Time to balance the books

Last week there was another news story about a $600 hammer and a $2,000 toilet seat—oft-cited illustrations of the Defense Department's financial mismanagement. But recent General Accounting Office reports show that overspending isn't DOD's biggest fiscal challenge.

GAO reported earlier this year that DOD's financial management systems don't comply with federal requirements and were not designed to collect data that meets accepted accounting principles. In its 2002 budget request, DOD earmarked $100 million to overhaul its financial management systems. That's still far short of the conservative $3.7 billion estimate DOD's deputy inspector general presented to a House subcommittee in early May.

DOD, however, isn't the only federal agency under fire for its accounting systems. Rep. Stephen Horn (R-Calif.) gave Fs for financial management to DOD, the Agriculture Department and the U.S. Agency for International Development.

Without working financial management systems, the government can't produce reliable balance sheets or accurately forecast how much money it really needs. The Bush administration plans to make annual audits a priority, according to Mitchell Daniels Jr., director of the Office of Management and Budget, perhaps to determine which agencies are using better business practices.

USAID.officials got the message. Criticized for scrapping the $100 million investment into its New Management System in 1999, they recently unveiled Phoenix. Unlike its predecessor, Phoenix is a commercial off-the-shelf product and uses the Momentum Financials software suite from American Management Systems Inc.

Since December, USAID has been using Phoenix at its headquarters and plans to enable its overseas bureaus to input data to the system.

As with any new system, we expect USAID will have some problems as more bureaus begin to use it. And the agency still has to create an electronic interface for the field data between Phoenix and the Mission Accounting and Controls System, which stores the data.

But Phoenix is a step in the right direction. We hope DOD officials are paying attention.

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