DOD Business Systems Modernization:

Continued Investment in Key Accounting Systems Needs to be Justified

GAO-03-465: Published: Mar 28, 2003. Publicly Released: Mar 31, 2003.

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The Department of Defense's (DOD) long-standing financial management and business systems modernization problems result in a lack of information needed to make sound decisions, hinder the efficiency of operations, and leave the department vulnerable to fraud, waste, and abuse. Such problems led us in 1995 to put financial management and business systems modernization at DOD on our list of high risk areas in the federal government, a designation that continues today. GAO was asked to (1) provide information on the number and cost of DOD's current business systems and (2) determine if DOD is effectively managing and overseeing selected accounting system investments.

DOD estimated that it had 1,731 business systems for its day-to-day operations as of October 2002. As GAO previously reported, these systems have evolved over time into the overly complex, error prone, duplicative, stovepiped environment that exists today. To support the operation, maintenance, and modernization of its business systems, the department requested approximately $18 billion for fiscal year 2003. Funding is only part of the solution to improving DOD's current system environment. A key ingredient to success is effectively managing and overseeing these investments. DOD has invested approximately $316 million in four key Defense Finance and Accounting Service (DFAS) projects. However, DOD has not demonstrated that this substantial investment will markedly improve DOD financial management information needed for decision-making and financial reporting purposes. In fact, the DOD Comptroller terminated one project in December 2002, after an investment of over $126 million, citing poor program performance and increasing costs. Continued investment in the other three projects has not been justified because requisite analyses of the costs, benefits, and risks of each one do not reflect cost increases and/or schedule delays. DOD oversight of the four DFAS projects has not been effective. Collectively, DFAS, the DOD Comptroller, and the DOD Chief Information Officer share investment management responsibility for these four projects. However, these DOD oversight entities have not questioned the impact of the cost increases and schedule delays and allowed the projects to proceed absent the requisite analytical justification.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The fiscal year 2005 defense authorization act directed the Department of Defense to, among other things, establish an investment structure and review process and approve and certify system modernizations in excess of $1 million. In response to the act, DOD established four investment review boards (IRBs) that are tasked with the review and certification of business system modernizations. In addition, on June 2, 2005, DOD issued guidance that provides for these boards to review all business system investments at least annually, and certify defense business system modernizations costing over $1 million, as required by the act. With respect to the three systems noted in our recommendation, the Defense Standard Disbursing System (DSDS) was terminated, while the other two systems were reviewed by the IRBs and approved by the Defense Business Systems Management Committee in September 2005, in accordance with the act and the intent of our recommendation.

    Recommendation: The Secretary of Defense should direct the Under Secretary of Defense (Comptroller) to limit funding in the DFAS Corporate Database/Corporate Warehouse, the Defense Standard Disbursing System, and the Defense Departmental Reporting System until the DOD Comptroller, in collaboration with the Assistant Secretary of Defense (Command, Control, Communications & Intelligence), and the Director, Program Analysis and Evaluation, demonstrates on the basis of credible analysis and data that continued investment in these three projects will produce benefits that exceed costs.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Congress included provisions in the defense authorization act for fiscal year 2005 that required the Department of Defense to, among other things, establish an investment structure and review process and approve and certify system modernizations in excess of $1 million. In addition, the act required reviews of all business systems annually. In response to the act, DOD established four investment review boards (IRBs) that are tasked with the review and certification of business system modernizations. In addition, on June 2, 2005, DOD issued guidance that provides for these boards to review all business system investments, at least annually, and certify defense business system modernizations costing over $1 million, as required by the act. These actions meet the intent of our recommendation.

    Recommendation: The Secretary of Defense should, in light of the department's ongoing efforts to modernize its business systems, direct the Under Secretary of Defense (Comptroller) to evaluate all remaining DFAS information technology projects and ensure that each project is being implemented at acceptable costs, within reasonable time frames, and is contributing to tangible, observable improvements in mission performance

    Agency Affected: Department of Defense

 

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