oversight

DOD Financial Management: Implementation Weaknesses in Army and Air Force Business Systems Could Jeopardize DOD's Auditability Goals

Published by the Government Accountability Office on 2012-02-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States Government Accountability Office

GAO             Report to Congressional Requesters




February 2012
                DOD FINANCIAL
                MANAGEMENT
                Implementation
                Weaknesses in Army
                and Air Force
                Business Systems
                Could Jeopardize
                DOD’s Auditability
                Goals




GAO-12-134
                                            February 2012

                                            DOD FINANCIAL MANAGEMENT
                                            Implementation Weaknesses in Army and Air Force
                                            Business Systems Could Jeopardize DOD’s
                                            Auditability Goals
Highlights of GAO-12-134, a report to
congressional requesters




Why GAO Did This Study                      What GAO Found
The Department of Defense (DOD) has         DOD has invested billions of dollars and will invest billions more to develop and
stated that successful implementation       implement its ERPs. The ERPs play a key role in DOD’s goal of audit readiness
of its enterprise resource planning         by fiscal year 2017. Furthermore, in light of the Secretary of Defense’s decision
(ERP) systems is critical to DOD’s          that the Statement of Budgetary Resources is to be audit ready by fiscal year
auditability goals. An ERP is an            2014, it is critical that DOD effectively implement the ERPs to support its
automated system that performs a            auditability goals.
variety of business-related functions.
The National Defense Authorization          Assessments by independent agencies of the Army’s General Fund Enterprise
Act for Fiscal Year 2010 mandates that      Business System (GFEBS) and the Global Combat Support System and the Air
DOD be able to validate its financial       Force’s Defense Enterprise and Accounting Management System (DEAMS) and
statements as audit ready by                Expeditionary Combat Support System identified operational problems, such as
September 30, 2017. GAO has                 deficiencies in data accuracy, inability to generate auditable financial reports, and
previously reported that DOD has not        the need for manual workarounds. Further, according to DFAS users, GFEBS
effectively employed acquisition            and DEAMS did not provide all expected capabilities in accounting and decision
management controls to help ensure          support. For example:
that the ERPs deliver the promised
capabilities on time and within budget.
GAO was asked to determine issues           •   Approximately two-thirds of invoice and receipt data must be manually
being encountered by the Army and               entered into GFEBS from the invoicing and receiving system due to interface
the Air Force in the implementation of          problems. Army officials explained that the primary cause of the problem is
selected ERPs. GAO reviewed                     that the interface specification that GFEBS is required by DOD to use does
independent assessments and reports             not provide the same level of functionality as the interface specification used
and interviewed the systems’ users              by the legacy systems. At the time of our review, Army officials stated that
and program management office                   they are working with DOD to resolve the problem, but no time frame for
officials.                                      resolution had been established.
What GAO Recommends
GAO is making five recommendations          •   DEAMS cannot produce the monthly accounts receivable aging report as
to the Secretary of Defense to ensure           intended. The DEAMS Financial Management Office is aware of the
the correction of system problems prior         problems and is in the process of resolving them. However, at the time of our
to further system deployment, including         review, no timetable had been set for the problems’ resolution.
user training. DOD concurred with four
and partially concurred with one of the
recommendations and described its           DOD oversight authority has limited the deployment of GFEBS and DEAMS
efforts to address them.                    based upon the results of the independent assessments. Continued monitoring of
                                            DOD ERPs is essential to identify system weaknesses and to help ensure that
                                            the systems provide the promised capabilities. Without timely and effective
                                            corrective action, the department is at risk of making investment and system
                                            deployment decisions that may not provide the desired results—improvements in
                                            the department’s business operations.
                                            According to DFAS personnel, the training they received for GFEBS and DEAMS
                                            did not fully meet their needs. DFAS personnel informed us that the training
                                            focused on an overview of GFEBS and DEAMS and how the systems were
                                            supposed to operate. While this was beneficial in identifying how GFEBS and
                                            DEAMS were different from the existing legacy systems, the training focused too
                                            much on concepts rather than the skills needed for DFAS users to perform their
View GAO-12-134. For more information,      day-to-day operations.
contact Asif A. Khan at (202) 512-9869 or
khana@gao.gov.

                                                                                     United States Government Accountability Office
Contents


Letter                                                                                  1
               Objective, Scope, and Methodology                                        2
               Background                                                               4
               Deficiencies in ERP Capabilities and Implementation Could
                 Jeopardize DOD’s Progress toward Accountability and
                 Auditability                                                           7
               Conclusions                                                             19
               Recommendations for Executive Action                                    20
               Agency Comments and Our Evaluation                                      21

Appendix I     Comments from the Department of Defense                                 25



Appendix II    Six ERPs Not Discussed In This Report                                   30



Appendix III   GAO Contacts and Staff Acknowledgments                                  32




               Page i                                  GAO-12-134 DOD Financial Management
Abbreviations

AFOTEC            Air Force Operational and Test Evaluation Center
ATEC              Army Test and Evaluation Command
BSM               Business System Modernization
DAI               Defense Agencies Initiative
DCMO              Deputy Chief Management Officer
DEAMS             Defense Enterprise Accounting and Management System
DFAS              Defense Finance and Accounting Service
DLA               Defense Logistics Agency
DOD               Department of Defense
EBS               Enterprise Business System
ECSS              Expeditionary Combat Support System
ERP               enterprise resource planning
FFMIA             Federal Financial Management Improvement Act of 1996
FIAR              Financial Improvement and Audit Readiness
FMO               Financial Management Office
GCSS-Army         Global Combat Support System-Army
GCSS-MC           Global Combat Support System-Marine Corps
GFEBS             General Fund Enterprise Business System
LMP               Logistics Modernization Program
MDA               Milestone Decision Authority
Navy ERP          Navy Enterprise Resource Planning
PMO               program management office
SFIS              Standard Financial Information Structure




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Page ii                                            GAO-12-134 DOD Financial Management
United States Government Accountability Office
Washington, DC 20548




                                   February 28, 2012

                                   Congressional Requesters

                                   The Department of Defense’s (DOD) business systems 1 modernization
                                   program has been on GAO’s high-risk list 2 since 1995 because of the size
                                   and complexity of DOD, the large and complex systems to be developed,
                                   and the significant efforts needed to establish effective and efficient
                                   business systems departmentwide. DOD’s business systems
                                   modernization entails purchasing, designing, and implementing
                                   comprehensive, integrated business systems for managing its resources,
                                   with the concurrent elimination of hundreds of legacy systems. These
                                   comprehensive business systems are commonly referred to as enterprise
                                   resource planning (ERP) systems. 3 According to DOD, the successful
                                   implementation of the ERPs is critical for addressing long-standing
                                   weaknesses in financial management and for resolving weaknesses in
                                   other high-risk areas such as business systems modernization and supply
                                   chain management. 4 The department has noted that the successful
                                   implementation of ERPs is essential for DOD to be able to validate that its
                                   financial statements are audit ready by September 30, 2017, as
                                   mandated by the National Defense Authorization Act for Fiscal Year
                                   2010. 5 In light of the Secretary of Defense’s recent decision that the




                                   1
                                    DOD excludes from its business systems those designated as national security systems
                                   under section 2222(j) of Title 10, United States Code. National security systems are
                                   information systems where the function, operation, or use of which involves intelligence
                                   activities, cryptologic activities related to national security, command and control of military
                                   forces, equipment that is an integral part of a weapon or weapon system or is critical to
                                   the direct fulfillment of military or intelligence missions (unless used for routine
                                   administrative and business applications), or is protected at all times by classification
                                   procedures in the interest of national defense or foreign relations, as authorized by law or
                                   executive order.
                                   2
                                   GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).
                                   3
                                    An ERP solution is an automated system using commercial off-the-shelf (COTS) software
                                   consisting of multiple, integrated functional modules that perform a variety of business-
                                   related tasks such as general ledger accounting, payroll, and supply chain management.
                                   4
                                   These areas were designated as high risk in 1995 and 1990, respectively.
                                   5
                                   Pub. L. No. 111-84, § 1003(a), (b), 123 Stat. 2190, 2439-40 (Oct. 28, 2009).




