oversight

DOD Financial Management: The Army Faces Significant Challenges in Achieving Audit Readiness for Its Military Pay

Published by the Government Accountability Office on 2012-03-22.

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

                             United States Government Accountability Office

GAO                          Testimony
                             Before the Subcommittee on Federal Management, Government
                             Information, Federal Services and International Security, Committee
                             on Homeland Security and Governmental Affairs, United States Senate;
                             and the Subcommittee on Government Organization, Efficiency and
                             Financial Management, Committee on Oversight and Government
                             Reform, House of Representatives


                             DOD FINANCIAL
For Release on Delivery
Expected at 10:00 a.m. EDT
Thursday, March 22, 2012

                             MANAGEMENT
                             The Army Faces Significant
                             Challenges in Achieving
                             Audit Readiness for Its
                             Military Pay
                             Statement of Asif A. Khan, Director
                             Financial Management and Assurance




GAO-12-501T
Chairmen Carper and Platts, Ranking Members Brown and Towns, and
Members of the Subcommittees:

It is a pleasure to be here today to discuss our work on the significant
challenges the Army faces in achieving audit readiness for its military pay.
The Army’s military pay is material to the Army’s financial statements.
The Chief Financial Officers Act of 1990, as amended, established
requirements for 24 agencies, including the Department of Defense
(DOD), to prepare annual financial statements and have them audited. 1
Further, the National Defense Authorization Act (NDAA) for Fiscal Year
2010 mandated that DOD be prepared to validate (certify) that its
consolidated financial statements are ready for audit by September 30,
2017. 2 On October 13, 2011, the Secretary of Defense directed the
department to achieve audit readiness for the Statement of Budgetary
Resources, one of the principal financial statements, by the end of fiscal
year 2014 as an interim milestone for DOD to meet the legal requirement
in the NDAA for Fiscal Year 2010 to achieve full audit readiness for all
DOD financial statements by 2017. 3

The Army’s active duty military payroll, comprising about 20 percent of its
reported $233.8 billion in fiscal year 2010 net outlays, 4 is significant to
both Army and DOD efforts to meet DOD’s 2014 Statement of Budgetary
Resources auditability goal as well as the mandate to achieve full audit
readiness for all DOD financial statements by 2017. For years, we and
others have reported continuing deficiencies with the Army’s military




1
 Pub. L. No. 101-576, § 303, 104 Stat. 2838, 2849 (Nov. 15, 1990), codified, as
amended at 31 U.S.C. § 3515.
2
Pub. L. No. 111-84, § 1003, 123 Stat. 2190, 2439-40 (Oct. 28, 2009).
3
 DOD, Secretary of Defense Memorandum, “Improving Financial Information and
Achieving Audit Readiness,” October 13, 2011.
4
 Outlays during a fiscal year may be for payment of obligations incurred in prior
years or in the same year. Net outlays are disbursements net of offsetting
collections.




Page 1                                                                 GAO-12-501T
             payroll processes and controls. 5 These reported continuing deficiencies in
             Army payroll processes and controls have called into question the extent
             to which the Army’s military payroll transactions are valid and accurate,
             and whether the Army’s military payroll is auditable. Further, other military
             components, such as the Air Force and the Navy, share some of the
             same process and system risks as the Army.

             My remarks today are based on our report, DOD Financial Management:
             The Army Faces Significant Challenges in Achieving Audit Readiness for
             Its Military Pay, which is being released today. 6 I will focus on problems
             that impede the Army’s ability to (1) identify a valid population of military
             payroll transactions and (2) provide documentation that supports the
             validity and accuracy of payments for Army military payroll.

             Our work on which this testimony is based was conducted 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 the evidence obtained provides
             a reasonable basis for our findings and conclusions based on our audit
             objectives. Our published report contains additional details on our scope
             and methodology for this audit.


