department of defense overview

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Department ofDefenseOverview

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Overview of the Department of Defense

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Snapshotof theDepartment

The Military Services of the United Stateshave a rich and glorious history. The earliestform of our warfighting infrastructure, theMassachusetts Bay Colony Militia, wasestablished more than 360 years ago. Sincethat time, U.S. Armed Forces have respondedeffectively to numerous challenges andevolved into the most powerful andsophisticated fighting force in the world.

The War Department (Army) was formed in1789; 9 years later--in 1798--the NavyDepartment was formed to manage Naval andMarine Corps affairs. Although there wasunified control of the military at the nationaland major command levels during World WarII, the two departments remained autonomousthroughout that conflict.

In 1947, the Congress created the NationalMilitary Establishment (NME) and directedthat it be headed by a civilian Secretary. Thelegislation that created this overarchingdepartment also created the Air Force as aService separate from the Army, convertedthe War Department to the Department of theArmy, and placed the four Services under thedirect control of the NME. A 1949 amend-ment to the “National Security Act of 1947”established the NME as an executivedepartment, renamed it the Department ofDefense, and withdrew cabinet level statusfrom the Secretaries of the Army, Navy andAir Force. For more than half a century thisnational security structure has remainedintact.

Since certain of our military units trace theirroots to before the Revolutionary War, somedescribe the Department of Defense as theoldest and largest firm in America.

Our MissionThe Department’s primary mission is toprovide the military forces needed to deterwar and protect the security and nationalinterests of the United States. We proudlyaccept this mission and diligently serve as“protector” of the American people.

With the same dedication and patriotism, theDepartment performs a variety of other veryimportant missions for the American peopleand U.S. allies around the world. Whether it'ssaving lives, protecting property or keepingthe peace, the U.S. military stands ready tokeep America strong and free.

Our ResourcesThe Department of Defense is the nation’slargest employer, with 1.4 million men andwomen currently on active duty, 700,000civilians, and another 900,000 volunteersserving in the selected Reserve. We have aworldwide presence with military and civilianpersonnel located in more than 130 countries,in every time zone and every climate.

The Department maintains a robustinfrastructure in order to support its forcestructure. No other U.S. firm owns, operatesand maintains the volume of physical assets(property, plant and equipment, andinventories) controlled by the Department.

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Chart 1 Source: WHS Directorate for InformationOperations & Reports

Our personnel are located at approximately600 fixed facilities that are composed of morethan 40,000 properties that occupy roughly18 million acres of land. The Departmentoperates and maintains approximately250,000 vehicles, over 15,000 aircraft, morethan 1,000 oceangoing vessels, and some550 public utility systems.

Chart 2 Source: Office of the Assistant Secretary ofDefense (Public Affairs) Press Release No.032-99

America’s oldest, largest and most diverse“firm” gets by on resources that are comparedto those in private industry. Our annualbudget is approximately $280 billion—abouthalf of which goes for salaries, one quarter for

operating and maintaining our forces, and theremainder for buying equipment andconducting and acquiring technologicalresearch and development.

In the past 10 years, DoD funding hasdeclined roughly 25 percent. The DoDbudget has shrunk both in terms of overallgovernment spending and as a percentage ofthe nation’s wealth, as measured by the GrossDomestic Product. To accommodate thissizable reduction, we have decommissionedenough ships, stood down enough combatdivisions and grounded enough flying units toarm a formidable foe.

Summary of Drawdowns (Since 1990)

• 1,000,000 Regular and Reserve personnel• 8 Army divisions• 7,800 main battle tanks• 960 combat aircraft• 211 strategic bombers• 450 long range ballistic missiles• 4 aircraft carriers, and• 42 submarines

Figure 1 Source: Defenselink/DoD101

Our WorkloadDespite the demise of the Soviet Union andthe downsizing of U.S. military forces,American operational commitments (since1990) have exponentially increased. Ourmilitary operational tempo from the end of theCold War through the end of fiscal year(FY) 1999 numbered 99 major commitmentsof Americans in uniform, to virtually everycorner of the globe.

