"The Defense Department maintains more than 3,700 business systems at a cost of about $16 billion per year. But the massive effort to modernize and integrate these systems lacks a clear strategy and direct leadership, according to the Government Accountability Office.
In written testimony submitted Aug. 3 to the Senate Homeland Security and Governmental Affairs Committee's Federal Financial Management, Government Information, and International Security Subcommittee, GAO Comptroller General David Walker criticized the long-standing problems in DOD's management of its business transformation.
'DOD's pervasive financial and business management 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,' Walker said.
To illustrate the point, GAO identified three weaknesses in DOD's financial management and business operations. The department has been unjustly pursuing debt collection for battle-injured soldiers; it cannot account for inventory shipped to repair contractors; and it is unable to properly track costs for the ongoing war on terror, according to the testimony.
'Neither DOD nor Congress know how much the war was costing and how appropriated funds were spent, or have historical data useful in considering future funding needs,' Walker said.
Weaknesses in financial management have several ill effects. DOD is less able to control costs, justify budgets, gauge performance and discourage fraud, he said. In a 2004 report, GAO said the department misreported costs for mobilizing Army reservists by 30 percent, or $2.1 billion.
DOD has taken steps to organize departmentwide business transformation, establishing the Defense Business Systems Management Committee in February 2005 and establishing the Business Transformation Agency last October. To address financial management, the department released its Financial Improvement and Audit Readiness Plan in December 2005 and has developed its Standard Financial Information Structure to categorize data. "