             For fiscal year 2010, Congress appropriated more than $52 billion to the
Background   Military Personnel, Army appropriation primarily for Army active duty




             5
              DOD Inspector General, Active Duty Military Personnel Accounts Were
             Generally Valid and Secure, but DoD May have Made Improper Payments, D-
             2011-093 (Arlington, VA: July 27, 2011); GAO, Military Pay: The Defense
             Finance and Accounting Service–Indianapolis Could Improve Control Activities
             over Its Processing of Active Duty Army Military Personnel Federal Payroll
             Taxes, GAO-09-557R (Washington, D.C.: June 18, 2009); Military Pay: Hundreds
             of Battle-Injured GWOT Soldiers Have Struggled to Resolve Military Debts,
             GAO-06-494 (Washington, D.C.: Apr. 27, 2006); Military Pay: Army National
             Guard Personnel Mobilized to Active Duty Experienced Significant Pay
             Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003).
             6
              GAO, DOD Financial Management: The Army Faces Significant Challenges in
             Achieving Audit Readiness for Its Military Pay, GAO-12-406 (Washington, D.C.:
             Mar. 22, 2012).




             Page 2                                                             GAO-12-501T
                         military personnel costs. 7 The Military Personnel, Army appropriation is a
                         1-year appropriation available for the pay, benefits, incentives,
                         allowances, housing, subsistence, travel, and training primarily for Army
                         service members on active duty. According to the Defense Finance and
                         Accounting Service in Indianapolis, Indiana (DFAS-IN), of the $52 billion
                         in fiscal year 2010 military personnel appropriations, the Army’s nearly
                         680,000 service members received $46.1 billion in pay and allowances.
                         Army Human Resources Command, unit commanders, and training
                         certification officials, among others, are responsible for providing DFAS-
                         IN with accurate and timely information regarding changes in individual
                         military member status necessary to maintain accurate and timely payroll
                         accounts. DFAS-IN is responsible for the accounting, disbursement, and
                         reporting for the Army’s military personnel costs using the Defense Joint
                         Military Pay System-Active Component (DJMS-AC).


                         We found that the Army could not readily identify a complete population of
Process and System       Army payroll accounts for fiscal year 2010, given existing procedures and
Weaknesses Hindered      systems. The Army and DFAS-IN did not have an effective, repeatable
                         process for identifying the population of active duty payroll accounts. In
Army’s Ability to        addition, the Defense Manpower Data Center (DMDC), DOD’s central
Identify a Valid         source for personnel information, did not have an effective process for
Population of Military   comparing military pay account files to military personnel files to identify a
                         valid population of military payroll transactions. 8 For example, it took 3
Payroll Transactions     months and repeated attempts before DFAS-IN could provide a
                         population of service members who received active duty Army military
                         pay in fiscal year 2010. Similarly, it took DMDC over 2 months to compare
                         the total number of fiscal year 2010 active duty payroll accounts to its
                         database of personnel files. Standards for Internal Control in the Federal
                         Government requires all transactions and other significant events to be
                         clearly documented and the documentation readily available for
                         examination. 9 DOD’s Financial Improvement and Audit Readiness (FIAR)



                         7
                          Department of Defense Appropriations Act, 2010, Pub. L. No. 111-118, 123 Stat.
                         3409, 3410, 3458 (Dec. 19, 2009); Supplemental Appropriations Act, 2010, Pub.
                         L. No. 111-212,124 Stat. 2302, 2305 (July 29, 2010).
                         8
                          DFAS-IN processes military payroll for the Army, and DMDC supports audits by
                         performing analyses of Army military personnel files and data.
                         9
                         GAO, Standards for Internal Control in the Federal Government,
                         GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).




                         Page 3                                                             GAO-12-501T
                             Guidance sets out key tasks essential to achieving audit readiness,
                             including defining and identifying the population of transactions for audit
                             purposes. 10 The GAO/PCIE Financial Audit Manual provides guidance
                             concerning typical control activities, such as independent checks on the
                             validity, accuracy, and completeness of computer-processed data. 11
                             Without effective processes for identifying a complete population of Army
                             military pay records and comparing military pay accounts to personnel
                             records, the Army will have difficulty meeting DOD’s 2014 Statement of
                             Budgetary Resources audit readiness goal and its 2017 goal for a
                             complete set of auditable financial statements.


