Military financial systems flagged

"Development of the Defense Finance and Accounting Service Corporate Database and Other Financial Management Systems"

The military services are moving forward with new financial management systems before the Defense Department has established an overall financial management enterprise architecture or a set of accounting standards, a report from the Department of Defense (DOD) inspector general (IG) says.

Such hodgepodge system development could result in the military services spending more than $2 billion to develop financial management systems with no assurance they will function as one integrated, department-wide system, according to the IG report.

The lack of an integrated financial management system may prolong DOD's inability to develop auditable financial statements, according to the Nov. 7 DOD IG report, "Development of the Defense Finance and Accounting Service Corporate Database and Other Financial Management Systems."

DOD's huge number of legacy financial systems feed data to the department's core accounting systems. Because there have been no standards, DOD has developed software that translates the data into the core system. Those translation systems are inefficient and often prone to errors.

The IG report notes that while DOD has been working to develop a financial management enterprise architecture that would provide a framework for developing the feeder systems, the military services have been moving forward with replacing those outdated systems.

"DOD continues to develop [the Defense Finance and Accounting Service Corporate Database] and other financial management systems, which will not establish an integrated financial management system," the IG report states.

The Defense Logistics Agency said that its $1 billion supply chain management system could not work with the Defense Finance and Accounting Service Corporate Database (DCD) and other standard systems, the report says. The Army and the Navy are purchasing enterprise resource planning (ERP) systems to replace the existing systems that feed financial data to the DOD core accounting system.

Those ERP systems use commercial data structures, which are not standardized, the report said.

"Each component cannot solve DOD problems independently and without a plan," the report says. "As a result, current DOD financial management system developments are not coordinated and will not lead to the establishment of an integrated financial management system."

The IG recommends that DOD conduct a review of critical financial management systems to ensure that projects lead to the development of an integrated financial management system.

The IG also recommends that DOD develop a plan to minimize the development of nonstandard systems until an enterprise architecture is completed.

In their comments on the report, DOD officials said that the DOD comptroller has directed that current ERP initiatives be approved before proceeding beyond the prototype stage to ensure that these projects are consistent with DOD's modernization efforts.