DOD Financial Management
Improved Controls, Processes, and Systems Are Needed for Accurate and Reliable Financial Information Gao ID: GAO-11-933T September 23, 2011In Process
DOD financial management has been on GAO's high-risk list since 1995 and, despite several reform initiatives, remains on the list today. Pervasive deficiencies in financial management processes, systems, and controls, and the resulting lack of data reliability, continue to impair management's ability to assess the resources needed for DOD operations; track and control costs; ensure basic accountability; anticipate future costs; measure performance; maintain funds control; and reduce the risk of loss from fraud, waste, and abuse. DOD spends billions of dollars each year to maintain key business operations intended to support the warfighter, including systems and processes related to the management of contracts, finances, the supply chain, support infrastructure, and weapon systems acquisition. These operations are directly impacted by the problems in financial management. In addition, the long-standing financial management weaknesses have precluded DOD from being able to undergo the scrutiny of a financial statement audit. DOD's past strategies for improving its financial management were ineffective, but recent initiatives are encouraging. In 2005, DOD issued its Financial Improvement and Audit Readiness (FIAR) Plan for improving financial management and reporting. In 2009, the DOD Comptroller directed that FIAR efforts focus on financial information in two priority areas: budget and mission-critical assets. The FIAR Plan also has a new phased approach that comprises five waves of concerted improvement activities. The first three waves focus on the two priority areas, and the last two on working toward full auditability. The plan is being implemented largely through the Army, Navy, and Air Force military departments and the Defense Logistics Agency, lending increased importance to the commitment of component leadership. Improving the department's financial management operations and thereby providing DOD management and Congress more accurate and reliable information on the results of its business operations will not be an easy task. It is critical that current initiatives related to improving the efficiency and effectiveness of financial management have the support of DOD leaders and that of DOD's Deputy Chief Management Officer and Comptroller continue with sustained leadership and monitoring. Absent continued momentum and necessary future investments, current initiatives may falter. Below are some of the key challenges that DOD must address for its financial management to improve to the point where DOD is able to produce auditable financial statements: (1) committed and sustained leadership, (2) effective plan to correct internal control weaknesses, (3) competent financial management workforce, (4) accountability and effective oversight, (5) well-defined enterprise architecture, and (6) successful implementation of the enterprise resource planning systems.
GAO-11-933T, DOD Financial Management: Improved Controls, Processes, and Systems Are Needed for Accurate and Reliable Financial Information
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United States Government Accountability Office:
GAO:
Testimony:
Before the Subcommittee on Government Organization, Efficiency and
Financial Management, Committee on Oversight and Government Reform,
House of Representatives:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Friday, September 23, 2011:
DOD Financial Management:
Improved Controls, Processes, and Systems Are Needed for Accurate and
Reliable Financial Information:
Statement of Asif A. Khan, Director:
Financial Management and Assurance:
GAO-11-933T:
GAO Highlights:
Highlights of GAO-11-933T, a testimony before the Subcommittee on
Government Organization, Efficiency and Financial Management,
Committee on Oversight and Government Reform, U.S. House of
Representatives.
Why GAO Did This Study:
As one of the largest and most complex organizations in the world, the
Department of Defense (DOD) faces many challenges in resolving serious
problems in its financial management and related business operations
and systems. DOD is required by various statutes to (1) improve its
financial management processes, controls, and systems to ensure that
complete, reliable, consistent, and timely information is prepared and
responsive to the financial information needs of agency management and
oversight bodies, and (2) to produce audited financial statements.
Over the years, DOD has initiated numerous efforts to improve the
department‘s financial management operations and to try to achieve an
unqualified (clean) opinion on the reliability of its reported
financial information. These efforts have fallen short of sustained
improvement in financial management or financial statement
auditability.
The Subcommittee has asked GAO to provide its perspective on the
status of DOD‘s financial management weaknesses and its efforts to
resolve them.
What GAO Found:
DOD financial management has been on GAO‘s high-risk list since 1995
and, despite several reform initiatives, remains on the list today.
Pervasive deficiencies in financial management processes, systems, and
controls, and the resulting lack of data reliability, continue to
impair management‘s ability to assess the resources needed for DOD
operations; track and control costs; ensure basic accountability;
anticipate future costs; measure performance; maintain funds control;
and reduce the risk of loss from fraud, waste, and abuse. DOD spends
billions of dollars each year to maintain key business operations
intended to support the warfighter, including systems and processes
related to the management of contracts, finances, the supply chain,
support infrastructure, and weapon systems acquisition. These
operations are directly impacted by the problems in financial
management. In addition, the long-standing financial management
weaknesses have precluded DOD from being able to undergo the scrutiny
of a financial statement audit.
DOD‘s past strategies for improving its financial management were
ineffective, but recent initiatives are encouraging. In 2005, DOD
issued its Financial Improvement and Audit Readiness (FIAR) Plan for
improving financial management and reporting. In 2009, the DOD
Comptroller directed that FIAR efforts focus on financial information
in two priority areas: budget and mission-critical assets. The FIAR
Plan also has a new phased approach that comprises five waves of
concerted improvement activities. The first three waves focus on the
two priority areas, and the last two on working toward full
auditability. The plan is being implemented largely through the Army,
Navy, and Air Force military departments and the Defense Logistics
Agency, lending increased importance to the commitment of component
leadership.
Improving the department‘s financial management operations and thereby
providing DOD management and Congress more accurate and reliable
information on the results of its business operations will not be an
easy task. It is critical that current initiatives related to
improving the efficiency and effectiveness of financial management
have the support of DOD leaders and that of DOD‘s Deputy Chief
Management Officer and Comptroller continue with sustained leadership
and monitoring.
Absent continued momentum and necessary future investments, current
initiatives may falter. Below are some of the key challenges that DOD
must address for its financial management to improve to the point
where DOD is able to produce auditable financial statements:
* committed and sustained leadership,
* effective plan to correct internal control weaknesses,
* competent financial management workforce,
* accountability and effective oversight,
* well-defined enterprise architecture, and.
* successful implementation of the enterprise resource planning
systems.
View [hyperlink, http://www.gao.gov/products/GAO-11-933T]. For more
information, contact Asif A. Khan at (202) 512-9869 or khana@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
It is a pleasure to be here today to discuss the status of the
Department of Defense's (DOD) efforts to improve its financial
management operations and achieve audit readiness. At the outset, I
would like to thank the Subcommittee for holding this hearing and to
acknowledge the important role of such hearings in the oversight of
DOD's financial management efforts.
DOD is one of the largest and most complex organizations in the world.
For fiscal year 2012, the budget requested for the department was
approximately $671 billion--$553 billion in discretionary budget
authority and $118 billion to support overseas contingency operations.