DFAS-IN Did Not Have an      DFAS-IN made three attempts from November 2010 through early
Effective Process for        January 2011 to provide us a Defense Joint Military Pay System-Active
Identifying the Population   Component (DJMS-AC) file extract of Army service members who
                             received active duty pay in fiscal year 2010. The first attempt included
of Army Military Payroll     11,940 duplicate pay accounts, and the total number of pay accounts
Records                      included in the second attempt increased by 28,035 records over the first
                             attempt, necessitating a third attempt to establish the population of fiscal
                             year 2010 active duty pay records. We requested that DMDC compare
                             the results of DFAS-IN’s third attempt to identify the population of Army
                             fiscal year 2010 payroll accounts against DMDC’s compilation of monthly
                             active duty payroll data that it received from DFAS-IN. Of the 677,024
                             Army active duty pay accounts, per DJMS-AC, we were able to reconcile
                             all but 1,025 pay accounts (less than 1 percent of the total active duty pay
                             accounts to pay account data that DFAS-IN had previously provided to
                             DMDC. However, as discussed later, we were unable to verify the validity
                             of the records. Standards for Internal Control in the Federal Government
                             requires all transactions and other significant events to be clearly
                             documented and the documentation readily available for examination. 12 In


                             10
                               DOD, Office of the Under Secretary of Defense (Comptroller/CFO), Financial
                             Improvement and Audit Readiness (FIAR) Guidance, December 2011.
                             11
                               GAO/PCIE, Financial Audit Manual, Volume 1, GAO-08-585G (Washington,
                             D.C.: July 2008). The President’s Council on Integrity and Efficiency (PCIE) was
                             replaced by the Council of the Inspectors General on Integrity and Efficiency
                             (CIGIE). CIGIE was statutorily established as an independent entity within the
                             executive branch by the Inspector General Reform Act of 2008, Pub. L. No. 110-
                             409, § 7, 122, Stat. 4302, 4305-4313 (Oct. 14, 2008) (codified at 5 U.S.C. App., §
                             11).
                             12
                              GAO/AIMD-00-21.3.1.




                             Page 4                                                                GAO-12-501T
                           addition, DOD’s Financial Improvement and Audit Readiness (FIAR)
                           Guidance states that being able to provide transaction-level detail for an
                           account balance is a key task essential to achieve audit readiness.

                           At the time we initiated our audit, Army officials told us that they had not
                           yet focused on this area in their audit readiness efforts because the target
                           date for Army military pay was not until the first quarter of fiscal year
                           2015. 13 The inability to readily provide a population of military pay
                           accounts impeded our efforts to accomplish our audit objectives and, if
                           not effectively addressed, will impede the Army’s ability to meet DOD’s
                           new Statement of Budgetary Resources audit readiness goal of
                           September 30, 2014.


System Weaknesses          The Army’s pay and personnel systems are not integrated, which can
Hindered the Matching of   lead to differences between the systems and potential errors. Therefore,
Army Pay Accounts to       an audit of military pay would include comparisons of military payroll
                           accounts to personnel records to identify discrepancies. However, we
Personnel Files            found that DMDC did not have an effective process for comparing military
                           pay account files with military personnel files. While DMDC was ultimately
                           able to confirm that all 677,024 service members who received fiscal year
                           2010 active duty Army military pay 14 from the DJMS-AC had an active
                           duty personnel file in one of the multiple personnel systems, the
                           reconciliation process was labor intensive and took over 2 months to
                           complete. For example, DMDC’s initial comparison of active duty Army
                           military pay accounts to personnel records identified 67,243 pay accounts
                           that did not have a corresponding active army personnel record on
                           September 30, 2010. 15 Labor-intensive research was necessary to
                           reconcile the differences between DJMS-AC pay records and Army
                           personnel files compiled by DMDC. According to DMDC, these
                           differences related primarily to personnel who had either left or were
                           scheduled to leave the service, were reserve component soldiers


