functions and
responsibilities will allow the USD(AT&L) to establish the level of
activity necessary to support and coordinate DBSMC activities. This
transfer also addresses the provisions and requirements set forth in
Public Law 108-375, Section 332 of the National Defense Authorization
Act for Fiscal Year 2005.
Consistent with this direction, I authorize the realignment of two
civilian manpower authorizations and two Senior Executive Service
resources from OUSD(C) to the OUSD(AT&L) for this essential business
transformation program. All funds programmed and budgeted for the
Business Modernization and Systems Integration (BMSI) Office will
remain in the Office of the Secretary of Defense account, but shall be
reclassified as AT&L. In addition, the BMSI is renamed the
Transformation Support Office.
The Under Secretary of Defense (Comptroller) and Director of
Administration and Management, in coordination with the USD(AT&L) shall
expedite the actions necessary to implement this direction.
Signed by:
Paul Wolfowitz:
[End of section]
Appendix III: DOD Business Systems Modernizations with Obligations in
Excess of $1 Million Approved by the DOD Comptroller in Fiscal Year
2004:
Name of system: Defense Travel System;
Approval date: October 2003.
Name of system: Standard Procurement System;
Approval date: October 2003.
Name of system: DFAS Operational Data Store;
Approval date: October 2003 and September 2004.
Name of system: Composite Health Care System II;
Approval date: November 2003.
Name of system: General Accounting and Finance System Reengineered;
Approval date: November 2003 and January 2004.
Name of system: Air Force Reserve Travel System;
Approval date: December 2003.
Name of system: DFAS Automated Time, Attendance and Production System;
Approval date: December 2003.
Name of system: DFAS Defense Joint Military Pay System--Active
Component;
Approval date: December 2003.
Name of system: DFAS Defense Joint Military Pay System--Reserve
Component;
Approval date: December 2003.
Name of system: DFAS Defense Military Pay Office;
Approval date: December 2003.
Name of system: DFAS Defense Retiree and Annuitant Pay System;
Approval date: December 2003.
Name of system: DFAS Marine Corps Total Force System;
Approval date: December 2003.
Name of system: MyPay;
Approval date: December 2003.
Name of system: Forward Compatible Payroll System;
Approval date: January 2004.
Name of system: Defense Civilian Pay System;
Approval date: January 2004.
Name of system: Milpay Systems Transition Program;
Approval date: January 2004.
Name of system: Defense Departmental Reporting System;
Approval date: January 2004.
Name of system: Global Combat Support System - Army;
Approval date: January 2004.
Name of system: Navy Enterprise Resource Planning;
Approval date: February 2004 and July 2004.
Name of system: Intra-Governmental Transaction System;
Approval date: March 2004.
Name of system: Fuels Automated System;
Approval date: April 2004.
Name of system: Advanced Planning and Scheduling;
Approval date: April 2004.
Name of system: On Line Vehicle Interactive Maintenance System;
Approval date: April 2004.
Name of system: Navy Cash;
Approval date: April 2004.
Name of system: Defense Personal Property System;
Approval date: May 2004.
Name of system: Navy Standard Integrated Personnel System;
Approval date: June 2004.
Name of system: Commissary Advanced Resale Transaction System;
Approval date: June 2004.
Name of system: Ebiz;
Approval date: July 2004.
Name of system: Business Systems Modernization;
Approval date: July 2004.
Name of system: Global Combat Service Support - Marine Corps;
Approval date: July 2004.
Name of system: Deployable Disbursing System;
Approval date: July 2004.
Name of system: Common Food Management System;
Approval date: August 2004.
Name of system: Air Force Reserve Order Writing System;
Approval date: September 2004.
Name of system: DFAS Defense Cash Accountability System;
Approval date: September 2004.
Name of system: DFARS Transformation Integrated System;
Approval date: September 2004.
Name of system: Air Force Job Order Cost Accounting System II;
Approval date: September 2004.
Name of system: DISA Wide Area Work Flow;
Approval date: September 2004.
Name of system: Air Force Financial Information Resource System;
Approval date: September 2004.
Source: GAO analysis of DOD reported information.
[End of table]
[End of section]
Appendix IV: Modernizations with Obligations in Excess of $1 Million
Not Submitted for the Required DOD Comptroller Review:
Dollars in millions.
Component: Army;
Name of system: Logistics Modernization Program;
Amount: $34.4.
Component: Army;
Name of system: Defense Civilian Personnel Data System-Sustainment;
Amount: $6.1.
