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United States General Accounting Office:

GAO:

Testimony:

Subcommittee on Financial Management, the Budget, and International 
Security, Committee on Governmental Affairs, U. S. Senate:

For Release on Delivery:

Expected at 10:30 a.m. EDT:

Thursday, July 8, 2004:

Department of Defense:

Financial and Business Management Transformation Hindered by Long-
standing Problems:

Statement of Gregory D. Kutz:

Director, Financial Management and Assurance:

GAO-04-941T:

GAO Highlights:

Highlights of GAO-04-941T, a testimony before the Subcommittee on 
Financial Management, the Budget, and International Security, Committee 
on Governmental Affairs, United States Senate 

Why GAO Did This Study:

GAO has previously reported on the Department of Defense’s (DOD) 
financial management and business related problems and key elements 
necessary for successful reform. Although the underlying conditions 
remain fundamentally unchanged, DOD continues to be confronted with 
pervasive problems related to its systems, processes (including 
internal controls), and people (human capital). These problems impede 
DOD’s ability to operate its numerous business operations in an 
efficient and effective manner. The Subcommittee asked GAO to provide 
its views on (1) the impact that long-standing financial management 
and related business process weaknesses continue to have on DOD, (2) 
the underlying causes of DOD business transformation challenges, and 
(3) DOD’s business transformation efforts. 

In addition, GAO reiterates the key elements to successful reform: (1) 
an integrated business management transformation strategy, (2) 
sustained leadership and resource control, (3) clear lines of 
responsibility and accountability, (4) results-oriented performance 
measures, (5) appropriate incentives and consequences, (6) an 
enterprise architecture to guide reform efforts, and (7) effective 
monitoring and oversight. 

What GAO Found:

DOD’s senior civilian and military leaders are committed to 
transforming the department and improving its business operations and 
have taken positive steps to begin this effort. However, overhauling 
the financial management and related business operations of one of the 
largest and most complex organizations in the world represents a 
daunting challenge. Six DOD program areas are on GAO’s “high risk” 
list, and the department shares responsibility for three other 
governmentwide high-risk areas. DOD’s substantial financial and 
business management weaknesses adversely affect not only its ability 
to produce auditable financial information, but also to provide 
accurate and timely information for management and Congress to use in 
making informed decisions. Further, the lack of adequate 
accountability across all of DOD’s major business areas results in 
billions of dollars in annual wasted resources in a time of increasing 
fiscal constraint. 

Impact of Weaknesses in Human Capital Management, Internal Control, 
and Systems: 

Business area affected: Military pay;
Problem identified: Ninety-four percent of mobilized Army National 
Guard soldiers GAO investigated had pay problems. These problems 
distracted soldiers from their missions, imposed financial hardships on 
their families, and had a negative impact on retention.

Business area affected: Logistics;
Problem identified: Asset visibility and other logistical support 
problems hampered mission readiness during Operation Iraqi Freedom, 
resulting in a discrepancy of $1.2 billion between the materiel 
shipped and the acknowledgement by the activity that the materiel was 
received.

Business area affected: Travel;Problem identified: Seventy-two percent 
of the over 68,000 premium class airline tickets DOD purchased for 
fiscal years 2001 and 2002 were not properly authorized and 73 percent 
were not properly justified.

Business area affected: Property;
Problem identified: New JSLIST chem-bio suits sold on the Internet for 
$3 while at the same time DOD was buying them for over $200. Further, 
thousands of defective suits declared excess by DOD were improperly 
issued to local law enforcement agencies—which are likely to be first 
responders in case of a terrorist attack.

Business area affected: Contract payments;
Problem identified: Some DOD contractors were abusing the federal tax 
system, with little or no consequence. As of September 2003, DOD had 
collected only $687,000 of unpaid federal taxes through a mandated 
levy program. GAO estimated that at least $100 million could be 
collected annually through effective implementation of the levy on DOD 
contract payments.

Business area affected: Systems;
Problem identified: The department invested $179 million on two failed 
system efforts that were intended to resolve its long-standing 
disbursement problems.

Source: GAO.

[End of table]

Four underlying causes impede reform: (1) lack of sustained leadership,
(2) cultural resistance to change, (3) lack of meaningful metrics and 
ongoing monitoring, and (4) inadequate incentives and accountability 
mechanisms. To address these issues, GAO offers two suggestions for 
legislative action. First, a senior management position should be 
established to manage and oversee DOD’s financial and business 
management transformation efforts. Second, in a recent report GAO 
proposes that Congress shift the control and accountability for 
business systems investments from the DOD components to the recently 
created functional areas known as domains. DOD disagrees and stated 
that its portfolio management process would provide the needed control 
over business system investments. In GAO’s view, providing the funding 
to the domains would be one way of overcoming DOD’s parochial 
operations and help preclude spending billions on nonintegrated 
systems. 

www.gao.gov/cgi-bin/getrpt?GAO-04-941T 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Gregory Kutz, (202) 512-
9505 (kutzg@gao.gov) 

[End of section]

Mr. Chairman and Members of the Subcommittees:

It is a pleasure to be here to discuss key aspects of business 
transformation efforts at the Department of Defense (DOD). At the 
outset, we would like to thank the Subcommittee for having this hearing 
and acknowledge the important role hearings such as this one serve. The 
involvement of this Subcommittee is critical to ultimately assuring 
public confidence in DOD as a steward that is accountable for its 
finances. DOD continues to confront pervasive decades-old financial 
management and business problems related to its systems, processes 
(including internal controls), and people (human capital). Of the 25 
areas on GAO's governmentwide "high risk" list, 6 are DOD program 
areas, and the department shares responsibility for 3 other high-risk 
areas that are governmentwide in scope.[Footnote 1] These problems 
preclude the department from producing accurate, reliable, and timely 
information to make sound decisions and to accurately report on its 
trillions of dollars of assets and liabilities. Further, DOD's 
financial management deficiencies, taken together, continue to 
represent the single largest obstacle to achieving an unqualified 
opinion on the U.S. government's consolidated financial statements.

Today, we will provide our perspectives on (1) the impact that long-
standing financial management and related business process weaknesses 
continue to have on DOD, (2) the underlying causes that have impeded 
the success of prior reform efforts, and (3) DOD's business systems 
transformation efforts. In addition, we will offer two suggestions for 
legislative consideration, which we believe improve the chances that 
DOD business systems transformation efforts will succeed. Our statement 
is based on previous GAO reports and testimonies.

Summary:

DOD's substantial long-standing business management systems and related 
problems adversely affect the economy, efficiency, and effectiveness of 
its operations, and have resulted in a lack of adequate accountability 
across all major business areas. These problems have left the 
department vulnerable to billions of dollars of fraud, waste, and abuse 
annually, at a time of increasing fiscal constraint. Secretary Rumsfeld 
has estimated that successful improvements to DOD's business operations 
could save the department 5 percent of its budget a year, which equates 
to over $20 billion a year in savings. The following examples indicate 
the magnitude and severity of the problems.

* Ninety-four percent of mobilized Army National Guard soldiers from 
the six units we reviewed had pay problems. According to the 
individuals we interviewed, these problems distracted from the soldiers 
missions, imposed financial hardships on their families, and had a 
negative impact on retention.[Footnote 2] For example, the commander of 
an Army National Guard Special Forces unit stated in January 28, 2004, 
testimony that 25 soldiers left his unit as a direct result of the pay 
problems they experienced and that another 15 asked for transfers to 
the inactive National Guard.

* DOD sold new Joint Service Logistics Integrated Suit Technology--
chem-bio suits--on the Internet for $3 while at the same time DOD was 
buying them for over $200.[Footnote 3] Ineffective supply chain 
management resulted in thousands of defective suits being declared 
excess by DOD and then improperly issued to local law enforcement 
agencies--which are likely to be first responders in case of a 
terrorist attack.[Footnote 4]

* Asset visibility and other logistical support problems hampered 
mission readiness during Operation Iraqi Freedom, including 
cannibalization of vehicles for parts and duplication of 
requisitions.[Footnote 5]

Further evidence of DOD's problems is the long-standing inability of 
any military service or major defense component to pass the test of an 
independent financial audit because of pervasive weaknesses in 
financial management systems, operations, and controls.

Over the years, the department has initiated several broad-based reform 
efforts intended to fundamentally reform its business operations. 
However, these efforts have not resulted in the fundamental reform 
necessary to resolve the department's long-standing management 
challenges because the department has not addressed the four underlying 
causes that have impeded meaningful reform:

* lack of sustained leadership and management accountability;

* deeply embedded cultural resistance to change, including military 
service parochialism and stovepiped operations;

* lack of results-oriented goals and performance measures and 
monitoring; and:

* inadequate incentives and accountability mechanisms for business 
transformation efforts.

These four issues, to a large degree, have impeded DOD's efforts to 
modernize its business systems--a critical factor in its transformation 
efforts. DOD's stovepiped, duplicative, and nonintegrated systems 
environment contributes to its operational problems and costs the 
taxpayers billions of dollars each year. For fiscal year 2004, DOD 
requested approximately $19 billion to operate, maintain, and modernize 
its reported 2,274 business systems. The existing systems environment 
evolved over time as DOD components--each receiving their own funding-
-developed narrowly focused parochial solutions to their business 
problems. Unfortunately, however, these system solutions have not been 
implemented on time, within budget, and delivered the promised 
capability. Two systems discussed in our recent report[Footnote 6]--the 
Defense Logistics Agency's Business Systems Modernization (BSM) effort 
and the Army's Logistics Modernization Program (LMP)--are no exception.

