DOD Business Transformation
Sustained Leadership Needed to Address Long-standing Financial and Business Management Problems Gao ID: GAO-05-723T June 8, 2005In July 2004, GAO testified before Congress on the impact and causes of financial and related business weaknesses on the Department of Defense's (DOD) operations and the status of DOD reform efforts. The report released today highlights that DOD still does not have management controls to ensure that its business systems investments are directed towards integrated corporate system solutions. GAO's reports continue to show that fundamental problems with DOD's financial management and related business operations result in substantial waste and inefficiency, adversely impact mission performance, and result in a lack of adequate accountability across all major business areas. Over the years, DOD leaders attempted to address these weaknesses and transform the department. For years, GAO has reported that DOD is challenged in its efforts to effect fundamental financial and business management reform and GAO's ongoing work continues to raise serious questions about DOD's chances of success. Congress asked GAO to provide information on the (1) pervasive long-standing financial and business management weaknesses that affect DOD's efficiency, (2) cost of and control over the department's business systems investments, and (3) legislative actions needed to enhance the success of DOD's business transformation efforts.
Overhauling the financial management and business operations of one of the largest and most complex organizations in the world represents a daunting challenge. Eight DOD program areas, representing key business functions, are on GAO's high-risk list, and the department shares responsibility for six other governmentwide high-risk areas, meaning that DOD is fully or partially responsible for 14 of the 25 high-risk areas in the federal government. DOD's substantial financial and business management weaknesses adversely affect not only its ability to produce auditable financial information, but also to provide accurate, complete, and timely information for management and Congress to use in making informed decisions. Further, the lack of adequate accountability across all of DOD's major business areas results in billions of dollars in annual wasted resources in a time of increasing fiscal constraint and has a negative impact on mission performance. The department has recently taken several steps to address provisions of the fiscal year 2005 defense authorization act which are aimed at improving DOD's business systems management practices. For example, DOD has established the Defense Business Systems Management Committee to oversee its business systems modernization efforts. However, DOD's overall transformation efforts have not adequately addressed the key causes of past reform failures. Lessons learned from these previous reform attempts include the need for sustained leadership at the highest level and a strategic and integrated plan. The seriousness of DOD's weaknesses underscores the importance of no longer condoning the "status quo." To improve the likelihood that DOD's transformation efforts will succeed, GAO proposes that business systems funding be appropriated to the approval authorities responsible for business systems investments. Additionally, GAO suggests that a senior management position be established to provide sustained leadership for DOD's overall business transformation. Absent this unified responsibility, authority, accountability, and control of funding, DOD's transformation efforts are likely to fail.
GAO-05-723T, DOD Business Transformation: Sustained Leadership Needed to Address Long-standing Financial and Business Management Problems
This is the accessible text file for GAO report number GAO-05-723T
entitled 'DOD Business Transformation: Sustained Leadership Needed to
Address Long-standing Financial and Business Management Problems' which
was released on June 8, 2005.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Testimony:
Before the Subcommittee on Government Management, Finance, and
Accountability, Committee on Government Reform, House of
Representatives:
For Release on Delivery Expected at 2:00 p.m. EDT June 8, 2005:
DOD Business Transformation:
Sustained Leadership Needed to Address Long-standing Financial and
Business Management Problems:
Statement of Gregory D. Kutz, Managing Director, Forensic Audits and
Special Investigations:
Randolph C. Hite, Director, Information Technology Architecture and
Systems Issues:
GAO-05-723T:
GAO Highlights:
Highlights of GAO-05-723T, testimony before the Subcommittee on
Government Management, Finance, and Accountability, Committee on
Government Reform, House of Representatives:
Why GAO Did This Study:
In July 2004, GAO testified before this Subcommittee on the impact and
causes of financial and related business weaknesses on the
Department of Defense‘s (DOD) operations and the status of DOD reform
efforts. The report released today highlights that DOD still does not
have management controls to ensure that its business systems
investments are directed towards integrated corporate system solutions.
GAO‘s reports continue to show that fundamental problems with DOD‘s
financial management and related business operations result in
substantial waste and inefficiency, adversely impact mission
performance, and result in a lack of adequate accountability across all
major business areas. Over the years, DOD leaders attempted to address
these weaknesses and transform the department. For years, GAO has
reported that DOD is challenged in its efforts to effect fundamental
financial and business management reform and GAO‘s ongoing work
continues to raise serious questions about DOD‘s chances of success.
