Defense Management
More Transparency Needed over the Financial and Human Capital Operations of the Joint Improvised Explosive Device Defeat Organization
GAO-08-342, Mar 6, 2008
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Improvised explosive devices (IED) have been and continue to be a significant threat to U.S. forces. The Department of Defense (DOD) expanded efforts to defeat IEDs with the establishment of the Joint Improvised Explosive Device Defeat Organization (JIEDDO) in January 2006. GAO was asked to review JIEDDO's management and operations. For this second report in its series, GAO determined (1) the extent to which JIEDDO's management processes provide adequate assurances that its financial information is accurate and provides transparency over its operations and (2) the extent to which JIEDDO identifies, records, tracks, and reports numbers of all personnel, including contractors. GAO analyzed data for the first half of fiscal year 2007, which included 47 funding transactions totaling $1.34 billion for 24 initiatives to address these objectives.
JIEDDO's financial management processes do not provide adequate assurances that its financial information is accurate, and as a result, JIEDDO is unable to provide full transparency over the cost of its operations. While JIEDDO has improved its financial management processes, it has not yet reached a point where those processes contain an effective system of internal control. According to federal standards, internal control comprises the plans, methods, and procedures used to meet missions, goals, and objectives of an organization and help it to achieve desired results through effective stewardship of its resources. GAO identified four internal control weaknesses that affect JIEDDO's financial management processes. First, JIEDDO has not comprehensively documented its administrative policies and operating manuals, which affects the consistency of how its financial management personnel perform their duties. Second, JIEDDO does not have adequate funds authorization controls to ensure that transactions are properly authorized before funds are committed. In reviewing funding transactions totaling $795 million, 18 of 24 initiatives were not properly authorized in accordance with internal control standards. As a result, funds may be used without proper scrutiny and without a mechanism to detect, correct, or address this control failure. Third, JIEDDO does not have controls to ensure that transactions are properly categorized. For example, of the $1.34 billion in fiscal year 2007 commitments reviewed, JIEDDO inaccurately categorized at least 83 percent of these dollars under one category that should have been applied to others. This could distort information used in assessing trends and prioritizing funds. Fourth, JIEDDO does not have an adequate internal process to monitor and review the efficacy of its internal controls. In the absence of an adequate system of internal control, the agency may not achieve all of its objectives and its use of resources may not be consistent with DOD priorities. Furthermore, decision makers may be basing their decisions on inaccurate financial data and reports. At the end of this review, JIEDDO managers said that they had corrected these weaknesses; however, because these actions occurred after audit completion, GAO could not determine their effectiveness. JIEDDO does not fully identify, track, and report all government and contractor personnel as provided for in DOD Directive 1100.4. Identifying all government and contractor personnel is important to JIEDDO's management and oversight responsibilities and contributes to its ability to effectively plan for its future workforce needs. While JIEDDO has a system in place for routinely tracking and reporting numbers of personnel JIEDDO regards as staff, this system is limited because it does not track all government and contractor personnel performing work for JIEDDO. However, since its creation in February 2006, JIEDDO has relied heavily on contractor support to accomplish its mission, which is not fully reflected in JIEDDO's system. When the Senate Appropriations Committee directed that JIEDDO provide a comprehensive accounting of all of its personnel, including contractors, by May 2007, JIEDDO had to rely on an ad hoc process to develop the report, which resulted in several inaccuracies and inconsistencies.
Status Legend:
Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
- In Process
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To comply with federal internal control standards as well as improve the quality of JIEDDO's financial management and the reliability of resulting financial data and reports, the Secretary of Defense should direct the Director of JIEDDO to develop and document a comprehensive system of internal control for its financial management processes. Actions to develop and implement JIEDDO's system of internal control to address specific control weaknesses we identified should, at a minimum, include fully documenting all internal control processes and procedures related to its financial management through the development of management directives, administrative policies, standard operating procedures, or other documentation that describe how JIEDDO personnel should perform their duties.
Agency Affected: Department of Defense
Status: Open
Comments: DOD concurred with this recommendation, responding that as of 6/5/2008 it had completed its planned actions. Specifically, DOD stated JIEDDO had worked diligently to formalize and document its processes to ensure that internal controls are emplaced within JIEDDO. DOD asserted that during the timeframe of GAO?s audit, many of these processes were finalized, but due to reporting time constraints, GAO did not validate these processes. In GAO?s subsequent (ongoing) work at JIEDDO, our objectives include assessing the efficacy of actions JIEDDO has taken addressing our original findings and recommendations. Accordingly, we are leaving this recommendation ?open? pending results of our assignment, expected to be completed in October 2009.
Recommendation: To comply with federal internal control standards as well as improve the quality of JIEDDO's financial management and the reliability of resulting financial data and reports, the Secretary of Defense should direct the Director of JIEDDO to develop and document a comprehensive system of internal control for its financial management processes. Actions to develop and implement JIEDDO's system of internal control to address specific control weaknesses we identified should, at a minimum, include establishing effective controls to ensure that transactions are properly authorized before funding is executed, related documentation supporting transactions is accurately dated, and exceptions are properly approved and documented.