Successful reform of DOD's fundamentally flawed financial and business 
management operations must simultaneously focus on its systems, 
processes, and people. While DOD has made some encouraging progress in 
addressing specific challenges, it is still in the very early stages of 
a departmentwide reform that will take many years to accomplish. 
Secretary Rumsfeld has made business transformation a priority. For 
example, through its Business Management Modernization Program (BMMP), 
DOD is continuing its efforts to develop and implement a business 
enterprise architecture (BEA) and establish effective management 
oversight and control over its business systems modernization 
investments. However, after about 3 years of effort and over $203 
million in reported obligations, we have not seen significant change in 
the content of DOD's architecture or in its approach to investing 
billions of dollars annually in existing and new systems. We have made 
numerous recommendations aimed at improving DOD's plans for developing 
the next version of the architecture and implementing controls for 
selecting and managing business systems investments.[Footnote 7] To 
date, DOD has not addressed 22 of our 24 recommendations.

The seriousness of DOD's business management weaknesses underscores the 
importance of no longer condoning "status quo" business operations at 
DOD. To improve the likelihood that the department's current business 
transformation efforts will be successful, we have previously 
suggested[Footnote 8] that a chief management official[Footnote 9] 
position be created. The individual would be responsible for overseeing 
key areas such as strategic planning, performance and financial 
management, and business systems modernization, while also facilitating 
the overall business transformation effort within the department.

Further, in a recent report[Footnote 10] we also suggest that to 
improve management oversight, accountability, and control of the 
department's business system funding, Congress may wish to consider 
providing the funds to operate, maintain, and modernize DOD's business 
systems to the functional areas, known as domains, rather than the 
military services and the defense agencies. Currently, each military 
service and defense agency receives its own funding and is largely 
autonomous in deciding how to spend these funds, thereby hindering the 
development of broad-based, integrated corporate system solutions to 
common DOD-wide problems. Transforming DOD's business operations and 
making them more efficient would free up resources that could be used 
to support the department's core mission, enhance readiness, and 
improve the quality of life for our troops and their families.

Background:

Because DOD is one of the largest and most complex organizations in the 
world, overhauling its business operations represents a huge management 
challenge. In fiscal year 2003, DOD reported that its operations 
involved over $1 trillion in assets, nearly $1.6 trillion in 
liabilities, approximately 3.3 million military and civilian personnel, 
and disbursements of over $416 billion. For fiscal year 2004, the 
department was appropriated more than $425 billion, which included 
approximately $65 billion for contingency operations. Execution of DOD 
operations spans a wide range of defense organizations, including the 
military services and their respective major commands and functional 
activities, numerous large defense agencies and field activities, and 
various combatant and joint operational commands that are responsible 
for military operations for specific geographic regions or theaters of 
operation. To execute these military operations, the department 
performs an assortment of interrelated and interdependent business 
processes, including logistics management, procurement, healthcare 
management, and financial management.

Transformation of DOD's business systems and operations is critical to 
the department providing Congress and DOD management with accurate and 
timely information for use in decision making. One of the key elements 
we have reported[Footnote 11] as necessary to successfully execute the 
transformation is establishing and implementing an enterprise 
architecture. In this regard, the department has undertaken a daunting 
challenge to modernize its existing business systems environment 
through the development and implementation of a business enterprise 
architecture (BEA)--a modernization blueprint. This effort is an 
essential part of the Secretary of Defense's broad initiative to 
"transform the way the department works and what it works on."

Pervasive Financial and Business Management Problems Affect DOD's 
Efficiency and Effectiveness:

For several years, we have reported that DOD faces a range of financial 
management and related business process challenges that are complex, 
long-standing, pervasive, and deeply rooted in virtually all business 
operations throughout the department. As the Comptroller General 
testified in March 2004 and as discussed in our latest financial audit 
report,[Footnote 12] DOD's financial management deficiencies, taken 
together, continue to represent the single largest obstacle to 
achieving an unqualified opinion on the U.S. government's consolidated 
financial statements. To date, none of the military services has passed 
the test of an independent financial audit because of pervasive 
weaknesses in internal control and processes and fundamentally flawed 
business systems.

In identifying improved financial performance as one of its five 
governmentwide initiatives, the President's Management Agenda 
recognized that obtaining a clean (unqualified) financial audit opinion 
is a basic prescription for any well-managed organization. At the same 
time, it recognized that without sound internal control and accurate 
and timely financial and performance information, it is not possible to 
accomplish the President's agenda and secure the best performance and 
highest measure of accountability for the American people. The Joint 
Financial Management Improvement Program (JFMIP)[Footnote 13] 
principals have defined certain measures, in addition to receiving an 
unqualified financial statement audit opinion, for achieving financial 
management success. These additional measures include (1) being able 
to routinely provide timely, accurate, and useful financial and 
performance information; (2) having no material internal control 
weaknesses or material noncompliance with laws and regulations; and 
(3) meeting the requirements of the Federal Financial Management 
Improvement Act of 1996 (FFMIA).[Footnote 14] Unfortunately, DOD does 
not meet any of these conditions. For example, for fiscal year 2003, 
the DOD Inspector General (DOD IG) issued a disclaimer of opinion on 
DOD's financial statements, citing 11 material weaknesses in internal 
control and noncompliance with FFMIA requirements.

Pervasive weaknesses in DOD's financial management and related business 
processes and systems have (1) resulted in a lack of reliable 
information needed to make sound decisions and report on the status of 
DOD activities, including accountability of assets, through financial 
and other reports to Congress and DOD decision makers; (2) hindered its 
operational efficiency; (3) adversely affected mission performance; 
and (4) left the department vulnerable to fraud, waste, and abuse, as 
the following examples illustrate.

* Of the 481 mobilized Army National Guard soldiers from six GAO case 
study Special Forces and Military Police units,[Footnote 15] 450 had at 
least one pay problem associated with their mobilization. According to 
the individuals we interviewed, DOD's inability to provide timely and 
accurate payments to these soldiers, many of whom risked their lives in 
recent Iraq or Afghanistan missions, distracted them from their 
missions, imposed financial hardships on the soldiers and their 
families, and has had a negative impact on retention.[Footnote 16] More 
specifically, in January 28, 2004, testimony, the commander of a 
special forces unit stated that 25 soldiers left the unit as a direct 
result of the pay problems they experienced and that another 15 asked 
for transfers to the inactive National Guard. He also stated that 
because it would take an estimated 2 years and $250,000 to train each 
replacement, these losses have had a significant negative impact on the 
unit's mission capability--one of only six such units in the nation.

* DOD incurred substantial logistical support problems as a result of 
weak distribution and accountability processes and controls over 
supplies and equipment shipments in support of Operation Iraqi Freedom 
activities, similar to those encountered during the prior Gulf War. 
These weaknesses resulted in (1) supply shortages, (2) backlogs of 
materials delivered in theater but not delivered to the requesting 
activity, (3) a discrepancy of $1.2 billion between the amount of 
materiel shipped and that acknowledged by the activity as received, (4) 
cannibalization of vehicles, and (5) duplicate supply requisitions.
[Footnote 17]

* Our analysis of data on more than 50,000 maintenance work orders 
opened during the deployments of six battle groups indicated that about 
29,000 orders (58 percent) could not be completed because the needed 
repair parts were not available on board ship. This condition was a 
result of inaccurate ship configuration records and incomplete, 
outdated, or erroneous historical parts demand data. Such problems not 
only have a detrimental impact on mission readiness, they may also 
increase operational costs due to delays in repairing equipment and 
holding unneeded spare parts inventory.[Footnote 18]

* Inadequate asset visibility and accountability resulted in DOD 
selling new Joint Service Lightweight Integrated Suit Technology--the 
current chemical and biological protective garment used by our military 
forces--on the Internet for $3 each (coat and trousers) while at the 
same time buying them for over $200 each.[Footnote 19] DOD has 
acknowledged that these garments should have been restricted to DOD 
use only and therefore should not have been available to the public.

* DOD sold excess biological laboratory equipment, including a 
biological safety cabinet, a bacteriological incubator, a centrifuge, 
and other items that could be used to produce biological agents. Using 
a fictitious company and fictitious individual identities, we were able 
to purchase a large number of new and usable equipment items and 
protective gear over the Internet from DOD. Although the production of 
biological warfare agents requires a high degree of expertise, the 
ease with which these items were obtained through public sales 
increases the risk that terrorists could obtain and use them to 
produce biological agents that could be used against the United States.
[Footnote 20]

* Some DOD contractors have been abusing the federal tax system with 
little or no consequence, and DOD is not collecting as much in unpaid 
taxes as it could. Under the Debt Collection Improvement Act of 1996, 
DOD is responsible--working with the Treasury Department--for 
offsetting payments made to contractors to collect funds owed, such as 
unpaid federal taxes. However, we found that DOD had collected only 
$687,000 of unpaid taxes as of September 2003. We estimated that at 
least $100 million could be collected annually from DOD contractors 
through effective implementation of levy and debt collection programs. 
We also found numerous instances of abusive or potentially criminal 
activity[Footnote 21] related to the federal tax system during our 
audit and investigation of 47 DOD contractor case studies. The 34 case 
studies involving businesses with employees had primarily unpaid 
payroll taxes, some dating to the early 1990s and some for as many as 
62 tax periods.[Footnote 22] The other 13 case studies involved 
individuals who had unpaid income taxes dating as far back as the 
1980s. Several of these contractors provided parts or services 
supporting weapons and other sensitive military programs.[Footnote 23]

