Does Defense need a high-level financial manager?

The Defense Department's goal of clean financial audits by the end of fiscal 2007 is a challenging but not an impossible task, DOD's chief financial officer said.

The Defense Department's financial woes have been well documented, but the department is now cleaning up its financial statements, said Dov Zakheim, department CFO, testifying March 23 before the Senate Armed Services Committee's Subcommittee on Readiness and Management Support.

Two years ago, testifying before the same subcommittee, Zakheim set a goal of clean financial audits by the end of fiscal 2004, a deadline since pushed back another three years.

Officials last spring unveiled the initial version of DOD financial management architecture, designed to break down inefficient stovepipe processes and systems.

"Our last completed inventory identified about 2,300 DOD business systems," Zakheim told senators. "Our ongoing efforts to identify all DOD business systems indicate the real total is a much higher number -- perhaps twice as high."

Even after the department's financial management enterprise architecture is in place, it will probably be years before officials from the General Accounting Office will be able to audit the department's books, government officials say.

Still, creating the department's financial management architecture is the first step toward fixing the department's financial mess, defense officials say. Then the department must implement systems conforming to that management framework.

One of the main problems facing the department is an inability to focus on financial management while doing military jobs, such as fighting wars, GAO Comptroller General David Walker said. He suggested a possible solution would be a high-level, term-appointed office with the sole responsibility for overseeing the day-to-day workings of financial management.

"We're talking about an individual who would have specified, statutory responsibility, specified qualifications and a time appointment of, let's say, a five- to seven-year period of time, and therefore would be there hopefully long enough to see through some of these challenging issues," he said.

Walker suggested any individual being appointed to that post would need to have seniority on what the government calls "level two," that is, the equivalent of an assistant secretary.

"Frankly, Dov [Zakheim, Deputy Defense] Secretary [Paul] Wolfowitz, and [Defense] Secretary [Donald] Rumsfeld and other key players have more than full-time jobs," Walker said. "And what happens is people focus on policy issues -- the day to day issues of this large, complex enterprise. We don't have somebody focused for a long enough period of time solely on the business transformation efforts."

Zakheim said the Defense Business Board -- 20 private sector business executives who advise Rumsfeld and other senior DOD leaders on business management issues -- recently came to the same conclusion. The possibility of creating such a position is currently being reviewed by the Defense secretary's office.

Zakheim will be leaving his office on April 15. President Bush recently nominated Tina Jonas, former deputy undersecretary of Defense for financial management and current chief financial officer and assistant director of the FBI's finance division to replace Zakheim.