The fiscal year 2012 budget request also noted that DOD employed over
3 million military and civilian personnel--including active and
reserve service members. DOD operations span a wide range of defense
organizations, including the military departments and their respective
major commands and functional activities, large defense agencies and
field activities, and various combatant and joint operational commands
that are responsible for military operations for specific geographic
regions or theaters of operation. To execute its operations, the
department performs interrelated and interdependent business
functions, including financial management, logistics management,
health care management, and procurement. To support its business
functions, DOD has reported that it relies on over 2,200 business
systems,[Footnote 1] including accounting, acquisition, logistics, and
personnel systems.
The department's sheer size and complexity contribute to the many
challenges DOD faces in resolving its pervasive, complex, and long-
standing financial management and related business operations and
systems problems. Numerous initiatives and efforts have been
undertaken by DOD and its components to improve the department's
financial management operations and to arrive at a point where the
reliability of its financial statements and related financial
management information would be sufficient to pass an audit with
favorable (clean) audit opinions. To date, DOD has not achieved
effective financial management capabilities or financial statement
auditability.[Footnote 2]
Today, I will discuss the status of DOD's financial management
weaknesses, its efforts to resolve those weaknesses, and the
challenges DOD continues to face in its efforts to improve its
financial management operations. In addition, I will outline the
status of the department's efforts to implement its Enterprise
Resource Planning (ERP) systems,[Footnote 3] which represent a
critical element of the department's Financial Improvement and Audit
Readiness (FIAR) strategy. My statement today is based on our prior
work related to the department's FIAR Plan[Footnote 4] and ERP
implementation efforts.[Footnote 5] Our work was conducted in
accordance with generally accepted government auditing standards and
our previously published reports contain additional details on the
scope and methodology for those reviews. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Background:
The department is facing near and long-term internal fiscal pressures
as it attempts to balance competing demands to support ongoing
operations, rebuild readiness following extended military operations,
and manage increasing personnel and health care costs as well as
significant cost growth in its weapon systems programs. For more than
a decade, DOD has dominated GAO's list of federal programs and
operations at high risk of being vulnerable to fraud, waste, abuse.
[Footnote 6] In fact, all of the DOD programs on GAO's High-Risk List
relate to business operations, including systems and processes related
to management of contracts, finances, the supply chain, and support
infrastructure,[Footnote 7] as well as weapon systems acquisition.
Long-standing and 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 financial status and cost of DOD activities to Congress and DOD
decision makers; (2) adversely impacted its operational efficiency and
mission performance in areas of major weapons system support and
logistics; and (3) left the department vulnerable to fraud, waste, and
abuse.
Because of the complexity and long-term nature of DOD's transformation
efforts, GAO has reported the need for a chief management officer
(CMO) position and a comprehensive, enterprisewide business
transformation plan. In May 2007, DOD designated the Deputy Secretary
of Defense as the CMO. In addition, the National Defense Authorization
Acts for fiscal years 2008 and 2009 contained provisions that codified
the CMO and Deputy Chief Management Officer (DCMO) positions, required
DOD to develop a strategic management plan, and required the
Secretaries of the military departments to designate their
Undersecretaries as CMOs and to develop business transformation plans.
Overview of DOD's Accounting and Finance Activities:
DOD financial managers are responsible for the functions of budgeting,
financing, accounting for transactions and events, and reporting of
financial and budgetary information. To maintain accountability over
the use of public funds, DOD must carry out financial management
functions such as recording, tracking, and reporting its budgeted
spending, actual spending, and the value of its assets and
liabilities. DOD relies on a complex network of organizations and
personnel to execute these functions. Also, its financial managers
must work closely with other departmental personnel to ensure that
transactions and events with financial consequences, such as awarding
and administering contracts, managing military and civilian personnel,
and authorizing employee travel, are properly monitored, controlled,
and reported, in part, to ensure that DOD does not violate spending
limitations established by statute or other legal provisions regarding
the use of funds.
Before fiscal year 1991, the military services and defense agencies
independently managed their finance and accounting operations.
According to DOD, these decentralized operations were highly
inefficient and failed to produce reliable information. On November
26, 1990, DOD created the Defense Finance and Accounting Service
(DFAS) as its accounting agency to consolidate, standardize, and
integrate finance and accounting requirements, functions, procedures,
operations, and systems. The military services and defense agencies
pay for finance and accounting services provided by DFAS using their
operations and maintenance appropriations. The military services
continue to perform certain finance and accounting activities at each
military installation. These activities vary by military service
depending on what the services wanted to maintain in-house and the
number of personnel they were willing to transfer to DFAS. As DOD's
accounting agency, DFAS records these transactions in the accounting
records, prepares thousands of reports used by managers throughout DOD
and by the Congress, and prepares DOD-wide and service-specific
financial statements. The military services play a vital role in that
they authorize the expenditure of funds and are the source of most of
the financial information that allows DFAS to make payroll and
contractor payments. The military services also have responsibility
over most of DOD's assets and the related information needed by DFAS
to prepare annual financial statements required under the Chief
Financial Officers Act.[Footnote 8]
DOD accounting personnel are responsible for accounting for funds
received through congressional appropriations, the sale of goods and
services by working capital fund businesses, revenue generated through
nonappropriated fund activities, and the sales of military systems and
equipment to foreign governments or international organizations. DOD's
finance activities generally involve paying the salaries of its
employees, paying retirees and annuitants, reimbursing its employees
for travel-related expenses, paying contractors and vendors for goods
and services, and collecting debts owed to DOD. DOD defines its
accounting activities to include accumulating and recording operating
and capital expenses as well as appropriations, revenues, and other
receipts. According to DOD's fiscal year 2012 budget request, in
fiscal year 2010 DFAS:
* processed approximately 198 million payment-related transactions and
disbursed over $578 billion;
* accounted for 1,129 active DOD appropriation accounts; and:
* processed more that 11 million commercial invoices.
Pervasive Financial Management Problems Continue to Affect the
Efficiency and Effectiveness of DOD Operations:
DOD financial management was designated as a high-risk area by GAO in
1995. Pervasive deficiencies in financial management processes,
systems, and controls, and the resulting lack of data reliability,
continue to impair management's ability to assess the resources needed
for DOD operations; track and control costs; ensure basic
accountability; anticipate future costs; measure performance; maintain
funds control; and reduce the risk of loss from fraud, waste, and
abuse.
Other business operations, including the high-risk areas of contract
management, supply chain management, support infrastructure
management, and weapon systems acquisition are directly impacted by
the problems in financial management. We have reported that continuing
weaknesses in these business operations result in billions of dollars
of wasted resources, reduced efficiency, ineffective performance, and
inadequate accountability. Examples of the pervasive weaknesses in the
department's business operations are highlighted below.