                           13
                             Subsequent to this discussion, the Secretary of Defense issued a memo
                           accelerating the Statement of Budgetary Resources audit readiness goal from
                           2017 to 2014.
                           14
                            Fiscal year 2010 was the most recently completed fiscal year at the time of our
                           audit.
                           15
                             The personnel file used for comparison included service members who were
                           still on active duty in the Army on September 30, 2010, and did not cover the
                           entire fiscal year.




                           Page 5                                                               GAO-12-501T
                       released from active duty, or were soldiers who had died during fiscal
                       year 2010.

                       DMDC attempted to complete our requested comparison of active duty
                       Army pay accounts to military personnel records in January 2011, but
                       was unable to complete the reconciliation until early March 2011. DMDC
                       officials told us that the reasons for the delays included mainframe
                       computer issues, 16 staff illness and turnover, and management data
                       quality reviews of the file comparison results, including additional file
                       comparisons to resolve differences. We referred six duplicate Social
                       Security numbers in personnel account records that we confirmed with
                       the Social Security Administration to DMDC and the Army for further
                       research and appropriate action. 17 The absence of an effective process
                       for confirming that the Army’s active duty payroll population reconciles to
                       military personnel records increases the risk that the Army will not meet
                       DOD’s Statement of Budgetary Resources auditability goal of September
                       30, 2014.


                       We identified deficiencies in DFAS-IN and Army processes and systems
The Army Was Unable    for readily identifying and providing documentation that supports
to Provide             payments for Army military payroll. First, DFAS-IN had difficulty retrieving
                       and providing usable Leave and Earnings Statement files for our sample
Documentation to       items. Second, the Army and DFAS-IN were able to provide complete
Support the Validity   documentation for 2 of our 250 military pay account sample items, partial
and Accuracy of a      support for 3 sample items, but no support for the remaining 245 sample
                       items. Because the Army was unable to provide documents to support
Sample of Payroll      reported payroll amounts for our sample of 250 soldier pay accounts, we
Transactions           were unable to determine whether the Army’s payroll accounts were valid
                       and we could not verify the accuracy of payments and reported active
                       duty military payroll. Further, because military payroll is significant to the
                       financial statements, the Army will not be able to pass an audit of its
                       Statement of Budgetary Resources without resolving these control
                       weaknesses.




                       16
                        DMDC and other DOD agencies use the Navy Postgraduate School mainframe
                       computer to support their activities and share data processing priorities.
                       17
                        The six duplicate personnel records related to Social Security numbers that
                       were assigned to two different service member names.




                       Page 6                                                               GAO-12-501T
DFAS-IN Could Not            DFAS-IN staff experienced difficulty and delays in providing usable Leave
Readily Provide Usable       and Earnings Statement files to support our testing of Army military
Leave and Earnings           payroll. We selected a sample of 250 Army active duty soldier pay
                             accounts and in April 2011 requested the relevant Leave and Earnings
Statement Files for Sample   Statement files for fiscal year 2010. Standards for Internal Control in the
Items                        Federal Government requires internal control and all transactions and
                             other significant events to be clearly documented and the documentation
                             readily available for examination. 18 DOD Regulation 7000.14-R, Financial
                             Management Regulation (FMR), requires the military components to
                             maintain documentation supporting all data generated and input into
                             finance and accounting systems or submitted to DFAS. 19 After multiple
                             discussions and requests, we ultimately obtained usable Leave and
                             Earnings Statement files for our sample items—5 weeks after our initial
                             request. DFAS-IN took over 2 weeks to provide the initial set of Leave
                             and Earning Statement files because it needed to retrieve files from two
                             areas of the Defense Joint Military Pay System-Active Component
                             (DJMS-AC). The DJMS-AC database holds the current month plus the
                             previous 12 months’ data. Data older than this are archived and need to
                             be retrieved from the archived database. In addition, the first set of Leave
                             and Earnings Statement files that DFAS-IN provided included statements
                             outside the requested fiscal year 2010 timeframe of our audit. It took 1
                             week, including our data reliability review, to obtain the second set of
                             DFAS-IN Leave and Earnings Statement files consisting of 445 separate
                             files containing monthly statements for 250 service member pay accounts
                             in our sample. We determined that the Leave and Earnings Statement
                             files for an individual service member generally were in two or more of the
                             files provided. Consequently, we had to combine these files into a format
                             with each service member’s Leave and Earnings Statement files grouped
                             together to include all of the pay and allowance information for the service
                             members in our sample. This combining and formatting required 2
                             additional weeks.