The impact that those commitments have hadon our military forces has been unrelenting.Army deployments have increased

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300 percent in the past 10 years; the numberof deployed Navy ships on any given day hasincreased by 52 percent in the last 6 years;and Air Force deployments have quadrupledsince 1986.

In addition to planned deployments, ourtroops routinely perform emergencydeployments, such as disaster relief inVenezuela, southern Mozambique and SouthAfrica; and peacekeeping and humanitarianrelief efforts in Kosovo and East Timor.

Our military forces have maintained thissustained level of commitments to defendingU. S. national security interests, while thenumber of DoD civilians and militarypersonnel reduced by 40 percent between1990 and 1999.

The increase in contingency operations hassubstantially raised the demand placed on ourReserve Component forces. In 1999, some235,000 Guard and Reserve personnel,averaging 19 days each, deployed overseasperforming duties ranging from humanitarianand peackeeping missions to readinesstraining. Another 325,000 personnel weredeployed in the United States to supportdomestic priorities, such as counter drugoperations and natural disaster assistance,averaging 22 days each. Over the past10 years the number of days these patriotshave served on active duty increased roughly13 fold!

The Department’s infrastructure supportworkload also has increased substantially.Every month we cut 5 million paychecks, take920,000 contract or purchase actions, andserve our troops approximately 3.4 millionmeals. On any given day we buy enough fuelto drive a car around the world 13,000 times,maintain 12,000 miles of waterways, operate24 percent of the nations hydropower

capacity, manage 225 schools and provideday care for 200,000 children.

In FY 1999, we recruited 207,000 newpersonnel and separated about 170,000personnel. That represents more than a25 percent turnover of our uniformedpersonnel and a 3 percent turnover of ourcivilians. Turnover rates of this magnitudechallenge our personnel managementfunctions and require significant investmentsin recruiting, training and developing ouremployees.

Our OrganizationalStructure

Chart 3 Source: FY 99 Agencywide FinancialStatement Overview

Orders for military operations emanate fromthe National Command Authority – i.e., thePresident and the Secretary of Defense. ThePresident, as commander-in-chief of theArmed Forces, is the ultimate authority. TheOffice of the Secretary of Defense carries outthe Secretary’s policies by tasking theMilitary Departments, the Chairman of theJoint Chiefs of Staff (JCS) and the CombatantCommands. The Military Departments train

National Command Authority

Office of the Secretary of Defense

Military Departments Chairman of the JCS

Combatant CommandsTrain & equip Plan & coordinate

Conduct operations

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and equip their forces, while the Chairman,JCS plans and coordinates deployments andoperations that are conducted by theCombatant Commands.

Office of the Secretary ofDefenseThe Office of the Secretary of Defense helpsthe Secretary plan, advise and carry out thenation’s security policies as directed by boththe Secretary and the President. Four keyUnder Secretaries support the Secretary in thecritical areas of policy, acquisition, financeand, force readiness.

PolicyThe Department’s senior policy advisor, theUnder Secretary of Defense (Policy),formulates national security/defense policy,integrates and oversees DoD policy, anddevelops plans to achieve national securityobjectives.

PurchasingThe Under Secretary of Defense forAcquisition, Technology and Logisticsoversees all matters related to buying,researching, testing, producing and movingassets and personnel, advises on the use ofnew technology, protects the environment andcontrols the Department’s use of atomicenergy.

FinanceThe Under Secretary of Defense(Comptroller), the Department’s ChiefFinancial Officer, oversees budgetary andfiscal operations, program analysis andevaluation, contract audit and generalmanagement improvement programs.

Human ResourcesThe Under Secretary of Defense (Personneland Readiness) oversees readiness; theReserve Component; health affairs; training;and personnel requirements and management,including equal opportunity, morale, welfare,and quality of life issues.

Inspector General, Department ofDefenseThe Inspector General, Department ofDefense (IG, DoD) serves as an independentdepartmental official responsible forinitiating, conducting, supervising andmonitoring investigations and inspectionsrelating to DoD programs and operations.