* DOD invests billions of dollars to acquire weapon systems, but it
lacks the financial management processes and capabilities it needs to
track and report on the cost of weapon systems in a reliable manner.
We reported on this issue over 20 years ago,[Footnote 9] but the
problems continue to persist. In July 2010, we reported[Footnote 10]
that although DOD and the military departments have efforts underway
to begin addressing these financial management weaknesses, problems
continue to exist and remediation and improvement efforts would
require the support of other business areas beyond the financial
community before they could be fully addressed.
* DOD also requests billions of dollars each year to maintain its
weapon systems, but it has limited ability to identify, aggregate, and
use financial management information for managing and controlling
operating and support costs. Operating and support costs can account
for a significant portion of a weapon system's total life-cycle costs,
including costs for repair parts, maintenance, and contract services.
In July 2010, we reported[Footnote 11] that the department lacked key
information needed to manage and reduce operating and support costs
for most of the weapon systems we reviewed[Footnote 12]--including
cost estimates and historical data on actual operating and support
costs. For acquiring and maintaining weapon systems, the lack of
complete and reliable financial information hampers DOD officials in
analyzing the rate of cost growth, identifying cost drivers, and
developing plans for managing and controlling these costs. Without
timely, reliable, and useful financial information on cost, DOD
management lacks information needed to accurately report on
acquisition costs, allocate resources to programs, or evaluate program
performance.
* In June 2010, we reported[Footnote 13] that the Army Budget Office
lacked an adequate funds control process to provide it with ongoing
assurance that obligations and expenditures do not exceed funds
available in the Military Personnel-Army (MPA) appropriation. We found
that an obligation of $200 million in excess of available funds in the
Army's military personnel account violated the Antideficiency Act. The
overobligation likely stemmed, in part, from lack of communication
between Army Budget and program managers so that Army Budget's
accounting records reflected estimates instead of actual amounts until
it was too late to control the incurrence of excessive obligations in
violation of the act. Thus, at any given time in the fiscal year, Army
Budget did not know the actual obligation and expenditure levels of
the account. Army Budget explained that it relies on estimated
obligations--despite the availability of actual data from program
managers--because of inadequate financial management systems. The lack
of adequate process and system controls to maintain effective funds
control impacted the Army's ability to prevent, identify, correct, and
report potential violations of the Antideficiency Act.
* In our February 2011 report[Footnote 14] on the Defense Centers of
Excellence (DCOE), we found that DOD's TRICARE Management Activity
(TMA) had misclassified $102.7 million of the nearly $112 million in
DCOE advisory and assistance contract obligations. The proper
classification and recording of costs are basic financial management
functions that are also key in analyzing areas for potential future
savings.
Without adequate financial management processes, systems, and
controls, DOD components are at risk of reporting inaccurate,
inconsistent, and unreliable data for financial reporting and
management decision making and potentially exceeding authorized
spending limits. The lack of effective internal controls hinders
management's ability to have reasonable assurance that their allocated
resources are used effectively, properly, and in compliance with
budget and appropriations law.
DOD's Past Strategies for Improving Financial Management Were
Ineffective but Recent Initiatives are Encouraging:
Over the years, DOD has initiated several broad-based reform efforts
to address its long-standing financial management weaknesses. However,
as we have reported, those efforts did not achieve their intended
purpose of improving the department's financial management operations.
In 2005, the DOD Comptroller established the DOD FIAR Directorate to
develop, manage, and implement a strategic approach for addressing the
department's financial management weaknesses and for achieving
auditability, and to integrate those efforts with other improvement
activities, such as the department's business system modernization
efforts. In May 2009,[Footnote 15] we identified several concerns with
the adequacy of the FIAR Plan as a strategic and management tool to
resolve DOD's financial management difficulties and thereby position
the department to be able to produce auditable financial statements.
Overall, since the issuance of the first FIAR Plan in December 2005,
improvement efforts have not resulted in the fundamental
transformation of operations necessary to resolve the department's
long-standing financial management deficiencies. However, DOD has made
significant improvements to the FIAR Plan that, if implemented
effectively, could result in significant improvement in DOD's
financial management and progress toward auditability, but progress in
taking corrective actions and resolving deficiencies remains slow.
While none of the military services has obtained an unqualified
(clean) audit opinion, some DOD organizations, such as the Army Corps
of Engineers, DFAS, the Defense Contract Audit Agency, and the DOD
Office of Inspector General, have achieved this goal. Moreover, some
DOD components that have not yet received clean audit opinions are
beginning to reap the benefits of strengthened controls and processes
gained through ongoing efforts to improve their financial management
operations and reporting capabilities. Lessons learned from the Marine
Corps' Statement of Budgetary Resources audit effort can provide a
roadmap to help other components better stage their audit readiness
efforts by strengthening their financial management processes to
increase data reliability as they develop action plans to become audit
ready.
In August 2009, DOD's Comptroller sought to further focus efforts of
the department and components, in order to achieve certain short-and
long-term results, by giving priority to improving processes and
controls that support the financial information most often used to
manage the department. Accordingly, DOD revised its FIAR strategy and
methodology to focus on the DOD Comptroller's two priorities--
budgetary information and asset accountability. The first priority is
to strengthen processes, controls, and systems that produce DOD's
budgetary information and the department's Statements of Budgetary
Resources. The second priority is to improve the accuracy and
reliability of management information pertaining to the department's
mission-critical assets, including military equipment, real property,
and general equipment, and validating improvement through existence
and completeness testing. The DOD Comptroller directed the DOD
components participating in the FIAR Plan--the departments of the
Army, the Navy, and the Air Force and the Defense Logistics Agency--to
use a standard process and aggressively modify their activities to
support and emphasize achievement of the priorities.
GAO supports DOD's current approach of focusing and prioritizing
efforts in order to achieve incremental progress in addressing
weaknesses and making progress toward audit readiness. Budgetary and
asset information is widely used by DOD managers at all levels, so its
reliability is vital to daily operations and management. DOD needs to
provide accountability over the existence and completeness of its
assets. Problems with asset accountability can further complicate
critical functions, such as planning for the current troop withdrawals.