                             18
                              GAO/AIMD-00-21.3.1.
                             19
                              DOD, FMR, Volume 6A, Chapter 2, “Financial Reports Roles and
                             Responsibilities,” ¶ 020201.B. (rev. August 2011).




                             Page 7                                                           GAO-12-501T
The Army Was Unable to   We found that the Army’s inability to locate personnel documents to
Locate Supporting        support its military payroll transactions was primarily the result of
Documentation for        weaknesses in Army procedures. Standards for Internal Control in the
                         Federal Government requires internal control and all transactions and
Military Pay Account     other significant events to be clearly documented and the documentation
Sample Items             readily available for examination. 20 DOD Regulation 7000.14-R, Financial
                         Management Regulation (FMR), requires the military components to
                         maintain documentation supporting all data generated and input into
                         finance and accounting systems or submitted to DFAS. 21 This regulation
                         also requires the components to ensure that audit trails are maintained in
                         sufficient detail to permit tracing of transactions from their sources to their
                         transmission to DFAS. Audit trails are necessary to demonstrate the
                         accuracy, completeness, and timeliness of transactions as well as to
                         provide documentary support for all data generated by the component
                         and submitted to DFAS for recording in the accounting systems and use
                         in financial reports. Further, DOD’s FIAR Guidance states that identifying
                         and evaluating supporting documentation for individual transactions and
                         balances, as well as the location and sources of supporting
                         documentation and confirming that appropriate supporting documentation
                         exists, is a key audit readiness step. 22 Without the capability to readily
                         locate and provide supporting documentation for military pay transactions,
                         the Army’s ability to pass a financial statement audit will be impeded.

                         As of the end of September 2011, 6 months after receiving our initial
                         request, the Army and DFAS-IN were able to provide complete
                         documentation for 2 of our 250 sample items, partial support for 3 sample
                         items, and no support for the remaining 245 sample items. As shown in
                         figure 1, our review of the partial documentation provided for 3 sample
                         items showed that the Army was unable to provide supporting
                         documentation for common elements of its military pay, including basic
                         allowance for housing, cost of living allowance, hardship duty pay-
                         location, and hostile fire/imminent danger pay.




                         20
                          GAO/AIMD-00-21.3.1.
                         21
                           DOD, FMR, Volume 6A, Chapter 2, “Financial Reports Roles and
                         Responsibilities,” ¶ 020201.B. (rev. August 2011).
                         22
                           DOD, Fiscal Year 2010 Financial Improvement and Audit Readiness (FIAR)
                         Guidance, Office of the Under Secretary of Defense (Comptroller/CFO)
                         (Arlington, VA: May 15, 2010).




                         Page 8                                                              GAO-12-501T
Figure 1: Test Results for 5 of 250 Soldier Pay Account Sample Items




One of the factors impeding the Army’s ability to provide supporting
documentation is that it does not have a centralized repository for pay-
affecting documents. Army personnel and finance documentation
supporting basic pay and allowances resides in numerous systems, and
original hard copy documents are scattered across the country—at
hundreds of Army units and National Archives and Records
Administration (NARA) federal records centers. According to Army and
DFAS-IN officials, there are at least 45 separate systems that the Army
uses to perform personnel and pay functions with no single, overarching
personnel system. Although these systems contain personnel data on
Army active duty military members and their dependents and feed these
data to DJMS-AC, the systems do not contain source documents.

