Senators Highlight GAO Study Showing Major Problems with Defense Department’s New Billion-Dollar Accounting Systems

WASHINGTON – Today, Sens. Tom Carper (D-Del.), Tom Coburn (R-Okla.), John McCain (R-Ariz.), Claire McCaskill (D-Mo.) and Scott Brown (R-Mass.) called attention to a new study that they requested by the Government Accountability Office (GAO) detailing cost overruns, schedule slippages, and basic operational problems with the Department of Defense’s (DOD) new, billion-dollar accounting and financial management systems, known as Enterprise Resource Planning (ERP) systems.

An ERP is an automated system that performs a variety of business-related functions, such as accounting and financial management. The modernization of these systems is critical to the DOD’s goal of passing a financial audit, as well as to ensure that the Pentagon can track its hundreds of billions of dollars in annual transactions. In its report, GAO found multiple operational problems with the new accounting and financial systems, which have already cost the Department billions of dollars to purchase and implement. Problems with the implementation of the new systems included deficiencies in data accuracy, inability to generate auditable financial reports, improper employee training, and the need for increasing levels of “manual workarounds.” Manual workarounds refer to repetitive data entry, print-outs, document scanning, and other labor-intensive steps that modern, electronic-based systems are typically designed to reduce. The ten DOD Enterprise Resource Planning systems have incurred cost overruns of at least $6.9 billion.

According to the GAO, one new system called the Army General Fund Enterprise Business System (or “GFEBS”), which has cost $770 million to date, is causing additional data entry and other “manual workarounds.” The GAO stated that the “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. GFEBS is scheduled to become operational this summer.

“Ensuring that the Department of Defense has the resources and tools to properly manage its finances is a top priority, particularly as we grapple with a record federal debt and deficit,” said Sen. Carper, Chairman of the Senate Subcommittee on Federal Financial Management. “The Pentagon must be able to keep track of the millions of transactions it makes each year and ensure that hundreds of billions of dollars in expenditures are properly accounted for. Unfortunately, as this report shows, the Department of Defense’s financial management systems are nowhere near where they need to be, particularly as the Department strives to have its books in proper shape so it can be ready to finally pass a financial audit. The point of these expensive new accounting and financial management systems is a quicker, faster, more accurate oversight of Pentagon spending. Yet as the GAO points out, the new Army system is causing DOD accountants to do more data entry, which could slow down the system and create more errors. The new Air Force system is also facing a lot of problems.”

“The new financial and accounting systems are critical to Secretary of Defense Panetta’s goal for the Pentagon to become audit-ready in 2017. But with the problems cited in the Government Accountability Office’s report, it will be challenging for the Department to get its financial management systems up and running, let alone pass an audit,” continued Sen. Carper. “Of course, no program is perfect. But Congress must ensure that the Pentagon can effectively and efficiently oversee its billions of dollars in annual spending. Today, the Department of Defense is the only federal agency that remains unable to conduct, let alone pass, a financial audit. This is a dubious distinction. I know Secretary Panetta has made these strong financial controls and management systems a top priority, and I look forward to working with him to improve the way the Department oversees its budget.

“I am disappointed that GAO continues to find problems with the Air Force and Army’s ‘new’ commercial off-the-shelf financial systems,” said Sen. Coburn, M.D. “These billion-dollar systems may not help the Pentagon pass a financial audit. What’s worse is that unlike some of the other ERP (enterprise resource planning) systems, these systems were purchased by accountants for accountants. If any system should have been a resounding success it’s these two. Congress should continue to perform aggressive oversight and question the effectiveness of every one of the billions of dollars spent on these ERP systems.”

“By 2016, the Department of Defense plans to spend more than $11 billion to improve its financial management operations. But GAO’s report highlights that DOD’s new enterprise resource planning systems are still lacking, despite this enormous investment,” said Sen. McCain. “I intend to continue to oversee the Department’s implementation of GAO’s recommendations to ensure that DOD can produce auditable financial statements as required by law.”

“As a former auditor, when I hear reports like this, it’s like fingernails on a chalkboard,” said Sen. McCaskill. “U.S. taxpayers have invested billions of dollars in developing business systems for the services, but as the Government Accountability Office has shown us again, these systems can’t get the job done. I’ll be digging into this further when the Readiness Subcommittee puts the Defense Department’s financial management under the microscope at a hearing next month.”

“As the GAO report points out, the military services have struggled to develop and integrate key business systems essential for financial management improvements and audit readiness across the Department of Defense,” said Sen. Brown. “Already years over schedule, it is simply unacceptable that Department leadership cannot get these programs on track and I will continue to hold them responsible for further setbacks.”

To read the GAO report, please visit: http://www.gao.gov/products/GAO-12-134.

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