* Based on statistical sampling, we estimated that 72 percent of the 
over 68,000 premium class airline tickets DOD purchased for fiscal 
years 2001 and 2002 were not properly authorized and that 73 percent 
were not properly justified. During fiscal years 2001 and 2002, DOD 
spent almost $124 million on airline tickets that included at least one 
leg in premium class--usually business class. Because each premium 
class ticket costs the government up to thousands of dollars more than 
a coach class ticket, unauthorized premium class travel resulted in 
millions of dollars of unnecessary costs being incurred annually.
[Footnote 24]

* Control breakdowns resulted in DOD paying for airline tickets that 
were not used and not processed for refund--amounting to about 58,000 
tickets totaling more $21 million for fiscal years 2001 and 2002. DOD 
was not aware of this problem before our audit and did not maintain any 
data on unused tickets. Based on limited data provided by the airlines, 
it is possible that the unused value of the fully and partially unused 
tickets DOD purchased from fiscal years 1997 through 2003 with DOD's 
centrally billed account could be at least $115 million.[Footnote 25]

* We found that DOD sometimes paid twice for the same airline ticket--
first to the Bank of America for the monthly credit and bill, and 
second to the traveler, who was reimbursed for the same ticket. Based 
on our mining of limited data, the potential magnitude of the improper 
payments was 27,000 transactions for over $8 million. For example, DOD 
paid a Navy GS-15 civilian employee $10,000 for 13 airline tickets he 
had not purchased.[Footnote 26]

* We found[Footnote 27] that 38 of 105 travel cardholders we reviewed 
who had their accounts charged-off due to nonpayment still had active 
secret or top-secret clearances as of June 2002. Some of the Army 
personnel holding security clearances who have had difficulty paying 
their travel card bills may present security risks to the Army. Army 
regulations provide that an individual's finances are one of the key 
factors to be considered in determining whether an individual should 
continue to be entrusted with a secret or top-secret clearance. 
However, we found that Army security officials were unaware of these 
financial issues and consequently could not consider their potential 
effect on whether these individuals should continue to have security 
clearances.

* Our review of fiscal year 2002 data revealed that about $1 of every 
$4 in contract payment transactions in DOD's MOCAS system was for 
adjustments to previously recorded payments--$49 billion of adjustments 
out of $198 billion in disbursement, collection, and adjustment 
transactions. According to DOD, the cost of researching and making 
adjustments to accounting records was about $34 million in fiscal year 
2002, primarily to pay hundreds of DOD and contractor staff.[Footnote 
28]

* Tens of millions of dollars are not being collected each year by 
military treatment facilities from third-party insurers because key 
information required to effectively bill and collect from third-party 
insurers is often not properly collected, recorded, or used by the 
military treatment facilities.[Footnote 29]

* DOD cannot provide reasonable assurance to the Congress that its IT 
budget request includes all funding for the department's business 
systems. We have reported[Footnote 30] that DOD's IT budget submission 
to Congress for fiscal year 2004 contained material inconsistencies, 
inaccuracies, or omissions that limited its reliability. We identified 
discrepancies totaling about $1.6 billion between two primary parts of 
the submission--the IT budget summary report and the detailed capital 
investments reports on each IT initiative. These problems were largely 
attributable to insufficient management attention and limitations in 
departmental policies and procedures, such as guidance in DOD's 
Financial Management Regulation, and to shortcomings in systems that 
support budget-related activities.

These examples clearly demonstrate not only the severity of DOD's 
current problems, but also the importance of business systems 
modernization as a critical element in the department's transformation 
efforts to improve the economy, efficiency, and effectiveness of its 
operations, and to provide for accountability to Congress and American 
taxpayers.

Underlying Causes of Financial and Related Business Process 
Transformation Challenges:

Since May 1997,[Footnote 31] we have highlighted in various reports and 
testimonies what we believe are the underlying causes of the 
department's inability to resolve its long-standing financial 
management and related business management weaknesses and fundamentally 
reform its business operations. We found that one or more of these 
causes were contributing factors to the financial management and 
related business process weaknesses previously discussed. Over the 
years, the department has initiated several broad-based reform efforts 
intended to fundamentally reform its business operations and improve 
the reliability of information used in the decision-making process. 
Unfortunately, these initiatives have generally proven to be less 
successful than anticipated because DOD has not addressed the 
following four underlying causes:

* lack of sustained top-level leadership and management accountability 
for correcting problems;

* deeply embedded cultural resistance to change, including military 
service parochialism and stovepiped operations;

* lack of results-oriented goals and performance measures and 
monitoring; and:

* inadequate incentives and accountability mechanisms relating to 
business transformation efforts.

If not properly addressed, these root causes, which I will now 
highlight, will likely result in the failure of current DOD 
transformation efforts and continue to hinder the department's ability 
to produce accurate, reliable, and timely information to make sound 
decisions and to accurately report on its billions of dollars of 
assets, such as inventory.

Lack of Sustained Leadership and Adequate Accountability:

Historically, DOD has not routinely assigned accountability for 
financial management performance to specific organizations or 
individuals who have sufficient authority to accomplish desired goals. 
For example, under the Chief Financial Officers Act of 1990,[Footnote 
32] it is the responsibility of the agency Chief Financial Officer 
(CFO) to establish the mission and vision for the agency's future 
financial management and to direct, manage, and provide oversight of 
financial management operations. However, at DOD, the Comptroller--who 
is by statute the department's CFO--has direct responsibility for only 
an estimated 20 percent of the data relied on to carry out the 
department's financial management operations. The remaining 80 percent 
comes from DOD's other business areas such as acquisition and 
personnel, which are not under the control and authority of the DOD 
Comptroller.

Further, DOD's past experience has suggested that top management has 
not had a proactive, consistent, and continuing role in integrating 
daily operations for achieving business transformation performance 
goals. It is imperative that major improvement initiatives have the 
direct, active support and involvement of the Secretary and Deputy 
Secretary of Defense to ensure that daily activities throughout the 
department remain focused on achieving shared, agencywide outcomes and 
success. While DOD leadership has demonstrated its commitment to 
reforming the department's business operations, the magnitude and 
nature of day-to-day demands placed on these leaders, given the 
current world events associated with fighting the war on terrorism, 
clearly affect the level of oversight, commitment, and involvement 
they can devote to the transformation efforts. Given the importance of 
DOD's business transformation efforts, it is imperative that it 
receives the sustained leadership needed to improve the economy, 
efficiency, and effectiveness of DOD's business operations. Based on 
our surveys of best practices of world-class organizations,[Footnote 
33] strong executive CFO and Chief Information Officer (CIO) leadership 
and centralized control over systems investments are essential to 
(1) making financial management an entitywide priority, (2) providing 
meaningful information to decision makers, (3) building a team of 
people that delivers results, and (4) effectively leveraging technology 
to achieve stated goals and objectives.

Cultural Resistance and Parochialism:

Cultural resistance to change, military service parochialism, and 
stovepiped operations have all contributed significantly to the failure 
of previous attempts to implement broad-based management reforms at 
DOD. The department has acknowledged that it confronts decades-old 
problems deeply grounded in the bureaucratic history and operating 
practices of a complex, multifaceted organization and that many of 
these practices were developed piecemeal and evolved to accommodate 
different organizations, each with its own policies and procedures. 
Recent audits reveal that DOD has made only small inroads in addressing 
these challenges. For example, as discussed in our May 2004 report,
[Footnote 34] DOD does not have the processes and controls in place to 
provide reasonable assurance that it is in compliance with the fiscal 
year 2003 defense authorization act,[Footnote 35] which requires the 
DOD Comptroller to review all system improvements with obligations 
exceeding $1 million. As a result, DOD was not able to satisfy our 
request for information on all obligations in excess of $1 million for 
system modernizations since passage of the act. Based upon a 
comparison of limited information provided by the military services 
and defense agencies for fiscal years 2003[Footnote 36] and 2004, as 
of December 2003, we identified a total of $863 million in obligations 
that exceeded $1 million for system improvements that were not 
submitted to the DOD Comptroller for required review.

Additionally, as discussed in our recent report,[Footnote 37] DOD 
continued to use a stovepiped approach to develop and fund its business 
system investments. As shown in table 1, DOD requested approximately 
$18.8 billion for fiscal year 2004 to operate, maintain, and modernize 
its reported 2,274 nonintegrated, duplicative, stovepiped business 
systems. The table also shows how business system funding is spread 
across various DOD components.

Table 1: DOD Fiscal Year 2004 Information Technology Budget Request for 
Business Systems by DOD Component:

(Dollars in millions):

Component: Army; 
Total: $3,652.

Component: Navy; 
Total: $3,778.

Component: Air Force; 
Total: $3,737.

Component: DISA[A]; 
Total: $3,938.

Component: TRICARE[B]; 
Total: $980.

Component: DLA[C]; 
Total: $774.

Component: DFAS[D]; 
Total: $502.

Other DOD components[E]; 
Total: $1,440.

Total: $18,801.

Source: GAO analysis based on DOD's fiscal year 2004 IT budget request.

[A] The Defense Information Systems Agency provides DOD and other 
organizations with a wide range of information services, such as data 
processing, telecommunications services, and database management.

[B] TRICARE is the health care system for DOD's active duty personnel, 
their dependents, and retirees.

[C] DLA is DOD's logistics manager for all consumable and some repair 
items; its primary business function is providing supply support to 
sustain military operations and readiness.

[D] Defense Finance and Accounting Services is the centralized 
accounting agency for DOD.

[E] Other DOD components include entities such as the Office of the 
Secretary of Defense and the Defense Contract Management Agency.