Subtotal Army;
Amount: $40.5.
Component: Navy;
Name of system: Navy Tactical Command Support System;
Amount: $56.5.
Component: Navy;
Name of system: Automated Teller Machines-At- Sea;
Amount: $13.7.
Component: Navy;
Name of system: Electronic Data Interchange;
Amount: $7.3.
Component: Navy;
Name of system: Conventional Ammunition Integrated Information System;
Amount: $3.9.
Component: Navy;
Name of system: Shipyard Management Information Systems-Financials;
Amount: $3.6.
Component: Navy;
Name of system: SPAWAR Financial Management - ERP;
Amount: $2.7.
Component: Navy;
Name of system: Material Financial Control System;
Amount: $1.5.
Component: Navy;
Name of system: NAVSEA Regional Fleet Maintenance ERP Pilot;
Amount: $1.4.
Component: Navy;
Name of system: Regional Maintenance Automated Information System;
Amount: $1.1.
Component: Navy;
Name of system: Material Management Systems;
Amount: $1.1.
Subtotal Navy;
Amount: $92.8.
Component: Air Force;
Name of system: Integrated Maintenance Data System;
Amount: $24.9.
Component: Air Force;
Name of system: Stock Control System;
Amount: $5.2.
Component: Air Force;
Name of system: Integrated Logistics System - Supply;
Amount: $8.7.
Component: Air Force;
Name of system: Depot Maintenance Accounting and Production System;
Amount: $6.8.
Component: Air Force;
Name of system: Financial Inventory Accounting & Billing System;
Amount: $3.2.
Component: Air Force;
Name of system: Regionalization of Civilian Personnel Support;
Amount: $7.3.
Component: Air Force;
Name of system: Job Order Production Master System;
Amount: $4.6.
Component: Air Force;
Name of system: Fuels Automated Management System Sustainment - Air
Force;
Amount: $8.4.
Component: Air Force;
Name of system: Purchase Request Process System;
Amount: $2.7.
Component: Air Force;
Name of system: Inventory Tracking System;
Amount: $4.7.
Component: Air Force;
Name of system: Automated Budget Analysis/Centralized User System;
Amount: $2.6.
Subtotal Air Force;
Amount: $79.1.
Component: DFAS;
Name of system: DFAS Corporate Database/DFAS Corporate Warehouse;
Amount: $2.6.
Component: DFAS;
Subtotal DFAS;
Amount: $2.6.
Component: DLA;
Name of system: Defense Medical Logistics Standard Support;
Amount: $4.9.
Component: DLA;
Name of system: Subsistence Total Order and Receipt Electronic System;
Amount: $1.4.
Component: DLA;
Name of system: Distribution Standard System;
Amount: $3.5.
Component: DLA;
Subtotal DLA;
Amount: $9.8.
Component: TRANSCOM;
Name of system: Transportation Financial Management System;
Amount: $1.1.
Component: TRANSCOM;
Subtotal TRANSCOM;
Amount: $1.1.
Component: TRICARE;
Name of system: Defense Medical Logistics Standard System;
Amount: $9.6.
Component: TRICARE;
Name of system: Patient Accounting System;
Amount: $7.0.
Component: TRICARE;
Subtotal TRICARE;
Amount: $16.6.
Total;
Amount: $242.5.
Source: GAO analysis of DOD reported information.
[End of table]
[End of section]
Appendix V: Modernizations with Obligations in Excess of $1 Million Not
Reviewed by DOD Comptroller per July 2004 Memorandum:
Dollars in millions.
Component: Army;
Name of system: Personnel Electronic Records Management System;
Amount: $5.3.
Component: Army;
Name of system: Personnel Transformation;
Amount: $3.7.
Component: Army;
Name of system: US MEPCOM Integrated Resource System;
Amount: $4.7.
Component: Army;
Name of system: Electronic Military Personnel System;
Amount: $8.7.
Component: Army;
Name of system: Installation Support Modules;
Amount: $1.1.
Component: Army;
Name of system: US Army Accessions Command Integrated Automation
Architecture;
Amount: $15.5.
Component: Army;
Name of system: Enterprise Human Resources System;
Amount: $1.6.
Subtotal Army;
Amount: $40.6.
Component: Navy;
Name of system: Target Location Design and Hand-Off System;
Amount: $33.2.
Component: Navy;
Name of system: Electronic Military Personnel Record System;
Amount: $8.2.
Component: Navy;
Name of system: One Touch Support;
Amount: $4.1.
