Clean audit in 2007 is DOD's goal

Each day the Defense Department seems to uncover another financial or business system to add to its already massive modernization program.

But even as the scope of the systems consolidation grows, officials are sticking to the goal of a clean financial audit by 2007.

DOD has faced stinging criticism from Congress and federal overseers as the number of systems in the project has ballooned from 2,274 to more than 4,700. Many systems are duplicative and unable to communicate.

The next clean financial audit the department receives will be its first. DOD plans to hire about 300 auditors within the next three years to deal with its complex financial statements.

Earlier this year, the department accepted financial improvement plans from the military services to comply with the DOD comptroller's accounting policies.

'These are changes to address near-term weaknesses,' said Elizabeth McGrath, deputy director of DOD's Business Modernization and Systems Integration Office, the program office for the Business Management and Modernization Program.

McGrath warned that funding will be cut for programs incompatible with the department's business enterprise architecture.

DOD needs to do a better job of managing and overseeing the systems it approves for development, the Government Accountability Office said in a recent report. The department also must build a central systems repository for the modernization and even define what a business system is, said Gregory Kutz, director of financial management and assurance for GAO, formerly the General Accounting Office. He testified this month before the House Government Reform Subcommittee on Efficiency and Financial Management.

BMMP, established by Defense secretary Donald Rumsfeld in July 2001, is having no more success 'getting everybody to play in an integrated manner' than when it first began, Kutz said.

Meanwhile, DOD has spent billions of dollars to operate, maintain and modernize its accounting, acquisition, logistics and personnel systems.

The BMMP office in February released Version 2.0 of its business enterprise architecture, but GAO found little improvement over the first.

Version 2.2 of the business architecture will be ready by the end of July, according to lead contractor IBM Corp. It will be the first version to include DOD's Enterprise Business Process Model for meeting a variety of financial requirements.

McGrath said Version 2.2 deals with many of GAO's concerns. 'They were looking for some of the financially relevant rules and regulations, and we didn't have all of them in the architecture,' she said.

For fiscal 2004, DOD requested about $19 billion to operate, maintain and modernize its business systems. In 2003, the department got $18 billion for the effort.

After three years of work and more than $203 million spent, there has been no significant change in the content of the architecture or in the department's approach to spending on existing and new systems, GAO found.

The Defense Department disagreed.

Larry J. Lanzillotta, who served as acting DOD comptroller until he left July 16 for the private sector, told committee members the department is making progress in correcting weaknesses and controlling its business system investments.

Lanzillotta said DOD has:
  • Established a progressively more comprehensive inventory of business systems
  • Designed an incremental strategy to achieve transformation goals

  • Organized into seven business domains with designated leaders for acquisition, accounting and financial management, environmental liabilities, logistics, personnel and readiness, program and budget, and technology infrastructure and real property

  • Established a portfolio management process for domain owners.

But legislators and GAO said BMMP has had more failures than accomplishments.
'Progress has been slow, investments ineffective,' Kutz said.

'Billions continue to be invested in business systems with inadequate oversight and accountability,' said Rep. Christopher Shays (R-Conn.).

No consequences

Subcommittee chairman Rep. Todd Platts (R-Pa.) said service officials know 'there are no consequences' when they continue to develop unintegrated systems.

Kutz offered lawmakers an example of two large military systems currently under development that are not integrated with the business enterprise architecture: the Army's Logistics Modernization Program and the Defense Logistics Agency's Business Systems Modernization project. He said he reviewed both systems and found they will face significant integration problems.

GAO also criticized BMMP for poorly sustained top-level accountability, deeply embedded cultural resistance to change, lack of performance measures and monitors, and inadequate incentives and accountability mechanisms.

But McGrath said there will be consequences by January, once the business enterprise architecture is mature enough to evaluate financial transactions in systems such as LOGMOD and BSM.

If any major military transformational system fails to comply with the architecture's business processes, the department will have its funding cut, McGrath said.

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