Defense business modernization draws fire

The Defense Department has an embedded culture of developing duplicative, non-integrated financial and business systems and the department continues to do so, wasting billions of tax dollars, according to testimony today before a House subcommittee.

The testimony was drawn from a May General Accounting Office report on DOD's Business Management Modernization Program.

Problems continue to surface as DOD develops and implements its business enterprise architecture.

For fiscal 2004, DOD requested about $19 billion to operate, maintain and modernize its 2,274 business systems. After about three years of work and more than $203 million in reported obligations, there has not been a significant change in the content of the architecture or in the department's approach to investing billions of dollars annually in existing and new systems, GAO found.

"DOD continues to confront pervasive, decades-old financial management and business problems related to its systems, processes (including internal controls) and people. These problems preclude the department from producing accurate, reliable, and timely information to make sound decisions and to accurately report on its trillions of dollars of assets and liabilities," according to the GAO report.

In the report, "Long-standing Problems Continue to Impede Financial and Business Management Transformation,' Gregory Kutz, GAO's director of financial management and assurance, said as the department moves forward with its Business Management Modernization Program, it must ensure that transformational business systems modernization projects'like the Army's Logistics Modernization Program and the Defense Logistics Agency's Business Systems Modernization project'are consistent with the efforts.

Kutz, who reviewed both business systems, concluded that the systems face significant problems of not being integrated into the department's business enterprise architecture.

Both LMP and BSM are flawed systems with inadequate asset visibility, Kutz added.

Some underlying problems with the programs and the direction of BMMP, according to GAO, include:

  • Lack of sustained top-level leadership and management accountability for correcting problems

  • Deeply embedded cultural resistance to change

  • Lack of results-oriented goals with performance measures and monitoring

  • Inadequate incentives and accountability mechanisms relating to business transformation efforts.

"DOD's substantial, long-standing business management systems and related problems adversely affect the economy, efficiency, and effectiveness of its operations, and have resulted in a lack of adequate accountability across all major business areas," the report said. "These problems have left the department vulnerable to billions of dollars of fraud, waste and abuse annually, at a time of increasing fiscal constraint."

GAO is recommending that Congress shift control and accountability for business system investments from the military services to seven business areas the department calls "domains."

The seven areas that make up the financial framework are: acquisition, accounting and financial management, environmental liabilities, logistics, personnel and readiness, program and budget, and technology infrastructure and real property. A domain owner will manage each business area.

DOD disagrees with the concept.

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