Component: Navy;
Name of system: Joint Engineer Data Management Information Control
System;
Amount: $12.1.
Component: Navy;
Name of system: MSC Afloat Personnel Management Center;
Amount: $2.2.
Component: Navy;
Name of system: Automation Identification Technology;
Amount: $15.5.
Component: Navy;
Name of system: NAVAIR Logistics Data Analysis;
Amount: $5.9.
Component: Navy;
Name of system: Predictive Response Center;
Amount: $3.3.
Component: Navy;
Name of system: Condition-Based Maintenance System;
Amount: $10.7.
Component: Navy;
Name of system: Human Resources Development Portfolio;
Amount: $2.0.
Component: Navy;
Name of system: Configuration Management Information System;
Amount: $3.2.
Component: Navy;
Name of system: Mounted Cooperative Target ID System;
Amount: $1.8.
Component: Navy;
Name of system: Total Fleet Support System;
Amount: $1.6.
Component: Navy;
Name of system: Surface Warfare Management Information Systems;
Amount: $1.3.
Component: Navy;
Name of system: InforM-21;
Amount: $1.2.
Subtotal Navy;
Amount: $106.3.
Component: Air Force;
Name of system: Reliability and Maintainability Information System;
Amount: $4.8.
Component: Air Force;
Name of system: Air Force Military Personnel Data System;
Amount: $4.2.
Component: Air Force;
Name of system: Education and Training Technology Applications Program;
Amount: $1.7.
Component: Air Force;
Name of system: Cadet Administrative Management Information System;
Amount: $1.2.
Component: Air Force;
Name of system: Air Force Recruiter Information Support System;
Amount: $2.6.
Component: Air Force;
Name of system: Joint Personnel Adjudication System;
Amount: $4.1.
Component: Air Force;
Name of system: Programming Depot Maintenance Scheduling System;
Amount: $3.1.
Component: Air Force;
Name of system: Maintenance Repair and Overhaul;
Amount: $2.6.
Component: Air Force;
Name of system: MA MRO Business System Modernization;
Amount: $6.6.
Component: Air Force;
Name of system: Center of Parts Activity;
Amount: $1.2.
Component: Air Force;
Name of system: Air Force Knowledge Services;
Amount: $7.4.
Component: Air Force;
Name of system: Enhanced Technical Information Management System;
Amount: $7.2.
Component: Air Force;
Name of system: Enterprise Knowledge Management/Knowledge Kinetics;
Amount: $1.3.
Component: Air Force;
Name of system: AFRL Business Support Consolidated Information;
Amount: $24.1.
Component: Air Force;
Name of system: Cadet Education;
Amount: $1.4.
Component: Air Force;
Name of system: Exchangeables Production System;
Amount: $1.3.
Subtotal Air Force;
Amount: $74.8.
Component: TRANSCOM;
Name of system: Joint Flow and Analysis System for Transportation;
Amount: $1.6.
Component: TRANSCOM;
Name of system: Core Automated Maintenance System;
Amount: $2.8.
Component: TRANSCOM;
Name of system: Global Air Transportation Execution System;
Amount: $6.3.
Component: TRANSCOM;
Name of system: Integrated Booking System;
Amount: $2.2.
Component: TRANSCOM;
Name of system: Intelligent Road/Rail Information Server;
Amount: $2.3.
Component: TRANSCOM;
Name of system: Worldwide Port System;
Amount: $3.2.
Subtotal TRANSCOM;
Amount: $18.4.
Component: TRICARE;
Name of system: Centralized Credentials and Quality Assurance System;
Amount: $3.8.
Component: TRICARE;
Name of system: Defense Blood Standard System;
Amount: $1.6.
Component: TRICARE;
Name of system: Defense Medical Human Resource System Internet;
Amount: $3.4.
Component: TRICARE;
Name of system: Enterprise Wide Scheduling and Registration;
Amount: $3.1.
Component: TRICARE;
Name of system: TRICARE Online;
Amount: $1.6.
Subtotal TRICARE;
Amount: $13.5.
Component: AFIS;
Name of system: Network Support - Armed Forces Information Services;
Amount: $4.9.
Subtotal AFIS;
Amount: $4.9.
Total;
Amount: $258.5.
Source: GAO analysis of DOD reported information.
[End of table]
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Darby Smith, (202) 512-7803;
J. Christopher Martin, (202) 512-9481:
Acknowledgments:
Staff members who made key contributions to this report were Beatrice
Alff, Francine DelVecchio, Francis Dymond, Lauren Fassler, Kristi
Karls, Mai Nguyen, Philip Reiff, and Bernard Trescavage.