                                   Page 1                                                GAO-12-134 DOD Financial Management
                        Statement of Budgetary Resources 6 is to be audit ready by fiscal year
                        2014, it is critical that the department effectively implement the systems to
                        support its auditability goals.

                        Over the years we have frequently reported 7 that the department has not
                        effectively employed acquisition management controls to help ensure that
                        ERPs deliver the promised capabilities on time and within budget. Delays
                        in the successful implementation of ERPs have extended the funding for
                        existing duplicative, stovepiped systems longer than anticipated.
                        Continued implementation problems can erode savings that were
                        estimated to accrue to DOD as a result of modernizing its business
                        systems and thereby reduce funds that could be used for other DOD
                        priorities. Delays in the successful implementation of the ERPs can also
                        have a negative impact on the department’s business operations.


                        As requested, this report provides information to support your oversight of
Objective, Scope, and   DOD’s progress in modernizing its business systems to address long-
Methodology             standing financial management weaknesses and ultimately to transform
                        its business operations. As agreed with your offices, our objective was to
                        identify issues being encountered by the Army and the Air Force in the
                        implementation of selected ERPs. Further, as agreed with your offices,
                        we selected the Army’s General Fund Enterprise Business System
                        (GFEBS) and the Global Combat Support System (GCSS-Army), and the
                        Air Force’s Defense Enterprise Accounting and Management System
                        (DEAMS) and the Expeditionary Combat Support System (ECSS),



                        6
                         The Statement of Budgetary Resources is designed to provide information on authorized
                        budgeted spending authority and links to the Budget of the United States Government
                        (President’s Budget), including budgetary resources, availability of budgetary resources,
                        and how obligated resources have been used.
                        7
                         GAO, Defense Logistics: Actions Needed to Improve Implementation of the Army
                        Logistics Modernization Program, GAO-10-461 (Washington, D.C.: Apr. 30, 2010); DOD
                        Business Systems Modernization: Important Management Controls Being Implemented on
                        Major Navy Program, but Improvements Needed in Key Areas, GAO-08-896 (Washington,
                        D.C.: Sept. 8, 2008); DOD Business Transformation: Air Force’s Current Approach
                        Increases Risk That Asset Visibility Goals and Transformation Priorities Will Not Be
                        Achieved, GAO-08-866 (Washington, D.C.: Aug. 8, 2008); DOD Business Systems
                        Modernization: Key Marine Corps System Acquisition Needs to Be Better Justified,
                        Defined, and Managed, GAO-08-822 (Washington, D.C.: July 28, 2008); and DOD
                        Business Transformation: Lack of an Integrated Strategy Puts the Army’s Asset Visibility
                        System Investments at Risk, GAO-07-860 (Washington, D.C.: July 27, 2007).




                        Page 2                                             GAO-12-134 DOD Financial Management
because of the concerns discussed in our October 2010 report, 8 and the
importance of these systems to the Army, the Air Force, and the
department’s audit-readiness goals.

To address our objective, we (1) reviewed the assessment reports on
GFEBS and GCSS-Army that were prepared by the Army Test and
Evaluation Command (ATEC) and the assessment reports on DEAMS
and ECSS that were prepared by the Air Force Operational Test and
Evaluation Center (AFOTEC); (2) interviewed system users from the
Defense Finance and Accounting Service (DFAS) about the functionality
provided by the selected ERPs; (3) reviewed Core Financial System
Requirements to identify system requirements for measuring systems
capabilities; and (4) met with DOD officials in offices of the DOD Deputy
Chief Management Officer (DCMO) 9 and the Army and the Air Force
Chief Management Officers, and the project management office (PMO) of
the four selected ERPs. In regard to GCSS-Army and ECSS, DFAS
officials told us they had just started using the systems for financial
reporting purposes, and they were not in a position to evaluate GCSS-
Army or ECSS effectiveness in performing day-to-day tasks from a user
point of view. Further, we did not separately evaluate these systems, but
rather, reviewed the evaluations that had been conducted by ATEC and
AFOTEC. Most of the financial information in this report was obtained
through interviews or responses to our questions from knowledgeable
military service and PMO officials for the four selected ERPs, and we did
not perform any separate evaluations of these systems, but rather,
reviewed the evaluations that had been conducted by ATEC and
AFOTEC.

We conducted this performance audit from October 2010 through
February 2012 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our


8
 GAO, DOD Business Transformation: Improved Management Oversight of Business
System Modernization Efforts Needed, GAO-11-53 (Washington, D.C.: Oct. 7, 2010).
9
 The Deputy Chief Management Officer of the department assists the Chief Management
Officer (CMO), who is responsible for strategic planning, performance management,
process improvement, and defense business system oversight. The individual military
services each have a CMO and DCMO, as well.




Page 3                                          GAO-12-134 DOD Financial Management
                    findings and conclusions based on our audit objective. We requested
                    comments on a draft of this report from the Secretary of Defense or his
                    designee. We received written comments from the Department of
                    Defense Deputy Chief Management Officer, which are reprinted in
                    appendix I.


                    DOD is one of the largest and most complex organizations in the world.
Background          For fiscal year 2012, the budget requested for the department was
                    approximately $671 billion—$553 billion in discretionary budget authority
                    and $118 billion to support overseas contingency operations. To support
                    its operations, DOD performs an assortment of interrelated and
                    interdependent business functions, such as logistics, procurement, health
                    care, and financial management. As we have previously reported, the
                    DOD systems environment that supports these business functions has
                    been overly complex and error prone, characterized by (1) little
                    standardization across the department, (2) multiple systems performing
                    the same tasks, (3) the same data stored in multiple systems, and (4) the
                    need for data to be entered manually into multiple systems. For fiscal
                    year 2012, the department requested about $17.3 billion to operate,
                    maintain, and modernize its business systems. DOD has reported that it
                    relies on 2,258 business systems, including 335 financial management
                    systems, 709 human resource management systems, 645 logistics
                    systems, 243 real property and installation systems, and 281 weapon
                    acquisition management systems.


DOD’s ERP Efforts   As we reported in our October 2010 report, 10 DOD has identified 10 ERPs
                    as critical to transforming the department’s business operations and
                    addressing some of its long-standing weaknesses in financial
                    management, business systems modernization, and supply chain
                    management. The department has estimated that the successful
                    implementation of these 10 ERPs will replace over 500 legacy systems
                    that reportedly cost hundreds of millions of dollars to operate annually.
                    We further reported that, based upon data provided by DOD, 6 of the 10
                    ERPs DOD had identified as critical to transforming its business
                    operations had experienced schedule delays ranging from 2 to 12 years,
                    and 5 had incurred cost increases totaling an estimated $6.9 billion. The 4



                    10
                     GAO-11-53.




                    Page 4                                    GAO-12-134 DOD Financial Management
ERPs we reviewed for this report are briefly described below. The 6
ERPs 11 we did not review for this report are described in appendix II.