The Subcommittee asked GAO to provide information on the
(1) pervasive long-standing financial and business management
weaknesses that affect DOD‘s efficiency, (2) cost of and control over
the department‘s business systems investments, and (3) legislative
actions needed to enhance the success of DOD‘s business transformation
efforts.
What GAO Found:
Overhauling the financial management and business operations of one of
the largest and most complex organizations in the world represents a
daunting challenge. Eight DOD program areas, representing key business
functions, are on GAO‘s high-risk list, and the department shares
responsibility for six other governmentwide high-risk areas, meaning
that DOD is fully or partially responsible for 14 of the 25 high-risk
areas in the federal government. DOD‘s substantial financial and
business management weaknesses adversely affect not only its ability to
produce auditable financial information, but also to provide accurate,
complete, and timely information for management and Congress to use in
making informed decisions. Further, the lack of adequate accountability
across all of DOD‘s major business areas results in billions of dollars
in annual wasted resources in a time of increasing fiscal constraint
and has a negative impact on mission performance.
Impact of Weaknesses in Human Capital Management, Internal Control, and
Systems:
Business area affected: Military pay;
Problem identified: Injured and ill reserve component soldiers”who are
entitled to extend their active duty service to receive medical
treatment”have been inappropriately removed from active duty status
causing significant gaps in their pay and medical benefits. The current
stovepiped, nonintegrated personnel and pay systems are labor intensive
and require extensive error-prone manual entry and reentry of data.
Business area affected: Logistics;
Problem identified: DOD does not have the ability to provide timely,
complete, or accurate information on the location, movement, status, or
identity of its supplies, even though total asset visibility has been a
departmentwide goal for over 30 years.
Business area affected: Systems;
Problem identified: DOD lacks the management structure to effectively
control billions of dollars being spent each year to operate, maintain,
and modernize its reported 4,150 duplicative, nonintegrated business
systems.
Source: GAO.
[End of table]
The department has recently taken several steps to address provisions
of the fiscal year 2005 defense authorization act which are aimed at
improving DOD‘s business systems management practices. For example, DOD
has established the Defense Business Systems Management Committee to
oversee its business systems modernization efforts. However, DOD‘s
overall transformation efforts have not adequately addressed the key
causes of past reform failures. Lessons learned from these previous
reform attempts include the need for sustained leadership at the
highest level and a strategic and integrated plan. The seriousness of
DOD‘s weaknesses underscores the importance of no longer condoning the
’status quo.“
To improve the likelihood that DOD‘s transformation efforts will
succeed, GAO proposes that business systems funding be appropriated to
the approval authorities responsible for business systems investments.
Additionally, GAO suggests that a senior management position be
established to provide sustained leadership for DOD‘s overall business
transformation. Absent this unified responsibility, authority,
accountability, and control of funding, DOD‘s transformation efforts
are likely to fail.
www.gao.gov/cgi-bin/getrpt?GAO-05-723T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Gregory Kutz (202) 512-
9095 or kutzg@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
It is a pleasure to be back before this Subcommittee to discuss
business transformation efforts at the Department of Defense (DOD). At
the outset, I would like to thank the Subcommittee for having this
hearing and acknowledge the important role hearings such as this one
serve in addressing DOD's business transformation challenges. DOD
spends billions of dollars each year to sustain key business operations
that support our forces, including systems and processes related to
acquisition and contract management, financial management, supply chain
management, support infrastructure management, human capital
management, and other key areas. Recent and ongoing military operations
in Afghanistan and Iraq and new homeland defense missions have led to
higher demands on our forces in a time of growing fiscal challenges for
our nation. In an effort to better manage DOD's resources, the
Secretary of Defense has appropriately placed a high priority on
transforming key business processes to improve their efficiency and
effectiveness in supporting the department's military mission.
However, as discussed in the report[Footnote 1] being released at this
hearing and previous reports and testimonies, fundamental problems with
DOD's financial management and related business operations continue to
cause substantial waste and inefficiency, have an adverse impact on
mission performance, and result in the lack of adequate transparency
and appropriate accountability across all major business areas. Of the
25 areas on GAO's governmentwide high-risk list, 8 are DOD specific
program areas related to key business functions, and the department
shares responsibility for 6 other high-risk areas that are
governmentwide in scope.[Footnote 2] These problems preclude the
department from producing reliable and timely information to make sound
decisions and to accurately report on its trillions of dollars of
assets and liabilities.
