Today, Senate Federal Financial Management Chairman Tom Carper (D-Del.) and Ranking Member Scott Brown (R-Mass.) called attention to a new study by the Government Accountability Office (GAO) detailing substantial problems in Navy and Marine Corps financial and accounting systems, identifying $22 billion in payment disbursement and collection errors. The GAO study, conducted at the request of Sens. Carper, Brown and Tom Coburn (R-Okla.), found that the Navy and Marines Corps were unable to complete their audit attempt of the "Fund Balance with Treasury" and that the current accounting system is still not performing basic accounting and financial operations, leaving the military budget prone to waste and fraud.
In its report, "DOD Financial Management: Ongoing Challenges with Reconciling Navy and Marine Corps Fund Balance with Treasury," the GAO found that not only were the Navy and Marine Corps unable to pass the audit of the "Fund Balance With Treasury," the equivalent of a corporate bank account statement, they weren't even able to complete the audit. Many of the basic accounting and financial records do not include basic documents such as canceled check or deposit tickets to prove that transactions occurred. Moreover, the GAO found that the Department of Defense accounting tool, called the Business Activity Monitoring or "B.A.M.", used to provide the Navy and Marine Corps with financial data and documentation, is still not working well enough to provide information to identify and resolve the financial discrepancies between various DOD financial systems. For the past four years, the Department of Defense has been implementing the "B.A.M." system -- an investment of $29 million.
"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, a 23-year veteran of the Navy. "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. While troubling, it is not surprising that the Navy and the Marine Corps are far from being audit-ready. The Navy and Marine Corps deserve credit for making these early attempts at auditing, which will help the entire department of defense move toward better financial systems and become ready to pass an audit. An audit is critical for the Department of Defense to ensure that billions of tax dollars are being spent properly, as well as helping to make certain that our troops have the equipment and supplies they need when and where they need it. Secretary Panetta has instructed the Pentagon -- including the Navy and Marine Corps -- to make solving their respective financial management problems a top priority. This report underscores that goal. I will continue to monitor the DOD's progress on its plan to reach auditability. 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."
"As Congress continues to debate how to solve the federal government's fiscal crisis, one issue not in debate is the federal government's inability to track and manage its funds properly," said Sen. Brown. "As the GAO report points out, after years of activity and tens of millions of dollars spent to modernize business systems, improve financial management, and produce a clean audit of simple financial statements, the Defense Department's investment is still falling short. This lack of significant progress is unacceptable, but I am encouraged by Secretary Panetta's commitment to making meaningful improvements over the next few years. This should be a top priority for the Defense Department, not only because good financial management is our responsibility to taxpayers, but also because it ultimately supports our troops."
The Department of Defense 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 financial systems have been the subject of several hearings of the Senate Federal Financial Management Subcommittee.