Joint Chiefs of Staff (JCS)Representatives from all the Military Servicessupport the Chairman of the Joint Chiefs ofStaff in his capacity as the principal militaryadvisor to the President, the National SecurityCouncil and the Secretary of Defense. TheJCS command structure consists of theChairman, the Vice Chairman, and the four-star heads of the four Military Services. TheChairman plans and coordinates militaryoperations involving U.S. Forces and, as such,is responsible for the operation of theNational Military Command Center,commonly referred to as the “war room,”from where all U.S. military operations aredirected. He meets regularly with the fourService chiefs to resolve issues andcoordinate “joint” Service military activities.

Commanders in Chief (CINCs)The Secretary of Defense exercises hisauthority over military training and equippingthrough the Service secretaries; but theSecretary of Defense uses the military

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command structure to deploy troops andexercise military power. This latter authorityis directed, with the advice of the Chairman of

Chart 4 Source: Office of the Joint Chiefs of Staff

the Joint Chiefs of Staff, to his ninecombatant commanders-in-chief (commonlyreferred to as “CINCs”). The CINCs havedirect links both to the President andSecretary of Defense. Five CINCs havegeographical responsibility, while theremaining four have worldwide responsibility.

Geographical CINCs

Central CommandThe Central Command oversees the balanceof the Mid-East, parts of Africa and westAsia, and part of the Indian Ocean.

European CommandThe European Command is responsible for allU.S. military activities in Europe, most of

Africa and Israel, Lebanon and Syria, and theSouth Atlantic Ocean.

Joint Forces CommandThe Joint Forces Command protects U.S.interests in the North Atlantic Ocean, ArcticOcean and Greenland. In addition, it hasworldwide responsibility for joint warfightingtraining and provides military support toweapons of mass destruction incidents withinthe Continental United States, its territoriesand possessions.

Pacific CommandThe Pacific Command covers 50 percent ofthe Earth's surface including Southwest Asia,Australia and Alaska.

Southern CommandThe Southern Command guards U.S. interestsin the southern hemisphere, including CentralAmerica, South America and the Caribbean.

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92oW 30oW 17oE

5oS, 68oE

28oN, 58oW

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Atlantic Ocean

Pacific Ocean

Arctic Ocean Arctic Ocean

I ndian Ocean

Atlantic Ocean

Pacific Ocean

42oE

95oW

USJ FCOM

USPACOM

USPACOM

USCENTCOMUSEUCOM

USSOUTHCOM

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Worldwide CINCS

Space CommandThe Space Command launches and operatessatellites, supports joint-service militaryforces worldwide with intelligence,communications, weather, navigation, andballistic missile attack warning information,engages adversaries from space, assures U.S.access to and operation in space, and denyenemies that same freedom. In essence, thecommand is responsible for controlling space,including what goes up and what comesdown.

Special Operations CommandThe Special Operations Command providescounter-paramilitary, counter-narcotics,guerilla, psychological warfare, civileducation, and insurgency capability insupport of U.S. national and internationalinterests.

Strategic CommandThe Strategic Command deters conventionaland nuclear attack on the U.S. and its allies.Its forces include land-based and sea-basednuclear assets. If deterrence fails, it employsthe needed forces to achieve national militaryand security objectives.

Transportation CommandThe Transportation Command is responsiblefor moving things and people around theworld, specifically providing air, land and seatransportation for the Department of Defensein time of peace and war.

The DoD Components

The Military ServicesTroops are trained and equipped through ourthree Military Departments -- the Army, theNavy and the Air Force. The Marine Corps,

our main amphibious force, is a component ofthe Department of the Navy.

ArmyThe Army’s mission is to defend the landmass of the United States and its territories,commonwealths and possessions andovercome any aggressor that imperils ournation's peace and security.

Throughout history, wars have been wonprimarily by armed forces on the ground.Only soldiers on the ground can take and holdterritory. America’s Army effectivelydeploys its forces and establishes direct,continuous, and comprehensive control overland, resources, and people to achieve victoryon the battlefield and ensure peace.

For nearly three quarters of a century, theArmy’s Corps of Engineers Civil WorksProgram has developed, managed, protected,and enhanced our nation’s water and relatedland resources for commercial navigation,flood damage reduction, environmentalrestoration, and allied purposes. The CivilWorks Program diligently supports the Armyin peacetime pursuits, during nationalemergencies, and in times of war.