In May 2010, DOD introduced a new phased approach that divides
progress toward achieving financial statement auditability into five
waves (or phases) of concerted improvement activities (see appendix
I). According to DOD, the components' implementation of the
methodology described in the 2010 FIAR Plan is essential to the
success of the department's efforts to ultimately achieve full
financial statement auditability. To assist the components in their
efforts, the FIAR Guidance, issued along with the revised plan,
details the implementation of the methodology with an emphasis on
internal controls and supporting documentation that recognizes both
the challenge of resolving the many internal control weaknesses and
the fundamental importance of establishing effective and efficient
financial management. The FIAR Guidance provides the process for the
components to follow, through their individual Financial Improvement
Plan (FIP), in assessing processes, controls, and systems; identifying
and correcting weaknesses; assessing, validating, and sustaining
corrective actions; and achieving full auditability. The guidance
directs the components to identify responsible organizations and
personnel and resource requirements for improvement work. In
developing their plans, components use a standard template that
comprises data fields aligned to the methodology. The consistent
application of a standard methodology for assessing the components'
current financial management capabilities can help establish valid
baselines against which to measure, sustain, and report progress.
Numerous Challenges Must Be Addressed In Order For DOD to Successfully
Reform Financial Management:
Improving the department's financial management operations and thereby
providing DOD management and the Congress more accurate and reliable
information on the results of its business operations will not be an
easy task. It is critical that the current initiatives being led by
the DOD DCMO and the DOD Comptroller be continued and provided with
sufficient resources and ongoing monitoring in the future. Absent
continued momentum and necessary future investments, the current
initiatives may falter, similar to previous efforts. Below are some of
the key challenges that the department must address in order for the
financial management operations of the department to improve.
Committed and sustained leadership. The FIAR Plan is in its sixth year
and continues to evolve based on lessons learned, corrective actions,
and policy changes that refine and build on the plan. The DOD
Comptroller has expressed commitment to the FIAR goals, and
established a focused approach that is intended to help DOD achieve
successes in the near term. But the financial transformation needed at
DOD, and its removal from GAO's high-risk list, is a long-term effort.
Improving financial management will need to be a cross-functional
endeavor; requiring improvements in some of DOD's other business
operations such as those in the high-risk areas of contract
management, supply chain management, support infrastructure
management, and weapon systems acquisition. As acknowledged by DOD
officials, sustained and active involvement of the department's CMO,
the DCMO, the military departments' CMOs, the DOD Comptroller, and
other senior leaders is critical. Within every administration, there
are changes at the senior leadership; therefore, it is paramount that
the current initiative be institutionalized throughout the department--
at all working levels--in order for success to be achieved.
Effective plan to correct internal control weaknesses. In May 2009, we
reported[Footnote 16] that the FIAR Plan did not establish a baseline
of the department's state of internal control and financial management
weaknesses as its starting point. Such a baseline could be used to
assess and plan for the necessary improvements and remediation to be
used to measure incremental progress toward achieving estimated
milestones for each DOD component and the department. DOD currently
has efforts underway to address known internal control weaknesses
through three integrated programs: (1) Internal Controls over
Financial Reporting (ICOFR) program, (2) ERP implementation, and (3)
FIAR Plan. However, the effectiveness of these three integrated
efforts at establishing a baseline remains to be seen. As discussed in
our recent report,[Footnote 17] the lack of effective internal
controls, in part, contributed to the DOD Inspector General issuing a
disclaimer of opinion[Footnote 18] on the Marine Corps' fiscal year
2010 Statement of Budgetary Resources (SBR). The auditors reported
that ineffective internal control and ineffective controls in key
financial systems should be addressed to ensure the reliability of
reported financial information.[Footnote 19] Examples of the problems
identified include the following:
* The Marine Corps did not have effective controls in place to support
estimated obligations, referred to as "bulk obligations," to record a
payment liability, and, as a result, was not able to reconcile the
related payment transactions to the estimates. The Marine Corps
estimates obligations in a bulk amount to record payment liabilities
where it does not have a mechanism to identify authorizing
documentation as a basis for recording the obligations.
* The auditors found ineffective controls over three major information
technology systems used by the Marine Corps and reported numerous
problems that required resolution.[Footnote 20] For example, the
auditors identified a lack of controls over interfaces between systems
to ensure completeness of the data being transferred. System interface
controls are critical for ensuring the completeness and accuracy of
data transferred between systems.
The report also noted that the Marine Corps did not develop an overall
corrective action or remediation plan that includes key elements of a
risk-based plan. Instead, its approach focuses on short-term
corrective actions based on manually intensive efforts to produce
reliable financial reporting at year-end. Such efforts may not result
in sustained improvements over the long term that would help ensure
that the Marine Corps could routinely produce sound data on a timely
basis for decision making. We previously reported that using
principles of risk management helps policymakers make informed
decisions about best ways to prioritize investments, so that the
investments target the areas of greatest need.[Footnote 21] However,
we found that the Marine Corps' SBR Remediation Plan focused on
individual initiatives to address 70 auditor Notices of Findings and
Recommendations that included 139 recommendations, without assessing
risks, prioritizing actions, or ensuring that actions adequately
responded to recommendations.[Footnote 22] Further, the plan did not
identify resources, roles and responsibilities, or include performance
indicators to measure performance against action plan objectives.
[Footnote 23]
Given the current efforts, goals, and timeframes for achieving
auditability of the Marine Corps' Fiscal Year 2011 SBR, the current
approach is understandably focused on short-term actions. However,
achieving financial accountability that is sustainable in the long
term will require reliable financial systems and sound internal
controls. An effective remediation plan would help ensure that audit
recommendations are fully addressed to deal with the short-term and
long-term goals.
The Marine Corps reported that actions on 88 of the 139
recommendations, including weaknesses related to accounting and
financial reporting and information technology systems were fully
implemented; however, the completeness and effectiveness of most
Marine Corps' actions have not yet been tested. DOD Inspector General
auditors told us that tests performed during the Marine Corps' fiscal
year 2011 SBR audit effort will determine whether and to what extent
the problems identified during the fiscal year 2010 SBR audit effort
have been resolved. They also confirmed that as of August 25, 2011,
the Marine Corps had remediated the problems on 11 of the information
technology audit recommendations.
Because of the department's complexity and magnitude, developing and
implementing a comprehensive plan that identifies DOD's internal
control weaknesses will not be an easy task. But it is a task that is
critical to resolving the long-standing weaknesses and will require
consistent management oversight and monitoring for it to be successful.
