	Scope and Methodology

In performing our evaluation of the accuracy and completeness of DOD’s reported inventory of financial management systems, we reviewed DOD guidance related to classifying its systems as financial, mixed financial, and nonfinancial; determined whether systems categorized as nonfinancial contained information needed to produce DOD financial statements and other financial reports; compared DOD’s financial management systems inventory to other DOD systems inventories to determine whether categories of systems not included in financial management systems inventories and reports were properly categorized as nonfinancial (however, we did not test the accuracy of these inventories); interviewed appropriate DOD, OMB, and DFAS staff to obtain information regarding the categorizing and reporting of financial management systems; reviewed federal financial management system guidance and applicable laws, the Joint Financial Management Improvement Program’s (JFMIP) Framework for Federal Financial Management Systems, and OMB Circulars A-123, A-127, and A-130; and reviewed military service audits to identify systems used to prepare financial statements. The act defines financial management systems to include the financial systems and the financial portions of mixed systems necessary to support financial management, including automated and manual processes, procedures, controls, data, hardware, software, and support personnel dedicated to the operation and maintenance of system functions. A mixed system is defined as an information system that supports both financial and nonfinancial functions of the federal government or its components. The number of reported systems has been limited because both DOD regulations and DFAS guidance did not properly define financial management systems, as required. Although we did not identify all of the systems that should have been included, several of the excluded systems account for billions of dollars of DOD assets and are clearly mixed systems that meet the OMB and JFMIP definition of financial management systems. Comments From the Department of Defense

The following are GAO’s comments on the Department of Defense’s letter dated January 24, 1997. 1. 2. 3.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) financial management systems, focusing on the accuracy and completeness of DOD's inventory of financial management systems.

What GAO Found

GAO found that: (1) DOD does not have a comprehensive inventory of the systems it relies on to record, accumulate, classify, and report financial information; (2) the number of systems included in DOD's inventory was limited because the regulations and guidance from the Defense Finance and Accounting Service (DFAS) did not properly define financial management systems; (3) Office of Management and Budget Circular A-127, Joint Financial Management Improvement Program system requirements, and the recently enacted Federal Financial Management Improvement Act of 1996 define financial management systems to include the financial systems and the financial portions of mixed systems necessary to support financial management; (4) a mixed system is defined as an information system that supports both financial and nonfinancial functions of the federal government or its components; (5) DOD considers mixed systems that are generally not within the Chief Financial Officer (Comptroller) organization, such as acquisition, logistics, and personnel systems, to be nonfinancial and, therefore, does not include them in its inventory; and (6) although GAO did not identify all of the systems that should have been included, several of the excluded systems account for billions of dollars of assets and clearly meet the required definition of financial management systems.