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NavyThe U.S. Navy is America’s forwarddeployed force and a major deterrent toaggression around the world. Ourcarriers are stationed in hotspots around theglobe -- in the Far East, in the Persian Gulf,and in the Mediterranean Sea -- ready toprovide a quick response to any crisisworldwide.

The Navy maintains, trains and equipscombat-ready Naval forces capable ofwinning wars, deterring aggression andmaintaining freedom of the seas.

Marine CorpsThe call “Send in the Marines!” has beensounded more than 200 times since the end of

World War II, an average of once every 90days. Marines have provided humanitarianassistance to earthquake victims in Turkey,were among the first U.S. ground troops toenter Kosovo and formed the core of U.S.peacekeeping efforts in East Timor.

The Marine Corps provides sea-based,integrated air-ground units for contingencyand combat operations, and for suppressing orcontaining international disturbances.

Air ForceThe Air Force defends the United Statesthrough control and exploitation of air andspace.

The Air Force provides America a rapid,flexible, and when necessary, lethal air andspace capability. It can deliver forcesanywhere in the world in less than 48 hours.

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It routinely participates in peacekeeping,humanitarian, and aeromedical evacuationmissions and actively patrolled the skiesabove Iraq and Bosnia. Air Force crewsannually fly missions into all but five nationsof the world.

Reserve ComponentsOur active military forces are supported bythe world's premier military powermultiplier—forces of the selected Reserve,including the National Guard and the FederalReserve. Within the last decade, ReserveComponent (RC) personnel have taken onnew and more important roles in wartimemilitary support, humanitarian, peacekeeping,law enforcement assistance and disasterassistance missions.

Size of Our force Multiplier in FY 2000

Figure 2 Source: Office of the Under Secretary ofDefense (Comptroller)

These challenges have been met both at homeand abroad, as America redefines its nationalmilitary strategy. With personal ties to localcommunities, RC personnel are the perfect fitfor these emerging missions. These personnelcomprise approximately half of America’stotal uniformed force. They are your friends,neighbors and coworkers, who sacrifice theirfree time to help guard our freedom - -

something that Americans have been doingsince 1636, when the country’s first militiaunits were organized in the MassachusettsBay Colony.

Defense Agencies

Several agencies provide operational supportservices to the Office of the Secretary ofDefense and the Military Services. The arrayof functions that these organizations performranges from making maps to shippingsupplies and equipment to our troops, toproviding information management, orfinance and accounting services.

The Department’s 15 Defense Agenciesprovide invaluable Department-wide supportand service functions. Following is asummary of each agency’s contribution to thenational defense mission.

Defense Advanced Research ProjectsAgency (DARPA)The DARPA, as the central research anddevelopment organization of the Department,primarily is responsible for maintaining U.S.technological superiority and guarding againstunforeseen technological advances bypotential adversaries.

Ballistic Missile Defense Organization(BMDO)The BMDO is responsible for managing,directing, and executing the DoD's BallisticMissile Defense (BMD) Program, focusing onthree areas-- Theater Missile Defense,National Missile Defense, and advancedBMD technologies. Such technologies arebased on continuing research anddevelopment of follow-on technologies thatare relevant for long-term BMD.

Army National Guard 353.045Army Reserve 206,892Naval Reserve 86,933Marine Corps Reserve 39,667Air National Guard 106,365Air Force Reserve 72,340Individual Ready Reserve 373,473

Total: 1,238,715Coast Guard Reserve w/IRR 7,965

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Defense Commissary Agency (DeCA)The DeCA is responsible for providing anefficient and effective worldwide system ofcommissaries for the use of militarypersonnel, their families, and other authorizedpatrons. Defense commissaries sell groceriesand household supplies at the lowest practicalprice (consistent with quality) to customerswhile maintaining high standards for qualityfacilities, products, and service.

Defense Contract Audit Agency (DCAA)The DCAA is responsible for performing allcontract audits for the Department. TheDCAA also provides financial advisoryservices related to contracts and subcontractsto DoD Components responsible forprocurement and contract administration.

Defenese Contract Management Agency(DCMA)The DCMA provides customer-focusedcontract management services throughout theacquisition lifecycle process for theDepartment. Services performed includeproduct and manufacturing assurance,delivery surveillance, program integration andcontract closeout.

