JIEDDO Has Taken Steps to Improve Financial Management Processes but Lacks Effective Internal Controls to Provide Assurances That Its Financial Data Are Accurate and Provide Transparency over Its Operations

JIEDDO has made progress in improving its financial management  processes but has not yet reached a point where its processes contain a  system of internal control that ensures the accuracy of its financial data  related to resources it has used in its operations. According to federal  standards, internal control comprises the plans, methods, and procedures  used to meet missions, goals, and objectives of an organization and help it  to achieve desired results through effective stewardship of public  resources. JIEDDO Lacks Effective Internal Controls to Provide Assurances That Its Financial Data Are Accurate, and JIEDDO Is Unable to Provide Transparency over Its Operations

JIEDDO does not have an effective internal control system in place to  ensure that its financial data are accurate, and without such assurances,  JIEDDO is unable to provide adequate transparency over the cost of its  operations. Second, JIEDDO’s internal control system does not have adequate funds  authorization controls to ensure that transactions are properly authorized  before committing funds, which is a fundamental control activity required  by government internal control standards. We reviewed 24 initiatives of  which 18 had funding transactions totaling $795 million that were not  authorized in accordance with the process that JIEDDO officials said  should take place in advance of the commitment of funds on initiatives  valued at greater than $25 million. Furthermore, the system did not detect, correct, or address this  control failure. Overall, of the $1.34 billion in fiscal year 2007  commitments we reviewed, JIEDDO inaccurately recorded at least 83  percent of the dollars committed—involving 15 of the 24 initiatives we  reviewed—as management and professional support services, when other  categorizations should have been applied by JIEDDO financial managers. Fourth, JIEDDO’s internal process to monitor and review the efficacy of  its internal controls is inadequate. As evidenced by these four weaknesses, in the absence of an adequate  system of internal control the objectives of the agency may not be fully  achieved and its use of resources may not be fully consistent with DOD  priorities. Furthermore, decision makers may be basing their decisions on  inaccurate financial data and reports. In discussing these internal  control findings at the end of our fieldwork, JIEDDO managers said that  they have taken several actions to address and correct these weaknesses,  which we noted previously. JIEDDO Does Not Comprehensively Identify, Track, and Report All Government and Contractor Personnel as Described by DOD

JIEDDO does not fully identify, track, and report all government and  contractor personnel as provided for in DOD Directive 1100.4. Identifying  all government and contractor personnel is important to JIEDDO’s  management and oversight responsibilities and contributes to its ability to  effectively plan for its future workforce needs. The Senate Appropriations Committee directed JIEDDO to provide a  comprehensive report of all of its personnel by May 2007, and because  JIEDDO does not have a comprehensive process to track all personnel, it  relied on an ad hoc process to develop the report. Although JIEDDO has not routinely tracked all of its contractors, it has  relied heavily on contractor support to accomplish its mission since its  creation in February 2006. Conclusions

As IEDs continue to pose a significant threat to U.S. forces in Iraq and  Afghanistan, defeating the threat continues to be a high defense priority. Appendix I: Scope and Methodology

To assess the Joint Improvised Explosive Device Defeat Organization’s  (JIEDDO) financial management processes, controls, and data, we  collected data on the $1.9 billion in funds available to JIEDDO for the first  half of fiscal year 2007 and analyzed associated financial management and  counter-improvised explosive device (IED) initiative data available for  management and external reporting of JIEDDO’s activities.
Why GAO Did This Study

Improvised explosive devices (IED) have been and continue to be a significant threat to U.S. forces. The Department of Defense (DOD) expanded efforts to defeat IEDs with the establishment of the Joint Improvised Explosive Device Defeat Organization (JIEDDO) in January 2006. GAO was asked to review JIEDDO's management and operations. For this second report in its series, GAO determined (1) the extent to which JIEDDO's management processes provide adequate assurances that its financial information is accurate and provides transparency over its operations and (2) the extent to which JIEDDO identifies, records, tracks, and reports numbers of all personnel, including contractors. GAO analyzed data for the first half of fiscal year 2007, which included 47 funding transactions totaling $1.34 billion for 24 initiatives to address these objectives.

What GAO Found

JIEDDO's financial management processes do not provide adequate assurances that its financial information is accurate, and as a result, JIEDDO is unable to provide full transparency over the cost of its operations. While JIEDDO has improved its financial management processes, it has not yet reached a point where those processes contain an effective system of internal control. According to federal standards, internal control comprises the plans, methods, and procedures used to meet missions, goals, and objectives of an organization and help it to achieve desired results through effective stewardship of its resources. GAO identified four internal control weaknesses that affect JIEDDO's financial management processes. First, JIEDDO has not comprehensively documented its administrative policies and operating manuals, which affects the consistency of how its financial management personnel perform their duties. Second, JIEDDO does not have adequate funds authorization controls to ensure that transactions are properly authorized before funds are committed. In reviewing funding transactions totaling $795 million, 18 of 24 initiatives were not properly authorized in accordance with internal control standards. As a result, funds may be used without proper scrutiny and without a mechanism to detect, correct, or address this control failure. Third, JIEDDO does not have controls to ensure that transactions are properly categorized. For example, of the $1.34 billion in fiscal year 2007 commitments reviewed, JIEDDO inaccurately categorized at least 83 percent of these dollars under one category that should have been applied to others. This could distort information used in assessing trends and prioritizing funds. Fourth, JIEDDO does not have an adequate internal process to monitor and review the efficacy of its internal controls. In the absence of an adequate system of internal control, the agency may not achieve all of its objectives and its use of resources may not be consistent with DOD priorities. Furthermore, decision makers may be basing their decisions on inaccurate financial data and reports. At the end of this review, JIEDDO managers said that they had corrected these weaknesses; however, because these actions occurred after audit completion, GAO could not determine their effectiveness. JIEDDO does not fully identify, track, and report all government and contractor personnel as provided for in DOD Directive 1100.4. Identifying all government and contractor personnel is important to JIEDDO's management and oversight responsibilities and contributes to its ability to effectively plan for its future workforce needs. While JIEDDO has a system in place for routinely tracking and reporting numbers of personnel JIEDDO regards as staff, this system is limited because it does not track all government and contractor personnel performing work for JIEDDO. However, since its creation in February 2006, JIEDDO has relied heavily on contractor support to accomplish its mission, which is not fully reflected in JIEDDO's system. When the Senate Appropriations Committee directed that JIEDDO provide a comprehensive accounting of all of its personnel, including contractors, by May 2007, JIEDDO had to rely on an ad hoc process to develop the report, which resulted in several inaccuracies and inconsistencies.