Today, my testimony will focus on two of the high-risk areas--financial
management and business systems modernization. Both of these areas have
been designated as high-risk since 1995--a decade ago. In this regard,
my testimony will provide our perspectives on the (1) pervasive long-
standing financial and business management weaknesses that affect DOD's
efficiency, (2) cost of and control over the department's business
systems investments, and (3) legislative actions needed to enhance the
success of DOD's business transformation efforts--specifically, the
central control of business systems investment funding and
establishment of a chief management official. Implementation of these
two suggestions would provide the sustained top-level leadership and
accountability needed and thereby increase the likelihood of successful
business transformation.
My statement is based upon the report[Footnote 3] released today, as
well as our previous reports and testimonies. Our work was performed in
accordance with U.S. generally accepted government auditing standards.
Summary:
DOD's substantial long-standing management problems related to business
operations and systems have adversely affected the economy, efficiency,
and effectiveness of its operations; and, in some cases, impacted the
morale of our fighting forces that are in harms way. These problems
have left the department vulnerable to billions of dollars of fraud,
waste, and abuse annually, at a time of increasing fiscal constraint
and have resulted in a lack of adequate accountability across all major
business areas. Additionally, our report released today describes other
indicators of the department's limited progress in transforming its
business operations and systems. This year, we added DOD's overall
approach to business transformation to our high-risk list[Footnote 4]
because DOD lacks a strategic and integrated business transformation
plan and because we have concerns over DOD's lack of adequate
management responsibility and accountability to achieve and sustain
business reform on a broad, strategic, departmentwide, and integrated
basis. The following examples indicate the magnitude and severity of
the resulting problems.
* As we testified[Footnote 5] before this Subcommittee on March 16,
2005, mobilized Army National Guard soldiers have experienced
significant problems getting accurate, timely, and consistent
reimbursement for out-of-pocket travel expenses. 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.
* DOD does not have the ability to provide timely or accurate
information on the location, movement, status, or identity of its
supplies. Although total asset visibility has been a departmentwide
goal for over 30 years, DOD currently estimates that it will not
achieve this goal until the year 2010.[Footnote 6]
* DOD's continued supply chain problems resulted in shortages of items
in Iraq. As discussed in our April 2005, report, demands for items like
vehicle track shoes, batteries, and tires exceeded their availability
because the department did not have accurate or adequately funded Army
war reserve requirements and had inaccurate forecasts of supply demands
for the operation. Furthermore, the Army's funding approval process
delayed the flow of funds to buy them. In addition, numerous problems,
such as insufficient transportation, personnel, and equipment, as well
as inadequate information systems, hindered DOD's ability to deliver
the right items to the right place at the right time for the
warfighter. Among the items the department had problems delivering were
generators for assault amphibian vehicles, tires, and Meals Ready-to-
Eat.[Footnote 7]
* DOD's stovepiped, duplicative, and nonintegrated systems environment
contributes to these operational problems and costs the American
taxpayers billions of dollars each year. For fiscal year 2005, the
department requested approximately $13 billion to operate, maintain,
and modernize its reported 4,150 business systems--an increase of about
1,900 in the number of reported systems since last year.
Because of the department's flawed processes, we found that 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 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. Further evidence of DOD's problems is
the long-standing inability of any military service or major defense
component to pass the test of an independent financial audit or provide
timely reliable and complete information for DOD decision makers
because of pervasive weaknesses in the department's financial
management systems, operations, and controls.
The seriousness of DOD's business management weaknesses underscores the
importance of no longer condoning "status quo" business operations at
DOD. To improve the likelihood that the department's current business
transformation efforts will be successful, we propose that those who
are responsible for business systems modernization control the
allocation and execution of funds for DOD business systems. Investments
in the modernization of the department's business systems need to be
directed towards integrated corporate system solutions to common DOD-
wide problems, and not the perpetuation of the stovepiped, duplicative
systems environment that exists today.
Additionally, due to the complexity and long-term nature of these
transformation efforts, strong and sustained executive leadership is
needed if DOD is to succeed. We believe one way to ensure this strong
and sustained leadership over DOD's business management reform efforts
would be to create a full-time, executive-level II position for a chief
management official (CMO), who would serve as the Deputy Secretary of
Defense for Management.[Footnote 8] We believe that the new CMO
position should be filled by an individual appointed by the President
and confirmed by the Senate, for a set term of 7 years. Articulating
the role and responsibilities of the position in statute and
establishing a term that spans administrations underscores the
importance of a professional, nonpartisan approach to this business
management-oriented position. This position would serve as a strategic
integrator to elevate and institutionalize the attention essential for
addressing key stewardship responsibilities, such as strategic
planning, enterprise architecture development and implementation,
information technology (IT), and financial management, while
facilitating the overall business management transformation within DOD.
