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entitled 'DOD Business Systems Modernization: Continued Investment in 
Key Accounting Systems Needs to be Justified' which was released on 
March 31, 2003.



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Report to the Chairman, Subcommittee on National Security, Emerging 

Threats, and International Relations, Committee on Government Reform, 

House of Representatives:



March 2003:



DOD Business Systems Modernization:



Continued Investment in Key Accounting Systems Needs to be Justified:



GAO-03-465:



GAO Highlights:



Highlights of GAO-03-465, a report to the Chairman, Subcommittee on 

National Security, Emerging Threats, and International Relations, 

Committee on Government Reform, House of Representatives



Why GAO Did This Study:



The Department of Defense’s (DOD) long-standing financial management 

and business systems modernization problems result in a lack of 

information needed to make sound decisions, hinder the efficiency of 

operations, and leave the department vulnerable to fraud, waste, and 

abuse. Such problems led us in 1995 to put financial management and 

business systems modernization at DOD on our list of high-risk areas 

in the federal government, a designation that continues today. GAO was 

asked to (1) provide information on the number and cost of DOD’s 

current business systems and (2) determine if DOD is effectively 

managing and overseeing selected accounting system investments.



What GAO Found:



DOD estimated that it had 1,731 business systems for its day-to-day 

operations as of October 2002. As GAO previously reported, these 

systems have evolved over time into the overly complex, error prone, 

duplicative, stovepiped environment that exists today. To support the 

operation, maintenance, and modernization of its business systems, the 

department requested approximately $18 billion for fiscal year 2003. 

Funding is only part of the solution to improving DOD’s current system 

environment. A key ingredient to success is effectively managing and 

overseeing these investments.



DOD has invested approximately $316 million in four key Defense Finance 

and Accounting Service (DFAS) projects. However, DOD has not 

demonstrated that this substantial investment will markedly improve DOD 

financial management information needed for decision-making and 

financial reporting purposes. In fact, the DOD Comptroller terminated 

one project in December 2002, after an investment of over $126 million, 

citing poor program performance and increasing costs. Continued 

investment in the other three projects has not been justified because 

requisite analyses of the costs, benefits, and risks of each one do not 

reflect cost increases and/or schedule delays.



[See PDF for image]



[End of table]



DOD oversight of the four DFAS projects has not been effective. 

Collectively, DFAS, the DOD Comptroller, and the DOD Chief Information 

Officer share investment management responsibility for these four 

projects. However, these DOD oversight entities have not questioned the 

impact of the cost increases and schedule delays and allowed the 

projects to proceed absent the requisite analytical justification.



What GAO Recommends:



March 2003

This report recommends that the Secretary of Defense limit future 

investments by the Defense Finance and Accounting Service (DFAS) in 

three ongoing system projects we reviewed until each has been 

adequately justified. The report also recommends that all other DFAS 

information technology projects be evaluated to ensure they are being 

implemented at acceptable costs and within reasonable time frames. 



DOD concurred with our recommendations and described efforts to address 

them.



www.gao.gov/cgi-bin/getrpt?GAO-03-465.

To view the full report, including the scope

and methodology, click on the link above.

For more information, contact Gregory Kutz,

(202) 512-9095 (kutzg@gao.gov) or

Randolph Hite (202) 512-3439

(hiter@gao.gov).



[End of section]



Letter:



Results in Brief:



Background:



DOD Is Investing Billions of Dollars Annually to Operate, Maintain, and 

Modernize Its Business Systems:



Investment Management and Oversight of Key DFAS Accounting Systems Has 

Not Been Effective:



Conclusions:



Recommendations for Executive Action:



Agency Comments and Our Evaluation:



Appendixes:



Appendix I: Scope and Methodology:



Appendix II: Comments from the Under Secretary of Defense:



Appendix III: GAO Contacts and Staff Acknowledgments:



Tables:



Table 1: DFAS Fiscal Year 2002 Financial Operations:



Table 2: Reported DOD Business Systems by Functional Area:



Table 3: Proposed Allocation of DOD’s Fiscal Year 2003 IT Budget:



Table 4: Reported Cost Increases and Schedule Delays for the Four DFAS 

Projects Reviewed:



Table 5: Reported Investment in DPPS, DDRS, and DSDS:



Figures:



Figure 1: Intended Interrelationship of the Four DFAS Projects:



Figure 2: Distribution of DOD’s Fiscal Year 2003 $26 Billion IT Budget 

Request (dollars in billions):



Figure 3: DCD/DCW Schedule Slippages and Cost Increases:



Figure 4: DPPS Schedule Slippages and Cost Increases:



Figure 5: DDRS Cost Increases and Schedule Delays:



Figure 6: DSDS Schedule Delays:



Figure 7: ITIM Stages of Maturity:



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Letter March 28, 2003:



The Honorable Christopher Shays

Chairman

Subcommittee on National Defense, Emerging Threats,

 and International Relations

Committee on Government Reform

House of Representatives:



Dear Mr. Chairman:



The Department of Defense’s (DOD) long-standing financial management 

and business systems[Footnote 1] modernization problems result in a 

lack of information needed to make sound decisions, hinder the 

efficiency of operations, and leave the department vulnerable to fraud, 

waste, and abuse. Such problems led us in 1995 to put financial 

management and business systems modernization at DOD on our list of 

high-risk areas[Footnote 2] in the federal government, a designation 

that continues today.[Footnote 3] DOD’s financial management problems 

are the result of challenges in the area of human capital, processes 

(internal controls), and its inability to effectively modernize its 

business systems.



The President has made financial management and the use of technology 

integral to his fiscal year 2002 Management Agenda for making the 

federal government more focused on results. The President’s Management 

Agenda states, “Without accurate and timely information it is not 

possible to accomplish the President’s agenda to secure the best 

performance and the highest measure of accountability for the American 

people.” Additionally, in September 2002, the Secretary of Defense 

identified the modernization of DOD’s financial management and business 

operations as one of his top 10 priorities.



This report responds to your request for information about DOD’s 

current and planned business systems environment and its management of 

certain key accounting system projects. As agreed with your office, our 

objectives were to (1) identify the number of existing business systems 

and the estimated cost to operate, maintain, and modernize systems and 

(2) determine if DOD is effectively overseeing selected business system 

investments made by the Defense Finance and Accounting Service (DFAS)-

-the centralized accounting agency for DOD.



To evaluate the effectiveness of information technology (IT) investment 

management and oversight practices, we selected four DFAS system 

acquisition projects as case studies. We selected these projects 

because all four were intended to benefit the entire department by 

addressing DOD’s financial management weaknesses in the areas of data 

accuracy, financial reporting, and problem disbursements. In reviewing 

these four system projects, we relied on documentation, including cost 

estimates, provided by DFAS. We did not verify the accuracy and 

completeness of the cost information provided by DFAS. Our work was 

performed from November 2001 to January 2003 in accordance with U.S. 

generally accepted government auditing standards. Details on our scope 

and methodology are included in appendix I. We requested comments on a 

draft of this report from the Secretary of Defense or his designee. 

Written comments from the Under Secretary of Defense (Comptroller) are 

reprinted in appendix II.



Results in Brief:



As part of its ongoing business systems modernization program, DOD is 

creating a repository of information about its existing systems 

environment. As of October 2002, DOD reported that its current business 

system environment consisted of 1,731 DOD systems and system 

acquisition projects. DOD officials said they believe the inventory is 

fairly comprehensive, given the in-depth work the department has 

undertaken over the past 18 months to develop this information, but 

acknowledge that it likely does not include all systems. More 

importantly, as we testified before this Subcommittee,[Footnote 4] 

these systems are acknowledged by DOD to be error prone, duplicative, 

and stovepiped. To support its existing business systems environment, 

the department requested approximately $18 billion for fiscal year 

2003. However, funding alone is not the solution to improving DOD’s 

current systems environment. A key to success is effectively managing 

and overseeing its investments in systems.



DOD has not effectively managed and overseen its planned investment of 

over $1 billion in four DFAS system modernization efforts. 

Specifically, one project did not have an economic analysis, and the 

other three did not have approved economic analyses that reflected the 

fact that expected project costs had increased, while in some cases the 

benefits had decreased. One project’s estimated cost had increased by 

as much as $274 million, while the schedule slipped by almost 4 years. 

Such analyses provide the requisite justification for decision makers 

to use in determining whether to invest additional resources in 

anticipation of receiving commensurate benefits and mission value. For 

each of these projects, DOD oversight entities--DFAS, the DOD 

Comptroller, and the DOD Chief Information Officer (CIO)--could not 

provide documentation that indicated they questioned the impact of the 

cost increases and schedule delays, and allowed the projects to proceed 

in the absence of the requisite analytical justification. For example, 

in one case, they allowed a $270 million project to proceed without an 

economic analysis. In another case, they allowed a project to continue 

despite known concerns with the validity of the project’s economic 

analysis. After spending over $126 million as of September 2002, the 

DOD Comptroller terminated the latter project in December 2002, citing 

poor program performance and increasing costs.



This report recommends that the Secretary of Defense limit future 

investments in the remaining three DFAS system projects until such 

investments have been adequately justified. Additionally, we are 

recommending that all remaining DFAS IT projects be evaluated to ensure 

they are being implemented at acceptable cost and within reasonable 

time frames. In its comments on a draft of this report, DOD agreed with 

our recommendations and briefly outlined its actions for addressing 

them.



Background:



DFAS, as DOD’s central accounting agency, is responsible for recording 

and processing accounting transactions; paying vendors, contractors, 

and military and civilian employees; preparing reports used by DOD 

managers and by the Congress; and preparing DOD-wide and service-

specific financial statements required by the Chief Financial Officers 

Act. Organizationally, DFAS is under the direction of the Under 

Secretary of Defense (Comptroller). Table 1 illustrates the enormous 

scope and importance of DFAS’s reported fiscal year 2002 financial 

operations.



Table 1: DFAS Fiscal Year 2002 Financial Operations:



Type of activity: Accounting transactions; Volume of activity: 124 

million.



Type of activity: Disbursements made; Volume of activity: $346.6 

billion.



Type of activity: Invoices paid; Volume of activity: 11.2 million.



