Summary
Since the first financial statement audit was attempted at a major Department of Defense (DOD) component over 20 years ago, GAO and DOD auditors have continued to report significant weaknesses in the department's ability to provide timely, reliable, consistent, and accurate information for management analysis, decision-making, and reporting. DOD has undertaken a number of initiatives over the years, such as the Financial Improvement Initiative in 2003, to improve the department's business operations, including financial management, and achieve clean financial statement audit opinions. However, these initiatives have met with limited success. In 2005, the DOD Comptroller established the DOD Financial Improvement and Audit Readiness (FIAR) Directorate to manage DOD-wide financial improvement efforts and to integrate those efforts with transformation activities, such as those outlined in the Enterprise Transition Plan, across the department. The components report accomplishments and progress against planned corrective actions to the FIAR Directorate for reporting in the FIAR Plan. Congress asked GAO to analyze the department's FIAR Plan to identify any areas where improvements are needed to enhance the plan's effectiveness as a management tool for guiding, monitoring, and reporting on the department's efforts to identify and resolve its financial management weaknesses and achieve financial statement auditability.
In 2004, we reported that DOD lacked a comprehensive and integrated strategic plan with key milestones, measures/metrics, accountability mechanisms, or cost estimates for achieving financial statement auditability. According to best practices, a strategic plan should include the following key elements: (1) provide a comprehensive view of performance, including the establishment of a baseline of current operational functions, capabilities, and performance against which progress toward a defined goal or objective can be measured; (2) align goals and measures with departmentwide goals, and cascading goals and measures to lower organizational levels; (3) establish timelines and demonstrate results; (4) assign accountability for achieving results; and (5) link resource needs to performance. While the FIAR Plan identifies three goals for improving DOD financial information and achieving audit readiness, it does not contain the key elements of a strategic plan that we have previously reported as necessary for successful DOD business transformation. During our review of DOD's September 2008 FIAR Plan, we identified the following areas that the department needs to address to improve the FIAR Plan as a strategic and management tool: (1) clear guidance is needed in developing and implementing improvement efforts; (2) no clear baseline exists against which incremental progress can be measured; (3) linkages between FIAR Plan goals and corrective actions and reported accomplishments are not always clear; (4) clear results-oriented metrics for measuring and reporting incremental progress are needed, and (5) accountability is not clearly defined or assigned and resources budgeted and consumed are not identified. We also identified recent actions the department is taking to begin to address many of the issues we have identified above.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Asif A. Khan
Government Accountability Office: Financial Management and Assurance
(202) 512-9869
Recommendations for Executive Action
Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to issue guidance to standardize the development of the FIPs, including their format and frequency, to aid in ensuring the (1) sufficiency of corrective actions through the identification of performance gaps in corrective actions planned within and between components; (2) sharing of successful methodologies developed and implemented to address a financial management weakness or achieve a defined capability; and (3) reliability of progress reporting, including clear linkages and descriptions of how the corrective action, individually or collectively contributes to achievement of a defined capability or goal by an estimated milestone date established for each component and the department.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to establish a baseline of financial management capabilities and weaknesses at the component level, and ultimately at the department level, that can be used to (1) obtain a clear understanding of needed improvements in DOD's or a component's policies, processes and controls, systems and data, and human capital that are needed to address these weaknesses and support relevant management assertions (i.e., existence or occurrence, completeness, valuation, rights and obligations, and presentation and disclosure) regarding the reliability of reported financial information; (2) identify gaps in planned corrective actions; and (3) establish a realistically attainable date, by component and at the department level, for achieving financial statement auditability.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to establish clear results-oriented metrics within the FIAR Plan and component FIPs for measuring and reporting quantifiable incremental results toward achieving defined financial management capabilities, addressing a specific weakness, and/or achieving FIAR Plan goals by an estimated milestone date established for each component and the department.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to describe in the FIAR Plan the oversight roles and responsibilities, if any, of the DOD CMO and military service CMOs over FIAR Plan and FIP improvement efforts, as appropriate.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to assign accountability in the FIAR Plan for achieving results to specific offices or organizations (1) within the department, such as the Property and Equipment Policy Office within the Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics); and/or (2) at lower levels within a DOD component, such as the Deputy Chief of Staff for Logistics, Installations, and Mission Support within the Air Force.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to provide visibility to DOD management and the Congress, within each FIAR Plan update, of resources budgeted and spent to address a specific weakness or achieve specific incremental improvements in the department's financial management capabilities.
Agency Affected: Department of Defense
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