The CMO would not conduct the day-to-day management functions of the
department; therefore, creating this position would not add an
additional hierarchical layer to the department. Day-to-day management
functions of the department would continue to be the responsibility of
the undersecretaries of defense, the service secretaries, and others.
Just as the CMO would need to focus full-time on business
transformation, we believe that the day-to-day management functions are
so demanding that it is difficult for these officials to maintain the
oversight, focus, and momentum needed to implement and sustain needed
reforms of DOD's overall business operations.
We are confident that transforming DOD's business operations and making
them more efficient would free up resources that could be used to
support the department's core mission, enhance readiness, and improve
the quality of life for our troops and their families. It is worth
noting that on April 14, 2005, a bill was introduced in the Senate that
would require 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 9]
In written comments on a draft of the report released today, DOD agreed
with our four recommendations and briefly outlined its actions for
addressing them.
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 in military and civilian personnel, and over $605 billion
in net cost of operations. For fiscal year 2005, the department
received an annual appropriation of about $417 billion and was
appropriated about $76 billion for the global war on terrorism.
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, procurement,
health care, 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." The
Secretary of Defense has estimated that improving business operations
of the department could save 5 percent of DOD's annual budget, which
based on fiscal year 2005 appropriations, represents a savings of about
$25 billion.
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 April 2005,[Footnote 10] DOD's financial management
deficiencies, taken together, continue to represent a major impediment
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 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.
Pervasive Weaknesses Impact DOD Operations:
Long-standing 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.
* The current inefficient, paper-intensive, error-prone travel
reimbursement process has resulted in inaccurate, delayed, and denied
travel payments for mobilized Army Guard soldiers. We found a broad
range of reimbursement problems that included disputed amounts for
meals that we estimated to be as high as about $6,000 for each of 76
soldiers in one case study that remained unpaid by the end of our
review. Until DOD improves the antiquated process that requires Army
Guard soldiers to accumulate, retain, and submit numerous paper
documents, reimbursement problems and inefficiencies will likely
continue. Of approximately 930,000 travel vouchers received between
fiscal years 2002 and 2004, the Defense Finance and Accounting Service
(DFAS) Contingency Travel Operations Office rejected and returned about
139,000 vouchers to soldiers for additional paper documentation or to
correct other processing deficiencies. This repeated churning of
vouchers frustrated soldiers and added to the volume of claims to be
processed.[Footnote 11]
* Injured and ill reserve component soldiers--who are entitled to
extend their active duty service to receive medical treatment--have
been inappropriately removed from active duty status in the automated
systems that control pay and access to medical care. The current
stovepiped, nonintegrated systems are labor-intensive and require
extensive error-prone manual entry and reentry. Inadequate controls
resulted in some soldiers experiencing significant gaps in their pay
and medical benefits, causing hardships for the soldiers and their
families. 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 12]
* Ninety-four percent of mobilized Army National Guard and Reserve
soldiers we investigated during two audits[Footnote 13] had pay
problems. These problems distracted soldiers from their missions,
imposed financial hardships on their families, and may have a negative
impact on retention. The processes and automated systems relied on to
provide active duty payments to mobilized Army Guard and Reserve
soldiers are so error-prone, cumbersome, and complex that neither DOD
nor, more importantly, the soldiers themselves could be reasonably
assured of timely and accurate payments. Some of the pay problems
soldiers experienced often lingered unresolved for considerable lengths
of time, some for over a year.
* DOD continues to lack visibility and control over the supplies and
spare parts it owns. Therefore, it cannot monitor the responsiveness
and effectiveness of the supply system to identify and eliminate choke
points.[Footnote 14] Currently, DOD does not have the ability to
provide timely or accurate information on the location, movement,
status, or identity of its supplies. Although total asset visibility
has been a departmentwide goal for over 30 years, DOD estimates that it
will not achieve this visibility until the year 2010. DOD may not meet
this goal by 2010, however, unless it overcomes three significant
impediments: (1) developing a comprehensive plan for achieving
visibility, (2) building the necessary integration among its many
inventory management information systems, and (3) correcting long-
standing data accuracy and reliability problems within existing
inventory management systems. A key to successful implementation of a
comprehensive logistics strategy will be addressing these initiatives
as part of a comprehensive, integrated business transformation.