(192141):
FOOTNOTES
[1] Business systems include those that are used to support civilian
and military personnel, finance, logistics, procurement, and
transportation.
[2] See, for example, GAO, Defense Inventory: Opportunities Exist to
Improve Spare Parts Support Aboard Deployed Navy Ships, GAO-03-887
(Washington, D.C.: Aug. 29, 2003); Military Pay: Army National Guard
Personnel Mobilized to Active Duty Experienced Significant Pay
Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003); and DOD Travel
Cards: Control Weaknesses Resulted in Millions of Dollars of Improper
Payments, GAO-04-576 (Washington, D.C.: June 9, 2004).
[3] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.:
Jan. 2005). The eight specific DOD high-risk areas are (1) approach to
business transformation, (2) business systems modernization, (3)
contract management, (4) financial management, (5) personnel security
clearance program, (6) supply chain management, (7) support
infrastructure management, and (8) weapon systems acquisition. The six
governmentwide high-risk areas are (1) disability programs, (2)
interagency contracting, (3) information systems and critical
infrastructure, (4) information sharing for homeland security, (5)
human capital, and (6) real property.
[4] 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 business enterprise
architecture.
[5] The six domains and the respective domain leaders for fiscal year
2004 were (1) acquisition--Under Secretary of Defense (Acquisition,
Technology and Logistics); (2) financial management--Under Secretary of
Defense (Comptroller/Chief Financial Officer); (3) human resources
management--Under Secretary of Defense (Personnel and Readiness); (4)
installations and environment--Under Secretary of Defense (Acquisition,
Technology and Logistics); (5) logistics--Under Secretary of Defense
(Acquisition, Technology and Logistics); and (6) enterprise information
environment--Assistant Secretary of Defense (Networks and Information
Integration)/Chief Information Officer. In September 2004, the
accounting and finance domain and the strategic planning and budgeting
domain were combined into one domain and renamed the financial
management domain.
[6] We did not independently determine if the list of obligations for
system modernization reported to us was complete and accurate.
[7] Subsection 1004(d) of the Bob Stump National Defense Authorization
Act for Fiscal Year 2003, Pub. L. No. 107-314, 116 Stat. 2458, 2630
(Dec. 2, 2002), provides that any amount in excess of $1 million may be
obligated for financial system improvements before approval of DOD's
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. The provision
was repealed on October 28, 2004, by the Ronald W. Reagan National
Defense Authorization Act for Fiscal Year 2005, Pub. L. No. 108-375, §
332, 118 Stat. 1811, 1851 (Oct. 28, 2004) (codified, in part, at 10
U.S.C. §§ 185, 2222), which enacted a new similar $1 million limitation
on obligations for business systems modernizations. The act notes that
failure to comply with the new provision after September 30, 2005, will
result in a violation of 31 U.S.C. § 1341(a)(1)(A), the Anti-Deficiency
Act.
[8] GAO, Information Technology: Improvements Needed in the Reliability
of Defense Budget Submissions, GAO-04-115 (Washington, D.C.: Dec. 19,
2003).
[9] These systems are intelligence systems, cryptologic activities
related to national security, military command and control systems, and
equipment that is an integral part of a weapon or weapons system or is
critical to the direct fulfillment of military or intelligence
missions.
[10] ERP products consist of multiple, integrated functional modules
that do different tasks, such as track payroll, keep a standard general
ledger, manage supply chains, and organize customer data.
[11] GAO, Department of Defense: Further Actions Are Needed to
Effectively Address DOD Business Management Problems and Overcome Key
Business Transformation Challenges, GAO-05-140T (Washington, D.C.: Nov.
18, 2004).
[12] JFMIP was a joint and cooperative undertaking of the Department of
the Treasury, GAO, the Office of Management and Budget (OMB), and the
Office of Personnel Management (OPM), working in cooperation with each
other and other federal agencies to improve financial management
practices in the federal government. Leadership and program guidance
were provided by the four Principals of JFMIP--the Comptroller General
of the United States, the Secretary of the Treasury, and the Directors
of OMB and OPM. Although JFMIP ceased to exist as a stand-alone
organization as of December 1, 2004, the JFMIP Principals will continue
to meet at their discretion.
[13] FFMIA, Pub. L. No. 104-208, div. A, § 101(f), title VIII, 110
Stat. 3009, 3009-389 (Sept. 30, 1996), requires the 24 major
departments and agencies covered by the Chief Financial Officers Act of
1990, Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990) (31 U.S.C. §
901(b), 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) the U.S. Standard General Ledger at the transaction level.
