Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to assign accountability in the FIAR Plan for achieving results to specific offices or organizations (1) within the department, such as the Property and Equipment Policy Office within the Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics); and/or (2) at lower levels within a DOD component, such as the Deputy Chief of Staff for Logistics, Installations, and Mission Support within the Air Force.

Agency Affected: Department of Defense

Status: Open

Comments: The Department of Defense (DOD) concurred with our recommendation. DOD officials responded that the Under Secretary of Defense(Comptroller) will work with the military service financial communities and the Chief Management Officers (CMOs) and Directors of the Defense Agencies and the Financial Improvement and Audit Readiness (FIAR) Directorate on assigning accountability for FIAR progress to the appropriate offices and organizations below the CMO level in the military services and Defense Agencies. According to DOD officials, the FIAR Directorate has added a requirement to the Financial Improvement Plans to identify the specific offices and organizations responsible for achieving each control objective and capability. We plan to follow-up on the status of this recommendation as part of our review of component financial improvement plans in 2010/2011.

Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to describe in the FIAR Plan the oversight roles and responsibilities, if any, of the DOD CMO and military service CMOs over FIAR Plan and FIP improvement efforts, as appropriate.

Agency Affected: Department of Defense

Status: Open

Comments: The Department of Defense (DOD) concurred with our recommendation, but stated in its response that the Under Secretary of Defense (Comptroller) will be responsible for implementing this option. In May 2010, DOD issued its Financial Improvement and Audit Readiness (FAIR) guidance and FIAR Status Report, which identified the department and military Chief Management Officers (CMOs) as key members of the FIAR goverance structure and stated that they are responsible, along with the department's financial management leaders, for providing the vision, oversight, and monitoring of financial management improvement efforts. Moreover, the both documents emphasized that the CMOs had cross-community responsibilities and authorities to transform business operations, including financial management, but did not specify how thoses responsibilities or authorities would be excercised or the process by which issues or concerns hindering financial managment improvements could be raised within the governance structure, including to the CMOs for resolution. We will monitor DOD's action to address this recommendation during our oversight and monitoring of DOD's financial statement and improvement efforts.

Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to establish clear results-oriented metrics within the FIAR Plan and component FIPs for measuring and reporting quantifiable incremental results toward achieving defined financial management capabilities, addressing a specific weakness, and/or achieving FIAR Plan goals by an estimated milestone date established for each component and the department.

Agency Affected: Department of Defense

Status: Open

Comments: The Department of Defense (DOD) concurred with our recommendation. DOD officials stated that the Under Secretary of Defense (Comptroller) is responsible for ensuring that the Military Service Chief Management Officers (CMOs), the Military Service Financial Improvement Plan Program Management Offices. In 2009/2010, the Financial Improvement and Audit Readiness (FIAR) Directorate collaborated with the military services to begin establishing outcome based performance metrics to measure progress toward financial management improvement and auditabililty. Further, DOD issued its FIAR guidance in May 2010 to begin establishing clear objectives and defining the capabilities needed to achieve financial management improvement and audit readiness. According to DOD, these objectives and capabilities will serve as the outcome-oriented metrics and milestones to measure incremental and meaningful progress towards the ultimate goals. We plan to follow-up on the status of this recommendation as part of our oversight and monitoring of DOD's financial statement audit and improvement efforts.

Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to establish a baseline of financial management capabilities and weaknesses at the component level, and ultimately at the department level, that can be used to (1) obtain a clear understanding of needed improvements in DOD's or a component's policies, processes and controls, systems and data, and human capital that are needed to address these weaknesses and support relevant management assertions (i.e., existence or occurrence, completeness, valuation, rights and obligations, and presentation and disclosure) regarding the reliability of reported financial information; (2) identify gaps in planned corrective actions; and (3) establish a realistically attainable date, by component and at the department level, for achieving financial statement auditability.

