Need for Significant Improvements in Financial Management--Department of Defense

The Department of Defense (DOD) should take advantage of existing opportunities for increasing productivity and reducing costs in areas which include logistical support, major procurement, and manpower. There is a need for DOD to improve its financial management systems. DOD is seriously lacking in effective accounting systems including cost accounting systems, systems to account for property, administrative fund control systems, and payroll systems. In the absence of good accounting systems, managers cannot adequately monitor, control, and utilize DOD resources. DOD has failed to implement systems which are adequate to identify and recover costs for goods and services provided to foreign countries under the foreign military sales program. DOD relies almost solely on contractors for accounting controls over materials furnished to them. Loss of administrative control over funds has resulted in overobligations. Recently developed payroll systems are unreliable and inefficient and have to be backed up with extensive manual operations. DOD can significantly improve its financial management by conforming its accounting systems to GAO prescribed principles and standards for accounting. Approval of large service-wide general accounting systems has been delayed primarily because the systems did not comply with GAO requirements for property accountability and cost accounting.