Competent financial management workforce. Effective financial
management in DOD will require a knowledgeable and skilled workforce
that includes individuals who are trained and certified in accounting,
well versed in government accounting practices and standards, and
experienced in information technology. Hiring and retaining such a
skilled workforce is a challenge DOD must meet to succeed in its
transformation to efficient, effective, and accountable business
operations. The National Defense Authorization Act for Fiscal Year
2006[Footnote 24] directed DOD to develop a strategic plan to shape
and improve the department's civilian workforce. The plan was to,
among other things; include assessments of (1) existing critical
skills and competencies in DOD's civilian workforce, (2) future
critical skills and competencies needed over the next decade, and (3)
any gaps in the existing or future critical skills and competencies
identified. In addition, DOD was to submit a plan of action for
developing and reshaping the civilian employee workforce to address
any identified gaps, as well as specific recruiting and retention
goals and strategies on how to train, compensate, and motivate
civilian employees. In developing the plan, the department identified
financial management as one of its enterprisewide mission-critical
occupations.
In July 2011, we reported[Footnote 25] that DOD's 2009 overall
civilian workforce plan had addressed some legislative requirements,
including assessing the critical skills of its existing civilian
workforce. Although some aspects of the legislative requirements were
addressed, DOD still has significant work to do. For example, while
the plan included gap analyses related to the number of personnel
needed for some of the mission-critical occupations, the department
had only discussed competency gap analyses for 3 mission-critical
occupations--language, logistics management, and information
technology management. A competency gap for financial management was
not included in the department's analysis. Until DOD analyzes
personnel needs and gaps in the financial management area, it will not
be in a position to develop an effective financial management
recruitment, retention, and investment strategy to successfully
address its financial management challenges.
Accountability and effective oversight. The department established a
governance structure for the FIAR Plan, which includes review bodies
for governance and oversight. The governance structure is intended to
provide the vision and oversight necessary to align financial
improvement and audit readiness efforts across the department. As
noted in our recent report,[Footnote 26] both DOD and the components
have established senior executive committees as well as designated
officials at the appropriate levels to monitor and oversee their
financial improvement efforts. These committees and individuals have
also generally been assigned appropriate roles and responsibilities.
To monitor progress and hold individuals accountable for progress, DOD
managers and oversight bodies need reliable, valid, meaningful metrics
to measure performance and the results of corrective actions. In May
2009, we reported[Footnote 27] that the FIAR Plan did not have clear
results-oriented metrics. To its credit, DOD has taken action to begin
defining results-oriented FIAR metrics it intends to use to provide
visibility of component-level progress in assessment; and testing and
remediation activities, including progress in identifying and
addressing supporting documentation issues. We have not yet had an
opportunity to assess implementation of these metrics--including the
components' control over the accuracy of supporting data--or their
usefulness in monitoring and redirecting actions.
Ensuring effective monitoring and oversight of progress--especially by
the leadership in the components--will be key to bringing about
effective implementation, through the components' FIPs. However, as
noted in our recent report,[Footnote 28] we found that weaknesses in
the Navy and Air Force FIAR Plan implementation efforts indicate that
the monitoring and oversight of such efforts have not been effective.
More specifically, we found that component officials as well as the
oversight committees at both the component and DOD levels did not
effectively carry out their monitoring responsibilities for the Navy
Civilian Pay and Air Force Military Equipment FIPs. For the two FIPs
that we reviewed, neither individual officials nor the executive
committees took sufficient action to ensure that the FIPs were
accurate or complied with the FIAR Guidance. As a result, the Navy
concluded that its Civilian Pay was ready for audit, as did the Air
Force with respect to its Military Equipment, even though they did not
have sufficient support to assert audit readiness.
On the other hand, once the Navy and Air Force submitted the FIPs to
DOD in support of their audit readiness assertions, both the DOD
Inspector General and the DOD Comptroller carried out their
responsibilities for reviewing the FIPs. In their reviews, both
organizations identified issues with the FIPs that were similar to
those we had identified. The DOD Comptroller, who makes the final
determination as to whether an assessable unit is ready for audit,
concluded that neither of these FIPs supported audit readiness.
Effective oversight and monitoring would also help ensure that lessons
learned from recent efforts would be sufficiently disseminated
throughout the department and applied to other financial improvement
efforts. In commenting on our report about the FIPs, the DOD
Comptroller stated that it is critical that the department continues
to look at how effectively it applies lessons learned.
Furthermore, effective oversight holds individuals accountable for
carrying out their responsibilities. DOD has introduced incentives
such as including FIAR goals in Senior Executive Service Performance
Plans, increased reprogramming thresholds granted to components that
receive a positive audit opinion on their Statement of Budgetary
Resources, audit costs funded by the Office of the Secretary of
Defense after a successful audit, and publicizing and rewarding
components for successful audits. The challenge now is to evaluate and
validate these and other incentives to determine their effectiveness
and whether the right mix of incentives has been established.
Well-defined enterprise architecture. For decades, DOD has been
challenged in modernizing its timeworn business systems. Since 1995,
we have designated DOD's business systems modernization program as
high risk. Between 2001 and 2005, we reported that the modernization
program had spent hundreds of millions of dollars on an enterprise
architecture and investment management structures that had limited
value. Accordingly, we made explicit architecture and investment
management-related recommendations. Congress included provisions in
the Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005 that were consistent with our recommendations. In response,
DOD continues to take steps to comply with the act's provisions and to
satisfy relevant system modernization management guidance.
Collectively, these steps address best practices in implementing the
statutory provisions concerning the business enterprise architecture
and review of systems costing in excess of $1 million. However, long-
standing challenges that we previously identified remain to be
addressed. Specifically, while DOD continues to release updates to its
corporate enterprise architecture, the architecture has yet to be
federated[Footnote 29] through development of aligned subordinate
architectures for each of the military departments. In this regard,
each of the military departments has made progress in managing its
respective architecture program, but there are still limitations in
the scope and completeness, as well as the maturity of the military
departments' architecture programs. For example, while each department
has established or is in the process of establishing an executive
committee with responsibility and accountability for the enterprise
architecture, none has fully developed an enterprise architecture
methodology or a well-defined business enterprise architecture and
transition plan to guide and constrain business transformation
initiatives. In addition, while DOD continues to establish investment
management processes, the DOD enterprise and the military departments'
approaches to business systems investment management still lack the
defined policies and procedures to be considered effective investment
selection, control, and evaluation mechanisms. Until DOD fully
implements these longstanding institutional modernization management
controls its business systems modernization will likely remain a high-
risk program.
Successful implementation of the ERPs. The department has invested
billions of dollars and will invest billions more to implement the
ERPs. The implementation of an integrated, audit-ready systems
environment through the deployment of ERP systems underlies all of
DOD's financial improvement efforts and is crucial to achieving
departmentwide audit readiness. According to DOD, the successful
implementation of the ERPs is not only critical for addressing long-
standing weaknesses in financial management, but equally important for
helping to resolve weaknesses in other high-risk areas such as
business transformation, business system modernization, and supply
chain management. Successful implementation will support DOD by
standardizing and streamlining its financial management and accounting
systems, integrating multiple logistics systems and finance processes,
providing asset visibility for accountable items, and integrating
personnel and pay systems. Previously, we reported that delays in the
successful implementation of ERPs have extended the use of existing
duplicative, stovepiped systems, and have continued the funding of
these systems longer than anticipated.[Footnote 30] To the degree that
these business systems do not provide the intended capabilities, DOD's
goal of departmentwide audit readiness by the end of fiscal year 2017
could be jeopardized.
