GAO, IG urge Defense to revamp finance apps

GAO, IG urge Defense to revamp finance apps

DOD is years from a favorable audit, IG Robert Lieberman says.

By Bill Murray

GCN Staff

The Defense Department must re-engineer its systems if it wants to generate sound financial data to manage its $1 trillion in assets, the General Accounting Office and the DOD inspector general recently concluded.

GAO has had DOD financial management on its list of high-risk areas vulnerable to abuse, fraud, mismanagement and waste since 1995, said Jeffrey C. Steinhoff, acting assistant comptroller general for the GAO's Accounting and Information Management Division.

During a hearing this month of the House Government Reform Subcommittee on Government Management, Information and Technology, Steinhoff issued the congressional audit agency's latest findings on DOD financial management.

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In Department of Defense: Progress in Financial Management Reform, GAO made five recommendations on how DOD could improve its financial management:

•'Improve accounting and reporting on billions of dollars worth of weapons systems.

•'Provide adequate security controls for financial data.

•'Determine retirement and health benefits costs for retirees and military employees.

•'Accurately report the net costs of DOD operations.

•'Provide accurate budget data.

'The sheer volume of DOD's on-hand inventories impedes the department's efforts to accumulate and report accurate inventory data,' Steinhoff said.

DOD is still a few years away from achieving favorable audit opinions on most major financial statements, testified Robert J. Lieberman, DOD's assistant IG for auditing. Changes in federal accounting standards have made DOD financial systems managers' jobs more difficult, he said.

Also, DOD systems modernization programs have faced severe competition for funding, particularly during the past two fiscal years, when officials made year 2000 readiness a top priority, Lieberman said.

DOD's chief financial officer defended the department's efforts. The Defense Finance and Accounting Service has made 'remarkable progress' since its 1991 formation, DOD comptroller and CFO William J. Lynn testified. As of March, DFAS operated 96 finance and accounting systems, after inheriting 324 systems nine years ago, he said.

By 2003, DFAS officials plan to run 31 systems, a 90 percent reduction, he said.

Rep. Steve Horn (R-Calif.), the subcommittee's chairman, said financial management deficiencies in the military are 'the single largest obstacle' to the federal government achieving an unqualified auditing opinion on its governmentwide financial statements.

Steinhoff praised DOD officials for making progress in equipment, plant and property accounting, improving reporting of disposal and environmental liabilities, and clarifying operations in DOD's Financial Management Improvement Plan.

Defense Logistics Agency officials are implementing a statistical sampling plan to better measure the dollar accuracy of their inventory, he said.

The Defense Joint Accounting System, a $700 million program DOD officials have selected as one of four next-generation accounting systems to replace scores of legacy systems, has been nixed by Air Force and Navy officials who are continuing to develop and modernize their own legacy systems, Lieberman said.

Lieberman also criticized the program's oversight, saying that Pentagon brass approved the system's deployment earlier this year, even though the software development effort had expanded from 16 months to six or more years, and the projected benefits had plummeted.

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