Defense Finance and Accounting Service(DFAS)The DFAS is responsible for providingaccurate, comprehensive, and timely financeand accounting services and financialinformation to the Department.

Defense Information Systems Agency(DISA)The DISA is a combat support agencyresponsible for planning, engineering,developing, testing and acquiring,implementing, operating and maintaininginformation systems. These systems supportcommand, control, communications (C3) and

information needs of the Department duringtimes of peace and war.

Defense Intelligence Agency (DIA)The DIA is a combat support agency thatserves as the nation’s primary manager andproducer of foreign military intelligence.

Defense Security Service (DSS)The DSS conducts all personnel securityinvestigations for DoD Components and,when appropriate, for other federal agenciesand activities.

Defense Legal Services Agency (DLSA)The DLSA provides legal advice and servicesfor the Defense Agencies, DoD FieldActivities, and other assigned organizations.

Defense Logistics Agency (DLA)The DLA, a combat support agency, providesworldwide logistics support to the MilitaryDepartments and the Combatant Commandsunder conditions of peace and war.

Defense Threat Reduction Agency (DTRA)The DTRA is charged with reducing thethreat to the United States and its allies fromnuclear, biological, chemical, conventionaland special weapons; to support the U.S.nuclear deterrent; and to provide technicalsupport on weapons of mass destructionmatters to the DoD Components.

Defense Security Cooperation Agency(DSCA)The DSCA serves as the DoD focal point andclearinghouse for the development andimplementation of security assistance plansand programs.

National Imagery and Mapping Agency(NIMA)The NIMA is a combat support agency thatprovides timely, relevant, and accurate

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imagery, imagery intelligence, and geo-spatialinformation in support of the national securityobjectives of the United States.

National Security Agency/Central SecurityService (NSA/CSS)The NSA/CSS is the combat support agencyresponsible for centralized coordination,direction, and performance of highlyspecialized intelligence functions in supportof U.S. Government activities.

DoD Field Activities

The following DoD Field Activities wereestablished by the Secretary of Defense, underthe provisions of Title 10, United States Code,to perform selected support and servicefunctions of a more limited scope than theaforementioned Defense Agencies. Briefsummaries of the scope of each fieldactivity’s mission follow.

American Forces Information Service(AFIS)The AFIS advises and acts for the AssistantSecretary of Defense (Public Affairs) inmanaging DoD internal informationprograms; develops policies, guidelines, andstandards for the management of DoD visualinformation activities and programs; developspolicies, guidelines, and standards for themanagement of Armed Forces Radio andTelevision Service (AFRTS) outlets andactivities; and provides joint-interest print,radio, film, and television materials for use inthe internal information programs of theMilitary Departments and other DoDorganizations.

Defense Prisoner of War/Missing in ActionOfficeThe Defense Prisoner of War/Missing inAction Office provides centralized

management and oversight of prisoner ofwar/missing in action affairs within theDepartment.

DoD Education ActivityThe DoD Education Activity serves as theprincipal staff advisor on all Defenseeducation matters relative to overseas,domestic, and continuing adult and post-secondary education activities and programs.

Human Resources ActivityThe Human Resources Activity providesprogram support, information management,and administrative services to the DoDComponents on human resource matters andcollects, archives and conducts informationmanagement research and analysis of humanresources and other related functional databases for the DoD.

TRICARE Management Activity (TMA)The TMA administers the Department’shealth management programs that servemembers of the Armed Forces, militaryretirees and their families. It managesTRICARE, executes the Defense HealthProgram Appropriation and the DoD UnifiedMedical Program, and supports theUniformed Services in the implementation ofthe TRICARE and the Civilian Health andMedical Program of the Uniformed Services(CHAMPUS).

Office of Economic AdjustmentThe Office of Economic Adjustment serves asthe principal staff advisor to the Departmenton economic adjustment, joint land usestudies, and intergovernmental coordinationprogram matters.

Washington Headquarters ServicesThe Washington Headquarters Servicesprovides administrative and operational

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support to specified DoD activities in theNational Capital Region.