* The Defense Logistics Agency (DLA) and each of the military services
experienced significant shortages of critical spare parts, even though
more than half of DOD's reported inventory--about $35 billion--exceeded
current operating requirements. In many cases, these shortages
contributed directly to equipment downtime, maintenance problems, and
the services' failure to meet their supply availability goals. DOD,
DLA, and the military services each lack strategic approaches and
detailed plans that could help mitigate these critical spare parts
shortages and guide their many initiatives aimed at improving inventory
management.[Footnote 15]
* The Navy did not know how much it spent on telecommunications and did
not have detailed cost and inventory data needed to evaluate spending
patterns and to leverage its buying power. At the four case study sites
we audited, management oversight of telecommunication purchases did not
provide reasonable assurance that requirements were met in the most
cost-effective manner. For example, cell phone usage at three sites was
not monitored to determine whether plan minutes met users' needs,
resulting in overpayment for cell phone services. In addition, the Navy
lacks specific policies and processes addressing the administration and
management of calling cards. On one card alone, in a 3-month period,
the Navy paid over $17,000. Not until the vendor's fraud unit raised
questions about more than $11,000 in charges in a 6-day period was the
card suspended.[Footnote 16]
* Over the years, DOD recorded billions of dollars of disbursements and
collections in suspense accounts because the proper appropriation
accounts could not be identified and charged. Because documentation
needed to resolve these payment recording problems could not be found
after so many years, DOD requested and received authority to write-off
certain aged suspense transactions. While DOD reported that it wrote
off an absolute value of $35 billion or a net value of $629 million
using the legislative authority, neither of these amounts accurately
represents the true value of all the individual transactions that DOD
had not correctly recorded in its financial records. Many of DOD's
accounting systems and processes routinely offset individual
disbursements, collections, adjustments, and correction entries against
each other and, over time, amounts might even have been netted more
than once. This netting and summarizing misstated the total value of
the write-offs and made it impossible for DOD to identify what
appropriations may have been under-or overcharged or to determine
whether individual transactions were valid. At December 31, 2004, DOD
reports showed that, even after the write-offs, more than $1.3 billion
(absolute value) remained in suspense accounts for longer than 60 days;
however, DOD has acknowledged that its suspense reports are incomplete
and inaccurate. In addition, DOD is still not performing effective
reconciliations of its disbursement and collection activity. Similar to
checkbook reconciliations, DOD needs to compare its records of monthly
activity to Treasury's records and promptly research and correct any
differences.[Footnote 17]
Financial Improvement Initiative Lacks a Comprehensive and Integrated
Plan and Effective Oversight and Monitoring Capabilities:
In September 2004, we reported[Footnote 18] that DOD had begun
implementing a financial improvement initiative that included the goal
of obtaining an unqualified audit opinion on its fiscal year 2007
consolidated financial statements but that the initiative lacked a
clearly defined, integrated, well-documented, and realistic plan for
improving DOD's financial management and thus achieving that goal. We
also reported that DOD lacked effective oversight and accountability
mechanisms to ensure that the mid-range financial improvement plans
being developed by the military services and defense agencies in
support of the initiative were adequately planned, implemented, and
sustainable. Our report expressed concern that DOD's emphasis on
obtaining a clean audit opinion for fiscal year 2007 could divert
limited resources away from ongoing efforts to develop and implement
the long-term systems and process changes needed to improve financial
information and to efficiently and effectively manage DOD's business
operations.
In the Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005,[Footnote 19] Congress placed a limitation on the use of
operations and maintenance funds for continued preparation or
implementation of DOD's mid-range financial improvement plan. Use of
such funds for the mid-range plan is prohibited until the Secretary of
Defense submits to the congressional defense committees a report
containing the following: (1) a determination that DOD's business
enterprise architecture (BEA) and the transition plan for implementing
the BEA have been developed, (2) an explanation of the manner in which
fiscal year 2005 operations and maintenance funds will be used by DOD
components to prepare or implement the mid-range financial improvement
plan, and (3) an estimate of future year costs for each of the military
services and defense agencies to prepare and implement the mid-range
financial improvement plan. As of the end of May 2005, DOD has not yet
provided the defense committees with the required report.
Ineffective Management Oversight and Control over Business System
Investments:
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. However, 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 hinder DOD's ability to develop a
definitive business systems inventory. 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.