[End of table]

The existing systems environment evolved over time as DOD components--
each receives its own system funding and follows decentralized 
acquisition and investment practices--developed narrowly focused 
parochial solutions to their business problems. DOD's ability to 
address its current "business-as-usual" approach to business system 
investments is further hampered by its lack of:

* a complete inventory of business systems--a condition we first 
highlighted in 1998. In fact, the DOD Comptroller testified in March 
2004[Footnote 38] that the size of DOD's actual systems inventory could 
be twice the size currently reported;

* a standard definition of what constitutes a business system;

* a well-defined BEA; and:

* an effective approach for the control and accountability over 
business system modernization investments.

Until DOD develops and implements an effective strategy for overcoming 
resistance, parochialism, and stovepiped operations, its 
transformation efforts will not be successful. Further, there can be 
little confidence that it will not continue to spend billions of 
dollars on stovepiped, duplicative, and nonintegrated systems that do 
not optimize mission performance and support the warfighter.

Lack of Results-Oriented Goals and Performance Measures:

At a programmatic level, the lack of clear, linked goals and 
performance measures handicapped DOD's past reform efforts. As a 
result, DOD managers lacked straightforward road maps showing how their 
work contributed to attaining the department's strategic goals, and 
they risked operating autonomously rather than collectively. As of 
March 2004, DOD formulated departmentwide performance goals and 
measures and continued to refine and align them with the outcomes 
described in its strategic plan--the September 2001 Quadrennial 
Defense Review (QDR). The QDR outlined a new risk management 
framework, consisting of four dimensions of risk--force management, 
operational, future challenges, and institutional--to use in 
considering trade-offs among defense objectives and resource 
constraints. According to DOD's Fiscal Year 2003 Annual Report to the 
President and the Congress, these risk areas are to form the basis for 
DOD's annual performance goals. They will be used to track performance 
results and will be linked to resources. As of March 2004, DOD was 
still in the process of implementing this approach on a departmentwide 
basis.

DOD currently has plans to institutionalize performance management by 
aligning management activities with the President's Management Agenda. 
As part of this effort, DOD linked its fiscal year 2004 budget 
resources with metrics for broad program areas, e.g., air combat, 
airlift, and basic research in the Office of Management and Budget's 
(OMB) Program Assessment Rating Tool.[Footnote 39] We have not reviewed 
DOD's efforts to link resources to metrics; however, some of our 
recent work notes the lack of clearly defined performance goals and 
measures in the management of such areas as defense inventory and 
military pay.[Footnote 40] Further, without modern integrated systems 
and streamlined business processes, the accuracy and reliability of 
DOD's performance data will be questionable.

One program that has yet to establish measurable, results-oriented 
goals is the BMMP.[Footnote 41] The BMMP is the department's business 
transformation initiative encompassing defense policies, processes, 
people, and systems that guide, perform, or support all aspects of 
business management, including development and implementation of the 
BEA. A key element of any major program is its ability to establish 
clearly defined goals and performance measures to monitor and report 
its progress to management. Since DOD has yet to develop performance 
measures for the BMMP, it is difficult to evaluate and track, on an 
ongoing basis, specific program progress, outcomes, and results, such 
as explicitly defining performance measures to evaluate the 
architecture's quality, content, and utility of subsequent major 
updates. Given that DOD has reported obligations of over $203 million 
since architecture development efforts began 3 years ago, this is a 
serious performance management weakness.

DOD recognizes that it needs to develop detailed plans and establish 
performance metrics to measure and track program progress to determine 
what it planned to accomplish by a certain point in time, what it 
actually accomplished at that point in time, and what has been spent 
thus far. In its March 15, 2004, progress report on the implementation 
of the BEA, DOD reported that it plans to establish an initial approved 
program metrics baseline to evaluate the cost, schedule, and 
performance of the BMMP and that, beginning with the fourth quarter of 
fiscal year 2004, it plans to begin formal tracking and reporting of 
specific program goals, objectives, and measures. Without explicitly 
defined program baselines, detailed plans, and performance measures, it 
is difficult to validate or justify the $122 million requested for 
fiscal year 2005 and the $494 million estimated to be needed for fiscal 
years 2006 through 2009.

Lack of Incentives for Change:

The final underlying cause of the department's long-standing inability 
to carry out needed fundamental reform has been the lack of incentives 
for making more than incremental change to existing "business-as-usual" 
operations, systems, and organizational structures. Traditionally, DOD 
has focused on justifying its need for more funding rather than on the 
outcomes its programs have produced. DOD has historically measured its 
performance by resource components such as the amount of money spent, 
people employed, or number of tasks completed.

The lack of incentive to change is evident in the business systems 
modernization area. Despite DOD's acknowledgement that many of its 
systems are error prone, duplicative, and stovepiped, DOD continues to 
allow its component organizations to make their own investments 
independently of one another and implement different system solutions 
to solve the same business problems. These stovepiped decision-making 
processes have contributed to the department's current complex, error-
prone environment. For example, our March 2003 report[Footnote 42] 
noted that DOD had not effectively managed and overseen its planned 
investment of over $1 billion in four Defense Finance and Accounting 
Service (DFAS) system modernization efforts. One project's estimated 
cost had increased by as much as $274 million, while the schedule 
slipped by almost 4 years. For each of these projects, DOD oversight 
entities--DFAS, the DOD Comptroller, and the DOD CIO--could not provide 
documentation that indicated they had questioned the impact of the cost 
increases and schedule delays, and allowed the projects to proceed in 
the absence of the requisite analytical justification. Such analyses 
provide the requisite justification for decision makers to use in 
determining whether to invest additional resources in anticipation of 
receiving commensurate benefits and mission value. Two of the four 
projects--the Defense Procurement Payment System and the Defense 
Standard Disbursing System--were terminated in December 2002 and 
December 2003, respectively, after an investment of approximately $179 
million that did not improve the department's business operations.

GAO and the DOD IG have identified numerous business system 
modernization efforts that are not economically justified on the basis 
of cost, benefits, and risk; take years longer than planned; and fall 
short of delivering planned or needed capabilities. Despite this track 
record, DOD continues to invest billions of dollars in business systems 
modernization, while at the same time it lacks the effective management 
and oversight needed to achieve results. Without appropriate incentives 
to improve their project management, ongoing oversight, and adequate 
accountability mechanisms, DOD components will continue to develop 
duplicative and nonintegrated systems that are inconsistent with the 
Secretary's vision for reform.

Keys to Successful Reform:

Successful reform of DOD's fundamentally flawed financial and business 
management operations must simultaneously focus on its systems, 
processes, and people. While DOD has made some encouraging progress in 
addressing specific challenges, it is still in the very early stages of 
a departmentwide reform that will take many years to accomplish. At 
this time, it is not possible to predict when--or even whether--DOD's 
reform effort will be successful. Our experience has shown there are 
several key elements that collectively would enable the department to 
effectively address the underlying causes of its inability to resolve 
its long-standing financial management problems. These elements, which 
we believe are key to any successful approach to transforming the 
department's business operations, include:

* addressing the department's financial management and related business 
operational challenges as part of a comprehensive, integrated, DOD-wide 
strategic plan for business reform;

* providing for sustained and committed leadership by top management, 
including but not limited to the Secretary of Defense;

* establishing resource control over business systems investments;

* establishing clear lines of responsibility, authority, and 
accountability;

* incorporating results-oriented performance measures and monitoring 
progress tied to key financial and business transformation objectives;

* providing appropriate incentives or consequences for action or 
inaction;

* establishing an enterprise architecture to guide and direct business 
systems modernization investments; and:

* ensuring effective oversight and monitoring.

These elements, which should not be viewed as independent actions but 
rather as a set of interrelated and interdependent actions, are 
reflected in the recommendations we have made to DOD and are consistent 
with those actions discussed in the department's April 2001 financial 
management transformation report.[Footnote 43] The degree to which DOD 
incorporates them into its current reform efforts--both long and short 
term--will be a deciding factor in whether these efforts are 
successful. Thus far, the department's progress in implementing our 
recommendations has been slow. Further, as will be discussed in more 
detail later, we have not yet seen a comprehensive, cohesive strategy 
that details how some of the ongoing efforts are being integrated. For 
example, we have not seen how the department plans to integrate its 
objective of obtaining an unqualified audit opinion in fiscal year 2007 
with the BMMP. It appears as if these two key efforts are being 
conducted in a stovepiped manner.

DOD Business Transformation Efforts:

Over the years, we have given DOD credit for beginning numerous 
initiatives intended to improve its business operations. Unfortunately, 
most of these initiatives failed to achieve their intended objective in 
part, we believe, because they failed to incorporate key elements that 
in our experience are critical to successful reform. Today, we would 
like to discuss one very important broad-based initiative--the BMMP--
that DOD currently has underway and, if properly developed and 
implemented, will result in significant improvements in DOD's business 
systems and operations.

Effectively managing and overseeing the department's $19 billion 
investment in its business systems is key to the successful 
transformation of DOD's business operations. The transformation also 
depends on the ability of the department to develop and implement 
business systems that provide users and department management with 
accurate and timely information on the results of operations and that 
help resolve the numerous long-standing weaknesses. As DOD moves 
forward with BMMP, it needs to ensure that the department's business 
systems modernization projects--such as BSM and LMP, discussed in our 
recently issued report--are part of a corporate solution to DOD long-
standing business problems. To assist the department with it ongoing 
efforts, we would like to offer two suggestions for legislative 
consideration that we believe could significantly increase the 
likelihood of a successful business transformation effort at DOD.

