DOD Financial Management: Challenges in the Implementation of Business Systems Could Impact Audit Readiness Efforts.GAO-12-177T October 27, 2011
As one of the largest and most complex organizations in the world, the Department of Defense (DOD (1) (Dial On Demand) A feature that allows a device to automatically dial a telephone number. For example, an ISDN router with dial on demand will automatically dial up the ISP when it senses IP traffic destined for the Internet. ) faces many challenges in resolving its long-standing financial and related business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets and system problems. DOD is in the process of implementing modern multifunction enterprise resource planning See ERP.
(application, business) Enterprise Resource Planning - (ERP) Any software system designed to support and automate the business processes of medium and large businesses. (ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. ) systems to replace many of its outdated legacy systems. The ERPs are intended to perform business-related tasks such as general ledger General Ledger
A company's accounting records. This formal ledger contains all the financial accounts and statements of a business.
The ledger uses two columns: one records debits, the other has offsetting credits. accounting and supply chain management. Modernizing DOD's business systems is a critical part of transforming the department's business operations, addressing high-risk areas, and providing more-accurate and reliable financial information to Congress on DOD's operations. The Panel requested that GAO provide its perspective on DOD's ERP implementation efforts and the impact implementation problems could have on DOD's efforts to improve financial management and be audit ready by fiscal year 2017. This statement is based on GAO's prior work, reports issued by the Department of Defense Inspector General (DOD IG), and GAO's ongoing oversight of selected DOD ERP efforts. Over the years, GAO has made numerous recommendations to improve the department's financial management operations.
DOD has invested billions of dollars and will invest billions more to develop and implement 10 ERPs that it has estimated will replace over 500 legacy systems that reportedly cost hundreds of millions of dollars to operate annually. DOD considers implementation of the ERPs as critical not only for addressing weaknesses in financial management, but also for resolving weaknesses in other high-risk areas such as business systems modernization and supply chain management. The ERPs are also important for DOD's goal of departmentwide audit readiness by fiscal year 2017. Furthermore, in light of the Secretary of Defense's recent decision that the Statement of Budgetary Resources is to be audit ready by fiscal year 2014, it is critical that the department have such systems in place to support its auditability goals. To date, however, DOD's ERP implementation has been impaired by delays, cost increases, failures in delivering the necessary functionality, and a lack of compliance with required standards. Delays in implementation have extended the use of existing duplicative, stovepiped systems, and the need to fund them. More specifically, (1) GAO has reported that, based upon the data provided by DOD, 6 of the 10 ERPs DOD had identified as critical to transforming its business operations experienced schedule delays ranging from 2 to 12 years, and five had incurred cost increases totaling an estimated $6.9 billion. (2) GAO's review of 6 ERPs found that none of the programs had developed a fully integrated master schedule, a best practice and tool in the management of business-system development that is crucial to estimating the overall schedule and cost of a program. (3) DOD IG has reported that the Army's Logistics Modernization Program, which is intended to provide financial management capabilities for the Army Working Capital Fund, was not compliant with the U.S. Government Standard General Ledger, which supports the consistent recording of financial information and the preparation of standard reports required by the Office of Management and Budget The Office of Management and Budget (OMB), formerly the Bureau of the Budget, is an agency of the federal government that evaluates, formulates, and coordinates management procedures and program objectives within and among departments and agencies of the Executive Branch. and the Department of the Treasury. Further, GAO's preliminary results from an ongoing audit of two ERPs--the Army's General Fund Enterprise Business System and the Air Force's Defense Enterprise Accounting and Management System--found that the systems did not provide Defense Finance and Accounting Service The Defense Finance and Accounting Service (DFAS), an agency of the United States Department of Defense, provides finance and accounting services for the military and other members of defense.
In FY 2004, DFAS:
Categories: National Defense, Accounting, Defense audits, Financial management, Financial management systems, Financial records, Information management, Internal audits, Internal controls, Legacy systems, Logistics, Noncompliance, Schedule slippages, Standards, Strategic planning, Systems conversions, Systems management