Under new budget process, Defense to focus on financial management

The streamlined budget process announced by Defense Undersecretary Dov Zakheim last week should free up extra time for managers to address the financial issues that have prevented the department from receiving clean audits, a Defense spokesman said Tuesday.

Under the new budget system unveiled on May 22, Defense managers will only have to submit a detailed budget request every two years, said Lt. Col. Gary Keck, a department spokesman. They will spend the off year focusing on strategic planning and on resolving accounting problems. Managers will use the new procedures as they work on fiscal 2005 budgets.

The concept behind Defense's new system is "not novel," according to John Mercer, an independent management consultant. But it is a concept other agencies would do well to adopt, he said, because it leaves more time for strategic planning.

Time saved under the streamlined procedure will allow Defense to concentrate on projects like the Financial Management Modernization Program, which aims to create a departmentwide financial management system, Keck said. The program will consolidate more than 1,000 existing individual computer systems, helping financial managers at agencies within Defense communicate better with each other and with top-level officials.

Miscommunications have fueled financial problems at Defense, Keck said. A record 21 of 24 agencies covered by the 1990 Chief Financial Officers Act received clean opinions for fiscal 2002. But Defense, along with the Small Business Administration and the U.S. Agency for International Development, flunked their audits, preventing the government from earning an overall passing mark.

Before, Defense required managers to submit a detailed budget request each year. The internal process for filing a request was quite extensive and repetitive, Keck said. Every year, managers had to project the budget they would need for the next five to six years.

These long-term budget projections changed very little from year to year because they accounted only for the money needed to sustain everyday activities and pay personnel, Keck said. Even so, the old system required managers to calculate long-term budget estimates each year, starting from scratch.

Now they only have to do this every two years. On the off year, they can simply change the existing estimate to reflect new laws, cost increases, or other such factors. Large, unanticipated or one-time items such as war expenditures are not usually included in Defense's annual budget projections, Keck said.

Managers will not need much training on how to use the new system, Keck said, since it is just a simplification of what they have already been doing. Defense does plan on issuing guidance on problems and strategic concerns managers should address during off years.

The new system simplifies only internal budget procedures and does not require congressional approval because Defense will still go through the appropriations process every year.