Financial Management: Analysis of DOD's First Biennial Financial Management Improvement Plan

In July 2001, the Secretary of Defense directed that the department undertake an effort to transform its business operations and systems. In April 2002, DOD issued a contract for the development of a DOD-wide blueprint--an enterprise architecture, aimed at modernizing the departments business systems and operations. The DOD Comptroller approved the initial version of the business enterprise architecture (BEA) on May 8, 2003. The BEA, at a high level, describes the overall business operations of the department, including the interrelationship between the various business areas, and identifies the numerous systems supporting each business area. The BEA also identified seven domains and the specific responsibilities of each domain. The seven domains are acquisition/procurement; finance, accounting operations and financial management; human resource management; logistics; strategic planning and budgeting; installations and environment; and technical infrastructure. Additionally, the initial version of the BEA identified approximately 2,300 systems that relate to specific functional areas, such as accounting, acquisition, budgeting, logistics, and personnel. The inclusion of various functional areas within the BEA will result in the development of a more fully integrated business systems and operations. Furthermore, the sharing of information between DOD's systems (domains) will result in an improved flow of information among functional areas that should help the department achieve greater accountability and control over its vast resources. DOD's efforts are consistent with the intent of GAO's recommendation.

In July 2001, the Secretary of Defense directed that the department undertake an effort to transform its business operations and systems. In April 2002, DOD issued a contract for the development of a DOD-wide blueprint--an enterprise architecture, aimed at modernizing the department's business systems and operations. The DOD Comptroller approved the initial version of the business enterprise architecture (BEA) on May 8, 2003. In developing the BEA, DOD incorporated about 4,000 external requirements in its "To Be" architecture from 152 federal sources. The JFMIP requirements were used extensively in developing the "To Be" architecture. JFMIP requirements arise from various public laws, regulations, bulletins, circulars, federal accounting standards, and leading practices, and are applicable government-wide. Agencies must use these requirements, in addition to agency-unique mission requirements, in planning and implementing their financial management improvement projects. Furthermore, DOD's use of the JFMIP requirements should help facilitate the exchange of information among and between the department's business areas such as acquisition, accounting and finance, logistics, personnel, and etc. DOD's extensive reliance upon the JFMIP requirements in developing the BEA is consistent with the intent of GAO's recommendation.

The development of the enterprise architecture directed by the Secretary's July 2001 memorandum should help DOD develop the roadmap that is needed to clearly show how its planned initiatives will result in the target financial management environment. GAO will continue to monitor DOD's effort in this area as part of its DOD financial management systems work.

In a January 5, 2001 memorandum, the then Under Secretary of Defense (Comptroller) established the Financial and Feeder Systems Compliance Process (hereafter referred to as the process). Modeled after the approach used for DOD's successful Year 2000 program, the process consists of five phases--awareness, evaluation, renovation, validation, and compliance. Overall, the process details steps to provide oversight and specific actions related to building reliability in the data provided by the Department's feeder systems. The goal of the process is to ensure that the feeder systems are compliant with applicable federal financial management requirements and are capable of providing requisite financial management and accounting information. The Senior Financial Management Oversight Council is responsible for providing oversight and guidance on system compliance issues. The Council's membership includes senior representation from across the department such as the Under Secretary of Defense (Comptroller), Under Secretary of Defense (Acquisition, Technology and Logistics); Under Secretary of Defense (Personnel and Readiness); Assistant Secretary of Defense (Command, Control, Communications and Intelligence); Assistant Secretaries of the Military Departments (Financial Management and Comptroller); Assistant Secretary of the Army (Acquisition, Logistics and Technology); Assistant Secretary of the Navy (Research, Development and Acquisition); and the Assistant Secretary of the Air Force (Acquisition). The Council is established as the governing body over the process and shall (1) act as the final approval authority for all action plans developed during the evaluation phase; (2) review the status of the applicable systems efforts on at least a quarterly basis; (3) approve the criteria for exit from each of the five phases of the process; (4) verify that all established exit criteria for a particular phase has been fulfilled; and (5) establish and oversee a Systems Compliance Working Group. The Working Group is responsible for (1) reviewing all correction action plans prior to being submitted to the Council; (2) reviewing the quarterly system status briefings; and (3) recommending systems for exit from the various phases of the process.