August 12, 2005

DoD needs financial reform
Waste, mismanagement damage soldiers' morale

By GREGORY KUTZ - Federal Times

"I implore this committee to promote the necessary steps, now and in the future, to prevent another citizen soldier from ever suffering the hardships that members of my company had to endure. Soldiers are prepared mentally and physically to face the rigors of combat in a foreign land. What they are not prepared for are the hardships imposed by an ineffective pay system. My soldiers have suffered divorces, bankruptcies, lost homes, and endured untold family problems that are far more destructive to their morale than any enemy they face in combat. Twenty-five soldiers have left my unit as a direct result of these pay problems."

Those are the words of a major from the Colorado National Guard who testified in 2004 before the House Government Reform Committee about ongoing pay problems for soldiers that were uncovered by the Government Accountability Office. Today, we at GAO continue to report that DoD's substantial, long-standing management problems adversely affect the economy, efficiency and effectiveness of its operations and, as the major noted, has affected the morale of our fighting forces. The following examples of GAO's work over the last several years provide a compelling case of the need for transforming DoD's financial management and overall business operations.

DoD was giving away, destroying or selling for pennies on the dollar unused inventory, while identical items were in demand by our military forces and being purchased. GAO purchased from DoD's liquidation contractor numerous items that DoD continued to buy and use, including tents, boots, medical supplies and tires. For example, GAO paid $12 per pair for extreme cold weather boots that DoD was buying for $135 per pair. In total, GAO paid about $3,000 for items that cost DoD $80,000.

Control breakdowns resulted in more than $100 million being paid for airline tickets that were not used and never processed for refund.

Thousands of DoD contractors abused the federal tax system, including potential criminal activity, with little or no consequence. DoD was not providing complete and accurate payments to the Treasury Department so that these contractor payments could be levied for unpaid taxes. We estimate that at least $100 million could have been collected annually; DoD had collected less than $1 million in the first four years of the levy program.

Ninety-four percent of the mobilized Army National Guard and Reserve soldiers who GAO investigated had pay problems. These problems distracted soldiers from their missions, imposed financial hardships on their families, and hurt retention.

Travel reimbursement problems affected hundreds of thousands of mobilized Army National Guard soldiers and their families.

To improve the chances of success for the department's current business transformation efforts, we have proposed that those who are responsible for business systems modernization control the allocation and execution of funds for DoD business systems. Investments in the modernization of the department's business systems need to be directed toward integrated corporate system solutions to common DoD-wide problems, not the stovepiped, duplicative systems that exist today.

Additionally, these complex, long-term transformation efforts need strong and sustained executive leadership to succeed. We believe one way to ensure this strong and sustained leadership would be to create a full-time position for a chief management official (CMO), who would serve as the deputy secretary of Defense for management. We believe the new CMO position should be filled by someone appointed by the president and confirmed by the Senate for a set term of seven years. Articulating the role and responsibilities of the position in statute and establishing a term that spans administrations underscores the importance of a professional, nonpartisan approach to this business-management position.

It is worth noting that on April 14 a bill was introduced in the Senate that would require the establishment of a CMO who would serve seven years after being appointed by the president and confirmed by the Senate. We look forward to continuing to work constructively with DoD on its transformation efforts. We are confident that transforming DoD's business operations and making them more efficient would free up resources that could be used to support the department's core mission, enhance readiness and improve the quality of life for our troops and their families.

Gregory Kutz is managing director, forensic audits and special investigations, at the Government Accountability Office.