Department of Defense Inspector General Details Problem with New Billion Dollar Accounting Systems

WASHINGTON – Today, Sen. Tom Carper (D-Del.), Chairman of the Subcommittee on Federal Financial Management, expressed concern about the findings in a recent report that describes further cost overruns and schedule slippages for a majority of the Department of Defense’s (DOD) major, billion-dollar accounting and financial management modernization systems, known as Enterprise Resource Planning (ERP) systems. The Department of Defense Inspector General report details nearly $8 billion in system cost overruns and schedule delays of between one and a half to 12.5 years.

The Inspector General report examined the status of the new accounting and financial systems’ deployment, as well as the costs of the projects as compared to earlier budget projections. The report found that as a result of schedule delays and cost increases, the Department will continue to use outdated financial and accounting systems and will likely lose estimated savings expected due to the new systems’ ability to track expenditures and finances. The schedule slippages will also jeopardize the DOD’s goal of becoming audit-ready by 2017. DOD remains the only agency that has yet to have its financial statements examined by an independent auditor as required by law.

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 the hundreds of billions of dollars in transactions it makes annually.

“Ensuring that the Department of Defense has the resources and tools necessary to properly manage its finances is a top priority, particularly as we grapple with a record federal debt and deficit,” said Sen. Carper. “The Pentagon must be able to keep track of the millions of financial transactions it makes each year in order to know for certain how and when it spends the billions of dollars we entrust to it. Unfortunately, the Inspector General report shows that the Department of Defense’s modernization of its financial and accounting systems faces serious cost overruns and other set-backs. The implementation of its new, multi-billion dollar systems to better track taxpayer dollars and ensure we spend those dollars effectively, is itself behind schedule and over budget. These ongoing delays and cost overruns continue to jeopardize the Pentagon’s ability to meet Secretary Panetta’s new financial accountability goals. Most importantly, these critical financial systems ensure that our military personnel are actually getting the critical supplies and services that they need to do their jobs –namely protecting Americans at home and abroad. The point of these expensive new accounting and financial management systems is quicker, faster, more accurate oversight of defense spending. It’s clear that while the Pentagon has made some progress in improving its financial management practices, it is certainly nowhere near where it needs to be. I will continue to monitor the implementation of these systems and work with Secretary Panetta and my colleagues to get the project back on track.”

Since 1995, DOD’s financial management itself has remained on the Government Accountability Office’s (GAO) listing of high-risk government areas. The GAO has noted that the department’s “pervasive financial and related business management and system deficiencies continue to adversely affect its ability” to control cost, ensure basic accountability, and prevent and detect fraud, waste and abuse, among other needs.

Report available here: Enterprise Resource Planning Systems Schedule Delays and Reengineering Weaknesses Increase Risks to DoD’s Auditability Goals (Project No. D2012-D000DE-0057.000).