Furthermore, given that DOD does not know how many business systems it
has, 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. Additionally, based upon data reported
to us by the military services and DOD components, obligations totaling
at least $243 million were made for systems modernizations in fiscal
year 2004 that were not referred to the DOD Comptroller for the
required review, as specified in the fiscal year 2003 defense
authorization act.[Footnote 20]
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 21] 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 22] or both. 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]
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. 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,
which are not subject to the same level of investment control. 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.
The reclassification of the Defense Information System Network
initiative as a national security system appeared reasonable since it
provides 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. However, our analysis of the 56
systems also identified instances for which 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.
In another example, this is the first year in which the Navy enterprise
resource planning (ERP) effort 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
as to 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. 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 Reports Significant Increase in the Number of Existing Business
Systems:
The department's reported number of business systems continues to rise,
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 23] 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.
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 24] 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 DOD's BEA, as it is developed.
In discussing the increase in the number of reported systems, some of
the domains stated that funding for 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.
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. 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. 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.
In an attempt to substantiate that financial system improvements with
over $1 million in obligations had in fact been reviewed by the DOD
Comptroller, as provided for in the fiscal year 2003 act, we requested
that DOD entities 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, DOD provided data showed that 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.
* 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 25] 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-hour reductions by DFAS.
* The Army obligated over $34 million for its Logistics Modernization
Program (LMP) in fiscal year 2004. In fiscal year 2003, the Army
obligated over $52 million without the prerequisite review being
performed by the DOD Comptroller. We have previously reported[Footnote
26] that LMP experienced significant problems once it became
operational at the first deployment site.
Cumulatively, 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.
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[Footnote 27]
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.
DOD has taken several steps to address provisions 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 28]
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
(DBSMC). As required by the act, DBSMC, with representation including
the Deputy Secretary of Defense, the designated approval authorities,
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.
Suggestions for Legislative Consideration:
I would like to reiterate two suggestions for legislative consideration
that I discussed in my July 2004 testimony,[Footnote 29] which I
believe could further improve the likelihood of successful business
transformation at DOD. Most of the key elements necessary for
successful transformation could be achieved under the current
legislative framework; however, addressing sustained and focused
leadership for DOD business transformation and funding control will
require additional legislation. These suggestions include the
appropriation of business system funding to the approval authorities
responsible and accountable for business systems investments under
provisions enacted by the Ronald W. Reagan National Defense
Authorization Act for Fiscal Year 2005,[Footnote 30] and the creation
of a CMO.
Central Control over Business Systems Investment Funds Is Crucial:
DOD's current business systems investment process, in which system
funding is controlled by DOD components, has contributed to the
evolution of an overly complex and error-prone information technology
environment containing duplicative, nonintegrated, and stovepiped
systems. We have made numerous recommendations to DOD to improve the
management oversight and control of its business systems investments.
However, as previously discussed, a provision of the Ronald W. Reagan
National Defense Authorization Act for Fiscal Year 2005, established
specific management oversight and accountability with the "owners" of
the various core business mission areas. This legislation defines the
scope of the various business areas (e.g., acquisition, finance,
logistics, and etc.), and established functional approval authority and
responsibility for management of the portfolio of business systems with
the relevant under secretary of defense for the departmental core
business mission areas and the Assistant Secretary of Defense for
Networks and Information Integration (information technology
infrastructure). For example, the Under Secretary of Defense for
Acquisition, Technology and Logistics is now responsible and
accountable for any defense business system intended to support
acquisition activities, logistics activities, or installations and
environment activities for DOD.
This legislation also requires that the responsible approval
authorities establish a hierarchy of investment review boards, the
highest level being DBSMC, 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 business-area portfolio, including
ensuring that investments are consistent with DOD's BEA.
Although this recently enacted legislation clearly defines the roles
and responsibilities of business systems investment approval
authorities, control over the budgeting for and execution of funding
for business systems investment activities remains at the DOD component
level. As a result, DOD continues to have little or no assurance that
its business systems investment money is being spent in an economical,
efficient, and effective manner. Given that DOD spends billions on
business systems and related infrastructure each year, we believe it is
critical that those responsible for business systems improvements
control the allocation and execution of funds for DOD business systems.
However, implementation may require review of the various statutory
authorities for the military services and other DOD components. Control
over business systems investment funds would improve the capacity of
DOD's designated approval authorities to fulfill their responsibilities
and gain transparency over DOD investments, and minimize the parochial
approach to systems development that exists today.