Further, we found that the Army had not established a mechanism for
periodic monitoring, review, and accountability of the Interactive



Page 9                                                                 GAO-12-501T
Personnel Management System (iPERMS) to ensure that personnel files
are complete. Army Regulation No. 600-8-104, Military Personnel
Information Management/Records, establishes requirements for the
Army’s Official Military Personnel File. 23 The Army deployed iPERMS in
2007 and designated it as the Army’s Official Military Personnel File.
However, when we attempted to find supporting documents in iPERMS,
we found that this system had not been consistently populated with the
required service member documents, resulting in incomplete personnel
records. For example, when testing our sampled transactions, we
discovered that documents, such as orders to support a special duty
assignment, permanent change of station orders, and release or
discharge from active duty, that should have been in iPERMS were not.
The Army has designated the Human Resources Command as the owner
of iPERMS; however, local installation personnel offices across the
country are responsible for entering most documents into individual
service member iPERMS accounts. We found that documents needed to
support pay transactions are not in iPERMS because (1) Army Regulation
600-8-104 does not require the specific personnel forms to be included
and (2) some pay-supporting documents are finance documents and are
not considered personnel documents. 24 We believe these finance
documents should also be maintained in the Army’s central repository of
pay-supporting documentation.

In addition, the Army’s efforts to achieve auditability are compounded by
payroll system limitations. DJMS-AC, used to process Army active duty
military pay, is an aging, Common Business Oriented Language
(COBOL) 25 mainframe-based system that has had minimum system
maintenance because DOD planned to transition to the Forward
Capability Pay System and then to the Defense Integrated Military Human




23
  Department of the Army, Army Regulation No. 600-8-104, Military Personnel
Information Management/Records (Washington, D.C.: June 22, 2004).
24
  These documents include the Department of the Army (DA) Form 5960,
Authorization to Start, Stop or Change Basic Allowance for Quarters and/or
Variable Housing Allowance; the Department of Defense (DD) Form 1561,
Statement to Substantiate Payment of Family Separation Allowance (FSA); and
the DD Form 2367, Individual Overseas Housing Allowance.
25
 COBOL is one of the earliest high-level programming languages. It was
developed in 1959, and the language continues to evolve.




Page 10                                                            GAO-12-501T
                          Resources System. 26 DJMS-AC lacks key payroll computation abilities to
                          pay active duty Army service members. To address these functionality
                          limitations, DFAS has developed approximately 70 workaround
                          procedures that are currently being used to compensate for the lack of
                          functionality in DJMS-AC. An audit of Army military pay would necessitate
                          an evaluation of these procedures and related controls.

                          Another factor in the Army’s inability to provide support for military payroll
                          is that the Army has not adequately documented its personnel processes
                          and controls related to military pay. During our audit, we spent
                          considerable time attempting to identify the range of personnel and
                          finance documents that would be needed to support basic military pay
                          and allowances reported on service members’ Leave and Earnings
                          Statements and the appropriate office responsible for providing the
                          documentation. According to Internal Control Standards, written
                          documentation should exist covering the agency’s internal control and all
                          significant transactions and events. 27 The documentation for internal
                          control includes identification of the agency’s activity-level functions and
                          related objectives and control activities and should appear in
                          management directives, administrative policies, accounting manuals, and
                          other such guidance.