•    GFEBS was initiated in October 2004 and is intended to support the
     Army’s standardized financial management and accounting practices
     for the Army’s general fund, 12 with the exception of the Army Corps of
     Engineers, which will continue to use its existing financial system, the
     Corps of Engineers Financial Management System. 13 GFEBS is
     intended to allow the Army to share financial, asset, and accounting
     data across the active Army, the Army National Guard, and the Army
     Reserve. The Army estimates that when fully implemented, GFEBS
     will be used to control and account for about $140 billion in annual
     spending. According to the Army DCMO, GFEBS will be fully
     deployed to all intended users by July 2012. According to the Army,
     the GFEBS life-cycle cost estimate 14 is approximately $1.3 billion. As
     of September 30, 2011, the Army reported that it had obligated
     approximately $770 million and expended $684 million for GFEBS.

•    GCSS-Army was initiated in December 2003 15 and is expected to
     integrate multiple logistics functions by replacing numerous legacy
     systems and interfaces. The system will provide tactical units with a
     common authoritative source for financial and related nonfinancial
     data, such as information related to maintenance and transportation of
     equipment. The system is also intended to help the Army achieve total



11
 The six ERPs are Army—Logistics Modernization Program (LMP); Navy—Navy
Enterprise Resource Planning System (Navy ERP) and Global Combat Support System-
Marine Corps (GCSS-MC); Defense—Service Specific Integrated Personnel and Pay
Systems; Defense Agencies Initiative (DAI); and Defense Logistics Agency—Enterprise
Business System (EBS).
12
  An agency’s general fund accounts are those accounts in the U.S. Treasury holding all
federal money administered by an agency that is not allocated by law to any other fund
account.
13
  According to the GFEBS PMO, once the system is fully operational, the Army will assess
the feasibility of GFEBS becoming the system of record for the Corps of Engineers.
14
  A life-cycle cost estimate provides an accounting of all resources and associated cost
elements required to develop, produce, deploy, and sustain a particular program. The life-
cycle cost estimate encompasses all past, present, and future costs for every aspect of
the program, regardless of funding source.
15
  Prior to the initiation of the current ERP effort, the Army had been developing custom
software since May 1997.




Page 5                                              GAO-12-134 DOD Financial Management
     asset visibility. 16 GCSS-Army will manage over $49 billion in annual
     spending by the active Army, National Guard, and the Army Reserve.
     The May 2011 Financial Improvement and Audit Readiness (FIAR)
     Plan notes that the full-deployment 17 date has been changed from the
     fourth quarter of fiscal year 2015 to the fourth quarter of fiscal year
     2017 in order to reduce the operational risk of having tactical units in
     training and combat in a mixed logistics information systems
     environment. In August 2011, the program received approval to be
     placed into limited deployment to support operational testing. 18 The
     Army estimates the life-cycle cost to be approximately $4.2 billion. As
     of September 30, 2011, the Army reported that it had obligated
     approximately $890 million and expended $804 million for GCSS-
     Army.

•    DEAMS was initiated in August 2003 and is intended to provide the
     Air Force with the entire spectrum of financial management
     capabilities, including collections, commitments and obligations, cost
     accounting, general ledger, funds control, receipts and acceptance,
     accounts payable and disbursement, billing, and financial reporting for
     the general fund. According to Air Force officials, when DEAMS is
     fully operational, it is expected to maintain control and accountability
     for about $160 billion in annual spending. The Air Force anticipates
     that DEAMS will be fully deployed by July 2016. Air Force officials
     estimate the DEAMS life-cycle cost estimate to be approximately
     $2 billion. As of September 30, 2011, the Air Force reported that it had
     obligated approximately $315 million and expended $301 million for
     DEAMS.




16
 DOD defines total asset visibility as the capability to provide timely, accurate information
on the location, movement, status or condition, and identity of units, personnel,
equipment, and supplies DOD-wide, and having the capability to act on that information.
17
  The National Defense Authorization Act for Fiscal Year 2010, Pub. L. No. 111-84, div. A,
§ 841, 123 Stat. 2190, 2418 (Oct. 28, 2009), directed that the term “full operational
capability” be changed to “full deployment.” Full deployment means, with respect to a
major automated information system program, the fielding of an increment of the program
in accordance with the terms of a full deployment decision—the final decision made by the
Milestone Decision Authority authorizing an increment of the program to deploy software
for operational use.
18
  The program received Milestone C approval, which authorizes entry of the system into
the production and deployment phase or into limited deployment in support of operational
testing.




Page 6                                               GAO-12-134 DOD Financial Management
                       •    ECSS was initiated in January 2004 and is intended to provide the Air
                            Force with a single, integrated logistics system—including
                            transportation, supply, maintenance and repair, engineering and
                            acquisition—for both the Air Force’s general and working capital
                            funds. ECSS is also intended to provide the financial management
                            and accounting functions for the Air Force’s working capital fund
                            operations. When fully implemented, ECSS is expected to control and
                            account for about $122 billion of inventory. As noted in the May 2011
                            FIAR Plan, the full-deployment decision and the full deployment for
                            the first release only are scheduled for the first and fourth quarters of
                            fiscal year 2013. According to the May 2011 FIAR Plan, the two
                            events had originally been scheduled for the third quarter of fiscal
                            year 2012 and the third quarter of fiscal year 2013. According to Air
                            Force officials, the ECSS life-cycle cost estimate is approximately
                            $5.2 billion. As of September 30, 2011, the Air Force reported that it
                            had obligated approximately $986 million and expended $876 million
                            for ECSS.

                       Deficiencies in the capability of GFEBS, GCSS-Army, DEAMS, and
Deficiencies in ERP    ECSS to perform essential functions as intended at sites of deployment
Capabilities and       have impaired the systems’ efficiency and effectiveness in accounting for
                       business transactions and reporting reliable financial information.
Implementation Could   Independent assessments conducted by ATEC 19 and AFOTEC 20 have
Jeopardize DOD’s       identified operational problems with each system. The reported problems
Progress toward        include areas such as data quality, data conversion, system interfaces,
                       and training. DFAS users of GFEBS and DEAMS also told us they were
Accountability and     having difficulties in using the systems to perform their day-to-day
Auditability           operations. The problems identified by DFAS users include
                       interoperability deficiencies between legacy systems and the new ERP
                       systems, lack of query and ad hoc reporting capabilities, and reduced
                       visibility for tracing transactions to resolve accounting differences. To



                       19
                         ATEC was established in October 1999. It is responsible for planning, integrating, and
                       conducting independent operational testing, evaluations, and assessments of acquisition
                       programs to provide essential information to decision makers. ATEC develops the
                       strategy, test design and evaluations to address operational effectiveness, suitability and
                       survivability of systems.
                       20
                         AFOTEC was established in January 1974 as the Air Force’s independent test center
                       responsible for testing, under operationally realistic conditions, new systems being
                       developed for Air Force and multiservice use. Test teams conduct tests at selected sites;
                       collect, analyze and evaluate the data; and prepare formal reports.