Business Management Modernization Program:

The BMMP, which the department established in July 2001 following our 
recommendation that DOD develop and implement an enterprise 
architecture,[Footnote 44] is vital to the department's efforts to 
transform its business operations.[Footnote 45] The purpose of the BMMP 
is to oversee development and implementation of a departmentwide BEA, 
transition plan, and related efforts to ensure that DOD business 
systems investments are consistent with the architecture and provide 
world class mission support to the fighting force. A well-defined and 
properly implemented BEA can provide assurance that the department 
invests in integrated enterprisewide business solutions and, 
conversely, can help move resources away from nonintegrated business 
system development efforts.

However, we recently reported[Footnote 46] that since our last 
review,[Footnote 47] and after about 3 years of effort and over $203 
million in reported obligations, we have not seen significant change in 
the content of DOD's architecture or in DOD's approach to investing 
billions of dollars annually in existing and new systems. Few actions 
have been taken to address the recommendations we made in our previous 
reports,[Footnote 48] which were aimed at improving DOD's plans for 
developing the next version of the architecture and implementing the 
institutional means for selecting and controlling both planned and 
ongoing business systems investments. To date, DOD has not yet 
addressed 22 of our 24 recommendations.

Further, DOD has not yet developed either near-term or long-term plans 
for developing the architecture that explicitly identify and establish 
a baseline for the actions to be taken, milestones to be achieved, cost 
estimates to be met, and targeted outcomes to be achieved. DOD has 
adopted an incremental approach to developing the architecture, 
including the transition plan, and plans to refine and extend the 
architecture in three increments, the first of which includes in part 
the department's efforts to obtain an unqualified audit opinion of 
DOD's consolidated fiscal year 2007 financial statements.

However, it is unclear what the increments individually or collectively 
mean, and what they will provide or allow DOD to achieve in the near 
and long term, because, as previously discussed, DOD has yet to develop 
detailed performance measures. Although the three increments were 
identified in November 2003, program officials do not expect to have a 
plan for increment one until the next version of the transition plan is 
completed in August 2004. According to program officials, the goals and 
scope for the second and third increments were only recently approved 
and, therefore, detailed plans of action and milestones do not yet 
exist.

Currently, DOD has three initiatives under way to support increment 
one. First, the program office is developing a plan of action for 
increment one and intends to complete the plan by August 2004. Second, 
the accounting and finance domain is conducting workshops to develop 
needed business rules and requirements for extending and evolving 
version 2.0 of the architecture. Last, DOD components are developing 
individual plans detailing their respective efforts for supporting 
increment one. However, there is no evidence that the program office is 
coordinating with the components and that the components are 
coordinating amongst themselves. Because there are not yet detailed 
plans guiding the program's activities, it is unclear whether and how 
these activities support each other and whether they support the 
department's goal of achieving an unqualified audit opinion in 2007.

As DOD moves forward with the BEA, it will be essential that the 
department have the management structure and processes in place to (1) 
improve the control and accountability over its billions of dollars of 
business systems investments; (2) develop corporate solutions to common 
business problems; and (3) implement system projects within budget, on 
time, and deliver the promised capability. The failure of the 
department to have the appropriate management structure and processes 
could result in billions of dollars continuing to be at risk of being 
spent on more systems that are duplicative, are not interoperable, cost 
more to maintain than necessary, and do not optimize mission 
performance and accountability.

Control and Accountability Over Business System Investments:

As previously discussed, DOD continues to lack adequate control and 
accountability over its billions of dollars of business systems 
investments. Each DOD component continues to make its own investment 
decisions, which has led to the proliferation of systems. As shown in 
table 2, the department has reported that it has at least 2,274 
business systems. For example, the department reportedly has 665 
systems to support human resource management, 565 systems to support 
logistical functions,[Footnote 49] 542 systems to perform finance and 
accounting functions, and 210 systems to support strategic planning and 
budget formulation.

Table 2: Reported DOD Business Systems by Domain and Functional Area:

Domain: Acquisition;
Air Force: 27;
Army: 31;
Navy/Marine Corps: 61;
DFAS: 3;
Other: 21;
Total: 143.

Domain: Accounting and finance;
Air Force: 43;
Army: 88;
Navy/Marine Corps: 195;
DFAS: 165;
Other: 51;
Total: 542.

Domain: Human resource management;
Air Force: 71;
Army: 387;
Navy/Marine Corps: 86;
DFAS: 33;
Other: 88;
Total: 665.

Domain: Installations and environment;
Air Force: 12;
Army: 98;
Navy/Marine Corps: 9;
DFAS: 1;
Other: 8;
Total: 128.

Domain: Logistics;
Air Force: 180;
Army: 191;
Navy/Marine Corps: 104;
DFAS: 11;
Other: 79;
Total: 565.

Domain: Strategic planning and budgeting;
Air Force: 23;
Army: 63;
Navy/Marine Corps: 98;
DFAS: 15;
Other: 11;
Total: 210.

Domain: Enterprise information environment;
Air Force: 1;
Army: 5;
Navy/Marine Corps: 2;
DFAS: 3;
Other: 10;
Total: 21.

Total;
Air Force: 357;
Army: 863;
Navy/Marine Corps: 555;
DFAS: 231;
Other: 268;
Total: 2274.

Source: GAO analysis of BMMP data.

[End of table]

These numerous systems have evolved into the overly complex and error-
prone operation that exists today, including (1) little standardization 
across DOD components, (2) multiple systems performing the same tasks, 
(3) the same data stored in multiple systems, (4) manual data entry 
into multiple systems, and (5) a large number of data translations and 
interfaces that combine to exacerbate problems with data integrity. The 
proliferation of systems has resulted because DOD components are 
largely autonomous and each receives its own business system funding.

DOD has recognized the need to improve its control and accountability 
of its business system investments and has various initiatives underway 
and planned. For example, in response to our recommendations,[Footnote 
50] DOD issued a policy in March 2004 that assigns the domains the 
responsibility for IT portfolio management. However, the procedures to 
be followed to implement the policy are currently being developed and 
no time frames for completion have been provided. In addition, specific 
roles and responsibilities of the domains have not yet been formalized, 
standard criteria for performing the system reviews have not been 
developed, and explicit authority for fulfilling roles and 
responsibilities has not been assigned. Although DOD recognizes the 
need to clarify the roles and responsibilities associated with managing 
the domains' portfolios of business systems and ensuring compliance 
with the architecture, it has not yet established time frames for 
completing these activities.

While DOD is continuing to work toward establishing the structure and 
processes to manage its business systems investments, it has not yet 
conducted a comprehensive system review of its ongoing IT investments 
to ensure that they are consistent with its BEA efforts. Additionally, 
execution of a comprehensive review of all modernization efforts by DOD 
before billions of dollars have been invested will reduce the risk of 
continuing the department's track record of business systems 
modernization efforts that cost more than anticipated, take longer than 
expected, and fail to deliver intended capabilities.

Corporate Solutions to Common Problems:

The department's business transformation also depends on its ability to 
develop and implement business systems that provide corporate solutions 
to DOD's numerous long-standing problems. This approach should help 
preclude the continued proliferation of duplicative, stovepiped systems 
and reduce spending on multiple systems that are supposed to perform 
the same function. However, as discussed in our recently released 
report,[Footnote 51] DOD is still developing systems that are not 
designed to solve corporatewide problems. BSM and LMP were initiated in 
November 1999 and February 1998, respectively, prior to DOD undertaking 
the BEA and establishing the domains. As such, they were not directed 
towards a corporate solution to the department's long-standing 
weaknesses in the inventory and logistics management areas, such as 
total asset visibility. Rather, both projects are more focused on DLA's 
and the Army's respective inventory and logistics management 
operations. Today, I would like to focus on one of those issues--total 
asset visibility, because of its significant impact on DOD's 
operational effectiveness.

In October 2002, a DLA official testified[Footnote 52] that BSM would 
provide improved control and accountability over the Joint Services 
Lightweight Integrated Suit Technology (JSLIST), which is a 
lightweight, two-piece garment--coat and trousers--designed to provide 
maximum protection against chemical and biological contaminants. Total 
asset visibility is critical for sensitive items such as the JSLIST. 
For example, tracking the specific location of each suit by lot number 
is necessary if for any reason they have to be recalled, as was the 
case with the JSLIST predecessor the Battle Dress Overgarment (BDO).

Over 700,000 of the BDOs were found to be defective and were recalled. 
Since DOD's systems did not provide the capability to identify the 
exact location of each suit, a series of data calls were conducted, 
which proved to be ineffective. We reported in September 2001[Footnote 
53] that DOD was unable to locate approximately 250,000 of the 
defective suits and therefore was uncertain if the suits were still in 
the possession of the military forces, or whether they had been 
destroyed or sold. Subsequently, we found that DOD had sold many of 
these defective suits to the public as excess, including 379 that we 
purchased in an undercover operation.[Footnote 54] In addition, DOD may 
have issued over 4,700 of the defective BDO suits to local law 
enforcement agencies. This is particularly significant because local 
law enforcement agencies are most likely to be the first responders to 
a terrorist attack, yet DOD failed to inform these agencies that using 
these suits could result in death or serious injury.

At the October 2002 hearing, the DLA official stated that JSLIST would 
be included in BSM at the earliest practicable date, which was 
estimated to be December 2003. BSM, however, is not designed to provide 
the corporate total asset visibility necessary to locate and track the 
suits throughout DOD's supply chain. While the suits are expected to be 
included in a future deployment of BSM, at the time of our review 
program officials had not yet specified a date when they will be 
included. Even when the suits are included, BSM is designed to provide 
visibility over the suits only within the DLA environment--something 
DLA has stated already exists within its current system environment.