Type of activity: Military and civilian employees, retirees, and 

annuitants paid; Volume of activity: 5.7 million.



Type of activity: Active DOD appropriations; Volume of activity: 267.



Source: DFAS:



[End of table]



DFAS’s fiscal year 2003 IT budgetary request was approximately $494 

million.[Footnote 5] Of that amount, $353 million relates to the 

operation and maintenance of existing DFAS systems and the remaining 

$141 million is for the modernization of systems. The purpose of each 

DFAS project we reviewed is highlighted below.



DFAS Corporate Database/DFAS Corporate Warehouse (DCD/DCW). DCD and DCW 

were originally separate initiatives. DCD was initiated in October 

1998, and was to be the single DFAS database, meaning it was to contain 

all DOD financial information required by DFAS systems and would be the 

central point for all shared data within DFAS. To accomplish this goal, 

DCD would crosswalk[Footnote 6] detailed transaction data from 

nonstandard finance and feeder[Footnote 7] systems into a standard 

format. Further, once the department implemented standard systems, the 

need to perform these crosswalks would be eliminated. In February 2001, 

the project’s scope was revised after DFAS realized that crosswalks of 

detail transaction data were cumbersome and cost prohibitive. DFAS is 

planning to crosswalk detailed transaction data only when information 

from multiple systems must be aggregated to satisfy a cross-service 

need such as the working capital fund activities.



DCW was initiated in July 2000 to provide a historical database to 

store and manage official DFAS information for analysis and generation 

of operational reports and queries. In November 2000, the DFAS CIO 

combined DCD/DCW into one program. In March 2001, DCD/DCW was 

designated as a major automated information system.[Footnote 8]



Defense Procurement Payment System (DPPS). DFAS determined the need for 

DPPS in April 1995. DPPS was intended to be the standard, automated 

information system for contract and vendor pay authorization and 

addressing deficiencies associated with overpayments, negative 

unliquidated obligations,[Footnote 9] and unmatched 

disbursements[Footnote 10]--all of which are long-standing problems in 

DOD. DPPS also was to incrementally replace eight contract and vendor 

systems. In October 1995, the DFAS Director approved proceeding with 

defining and evaluating the feasibility of alternative concepts and 

assessing the relative merits of these concepts. In November 1996, the 

Office of the Assistant Secretary of Defense (Command, Control, 

Communications, and Intelligence)--DOD’s CIO--designated DPPS a major 

automated information system. DFAS awarded a contract in June 1998 for 

the acquisition of a system that was intended to address DOD’s contract 

and vendor pay deficiencies.



Defense Standard Disbursing System (DSDS). Disbursing activities for 

DOD are largely accomplished through systems that were designed 15-20 

years ago. In 1997, DFAS launched DSDS to be the single, standard DFAS 

automated information system for collecting, processing, recording, and 

reporting disbursement data and transactions for the military services 

and defense agencies. These disbursing functions are currently being 

provided by multiple automated information systems and manual 

activities at various DFAS locations.



Defense Departmental Reporting System (DDRS). In April 1997, DFAS 

initiated DDRS to be the standardized departmental reporting system. 

DDRS has two phases. The first phase--DDRS-AFS (Audited Financial 

Statements)--is intended to be a departmentwide financial reporting 

system. The second phase--DDRS-Budgetary--is intended to establish a 

departmentwide budgetary reporting system. Among other things, DDRS is 

intended to reduce the number of departmental reporting systems and 

standardize departmental general ledger processes.



These four projects are part of the DFAS Corporate Information 

Infrastructure (DCII) program. According to DFAS, DCII is intended to 

facilitate cross-functional, integrated processes; promote 

standardized data and reporting; facilitate standardized business 

practices; reduce cost of operations; and provide timely information 

for decision making. Figure 1 depicts a high-level view of the 

interrelationships among these four system projects.



Figure 1: Intended Interrelationship of the Four DFAS Projects:



[See PDF for image]



[A] Feeder systems are outside the direct control of DFAS. These are 

the systems used by DOD’s various functional areas such as acquisition, 

logistics, and personnel. DOD has estimated that 80 percent of the 

department’s financial management data comes from the feeder systems 

controlled by the military services and defense agencies.



[B] Electronic commerce/electronic data interchange. Electronic 

commerce is the interchange and processing of information using 

electronic techniques for accomplishing business. Electronic data 

interchange is the computer-to-computer exchange of business data in a 

standardized format between entities.



[End of figure]



Overview of DFAS and DOD System Acquisition Management and Oversight 

Process:



DOD and DFAS have an established acquisition management and oversight 

process for acquiring, operating, and maintaining business systems. 

Among other things, this process requires project managers to provide 

cost, schedule, and performance data to the DFAS Chief Information 

Officers/Business Integration Executive (CIO/BIE) Council--DFAS’s IT 

investment board--prior to scheduled milestone[Footnote 11] reviews. 

These milestones are intended to be decision points for determining 

whether a project should continue in the current phase of the system 

life-cycle, proceed to the next phase, be modified, or be terminated. 

The results of these reviews are to be set forth in a system decision 

memorandum which is to be signed by the milestone decision authority. 

The milestone decision authority for DSDS and DDRS is the Director, 

DFAS. The DOD CIO is the milestone decision authority for DCD/DCW and 

DPPS.



Prior Reviews Have Identified Problems With DOD’s Management and 

Oversight of System Acquisitions:



We and the DOD Inspector General have continued to report on a variety 

of long-standing management problems for modernizing DOD’s IT systems. 

Three recent system endeavors that have fallen short of their intended 

goals illustrate these problems. They are the Standard Procurement 

System, the Defense Travel System, and the Defense Joint Accounting 

System. These efforts were aimed at improving the department’s 

financial management and related business operations. Significant 

resources--in terms of dollars, time, and people--have been invested in 

these three efforts.



Standard Procurement System (SPS). In November 1994, DOD began the SPS 

program to acquire and deploy a single automated system to perform all 

contract management-related functions within DOD’s procurement process 

for all DOD organizations and activities. The laudable goal of SPS was 

to replace 76 existing procurement systems with a single departmental 

system. DOD estimated that SPS had a life-cycle cost of approximately 

$3 billion over a 10-year period. According to DOD, SPS was to support 

about 43,000 users at over 1,000 sites worldwide and was to interface 

with key financial management functions, such as payment processing. 

Additionally, SPS was intended to replace the contract administration 

functions currently performed by the Mechanization of Contract 

Administration Services, a system implemented in 1968. Our July 2001 

report[Footnote 12] and February 2002 testimony[Footnote 13] identified 

weaknesses in the department’s management of its investment in SPS. 

Specifically:



* The department had not economically justified its investment in the 

program because its latest (January 2000) analysis of costs and 

benefits was not credible. Further, this analysis showed that the 

system, as defined, was not a cost-beneficial investment.



* The department had not effectively addressed the inherent risks 

associated with investing in a program as large and lengthy as SPS 

because it had not divided the program into incremental investment 

decisions that coincided with incremental releases of system 

capabilities.



* Although the department committed to fully implementing the system by 

March 31, 2000, this target date had slipped by over 3 ½ years to 

September 30, 2003, and program officials have recently stated that 

this date will also not be met.



Defense Travel System (DTS). In July 2002,[Footnote 14] the DOD 

Inspector General raised concerns that DTS remained a program at high 

risk of not being an effective solution in streamlining the DOD travel 

management process. The report stated that “The Defense Travel System 

was being substantially developed without the requisite requirements, 

cost, performance, and schedule documents and analyses needed as the 

foundation for assessing the effectiveness of the system and its return 

on investment.” The report further noted there was increased risk that 

the $114.8 million and 6 years of effort already invested will not 

fully realize all goals to reengineer temporary duty travel, make 

better use of IT, and provide an integrated travel system. 

Additionally, the DOD Inspector General reported that DTS was to cost 

approximately $491.9 million (approximately 87 percent more than the 

original contract cost of $263.7 million) and DOD estimates that 

deployment will not be completed until fiscal year 2006, approximately 

4 years behind schedule.



Defense Joint Accounting System (DJAS). In 1997, DOD selected 

DJAS[Footnote 15] to be one of three general fund accounting systems. 

The other two general fund systems were the Standard Accounting and 

Reporting System and the Standard Accounting and Budgetary Reporting 

System. As originally envisioned, DJAS would perform the accounting for 

the Army and the Air Force as well as the DOD transportation and 

security assistance areas. Subsequently, in February 1998, DFAS decided 

that the Air Force could withdraw from using DJAS, because either the 

Air Force processes or the DJAS processes would need significant 

reengineering to permit use of a joint accounting system. As a result, 

the Air Force started its own general fund accounting system--General 

Fund and Finance System--which resulted in the development of a fourth 

general fund accounting system.



In June 2000, the DOD Inspector General reported[Footnote 16] that DFAS 

was developing DJAS at an estimated life-cycle cost of about $700 

million without demonstrating that the program was the most cost-

effective alternative for providing a portion of DOD’s general fund 

accounting. More specifically, the report stated that DFAS had not 

developed a complete or fully supportable feasibility study, analysis 

of alternatives, economic analysis, acquisition program baseline, or 

performance measures, and had not reengineered business processes.



DOD Is Investing Billions of Dollars Annually to Operate, Maintain, and 

Modernize Its Business Systems:



As part of its ongoing business systems modernization program, and 

consistent with our past recommendation,[Footnote 17] DOD is creating a 

repository of information about its existing systems environment. As of 

October 2002, DOD reported that its current business systems 

environment consisted of 1,731 systems and system acquisition projects. 

In particular, DOD reported that it had 374 systems to support civilian 

and military personnel matters, 335 systems to perform finance and 

accounting functions, and 310 systems that produce information for 

management decision making. Table 2 presents the composition of DOD 

business systems by functional area.



Table 2: Reported DOD Business Systems by Functional Area:



Functional area: Personnel; Army: 266; Navy: 49; Air Force: 13; DFAS: 

19; DLA: 0; Other: 27; Total: 374.



Functional area: Finance and accounting; Army: 79; Navy: 61; Air Force: 

27; DFAS: 131; DLA: 9; Other: 28; Total: 335.