This DoD military structure continues to beeffective at deterring threats to the nationalsecurity and protecting the United States andits allies. Our men and women in uniform,together with the DoD civilians in supportroles, are the Department’s most importantresources. They are proud to be charged withthe task of keeping America strong and free.

FinancialConditionThe improvement in the quality of thefinancial data in this year’s reports is dueprimarily to the efforts we took to correctmajor “non-system” deficiencies. TheDepartment, in coordination with the Officeof Management and Budget (OMB), theGeneral Accounting Office (GAO) and theOffice of the Inspector General, Departmentof Defense, aggressively pursued newapproaches for addressing deficienciesidentified in previous audit reports in theareas of inventory management; operatingmaterials and supplies; property, plant andequipment; future liabilities; fund balancewith the U.S. Treasury; and intragovern-mental eliminations. We believe noticeableprogress has been made toward improvingdata quality in those categories.

In addition, the DFAS has initiated measuresto address issues that were raised in previousaudit reports regarding journal vouchers,unliquidated obligations, and abnormalbalances in payables and receivables.Workgroups were formed to researchdeficiencies, make process changes andinitiate other corrective actions that would

reduce the number of deficiencies in each ofthe identified areas.

The DoD financial statements have beenprepared to report the financial position andresults of operations for the entity, pursuant tothe requirements of the 31 U.S.C. 3515(b).While these statements have been preparedfrom the books and records of theDepartment, in accordance with the formatsprescribed by the OMB, the statements are inaddition to those financial reports used tomonitor and control budgetary resourceswhich are prepared from the same books andrecords.

To the extent possible given the existingsystems and data sources, the financialstatements have been prepared in accordancewith federal accounting standards. At times,the Department is unable to implement allelements of the standards due to financialmanagement systems limitations. TheDepartment continues to implement systemimprovements to address these limitations.There are other instances when theDepartment’s application of the accountingstandards is different from the auditor’sapplication of the standards. In thosesituations, the Department has reviewed theintent of the standard and applied it in amanner that management believes fulfills thatintent.

The statements should be read with therealization that they are for a component ofthe U.S. Government, a sovereign entity. Oneimplication of this is that the liabilities cannotbe liquidated without legislation that providesresources to do so.

As of the date these statements were prepared,the Federal Accounting Standards AdvisoryBoard (FASAB) had not determined the finalreporting requirements for National Defense

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Property, Plant and Equipment (ND PP&E).Therefore, the Department elected to reportND PP&E in its FY 2000 financial statementsconsistent with reporting in its FY 1998 andFY 1999 statements. The Department imple-mented early for FY 1998, as encouraged bythe FASAB, the then proposed amendmentsto the accounting standards that required thereporting of quantities, condition andinvestment trends for major types of NDPP&E. At subsequent FASAB meetings, theBoard chose not to implement the proposedamendments to the Statement of FederalFinancial Accounting Standards (SFFAS)No.6, “Accounting for Property, Plant andEquipment,” and SFFAS No. 8,“Supplementary Stewardship Reporting,” but,rather, chose to continue studying variousalternatives for reporting ND PP&E. Thesestudies were ongoing at the conclusion ofFY 2000.

Since the FASAB did not adopt the proposedamendments, the Department is not in fullcompliance with the existing reportingrequirements that require the Department toreport the value of ND PP&E. TheDepartment cannot comply fully with theexisting reporting requirement, because manyof the Department’s ND PP&E accountabilityand logistics systems do not contain a valuefor the ND PP&E assets. These systems weredesigned for purposes of maintaining account-ability and meeting other logisticsrequirements, and not for reporting the valueof ND PP&E.

Given the complexity of the existingtemporary reporting requirements, theenormous cost of implementing thosetemporary reporting requirements and theinterim nature of the temporary reportingrequirements, the Department is continuing touse the prior year reporting disclosure.Further, the Department believes the most

reasonable and responsible course of action isto report quantity and investment informationfor the ND PP&E until such time that theFASAB adopts permanent reportingrequirements.

Systems ControlsandLegal ComplianceEffective internal controls and fullcompliance with established systemsguidelines and standards are two of DoD’score financial management priorities. Foralmost a decade, we have taken innovativesteps to ensure systematic and continuousimprovement in these areas. The Departmentis committed to prudent management andproper stewardship of the resources entrustedto it.