Agency Affected: Department of Defense

Status: Open

Comments: The Department of Defense (DOD) concurred with our recommendation. DOD officials responded that the Under Secretary of Defense (Comptroller) is responsible for ensuring that the Financial Improvement and Audit Readiness (FIAR) Directorate works directly with the Military Service Financial Improvement Plan (FIP) Program Management Offices to establish capability baselines related to financial controls and to ensure that the military services make appropriate progress in achieving the objectives and capabilities. In 2009/2010, the FIAR Directorate collaborated with the military services FIP Program Management Offices to establish a set of control objectives and identify key capabilities that are critical to achieving improved financial management and audit readiness in support of two DOD Comptroller improvement priority areas: budget information and accountability over mission critical assets (e.g. real property, personal property, military equipment, and inventory). These control objectives and key capabilities are to be integrated into the Component FIPs to serve as the outcomes against which progress will be measured. We plan to follow-up on the status of this recommendation as part of our oversight and monitoring of DOD's financial statement audit and improvement efforts.

Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to issue guidance to standardize the development of the FIPs, including their format and frequency, to aid in ensuring the (1) sufficiency of corrective actions through the identification of performance gaps in corrective actions planned within and between components; (2) sharing of successful methodologies developed and implemented to address a financial management weakness or achieve a defined capability; and (3) reliability of progress reporting, including clear linkages and descriptions of how the corrective action, individually or collectively contributes to achievement of a defined capability or goal by an estimated milestone date established for each component and the department.

Agency Affected: Department of Defense

Status: Open

Comments: The Department of Defense (DOD)concurred with our recommendation. In its response to GAO's recommendation, DOD responded that the Under Secretary of Defense (Comptroller)/Chief Financial Officer will retain overall responsibility for statement auditability and ensure that the Military Services Financial Improvement Plan (FIP) Program Management Offices and Military Service Chief Management Officers (CMOs) collaborate with the Financial Improvement and Audit Readiness (FIAR) Directorate on implementing standard FIPs. In May 2010, DOD issued FIAR guidance to its components to address our recommendation. The FIAR guidance requires DOD components to use a standard FIP framework and template, which is described in the guidance, and concentrates their financial improvement efforts on two specific departmentwide priority areas: the statement of budgetary resources and verification of asset accountability information. DOD components are also required to update their FIPs and status online at least monthly. While the standard FIP and guidance provides the overall strategy and common focus of effort for achieving auditability as well as a detailed methodology for achieving improvements in the two priority areas identified above, they lack sufficient detail regarding the department's strategy or methodology for achieving full financial statement audit readiness. We will continue to monitor DOD's progress in addressing our recommentations through our oversight and monitoring of DOD's financial statement audit and improvement efforts.

Recommendation: To increase the FIAR Plan's effectiveness as a strategic and management tool for guiding, monitoring, and reporting on financial management improvement efforts and increasing the likelihood of meeting the department's goal of financial statement auditability, that the Secretary of Defense should direct the DOD CMO to ensure that the military service CMOs and the DOD Comptroller's Acting FIAR Director work jointly, as appropriate, to provide visibility to DOD management and the Congress, within each FIAR Plan update, of resources budgeted and spent to address a specific weakness or achieve specific incremental improvements in the department's financial management capabilities.

Agency Affected: Department of Defense

Status: Open

Comments: The Department of Defense (DOD) partially concurred with our recommendation. DOD officials stated that the Under Secretary of Defense (Comptroller) is responsible for ensuring that the Military Service Chief Management Officers (CMOs) and Military Service Financial Improvement Plan (FIP) Program Management Offices collaborate with the Financial Improvement and Audit Readiness (FIAR) Directorate to provide visibility of the resources needed and used for FIAR efforts. The Department stated that it recognizes the importance of properly allocating resources to the FIAR effort and to ensure that, once allocated, those resources are effective and in its May 2010 FIAR Status report provide summary level budget estimates for DOD, Army, Navy, Air Force, and the Defense Logistics Agency. DOD officials also stated in the department's response to our report that the FIP plans have been modified to collect this information; however, the cost and effort of assigning and tracking resources to address specific weaknesses may be prohibitive. We plan to follow-up on the status of this recommendation as part of our oversight and monitoring of DOD's financial statement audit and improvement efforts, including our review of military department FIPs in 2010/2011.