Functional area: Management information; Army: 156; Navy: 40; Air 

Force: 50; DFAS: 14; DLA: 4; Other: 46; Total: 310.



Functional area: Inventory; Army: 98; Navy: 53; Air Force: 40; DFAS: 7; 

DLA: 7; Other: 17; Total: 222.



Functional area: Acquisition; Army: 18; Navy: 10; Air Force: 22; DFAS: 

0; DLA: 5; Other: 19; Total: 74.



Functional area: Budget formulation; Army: 25; Navy: 18; Air Force: 10; 

DFAS: 5; DLA: 0; Other: 10; Total: 68.



Functional area: Cost; Army: 19; Navy: 29; Air Force: 8; DFAS: 0; DLA: 

1; Other: 4; Total: 61.



Functional area: Logistics; Army: 12; Navy: 6; Air Force: 22; DFAS: 3; 

DLA: 7; Other: 5; Total: 55.



Functional area: National defense property management; Army: 5; Navy: 

12; Air Force: 25; DFAS: 1; DLA: 2; Other: 1; Total: 46.



Functional area: Travel; Army: 9; Navy: 13; Air Force: 3; DFAS: 2; DLA: 

0; Other: 5; Total: 32.



Functional area: Real property management; Army: 17; Navy: 4; Air 

Force: 6; DFAS: 0; DLA: 0; Other: 1; Total: 28.



Functional area: Time and attendance; Army: 3; Navy: 14; Air Force: 2; 

DFAS: 2; DLA: 3; Other: 1; Total: 25.



Functional area: Budget execution; Army: 6; Navy: 4; Air Force: 2; 

DFAS: 7; DLA: 0; Other: 3; Total: 22.



Functional area: Personal property management; Army: 3; Navy: 7; Air 

Force: 7; DFAS: 0; DLA: 0; Other: 4; Total: 21.



Functional area: Procurement; Army: 7; Navy: 5; Air Force: 1; DFAS: 0; 

DLA: 3; Other: 4; Total: 20.



Functional area: Vendor payment; Army: 3; Navy: 3; Air Force: 1; DFAS: 

7; DLA: 0; Other: 4; Total: 18.



Functional area: Transportation; Army: 5; Navy: 1; Air Force: 4; DFAS: 

0; DLA: 0; Other: 2; Total: 12.



Functional area: Other functions combined; Army: 12; Navy: 7; Air 

Force: 6; DFAS: 3; DLA: 0; Other: 9; Total: 37.



Functional area: Total; Army: 743; Navy: 336; Air Force: 249; DFAS: 

201; DLA: 41; Other: 190; Total: 1,760[A].



Source: DOD Business Modernization Systems Integration Office.



[A] There are 29 reported duplications within the DOD database (e.g., 

systems shown in multiple functional areas). Taking this duplication 

into account provides the reported 1,731 business systems.



[End of table]



As we have previously reported,[Footnote 18] these numerous systems 

have evolved into the overly complex and error prone operation that 

exists today, including (1) little standardization across DOD 

components, (2) multiple systems performing the same tasks, (3) the 

same data stored in multiple systems, (4) manual data entry into 

multiple systems, and (5) a large number of data translations and 

interfaces that combine to exacerbate problems with data integrity. The 

department has recognized the uncontrolled proliferation of systems and 

the need to eliminate as many systems as possible and integrate and 

standardize those that remain. In fact, three of the four DFAS projects 

we reviewed were intended to reduce the number of systems or eliminate 

a portion of different systems that perform the same function. For 

example,



* DPPS was intended to consolidate eight contract and vendor pay 

systems;



* DDRS is intended to reduce the number of departmental reporting 

systems from seven to one; and:



* DSDS is intended to eliminate four different disbursing systems.



Similarly, DTS is intended to be the DOD-wide travel system. According 

to data reported by DOD, currently there are 32 travel systems 

operating within the department.



For fiscal year 2003, DOD has requested approximately $26 billion in IT 

funding to support a wide range of military operations as well as DOD 

business system operations. As shown in figure 2, the $26 billion is 

spread across the military services and defense agencies. Each receives 

its own funding for IT investments.



Figure 2: Distribution of DOD’s Fiscal Year 2003 $26 Billion IT Budget 

Request (dollars in billions):



[See PDF for image]



[A] Defense Logistics Agency is DOD’s logistics manager for all 

consumable and some repair items; its primary business function is 

providing supply support to sustain military operations and readiness.



[B] Other DOD components include entities such as DFAS and the Defense 

Commissary Agency.



[C] Defense Information Systems Agency provides DOD and other 

organizations a wide range of information services such as data 

processing, telecommunication services, and database management.



[End of figure]



The $26 billion supports three categories of IT--business systems, 

business systems infrastructure, and national security systems (NSS)--

the first two of which comprise the 1,731 business systems. DOD defines 

these three categories as follows:



* Business systems--used to record the events associated with DOD’s 

functional areas. Such areas include finance, logistics, personnel, and 

transportation.



* Business systems infrastructure--represents the costs associated with 

the operations of the department’s business systems. Such costs would 

include transmission lines, network management, and information 

security.



* National Security System (NSS)--intelligence systems, cryptologic 

activities related to national security, military command and control 

systems, and equipment that is an integral part of a weapon or weapons 

system, or is critical to the direct fulfillment of military or 

intelligence mission.



As shown in table 3, approximately $18 billion--the nearly $5.2 billion 

for business systems and the $12.8 billion for business systems 

infrastructure--relates to the operation, maintenance, and 

modernization of DOD’s 1,731 business systems.



Table 3: Proposed Allocation of DOD’s Fiscal Year 2003 IT Budget:



Dollars in millions.



Air Force; Business systems: $578; Business system infrastructure: 

$3,178; NSS: $2,674; Total: $6,430.



Navy; Business systems: 1,397; Business system infrastructure: 2,674; 

NSS: 1,444; Total: 5,515.



Army; Business systems: 1,122; Business system infrastructure: 2,223; 

NSS: 1,823; Total: 5,168.



DISA; Business systems: 45; Business system infrastructure: 3,190; NSS: 

648; Total: 3,884.



Tricare; Business systems: 444; Business system infrastructure: 452; 

NSS: 15; Total: 911.



DLA; Business systems: 434; Business system infrastructure: 407; NSS: 

24; Total: 865.



Other DOD components; Business systems: 1,135; Business system 

infrastructure: 676; NSS: 1,843; Total: 3,653.



Total; Business systems: $5,155; Business system infrastructure: 

$12,800; NSS: $8,471; Total: $26,426.



Source: GAO analysis based on DOD’s fiscal year 2003 IT budget request:



[End of table]



As we have reported,[Footnote 19] while DOD plans to invest billions of 

dollars in modernizing its financial management and other business 

support systems, it does not yet have an overall blueprint--or 

enterprise architecture--in place to guide and direct these 

investments. Our review of practices at leading organizations showed 

they were able to provide reasonable assurance that their business 

systems addressed corporate--rather than individual business units--

objectives by using enterprise architectures to guide and constrain 

investments.[Footnote 20]



Consistent with our recommendation,[Footnote 21] DOD is now working to 

develop a financial management enterprise architecture, which is a 

positive step. Further, Section 1004 of the National Defense 

Authorization Act for Fiscal Year 2003[Footnote 22] directs DOD to 

develop an enterprise architecture not later than May 1, 2003, and that 

a transition plan accompany the architecture that delineates how the 

architecture will be implemented. The act also directs that we provide 

an assessment to the congressional defense committees as to whether DOD 

has complied with the provisions of Section 1004.



Investment Management and Oversight of Key DFAS Accounting Systems Has 

Not Been Effective:



DOD management and oversight authorities for the four case study 

projects are DFAS, the DOD Comptroller, and the DOD CIO. They permitted 

each project to proceed despite the absence of the requisite analysis 

to demonstrate that the projects will produce value commensurate with 

the costs being incurred. For example, an economic analysis has yet to 

be prepared for DCD/DCW and the other three projects did not have 

economic analyses that reflected the fact that project costs, 

schedules, and/or expected benefits had changed materially. Table 4 

highlights these cost increases and schedule delays.





Table 4: Reported Cost Increases and Schedule Delays for the Four DFAS 

Projects Reviewed:



Dollars in millions.



DCD/DCW[B]; Original cost estimate: $229; Current 

cost estimate: $270; Original planned date (fiscal year) of full 

operational capability[A]: 2001; Current planned date (fiscal year) of 

full operational capability: 2005.



DPPS; Original cost estimate: $278; Current cost 

estimate: $552; Original planned date (fiscal year) of full operational 

capability[A]: 2002; Current planned date (fiscal year) of full 

operational capability: 2006.



DDRS; Original cost estimate: $ 52; Current cost 

estimate: $170; Original planned date (fiscal year) of full operational 

capability[A]: 1999; Current planned date (fiscal year) of full 

operational capability: 2004.



DSDS; Original cost estimate: $151[C]; Current 

cost estimate: $151; Original planned date (fiscal year) of full 

operational capability[A]: 2002; Current planned date (fiscal year) of 

full operational capability: 2006.



Total; Original cost estimate: $710; Current cost 

estimate: $1,143; Original planned date (fiscal year) of full 

operational capability[A]: [Empty]; Current planned date (fiscal year) 

of full operational capability: [Empty].



Source: GAO based upon information provided by DFAS.



[A] Full operational capability means the system is deployed and 

operating at all intended locations.



[B] When DFAS initiated the DCW in July 2000, a full operational 

capability date was not established. The current full operational 

capability date applies to both DCD and DCW since they were combined 

into one program in November 2000.



[C] DSDS began in 1997; however, a cost estimate was not developed 

until September 2000, and this estimate has not been updated.



[End of table]



In the case of DPPS, the estimated costs had increased by $274 million 

and the schedule had slipped by almost 4 years. In December 2002, 

following our discussions with DOD Comptroller officials, the DOD 

Comptroller terminated DPPS after 7 years of effort and an investment 

of over $126 million. In making this decision, the DOD Comptroller 

noted that the project was being terminated due to poor program 

performance and increasing costs.



