GAO: Pentagon should speed up business modernization

DOD Business Systems Modernization: Limited Progress in Development of Business Enterprise Architecture and Oversight of Information Technology Investments

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A report issued this week by the General Accounting Office offers a scathing review of the Defense Department's implementation of business management modernization programs and says officials have taken few steps to improve the financial management situation.

"Since our last review -- and after three years of effort and $203 million in obligations -- we have not seen any significant change in the content of DOD's architecture or in DOD's approach to investing billions of dollars annually in existing and new systems," the report states.

GAO auditors assessed a DOD report issued to Congress March 15. Defense officials are required to submit an annual report for the next three years outlining their progress in implementing a financial management architecture.

Last year DOD officials announced they had completed the architecture ahead of schedule and under budget, but they have apparently lagged behind in implementing it, the GAO report alleges.

"Few actions have been taken to address the recommendations we made in our September 2003 report, which were aimed at improving DOD's plans for developing the next version of the architecture and implementing the institutional means for selecting and controlling both planned and ongoing business systems investments," the report states.

The Business Management Enterprise Architecture, formerly the Financial Management Enterprise Architecture, is an ambitious project designed to consolidate and standardize all of DOD's financial reporting systems. It was completed last April, just one year after the contract was awarded.

The architecture is designed to help the department obtain a clean financial audit, something it has been unable to do so far. DOD has received a failing grade from GAO and the Office of Management and Budget every year that audits have been performed. In its most recent audit, released in February, GAO says DOD's financial reporting structure is one of the key barriers to having an accurate and reliable accounting of the federal government's money.

GAO auditors say the military is trying improve its financial systems, but congressional auditors believe progress is too slow.

"To DOD's credit, it has established, for example, a group under the Business Management Modernization Program steering committee to facilitate communications and coordination...for modernization program activities, including extending and evolving the architecture," the GAO report states.

DOD's Business Management Enterprise Architecture is designed to bring the department together under one financial management system. Achieving financial management success is one of Defense Secretary Donald Rumsfeld's top 10 priorities. According to the current schedule, DOD is slated to receive a clean audit in fiscal 2007, but both David Walker, GAO's comptroller general, and Dov Zakheim, DOD's former chief financial officer, expressed their doubts earlier this year that the deadline can be met.

GAO officials did not make any new recommendations in their report, because their existing recommendations -- going back as far as May 2001 -- still stand unfulfilled.

"It is imperative that DOD act swiftly to implement these recommendations," the report states. "If it does not, the prognosis for this program is bleak, which in turn puts the department's business transformation efforts in jeopardy."

Lawrence Lanzillotta, DOD's acting CFO, said the department's progress, although slower than GAO or DOD would like, has been significant during the past three years.

"DOD agrees with the assessment and concurs with the urgent need to undertake the largest ongoing transformation in the public sector," Lanzillotta wrote in his response. "However, GAO's draft report characterizes DOD's progress so far as 'limited.' Though progress over the past three years has been slower than either GAO or DOD would prefer, it has been significant, despite appearances to the contrary."

After reading Lanzillotta's response, GAO officials maintained their position that DOD's progress was too slow and limited.

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