DoD told to get serious about financial reforms

The Defense Department must attack its complex financial management problems with the same vigor it applied to the year 2000 computer crisis-creating detailed plans, setting deadlines and target goals, and issuing regular updates-auditors said Wednesday.

DoD consistently has not been able to comply with federal audit regulations due to internal financial systems weaknesses, DoD Inspector General Eleanor Hill told the Senate Armed Services Subcommittee on Readiness and Management Support. In 1999 alone, DoD auditors were left with $1.7 trillion in unsupported adjustments, she said.

As a result, resources are being drained from critical defense goals, such as weapons modernization, said Gene L. Dodaro, assistant comptroller general in the Accounting and Information Management Division of the General Accounting Office. DoD's inaccurate inventory results in unnecessary spending and wasteful holding costs while its inability to account for weapons systems affects defense readiness, he said. An audit of Navy military equipment, for example, revealed 15 service craft that had been disposed of but were still on record as being available to meet rapid mobilization requirements.

The auditors disagreed as to how DoD should begin to fix its outdated financial systems. According to Hill, annual audits should be stopped until DoD has a reliable process for accumulating data. "Right now, we don't have accurate data to audit," she said. But Dodaro argued that annual audits keep a short-term focus on financial deficiencies and accountability.

Both Hill and Dodaro agreed, however, that DoD was fully capable of updating its financial system. "There's no reason why it can't be fixed," Dodaro said.

Subcommittee Chairman James Inhofe, R-Okla., expressed concern that the committee's oversight of defense issues such as A-76 outsourcing and base closures is based on inaccurate savings expectations projected from ad hoc data collection.

According to Dodaro, such fears are well-founded. "Without good cost information, we really don't know what's the most economical approach to use" in downsizing and outsourcing, he said.