Budget and Spending:

Maximizing DOD's Potential to Face New Fiscal Challenges and Strengthen Interagency Partnerships

GAO-10-359CG: Published: Jan 6, 2010. Publicly Released: Jan 6, 2010.

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This speech was given by the Acting Comptroller General before the National Defense University in Washington D.C. on January 6, 2010. This speech focuses on DOD and the challenges it faces given the national government's current long term unsustainable fiscal path and ongoing U.S. commitments in Iraq and Afghanistan. DOD can take steps to better position itself for the future and maximize the use of taxpayer dollars, particularly by improving its business operations. Additionally, this speech discusses how the Department can work more collaboratively with other national security agencies, such as State and Agency for International Development (AID), to build the strong partnerships needed to adapt to the changing complexities of the national security environment. DOD is facing a number of internal fiscal pressures as it tries to support ongoing operations, rebuild readiness, and prepare for the future. To succeed in this era of fiscal constraint, new ways of thinking, constructive change, and basic reforms are essential. Everything must be on the table and subject to scrutiny. This includes the stove-piped approaches to planning and budgeting that have typically led to a mismatch between programs and budgets. It is also time to rethink and act decisively to rectify inefficient ways of doing business that undermine support for the troops on the battlefield. DOD is second to none in warfighting capabilities; but it is a very different story when it comes to issues of economy, efficiency, and accountability on the Department's business side. By taking decisive action now, DOD can avoid a range of unintended consequences and less than optimal performance in the future. The federal budget's structural imbalance affects the entire national security community, not just DOD. As difficult decisions are made about national priorities, all U.S. national security agencies will need to strike an affordable balance between investments in current missions and investments in new capabilities to meet future challenges. Given the complexities of the security environment, they will also need to build stronger partnerships and improve their capability to collaborate on solutions to address interrelated conventional and emerging threats that transcend the scope and authority of any one agency.

The fiscal year 2009 deficit reached a record $1.4 trillion and the debt held by the public exceeded 50 percent of GDP, a level not seen since 1956. While the current fiscal situation has received considerable attention, the federal government faces even larger financing challenges that will persist long after the economy recovers and financial markets stabilize. Recent GAO simulations indicate that, absent major fiscal policy changes, federal debt held by the public will increase dramatically over the next several decades and could trend towards 200 percent of gross domestic product (GDP). GAO highlighted four areas for the Congress and the Administration: 1) ongoing operations will continue to require substantial amounts of resources; 2) extended military operations have taken a toll on readiness and rebuilding such a force will come with a big price tag; 3) personnel and health care costs are increasing; 4) cost growth in weapon systems programs remains a significant problem. DOD programs on GAO's High-Risk List relate to business operations, including systems and processes related to management of contracts, finances, the supply chain, and support infrastructure, in addition to weapon systems acquisition. Inefficiencies and other long-standing weaknesses in these areas lead to challenges in supporting the warfighter, billions of dollars being wasted annually, and missed opportunities to free up resources for higher priority needs. DOD components are developing detailed plans to support efforts to improve financial management in budgetary reporting and related operational processes and accountability for asset existence and completion. Based on what GAO has seen of the plan so far, GAO believes this prioritization is a reasonable approach for now. A consistent focus may increase the Department's ability to show incremental progress toward achieving auditability in the short term. In response to GAO's recommendations, the department has also put in place a process to improve standardization and comparability across components. The success of this process will depend on top management support, as well as high-quality planning and effective implementation at all levels. Opportunities for strengthening interagency collaboration include developing and implementing overarching, integrated strategies, formalizing coordination mechanisms to overcome organizational differences, developing a well-trained workforce, and sharing and integrating national security information across agencies. DOD has a real opportunity to set a new course for the future, take concrete steps to correct long-standing problems, and achieve meaningful results that can better position the Department to respond to changing economic conditions and future threats.

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