The Clinger-Cohen Act of 1996 and Office of Management and Budget (OMB) 

guidance provide an effective framework for IT investment 

management.[Footnote 23] They emphasize the need to have investment 

management processes and information to help ensure that IT projects 

are being implemented at acceptable costs and within reasonable and 

expected time frames and that they are contributing to tangible, 

observable improvements in mission performance. DOD policy also 

reflects these investment principles by requiring that investments be 

justified by an economic analysis.[Footnote 24] More specifically, the 

policy states that the economic analysis is to reflect both the life-

cycle cost and benefit estimates, including a return-on-investment 

calculation, to demonstrate that the proposed investment is 

economically justified before it is made.



DCD/DCW Has Not Been Economically Justified:



After 4 years of effort and an investment of approximately $93 million, 

DOD has yet to economically justify that its investment in DCD/DCW will 

result in tangible improvement in DOD financial management operations. 

Consistent with the Clinger-Cohen Act, DOD and DFAS systems acquisition 

guidance[Footnote 25] requires that certain documentation be prepared 

at each milestone within the system life-cycle. This documentation is 

intended to provide relevant information for management oversight and 

in making decisions as to whether the investment of resources is cost 

beneficial.



A key piece of information--the economic analysis--was never completed 

for the DCD/DCW project. In May 2000, the Director, DFAS, granted 

approval to continue with development of DCD with a condition that a 

cost benefit analysis be completed by June 2000. DFAS completed a draft 

cost benefit analysis for DCD in October 2000. This document was not 

finalized and in November 2000, DCD/DCW were combined into one program. 

Since that time, DCD/DCW has continued without a valid, well-supported 

economic justification to support continued investment in DCD/DCW. DCD 

project management officials stated that the economic analysis has not 

been finalized because they were unable to agree on how to compute the 

return on investment and demonstrate that benefits exceeded costs.



In March 2001, DCD/DCW was designated a Major Automated Information 

System, and as such, DOD’s Office of Program Analysis and Evaluation 

(PA&E) is required to assess the economic analysis and provide any 

recommendations to the DOD CIO. However, after approximately 2 years, 

the economic analysis still has not been developed and PA&E officials 

stated that it did not anticipate receiving the economic analysis until 

May 2003. At the same time, as highlighted in figure 3, the cost and 

schedule of this project have continued to increase over the years.



Figure 3: DCD/DCW Schedule Slippages and Cost Increases:



[See PDF for image]



[End of figure]



Additionally, the planned functionality of DCD has been drastically 

reduced since the original concept was set forth. Originally, DCD was 

to contain all DOD financial information required by DFAS systems, 

making it the central point for all shared data within DFAS. To 

accomplish this goal, DCD was to crosswalk[Footnote 26] detailed 

transactions from nonstandard finance and feeder systems into a 

standard format, pending the acquisition and implementation of standard 

feeder systems. In February 2001, the scope of the DCD project was 

revised after DFAS realized, through testing of Air Force detailed 

transactions from feeder systems, that the planned crosswalks were 

cumbersome and cost prohibitive. Currently, DFAS is planning to 

crosswalk detailed transaction data only when information from multiple 

systems must be aggregated to satisfy a cross-service need such as the 

working capital fund activities. This will result in the originally 

envisioned capability not being provided. Additionally, DCD/DCW will 

continue to rely on the error-plagued data in the feeder systems and 

will not produce financial records that are traceable to transaction-

level data. According to the DOD Inspector General, DCD was a high-risk 

effort because there was no assurance that DCD and other financial 

management systems would standardize DOD business processes; reduce the 

number of finance, accounting, and feeder systems; reduce costs; and 

produce accurate and auditable financial information.[Footnote 27]



Until the economic analysis is finalized, DOD does not know if its 

investment in DCD/DCW is justified and the decision to move to the next 

milestone will continue to be delayed. Nevertheless, DOD continues to 

spend funds to perform tasks in anticipation of milestone approval 

being received. In fiscal year 2002, according to DFAS officials, 

approximately $36 million was spent on DCD/DCW.



Economic Justification for the Other Three Projects Is Not Current:



DOD had developed an economic analysis for each of the remaining three 

projects. However, these analyses had not been updated to reflect 

schedule delays, cost increases, and changes in scope that have 

occurred--each of which has an impact on the projected benefits that 

were originally justified. Nevertheless, as shown in table 5, 

investment in each project continues.



Table 5: Reported Investment in DPPS, DDRS, and DSDS:



Dollars in millions.



DPPS; Date of the economic analysis: February 

1998; Fiscal year 2002 investment: $20; Total investment as of 

September 2002: $126.5.



DDRS; Date of the economic analysis: October 1998; 

Fiscal year 2002 investment: $10; Total investment as of September 

2002: $57.5.



DSDS; Date of the economic analysis: September 

2000; Fiscal year 2002 investment: $7; Total investment as of September 

2002: $39.



Total; Date of the economic analysis: [Empty]; 

Fiscal year 2002 investment: $37; Total investment as of September 

2002: $223.



Source: GAO based on information provided by DFAS:



[End of table]



The investment of resources in a system project should be conditional 

upon analytical justification that the proposed investment will produce 

commensurate value. As called for in OMB guidance,[Footnote 28] 

analyses of investment costs, benefits, and risks should be (1) updated 

throughout a project’s life cycle to reflect material changes in 

project scope and estimates and (2) used as a basis for ongoing 

investment selection and control decisions. To do less presents the 

risk of continued investment in projects on the basis of outdated and 

invalid economic justification.



In the case of DPPS, PA&E questioned the validity of the economic 

analysis developed by DFAS. Since DPPS is classified as a major 

automated information system, the economic analysis is to be reviewed 

by PA&E. In its May 1998 assessment of the economic analysis, PA&E 

questioned areas such as the validity of the estimated savings and the 

ability to implement DPPS within the original estimated cost and 

schedule. According to DOD officials, these issues were resolved, but 

they could not provide any documentation to substantiate their 

position. The DOD CIO subsequently granted permission to continue the 

project.



Over the years, as shown in figure 4, the DPPS effort has been marked 

by significant increases in cost and schedule delays.



Figure 4: DPPS Schedule Slippages and Cost Increases:



[See PDF for image]



[End of figure]



The original full operational capability date of April 2002 slipped to 

December 2005--a delay of almost 4 years--with the estimated cost 

almost doubling to $552 million. In December 2002, following our 

discussion with DOD Comptroller officials of DPPS cost increases and 

schedule slippages, the DOD Comptroller terminated DPPS. In making this 

decision, the DOD Comptroller noted that the project was being 

terminated due to poor program performance and increasing costs.



With regard to DDRS, the economic analysis used to justify this 

initiative was developed in October 1998--over 4 years ago. At that 

time, it was estimated that DDRS would cost $111 million and be fully 

operational by April 2000. However, based upon information provided by 

DFAS, and as shown in figure 5, DDRS has experienced increased cost and 

schedule delays. However, the economic analysis has not been updated to 

reflect the known changes in the project’s costs and schedule.



Figure 5: DDRS Cost Increases and Schedule Delays:



[See PDF for image]



[End of figure]



Moreover, the intended capability of DDRS as originally envisioned has 

been reduced. For example, DDRS is no longer intended to provide the 

capability to build an audit trail so that financial data can be 

tracked back to its transaction-based support, as originally planned. 

The Federal Financial Management Improvement Act of 1996[Footnote 29] 

requires that agency financial management systems comply with federal 

financial management systems requirements, applicable federal 

accounting standards, and the U.S. Government Standard General Ledger 

at the transaction level. Systems meeting these requirements should be 

able to produce auditable financial statements and otherwise have audit 

trail capability. However, DDRS system users will have to rely on the 

audit trail capabilities of feeder systems in order to trace individual 

transactions to their source documents. As we have previously 

reported,[Footnote 30] the data from the feeder systems, which are 

outside the control of DFAS and provide approximately 80 percent of the 

data that DOD needs for financial reporting purposes, are not reliable. 

Additionally, until DCD is operational, DDRS will be receiving data 

from the feeder systems in order to prepare the department’s financial 

reports on the results of its operations. Therefore, DOD’s financial 

reports produced by DDRS will (1) continue to be incomplete and 

inaccurate and thus not useful for decision-making purposes and (2) 

remain unable to withstand the scrutiny of a financial audit.



For DSDS, an economic analysis was prepared in September 2000. However, 

it has not been updated to reflect material changes in the project. For 

example, as shown in figure 6, the full operational capability (FOC) 

date[Footnote 31] at the time the economic analysis was prepared was 

February 2003. However, according to information provided by DFAS, the 

current FOC date is December 2005--a schedule slippage of almost 3 

years.[Footnote 32] Such delays postpone the delivery of promised 

benefits. DFAS has stated that the cost information is being updated to 

support a Milestone C decision, which they anticipate will occur in 

early fiscal year 2004.



Figure 6: DSDS Schedule Delays:



[See PDF for image]



[End of figure]



Additionally, DSDS delivery of promised benefits depends upon the DCD/

DCW being implemented on time. However, as previously discussed, DCD/

DCW implementation has been fraught with difficulties, which has a 

corresponding adverse effect on DSDS schedule delays. For example, DCD/

DCW project management officials are in the process of addressing 102 

requests for requirement changes. According to the DCD/DCW program 

manager, the date for resolving these changes and approving the 

Operational Requirements Document is November 2003. Until this process 

is completed, affected systems integration testing for other DCD/DCW 

dependent systems, such as DSDS, cannot be finalized. Further, 

according to DFAS officials, the continued operation of existing legacy 

systems may result in an increase to the DSDS life-cycle cost estimate 

by approximately $14 million for each 6-month delay. This would quickly 

erode the savings of $171 million that DFAS estimated in September 

2000, and reconfirmed in January 2003.



Without an updated economic analysis to justify continued investment in 

DDRS and DSDS, DOD does not have reasonable assurance that continued 

investment will result in commensurate improvement in the financial 

management operations of the department.