                       Page 7                                              GAO-12-134 DOD Financial Management
                            compensate, DFAS users were relying on manual workarounds to enter
                            data into the ERPs, thus adversely impacting operational efficiency. Using
                            manual workarounds to accomplish day-to-day tasks falls far short of the
                            vision DOD has for its business system investments, which is to improve
                            the efficiency and effectiveness of its support operations. Army and Air
                            Force officials told us that they have plans to address these issues, and
                            the Army has plans to validate the audit readiness of GFEBS in a series
                            of independent auditor examinations of selected business processes and
                            controls in the GFEBS environment over the next several fiscal years.

                            While we were told that the Army and the Air Force have corrective
                            actions underway to address identified deficiencies, specific time lines
                            have not been developed for purposes of tracking and monitoring
                            progress. Monitoring the status of the corrective actions, along with the
                            overall progress of DOD ERPs, is essential to help ensure that the
                            systems are implemented on schedule and within budget, and provide the
                            promised capabilities. We have previously reported that if a system is
                            deployed and not providing users with the intended capabilities, it can
                            have an adverse effect on agency operations. 21

                            Implementation efforts for both GFEBS and DEAMS have been impacted
                            by inadequate training that did not meet the needs of users. The system
                            training that DFAS users received, officials told us, presented an overview
                            of how the systems were supposed to operate rather than the training
                            necessary for users to perform day-to-day operations. According to DFAS
                            officials, the training was not user role-based and lacked instructions for
                            data mining and managerial reporting.


Independent Assessments     Independent testing and evaluation by ATEC and AFOTEC have
and DFAS Users Have         identified operational deficiencies in GFEBS, GCSS-Army, DEAMS, and
Identified Implementation   ECSS that impaired the systems’ efficiency and effectiveness in
                            accounting for business transactions and reporting reliable financial
Problems with Army and      information. Further, at the time of our review, GFEBS and DEAMS were
Air Force ERPs              not providing DFAS users with the expected capabilities in accounting,
                            management information, and decision support. According to the Office of


                            21
                             GAO, Defense Logistics: Actions Needed to Improve Implementation of the Army
                            Logistics Modernization Program, GAO-10-461 (Washington, D.C.: Apr. 30, 2010); and
                            Army Depot Maintenance: Ineffective Oversight of Depot Maintenance Operations and
                            System Implementation Efforts, GAO-05-441 (Washington, D.C.: June 30, 2005).




                            Page 8                                          GAO-12-134 DOD Financial Management
        Federal Financial Management, “Core Financial System Requirements,” a
        system must be able to provide consistent, standardized information for
        program managers, financial managers, agency executives, and
        oversight organizations.

GFEBS   According to the Army, when completed, GFEBS will be operational at
        200 locations and will have approximately 79,000 users. Currently,
        GFEBS is deployed to about 160 locations and is being used by
        approximately 38,000 individuals.

        In December 2009, 22 ATEC reported on deficiencies in GFEBS Release
        1.3 23 data accuracy, reliability, and timeliness. More specifically, the
        report noted that Army “installations were certifying year-end data with
        caveats and notes related to inaccurate, incomplete, and missing data.”
        Furthermore, the report noted that “because of incomplete or not
        implemented business processes, users at times, executed their mission
        using the workarounds of the legacy systems that the GFEBS is intended
        to replace or subsume.” The report recommended that the deployment of
        GFEBS be limited until the problems are resolved and the corrective
        actions have been validated by ATEC. According to the PMO, a plan of
        action and milestones has been developed in conjunction with ATEC, to
        address the issues. The PMO noted that GFEBS is undergoing an
        additional operational test and evaluation limited user test, 24 and at the
        conclusion of the testing, a determination will be made whether the ATEC
        issues have been addressed.

        Further, in November 2010, ATEC reported that while GFEBS Release
        1.4.1 successfully executed core business mission transactions for every
        functional area, except funds management, the system did not meet



        22
          U.S. Army Test and Evaluation Command, Operational Test Agency Evaluation Report
        for the General Fund Enterprise Business System (Alexandria, Va.: Dec. 16, 2009).
        23
         The GFEBS Release 1.3 will replace the Standard Army Finance Information System
        and the Standard Operations and Maintenance Army Research and Development System.
        24
          The Limited User Test (LUT) addresses a limited number of operational issues. The LUT
        is a user test conducted that does not address all of the effectiveness, suitability, and
        survivability issues and is therefore limited in comparison to an initial operational test (IOT)
        that must address all effectiveness, suitability, and survivability issues. The LUT may be
        conducted to provide a data source for system assessments in support of the Milestone C
        decision and for reviews conducted before IOT. The LUT may be conducted to verify fixes
        to problems discovered in IOT that must be verified prior to fielding.




        Page 9                                                GAO-12-134 DOD Financial Management
standards for generating auditable financial management reports and
period-end data. 25 The report further noted that overall GFEBS’s
limitations significantly affected users’ abilities to perform their daily tasks
and that GFEBS did not improve accountability and oversight of
budgetary resources. The report also stated that GFEBS’s reporting
capabilities, including ad hoc query reports, were inadequate and
unreliable. For example, operational testing found that GFEBS accurately
captured user data entries, but internal data processing did not always
reflect the original input. There were other cases where missing data
caused delays and rework for users, as well as many workarounds, which
need programming improvements to GFEBS. According to the Milestone
Decision Authority (MDA), 26 ATEC will conduct continuous evaluation to
validate any remaining problems and additional operational testing for
future releases.

To help identify operational issues with GFEBS, we met with DFAS
personnel who use the system in performing their daily duties and
responsibilities. According to DFAS, the backlog of unresolved GFEBS
trouble tickets 27 increased from about 250 in September 2010 to
approximately 400 in May 2011. Most of the problems are related to
areas such as system security, the entitlement process, unmatched
disbursements, and cash reconciliation with the Fund Balance with
Treasury. According to Army officials, this increase in the number of
tickets was not unexpected because the number of users and the number
of transactions being processed by the system has increased, and the
Army and DFAS are taking steps to address the problems identified by
DFAS. However, the Army had not developed a specific time frame for
completion of the actions.

DFAS users stated that approximately two-thirds of invoice and receipt
data must be manually entered into GFEBS from the invoicing and


25
  U.S. Army Test and Evaluation Command, Operational Test Agency (OTA) Follow-on
Evaluation Report (OFER) for the General Fund Enterprise Business System (GFEBS)
(Alexandria, Va.: Nov. 19, 2010).
26
  The Milestone Decision Authority is the senior DOD official who has overall authority to
approve entry of an acquisition program into the next phase of the acquisition process and
is accountable for cost, schedule, and performance reporting, including congressional
reporting.
27
 Trouble tickets represent user questions and problems with transactions or system
performance that have not been resolved.




Page 10                                            GAO-12-134 DOD Financial Management
receiving system (i.e., Wide Area Work Flow) due to interface problems. 28
DFAS personnel told us that manual data entry will eventually become
infeasible due to increased quantities of data that will have to be manually
entered as GFEBS is deployed to additional locations. Army officials
explained that the primary cause of the problem is that the interface
specification that GFEBS is required to use by the department does not
provide the same level of functionality as the interface specification that
the legacy systems are allowed to use. Army officials stated they are
working with DOD to resolve the problem. Again, the Army had not
developed a specific time frame for completion of the corrective actions.