[14] GAO, Army National Guard: Inefficient, Error-Prone Process Results
in Travel Reimbursement Problems for Mobilized Soldiers, GAO-05-79
(Washington, D.C.: Jan. 31, 2005).
[15] GAO, Military Pay: Gaps in Pay and Benefits Create Financial
Hardships for Injured Army National Guard and Reserve Soldiers, GAO-05-
125 (Washington, D.C.: Feb. 17, 2005).
[16] GAO, Military Pay: Army Reserve Soldiers Mobilized to Active Duty
Experienced Significant Pay Problems, GAO-04-911 (Washington, D.C.:
Aug. 20, 2004).
[17] GAO, Department of Defense: Status of Financial Management
Weaknesses and Progress Toward Reform, GAO-03-931T (Washington, D.C.:
June 25, 2003).
[18] GAO, 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).
[19] Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, § 332, 118 Stat. 1811, 1851 (Oct. 28,
2004) (codified, in part, at 10 U.S.C. §§ 186, 2222).
[20] DOD categorizes its funding request as follows: business systems-
-$5 billion; national security systems--$7.8 billion; shared
infrastructure and information assurance activities--$14.8 billion; and
related technical activities--$1.1 billion.
[21] According to the department's definition in its Financial
Management Regulation, development/modernization/enhancement include
(1) new applications and infrastructure capabilities that are planned
and under development; (2) any change or modification to existing
applications and infrastructure capabilities which is intended to
result in improved capabilities or performance of the activity,
including (a) all modifications to existing operational software (other
than corrective software maintenance) and (b) expansion of capabilities
to new users; (3) changes mandated by Congress or the Office of the
Secretary of Defense; and (4) personnel costs for project management.
[22] GAO, DOD Business Systems Modernization: Billions Continue to Be
Invested with Inadequate Management Oversight and Accountability, GAO-
04-615 (Washington, D.C.: May 27, 2004).
[23] GAO-04-615.
[24] GAO-04-615.
[25] GAO-04-615.
[26] Pub. L. No. 108-375, § 332, 118 Stat. 1811, 1854 (Oct. 28, 2004)
(codified at 10 U.S.C. § 2222(j)(2)).
[27] A mixed system is an information system that supports both
financial and nonfinancial functions of the federal government or
components.
[28] GAO-04-615.
[29] DIMHRS is a major IT program that is to provide integrated
personnel and pay system for all components of the military services.
[30] GAO, Budget Justification Issue Paper on Fiscal Year 2005 IT
Budget Request for Systems That Are to Be Replaced by DOD's Planned
Defense Integrated Military Human Resources System (Personnel/Pay)
(Washington, D.C.: June 25, 2004).
[31] Hearing on Department of Defense Business Transformation Before
the Subcommittee on Terrorism, Unconventional Threats and Capabilities,
House Armed Services Committee, 108TH Cong. (Mar. 31, 2004) (statement
by Deputy Chief Financial Officer, Department of Defense, JoAnn
Boutelle).
[32] Bob Stump National Defense Authorization Act for Fiscal Year 2003,
Pub. L. No. 107-314, § 1004(d), 116 Stat. 2458, 2629 (Dec. 2, 2002).
[33] GAO, DOD Business Systems Modernization: Improvements to
Enterprise Architecture Development and Implementation Efforts Needed,
GAO-03-458 (Washington, D.C.: Feb. 28, 2003); GAO-03-1018; and GAO-04-
615.
[34] These questions must be completed by the system owner for each
business system submitted to the DOD Comptroller for review. The
questions include, but are not limited to, the following for each
system: name; purpose; scope; program overview; system owner/program
manager; milestone decision authority; domain(s); system capabilities;
program schedules and dependencies; system interfaces; economic
justification; cost; and whether system is compliant/consistent with
the Clinger-Cohen Act of 1996 (Pub. L. No. 104-106, div. E, 110 Stat.
679 (Feb. 10, 1996)), FFMIA, and the BEA.
[35] Status of Financial Management Reform Within the Department of
Defense and the Individual Services: Hearing Before the Subcommittee on
Readiness and Management Support, Senate Armed Services Committee,
108th Cong. (Nov. 18, 2004) (statement by Under Secretary of Defense
(Comptroller) Tina Westby Jonas).
