Summary: Financial management problems at the Defense Department (DOD)--which oversees an estimated $1 trillion in assets, has nearly $1 trillion in reported liabilities, and had a net cost of operations of $378 billion in fiscal year 1999--represent the single largest obstacle that must be overcome before an unqualified opinion can be rendered on the U.S. government consolidated financial statements. So far, no major part of DOD has been able to pass the test of an independent audit. Pervasive weaknesses in DOD financial management systems, operations, and controls led GAO to put DOD financial management on its 1995 list of government areas at high risk for waste, fraud, abuse, and mismanagement. DOD has made genuine progress in many areas. GAO has seen a strong commitment by the DOD Comptroller and his counterparts in the military services to address deeply rooted problems. This testimony outlines the most difficult financial management challenges and describes the initiatives that are in place or planned to deal with them.