In addition, to improve coordination and integration activities, we
suggest that all approval authorities coordinate their business systems
modernization efforts with a CMO who would chair the DBSMC. Cognizant
business area approval authorities would also be required to report to
Congress through a CMO and the Secretary of Defense on applicable
business systems that are not compliant with review requirements and to
include a summary justification for noncompliance.
Chief Management Official Is Essential for Sustained Leadership of
Business Management Reform:
As DOD embarks on large-scale business transformation efforts, we
believe that the complexity and long-term nature of these efforts
requires the development of an executive position capable of providing
strong and sustained change management leadership across the
department--and over a number of years and various administrations. One
way to ensure such leadership would be to create by legislation a full-
time executive-level II position for a CMO, who would serve as the
Deputy Secretary of Defense for Management. This position would
elevate, integrate, and institutionalize the high-level attention
essential for ensuring that a strategic business transformation plan--
as well as the business policies, procedures, systems, and processes
that are necessary for successfully implementing and sustaining overall
business transformation efforts within DOD--are implemented and
sustained. An executive-level II position for a CMO would provide this
individual with the necessary institutional clout to overcome service
parochialism and entrenched organizational silos, which in our opinion
need to be streamlined below the service secretaries and other levels.
The CMO would function as a change agent, while other DOD officials
would still be responsible for managing their daily business
operations. The position would divide and institutionalize the current
functions of the Deputy Secretary of Defense into a Deputy Secretary
who, as the alter ego of the Secretary, would focus on policy-related
issues such as military transformation, and a Deputy Secretary of
Defense for Management, the CMO, who would be responsible and
accountable for the overall business transformation effort and would
serve full-time as the strategic integrator of DOD's business
transformation efforts by, for example, developing and implementing a
strategic and integrated plan for business transformation efforts. The
CMO would not conduct the day-to-day management functions of the
department; therefore, creating this position would not add an
additional hierarchical layer to the department. Day-to-day management
functions of the department would continue to be the responsibility of
the undersecretaries of defense, the service secretaries, and others.
Just as the CMO would need to focus full-time on business
transformation, we believe that the day-to-day management functions are
so demanding that it is difficult for these officials to maintain the
oversight, focus, and momentum needed to implement and sustain needed
reforms of 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. Likewise, the breadth and complexity of the
problems and their overall level within the department preclude the
under secretaries, such as the DOD Comptroller, from asserting the
necessary authority over selected players and business areas while
continuing to fulfill their other responsibilities.
If created, we believe that the new CMO position could be filled by an
individual appointed by the President and confirmed by the Senate, for
a set term of 7 years. As prior GAO work examining the experiences of
major change management initiatives in large private and public sector
organizations has shown, it can often take at least 5 to 7 years until
such initiatives are fully implemented and the related cultures are
transformed in a sustainable way. Articulating the roles and
responsibilities of the position in statute would also help to create
unambiguous expectations and underscore Congress's desire to follow a
professional, nonpartisan, sustainable, and institutional approach to
the position. In that regard, an individual appointed to the CMO
position should have a proven track record as a business process change
agent in large, complex, and diverse organizations--experience
necessary to spearhead business process transformation across DOD.
Furthermore, to improve coordination and integration activities, we
suggest that all business systems modernization approval authorities
designated in the Ronald W. Reagan National Defense Authorization Act
for Fiscal Year 2005 coordinate their efforts with the CMO, who would
chair the DBSMC that DOD recently established to comply with the act.
We also suggest that cognizant business area approval authorities would
also be required to report to Congress through the CMO and the
Secretary of Defense on applicable business systems that are not
compliant with review requirements and include a summary justification
for noncompliance. In addition, the CMO would enter into an annual
performance agreement with the Secretary that sets forth measurable
individual goals linked to overall organizational goals in connection
with the department's business transformation efforts. Measurable
progress toward achieving agreed-upon goals should be a basis for
determining the level of compensation earned, including any related
bonus. In addition, the CMO's achievements and compensation should be
reported to Congress each year. As previously noted, on April 14, 2005,
a bill was introduced in the Senate that requires the establishment of
a CMO who would be appointed by the President and confirmed by the
Senate, for a set term of 7 years.[Footnote 31]
Conclusion:
DOD lacks the efficient and effective financial management and related
business operations, including processes and systems, to support the
war fighter, DOD management, and Congress. With a large and growing
fiscal imbalance facing our nation, achieving tens of billions of
dollars of annual savings through successful DOD transformation is
increasingly important. Recent legislation pertaining to defense
business systems, enterprise architecture, accountability, and
modernization, if properly implemented, should improve oversight and
control over DOD's significant system investment activities. However,
DOD's transformation efforts to date have not adequately addressed key
underlying causes of past reform failures. Reforming DOD's business
operations is a monumental challenge and many well-intentioned efforts
have failed over the last several decades. Lessons learned from these
previous reform attempts include the need for sustained and focused
leadership at the highest level. This leadership could be provided
through the establishment of a CMO. Absent this leadership, authority,
and control of funding, the current transformation efforts are likely
to fail.
