Defense Department not tracking personnel spending, report says

The Defense Department is not providing sufficient oversight to ensure that military personnel appropriations actually are directed to cover pay, benefits and expenses, according to a new Government Accountability Office report.

As a result of the report, the Office of the Secretary of Defense has ordered a study on the cost and time needed to modify the relevant financial systems to comply with regulations.

GAO released similar findings to lawmakers in 2003, and the fiscal 2004 conference report on defense appropriations called on the Pentagon to "strengthen the annual review process" and "provide transparency of disbursements at the same level as the budget submission."

In the report released this week, however, GAO announced that the Pentagon is not following congressional direction on oversight.

"The military services are not matching obligations to disbursements at the individual disbursement transaction level in all the years that disbursements can occur as required by the Financial Management Regulation," the report (GAO-05-87R) said. "Additionally, the services are not reporting the obligation balances at the budget submission level as directed by congressional conferees."

In their report, GAO noted that military personnel appropriations, also known as MILPERS, make up a significant amount of the Defense Department's budget. In fiscal 2003, MILPERS accounted for more than $109 billion. That figure also includes allowances, housing, travel and reserve training. GAO investigators said the insufficient budget review is stopping lawmakers from making informed decisions on funding.

"This has made it difficult, if not impossible, for decision-makers to oversee how the services actually use MILPERS funds," the GAO report said.

The investigators took the Office of the Secretary of Defense to task for failing to implement the reforms from the top.

"OSD has not provided the services with explicit instructions in the Financial Management Regulation requiring them to review MILPERS obligations," the report said. "Moreover, OSD has not effectively monitored the services' compliance with the Financial Management Regulation's requirement to review obligation balances. Unless the services strengthen their year-end reviews and certification processes, the actual use of MILPERS funds will continue to be masked, and the baseline for future budget requests may be inaccurate."

GAO did note that the Army has made some progress in developing prior year financial reports with great detail. In a Nov. 23 directive, top Defense officials ordered the Air Force, Navy and the Defense Finance and Accounting Service to complete a feasibility study on recording and reporting detailed disbursements for prior years' spending. That study is scheduled to be completed by Jan. 31, 2005.