Over the years we have reported[Footnote 31] that the department has
not effectively employed acquisition management controls to help
ensure the ERPs deliver the promised capabilities on time and within
budget. As we reported in October 2010, DOD has identified 10 ERPs--1
of which had been fully implemented--as essential to its efforts to
transform its business operations.[Footnote 32] We are currently
reviewing the status of two of these ERPs--the Army's General Fund
Enterprise Business System (GFEBS) and the Air Force's Defense
Enterprise Accounting and Management System (DEAMS). GFEBS is intended
to support the Army's standardized financial management and accounting
practices for the Army's general fund, except for funds related to the
Army Corps of Engineers. The Army estimates that GFEBS will be used to
control and account for approximately $140 billion in annual spending.
DEAMS is intended to provide the Air Force with the entire spectrum of
financial management capabilities and is expected to maintain control
and accountability for approximately $160 billion. GFEBS is expected
to be fully deployed during fiscal year 2012, is currently operational
at 154 locations, including DFAS, and is being used by approximately
35,000 users. DEAMS is expected to be fully deployed during fiscal
year 2016, is currently operational at Scott Air Force Base and DFAS,
and is being used by about 1,100 individuals.
Our preliminary results identified issues related to GFEBS and DEAMS
providing DFAS users with the expected capabilities in accounting,
management information, and decision support. To compensate, DFAS
users have devised manual workarounds and several applications to
obtain the information they need to perform their day-to-day tasks.
Examples of the issues in these systems that DFAS users have
identified include the following:
GFEBS:
* The backlog of unresolved GFEBS trouble tickets has continued to
increase from about 250 in September 2010 to approximately 400 in May
2011. Trouble tickets represent user questions and issues with
transactions or system performance that have not been resolved.
According to Army officials, this increase in tickets was not
unexpected since the number of users and the number of transactions
being processed by the system has increased, and the Army and DFAS are
taking steps to address issues raised by DFAS.
* Approximately two-thirds of invoice and receipt data must be
manually entered into GFEBS from the invoicing and receiving system
(i.e., Wide Area Work Flow).[Footnote 33] DFAS personnel stated that
manual data entry will eventually become infeasible due to increased
quantities of data that will have to be manually entered as GFEBS is
deployed to additional locations. Army officials acknowledged that
there is a problem with the Wide Area Work Flow and GFEBS interface
and that this problem reduced the effectiveness of GFEBS, and that
they are working with DOD to resolve the problem.
* GFEBS lacks the ability to run ad hoc queries or search for data in
the system to resolve problems or answer questions.[Footnote 34] The
Army has recognized this limitation and is currently developing a
system enhancement that they expect will better support the users'
needs.
DEAMS:
* Manual workarounds are needed to process certain accounts receivable
transactions such as travel debts. DFAS personnel stated that the
problem is the result of the data not being properly converted from
the legacy systems to DEAMS.
* DFAS officials indicated that they were experiencing difficulty with
some of the DEAMS system interfaces.[Footnote 35] For example, the
interface problem with the Standard Procurement System has become so
severe that the interface has been turned off, and the data must be
manually entered into DEAMS.
* DFAS officials stated that DEAMS does not provide the capability--
which existed in the legacy systems--to produce ad hoc reports that
can be used to perform the data analysis need to perform daily
operations.[Footnote 36] They also noted that when some reports are
produced, the accuracy of those reports is questionable.
The Army and Air Force have stated that they have plans to address
these issues, and the Army has plans to validate the audit readiness
of GFEBS in a series of independent auditor examinations over the next
several fiscal years. For DEAMS, the DOD Milestone Decision
Authority[Footnote 37] has directed that the system is not to be
deployed beyond Scott Air Force Base until the known system weaknesses
have been corrected and the system has been independently tested to
ensure that it is operating as intended.
Closing Comments:
In closing, I am encouraged by the recent efforts and commitment DOD's
leaders have shown toward improving the department's financial
management. Progress we have seen includes recently issued guidance to
aid DOD components in their efforts to address their financial
management weaknesses and achieve audit readiness, and standardized
component financial improvement plans to facilitate oversight and
monitoring, as well as sharing lessons learned. In addition, the DOD
Comptroller and DCMO have shown commitment and leadership in moving
DOD's financial management improvement efforts forward.
The revised FIAR strategy is still in the early stages of
implementation, and DOD has a long way and many long-standing
challenges to overcome, particularly with regard to sustained
commitment, leadership, and oversight, before the department and its
military components are fully auditable, and DOD financial management
is no longer considered high risk. However, the department is heading
in the right direction and making progress. Some of the most difficult
challenges ahead lie in the effective implementation of the
department's strategy by the Army, Navy, Air Force, and DLA, including
successful implementation of ERP systems and integration of financial
management improvement efforts with other DOD initiatives.
GAO will continue to monitor the progress of and provide feedback on
the status of DOD's financial management improvement efforts. We
currently have work in progress to assess implementation of the
department's FIAR strategy and efforts toward auditability. As a final
point, I want to emphasize the value of sustained congressional
interest in the department's financial management improvement efforts,
as demonstrated by this Subcommittee's leadership.
Mr. Chairman and Members of the Subcommittee, this concludes my
prepared statement. I would be pleased to respond to any questions
that you or other members of the Subcommittee may have at this time.
For further information regarding this testimony, please contact Asif
A. Khan, (202) 512-9869 or khana@gao.gov. Key contributors to this
testimony include J. Christopher Martin, Senior-Level Technologist; F.
Abe Dymond, Assistant Director; Gayle Fischer, Assistant Director;
Greg Pugnetti, Assistant Director; Darby Smith, Assistant Director;
Beatrice Alff; Steve Donahue; Keith McDaniel; Maxine Hattery; Hal
Santarelli; and Sandy Silzer.
[End of section]
Appendix I" FIAR Plan Waves:
The first three waves focus on achieving the DOD Comptroller's interim
budgetary and asset accountability priorities, while the remaining two
waves are intended to complete actions needed to achieve full
financial statement auditability. However, the department has not yet
fully defined its strategy for completing waves 4 and 5. Each wave
focuses on assessing and strengthening internal controls and business
systems related to the stage of auditability addressed in the wave.