DFAS users also noted that GFEBS does not provide users the ability to
run ad hoc queries or to research data to resolve problems or answer
questions. 29 The Army has recognized this limitation and is currently
developing a system enhancement that Army officials expect will better
support the users’ needs. However, a specific time frame for completion
of corrective actions had not yet been developed. At the time of our
review, some reports were created by extracting the data from GFEBS
and downloading reports into applications or copying the data into
spreadsheets before analyses can be performed. This workaround
increases the difficulty in performing some account analyses such as
aging analysis. More specifically, DFAS officials told us that the Army has
initiated a pilot providing DFAS with 30 enhanced licenses to strengthen
connectivity to GFEBS and permit users to pull moderate quantities of
data without the system’s timing out. However, the limited number of
licenses does not fully satisfy DFAS user needs and cannot sustain future
GFEBS deployments which will increase the number of transactions.

Another interoperability deficiency is the manual transfer of accounts
receivable transactions from legacy financial systems into GFEBS. 30


28
  Office of Federal Financial Management, Core Financial System Requirements
(Washington, D.C.: January 2006), states that a core financial system must deliver
workflow capabilities including integrated workflow, workflow process definition, and
processing exception notices.
29
  Office of Federal Financial Management, Core Financial System Requirements
(Washington, D.C.: January 2006), states that a core financial system must provide an
integrated ad hoc query capability to support agency access to and analysis of system-
maintained financial data.
30
  Office of Federal Financial Management, Core Financial System Requirements
(Washington, D.C.: January 2006), states that a core financial system must be able to
provide interoperability.




Page 11                                             GAO-12-134 DOD Financial Management
            According to DFAS officials, this problem is the result of the relevant
            business processes not being incorporated within GFEBS. Although the
            Army has debt management pilots under way, debt collection will
            continue to be nonoptimal until the functionality is developed and
            operational within GFEBS. DFAS officials were not certain whether or
            when the functionality would be incorporated.

GCSS-Army   According to the Army DCMO, when fully deployed, GCSS-Army will be
            operational at 379 locations and will have approximately 170,000 users.
            Currently, GCSS-Army is undergoing initial operational test and
            evaluation activities that began in March 2011 and will continue through
            October 2011 at Ft. Bliss, Texas.

            In April 2011, 31 ATEC reported on the results of its user testing of the
            GCSS-Army Release 1.1. 32 The report noted that its primary purpose was
            to ascertain whether the system has the potential to be operationally
            effective, suitable, and survivable. 33 The report noted that the limited
            testing found that logistics information processing is near real time and
            that supervisor-level users were satisfied and expressed confidence in
            the accuracy of the transactions processed by the system. However, the
            report also noted that at times the users needed to implement manual
            workarounds to accomplish their mission. Further, at the time of the
            review, ATEC found that GCSS-Army was not compliant with certain
            standards in DOD’s business enterprise architecture, such as DOD’s
            Standard Financial Information Structure (SFIS), 34 or requirements of the


            31
              U.S. Army Test and Evaluation Command, Operational Test Agency (OTA) Milestone
            Assessment Report (OMAR) for the Global Combat Support System (GCSS-Army)
            (Aberdeen Proving Ground, Md.: Apr. 13, 2011).
            32
               GCSS-Army Release 1.1 functionality includes maintenance, supply, property book, and
            finance.
            33
              The term “operationally effective” is the overall degree of mission accomplishment of a
            system when used by representative personnel in the environment planned or expected
            for operational deployment of the system. The term “operationally suitable” is the degree
            to which a system can be placed satisfactorily in production given such factors as
            availability, compatibility, interoperability, reliability, maintainability, and supportability. The
            term “operationally survivable” is the capability of a system to avoid or withstand a man-
            made hostile environment without suffering an abortive impairment of its ability to
            accomplish its designated mission.
            34
             The Standard Financial Information Structure is intended to provide a standard financial
            management data structure and uniformity throughout DOD in reporting on the results of
            operations.




            Page 12                                                  GAO-12-134 DOD Financial Management
        Federal Financial Management Improvement Act of 1996 (FFMIA). 35 The
        report also pointed out that training could be improved through the use of
        hands-on training in addition to instructor-led training. The PMO is
        currently implementing a “get-well plan” to ensure that GCSS-Army is
        effective in the deployed environment and compliance efforts are
        underway to address the SFIS and FFMIA compliance issues. A specific
        time frame for the resolution of the identified problems is being
        developed.

DEAMS   When completed, DEAMS is to be deployed to 179 locations and used by
        30,000 individuals. DEAMS is currently being tested at Scott Air Force
        Base and DFAS Limestone and has been in use there since 2010 by
        about 1,050 individuals.

        In January 2011, AFOTEC reported on the Air Force’s implementation
        efforts at Scott Air Force Base and found that substantial manual
        intervention is required on a daily basis to keep DEAMS working as
        intended. 36 It was further noted that many interfaces were inoperable and
        required reports were not being produced or were inaccurate or
        incomplete. AFOTEC also found that training was inadequate and system
        deficiencies were present when the assessment started and had
        continued to accrue. In May 2011, we interviewed the DEAMS PMO who
        told us that 245 problems needed to be addressed. The Air Force is in the
        process of developing a time line to show when each problem needs to
        be addressed and the specific actions that must be taken to resolve the
        problem. At the time of our review, a specific time frame for completion of
        the corrective actions had not been developed.

        In interviews, DFAS officials and users of DEAMS identified problems in
        the system’s operation. DEAMS is not able to produce the monthly
        accounts receivable aging report as intended, officials told us, and




        35
           Pub. L. No. 104-208, div. A, title VIII, § 803, 110 Stat. 3009, 3009-390 (Sept. 30, 1996).
        FFMIA requires certain federal agencies, including DOD, to implement and maintain
        financial management systems that comply substantially with federal financial
        management systems requirements, applicable federal accounting standards, and the
        United States Government Standard General Ledger at the transaction level.
        36
         DOD Operational Test and Evaluation, Defense Enterprise Accounting and Management
        System, (Washington, D.C.: Jan. 13, 2011).




        Page 13                                              GAO-12-134 DOD Financial Management
therefore, the report is produced manually. 37 According to the officials, the
capability to produce the aging report existed in the legacy systems.
Manual workarounds are also needed to process certain accounts
receivable transactions such as travel debts. DFAS personnel told us that
these accounts receivable-related problems are the result of the improper
conversion of data transferred from the legacy systems to DEAMS. The
DEAMS Financial Management Office (FMO) is aware of the problems
and is in the process of resolving them. However, at the time of our
review, no timetable had been set for the problem resolution.

DFAS users told us they were experiencing difficulty with some DEAMS
system interfaces. 38 For example, the interface problem with the Standard
Procurement System had become so serious that the interface had been
turned off, and the data were manually entered into DEAMS. In
September 2011, the Air Force testified that there were problems with the
interface because the data in the procurement system is not accurate. 39 A
DOD DCMO official stated that the Standard Procurement System will be
replaced, but a time frame has not been established for the system
initiative start date or estimated completion date.

DFAS users also told us that DEAMS does not provide the capability—
which existed in the legacy systems—to produce ad hoc query reports
that can be used to perform the data analysis needed for daily




37
  Office of Federal Financial Management, Core Financial System Requirements
(Washington, D.C.: January 2006), states that a core financial system must “generate an
accounts receivable aging report,” and DOD Financial Management Regulation 7000.14-
R, Volume 4, Chapter 3, Receivables, sec. 030504 (Nov. 2009), states “Accounts
receivable must be aged. Aging allows for management of collection actions.”
38
  Office of Federal Financial Management, Core Financial System Requirements
(Washington, D.C.: January 2006), states that a core financial system financial
transactions can be originated using multiple external feeder applications. These feeder
systems and the core financial system must interface seamlessly so that data can move
effectively between them. The core financial system must be able to process and validate
the data independent of origination. There must also be a process for handling erroneous
input and correction.
39
 Assistant Secretary of the Air Force Financial Management and Comptroller Testimony
before the Subcommittee on Federal Financial Management, Government Information,
Federal services and International Security, Senate Committee on Homeland Security and
Government Affairs (September 15, 2011).




