First Biennial Plan Important Step Toward Improving Financial Management

In developing its concept of operations as part of its Biennial Plan, DOD has taken an important step in improving its financial management operations. DOD has reported, for the first time, the importance of the programmatic functions of personnel, acquisition, property management, and inventory management to the department’s ability to support consistent, accurate information flows to all information users. However, the concept of operations does not address two critical elements that are necessary for producing sustainable financial management improvement over the long term. Specifically, the concept of operations does not address (1) how its financial management operations effectively support not only financial reporting but also asset accountability and control, and (2) budget formulation. Transition Plan Does Not Provide a Road Map From the Current Environment to DOD’s Future Financial Management System

The transition plan, while an ambitious statement of DOD’s planned improvement efforts, has two important limitations: (1) clear links are not provided between the envisioned future operations and the numerous planned improvement initiatives to determine whether the proposed transition will result in the target financial management environment and (2) actions to ensure feeder systems’ data integrity are not addressed. In addition, Volume II of the department’s Biennial Plan includes overview information on over 200 specific initiatives. Without identifying specific actions that will ensure feeder system data integrity, it is unclear whether the department will be able to effectively carry out not only its financial reporting, but also its other financial management responsibilities. Further Details Will Be Needed to Evaluate the Workability of DOD’s Planned Financial Management Environment

Certain additional detailed information would be necessary to determine whether implementation of the department’s future financial management environment is “workable”—that is, whether the planned environment is practical, cost-effective, and feasible. Such details are not within the scope of the high-level, strategic financial management improvement plan that DOD was asked to provide and we were asked to analyze. DOD officials have stated that they recognize that additional information will be necessary and that they are developing further details on these issues. Objectives, Scope, and Methodology

To address the requirements of section 912 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public Law 105-261), our objectives were to determine (1) whether DOD’s concept of operations included the critical elements necessary for producing sustainable financial management improvement over the long term and (2) whether the transition plan provided a “road map” from the current environment to DOD’s planned future financial management environment. This report also includes a discussion of additional technical details that would be needed to determine whether implementation of the department’s future financial management environment is practical, cost-effective, and feasible. 3. 4. 5. 6. 8. 9.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) Biennial Financial Management Improvement Plan to determine whether the: (1) concept of operations included the critical elements necessary for producing sustainable financial management improvement over the long term; (2) transition plan provided a strategic-level road map from the current environment to DOD's planned future financial management environment; and (3) implementation of the department's future financial management environment is practical, cost-effective, and feasible.

What GAO Found

GAO noted that: (1) in developing this overall concept of its envisioned financial management environment, DOD has taken an important first step in improving its financial management operations; (2) the department's Biennial Plan also represents a significant landmark because it includes, for the first time, a discussion of the importance of the programmatic functions of personnel, acquisition, property management, and inventory management to the department's ability to support consistent, accurate information flows to all information users; (3) in addition, DOD's Biennial Plan includes an impressive array of initiatives intended to move the department from its current state to its envisioned financial management environment; (4) while the initiatives discussed should result in some improvements in DOD's financial management operations, the department's Biennial Plan lacks critical elements necessary for producing sustainable financial management improvement over the long term; (5) specifically, the Plan's discussion of how DOD's financial management operations will work in the future--its concept of operations--does not address: (a) how its financial management operations will effectively support not only financial reporting but also asset accountability and control; and (b) budget formulation; (6) in addition, the transition plan, while an ambitious statement of DOD's planned improvement efforts, has two critical flaws: (a) links are not provided between the envisioned future operations and the over 200 planned improvement initiatives to determine whether the proposed transition will result in the target financial management environment; and (b) actions to ensure feeder systems' data integrity are not addressed--an acknowledged major deficiency in the current environment; (7) without identifying specific actions that will ensure feeder system data integrity, it is unclear whether the department will be able to effectively carry out not only its financial reporting, but also its other financial management responsibilities; (8) additional detailed information would be necessary to determine whether implementation of the department's future financial management environment is practical, cost-effective, and feasible; (9) such details are appropriately not included in the strategic financial management improvement plan that DOD was asked to provide; and (10) DOD officials have stated that they recognize that additional information will be necessary and that they are developing further details on these issues.