As we have previously reported,[Footnote 55] the lack of integrated 
systems hinders DOD's ability to know how many JSLIST it has on hand 
and where they are located once they leave the DLA warehouse. For 
example, we found that military units that receive JSLIST from DLA 
warehouses maintained inventory data in nonstandard, stovepiped systems 
that did not share data with DLA or other DOD systems. The methods used 
to control and maintain visibility over JSLIST at the units we visited 
ranged from stand-alone automated systems, to spreadsheet applications, 
to pen and paper. One military unit we visited did not have any 
inventory system for tracking JSLIST. BSM does not address asset 
visibility outside of DLA's supply chain for the JSLIST, and thus 
cannot provide DOD with the capability to readily locate JSLIST for any 
reason, including any potential need for a recall of defective suits.

Similarly, we recently reported[Footnote 56] that LMP will not provide 
the Army with total asset visibility until a suite of other systems has 
been developed and implemented. Specifically, Army officials have 
stated that LMP will require integration with other Army systems that 
are under development in order to achieve total asset visibility within 
the Army. These additional systems are the Product Lifecycle Management 
Plus (PLM+) and Global Combat Support System--Army (GCSS-A). According 
to the Army, PLM+ is to integrate LMP and GCSS-A to create end-to-end 
solution for Army logistics. However, time frames and cost estimates 
have not been developed for these two additional system initiatives.

Further, to help provide for departmentwide total asset visibility, DLA 
is undertaking the implementation of the Integrated Data Environment 
(IDE) program. According to DLA, this initiative is intended to provide 
the capability for routing data from multiple systems within DLA and 
DOD into one system. According to DLA, IDE is expected to reach full 
operational capability in August 2007, with a current estimated cost of 
approximately $30 million. However, successfully meeting this 
completion depends on other departmental efforts being completed on 
time, such as PLM+, for which a completion date had not been 
established.

Project Management and Oversight:

While the success of BMMP and improved control and accountability of 
business system investments are critical aspects of the department's 
transformation efforts, equally important is the ability of DOD to 
implement chosen systems solutions on time, within budget, and with the 
promised capability. The department has not demonstrated the ability to 
achieve these goals.

As discussed in our recently released report,[Footnote 57] BSM and LMP 
have experienced cost increases, schedule slippages, and did not 
deliver planned system capabilities in their first release. Our 
analysis indicated that many of the operational problems experienced by 
BSM and LMP can be attributed to DOD's inability to effectively 
implement the disciplined processes necessary to reduce the risks 
associated with these projects to acceptable levels. Disciplined 
processes have been shown to reduce the risks associated with software 
development and acquisition efforts to acceptable levels and are 
fundamental to successful systems acquisition.

Specifically, in the case of these two projects, they had significant 
deficiencies in defining requirements and testing--two areas that form 
the foundation for a project's success or failure. In fact, DLA and 
Army program officials acknowledged that requirements and testing 
defects were factors contributing to the operational problems and 
stated that they are working to develop more effective processes. To 
their credit, DLA and the Army have decided that future deployments of 
BSM and LMP will not go forward until they have reasonable assurance 
that the deployed systems will operate as expected for a given 
deployment. Our analysis of selected BSM and LMP key 
requirements[Footnote 58] and testing processes found that (1) the 
functionality to be delivered was not adequately described or stated to 
allow for quantitative evaluation; (2) the traceability among the 
various process documents (e.g., operational requirements documents, 
functional or process scenarios, and test cases) was not maintained; 
and (3) system testing was ineffective.

In commenting on the report,[Footnote 59] the department acknowledged 
that the initial implementation of BSM and LMP experienced problems 
that could be attributed to the lack of adequate requirements 
determination and system testing. To address these inadequacies, the 
department noted that requirements analysis had been expanded to 
include greater specificity and that the successful completion of 
comprehensive testing would be required prior to further implementation 
of either system.

Suggestions for Legislative Consideration:

We would like to offer two suggestions for legislative consideration 
that we believe could contribute significantly to the department's 
ability to not only address the impediments to DOD's success but also 
to incorporate needed key elements to successful reform. These 
suggestions would include the (1) creation of a chief management 
official and (2) centralization of the funding business systems 
investments with the domain leaders responsible for the department's 
various business areas, such as logistics and human resource 
management. We provided similar views in our testimonies on March 23, 
2004,[Footnote 60] before the Subcommittee on Readiness and Management 
Support, Senate Committee on Armed Services, on March 31, 2004,
[Footnote 61] before the Subcommittee on Terrorism, Unconventional 
Threats, and Capabilities, House Committee on Armed Services, and 
yesterday[Footnote 62] before a joint hearing of the Subcommittee on 
National Security, Emerging Threats, and International Relations, the 
Subcommittee on Technology, Information Policy, Intergovernmental 
Relations, and the Census, and the Subcommittee on Government 
Efficiency and Financial Management, House Committee on Government 
Reform.

Chief Management Official:

I will now discuss our first matter for consideration. Previous failed 
attempts to improve DOD's business operations illustrate the need for 
sustained involvement of DOD leadership in helping to assure that DOD's 
financial and overall business process transformation efforts remain a 
priority.

While the Secretary and other key DOD leaders have demonstrated their 
commitment to the current business transformation efforts, the long-
term nature of these efforts requires the development of an executive 
position capable of providing strong and sustained executive leadership 
over a number of years and various administrations.

However, the tenure of the department's top political appointees has 
generally been short in duration and as a result, it is sometimes 
difficult to maintain the focus and momentum that are needed to resolve 
the management challenges facing DOD. For example, the former DOD 
Comptroller, who was very supportive of the current transformation 
effort, and one of its principal leaders, served as the DOD Comptroller 
for slightly over 3 years. Further, within the office of the DOD 
Comptroller, the current Principal Deputy/Deputy Under Secretary of 
Defense for Management Reform will soon be leaving the department. He 
also was in that position for slightly over 3 years. Additionally, 
leadership voids have existed in other key positions such as the 
program manager for BMMP. From May 2003 to February 2004, there was no 
program manager to identify, direct, and execute program 
activities.[Footnote 63] The resolution of the array of interrelated 
business system management challenges that DOD faces is likely to span 
several administrations and require sustained leadership to maintain 
the continuity needed for success.

One way to ensure sustained leadership over DOD's business 
transformation efforts would be to create a full-time executive level 
II position for a chief management official[Footnote 64] who would 
serve as the Principal Under Secretary of Defense for Management. This 
position would provide the sustained attention essential for addressing 
key stewardship responsibilities such as strategic planning, 
performance and financial management, and business systems 
modernization in an integrated manner. This position could be filled by 
an individual, appointed by the President and confirmed by the Senate, 
for a set term of 7 years with the potential for reappointment. Such an 
individual should have a proven track record as a business process 
change agent in large, complex, and diverse organizations--experience 
necessary to spearhead business process transformation across the 
department, and potentially administrations, and serve as an integrator 
for the needed business transformation efforts. In addition, this 
individual would enter into an annual performance agreement with the 
Secretary that sets forth measurable individual goals linked to overall 
organizational goals. Measurable progress towards achieving agreed-
upon goals would be a basis for determining the level of compensation 
earned, including any related bonus. In addition, this individual's 
achievements and compensation would be reported to Congress each year.

Functional Domain Control and Accountability Over Business System 
Investments:

We have made numerous recommendations to DOD intended to improve the 
management oversight and control of its business systems investments. 
However, progress in achieving this control has been slow and, as a 
result, DOD has little or no assurance that current business systems 
investments are being spent in an economically efficient and effective 
manner. DOD's current systems funding process has contributed to the 
evolution of an overly complex and error-prone information technology 
environment containing duplicative, nonintegrated, and stovepiped 
systems. Given that DOD spends billions of dollars annually on business 
systems and related infrastructure, it is critical that actions be 
taken to gain more effective control over such business systems 
funding.

The second suggestion we have for legislative action to address this 
issue, as discussed in our report[Footnote 65] and consistent with our 
open recommendations to DOD, is to establish specific management 
oversight, accountability, and control of funding with the "owners" of 
the various functional areas or domains. This legislation would define 
the scope of the various business areas (e.g., accounting, acquisition, 
logistics, and personnel) and establish functional responsibility for 
management of the portfolio of business systems in that area with the 
relevant Under Secretary of Defense for the six departmental domains 
and the CIO for the Enterprise Information Environment Mission 
(information technology infrastructure). For example, planning, 
development, acquisition, and oversight of DOD's portfolio of 
logistics business systems would be vested in the Under Secretary of 
Defense for Acquisition, Technology and Logistics.

We believe it is critical that funds for DOD business systems be 
appropriated to the domain owners in order to provide for 
accountability and the ability to prevent the continued parochial 
approach to systems investment that exists today. The domains would 
establish a hierarchy of investment review boards with DOD-wide 
representation, including the military services and defense agencies. 
These boards would be responsible for reviewing and approving 
investments to develop, operate, maintain, and modernize business 
systems for the domain portfolio, including ensuring that investments 
were consistent with DOD's BEA. All domain owners would be responsible 
for coordinating their business systems investments with the chief 
management official who would chair the proposed Defense Business 
Systems Modernization Executive Committee and provide a cross-domain 
perspective. Domain leaders would also be required to report to 
Congress through the chief management official and the Secretary of 
Defense on applicable business systems that are not compliant with 
review requirements and to include a summary justification for 
noncompliance.