Page 14                                           GAO-12-134 DOD Financial Management
       operations. 40 For example, they said that legacy systems had a support-
       system tool called On-Line Report View that allowed data normally
       printed to be generated for an electronic report. DFAS considers this a
       useful tool for viewing fund-status reports and other reports generated
       from the legacy systems. However, they noted that when some reports
       are produced, the accuracy of those reports is questionable. According to
       DFAS officials, they are currently working with the DEAMS FMO to design
       the type of reports DFAS needs. DFAS personnel further noted that
       DEAMS’ current processes are not streamlined and have not made the
       process easier. Further, an external survey report issued in April 2011,
       noted that about 48 percent of DEAMS users said that their workload
       increased as a result of the tasks they perform in DEAMS, 15 percent felt
       satisfied with DEAMS, and 10 percent felt their work was more
       accurate. 41

ECSS   According to the Air Force PMO, when fully implemented, ECSS is to be
       deployed to 186 locations and used by approximately 250,000 individuals.
       ECSS is currently being tested at 10 locations at Hanscom Air Force
       Base with a total of 225 users and has been in use there since December
       2010.

       In April 2010, 42 AFOTEC reported on its review of Release 1 Pilot A 43 for
       ECSS. The review was conducted to assess the system’s progress
       toward operational effectiveness, suitability, and mission capability. Due
       to the limited scope of Pilot A (with less than one-tenth of the planned
       Release 1 capability), AFOTEC was not able to collect sufficient
       quantitative data to determine whether the program was on track to


       40
         Office of Federal Financial Management, Core Financial System Requirements
       (Washington, D.C.: January 2006), states that a core financial system financial transaction
       must deliver an integrated ad hoc query capability to support agency access to and
       analysis of system maintained financial data.
       41
         Booz/Allen/Hamilton, Defense Enterprise Accounting and Management System
       (DEAMS) Spiral 2 Post-Deployment End-User Survey Report (Fairview Heights, Ill.: Apr.
       13, 2011).
       42
        Air Force Operational Test and Evaluation Center, Expeditionary Combat Support
       System (ECSS) Release 1 (R1) Early Operational Assessment (EOA) Report (Kirtland Air
       Force Base, N. Mex.: Apr. 20, 2010).
       43
        Release 1 provides the initial operational capability to support tools, equipment, vehicle,
       and base level materiel management, into three incremental pilot releases (Pilots A, B,
       and C).




       Page 15                                             GAO-12-134 DOD Financial Management
deliver desired performance at the conclusion of Release 1. However,
interviews with subject matter experts and analysis of the limited data
identified several areas of concern, including data quality, data
conversion, interoperability, usability, information assurance, and
requirements testability. For example, ECSS will have approximately 230
one-way interfaces, with approximately 120 to be implemented in Release
1. However, Pilot A had only implemented two, so there were insufficient
data to assess interface development.

The report further noted that many requirements were written at a high
level and were not written specifically to address the performance of
ECSS and that the ECSS requirements needed to be significantly refined.
In a July 2010 memorandum, the Director of the DOD Operational Testing
and Evaluation Office noted that the ECSS PMO had taken actions and
conducted additional tests to mitigate the areas of concern. In October
2011, the Air Force DCMO testified that “the development and
implementation of ECSS have lagged.” 44 According to the Air Force
DCMO, the Air Force raised concerns to the DOD MDA and noted that
“the department is now engaged in a strategic reassessment of the
overall program.” The Air Force DCMO further noted that the
reassessment maintains focus on addressing both audit readiness and
achievement of genuine return on investment. The joint DOD and Air
Force team is to make recommendations on the way ahead for ECSS to
the MDA by December 2011. Alternatives under consideration include
building on the current ERP software, leveraging other service/defense
agency solutions, and/or modifying legacy capability.

Army and Air Force officials told us that they have plans to address these
issues, and the Army has plans to validate the audit readiness of GFEBS
in a series of independent auditor examinations auditing selected
business processes and controls in the GFEBS environment over the
next several fiscal years. Regarding DEAMS, the MDA has directed that
the system not be deployed beyond Scott Air Force Base until the known
system weaknesses have been corrected and the system has been
independently tested to ensure that it is operating as intended.




44
  Air Force Deputy Chief Management Officer’s Testimony before the Panel on Defense
Financial Management and Auditability Reform, Committee on Armed Services, House of
Representatives, (Oct. 27, 2011).




Page 16                                        GAO-12-134 DOD Financial Management
Continual Monitoring of   Monitoring is essential to help ensure that systems are implemented on
ERPs Is Needed to Help    schedule and within budget, and provide the promised capabilities. It
Ensure Successful         helps to ensure that identified deficiencies are corrected prior to full
                          deployment, and also helps to provide visibility for senior management
Implementation            into investment management activities. Standards for internal control note
                          that monitoring should be ongoing and be performed continually. 45

                          At DOD, the MDA plays a crucial role in monitoring as the senior official
                          with overall authority to approve the advancement of ERPs through the
                          phases of the acquisition process. For the ERPs we reviewed, the MDA
                          authority is divided between two officials. For GFEBS and DEAMS, the
                          MDA is the DOD DCMO and for GCSS-Army and ECSS, the MDA is the
                          Under Secretary of Defense for Acquisition, Technology and Logistics.
                          The MDA determines the entry point of an acquisition program in the
                          acquisition process and is accountable for cost, schedule, and
                          performance reporting, including congressional reporting. While factors
                          such as cost, schedule, performance, risk, and technical maturity are
                          considered by the MDA, the entrance criteria for each phase of the life
                          cycle guide the MDA in determining the appropriate entry point for a
                          program.

                          The MDA for GFEBS and DEAMS has responded to the results of ATEC
                          and AFOTEC reviews with actions to help ensure the systems’ readiness
                          for full deployment. The MDA limited the deployment of GFEBS when the
                          two ATEC reports previously mentioned noted deficiencies in the
                          operation of the system. In regard to DEAMS, the MDA has directed that
                          the system not be deployed beyond Scott Air Force Base until the known
                          system weaknesses have been corrected and the system has been
                          independently tested to ensure that it is operating as intended. Regarding
                          GCSS-Army and ECSS, ATEC and AFOTEC have identified
                          implementation issues. Once ATEC and AFOTEC have performed
                          additional testing of the systems, and if deficiencies are identified, the
                          MDA for the systems will have an opportunity to evaluate the results, as
                          did the MDA for GFEBS and DEAMS, and take appropriate corrective
                          actions. The resolution or mitigation of these system deficiencies is critical
                          prior to the approval of further deployment of the systems.




                          45
                           GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
                          (Washington, D.C.: November 1999).




                          Page 17                                        GAO-12-134 DOD Financial Management
                           While we were informed that the Army and the Air Force have corrective
                           actions underway or planned, they have not established specific time
                           frames for the purposes of tracking and monitoring progress of the
                           corrective actions needed to address the issues identified by DFAS. The
                           timely resolution of these issues is important in order for DFAS users to
                           perform their day-to-day operations as the department’s primary
                           accounting entity. The establishment of a time frame and milestone dates
                           by the Army and the Air Force is important for measuring and monitoring
                           progress. If a planned milestone date is not achieved, Army and Air Force
                           management can then ascertain what additional actions are needed to
                           help ensure that the problem is resolved promptly.

