DoD Financial Systems $6.9 Billion Over Budget

As much as 12 years behind schedule, Pentagon officials blame the military's complexity and say that meeting Congressional audit requirements by 2017 will increase costs even further.

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McGrath and Hale place some of the blame on DoD's scale. "DoD's enormous size and geographical dispersion substantially complicate the challenges associated with meeting audit standards," they said. "Because of our size and mission requirements, it is not feasible to deploy an army of accountants to manually reconcile our books."

"Significant leadership and oversight challenges have hindered efforts to implement these systems on schedule, within cost and with intended capabilities," Asif Khan, director of financial management for the Government Accountability Office, said in prepared testimony. The GAO is unable to predict when the Pentagon will be able to meet its audits requirements, but he said that the military is "headed in the right direction" when it comes to improving its systems.

The Department of Defense recognizes the problems, and has put in place an organization and new governance model in hopes to address them, Hale and McGrath's testimony said. "We understand that there are enterprise-wide weaknesses in DoD financial management that demand an enterprise-wide response," they said.

Shortly after the new administration took office, the DoD worked with the Office of Management and Budget and GAO to re-assess its financial management thinking. The DoD placed priority on the new approach by making it one of DoD's top 10 business priorities, identifying it among the DoD's High-Priority Performance Goals, and making it a key component of the DoD's Strategic Management Plan. It created a governance board that meets quarterly, added financial resources to the effort, and put in place interim goals to be achieved by 2012.

A big part of that approach includes upgrades to old financial management systems and implementations of new systems. These upgrades include three key focuses, according to Hale and McGrath: improving the approach to acquiring and implementing IT systems (an IT Acquisition Reform Task Force has been established to lead that effort), defining target systems architecture, and leveraging the DoD's higher-level Business Enterprise Architecture.

DoD is also working with the Office of Management and Budget, Department of Treasury and GAO to determine if there are more cost-effective paths forward to full auditability. The White House earlier this summer launched an effort aimed at reforming the way the federal government carries out financial system modernizations. As part of that effort, it planned to review about 30 financial system projects. While the Office of Management and Budget didn't list any particular DoD projects in an initial list of the projects under review or place the DoD on its initial public schedule of reviews, it did say that DoD systems would be part of the review.