Financial Management:

Strong Leadership Needed to Improve Army's Financial Accountability

AIMD-94-12: Published: Dec 22, 1993. Publicly Released: Dec 22, 1993.

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Pursuant to a legislative requirement, GAO reviewed the Army's overall financial accountability for its disbursements during fiscal year (FY) 1992, focusing on: (1) the reliability of the disbursements reported in the Army's budget execution system; (2) the adequacy of automated data processing controls that support the Army's financial accountability systems; and (3) progress made on Department of Defense (DOD) initiatives to improve Army financial management.

GAO found that: (1) the lack of sustained DOD leadership has impaired the Army's overall ability to strengthen its financial accountability; (2) the Army's budget execution system has not been reliable; (3) during FY 1992, the Army Materiel Command did not retain adequate records to support disbursements recorded in the Army budget execution system; (4) weak controls over data processing operations could not ensure that the Army's financial data were accurately processed and secured; and (5) DOD financial management initiatives have been impaired due to a lack of key DOD personnel and a comprehensive guidance plan.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Secretary of Defense laid out a blueprint for fundamentally reforming DOD's financial management in February 1995, including the organization structure, systems, and personnel areas. In November 1995, DOD issued a new policy clarifying organizational responsibilities for carrying out DOD's financial management responsibilities. In the financial management systems arena, DOD established a Defense Accounting System Program Management Office (PMO) to provide centralized management control and oversight for all Defense Finance and Accounting Service accounting systems. DOD is also working cooperatively with GAO to develop baseline information on qualifications of its financial management personnel. But many problems remain, and GAO has continuing concerns over the comprehensiveness and effectiveness of DOD's actions in these areas. GAO will follow up on each of these areas as part of its planned DOD-wide and consolidated government-wide financial statement audits.

    Recommendation: The Acting DOD Chief Financial Officer should develop and implement a comprehensive plan, with specific milestones, for comprehensively identifying and monitoring improvements in DOD and Army financial management, including personnel qualifications, organizational structures, and systems used to carry out Army financial management.

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer

  2. Status: Closed - Implemented

    Comments: Consistent with the recommendation, DOD officials report that the Department has now put in place contingency plans for its automated data processing centers. Also, in December 1999, a diesel generator was installed as a backup power supply for the Rock Island data processing center.

    Recommendation: The Assistant Secretary of Defense for Command, Control, Communication, and Intelligence should maintain current, regularly tested contingency plans for all automated data processing centers and install a backup generator for the Rock Island automated data processing center.

    Agency Affected: Department of Defense: Office of the Assistant Secretary for Command, Control, Communications, and Intelligence

  3. Status: Closed - Not Implemented

    Comments: GAO continues to believe that additional procedural guidance to the design centers requiring independent follow-up testing of emergency system software changes at the time the changes are made is needed to ensure effective implementation of DOD directives. In its July 21, 1994, response to the GAO report, however, DOD asserted that the scope and frequency of testing for system changes was adequate under DOD Directive 5000.2.

    Recommendation: The Assistant Secretary of Defense for Command, Control, Communication, and Intelligence should instruct all system design center directors to establish procedures to implement existing federal standards and regulations requiring follow-up testing of all emergency software changes.

    Agency Affected: Department of Defense: Office of the Assistant Secretary for Command, Control, Communications, and Intelligence

  4. Status: Closed - Not Implemented

    Comments: The DOD guidance that was the focus of this recommendation, DOD 5200.28, has been superseded by other DOD guidance that is intended to provide a comprehensive information assurance program. Recommended actions with respect to this broader guidance have been addressed in subsequent GAO and DOD Inspector General reports--GAO/AIMD-96-84 (Information Security: Computer Attacks at Department of Defense Pose Increasing Risks) and DODIG Report D-2000-058. Therefore, follow-up actions will be tracked through the recommendations in these later reports.

    Recommendation: The Assistant Secretary of Defense for Command, Control, Communication, and Intelligence should issue detailed procedures, or establish other controls, to implement existing security access policies, including specifying: (1) who is responsible for identifying individuals that should be authorized access to what systems; (2) how system resources are controlled; and (3) a standard system naming convention for all automated systems.

    Agency Affected: Department of Defense: Office of the Assistant Secretary for Command, Control, Communications, and Intelligence

  5. Status: Closed - Implemented

    Comments: DOD officials report that they have no plans to make changes to DOD 7220.9-M. However, in May 1998, in response to DOD IG audit recommendations, the Under Secretary of Defense Comptroller and the Under Secretary of Defense for Acquisition and Technology directed the Services to reduce the number of contract fund citations which, consistent with the intent of the recommendation, should reduce opportunities for problem disbursements and facilitate prevalidation efforts.

    Recommendation: The DOD Chief Financial Officer should monitor progress against milestones established for the implementation of proposed changes to DOD 7220.9-M to ensure that funding and paying offices are: (1) receiving the information necessary to correctly match progress payments with obligations; and (2) matching payments to obligations correctly.

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer

  6. Status: Closed - Implemented

    Comments: Consistent with the intent of this recommendation, DFAS and Army officials worked to consolidate and resolve systemic deficiencies. Beginning in July 1998, DFAS began to automate the contract payment and reporting process for the 5 Army major commands. By August 1999, most disbursement and collection transactions were being sent electronically to the DFAS-Army accounting stations.

    Recommendation: The DOD Chief Financial Officer should head a cooperative effort with the Defense Finance and Accounting Service (DFAS) and the Army to evaluate and resolve problems and systemic difficulties in the budget execution area, including the failure to follow certain policies and procedures that are resulting in: (1) numerous changes in the posting of disbursements to appropriations; and (2) delays in distributing and correctly posting disbursements made by offices other than the Army office responsible for controlling the funds.

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer

  7. Status: Closed - Implemented

    Comments: On November 15, 1995, the DOD Comptroller issued a department-wide policy, "Roles and Responsibilities of the DOD Components and the Defense Finance and Accounting Service Relative to Finance and Accounting Operations and Departmental Reports." This guidance should provide a vehicle to begin holding appropriate DFAS and military service officials accountable for meeting existing financial management requirements. However, DOD has not yet issued guidance to clearly delineate Army organizations' financial management responsiblities.

    Recommendation: The Acting DOD Chief Financial Officer should revise existing policies and procedures to more clearly delineate the roles of the various DOD and Army organizations with Army financial management responsibilities.

    Agency Affected: Department of Defense: Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer

 

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