It may be a while before Pentagon financial statements are auditable, IG warns

The Defense Department's ongoing effort to produce auditable financial statements by a congressionally imposed deadline of 2017 could be in jeopardy, according to an inspector general's report released this month.

For years, the Government Accountability Office has has been warning that many military agencies are behind in modernizing their software and auditing procedures under a coordinated push to clean up the books of the government's largest department -- a goal Defense Secretary Leon Panetta would like to see accomplished by 2014.

The IG's report, dated July 13 and requested by Congress, examined six of the department's key enterprise resource planning systems that streamline auditing of expenses and found cost increases of $8 billion and schedule delays of 1.5 to 12.5 years.

“As a result of the schedule delays, DoD will continue using outdated legacy systems and diminish the estimated savings associated with transforming business operations through business system modernization,” the IG wrote. “In addition, the impact of schedule delays increases the risk that DoD will not achieve an auditable Statement of Budgetary Resources by fiscal 2014, or accomplish its goal of full financial statement audit readiness by fiscal 2017.”

The report recommended that Defense's deputy chief management officer and the chief management officers of the Army, Navy and Air Force develop procedures to review progress on reengineering auditing tools and withhold funding from those components that do not demonstrate progress. It recommended the Defense comptroller update the department's Financial Improvement and Audit Readiness Plan.

The services' chief management officers generally agreed with the recommendations in draft report. Defense Chief Management Officer Beth McGrath, the report said, had not responded.

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