                           Further, given the Secretary of Defense’s goal for the department, that
                           the Statement of Budgetary Resources is to be audit ready by fiscal year
                           2014, the resolution of the issues identified at DFAS is even more critical
                           since GFEBS and DEAMS are an essential part of the ability of the Army
                           and the Air Force to meet the Secretary’s goal. Without timely and
                           effective corrective action, the department is at risk of making investment
                           decisions that may not provide the desired results—improvements in the
                           department’s business operations—and the ERP efforts could continue to
                           experience unnecessary schedule delays and cost increases.


System Training Does Not   Army and Air Force ERP training strategies were intended to provide ERP
Fully Meet User Needs      users with the skills and knowledge they need to successfully perform
                           their new roles. However, according to DFAS personnel, the training they
                           received for GFEBS and DEAMS, prior to the systems becoming
                           operational at the various DFAS locations, did not fully meet their needs
                           as users. DFAS personnel informed us that the training focused on an
                           overview of GFEBS and DEAMS and how the systems were supposed to
                           operate. While this was beneficial in identifying how GFEBS and DEAMS
                           were different from the existing legacy systems, the instruction focused
                           too much on concepts rather than the skills needed for DFAS users to
                           perform their day-to-day operations. The training problems raised by
                           DFAS, were also reported in an April 2011 external review of the DEAMS
                           program. 46 The report noted that for instructor-led training, 53 percent of
                           the system users that responded to the survey indicated that the training


                           46
                             Booz/Allen/Hamilton, Defense Enterprise Accounting and Management System
                           (DEAMS) Spiral 2 Post-Deployment End-User Survey Report (Fairview Heights, Ill.: Apr.
                           13, 2011).




                           Page 18                                          GAO-12-134 DOD Financial Management
              did not prepare them for using DEAMS. For web-based training, 40
              percent of the users indicated that the training did not prepare them to
              use DEAMS.

              To address the training problems, DFAS is in the process of developing
              training courses and desk guides that would be more beneficial to DFAS
              employees who have to use GFEBS and DEAMS on a day-to-day basis.
              DFAS is in the process of developing 4 specific courses related to
              GFEBS. Besides the courses, DFAS is also in the process of developing
              desk guides for use by DFAS personnel. These guides are intended to
              explain further how an individual is to perform an assigned task within
              GFEBS and DEAMS. Because DFAS is developing these training
              courses and the operational materials on its own, the cost incurred by
              DFAS will be billed to the Army and the Air Force through the prices they
              charge for the services provided. As a working-capital-fund entity, DFAS
              is required to recover all costs incurred; therefore, the annual amounts
              billed to the Army and the Air Force for services provided may be higher
              than anticipated because of the additional training DFAS is developing.
              As a result, it is incumbent upon the Army and the Air Force to ensure
              that the training provided to DFAS users of GFEBS and DEAMS prepares
              them to perform their day-to-day mission effectively. Without this
              knowledge base and proficiency in the operation of the systems, some of
              the benefits that were intended with the implementation of GFEBS and
              DEAMS may not be achieved.


              Modernizing DOD’s business systems is a critical part of transforming
Conclusions   DOD’s business operations, providing more accurate and reliable
              financial information to DOD management on the results of the
              department’s operations, and providing the processes and data reliability
              that DOD needs to produce auditable financial statements. Successful
              implementation can help to standardize and streamline DOD’s financial
              management and accounting systems, logistics systems, and finance
              processes, provide asset visibility for accountable items, and integrate
              personnel and pay systems.

              DOD is currently in the midst of implementing numerous ERPs that are
              critical to improving its business operations and achieving auditability.
              During its implementation efforts, the department has identified system
              weaknesses. It is critical that these problems be corrected as early as
              possible to help ensure that the billions of dollars spent annually are used
              effectively and to achieve effective implementation of the ERPs so that
              DOD can begin to fully realize the systems’ intended benefits.


              Page 19                                    GAO-12-134 DOD Financial Management
                      The monitoring of the status of DOD’s ERPs implementation efforts is an
                      essential part of helping to ensure that the billions of dollars being
                      invested provide the intended capabilities. The MDA for GFEBS and
                      DEAMS has taken steps to help ensure that identified system
                      weaknesses are resolved before full deployment of the systems. The
                      action by the MDA provides an opportunity to prevent known weaknesses
                      from persisting into deployment and negatively affecting the efficiency
                      and effectiveness of the systems in operation. It is equally important that
                      the Army and the Air Force establish time lines and monitor the status of
                      the corrective actions to help ensure that the issues identified by DFAS
                      users are resolved in a timely manner. The implementation of the ERPs is
                      a long-term endeavor that will require the sustained and active
                      involvement of senior management at all levels of the department.

                      The training provided to DFAS users did not adequately demonstrate how
                      users were to perform their expected duties using the systems. While the
                      training explained how the systems were different than the existing legacy
                      systems, it did not completely provide them with the skills needed to
                      perform their day-to-day operations.

                      In light of the Secretary of Defense’s recent decision that the Statement of
                      Budgetary Resources is to be audit ready by fiscal year 2014, it is critical
                      that the department have effective business systems in place to support
                      its auditability goals. If these business systems do not provide the
                      intended capabilities by the expected deadlines, DOD’s goal of improving
                      financial management operations and becoming audit ready could be
                      jeopardized.


                      To help provide for the successful implementation of Army and Air Force
Recommendations for   ERPs, and to help ensure that DFAS users have the training needed, we
Executive Action      recommend that the Secretary of Defense take the following five actions:

                      •   Direct that the MDA for GFEBS, GCSS-Army, DEAMS, and ECSS
                          ensure that any future system deficiencies identified through
                          independent assessments are resolved or mitigated prior to further
                          deployment of the systems.

                      •   Direct the Secretary of the Army to ensure that time lines are
                          established and monitored for those issues identified by DFAS that
                          are impacting their efficient and effective use of GFEBS.




                      Page 20                                    GAO-12-134 DOD Financial Management
                     •   Direct the Secretary of the Air Force to ensure that time lines are
                         established and monitored for those issues identified by DFAS that
                         are impacting their efficient and effective use of DEAMS.

                     •   Direct the Secretary of the Army to improve training for GFEBS users
                         by providing training on actual job processes in a manner that allows
                         users to understand how the new processes support their job
                         responsibilities and the work they are expected to perform.

                     •   Direct the Secretary of the Air Force to improve training for DEAMS
                         users by providing training on actual job processes in a manner that
                         allows users to understand how the new processes support their job
                         responsibilities and the work they are expected to perform.

                     DOD concurred with four and partially concurred with one of the
Agency Comments      recommendations in our draft report. In regard to the four
and Our Evaluation   recommendations with which the department concurred, DOD identified
                     specific actions that it has completed, underway, or planned to establish
                     time lines for addressing GFEBS and DEAMS issues identified by DFAS
                     users and for improving training provided to GFEBS and DEAMS users.
                     For example, with respect to our recommendations concerning the
                     establishment of time lines for GFEBS and DEAMS issues, the
                     department cited actions taken or underway to provide for greater DFAS
                     involvement in the ERP systems’ implementation. Also, regarding
                     recommendations to improve training provided to GFEBS and DEAMS
                     users, DOD cited actions taken or underway to provide additional or
                     expanded user training on roles and job responsibilities under the new
                     ERP systems’ environments.