DOD Oversight of DFAS IT Projects Has Not Been Effective:



DOD’s oversight over the four DFAS projects we reviewed has been 

ineffective. Investment management responsibility for the four projects 

rests with DFAS, the DOD Comptroller, and the DOD CIO. In discharging 

this responsibility, each has allowed project investments to continue 

year after year, even though the projects have been marked by cost 

increases, schedule slippages, and capability changes. As a result, DOD 

has invested approximately $316 million in the four projects without 

adequately knowing if these efforts will resolve some of DOD’s 

financial management difficulties--the rationale upon which each 

initiative was undertaken. In fact, as previously noted, after an 

investment of over $126 million and 7 years of effort, the DOD 

Comptroller terminated DPPS in December 2002.



GAO’s Information Technology Investment Management (ITIM) maturity 

framework[Footnote 33] defines critical processes pertaining to IT 

investment management and oversight. Among other things these processes 

provide for establishing investment decision-making bodies responsible 

for selecting and controlling IT investments by (1) understanding, for 

example, each project’s expected return on investment and associated 

costs, schedule, and performance commitments, (2) regularly determining 

each project’s progress toward these expectations and commitments, and 

(3) taking corrective actions to address deviations. Additionally, the 

Clinger-Cohen Act and OMB guidance similarly emphasize the need to have 

investment management processes and information to help ensure that IT 

projects are being implemented at acceptable costs and within 

reasonable and expected time frames and that they are contributing to 

tangible, observable improvements in mission performance (i.e., that 

projects are meeting the cost, schedule, and performance commitments 

upon which their approval was justified).



Organizationally, within DOD, the Comptroller has overall management 

and oversight responsibility for DFAS’s activities--including system 

investments. However, DOD Comptroller officials told us that they were 

unaware of the cost increases and schedule slippages on the projects 

until we brought them to their attention. Further, these officials said 

that they do not review DFAS’s system investments to ensure that they 

are meeting cost, schedule, and performance commitments, stating that 

DFAS is responsible for ensuring that projects stay on target in terms 

of cost, schedule, and performance. Additionally, they told us that 

their review is limited to a review of budgetary information and budget 

exhibits, and that they compare the current year budget request to the 

previous year’s request to determine if any significant funding 

increases are being requested for the coming fiscal year. If the budget 

request is generally consistent from year to year, they said that they 

do not raise questions about the project. According to these officials, 

the review of DFAS’s fiscal year 2003 budget did not result in the 

identification of issues that warranted further review.



While the DOD Comptroller is the responsible authority for DFAS 

activities, DFAS is also responsible for ensuring that its proposed 

investments will result in systems that are implemented at acceptable 

costs and within reasonable and expected time frames. To fulfill this 

responsibility, DFAS established the CIO/BIE Council to oversee system 

investments. As outlined in the CIO/BIE Council charter, members of the 

council are responsible for, among other things, advising the 

Leadership Council--DFAS’s senior decision-making body--on IT 

investment decisions. The CIO/BIE Council membership includes 

representatives of DFAS’s business lines, such as accounting services 

and commercial pay, as well as IT management.



In order to assure that the roles, responsibilities, and authorities of 

the IT investment board are well defined and that board processes are 

clear, the ITIM Framework states that an IT investment process guide 

should be created to direct IT investment board operations. While DFAS 

has endeavored to give the CIO/BIE a role in the acquisition management 

and oversight process, it has not provided clear, consistent guidance 

to describe that role and the associated operating procedure. Though 

the council charter does mention the CIO/BIE Council’s 

responsibilities, it does not adequately describe them, address the 

council’s authority, or describe how the council is to fulfill its 

responsibilities. The DFAS 8000 series also addresses CIO/BIE 

responsibilities (DFAS 8000.1-R, Part C). However, the 8000 series does 

not describe how the CIO/BIE is expected to execute its 

responsibilities, including providing corporate oversight and 

reviewing capital budget proposals. The lack of clear definition of 

responsibilities and authority limits the council’s ability to 

effectively perform oversight-related activities. For the four IT 

investment projects we reviewed, we found no evidence that the CIO/BIE 

effectively monitored the cost, schedule, or performance goals of the 

four projects.



As previously noted, the DOD CIO is responsible for overseeing major 

automated information systems. As such, this office is responsible for 

ensuring that the investments being made in DCD/DCW and DPPS are 

justified. However, the DOD CIO did not effectively exercise this 

authority. In regard to DPPS, the DOD CIO was designated the milestone 

decision authority in November 1996. While DOD CIO officials told us 

that they were aware of the problems with DPPS, they were unable to 

provide any documentation that indicated they had raised concerns with 

the DPPS effort.



DCD/DCW was not brought under the purview of the DOD CIO until March 

2001--approximately 2½ years after the project began. DOD CIO officials 

expressed concerns about the viability of DCD/DCW and questioned DFAS’s 

decision to move forward absent an economic analysis. However, they 

were unable to provide us with documentation that indicated they had 

carried out their oversight responsibilities and independently 

determined whether DCD/DCW was a viable investment.



According to DOD CIO officials, despite being the milestone decision 

authority for major projects, they have little practical authority in 

influencing component agency IT projects. As such, they said they try 

to work with the program managers to ensure that all of the required 

documentation for passing the next milestone is prepared, but the 

department’s culture, which rests organizational authority and funding 

control with the components, precludes them from exercising effective 

IT investment oversight. The comments of the DOD CIO officials support 

the fact that the current stovepiped, parochial management of DOD’s IT 

investments has led to the previously discussed proliferation of 

business systems. As we previously reported,[Footnote 34] DOD’s 

organizational structure and embedded culture have made it difficult to 

implement departmentwide oversight or visibility over information 

resources.



Similarly, we recently reported[Footnote 35] that DOD does not yet have 

the departmental investment governance structure and process controls 

needed to adequately align ongoing investments with DOD’s architectural 

goals and direction. Instead, DOD continues to allow its component 

organizations to make their own investment decisions, following 

different approaches and criteria. We reported that this stovepiped 

decision-making process has contributed to the department’s current 

complex, error prone environment of over 1,700 systems. In particular, 

DOD has not yet established and applied common investment criteria to 

its ongoing IT system projects using a hierarchy of investment review 

and funding decision-making bodies, each composed of representatives 

from across the department. DOD also has not yet conducted a 

comprehensive review of its ongoing IT investments to ensure that they 

are consistent with its architecture development efforts. Until it does 

these things, DOD will likely continue to lack effective control over 

the billions of dollars it is currently spending on IT projects. To 

address this problem we recommended that DOD establish a series of 

investment review boards, each responsible and accountable for 

selecting and controlling investments that meet defined threshold 

criteria, and each composed of the appropriate level of executive 

representatives, depending on the threshold criteria, from across the 

department. We also reiterated our open recommendations governing 

limitations in business system investments pending development of the 

architecture.[Footnote 36]



Conclusions:



DOD is investing billions of dollars annually in hundreds of systems 

that perform the same function spread across numerous DOD components. 

As we have previously reported, this proliferation of systems has 

resulted in part because DOD’s embedded culture and parochial 

operations have permitted each of the military services and DOD 

agencies to manage and oversee their IT investments apart from one 

another. It has also occurred because DOD has not effectively managed 

its investments in IT business systems, as our past work and the DOD 

Inspector General work have demonstrated. As a result, DOD runs a high 

risk that hundreds of millions of dollars will continue to be invested 

annually in modernization efforts that will not result in improvements 

in the department’s operations.



In each of the four system projects we discuss in the report, DOD has 

invested millions of dollars without economically justifying its 

investments, in large part because those entities responsible for 

managing and overseeing these investments have not required such 

justification despite schedule slippages, cost overruns, and reductions 

in planned capability. Urgent need for effective investment control is 

exemplified by DPPS--$126 million for a terminated project. More 

vigorous oversight of DPPS could have precluded the substantial 

investment in this failed effort. Until it has effective investment 

management and oversight, DOD will not have reasonable assurance that 

its continued investment in the remaining three projects discussed in 

this report, as well as its other system projects, are justified.



Recommendations for Executive Action:



We recommend that the Secretary of Defense direct the Under Secretary 

of Defense (Comptroller) to limit funding in the DFAS Corporate 

Database/ Corporate Warehouse, the Defense Standard Disbursing System, 

and the Defense Departmental Reporting System until the DOD 

Comptroller, in collaboration with the Assistant Secretary of Defense 

(Command, Control, Communications & Intelligence), and the Director, 

Program Analysis and Evaluation, demonstrates on the basis of credible 

analysis and data that continued investment in these three projects 

will produce benefits that exceed costs.



We further recommend that the Secretary of Defense, in light of the 

department’s ongoing efforts to modernize its business systems, direct 

the Under Secretary of Defense (Comptroller) to evaluate all remaining 

DFAS IT projects and ensure that each project is being implemented at 

acceptable costs, within reasonable time frames, and is contributing to 

tangible, observable improvements in mission performance.



Agency Comments and Our Evaluation:



DOD provided written comments on a draft of this report. DOD concurred 

with our recommendations and identified actions it planned to take to 

ensure that future investments in DFAS’s systems are justified. For 

example, the Under Secretary of Defense (Comptroller) noted that the 

review of DCD/DCW, DDRS, and DSDS would be completed by June 15, 2003. 

Additionally, the Under Secretary of Defense (Comptroller) stated that 

all systems would be reviewed as part of the department’s effort to 

establish a financial management enterprise architecture governance 

structure. As discussed in our February 2003 report,[Footnote 37] the 

governance structure is intended to provide DOD the means to gain 

control over its IT investments. However, as noted in our report, we 

have not verified or evaluated the extent to which the planned 

governance structure will address our recommendation. DOD comments are 

reprinted in appendix II.



:



As agreed with your office, unless you announce the contents of this 

report earlier, we will not distribute this report until 30 days from 

its date. At that time, we will send copies to the Chairman and Ranking 

Minority Member, Senate Committee on Armed Services; Chairman and 

Ranking Minority Member, Senate Appropriations Subcommittee on Defense; 

Chairman and Ranking Minority Member, House Armed Services Committee; 

Chairman and Ranking Minority Member, House Appropriations Subcommittee 

on Defense; Chairman and Ranking Minority Member, Senate Committee on 

Governmental Affairs; Chairman and Ranking Minority Member, House 

Committee on Government Reform; the Director, Office of Management and 

Budget; the Under Secretary of Defense (Comptroller); the Assistant 

Secretary of Defense (Command, Control, Communications & Intelligence); 

and the Director, Defense Finance and Accounting Service. Copies of 

this report will be made available to others upon request. The report 

will also be available on GAO’s Web site at http://www.gao.gov.