In commenting on our report, DOD stated that it did not agree with this 
funding concept. The department stated that the portfolio management 
process being established--to include investment review boards--would 
provide the appropriate control and accountability over business system 
investments. DOD also stated that beginning with the fiscal year 2006 
budget review process, the domains will be actively involved in 
business system investment decisions. DOD stated that the military 
services implement their own statutory authorities for acquisition and 
IT systems development in consultation with DOD. While the 
establishment of the investment review boards is consistent with our 
previous recommendations, we continue to believe that appropriating 
funds for DOD business systems to the domains, rather than the various 
DOD entities, will significantly improve accountability over business 
system investments. DOD's comments indicate that the domains will be 
more accountable for making business system investment decisions, but 
unless they control the funding, they will not have the means to effect 
real change. Continuing to provide business system funding to the 
military services and defense agencies is an example of the 
department's embedded culture and parochial operations. As a result of 
DOD's intent to maintain the status quo, there can be little confidence 
that it will not continue to spend billions of dollars on duplicative, 
nonintegrated, stovepiped, and overly costly systems that do not 
optimize mission performance and accountability and, therefore, do not 
support the department's transformation goals.

Conclusion:

The excellence of our military forces is unparalleled. However, that 
excellence is often achieved in the face of enormous challenges in 
DOD's financial management and other business areas, which have serious 
and far-reaching implications related to the department's operations 
and critical national defense mission. Our recent work has shown that 
DOD's long-standing financial management and business problems have 
resulted in fundamental operational problems, such as failure to 
properly pay mobilized Army Guard soldiers and the inability to provide 
adequate accountability and control over supplies and equipment 
shipments in support of Operation Iraqi Freedom. Further, the lack of 
appropriate accountability across all business areas has resulted in 
fraud, waste, and abuse and hinders DOD's attempts to develop world-
class operations and activities to support its forces. Additionally, 
DOD cannot provide Congress reasonable assurance that the billions of 
dollars spent annually on business systems modernizations are not being 
wasted on projects that will perpetuate the current costly, 
nonintegrated, duplicative systems environment. If DOD is unable to 
address the underlying causes that have resulted in the failure of 
previous broad-based reform efforts, improvements will remain marginal, 
confined to narrowly defined incremental improvements.

As our nation continues to be challenged with growing budget deficits 
and increasing pressure to reduce spending levels, every dollar that 
DOD can save through improved economy and efficiency of its operations 
is important. As previously noted, the Secretary has stated that the 
department could save approximately 5 percent of its budget annually--
which equal about $20 billion--through improved business operations. 
DOD's senior leaders have demonstrated a commitment to transforming the 
department and improving its business operations and have taken 
positive steps to begin this effort. We believe that implementation of 
our open recommendations and our suggested legislative initiatives 
would greatly improve the likelihood of meaningful, broad-based reform 
at DOD.

The continued involvement and monitoring by congressional committees 
will also be critical to ensure that DOD's transformation actions are 
sustained and extended and that the department achieves its goal of 
securing the best performance and highest measure of accountability for 
the American people. We commend the Subcommittee for holding this 
hearing and we encourage you to use this vehicle, on at least an annual 
basis, as a catalyst for long overdue business transformation at DOD.

Mr. Chairman, this concludes our statement. We would be pleased to 
answer any questions you or other members of the Subcommittee may have 
at this time.

Contacts and Acknowledgments:

For further information about this testimony, please contact Gregory D. 
Kutz at (202) 512-9505 or kutzg@gao.gov. The following individuals 
contributed to the various reports and testimonies that were the basis 
for this testimony: Beatrice Alff, Molly Boyle, Art Brouk, Cherry 
Clipper, Mary Ellen Chervenic, Francine Delvecchio, Stephen Donahue, 
Francis Dymond, Eric Essig, Gayle Fischer, Geoff Frank, John Kelly, 
Randolph Hite, Cynthia Jackson, Neelaxi Lakhmani, Evelyn Logue, John 
Martin, Elizabeth Mead, Mai Nguyen, Michael Peacock, David Plocher, 
Gregory Pugnetti, Cary Russell, John Ryan, Katherine Schirano, Darby 
Smith, Carolyn Voltz, Marilyn Wasleski, and Jenniffer Wilson.

Selected GAO Products Related to DOD's Business Systems Modernization:

U.S. General Accounting Office, DOD Business Systems Modernization: 
Important Progress Made to Develop Business Enterprise Architecture, 
but Much Work Remains, GAO-03-1018 (Washington, D.C.: Sept. 19, 2003).

U.S. General Accounting Office, Business Systems Modernization: Summary 
of GAO's Assessment of the Department of Defense's Initial Business 
Enterprise Architecture, GAO-03-877R (Washington, D.C.: July 7, 2003).

U.S. General Accounting Office, DOD Business Systems Modernization: 
Longstanding Management and Oversight Weaknesses Continue to Put 
Investments at Risk, MACROBUTTON HtmlResAnchor GAO-03-553T 
(Washington, D.C.: Mar. 31, 2003).

U.S. General Accounting Office, DOD Business Systems Modernization: 
Continued Investment in Key Accounting Systems Needs to be Justified, 
MACROBUTTON HtmlResAnchor GAO-03-465 (Washington, D.C.: March 28, 
2003).

U.S. General Accounting Office, DOD Business Systems Modernization: 
Improvements to Enterprise Architecture Development and Implementation 
Efforts Needed, GAO-03-458 (Washington, D.C.: Feb. 28, 2003).

U.S. General Accounting Office, DOD Financial Management: Integrated 
Approach, Accountability, Transparency, and Incentives Are Keys to 
Effective Reform, GAO-02-497T (Washington, D.C.: Mar. 6, 2002).

U.S. General Accounting Office, Information Technology: Architecture 
Needed to Guide Modernization of DOD's Financial Operations, GAO-01-525 
(Washington, D.C.: May 17, 2001).

(192138):

FOOTNOTES

[1] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
03-119 (Washington, D.C.: January 2003). The nine interrelated high-
risk areas that represent the greatest challenge to DOD's development 
of world-class business operations to support its forces are: contract 
management, financial management, human capital management, 
information security, inventory management, real property, systems 
modernization, support infrastructure management, and weapon systems 
acquisition. 

[2] U.S. General Accounting Office, Military Pay: Army National Guard 
Personnel Mobilized to Active Duty Experienced Significant Pay 
Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003).

[3] U.S. General Accounting Office, DOD Management: Examples of 
Inefficient and Ineffective Business Processes, GAO-02-873T 
(Washington, D.C.: June 25, 2002).

[4] U.S. General Accounting Office, DOD Excess Property: Risk 
Assessment Needed on Public Sales of Equipment That Could Be Used to 
Make Biological Agents, GAO-04-81TNI (Washington, D.C.: Oct. 7, 2003). 

[5] U.S. General Accounting Office, Defense Logistics: Preliminary 
Observations on the Effectiveness of Logistics Activities during 
Operation Iraqi Freedom, GAO-04-305R (Washington, D.C.: Dec. 18, 2003).

[6] U.S. General Accounting Office, DOD Business Systems Modernization: 
Billions Continue to Be Invested with Inadequate Management Oversight 
and Accountability, GAO-04-615 (Washington, D.C.: May 27, 2004).

[7] See Related Reports.

[8] U.S. General Accounting Office, Department of Defense: Further 
Actions Needed to Establish and Implement a Framework for Successful 
Financial and Business Management Transformation, GAO-04-551T 
(Washington, D.C.: Mar. 23, 2004) and U.S. General Accounting Office, 
Department of Defense: Further Actions Needed to Establish and 
Implement a Framework for Successful Business Transformation, GAO-04-
626T (Washington, D.C.: Mar. 31, 2004).

[9] On September 9, 2002, GAO convened a roundtable of executive branch 
leaders and management experts to discuss the Chief Operating Officer 
concept. For more information see U.S. General Accounting Office, 
Highlights of a GAO Roundtable: The Chief Operating Officer Concept: A 
Potential Strategy to Address Federal Governance Challenges, GAO-03-
192SP (Washington, D.C.: Oct. 4, 2002).

[10] GAO-04-615.

[11] U.S. General Accounting Office, Department of Defense: Status of 
Financial Management Weaknesses and Progress Toward Reform, GAO-03-931T 
(Washington, D.C.: June 25, 2003).

[12] U.S. General Accounting Office, Fiscal Year 2003 U.S. Government 
Financial Statements: Sustained Improvement in Federal Financial 
Management Is Crucial to Addressing Our Nation's Future Fiscal 
Challenges, GAO-04-477T (Washington, D.C.: Mar. 3, 2004) and our report 
contained in the U.S. Department of the Treasury, Financial Report of 
the United States Government (Washington, D.C.: Feb. 27, 2004).

[13] JFMIP is a joint undertaking of the Office of Management and 
Budget, GAO, the Department of Treasury, and the Office of Personnel 
Management, working in cooperation with each other and with operating 
agencies to improve financial management practices throughout the 
government.

[14] FFMIA, Pub. L. No. 104-208, div. A., §101(f), title VIII, 110 
Stat. 3009, 3009-389 (Sept. 30, 1996), requires the 23 major 
departments and agencies covered by the Chief Financial Officers Act of 
1990, Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990) (as amended), 
to implement and maintain financial management systems that comply 
substantially with (1) federal financial management systems 
requirements, (2) applicable federal accounting standards, and (3) U.S. 
Standard General Ledger (SGL) at the transaction level. 

[15] The six case study units reviewed include the Colorado B Company 
Special Forces, Virginia B Company Special Forces, West Virginia C 
Company Special Forces, Mississippi 114TH Military Police Company, 
California 49TH Military Police Headquarters and Headquarters 
Detachment, and the Maryland 200TH Military Police Company. In 
addition, our limited review of pay experiences of soldiers in the 
Colorado Army Guard's 220TH Military Police Company, which recently 
returned from Iraq, indicated that some of the same types of pay 
problems that we found in our case studies had also affected soldiers 
in this unit. 

[16] GAO-04-89.

