Air Force's progress raises DoD's confidence toward audit readiness

Air Force officials say the service is making up the most ground of any of the military services as part of the push to finally get the Defense Department to successfully close its financial books.

But government auditors say this entire Pentagon effort is at risk because of shortcomings in the services' technology systems.

Jamie Morin, the assistant secretary of the Air Force for financial management and comptroller, said he is more optimistic than ever before because the service put money and people behind the problem.

Morin said during a hearing Tuesday before the Senate Homeland Security and Governmental Affairs Committee that there is an increased likelihood that the Air Force will meet the 2017 deadline to have its financial statements fully auditable and the September deadline of being able to assert audit readiness for its schedule of budgetary activity.

This is a major change since last October when Morin told Senate Armed Services Committee members that the Air Force would struggle to meet the 2014 deadline, and 2017 wasn't going to be any easier.

But over the last six months, the Air Force has accomplished specific tasks one- by-one to meet the congressionally mandated deadlines.

Each of the services and DoD on the whole remain at different points in the process to achieve audit readiness. DoD is the only federal department that can't successfully account for its spending to meet third-party auditors requirements. The Marines Corps in fiscal 2012 received an unqualified opinion on its schedule of budgetary activity (SBA) — the first DoD service ever to receive that result.

Robert Hale, the out-going DoD comptroller, said he expects the Marines Corps to earn the same result for 2013.

While each of the services is at different points, the one common major challenge the Army, Navy, Air Force and the Office of the Secretary of Defense all face is updating and integrating their technology software, specifically the enterprise resources planning (ERP) systems, to meet the audit readiness requirements.

Take the Air Force as one example. It's still using a system from 1968.

Morin said the Defense Enterprise Accounting Management System (DEAMS), is under development to replace that 40-year-old system.

He said the service received a positive assessment from the Air Force Operational Test and Evaluation Center on DEAMS as currently deployed at more than six bases.

The Air Force plans to complete DEAMS deployment to all Air Mobility Command in the next couple of weeks and then more bases by Oct. 1. Morin said the Air Force also is on track to complete deployment Air Force-wide before the full financial statement audits begin.

The Army, on the other hand, is in better shape.

Robert Speer, the Army's acting assistant secretary for financial management and comptroller, said the general fund enterprise business system (GFEBs) is used by 53,000 service members and civilians at 200 locations worldwide.

Sen. Tom Coburn (R-Okla.), the ranking member of the committee, said in no uncertain terms if the ERPs don't work, this effort is in real trouble. Coburn has asked both the IG and GAO to continue looking at DoD's ERP efforts.

-Jason Miller, FederalNewsRadio.com
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Today's GAO Publications

DOD Financial Management:
Reported Status of Department of Defense's Enterprise Resource Planning Systems.
GAO-12-565R, March 30.
http://www.gao.gov/products/GAO-12-565R

The Federal Government's Long-Term Fiscal Outlook: Spring 2012 Update.
GAO-12-521SP, April 5.

http://www.gao.gov/products/GAO-12-521SP

The Government's Long-Term Fiscal Challenge: Implications for Federal Agencies by Gene L. Dodaro, Comptroller General of the United States before the 9th Annual Department of Homeland Security Office of the Chief Financial Officer Symposium in Washington, DC.
GAO-12-617CG, March 14.

http://www.gao.gov/products/GAO-12-617CG

Board approves next phase of defense accounting system

The Defense Department received a boost in meeting its goal to have clean financial books by 2017. The Defense Acquisition Board approved the next phase of development for the Defense Enterprise Accounting and Management System or DEAMS.


The Board's approval means the Air Force, the U.S. Transportation Command and the Defense Finance and Accounting Services can develop an acquisition strategy and begin deploying the system across the Air Force in 2012.

Congress mandated DoD have balanced books by 2017. Defense Secretary Leon Panetta set a goal of 2014 for a partial audit around its Statement of Budgetary Resources, an accounting of money in and money out that could withstand the scrutiny of professional auditors.

-Jason Miller, FederalNewsRadio.com
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DoD ERP implementation woes include feeder systems

Worries about the Defense Department's implementation of enterprise resource planning systems increasingly encompasses data quality from feeder systems.
The Army has hired an independent auditor to examine its financial management ERP, the General Fund Enterprise Business System, for whether "we are using it in a way to include the feeder systems that's auditable," said Robert Hale, the DoD comptroller, during a July 27 Senate hearing.

Hale said plans exist to do a similar check with the Navy "in the context of a major defense acquisition program" and later with the Air Force ERP, the Defense Enterprise Accounting and Management System.

Jamie Morin, the Air Force comptroller, told the committee that DEAMS detects bad data from feeder systems more readily than legacy systems. DEAMS "told us thousands of transactions were not meeting standards, which instantly brought the level of management attention to fix the problem," he said.