Army Military Pay Audit   DOD’s November 2011 FIAR Status Report includes DOD’s goal of
Readiness Efforts         achieving audit readiness for its Statement of Budgetary Resources by
Currently Under Way       the end of fiscal year 2014. DOD and the Army have established interim
                          goals for meeting the fiscal year 2014 Statement of Budgetary Resources
                          audit readiness goal. For example, the Army plans to assert audit
                          readiness for its General Fund Statement of Budgetary Resources,
                          including military pay, by March 31, 2013, and have its assertion tested
                          and fully validated by June 30, 2014. Army officials stated that military
                          pay audit readiness poses a significant challenge and acknowledged that
                          the success of the Army’s efforts will be key to meeting DOD’s 2014
                          Statement of Budgetary Resources audit readiness goal. To meet this
                          goal, the Army has several military pay audit readiness efforts planned or



                          26
                            The Defense Integrated Military Human Resources System was terminated due
                          to the differences in the business processes, operations, and information
                          required by each Service.
                          27
                               GAO/AIMD-00-21.3.1.




                          Page 11                                                            GAO-12-501T
               under way, such as developing a matrix of personnel documents that
               support military pay and allowances and developing the Integrated
               Personnel and Payroll System-Army. 28 However, many of these efforts
               are in the early planning stages.

               In our report, we recommend that the Army document and implement a
               process for identifying and validating the population of payroll
               transactions and identify, centrally retain, and periodically review key
               finance and personnel (i.e., pay-affecting) documents that support military
               payroll transactions. The Army agreed with our recommendations to
               improve the controls and processes related to active duty military. Our
               report more fully describes the Army’s comments and our evaluation of
               them.


               Active Army military payroll, reported at $46.1 billion for fiscal year 2010,
Concluding     is material to the Army’s financial statements and, as such, will be
Observations   significant to DOD’s audit readiness goals for the Statement of Budgetary
               Resources. The Army has several military pay audit readiness efforts that
               are planned or under way. Timely and effective implementation of these
               efforts could help reduce the risk related to DOD’s ability to achieve its
               2014 Statement of Budgetary Resources audit readiness goal. However,
               most of these actions are in the early planning stages. Moreover, these
               initiatives, while important, do not address (1) establishing effective
               processes and systems for identifying a valid population of military payroll
               records, (2) ensuring Leave and Earnings Statement files and supporting
               personnel documents are readily available for verifying the accuracy of
               payroll records, (3) ensuring key personnel and other pay-related
               documents that support military payroll transactions are centrally located,
               retained in service member Official Military Personnel Files, or otherwise
               readily accessible, and (4) requiring the Army’s Human Resources
               Command to periodically review and confirm that service member Official
               Military Personnel File records in iPERMS or other master personnel
               record systems are consistent and complete. These same issues, if not
               effectively resolved, could also jeopardize the 2017 goal for audit



               28
                 Currently under development, the Integrated Personnel and Pay System-Army (IPPS-A)
               is intended to be the Army’s future web-based Human Resources management system.
               The goal of IPPS-A is to standardize, streamline, and integrate critical soldier personnel
               and pay processes and data across the Active Army, Army National Guard, and Army
               Reserve.




               Page 12                                                                      GAO-12-501T
                  readiness on the complete set of DOD financial statements. In addition,
                  the Army’s military pay auditability weaknesses have departmentwide
                  implications for other military components, such as the Air Force and the
                  Navy, that share some of the same military pay process and systems
                  risks as the Army.


                  Chairmen Carper and Platts, Ranking Members Brown and Towns, and
                  Members of the Subcommittees, this completes my prepared statement. I
                  would be pleased to respond to any questions that you or other members
                  of the subcommittees may have.


                  If you or your staffs have any questions about this testimony, please
GAO Contact and   contact me at (202) 512-9869 or khana@gao.gov. Contact points for our
Staff             Offices of Congressional Relations and Public Affairs may be found on
                  the last page of this testimony. GAO staff who made key contributions to
Acknowledgments   this testimony are Gayle L. Fischer, Assistant Director; Carl S. Barden;
                  Lauren S. Fassler; Wilfred B. Holloway; Julia C. Matta, Assistant General
                  Counsel; Sheila D. M. Miller, Auditor in Charge; Margaret A. Mills;
                  Heather L. Rasmussen; James Ungvarsky; and Matt Zaun.




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                  Page 13                                                         GAO-12-501T
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