[17] GAO-04-305R.

[18] U.S. General Accounting Office, Defense Inventory: Opportunities 
Exist to Improve Spare Parts Support Aboard Deployed Navy Ships, GAO-
03-887 (Washington, D.C.: Aug. 29, 2003).

[19] GAO-02-873T.

[20] U.S. General Accounting Office, DOD Excess Property: Risk 
Assessment Needed on Public Sales of Equipment That Could Be Used to 
Make Biological Agents, GAO-04-81TNI (Washington, D.C.: Oct. 7, 2003).

[21] We characterized as "potentially criminal" any activity related to 
federal tax liability that may be a crime under a specific provision of 
the Internal Revenue Code. Depending on the potential penalty provided 
by statute, the activity could be a felony (punishable by imprisonment 
of more than 1 year) or a misdemeanor (punishable by imprisonment of 1 
year or less). Some potential crimes under the Internal Revenue Code 
constitute fraud because of the presence of intent to defraud, 
intentional misrepresentation or deception, or other required legal 
elements.

[22] A "tax period" varies by tax type. For example, the tax period for 
payroll and excise taxes is one quarter of a year. The taxpayer is 
required to file quarterly returns with IRS for these types of taxes, 
although payment of the taxes occurs throughout the quarter. In 
contrast, for income, corporate, and unemployment taxes, a tax period 
is 1 year.

[23] U.S. General Accounting Office, Financial Management: Some DOD 
Contractors Abuse the Federal Tax System with Little Consequence, GAO-
04-95 (Washington, D.C.: Feb. 12, 2004).

[24] U.S. General Accounting Office, Travel Cards: Internal Control 
Weaknesses at DOD Led to Improper Use of First and Business Class 
Travel, GAO-04-229T (Washington, D.C.: Nov. 6, 2003), and U.S. General 
Accounting Office, Travel Cards: Internal Control Weaknesses at DOD Led 
to Improper Use of First and Business Class Travel, GAO-04-88 
(Washington, D.C.: Oct. 24, 2003).

[25] U.S. General Accounting Office, DOD Travel Cards: Control 
Weaknesses Led to Millions of Dollars of Wasted on Unused Airline 
Tickets, GAO-04-398 (Washington, D.C.: Mar. 31, 2004).

[26] U.S. General Accounting Office, DOD Travel Cards: Control 
Weaknesses Resulted in Millions of Dollars of Improper Payments, GAO-
04-576 (Washington, D.C.: June 9, 2004).

[27] U.S. General Accounting Office, Travel Cards: Control Weaknesses 
Leave Army Vulnerable to Potential Fraud and Abuse, GAO-03-169 
(Washington, D.C.: Oct. 11, 2002).

[28] U.S. General Accounting Office, DOD Contract Payments: Management 
Action Needed to Reduce Billions in Adjustments to Contract Payment 
Records, GAO-03-727 (Washington, D.C.: Aug. 8, 2003).

[29] U.S. General Accounting Office, Military Treatment Facilities: 
Improvements Needed to Increase DOD Third-Party Collections, GAO-04-
322R (Washington, D.C.: Feb. 20, 2004).

[30] U.S. General Accounting Office, Information Technology: 
Improvements Needed in the Reliability of Defense Budget Submissions, 
GAO-04-115 (Washington, D.C.: Dec. 19, 2003).

[31] U.S. General Accounting Office, DOD High-Risk Areas: Eliminating 
Underlying Causes Will Avoid Billions of Dollars in Waste, GAO/T-NSIAD/
AIMD-97-143 (Washington, D.C.: May 1, 1997).

[32] Chief Financial Officers Act of 1990, Pub. L. No. 101-576, 104 
Stat. 2838, 2843 (Nov. 15, 1990) (codified, as amended, in scattered 
sections of title 31, United States Code). 

[33] U.S. General Accounting Office, Executive Guide: Creating Value 
Through World-class Financial Management, GAO/AIMD-00-134 (Washington, 
D.C.: April 2000) and U.S. General Accounting Office, Executive Guide: 
Maximizing the Success of Chief Information Officers: Learning From 
Leading Organizations, GAO-01-376G (Washington, D.C.: February 2001).

[34] U.S. General Accounting Office, DOD Business Systems 
Modernization: Limited Progress in Development of Business Enterprise 
Architecture and Oversight of Information Technology Investments, GAO-
04-731R (Washington, D.C.: May 17, 2004). 

[35] Subsection 1004 (d) of the Bob Stump National Defense 
Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314, 116 Stat. 
2629 (Dec. 2, 2002), provides that any amount in excess of $1 million 
may be obligated for financial system improvements before approval of 
its enterprise architecture and a supporting transition plan only if 
the DOD Comptroller makes a determination that the improvement is 
necessary for (1) critical national security capability or critical 
safety and security requirements or (2) prevention of significant 
adverse effect on a project that is needed to achieve an essential 
capability. The act further provides that after the architecture is 
approved, the DOD Comptroller must determine before making obligations 
that exceed $1 million for system improvements that such improvements 
are consistent with the enterprise architecture and the transition 
plan.

[36] We requested obligational data for fiscal year 2003 for the period 
December 2, 2002, the date of the enactment of the act, through 
September 30, 2003.

[37] GAO-04-615. 

[38] U.S. General Accounting Office, Department of Defense: Further 
Actions Needed to Establish and Implement a Framework for Successful 
Business Transformation, GAO-04-626T (Washington, D.C.: Mar. 31, 2004).

[39] OMB developed the Program Assessment Rating Tool to strengthen the 
process for assessing the effectiveness of programs across the federal 
government. For fiscal year 2004, OMB rated the following 12 defense 
program areas: Air Combat; Airlift; Basic Research; Chemical 
Demilitarization; Communications Infrastructure; Defense Health; 
Energy Conservation Improvement; Facilities Sustainment, Restoration, 
Modernization, and Demolition; Housing; Missile Defense; Recruiting; 
and Shipbuilding. DOD linked metrics for these program areas, which 
represent 20 percent of the department's fiscal year 2004 budget; it 
linked another 20 percent in the 2005 budget and 30 percent in the 2006 
budget, for a total of 70 percent.

[40] In July 2003 we reported that DOD and the military services do not 
have an effective approach to prevent and mitigate equipment corrosion, 
and that DOD's strategic plan should contain clearly defined goals, 
measurable, outcome-oriented objectives, and performance measures. 
(U.S. General Accounting Office, Defense Management: Opportunities to 
Reduce Corrosion Costs and Increase Readiness, GAO-03-753 (Washington, 
D.C.: July 7, 2003)). Similarly, in January 2004 we testified that 
existing processes and controls used to provide pay and allowances to 
mobilized Army Guard personnel prevented DOD from being able to 
reasonably assure timely and accurate payroll payments. We stated that 
DOD needs to establish a unified set of policies and procedures, as 
well as performance measures in the pay area. (U.S. General Accounting 
Office, Military Pay: Army National Guard Personnel Mobilized to Active 
Duty Experienced Significant Pay Problems, GAO-04-413T (Washington, 
D.C.: Jan. 28, 2004)).

[41] GAO-04-731R.

[42] GAO-03-465.

[43] Department of Defense, Transforming Department of Defense 
Financial Management: A Strategy for Change (Washington, D.C.: Apr. 13, 
2001).

[44] DOD has one Enterprise Information Environment Mission, and six 
departmental domains including

(1) acquisition/procurement; (2) finance, accounting, and financial 
management; (3) human resource management; (4) logistics; (5) strategic 
planning and budgeting; and (6) installations and environment. 

[45] GAO-01-525. 

[46] GAO-04-731R.

[47] GAO-03-1018.

[48] GAO-03-458 and GAO-03-1018.

[49] According to logistics domain officials, there are currently about 
3,000 systems just within the logistics domain. Of that amount, about 
1,900 systems have been validated by the DOD components as logistics 
systems--that is, they are not merely a spreadsheet or a report. Such a 
determination has not been made for the other 1,100. 

[50] GAO-01-525 and GAO-03-458.

[51] GAO-04-615. 

[52] Chemical and Biological Equipment: Preparing for a Toxic 
Battlefield: Hearing Before the House Committee on Government Reform, 
Subcommittee on National Security, Veterans Affairs and International 
Relations, 107TH Cong. 119 (Oct. 1, 2002) (statement of Deputy 
Commander, Defense Supply Center Philadelphia, Mr. George H. Allen).

[53] U.S. General Accounting Office, Chemical and Biological Defense: 
Improved Risk Assessment and Inventory Management Are Needed, GAO-01-
667 (Washington, D.C.: Sept. 28, 2001).

[54] U.S. General Accounting Office, DOD Excess Property: Risk 
Assessment Needed on Public Sales of Equipment That Could Be Used to 
Make Biological Agents, GAO-04-81TNI (Washington, D.C.: Oct. 7, 2003).

[55] GAO-02-873T.

[56] GAO-04-615.

[57] GAO-04-615. 

[58] BSM and LMP have identified and documented 202 and 293 system 
requirements, respectively. For BSM, we reviewed 13 requirements 
related to finance, order fulfillment, planning, and procurement. For 
LMP, we reviewed 12 requirements related to planning and budget 
development, asset management, inventory management, and maintenance 
analysis and planning.

[59] GAO-04-615.

[60] GAO-04-551T.

[61] GAO-04-626T.

[62] U. S. General Accounting Office, Department of Defense: Long-
standing Problems Continue to Impede Financial and Business Management 
Transformation, GAO-04-907T (Washington, D.C.: July 7, 2004).

[63] GAO-04-731R.

[64] GAO-03-192SP.

[65] GAO-04-615.