Financial Management:

DOD Inventory of Financial Management Systems Is Incomplete

AIMD-97-29: Published: Jan 31, 1997. Publicly Released: Jan 31, 1997.

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Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) financial management systems, focusing on the accuracy and completeness of DOD's inventory of financial management systems.

GAO found that: (1) DOD does not have a comprehensive inventory of the systems it relies on to record, accumulate, classify, and report financial information; (2) the number of systems included in DOD's inventory was limited because the regulations and guidance from the Defense Finance and Accounting Service (DFAS) did not properly define financial management systems; (3) Office of Management and Budget Circular A-127, Joint Financial Management Improvement Program system requirements, and the recently enacted Federal Financial Management Improvement Act of 1996 define financial management systems to include the financial systems and the financial portions of mixed systems necessary to support financial management; (4) a mixed system is defined as an information system that supports both financial and nonfinancial functions of the federal government or its components; (5) DOD considers mixed systems that are generally not within the Chief Financial Officer (Comptroller) organization, such as acquisition, logistics, and personnel systems, to be nonfinancial and, therefore, does not include them in its inventory; and (6) although GAO did not identify all of the systems that should have been included, several of the excluded systems account for billions of dollars of assets and clearly meet the required definition of financial management systems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD has revised its Financial Management Regulation definitions of financial management systems to include primary accounting systems, administrative accounting systems, and feeder systems. DOD's feeder systems are similar to the OMB definition of a mixed system, the financial portion of which OMB specifies should be included as an agency financial management system. Specifically, OMB defines a mixed system as any information system that supports both financial and nonfinancial functions of the federal government or components thereof. Consistent with this definition, DOD's definition of feeder systems includes logistics systems, inventory systems and personnel systems. However, DOD's revised Financial Management Regulation definition of feeder systems is inconsistent with OMB's definition of a mixed system in that it states that the feeder systems do not generate financial information and are not within the scope of Section 4 of the Integrity Act.

    Recommendation: As part of DOD's long-term systems improvement strategy, the Deputy Secretary of Defense should direct that the Under Secretary of Defense (Comptroller) revise the DOD Financial Management Regulation, DOD 7000.14-R, volume 1, to include all mixed systems in its definition of financial management systems.

    Agency Affected: Department of Defense: Office of the Deputy Secretary

  2. Status: Closed - Implemented

    Comments: DOD has historically omitted feeder systems from its inventory of financial management systems. In its first Biennial Financial Management Improvement Plan, DOD reported an inventory of financial management systems that included, for the first time, 83 feeder, or mixed, systems. While not a complete listing, these are those systems DOD deems critical.

    Recommendation: As part of DOD's long-term systems improvement strategy, the Senior Financial Management Oversight Council should oversee the development of an inventory of all financial management systems, using the revised definition.

    Agency Affected: Department of Defense: Office of the Deputy Secretary

  3. Status: Closed - Implemented

    Comments: DOD identified 192 systems in its first Biennial Financial Management Improvement Plan. In the forward to this plan, DOD states that it is also intended to satisfy the (1) reporting requirements of the Chief Financial Officers (CFO) Financial Management Five Year Plan - CFO Act of 1990, (2) Remediation Plan - Federal Financial Management Improvement Act of 1996, and (3) Statement of Assurance, Section IV - Federal Managers' Financial Integrity Act of 1982.

    Recommendation: As part of DOD's long-term systems improvement strategy, systems identified should be incorporated in the DOD Chief Financial Officer Financial Management 5-Year Plan, DFAS Chief Financial Officer Financial Management 5-Year Plan, and Federal Managers' Financial Integrity Act Section 4 reporting.

    Agency Affected: Department of Defense: Office of the Deputy Secretary

 

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