Sens. Carper, Coburn Highlight New GAO Study Revealing Billions in Cost Overruns and Missed Deadlines for Defense Department’s New Accounting Systems

Defense Department Unlikely to Meet 2017 Audit Requirement

WASHINGTON – Today, Sen. Tom Carper (D-Del.), Chairman of the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security, called attention to a new study by the Government Accountability Office (GAO) detailing cost overruns and schedule slippages of the Department of Defense’s (DOD) programs to upgrade its accounting systems. The GAO study was conducted at the request of Sens. Carper, Levin (D-MI), Coburn (R-OK) and McCain (R-AZ) and found that the new military accounting systems are years behind schedule and have seen cost-overruns totaling more than $6.9 billion, raising serious questions about the DOD’s ability to meet a congressional requirement to be ready to pass an audit by 2017.  The Department of Defense’s (DOD) financial systems and the findings of the GAO report will be discussed in further detail later today at Sen. Carper’s subcommittee hearing on "Improving Financial Accountability at the Department of Defense."


"The Department of Defense is trying to modernize its financial systems, as mandated by Congress, to finally become audit ready by 2017," said Sen. Carper. "This is a critical goal and considering the amount of time and money that’s gone into this effort, it’s one that should have been met years ago.  Not only will an audit help the Department of Defense ensure that billions of tax dollars are being spent properly, but it will help make certain that our troops have the equipment they need when and where they need it.  Unfortunately, according to the Government Accountability Office’s report, the Department of Defense cannot even say whether the audit readiness goal of 2017 will be met.  Perhaps even more disturbing, the Department of Defense cannot even tell us how far behind schedule or over-budget they are when it comes to meeting that 2017 audit readiness goal.  As anyone who’s taken a road trip can tell you, it’s difficult to reach a destination if you haven’t even bought a map or a tank of gas.  


"As a recovering Governor, I understand the unique challenges that come along with running a major institution like the Department of Defense; however, as a former State Treasurer, I also know the importance of keeping one’s financial house in order.   At the end of the day, making sure the Department of Defense’s financial books are in order isn’t just about being a good steward of taxpayer’s money – although that is a top priority for me – it’s about ensuring that our brave service men and women have the equipment and supplies that they need and that we’re paying for."


"The Department of Defense has again proven itself incapable of managing its budget and breaking promises to be auditable by 2010. The perpetual waste, fraud, and abuse found in the Defense Department represents the bigger issue of a government continuing to operate beyond its means. The need for Congress to be held accountable in conducting aggressive oversight is not only vital to achieving a clean financial audit, but to saving the lives of our troops. I look forward to discussing an effective plan for the Defense Department’s financial improvement. The American people deserve financial accountability from the Defense Department, and to know how their hard-earned dollars are being spent," said Sen. Coburn, M.D.


As part of its study, the GAO conducted a review of the DOD’s major programs to upgrade their financial and associated business systems. The Army, Navy, Air Force and the Department of Defense are all conducting "Enterprise Resource Planning" (ERP) program that include activities such as modernizing their accounting software and other business and financial systems. The GAO examined the schedules and status of the nine major programs, including cost projections and deployment schedules.  The GAO also examined whether best practices are being followed for the ERP programs, including the establishment of clear program metrics to determine progress.  


The nine financial system upgrades are critical for the Department of Defense to become ready for a financial audit, as required by law.  However, the upgrades are years from completion and, according to the GAO, the systems have seen cost-overrun totaling at least $6.9 billion. The GAO reports that six of the systems are facing schedule slippages ranging from two to 12 years, one is on schedule, but the U.S. military has not even determined a schedule of completion for the final two.  As of December 2009, DOD has already invested $5.8 billion on its nine ERP systems.   

The new accounting and financial management systems are designed to better manage programs and money at the Department of Defense. The systems are necessary to enable the Department of Defense to perform and pass an audit.  If modern and effective accounting systems are not in place, then the military budget is prone to waste and fraud, which is unfortunately found in the budget every year.