Wave 1--Appropriations Received Audit focuses on the appropriations
receipt and distribution process, including funding appropriated by
Congress for the current fiscal year and related apportionment/
reapportionment activity by the OMB, as well as allotment and sub-
allotment activity within the department.
Wave 2--Statement of Budgetary Resources Audit focuses on supporting
the budget-related data (e.g., status of funds received, obligated,
and expended) used for management decision making and reporting,
including the Statement of Budgetary Resources. In addition to fund
balance with Treasury reporting and reconciliation, other significant
end-to-end business processes in this wave include procure-to-pay,
hire-to-retire, order-to-cash, and budget-to-report.
Wave 3--Mission Critical Assets Existence and Completeness Audit
focuses on ensuring that all assets (including military equipment,
general equipment, real property, inventory, and operating materials
and supplies) that are recorded in the department's accountable
property systems of record exist; all of the reporting entities'
assets are recorded in those systems of record; reporting entities
have the right (ownership) to report these assets; and the assets are
consistently categorized, summarized, and reported.
Wave 4--Full Audit Except for Legacy Asset Valuation includes the
valuation assertion over new asset acquisitions and validation of
management's assertion regarding new asset acquisitions, and it
depends on remediation of the existence and completeness assertions in
Wave 3. Also, proper contract structure for cost accumulation and cost
accounting data must be in place prior to completion of the valuation
assertion for new acquisitions. It involves the budgetary transactions
covered by the Statement of Budgetary Resources effort in Wave 2,
including accounts receivable, revenue, accounts payable, expenses,
environmental liabilities, and other liabilities.
Wave 5--Full Financial Statement Audit focuses efforts on assessing
and strengthening, as necessary, internal controls, processes, and
business systems involved in supporting the valuations reported for
legacy assets once efforts to ensure control over the valuation of new
assets acquired and the existence and completeness of all mission
assets are deemed effective on a go-forward basis. Given the lack of
documentation to support the values of the department's legacy assets,
federal accounting standards allow for the use of alternative methods
to provide reasonable estimates for the cost of these assets.
In the context of this phased approach, DOD's dual focus on budgetary
and asset information offers the potential to obtain preliminary
assessments regarding the effectiveness of current processes and
controls and identify potential issues that may adversely impact
subsequent waves.
[End of section]
Footnotes:
[1] DOD excludes from its business systems those designated as
national security systems under section 2222(j) of Title 10, United
States Code. National security 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.
[2] DOD's auditors have reported material financial management
weaknesses in the following areas: (1) Financial Management Systems,
(2) Fund Balance with Treasury, (3) Accounts Receivable, (4)
Inventory, (5) Operating Materials and Supplies, (6) General Property,
Plant, and Equipment, (7) Government-Furnished Material and Contractor-
Acquired Material, (8) Accounts Payable, (9) Environmental
Liabilities, (10) Statement of Net Cost, (11) Intragovernmental
Eliminations, (12) Other Accounting Entries, and (13) Reconciliation
of Net Cost of Operations to Budget.
[3] An ERP system uses commercial off-the-shelf (COTS) software
consisting of multiple, integrated functional modules that perform a
variety of business related tasks such as general ledger accounting,
payroll, and supply chain management.
[4] GAO, Financial Management: Achieving Financial Statement
Auditability in the Department of Defense, [hyperlink,
http://www.gao.gov/products/GAO-09-373] (Washington, D.C.: May 6,
2009).
[5] GAO, DOD Business Transformation: Improved Management and
Oversight of Business Modernization Efforts Needed, [hyperlink,
http://www.gao.gov/products/GAO-11-53] (Washington, D.C.: Oct. 7,
2010); Defense Logistics: Actions Needed to Improve Implementation of
the Army Logistics Modernization Program, [hyperlink,
http://www.gao.gov/products/GAO-10-461] (Washington, D.C.: Apr. 30,
2010), DOD Business Transformation: Air Force's Current Approach
Increases Risk That Asset Visibility Goals and Transformation
Priorities Will Not Be Achieved, [hyperlink,
http://www.gao.gov/products/GAO-08-866] (Washington, D.C.: Aug. 8,
2008), DOD Business Systems Modernization: Important Management
Controls Being Implemented on Major Navy Program, but Improvements
Needed in Key Areas, [hyperlink,
http://www.gao.gov/products/GAO-08-896] (Washington, D.C.: Sept. 8,
2008), and DOD Business Transformation: Lack of an Integrated Strategy
Puts the Army's Asset Visibility System Investments at Risk,
[hyperlink, http://www.gao.gov/products/GAO-07-860] (Washington, D.C.:
July 27, 2007).
[6] DOD bears responsibility, in whole or in part, for 14 of the 30
federal programs or activities that GAO has identified as being at
high risk of waste, fraud, abuse, and mismanagement. The seven
specific DOD high-risk areas are (1) approach to business
transformation, (2) business systems modernization, (3) contract
management, (4) financial management, (5) supply chain management, (6)
support infrastructure management, and (7) weapon systems acquisition.
The seven 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, (6) real property, and (7)
ensuring the effective protection of technologies critical to U.S.
national security Interests.
[7] Support infrastructure includes categories such as installations,
central logistics, the defense health program, and central training.
[8] Sec. 31 U.S.C. §3515(a),(c); OMB Bulletin No. 07-04, Audit
Requirements For Federal Financial Statements, Appendix B (Sept. 4,
2007).
[9] GAO, Financial Audit: Air Force Does Not Effectively Account for
Billions of Dollars of Resources, [hyperlink,
http://www.gao.gov/products/GAO/AFMD-90-23[ (Washington, D.C.: Feb.
23, 1990).
[10] GAO, Department of Defense: Additional Actions Needed to Improve
Financial Management of Military Equipment, [hyperlink,
http://www.gao.gov/products/GAO-10-695] (Washington, D.C. July 26,
2010).
[11] GAO, Defense Management: DOD Needs Better Information and
Guidance to More Effectively Manage and Reduce Operating and Support
Costs of Major Weapon Systems, [hyperlink,
http://www.gao.gov/products/GAO-10-717] (Washington, D.C.: July 20,
2010).
[12] GAO reviewed the following seven major aviation systems: the
Navy's F/A-18E/F; the Air Force's F-22A, B-1B, and F-15E; and the
Army's AH-64D, CH-47D, and UH-60L.
[13] GAO, Department of the Army--The Fiscal Year 2008 Military
Personnel Army Appropriation and the Antideficiency Act, B-318724
(Washington, D.C.: June 22, 2010).
