More setbacks for DOD financial management reform?

Improving Defense Department bookkeeping has been an ongoing challenge at the Pentagon, and though officials have cautiously touted progress, government watchdogs often report systematic flaws. The latest examination of DOD financial management efforts, a DOD Inspector General report on the Air Force’s enterprise resource planning program, reveals more ongoing struggles.

Though still relatively early in its deployment, the Air Force Defense Enterprise Accounting and Management System (DEAMS) – a broad ERP aimed at modernizing financial management – has run into problems. Most recently, as detailed in the DOD IG report released Sept. 28, an unreliable chart of accounts within DEAMS is hindering auditability.

“DEAMS lacked critical functional capabilities needed to generate accurate and reliable financial management information,” the report stated. “DEAMS data lack validity and reliability.”

The problems appear to be rooted in unauthorized changes and inconsistencies in the system’s data, which are part of a larger problem with deficient monitoring of and policies for modifications to system information. In addition, the DOD IG found the Air Force did not report financial data directly to the Defense Department Reporting System, which is used to standardize and report on DOD-wide bookkeeping.

According to the DOD IG, the setbacks put the Air Force at risk of missing a mandated DOD-wide deadline to prove audit-readiness with a full Statement of Budgetary Resources by the end of fiscal 2014.

The findings seem to contradict some reassurances DOD and Air Force officials gave to a House Armed Services subcommittee just two weeks before the IG report’s release.

On Sept. 14 Marilyn Thomas, principal deputy assistant secretary of the Air Force (financial management and comptroller) testified that the department had made “significant progress” on getting audit-ready. Yet she also acknowledged a number of challenges the service is facing along the way.

“Despite tremendous progress to date, we do face challenges to include the need to improve our legacy systems in order to achieve the accelerated timeline, educate our airmen on what they need to do to achieve audit readiness, and build the skills and experience required to achieve and maintain audit readiness in all of our resource management specialties,” Thomas said in her testimony.

According to Thomas, a critical part of the problem is the quantity of old systems and processes – some dating back decades – that must either be modernized or phased out in favor of new systems. It is even more difficult to make the transition under an accelerated timeline to become audit-ready, which Defense Secretary Leon Panetta pledged last year.

“A primary challenge facing the Air Force is adhering to the schedule for modernizing our legacy information technology systems and deploying the targeted [ERP] systems. Over the last two years, we have identified over 160 different systems that record, track, and report information used to support the financial statements,” Thomas testified. “Our challenge over the next two years is to identify, prioritize and implement cost-effective improvements to these systems so that we can meet the accelerated audit timeline for the Statement of Budgetary Resources.”

That issue is not limited to the Air Force, as other officials stated in the Sept. 14 testimony.

“Although a nice new system sounds a lot easier than a legacy system, really there are a lot more internal controls and complexities,” DOD Deputy Chief Management Officer Elizabeth McGrath said.

For DEAMS, the DOD IG recommended that Thomas and her office validate the corrective actions already under way before further fielding the system, which is being rolled out in a demonstration at Scott Air Force Base. The IG also recommended DEAMS managers implement better monitoring controls that identify and fix data inconsistencies. According to the report, Thomas agreed to the recommendations.