[36] The act defines a defense business system modernization as (1) the
acquisition or development of a new defense business system or (2) any
significant modification or enhancement of an existing defense business
system (other than those necessary to maintain current services).
[37] GAO-03-1018 and GAO, 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).
[38] GAO-04-615.
[39] GAO-04-731R.
[40] GAO-04-615.
[41] GAO-04-731R.
[42] Withheld funds are those funds appropriated to programs that DOD
temporarily holds back for some period during the funds' periods of
availability before releasing them to programs. Prior to being released
for execution, funds may be withheld by the Office of the Secretary of
Defense for a variety of reasons without obtaining congressional
approval. While funds are withheld, the funds are still designated for
the program but not yet released to that program. Withheld funds are
eventually either released to the designated programs or reprogrammed
for other uses.
[43] GAO-04-615.
[44] Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, § 332, 118 Stat. 1811, 1851-56 (Oct.
28, 2004) (codified, in part, at 10 U.S.C. §§ 186, 2222).
[45] The act requires the use of procedures for ensuring consistency
with the guidance issued by the Secretary of Defense and the Defense
Business Systems Management Committee and incorporation of common
decision criteria, including standards, requirements, and priorities
that result in the integration of defense business systems.
[46] A key condition identified in the act includes certification by
designated approval authorities that the defense business system
modernization is (1) in compliance with the enterprise architecture;
(2) necessary to achieve critical national security capability or
address a critical requirement in an area such as safety or security;
or (3) necessary to prevent a significant adverse effect on a project
that is needed to achieve an essential capability, taking into
consideration the alternative solutions for preventing such an adverse
effect. Furthermore, the act's definition of a business system
modernization is broader than specified in the fiscal year 2003 defense
authorization act.
[47] Approval authorities, including the Under Secretary of Defense for
Acquisition, Technology and Logistics; the Under Secretary of Defense
(Comptroller); the Under Secretary of Defense for Personnel and
Readiness; the Assistant Secretary of Defense for Networks and
Information Integration/Chief Information Officer of the Department of
Defense; and the Deputy Secretary of Defense or an Under Secretary of
Defense, as designated by the Secretary of Defense, are responsible for
the review, approval, and oversight of business systems and must
establish investment review processes for systems under their
cognizance.
[48] 31 U.S.C. § 1341(a)(1)(A); see 10 U.S.C § 2222(b).
[49] See, for example, GAO, DOD Systems Modernization: Continued
Investment in the Standard Procurement System Has Not Been Justified,
GAO-01-682 (Washington, D.C.: July 31, 2001); DOD Business Systems
Modernization: Continued Investment in Key Accounting Systems Needs to
Be Justified, GAO-03-465 (Washington, D.C.: Mar. 28, 2003); and GAO- 04-
615.
[50] GAO, Information Technology: Architecture Needed to Guide
Modernization of DOD's Financial Operations, GAO-01-525 (Washington,
D.C.: May 17, 2001).
[51] GAO, Results-Oriented Cultures: Creating a Clear Linkage between
Individual Performance and Organizational Success, GAO-03-488
(Washington, D.C.: Mar. 14, 2003).
[52] Approval authorities include the Under Secretary of Defense for
Acquisition, Technology and Logistics; the Under Secretary of Defense
(Comptroller); the Under Secretary of Defense for Personnel and
Readiness; and the Assistant Secretary of Defense for Networks and
Information Integration/Chief Information Officer of the Department of
Defense. These approval authorities are responsible for the review,
approval, and oversight of business systems and must establish
investment review processes for systems under their cognizance.
[53] GAO, Department of Defense: Long-standing Problems Continue to
Impede Financial and Business Management Transformation, GAO-04-907T
(Washington, D.C.: July 7, 2004); Department of Defense: Financial and
Business Management Transformation Hindered by Long-standing Problems,
GAO-04-941T, (Washington, D.C.: July 8, 2004); and Department of
Defense: Further Actions Are Needed to Effectively Address Business
Management Problems and Overcome Key Business Transformation
Challenges, GAO-05-140T (Washington, D.C.: Nov. 18, 2004).
[54] GAO, DOD's High-Risk Areas: Successful Business Transformation
Requires Sound Strategic Planning and Sustained Leadership, GAO-05-520T
(Washington, D.C.: Apr. 13, 2005).
[55] S. 780, 109TH Cong. (2005).
[56] Bob Stump National Defense Authorization Act for Fiscal Year 2003,
Pub. L. No. 107-314, § 1004, 116 Stat. 2458, 2630 (Dec. 2, 2002).
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