Summary: Since the first financial statement audit was attempted at a major Department of Defense (DOD) component over 20 years ago, GAO and DOD auditors have continued to report significant weaknesses in the department's ability to provide timely, reliable, consistent, and accurate information for management analysis, decision-making, and reporting. DOD has undertaken a number of initiatives over the years, such as the Financial Improvement Initiative in 2003, to improve the department's business operations, including financial management, and achieve clean financial statement audit opinions. However, these initiatives have met with limited success. In 2005, the DOD Comptroller established the DOD Financial Improvement and Audit Readiness (FIAR) Directorate to manage DOD-wide financial improvement efforts and to integrate those efforts with transformation activities, such as those outlined in the Enterprise Transition Plan, across the department. The components report accomplishments and progress against planned corrective actions to the FIAR Directorate for reporting in the FIAR Plan. Congress asked GAO to analyze the department's FIAR Plan to identify any areas where improvements are needed to enhance the plan's effectiveness as a management tool for guiding, monitoring, and reporting on the department's efforts to identify and resolve its financial management weaknesses and achieve financial statement auditability.
In 2004, we reported that DOD lacked a comprehensive and integrated strategic plan with key milestones, measures/metrics, accountability mechanisms, or cost estimates for achieving financial statement auditability. According to best practices, a strategic plan should include the following key elements: (1) provide a comprehensive view of performance, including the establishment of a baseline of current operational functions, capabilities, and performance against which progress toward a defined goal or objective can be measured; (2) align goals and measures with departmentwide goals, and cascading goals and measures to lower organizational levels; (3) establish timelines and demonstrate results; (4) assign accountability for achieving results; and (5) link resource needs to performance. While the FIAR Plan identifies three goals for improving DOD financial information and achieving audit readiness, it does not contain the key elements of a strategic plan that we have previously reported as necessary for successful DOD business transformation. During our review of DOD's September 2008 FIAR Plan, we identified the following areas that the department needs to address to improve the FIAR Plan as a strategic and management tool: (1) clear guidance is needed in developing and implementing improvement efforts; (2) no clear baseline exists against which incremental progress can be measured; (3) linkages between FIAR Plan goals and corrective actions and reported accomplishments are not always clear; (4) clear results-oriented metrics for measuring and reporting incremental progress are needed, and (5) accountability is not clearly defined or assigned and resources budgeted and consumed are not identified. We also identified recent actions the department is taking to begin to address many of the issues we have identified above.