[14] GAO, Defense Health: Management Weaknesses at Defense Centers of
Excellence for Psychological Health and Traumatic Brain Injury Require
Attention, [hyperlink, http://www.gao.gov/products/GAO-11-219]
(Washington, D.C.: Feb. 28, 2011).
[15] GAO, Financial Management: Achieving Financial Statement
Auditability in the Department of Defense, [hyperlink,
http://www.gao.gov/products/GAO-09-373] (Washington, D.C.: May 6,
2009).
[16] [hyperlink, http://www.gao.gov/products/GAO-09-373].
[17] GAO, DOD Financial Management: Marine Corps Statement of
Budgetary Resources Audit Results and Lessons Learned, [hyperlink,
http://www.gao.gov/products/GAO-11-830] (Washington, D.C.: Sept. 15,
2011).
[18] In a disclaimer of opinion, the auditor does not express an
opinion on the financial statements. A disclaimer of opinion is
appropriate when the audit scope is not sufficient to enable the
auditor to express an opinion, or when there are material
uncertainties involving a scope limitation--a situation where the
auditor is unable to obtain sufficient appropriate audit evidence.
[19] Internal control comprises the plans, methods, and procedures to
provide reasonable assurance that objectives are being achieved in the
following areas: (1) effectiveness and efficiency of operations, (2)
reliability of financial reporting, and (3) compliance with applicable
laws and regulations.
[20] The three systems are the Marine Corps Total Force System
(MCTFS), which is an integrated military personnel and payroll system;
the Standard Accounting, Budgeting, Reporting System (SABRS), which is
the Marine Corps' general ledger accounting system; and the Defense
Departmental Reporting System (DDRS), which is a DOD-wide financial
reporting system.
[21] GAO, Defense Business Transformation: DOD Needs To Take
Additional Actions to Further Define Key Management Roles, Develop
Measurable Goals, and Align Planning Efforts, [hyperlink,
http://www.gao.gov/products/GAO-11-181R] (Washington, D.C.: Jan. 26,
2011); and Risk Management: Strengthening the Use of Risk Management
Principles at Homeland Security, [hyperlink,
http://www.gao.gov/products/GAO-08-904T] (Washington, D.C.: June 25,
2008).
[22] The Marine Corps SBR Remediation Plan consists of a written plan
covering the initial 11 financial statement process notices of
findings and recommendations (NFR) to comply with DOD IG audit
requirements and 59 additional NFRs that were addressed in separate
plans of action and milestones.
[23] Some of these elements are consistent with the FIAR Guidance
requirements for a corrective action plan, such as identifying
required resources and ensuring that actions address the identified
deficiencies.
[24] Pub. L. No. 109-163, div. A, § 1122, 119 Stat. 3136, 3452 (Jan.
6, 2006). The National Defense Authorization Act for Fiscal Year 2010
made this strategic plan into an annual requirement. Pub. L. No. 111-
84, div. A, § 1108, 123 Stat. 2190, 2488 (Oct. 28, 2009), codified at
10 U.S.C. § 115b.
[25] GAO, DOD Civilian Personnel: Competency Gap Analysis and Other
Actions Needed to Enhance DOD's Strategic Workforce Plans, [hyperlink,
http://www.gao.gov/products/GAO-11-827T] (Washington, D.C.: July 14,
2011).
[26] GAO, DOD Financial Management: Improvement Needed in DOD
Components' Implementation of Audit Readiness Efforts, [hyperlink,
http://www.gao.gov/products/GAO-11-851] (Washington, D.C.: Sept. 13,
2011).
[27] [hyperlink, http://www.gao.gov/products/GAO-09-373].
[28] [hyperlink, http://www.gao.gov/products/GAO-11-851].
[29] A federated architecture consists of a family of coherent but
distinct member architectures in which subsidiary architectures
conform to an overarching corporate architectural view and rule set.
[30] GAO, DOD Business Transformation: Improved Management Oversight
of Business System Modernization Efforts Needed, [hyperlink,
http://www.gao.gov/products/GAO-11-53] (Washington, D.C.: Oct. 7,
2010).
[31] [hyperlink, http://www.gao.gov/products/GAO-10-461]; DOD Business
Systems Modernization: Navy Implementing a Number of Key Management
Controls on Enterprise Resource Planning System, but Improvements
Still Needed, [hyperlink, http://www.gao.gov/products/GAO-09-841]
(Washington, D.C.: Sept. 15, 2009); [hyperlink,
http://www.gao.gov/products/GAO-08-896]; [hyperlink,
http://www.gao.gov/products/GAO-08-866]; DOD Business Systems
Modernization: Key Marine Corps System Acquisition Needs to Be Better
Justified, Defined, and Managed, [hyperlink,
http://www.gao.gov/products/GAO-08-822] (Washington, D.C.: July 28,
2008); [hyperlink, http://www.gao.gov/products/GAO-07-860].
[32] [hyperlink, http://www.gao.gov/products/GAO-11-53]. The 10 ERPs
are as follows: Army--General Fund Enterprise Business System (GFEBS),
Global Combat Support System-Army (GCSS-Army), and Logistics
Modernization Program (LMP); Navy--Navy Enterprise Resource Planning
(Navy ERP) and Global Combat Support System-Marine Corps (GCSS-MC);
Air Force--Defense Enterprise Accounting and Management System (DEAMS)
and Expeditionary Combat Support System (ECSS); Defense--Service
Specific Integrated Personnel and Pay Systems and Defense Agencies
Initiative (DAI); and Defense Logistics Agency--Business System
Modernization (BSM). According to DOD, BSM was fully implemented in
July 2007.
[33] Office of Federal Financial Management, Core Financial System
Requirements (Washington, D.C.: January 2006) states that a Core
financial system must deliver workflow capabilities including
integrated workflow, workflow process definition and processing
exception notices.
[34] Office of Federal Financial Management, Core Financial System
Requirements, states that a Core financial system must provide an
integrated ad hoc query capability to support agency access to and
analysis of system-maintained financial data.
[35] Office of Federal Financial Management, Core Financial System
Requirements, states that a Core financial system financial
transaction can be originated using multiple external feeder
applications. These feeder systems and the Core financial system must
interface seamlessly so that data can move effectively between them.
The Core system must be able to process and validate the data
independent of origination. There must also be a process for handling
erroneous input and correction.
[36] Office of Federal Financial Management, Core Financial System
Requirements, states that a Core financial system financial
transaction must deliver an integrated ad hoc query capability to
support agency access to and analysis of system maintained financial
data.
[37] The Milestone Decision Authority is the senior DOD official who
has overall authority to approve entry of an acquisition program into
the next phase of the acquisition process and is accountable for cost,
schedule, and performance reporting, including congressional reporting.
[End of section]
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