If you or your staff have any questions on matters discussed in this 

report, please contact Gregory D. Kutz at (202) 512-9505 or 

kutzg@gao.gov or Randolph C. Hite at (202) 512-3439 or hiter@gao.gov. 

Major contributors to this report are acknowledged in appendix III.



Signed by:



Gregory D. Kutz

Director, Financial Management and Assurance:



Randolph C. Hite

Director, Information Technology Architecture and Systems Issues:



Signed by Gregory D. Kutz and Randolph C. Hite:



[End of section]



Appendixes:



Appendix I: Scope and Methodology:



To obtain an overview of DOD’s current business systems environment we 

met with representatives of the then Financial Management Modernization 

Program Office[Footnote 38] to obtain information on the number of 

systems that are part of the current systems environment. We also 

reviewed DOD’s $26 billion fiscal year 2003 IT budget request to 

determine what portion of the budget relates to DOD business systems. 

Additionally, we reviewed the IT budget to determine the reported 

operations, maintenance, development, and infrastructure costs for 

DOD’s business systems.



To determine if DOD was effectively managing and overseeing its IT 

investments, we focused on the four system projects previously noted. 

To assist us in our evaluation, we used our Information Technology 

Investment Management (ITIM) framework. The ITIM identifies critical 

processes for successful IT investment and organizes these processes 

into a framework of increasingly mature stages. We focused on the Stage 

2 critical processes of IT project oversight and IT investment board 

practices based on DFAS’s self assessment that it was at Stage 2. 

Figure 7 shows ITIM’s five stages of maturity.



Figure 7: ITIM Stages of Maturity:



[See PDF for image]



[End of figure]



In addition, we also evaluated DOD’s and DFAS’s guidance on systems 

acquisition, as it relates to life-cycle management and milestones for 

proceeding to the next phase of the system acquisition 

process.[Footnote 39] To verify application of the critical processes 

and practices, we selected projects that (1) were in different life-

cycle phases of systems development 

(2) required oversight by a DOD authority outside of the DOD 

Comptroller, such as the Office of the Assistant Secretary of Defense 

(Command, Control, Communications & Intelligence)--DOD’s CIO, and (3) 

supported different DFAS business areas such as disbursements and 

departmental reporting. For these four projects we reviewed 

documentation, such as mission needs statements, acquisition program 

baseline updates, and project management plans. According to DOD, it 

provided estimates for DCD/DCW and DDRS in constant dollars and DPPS 

and DSDS in escalated dollars. We also reviewed and analyzed charters 

and meeting minutes of the DFAS investment oversight boards and working 

groups. To supplement our document reviews, we interviewed senior DFAS 

officials in the CIO and Systems Integration Offices, as well as the 

program managers for the four projects. We also met with officials in 

the offices of the DOD Comptroller and DOD CIO to obtain an 

understanding of their specific duties and responsibilities in 

approving, reviewing, and overseeing investments in the four DFAS 

systems modernization projects.



We conducted our work at DFAS Headquarters; the Office of the Under 

Secretary of Defense (Comptroller); the Office of the Secretary of 

Defense Program Analysis and Evaluation; and the Office of the 

Assistant Secretary of Defense (Command, Control, Communications & 

Intelligence) from November 2001 through January 2003, in accordance 

with U.S. generally accepted government auditing standards. We did not 

verify the accuracy and completeness of the cost information provided 

by DFAS for the four projects we reviewed. We requested comments on a 

draft of this report from the Secretary of Defense or his designee. We 

received written comments on a draft of this report from the Under 

Secretary of Defense (Comptroller), which are reprinted in appendix II.



[End of section]



Appendix II: Comments From the Under Secretary of Defense:



COMPTROLLER:



UNDER SECRETARY OF DEFENSE:



1100 DEFENSE PENTAGON WASHINGTON, DC 20301-1100:



MAR 19 2003:



Mr. Gregory Kutz:



Director, Financial Management and Assurance United States General 

Accounting Office Washington, DC 20548:



Dear Mr. Kutz:



This is the Department of Defense (DoD) response to the General 

Accounting Office (GAO) draft report, “DoD Business Systems 

Modernization: Continued Investment in Key Accounting Systems Needs to 

be Justified,” dated February 14, 2003, (GAO Code 192043/ GAO-03-465).



We concur with the two recommendations of the draft report. The DoD 

comments to the draft GAO recommendations are enclosed. My point of 

contact for this matter is Mr. Steven Worton, Director for Business 

Modernization and Systems Integration. Mr. Worton may be contacted by 

e-mail at wortons@osd.pentagon.mil or by telephone at (703) 607-3380.



Dov S. Zakheim:



Signed by Dov S. Zakheim:



Enclosure:



DoD Comments to GAO Draft Report, “DOD Business Systems Modernization: 

Continued Investment in Key Accounting Systems Needs to be Justified,” 

dated February 14, 2003, (GAO Code 192043/GAO-03-465):



GAO Recommendation 1: The GAO recommended that the Secretary of Defense 

direct the Under Secretary of Defense (Comptroller) to limit funding in 

the Defense Corporate Database/ Defense Corporate Warehouse, the 

Defense Standard Disbursing System, and the Defense Departmental 

Reporting System, until the DoD Comptroller, in collaboration with the 

Assistant Secretary of Defense (Command, Control, Communications and 

Intelligence), and the Director, Program Analysis and Evaluation 

demonstrates, on the basis of credible analysis and data, that 

continued investment in these three projects will produce benefits that 

exceed costs.



DoD Comment to GAO Recommendation 1: Concur. During the development of 

the 

fiscal years (FY) 2004/2005 President’s Biennial budget, the Department 

terminated the Defense Procurement and Payment System and limited 

related funding for Defense Corporate Database and Defense Corporate 

Warehouse (DCD/DCW). We are now revising the DCD/DCW strategy and plan 

to review it along with Defense Departmental Reporting System, and 

Defense Standard Disbursing System. These reviews will be coordinated 

with the Assistant Secretary of Defense (Command, Control, 

Communications and Intelligence), and the Director, Program Analysis 

and Evaluation as appropriate. We will provide a status of these 

reviews by June 15, 2003. The status will include an update and 

schedule to complete the reviews. The reviews will validate scope, 

direction, cost, and benefit for each system. It is important to note 

that investment decisions may be based on nonmonetary benefits, such as 

the need for timely and accurate financial information for 

decisionmaking or a clean audit opinion, and may not always exceed 

costs.



GAO Recommendation 2: The GAO recommended that the Secretary of Defense 

direct the Under Secretary of Defense (Comptroller) to evaluate all 

remaining Defense Finance and Accounting Service Information Technology 

projects and provide assurance that each project is being implemented 

at acceptable costs and within reasonable time frames and are 

contributing to tangible, observable improvements in mission 

performance.



DoD Response to GAO Recommendation 2: Concur. The USD(C) and other 

Domain Owners, as necessary, will review all systems. The Department is 

inventorying all systems. The inventory will be validated by Domain 

Owners and provide the basis for them to stratify systems for review to 

ensure that the critical ones are reviewed first. Vehicles for the 

reviews will include the Architecture Review Board and Investment 

Review Board being established as part of the Financial Management 

Enterprise Architecture governance structure.



Enclosure:



General Comments:



Fact Corrections:



Page 3, Results in Brief, Second paragraph, a sentence reads as 

follows: “One project’s cost had increased by as much as $274 million, 

while the schedule slipped by 3 _years.”:



The DPPS did not have a project cost increase of $274 million. The DPPS 

program was approved for Milestone I/II in June 1998 with a cost 

baseline not to exceed $152 million. The program did not exceed this 

baseline amount.



Page 4, paragraph 1:



Change from: “For example, in one case, they allowed a $270M project to 

proceed without an economic analysis.”:



Change to: For example, in one case, they allowed a $270M project to 

continue based on a cost benefit analysis instead of an economic 

analysis.



Page 4, Results in Brief, Second paragraph (continued from page 3), 

states “...DOD Comptroller and the DOD Chief Information Officer - have 

not questioned the impact of the cost increases and schedule delays, 

and allowed the proiects to proceed in the absence of the requisite 

analytical justification.”:



The OASD C3I directed DPPS to revise the life cycle cost estimate based 

on the new assumptions that would be needed for the program to continue 

to accomplish its intended mission. As a result, the program created a 

new life cycle cost estimate. The program conducted a full function 

point count to ensure that the cost for development and maintenance of 

the additional software enhancements were accounted for properly. The 

program’s new life cycle cost estimate underwent an independent 

Component Cost Analysis (CCA). A reconciled cost position for DFAS for 

DPPS was attained. In addition, DFAS conducted its own Vendor Pay 

System Analysis of Alternatives (AOA). The purpose of the analysis was 

to ensure that DFAS make the appropriate investment in the right 

software solution for vendor payment entitlement. DFAS reviewed its 

current entitlement systems to ascertain the capability of each system.



Page 5, paragraph 2:



Change from: “In February 2001, the project’s scope was revised after 

DFAS realized that crosswalks of detail transaction data were 

cumbersome and cost prohibitive. Currently DFAS is planning to 

crosswalk only summary level data.”:



Change to: In February 2001, the project’s scope was revised based on 

an assessment of the prototype effort that resulted in significant and 

continuous data clean up due to the lack of edits at the front end of 

the source system and a reassessment of the DCII strategy to reengineer 

COTS applications into the DCII. Consistent with the Clinger-Cohen 

mandate to use COTS, DFAS procured a COTS solution to replace the DCII 

strategy to build a DWCF capability replacement for DBMS and a COTS 

solution for AF accounts

receivable. In addition, a GAFS-R AF specific datawarehouse was 

established to resolve the AF general fund accounting deficiencies. 

