DOD needs systems to balance finances

Defense Department officials told Congress last week that installing new computer systems is key to improving the department's balance sheet, which cannot account for as much as $10 billion.

"We have lousy systems," DOD assistant inspector general Robert Lieberman told the House Government Management, Information and Technology Subcommittee. "New ones are in the works.... The data we have in our systems is not particularly reliable."

Nelson Toye, deputy chief financial officer for the department, said part of the problem stems from DOD's use of disparate computer systems for tracking DOD resources, including logistics systems, medical information systems and personnel management systems. Many of the systems do not capture the financial data that the department needs to generate accurate financial reports, Toye said.

DOD has been at the center of the government's financial management crisis for the past year. Last year the General Accounting Office found in the first consolidated financial statement that the government's books are riddled with financial discrepancies and overpayments and are missing equipment records. GAO officials said much of the problem stems from outdated financial management systems.

Weaknesses in DOD's financial management systems leave the department open to fraud, waste and abuse, overseers said.

GAO assistant comptroller general Gene Dodaro told the subcommittee that without a clean balance sheet, DOD cannot make sure its money is spent appropriately. "They have no ability to compare and reconcile the information," he testified.

Dodaro recommended that DOD leaders focus on improving information systems as a way to improve financial management. "The data in the existing systems the department is using needs to be better," he said.

DOD comptroller William Lynn told the subcommittee that the department's systems were about "two-thirds" of the way toward being able to generate a consolidated financial statement on which auditors will be able to render a "clean" opinion. He acknowledged that improving information systems is a top priority. "The biggest thing we need to do is we need to improve the systems," he said.

Subcommittee chairman Rep. Steve Horn (R-Calif.), who failed DOD on its financial management as part of an overall financial management report card issued in March, said he remains concerned with DOD's ability to generate an accurate financial statement. But he said he is pleased with the department's focus on cleaning up its books. "I think they're making progress, and I think they've got their act together," Horn said.

Plenty of information technology concerns must be solved before DOD can clean up its balance sheet. Dodaro said the department needs to continue to focus on following the Clinger-Cohen Act, a 1996 law that seeks to make IT procurement easier and to make sure IT projects are more diligently managed. "The department is committed to put in place the requirements of that legislation, but it has yet to fully implement them," he said.

Lynn said DOD's books are off balance by about $10 billion, but he said DOD has not lost that $10 billion. "The money is not lost. It is a problem in the paperwork," he said. "You want to have an electronic system so you don't have to do that paperwork."

Lynn said DOD continues to put energy into linking computer systems to eliminate paperwork, which can be misplaced or easily destroyed, and to reconcile financial transactions instantly.

Meanwhile, the department is trying to consolidate the number of financial and accounting systems it has in place. In October, the department had 109 such systems, according to Lynn. By 2003, however, officials hope to have only 32 systems, he said.