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 the decision-making process. DOD’s fiscal  year 2005 budget request for its business systems was $13.3 billion, which  on its face is about $6 billion, or 29 percent, less than its fiscal year 2004  budget request. In some cases, we found that the reclassification appeared reasonable. DOD Reports Significant Increase in the Number of Existing Business Systems

The department’s reported number of business systems continues to  fluctuate, and DOD does not yet have reasonable assurance that the  currently reported number of business systems is complete. As of  February 2005, DOD reported that its business systems inventory consisted  of 4,150 systems, which is an increase of approximately 1,900 reported  business systems since April 2003. The table shows the stovepiped, duplicative nature of DOD’s business  systems. In this regard, based upon data reported to us by the military  services and DOD components, obligations totaling about $243 million  were made for systems modernizations in fiscal year 2004 that were not  referred to the DOD Comptroller for the required review. In an attempt to substantiate that financial system improvements with over  $1 million in obligations were reviewed by the DOD Comptroller, as  provided for in the fiscal year 2003 act, we requested that DOD activities  provide us with a list of obligations (by system) greater than $1 million for  modernizations for fiscal year 2004. Although the requirements of the fiscal year 2005 defense authorization act  establish a management structure, each of the military services has  established its own business systems investment review process. Since April 2003, the  reported inventory has increased by about 1,900 systems. Given these  circumstances, the department has made limited progress in achieving  effective management control and accountability over the billions of  dollars invested annually in its business systems. By doing less, DOD will continue to waste billions of dollars by  perpetuating today’s legacy business systems environment. We recommend that the Secretary of Defense direct that the   DOD CIO, in consultation with the domains, review the 56 systems  reclassified from business systems to national security systems to  determine how these should be properly reported in the fiscal year 2007  IT budget request;  Defense Business Systems Management Committee work with the  domain investment review boards to review the reported BMMP  business systems inventory so systems are defined in accordance with  the definition specified in the fiscal year 2005 defense authorization act;   Defense Business Systems Management Committee develop a  comprehensive plan that addresses implementation of our previous  recommendations related to the BEA and the control and accountability  over business systems investments (at a minimum, the plan should  assign responsibility and estimated time frames for completion); and    comprehensive plan we recommend above be incorporated into the  department’s second annual report due March 15, 2006, to the defense  congressional committees, as required by the fiscal year 2005 defense  authorization act, to help facilitate congressional oversight. We also reviewed and  analyzed the DOD budget request for fiscal year 2004 to identify the  business systems investments that could be subject to the requirements of  the Bob Stump National Defense Authorization Act for Fiscal Year 2003,  which requires the DOD Comptroller to review all financial system  improvements with obligations exceeding $1 million and determine  whether each improvement is in accordance with criteria specified in the  act.
Why GAO Did This Study

Despite its significant investment in business systems, the Department of Defense (DOD) continues to have long-standing financial and business management problems that preclude the department from producing reliable and timely information for making decisions and for accurately reporting on its billions of dollars of assets. GAO was asked to (1) identify DOD's fiscal year 2005 estimated funding for its business systems and (2) determine whether DOD has effective control and accountability over its business systems modernization investments.

What GAO Found

DOD's business and financial management weaknesses have resulted in billions of dollars wasted annually in a time of increasing fiscal constraint. These weaknesses continue despite DOD requesting over $13 billion in fiscal year 2005--about $6 billion less than in fiscal year 2004--to operate, maintain, and modernize its existing duplicative business systems. The difference is more a reclassification of systems rather than an actual spending reduction. Some of the reclassifications appeared reasonable and others were questionable due to inconsistent information. At the same time, DOD reported an increase in the number of business systems to 4,150 as of February 2005--an increase of about 1,900 systems since April 2003. The duplicative and stovepiped nature of DOD's systems environment is illustrated by the numerous systems in the same business area. For example, DOD reported that it has over 2,000 logistics systems--an increase of approximately 255 percent since April 2003. DOD still does not have an effective departmentwide management structure for controlling business systems investments. Furthermore, DOD is not in compliance with the National Defense Authorization Act for Fiscal Year 2003, which requires the DOD Comptroller to determine that system improvements with obligations exceeding $1 million meet the criteria specified in the act. Based on limited information provided by DOD, system improvements totaling about $243 million of obligations over $1 million were not reviewed by the DOD Comptroller in fiscal year 2004. Cumulatively, based upon DOD's reported data, system improvements totaling about $651 million of obligations over $1 million were not reviewed by the DOD Comptroller before obligations were made since passage of the 2003 act. The 2005 defense authorization act directed that DOD put in place a management structure to improve the control and accountability over business systems investments by placing more responsibility with the domains. At the same time, each military service has its own investment review process. Absent an integrated management structure that clearly defines the relationship of the domains and the military services, DOD will be at risk that the parochialism contributing to the current problems will continue.