I commend the Subcommittee for holding this hearing and I encourage you
to use this vehicle, on an annual basis, as a catalyst for long overdue
business transformation at DOD. Mr. Chairman, this concludes my
statement.
Contacts and Acknowledgments:
For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-9095 or [Hyperlink, kutzg@gao.gov]. The following
individuals contributed to the various reports and testimonies that
were the basis for the testimony: Beatrice Alff, Renee Brown, Donna
Byers, Molly Boyle, Mary Ellen Chervenic, Francine DelVecchio, Francis
Dymond, Geoff Frank, Gina Flacco, Diane Handley, Cynthia Jackson,
Evelyn Logue, John Martin, Elizabeth Mead, Dave Moser, Mai Nguyen,
Sharon Pickup, David Plocher, John Ryan, and Darby Smith.
(192170):
FOOTNOTES
[1] GAO, DOD Business Systems Modernization: Billions Being Invested
without Adequate Oversight, GAO-05-381 (Washington, D.C: Apr. 29, 2005).
[2] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.:
January 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 that include DOD 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.
[3] GAO-05-381.
[4] GAO-05-207.
[5] GAO, Army National Guard: Inefficient, Error-Prone Process Results
in Travel Reimbursement Problems for Mobilized Soldiers, GAO-05-400T
(Washington, D.C.: Mar. 16, 2005).
[6] GAO, Defense Inventory: Improvements Needed in DOD's Implementation
of Its Long-Term Strategy for Total Asset Visibility of Its Inventory,
GAO-05-15 (Washington, D.C.: Dec. 6, 2004).
[7] GAO, Defense Logistics: Actions Needed to Improve the Availability
of Critical Items during Current and Future Operations, GAO-05-275
(Washington, D.C.: Apr. 8, 2005).
[8] GAO, Defense Management: Key Elements Needed to Successfully
Transform DOD Business Operations, GAO-05-629T (Washington, D.C.:
Apr.28, 2005).
[9] S. 780, 109TH Cong. (2005).
[10] GAO-05-629T.
[11] GAO-05-400T.
[12] 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).
[13] GAO, Military Pay: Army Reserve Soldiers Mobilized to Active Duty
Experienced Significant Pay Problems, GAO-04-911 (Washington, D.C.:
Aug. 20, 2004) and Military Pay: Army National Guard Personnel
Mobilized to Active Duty Experienced Significant Pay Problems, GAO-04-
89 (Washington, D.C.: Nov. 13, 2003).
[14] GAO-05-629T.
[15] GAO-05-207
[16] GAO, Vendor Payments: Inadequate Management Oversight Hampers the
Navy's Ability to Effectively Manage Its Telecommunication Program, GAO-
04-671 (Washington, D.C.: June 14, 2004).
[17] GAO, DOD Problem Disbursements: Long-standing Accounting
Weaknesses Result in Inaccurate Records and Substantial Write-offs, GAO-
05-521 (Washington, D.C.: June 2, 2005).
[18] GAO, Financial Management: Further Actions Are Needed to Establish
Framework to Guide Audit Opinion and Business Management Improvement
Efforts at DOD, GAO-04-910R (Washington, D.C.: Sept. 20, 2004).
[19] Pub. L. No. 108-375, § 352.
[20] Bob Stump National Defense Authorization Act for Fiscal Year 2003,
Pub. L. No. 107-314, § 1004(d), 116 Stat. 2458, 2629 (Dec. 2, 2002).
[21] 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.
[22] 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.
[23] 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).
[24] DIMHRS is a major IT program that is to provide an integrated
personnel and pay system for all components of the military services.
[25] 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).
[26] GAO-04-615.
[27] Pub. L. No. 108-375, § 332.
[28] 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.
[29] GAO, Department of Defense: Long-standing Problems Continue to
Impede Financial and Business Management Transformation, GAO-04-907T
(Washington, D.C.: July 7, 2004).
[30] See 10 U.S.C. §2222(f).
[31] S. 780, 109TH Cong. (2005).