To strengthen internal controls and elevatefraud awareness, the Department hasimplemented, and continues to installadditional checks, balances, and approvalrequirements for finance and accountingtransactions. Our goal is to incorporateappropriate levels of verification withoutrequiring excessive resources or hamperingthe Department’s ability to complete itsmission.

Systems Controls

The DFAS has an aggressive internal controlprogram. This fiscal year, the DFASconsolidated its Fraud and Internal ReviewOffice to better ensure that programs achieveintended results, laws and regulations areobeyed, resources are appropriate for the

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program’s mission, data are reliable, andfraud is prevented. Other efforts that weretaken included the implementation of bettercontrols to reduce vulnerability, and broaderexposure of DFAS employees to fraudawareness and training.

Another internal control initiative, OperationMongoose, completed its fifth year as DoD’sagency-wide financial management fraudprevention and detection program. Thisprogram utilizes state-of-the-art technology todetect and prevent fraudulent and erroneouspayments.

Through the combined efforts of theinitiatives described above, the DoD financialmanagement community expects continued,marked success in strengthening internalcontrols.

Legal Compliance

Three initiatives serve as the foundation of theDepartment’s efforts to comport with systemsmanagement policies and requirements. All ofthose efforts are well underway.

The first of these initiatives is the finance andaccounting systems streamlining effort. TheDepartment has reduced the number of itsfinance and accounting systems from 324 to76, since 1991. By 2005, the DFAS expectsto perform its accounting functions and payover 2 million service members, 2.2 millionretirees and annuitants, over 700,000 civilianemployees, and 200,000 contractors using just30 finance and accounting systems -- a90 percent reduction since 1991.

These consolidations have achieved genuinebenefits and savings. For example, afterconsolidating 700,000 civilian payrollaccounts into a single system, 26 separatesystems were eliminated and 348 payroll

offices closed. In 2000, a typical civilian pay-roll technician handled over 2,200 accounts,compared to just 380 accounts in 1991.

The DFAS Corporate Information Infrastructure(DCII), the second systems improvementinitiative, is under development. The DCII willhelp modernize DFAS accounting and financesystems and augment our current financialmanagement information managementenvironment by improving the interactionsbetween DoD’s procurement and financialsystems. Substantial amounts of the data on ourfinancial statements comes from personnel,acquisition, logistics and other “feeder”systems. Establishing a seamless connectionbetween these feeder systems and theaccounting systems used to prepare financialstatements is a crucial step in moving towardfull systems compliance. Most feeder systemswere developed and put into service long beforethe promulgation of federal accountingstandards. As a result, they simply were notdesigned to produce information that feedsbusiness type financial statements.

For example, most of DoD’s inventorysystems were designed to maintain records onthe latest acquisition costs. These are the datathat our logistics managers find most critical.The systems do not retain historical costs,which are the data that the auditors seek in thefinancial statements. The Department ismoving to upgrade its inventory systems toretain both historical and latest acquisitioncosts--but it is an expensive and laboriousprocess.

The third initiative, the “Financial and FeederSystems Compliance Process,” was created tomanage the massive effort required to bringthe Department’s automated systems intocompliance with established guidelines. TheProcess will be implemented fully in

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FY 2001. It also was designed to facilitatemanagement oversight and monitor progresson actions needed to ensure that both financialand feeder systems meet federal financialmanagement requirements. All critical feedersystems and migratory accounting and financesystems were evaluated for compliance withfederal financial management requirements;and remediation plans were developed for allsystems that are non-compliant. Theremediation plans layout a clear road map forgetting from “where we are to where we’dlike to be,” and include specific, measurablecorrective actions with clear objectives,intermediate target dates, performancemeasures, and an estimated cost for theinstallation of corrective actions.

Substantial progress has been made, yet muchremains to be done. Our timeline forcompleting the corrective actions that willproduce fully compliant systems extends intoFY 2003. Our goal is to make steady,incremental progress in systems improvementeach fiscal year and produce more accurate,timely and meaningful financial managementinformation by the middle of this decade.

department of defense overview

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