[eliminate “Currently DFAS is planning to crosswalk only summary level 

data” - this is inaccurate].



Page 8 figure:



Change from: Financial feeder systems.



Change to: Financial feeder systems and source accounting systems 

Change from: DDRS is intended to use data from the DCD and DCW... 

Change to: DDRS is intended to use data from the DCD, DCW and source 

accounting systems.



Page 11, paragraph 1:



The IG, DoD report on the Defense Travel System cited an 87 percent 

cost increase - which is not true. The report improperly compared a 

contract cost ($263.7M) with a total program budget ($491.9M). The 

contract cost has not changed.



Page 11, paragraph 2:



Change from: “Subsequently, in February 1998, DFAS decided that the AF 

could withdraw from using WAS, because either the Air Force processes 

or the WAS processes would need significant reengineering to permit use 

of a joint accounting system. As a result, the AF started its own 

general fund accounting system-GAFS-which resulted in the development 

of a fourth general fund accounting system.”:



Change to: In February 1998, DFAS performed a functional feasibility 

assessment that identified significant mission and business process 

differences between the AF and Army financial and feeder systems. 

Because WAS was based on Army processes and data structures, either 

significant modification would be required to the AF financial system 

architecture or an AF version of WAS that incorporates AF processes and 

data structures would be necessary. The scope of WAS was limited to the 

Army where it could be readily implemented. The DFAS developed a cost/

benefit analysis for the enhancement of the AF existing GAFS.



Page 17, paragraph 2:



Change from: “For example, an economic analysis has yet to be prepared 

for DCD/DCW and the other three projects did not have an economic 

analyses that reflected the fact that project costs, schedules and/or 

expected benefits had changed materially.” Change to: For example, a 

cost benefit analysis was used instead of an economic analysis for the 

DCD/DCW. Attempts to develop an economic analysis proved difficult due 

to the fact that the DCD/DCW is an architecture, not a defined project. 

Projects are added, modified and eliminated from the architecture based 

on the business case and progress of the parent initiative. For 

example, with the elimination of DPPS, the related interfaces and 

supplemental functionality supported by the DCD/DCW have been 

discontinued. The introduction of a new DoD initiative like DIMHRS 

levies new interfaces to the architecture, thereby changing the scope 

and cost of DCD/DCW. Because the architecture evolves and the benefits 

accrue to the parent project, completing an economic analysis on the 

DCD/DCW architecture is elusive.



Page 17, Table 4: Reported Cost Increases and Schedule Delays for the 

Four DFAS Projects Reviewed (dollars in million).



The table shows that the DPPS original cost estimate was $278 million. 

This is not accurate. The original LCCE for DPPS was $1.8 billion. This 

is the figure that was approved at Milestone UII for the program in 

June 1998. The original estimate presumed an immediate cut-over 

strategy, which was a more aggressive implementation methodology. These 

decisions to implement DPPS in a dual processing environment made the 

difference not in the cost of obtaining DPPS as a system itself. The 

current estimate of $552 million is the most recent estimate after DFAS 

conducted its own independent component cost analysis. The major cost 

drivers in the $552 million figure was legacy system operation and 

maintenance and a change in how DPPS was to be implemented in that the 

new estimate accounted for an extended data conversion strategy wherein 

DFAS would be in a dual system operational mode for a time.



Page 18, paragraph 3:



Change from: “DoD has yet to economically justify that its investment 

in DCD/DCW will result in tangible improvement in DoD financial 

management operations.” Change to: “DoD has been unable to economically 

justify that its investment in DCD/DCW will result in tangible 

improvement in DoD financial management operations. Since the DCD/DCW 

provides only an architecture for supporting other initiatives it does 

not, by itself, produce quantifiable benefits. In addition, the 

evolving use of the architecture changes as the Department updates its 

financial management system strategy and as new system solutions are 

introduced into the architecture. The cost of DCD/DCW interfaces, 

crosswalks, and edits need to be applied across specific benefiting 

programs in order to compare total cost to total benefits for a 

specified capability.



Page 19, paragraph 1:



Change from: “In May 2000, the Director, DFAS granted approval to 

continue with the development of the DCD with a condition that an 

economic analysis be completed within 2 months. In November 2000, 4 

months after the economic analysis was due, it had still not been 

completed”:



Change to: “In May 2000, the Director, DFAS granted approval to 

continue with the development of the DCD with a condition that a cost 

benefit analysis be completed within 2 months.” The cost benefit 

analysis was completed in October 2000.



Change from: “The DFAS CIO verbally granted a waiver to for the 

development of the DCD economic analysis,....”:



Change to: “The System Decision Memorandum for Milestone UII stated 

that the DCD must complete the Cost Benefit Analysis within 2 months.”:



Page 21, paragraph 1:



Change from: “In February, the scope of the DCD project was revised 

after DFAS realized, through testing of AF detailed transactions from 

feeder systems, that the planned crosswalks were cumbersome and cost 

prohibitive. Currently DFAS is planning to crosswalk only summary-level 

data into DCD, meaning the originally envisioned capability will not be 

provided. Additionally, DCD/DCW will continue to rely on the error-

plagued data in the feeder systems and will not produce financial 

records that are traceable to transaction-level data.



Change to: In February 2001, the project’s scope was revised based on 

an assessment of the prototype effort that resulted in significant and 

continuous data clean up due to the lack of edits at the front end of 

the source system and a reassessment of the DCII strategy to reengineer 

GOTS applications into the DCII. Consistent with the Clinger-Cohen 

mandate to use COTS, DFAS procured a COTS solution to replace the DCII 

strategy to build a DWCF capability to replace DBMS and a COTS solution 

to support AF accounts receivable. In addition, an AF specific 

datawarehouse was established to resolve the AF general fund accounting 

deficiencies and provide general ledger traceability to detail 

accounting transactions. [eliminate “Currently DFAS is planning to 

crosswalk only summary level data” - we have been and continue to 

crosswalk detail transactions to standardize and normalize data for our 

customers]. The Department will need to maintain on emphasis on front-

end edits in source systems and maintain the integrity of the data 

between systems to maintain the auditability of financial transactions.



Page 22/23, Economic Justification - for the Other Three Projects Is 

Not Current states: “In the case of DPPS, PA&E questioned the validity 

of the economic analysis developed by DFAS.-Despite these concerns, the 

DOD CIO granted permission to continue the protect.”:



The GAO report failed to mention that DFAS and PA&E met after their May 

1998 letter was issued. DFAS and PA&E discussed the cost position for 

the program, although PA&E did not change or update their assessment of 

the economic analysis. After this meeting wherein these issues were 

satisfactorily resolved, the DOD CIO approved the program.



Page 24, paragraph 2:



Change from: “DDRS has experienced increased cost and schedule delays. 

However, the economic analysis has not been updated to reflect the 

known changes in the project’s cost and schedule.”:



Change to: “DDRS has experienced increased scope and cost; and schedule 

delays. For example, to meet the OMB Bulletin 01-09 which established 

accelerated and quarterly reporting requirements for Audited Financial 

Statements, DFAS approved in June 2002, the DDRS development of a Data 

Collection Module (DCM) to capture financial information for the 

Audited Financial Statements from nonfinancial systems. The DCM was 

implemented in September 2002. The DDRS, to date, has completely 

transformed the Department’s Audited Financial Statement process. 

Consistent with the DFAS LCM Regulation, DDRS completed an LCCE, which 

included an ROI for each milestone 

decision. The LCCE is again being updated for the July 2003 Milestone C 

decision for DDRS Budgetary Reporting.



Page 25:



Change from: “DDRS is no longer intended to provide the capability to 

build an audit trail so that financial data can be tracked back to its 

transaction-based support, as originally planned.”:



Change to: The DDRS strategy changed to acknowledge the fact that 

source systems are required to maintain an audit trail from detail 

transactions to general ledger accounts that produce financial results. 

Duplicating this capability in DDRS has the potential for deriving 

disparate results based on attributes and posting logic resulting in 

unnecessary reconciliation between systems. Instead, source systems 

produce summarized trial balances monthly that are traceable to daily 

transactions. The trial balance is submitted to DDRS to produce 

Departmental Reports. The DDRS maintains a drill down to the trial 

balance received while the source system maintains a drill down from 

the trial balance to source detail transactions.



Page 26:



Change from: “Additionally, until DCD is operational, DDRS will be 

receiving data from the feeder systems in order to prepare the 

department’s financial reports on the results of its operations. 

Therefore, DoD’s financial reports produced by DDRS will: (1) continue 

to be incomplete and inaccurate and thus not useful for decisionmaking 

purposes and (2) remain unable to withstand the scrutiny of a financial 

audit.”:



Change to: Data reliability must be accomplished through an enterprise 

architecture that ensures data integrity at the source accounting 

system and auditability to DDRS. Four of the eighteen DoD Reporting 

Entities using DDRS received an unqualified opinion for FY2002 - 

showing that the potential for accurate data to be used for 

decisionmaking purposes and the ability to withstand the scrutiny of a 

financial audit can be accomplished through an enterprise solution.



Page 27:



Change from: Additionally, DSDS delivery of promised benefits depends 

upon the DCD/DCW being implemented on time. However, as previously 

discussed, DCD/DCW implementation has been fraught with difficulties, 

which has a corresponding adverse effect on DSDS schedule delays. For 

example, DCD/DCW project management officials are in the process of 

addressing 102 requests for requirement changes. According to the DCD/

DCW program manager, the date for resolving these changes and approving 

the ORD is November 2003. Until this process is completed affected 

systems integration testing for other DCD/DCW dependent systems, such 

as DSDS, cannot be finalized. Change to: The DSDS program needs to 

incorporate the functionality, cost and schedule associated with the 

DCD/DCW interfaces and crosswalks to provide a complete program cost 

and benefit. DSDS life cycle decisions need to be accomplished 

independent of other capabilities and programs using the DCD/DCW 

architecture. In actuality, the DSDS program development, including 

DCD/DCW interfaces and capabilities are developed and tested as an 

integrated solution independent from other programs and initiatives.



Page 28:



Change from: Further, according to DFAS officials, the continued 

operation of existing legacy systems may result in an increase to the 

DSDS life cycle cost estimate by $14M for each 6-month delay. This 

would quickly erode the savings of $171M estimated by DFAS in September 

2000.