                     DOD partially concurred with our recommendation that the Milestone
                     Decision Authority for GFEBS, GCSS-Army, DEAMS, and ECSS ensure
                     that any future system deficiencies identified through independent
                     assessments are resolved or mitigated prior to further deployment of the
                     systems. The department agreed that high severity system deficiencies
                     identified through independent assessments should be resolved or
                     mitigated prior to deployment. DOD cited Army and Air Force progress
                     towards the resolution of the deficiencies noted in our report. For
                     example, DOD stated that the Air Force is aggressively resolving the 245
                     DEAMS deficiencies identified in the January 2011 independent
                     assessment. However, it also commented that all system deficiencies are
                     not required to be remediated prior to deployment. In this regard, DOD
                     commented that lower severity level deficiencies may be deferred, if an



                     Page 21                                   GAO-12-134 DOD Financial Management
acceptable workaround exists, to avoid schedule slippages and added
cost.

Prioritization is an important part of an effective risk-based process for
addressing deficiencies. As such, the most severe deficiencies should be
fully addressed prior to deployment. To the extent that any deficiencies
are designated as “lower priority” and allowed to continue, at a minimum,
acceptable short-term workarounds should be in place to mitigate the
impact on operational efficiency. However, as discussed in our report, it is
also essential that corrective actions for all identified deficiencies include
specific time lines for tracking and monitoring progress. Consequently, we
continue to believe that comprehensive corrective actions should be
established for all identified deficiencies. Until DOD takes such action to
fully address all identified deficiencies, the department’s ERP systems are
at risk of not being implemented on schedule, within budget, or with the
intended capabilities. The written comments on a draft of this report
received from the Department of Defense Deputy Chief Management
Officer are reprinted in appendix I.


As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies of this report to the
Secretary of Defense; the Secretary of the Army; the Secretary of the Air
Force; the Deputy Secretary of Defense; the Deputy Chief Management
Officer; the Under Secretary of Defense (Comptroller); the Under
Secretary of the Army and the Under Secretary of the Air Force, in their
capacity as the Chief Management Officer of their respective service; the
program management office for each business system that was included
in the audit; and other interested congressional committees and
members. This report also is available at no charge on the GAO website
at http://www.gao.gov.

Please contact Asif A. Khan at (202) 512-9869 or khana@gao.gov or
Nabajyoti Barkakati at (202) 512-4499 or barkakatin@gao.gov if you or
your staff have questions on matters discussed in this report. Contact
points for our Offices of Congressional Relations and Public Affairs may




Page 22                                     GAO-12-134 DOD Financial Management
be found on the last page of this report. Key contributors to this report are
listed in appendix III.




Asif A. Khan
Director
Financial Management and Assurance




Nabajyoti Barkakati
Chief Technologist
Applied Research and Methods
Center for Science, Technology, and Engineering




Page 23                                    GAO-12-134 DOD Financial Management
List of Requesters

The Honorable Thomas R. Carper
Chairman
The Honorable Scott Brown
Ranking Member
Subcommittee on Federal Financial Management, Government
 Information, Federal Services, and International Security
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Claire McCaskill
Chairman
Subcommittee on Contracting Oversight
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Tom Coburn
Ranking Member
Permanent Subcommittee on Investigations
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable John McCain
United States Senate




Page 24                               GAO-12-134 DOD Financial Management
Appendix I: Comments from the Department
             Appendix I: Comments from the Department of
             Defense



of Defense




             Page 25                                       GAO-12-134 DOD Financial Management
Appendix I: Comments from the Department of
Defense




Page 26                                       GAO-12-134 DOD Financial Management
Appendix I: Comments from the Department of
Defense




Page 27                                       GAO-12-134 DOD Financial Management
Appendix I: Comments from the Department of
Defense




Page 28                                       GAO-12-134 DOD Financial Management
Appendix I: Comments from the Department of
Defense




Page 29                                       GAO-12-134 DOD Financial Management
Appendix II: Six ERPs Not Discussed In This
              Appendix II: Six ERPs Not Discussed In This
              Report



Report

              Provided below is a brief description of the six critical enterprise resource
              planning (ERP) systems for addressing long-standing weaknesses in
              financial management and resolving weaknesses in other high-risk areas
              such as business systems modernization and supply chain management.
              (See the background section of this report for brief descriptions of the four
              ERPs discussed in this report.)

              •   The Logistics Modernization Program (LMP) was initiated in
                  December 1999 and is intended to provide order fulfillment, demand
                  and supply planning, procurement, asset management, material
                  maintenance, and financial management capabilities for Army’s
                  working capital fund. The third and final deployment occurred in
                  October 2010.

              •   The Navy Enterprise Resource Planning System (Navy ERP) was
                  initiated in July 2003 and is intended to standardize the acquisition,
                  financial, program management, maintenance, plant and wholesale
                  supply, and workforce management capabilities at Navy commands.

              •   The Global Combat Support System-Marine Corps (GCSS-MC)
                  was initiated in September 2003 and is intended to provide the
                  deployed warfighter with enhanced capabilities in the areas of
                  warehousing, distribution, logistical planning, depot maintenance, and
                  improved asset visibility.

              •   Each of the military departments is in the process of developing its
                  own Service Specific Integrated Personnel and Pay System. The
                  military departments’ integrated personnel and pay systems replace
                  the Defense Integrated Military Human Resources System that was
                  initiated in February 1998 and intended to provide a joint, integrated,
                  standardized personnel and pay system for all military personnel.

              •   The Defense Agencies Initiative (DAI) was initiated in January 2007
                  and is intended to modernize the defense agencies’ financial
                  management processes by streamlining financial management
                  capabilities and transforming the budget, finance, and accounting
                  operations. When DAI is fully implemented, it is expected to have the
                  capability to control and account for all appropriated, working capital,
                  and revolving funds at the defense agencies implementing the
                  system.

              •   The Enterprise Business System (EBS) is the second phase of the
                  Defense Logistics Agency’s (DLA) Business System Modernization
                  (BSM) effort, which was initiated in November 1999 and implemented


              Page 30                                       GAO-12-134 DOD Financial Management
Appendix II: Six ERPs Not Discussed In This
Report




    in July 2007. BSM focused on DLA’s operations in five core business
    processes: order fulfillment, demand and supply planning,
    procurement, technical/quality assurance, and financial management.
    In September 2007, the name of the program was changed to
    Enterprise Business System as it entered the second phase, and
    according to the agency, EBS will further enhance DLA’s supply chain
    management of nearly 6 million hardware and troop support items.




Page 31                                       GAO-12-134 DOD Financial Management
Appendix III: GAO Contacts and Staff
                  Appendix III: GAO Contacts and Staff
                  Acknowledgments



Acknowledgments

                  Asif A. Khan, (202) 512-9869 or khana@gao.gov
GAO Contacts
                  Nabajyoti Barkakati, (202) 512-4499 or barkakatin@gao.gov


                  In addition to the contacts named above, the following individuals made
Staff             key contributions to this report: J. Christopher Martin, Senior-Level
Acknowledgments   Technologist; Darby Smith, Assistant Director; Beatrice Alff; Jacquelyn
                  Hamilton; Maxine Hattery; Jeffrey Isaacs; Jason Kirwan; Katherine
                  Lenane; Julia Matta; and Brian Paige.




(197095)
                  Page 32                                  GAO-12-134 DOD Financial Management
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