The Defense Department's number crunchers are still not properly trained and its financial data isn't fully trustworthy yet, but DoD officials are doing their best to identify and correct the problems that plague the department's accounting systems, witnesses at a congressional hearing said Tuesday.
DoD's financial records have $9.6 billion in unresolved differences from the Treasury Department's records. No major part of DoD can pass an independent audit and the agency's financial managers don't receive adequate training in accounting methods, auditors testified before the House Government Reform Subcommittee on Government Management, Information and Technology.
But the Pentagon has accelerated its efforts to address financial management weaknesses, said Gene Dodaro, a General Accounting Office auditor. "The atmosphere of 'business as usual' at DoD has changed to one of marked effort at real reform," Dodaro said.
"Fundamental problems have been repeatedly and candidly acknowledged in DoD management representation letters, annual Secretary of Defense management control assessments and congressional hearings," said Donald Mancuso, acting inspector general for DoD.
The Defense Finance and Accounting Service (DFAS) is the pivotal point of reform, said William Lynn, DoD's chief financial officer. Since its inception in 1991, DFAS has been streamlined from 330 financial management offices to 20. Finance and accounting systems are being reduced as well. DoD hopes to use just 32 systems by the year 2003, a 90 percent reduction from the 324 it used in 1991. Currently Defense agencies use 109 financial systems.
Outsourcing under Office of Management and Budget Circular A-76 is also a key reform tool, Lynn said. Within the financial realm, DoD is studying A-76 options for Defense Commissary Agency accounting, transportation accounting, depot maintenance accounting, and civilian and retiree payroll processing.
Last fall, DoD submitted a plan for financial management improvement to Congress that included its strategies for modernization. DoD intends to update the plan annually as part of its long-term improvement efforts. Mancuso called the plan a "valid first attempt."
DoD's next goal is a clean audit opinion. But auditors warned that a clean audit alone will not mean the department has finished its work. If Defense agencies bypass official accounting systems, they could fudge a clean audit, Mancuso said. "We would consider the achievement of favorable audit opinions on annual financial statements, under those circumstances, to be a Pyrrhic victory," he said.
According to Lynn, DoD recognizes that "a good audit opinion in and of itself is of limited value" without fixing underlying problems. But reforms will take time because of the size and complexity of DoD's ongoing operations. The financial management reform effort, Lynn said, is "a lot like changing the wheels on an automobile without stopping."
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