Agency Affected: Department of Defense
Status: Open
Comments: DOD concurred with this recommendation, responding that as of 6/5/2008 it had completed its planned action and that JIEDDO now only releases funding documents after proper authorization is received and documented in the form of a JIEDDO funding memorandum (for less than $25M) or Deputy Secretary of Defense approval (for in excess of $25M). JIEDDO acknowledged that in the past, there has been some confusion regarding the actual definition of the $25M. The new process requires that as soon as it is determined that an initiative will exceed the $25M threshold, SECDEF approval is obtained. In another effort to ensure adequate internal controls are included in its processes, JIEDDO developed mandatory minimal transaction documentation required to be completed and kept on file. In GAO?s subsequent (ongoing) work at JIEDDO, our objectives include assessing the efficacy of actions JIEDDO has taken addressing our original findings and recommendations. We have noted JIEDDO marked increased in its attention and efforts to improve JIEDDO?s resource management to address this recommendation. We are not however finished with our analysis and accordingly, we are leaving this recommendation ?open? pending our results, expected to be completed in October 2009.
Recommendation: To comply with federal internal control standards as well as improve the quality of JIEDDO's financial management and the reliability of resulting financial data and reports, the Secretary of Defense should direct the Director of JIEDDO to develop and document a comprehensive system of internal control for its financial management processes. Actions to develop and implement JIEDDO's system of internal control to address specific control weaknesses we identified should, at a minimum, include establishing effective controls to ensure that all transactions are properly classified by lines of operation and other expenditure categories used by JIEDDO, and to promptly and properly correct misclassifications when identified.
Agency Affected: Department of Defense
Status: Open
Comments: DOD concurred with this recommendation, responding that as of 6/8/2008 JIEDDO has undertaken actions to: (1) develop guidance for accounting and budget personnel to ensure that correct cost categories are used in the recording of accounting data, (2) fully staff the division responsible for financial management and (3) develop management directives, administrative policies, standard operating procedures, and other documentation that describe specific organizational responsibilities. In GAO?s subsequent (ongoing) work at JIEDDO, our objectives include assessing the efficacy of actions JIEDDO has taken addressing our original findings and recommendations. We have noted JIEDDO marked increased in its attention and efforts to improve JIEDDO?s resource management to address this recommendation. We are not however finished with our analysis and accordingly, we are leaving this recommendation ?open? pending our results, expected to be completed in October 2009.
Recommendation: To comply with federal internal control standards as well as improve the quality of JIEDDO's financial management and the reliability of resulting financial data and reports, the Secretary of Defense should direct the Director of JIEDDO to develop and document a comprehensive system of internal control for its financial management processes. Actions to develop and implement JIEDDO's system of internal control to address specific control weaknesses we identified should, at a minimum, include developing an internal process, to include involvement of its internal audit staff, to routinely monitor and review the efficacy of JIEDDO's system of internal control and promptly correct any weaknesses identified.
Agency Affected: Department of Defense
Status: Open
Comments: DOD concurred with this recommendation, responding that as of 6/5/2008 it had completed its planned actions. DOD stated that JIEDDO had developed a draft Five-Year Management Control Plan and will be provided to JIEDDO leadership for comment and modification. JIEDDO provided additional training and instructions all of its personnel. Key checklists were developed and are an integral piece of the Management Control Program. Management Control Administrators and Assessable Unit Managers were identified and targeted training was provided to ensure that checklists are not just completed, but that ?actual testing of key controls? were accomplished. In GAO?s subsequent (ongoing) work at JIEDDO, our objectives include assessing the efficacy of actions JIEDDO has taken addressing our original findings and recommendations. Accordingly, we are leaving this recommendation ?open? pending results of our assignment, expected to be completed in October 2009.
Recommendation: The Secretary of Defense should direct the Director of JIEDDO to report to Congress on the status of its efforts to implement its comprehensive system of internal control 1 year from the date of this report.
Agency Affected: Department of Defense
Status: Open
Comments: At the closure of GAO's assignment, OSD planned an alternative approach to reporting on JIEDDO's progress in implementing its internal control measures to Congress. OSD, stated that JIEDDO's Quarterly Reports to Congress are specifically focused on describing the IED threat and JIEDDO's efforts to counter that threat, and that by including JIEDDO?'s internal "administrative efforts" within the report is not in keeping with the intent of the report and serves to weaken the report?s focus. Instead, therefore, OSD Policy recommends the Deputy Secretary of Defense direct JIEDDO to provide Ranking and Minority leaders of the Armed Services and Appropriations Committee with a report within one year from the date of the GAO final report as to steps JIEDDO has taken to address and correct the weaknesses identified by GAO.
Recommendation: To improve JIEDDO personnel or manpower management and provide Congress with the information it needs to perform its oversight duties effectively, the Secretary of Defense should direct the Director of JIEDDO to establish and document a method or system to comprehensively identify, track, and report on a routine basis all government and contractor personnel.
Agency Affected: Department of Defense
Status: Open
Comments: DOD concurred with this recommendation, responding that as of 6/8/2008 JIEDDO has undertaken actions to: (1) comply with the provisions of Department of Defense Directive 1100.4, Guidance for Manpower Management, (2) refine the implementation of the provisions outlined in this Directive to include requirements determination, resource allocations, manpower authorizations, and manpower planning, (3) augment and revise positions to add an additional 18 military and 27 government civilian billets to provide enhanced government oversight and fiduciary control over the organization's resources, (4) identified additional positions needed to ensure performance of inherently governmental responsibilities by government staff, (5) develop and institute matrices to assess organizational functions, missions, goals and process vis-?-vis manpower resource allocation to the most needed requirements.