Meanwhile, when parts deemed worth saving from the to-be-shuttered Business Transformation Agency are moved into the office of the Defense Department deputy chief management officer, the modernized financial system the BTA has been using will go on hiatus for a while, DCMO Elizabeth McGrath said.

The financial system, the Defense Agencies Initiative, would be an anomaly among secretary of defense offices were the DCMO to start utilizing it immediately, McGrath said before the subcommittee.

But the plan is not to shutter DAI, McGrath said. "We're moving to DAI. We're not doing it today, because I'm a component of the overall OSD budget," she added.

-David Perera, FierceGovernmentIT.com
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Air Force in danger of missing 2017 deadline for clean audit

The Air Force's chances of being able to produce a clean audit opinion by 2017--the current congressional mandate for the entire Defense Department--could be running into trouble thanks to implementation of a modernized financial system going wrong.

The Air Force officially began (kicked off Milestone A) in April 2005 implementation of a financial management system known as the Defense Enterprise Accounting and Management Systems, hiring Accenture (NYSE: ACN) in 2006 on a 5-year, $79 million contract to implement the first of three planned DEAMS increments.

In May 2010, the report says, DEAMS crossed a threshold since it was unable to achieve a full deployment decision within 5 years after funds were first obligated, a statutory obligation.

As a result, the Air Force has folded elements from the planned second increment into the first increment and canceled the third increment, the report says.

"All offices recognize DEAMS must receive the authority to field its current capability beyond Scott AFB or risk non-compliance with Congressional mandate for CFO Act by 2017," the report adds.

Since undergoing a "critical program change" as a result of its failure to attain full deployment, DEAMS has been designated as a trial program for realignment under the Business Capability Lifecycle, the report states. BCL is a methodology developed by the Business Transformation Agency that emphasizes prototyping and is favored by Ashton Carter, the undersecretary of defense for acquisition, technology and logistics.

-David Perera, FierceGovernmentIT.com
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DoD will spend at least $6.9 billion more on ERPs

The future financial systems health of the Defense Department depends on enterprise resource planning projects that are mostly late and over budget, according to the Government Accountability Office.

In testimony presented Sept. 29 before a Senate Homeland Security and Government Affairs subcommittee, the GAO said the Defense Department has identified 10 ERPs essential to transforming its business operations. Of those ten, so far one--the Defense Logistics Agency's Business System Modernization--has been implemented despite $5.8 billion already spent, according to the GAO.

That spending figure will likely increase by at least another $6.9 billion, according to figures in the GAO's prepared testimony.

During the hearing, Defense officials emphasized the importance of ERPs in making the notoriously messy DoD books auditable at fiscal year's end. The 10 ERPs being implemented should replace more than 500 legacy systems.

As for the department's stated goal of achieving a clean audit by 2017--a goal that previously was by 2007, but which was changed after the Pentagon realized it would be impossible--Robert Hale, the DoD comptroller and chief financial officer, said it's doable. That is, doable for budget information and information pertaining to mission critical assets.

"If we try for everything, I'm afraid we'll get nothing once again. I believe firmly we've got to pick some priorities and go after it. The only way, in my mind, to set those priorities is to focus on what we use to manage in the Department of Defense," Hale said.

Under current audit guidelines, a clear financial picture in those areas would be insufficient to get a clean audit, Hale acknowledged. The rules might need to be changed, he added, since the hurdle to getting a clean audit would be historical asset cost data.

-David Perera, FierceGovernmentIT.com
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For more:
- go to the hearing webpage, complete with prepared statements, or go directly to the webcast
- download the GAO's prepared testimony (.pdf)
- read the fiscal 2010 Defense authorization bill

Accenture, AF activate new financial system

Accenture Ltd. and Air Force officials have tested and launched a new enterprisewide accounting and fiscal management system for the Air Force.

The new system is the first step in replacing several older financial systems and is intended to help the Air Force manage its operations more efficiently and at a lower cost, Accenture said in a news release.

The first phase of Spiral 1 of the Defense Enterprise Accounting and Management System (DEAMS) replaces the commitment accounting functions currently provided by the Air Force’s Automated Business Services System.

The company expects to finish the second phase of the project, which will complete the Spiral 1 implementation, later this year. Future releases will improve processes for cost accounting, purchase requests, accounts payable and disbursement, financial obligations, collections and customer billing.

DEAMS 1 is based on Oracle e-business commercial software. The 554th Electronic System Group at Wright-Patterson Air Force Base near Dayton, Ohio, is responsible for program development. Scott Air Force Base, near Belleville, Ill., is tasked with the implementation because of its role as headquarters for the Air Mobility Command, U.S. Transportation Command and Air Force Communications Agency.

The new financial management system is an attempt to bring positive lessons learned from private-sector business transformation to the Defense Department, Accenture said.

-William Walsh, Washington Technology.com

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