The U.S. federal government’s General Accounting Office said in late December that sloppy accounting practices by the U.S. Department of Defense led to a US$1.6 billion discrepancy between two key IT budget reports for fiscal 2004.
The GAO said in a report that there were “material inconsistencies, inaccuracies or omissions” that tainted the reliability of the Pentagon’s IT accounting practices.
The DOD’s fiscal 2004 IT budget summary request and its detailed capital investment report were inconsistent, the GAO report said. The GAO said that 15 initiatives that are in the Pentagon’s budget summary aren’t included in its capital investment report and that “discrepancies exist between the two types of reports in the amounts requested for 73 major initiatives.”
The discrepancy adds up to about US$1.6 billion, or six per cent of the department’s US$28 billion budget request for fiscal 2004.
According to a DOD spokesman, the reason for the difference is that the capital investment report “is an auxiliary document to the president’s information technology budget. Not all IT initiatives are explained using capital investment reporting.” The list of DOD IT initiatives that have an associated capital investment report is negotiated between the DOD and the Office of Management and Budget, the spokesman said.
Topping the list of projects with inconsistent budget figures was the Navy/Marine Corps Intranet program, which is designed to connect as many as 310,000 Navy and Marine Corps IT users once it’s in place. The GAO said that about 95 per cent of the total dollar difference between IT budget requests from the Navy — US$581 million — could be attributed to the intranet initiative. That project is expected to cost the Navy US$6.9 billion.
“That’s a whopping error,” said John Gantz, an analyst at IDC in Framingham, Mass. “You wouldn’t expect an error bigger than five per cent.”
Yet Gantz said he wasn’t surprised by the report, noting that the Defense Department is known for having poor accounting practices, which he attributed mainly to inadequate management and accounting procedures. He suggested that a bill that affects the government the way the Sarbanes-Oxley Act affects the private sector “would shape it all up pretty quickly.”
The GAO attributed the budget discrepancies to what it called “insufficient management attention” as well as “ambiguities” in the Defense Department’s internal regulatory processes, including those for ensuring consistency between reports. According to the DOD spokesman, key reasons for the discrepancies include insufficient time to reconcile the data, errors, conversion of different data formats for certain projects and the fact that “not all dollars were included for particular initiatives based on OMB guidance.”
The GAO report cited a US$362 million discrepancy in Air Force budget requests and a US$55 million discrepancy in Army requests. Several other organizations within the department were responsible for another US$618 million that could not be accounted for.
The GAO recommended that the secretary of Defense establish policies, procedures and supporting systems to avoid repeating the problems it found in the department’s budget request. “This is particularly important because the (DOD) spends more on IT annually than any other department or agency, accounting for about half of the roughly (US)$59 billion government-wide IT budget in fiscal year 2004,” the report stated.