Change to: Further, continued operation of existing legacy systems, 

while not changing the ROI (based on FOC plus 10 years), defers savings 

to future years.



Page 29, paragraph 2.



Change from: “They (Comptroller officials) indicated that they were 

unaware of the cost increases and schedule slippages on the projects 

until we brought them to their attention. ...If the budget request is 

generally consistent from year-to-year, they said that they do not 

raise questions about the project.”:



Change to: “They review the funding requirements, including prior 

expenditures and planned expenditures, for each of the projects in the 

capital purchases program during development of the President’s budget 

and throughout execution. They receive budgetary information as part of 

the Budget Estimates Submission, in accordance with the “DoDFMR,” that 

includes a funding profile and narrative justification. They also 

require a cost-benefit analysis for each capital purchase program and 

review it as part of the budget development process. Major 

discrepancies from year-to-year are identified in the justification 

material and reviewed with the Components.	If there is continued poor 

performance or a lack of a cost-benefit analysis, the program is 

recommended for termination, as was the case with the Defense 

Procurement Pay System.



Page 30, DOD Oversight of DFAS IT, last paragraph states “...No such 

guide exists to describe the CIO/BIE’s roles or responsibilities, and 

no process guide exists to describe how the board evaluates projects 

and proposals”:



The DFAS 8000.1 Regulation states the roles and responsibilities of 

CIO/BIE Council as it relates to IT oversight. The Director of DFAS 

sent guidance to all Executives, defining the process for obtaining 

system approvals and funding for IT Investments. A copy of this 

direction was provided to the GAO during this review. In addition, we 

provided the Program Managers with standard templates for each 

presentation that keep each presentation on target for all issues that 

should be addressed at that particular point in development.



[End of section]



Appendix III: GAO Contacts and Staff Acknowledgments:



GAO Contacts:



Darby Smith, (202) 512-7803

Jenniffer Wilson, (202) 512-9192:



Acknowledgments:



In addition to the individuals named above, key contributors to this 

report included Beatrice Alff, Joseph Cruz, Francine DelVecchio, Lester 

Diamond, Jason Kelly, J. Christopher Martin, Stacey Smith, and Robert 

Wagner.



(192043):



:



FOOTNOTES



[1] Business systems include those that are used for areas such as 

civilian personnel, finance, health, logistics, military personnel, 

procurement, and transportation, with the common element being the 

generation or use of financial data.



[2] U.S. General Accounting Office, High-Risk Series: An Overview, GAO-

HR-95-263 (Washington, D.C.: February 1995).



[3] U.S. General Accounting Office, High-Risk Series: An Update, GAO-

03-119 (Washington, D.C.: January 2003).



[4] U.S. General Accounting Office, DOD Financial Management: Important 

Steps Underway But Reform Will Require a Long-term Commitment, GAO-02-

784T (Washington, D. C.: June 4, 2002).



[5] DOD Information Technology Fiscal Year 2003 Budget Estimate, 

February 2002.



[6] Translate information so that systems that define data differently 

(i.e., use different data schemes) can understand each other and 

communicate accurately.



[7] Feeder systems are outside the direct control of DFAS. These are 

the systems used by DOD’s various functional areas such as acquisition, 

logistics, and personnel. DOD has estimated that 80 percent of the 

department financial management data comes from the feeder systems 

controlled by the military services and defense agencies.



[8] Major automated information systems are defined as IT projects with 

(1) program costs in any single year that exceed $32 million, (2) total 

program costs that exceed $126 million, or (3) total life-cycle costs 

that exceed $378 million. The life-cycle cost is the total cost to the 

government for an information system over its expected useful life and 

includes the costs to acquire, operate, maintain, and dispose of the 

system. DOD Regulation 5000.2-R, Mandatory Procedures for Major Defense 

Acquisition Programs and Major Automated Information System Acquisition 

Programs, specifies mandatory policies and procedures for major 

acquisitions. The policy also specifies that the DOD CIO is the 

milestone decision authority, responsible for program approval, for all 

major automated information systems, such as DCD/DCW and DPPS.



[9] Negative unliquidated obligations occur when recorded disbursements 

exceed recorded obligations, indicating that expenditures may exceed 

amounts obligated.



[10] Unmatched disbursements occur when a disbursement cannot be 

matched to an obligation.



[11] DFAS’s system life-cycle process is consistent with DOD’s Defense 

Acquisition System guidance, which has three milestones: Milestone A or 

Concept and Technology Development, Milestone B or System Development 

and Demonstration, and Milestone C or Production and Deployment. The 

Defense Acquisition System guidance was revised in October 2000. Prior 

to this, Milestone A was Milestone 0, Milestone B was Milestone I/II, 

and Milestone C was Milestone III.



[12] U.S. General Accounting Office, DOD Systems Modernization: 

Continued Investment in the Standard Procurement System Has Not Been 

Justified, GAO-01-682 (Washington, D.C.: July 31, 2001).



[13] U.S. General Accounting Office, DOD’s Standard Procurement System: 

Continued Investment Has Yet to Be Justified, GAO-02-392T (Washington, 

D.C.: Feb. 7, 2002).



[14] Department of Defense Office of the Inspector General, Allegations 

to the Defense Hotline on the Management of the Defense Travel System, 

Report No. D-2002-124 (Arlington, Va.: July 1, 2002).



[15] The original name of the system was the Corps of Engineers 

Financial Management System (CEFMS). After it was determined that CEFMS 

could be modified to satisfy Army customers and had the potential for 

supporting the Defense Working Capital Funds, DFAS selected CEFMS to 

meet the DJAS requirements.



[16] Department of Defense Office of the Inspector General, Acquisition 

of the Defense Joint Accounting System, Report No. D-2000-151 

(Arlington, Va.: June 16, 2000).



[17] U.S. General Accounting Office, Financial Management: DOD 

Improvement Plan Needs Strategic Focus, GAO-01-764 (Washington, D.C.: 

Aug. 17, 2001).



[18] U.S. General Accounting Office, DOD Financial Management: 

Important Steps Underway But Reform Will Require a Long-term 

Commitment, GAO-02-784T (Washington, D.C.: June 4, 2002).



[19] U.S. General Accounting Office, Information Technology: 

Architecture Needed to Guide Modernization of DOD’s Financial 

Operations, GAO-01-525 (Washington, D.C.: May 17, 2001).



[20] U.S. General Accounting Office, Defense Acquisitions: DOD Faces 

Challenges in Implementing Best Practices, GAO-02-469T (Washington, 

D.C.: Feb. 27, 2002).



[21] U.S. General Accounting Office, Information Technology: 

Architecture Needed to Guide Modernization of DOD’s Financial 

Operations, GAO-01-525 (Washington, D.C.: May 17, 2001).



[22] P.L. 107-314, December 2, 2002.



[23] Clinger-Cohen Act of 1996, P.L. 104-106, Div. E, 110 Stat. 679, 

February 10, 1996 (originally known as the Information Technology 

Management Reform Act of 1996) and OMB Circular A-130, Management of 

Federal Information Resources (Nov. 30, 2000).



[24] DOD Regulation 5000.2-R, Mandatory Procedures for Major Defense 

Acquisition Programs and Major Automated Information System Acquisition 

Programs (Apr. 5, 2002).



[25] DOD Regulation 5000.2-R, Mandatory Procedures for Major Defense 

Acquisition Programs and Major Automated Information System Acquisition 

Programs (Apr. 5, 2002) and DFAS 8000.1-R, Part C, DFAS Information 

Technology Life Cycle Management Policy (May 3, 2002).



[26] Translate information so that systems that define data differently 

can understand each other and communicate accurately.



[27] Department of Defense Office of the Inspector General, Development 

of the Defense Finance and Accounting Service Corporate Database and 

Other Financial Management Systems, Report No. D-2002-014 (Arlington, 

Va.: Nov. 7, 2001).



[28] OMB Circular A-130 (Nov. 30, 2000).



[29] P.L. 104-208, Div. A, 110 Stat. 3009-389, Sept. 30, 1996.



[30] U.S. General Accounting Office, DOD Financial Management: 

Important Steps Underway But Reform Will Require a Long-term 

Commitment, GAO-02-784T (Washington, D. C.: June 4, 2002).



[31] The full operational capability date represents the date that a 

system will be operating at all intended locations.



[32] In March 1998, DFAS estimated the FOC date would be February 2002.



[33] U.S. General Accounting Office, Information Technology Investment 

Management: A Framework for Assessing and Improving Process Maturity 

(Exposure Draft), GAO/AIMD-10.1.23 (Washington, D.C.: May 2000).



[34] U.S. General Accounting Office, Defense IRM: Poor Implementation 

of Management Controls Has Put the Migration Strategy at Risk, GAO/

AIMD-98-5 (Washington, D.C.: Oct. 20, 1997).



[35] U.S. General Accounting Office, DOD Business Systems 

Modernization: Improvements to Enterprise Architecture Development and 

Implementation Efforts Needed, GAO-03-458 (Washington, D.C.: Feb. 28, 

2003).



[36] U.S. General Accounting Office, Information Technology: 

Architecture Needed to Guide Modernization of DOD’s Financial 

Operations, GAO-01-525 (Washington, D.C.: May 17, 2001).



[37] U.S. General Accounting Office, DOD Business Systems 

Modernization: Improvements to Enterprise Architecture Development and 

Implementation Efforts Needed, GAO-03-458 (Washington, D.C.: Feb. 28, 

2003).



[38] This office has been renamed the Business Modernization Systems 

Integration Office.



[39] DOD Regulation 5000.2-R, Mandatory Procedures for Major Defense 

Acquisition Programs and Major Automated Information System Acquisition 

Programs (Apr. 5, 2002), DOD Instruction 5000.2, Operation of the 

Defense Acquisition System (Apr. 5, 2002), DFAS 8000.1-R, Part C, DFAS 

Life Cycle Management Policy (May 3, 2002), and DFAS 8000-1-R, 

Information Systems Life Cycle Management, policies for 1996, 1997, and 

1998.



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