Summary: The Pentagon faces formidable challenges in overcoming problems plaguing the Defense Business Operations Fund. Many of these shortcomings, such as inadequate financial and accounting systems, are the result of years of neglect and date from the old industrial and stock funds. The Fund's financial systems cannot produce accurate and reliable information on Fund operations. Until these antiquated systems are eliminated, (1) the infrastructure costs of maintaining multiple systems for the same purpose will persist and (2) the Defense Department (DOD) and Congress will continue to receive inaccurate and unreliable information on Fund operations. Also, the recent decision to devolve cash management abandons one of the Fund's goals. DOD can cut costs only if it is more conscious of operating expenses and makes fundamental improvements in the way it conducts business. Although the Fund is supposed to operate on a break-even basis, it has not been able to meet this goal. Fiscal year 1994 marked the third consecutive year of reported losses. If top management does not reverse this trend, potential savings from the Fund will not be realized.
