Lawmakers complained Wednesday that the Pentagon is mismanaging a systemic overhaul of its accounting systems, casting doubt on the Defense Department’s efforts to better manage its nearly $700 billion budget.

A new Government Accountability Office (GAO) audit found that new computer systems intended to improve the Pentagon’s financial oversight are themselves nearly $7 billion over budget and well behind schedule.

The larger problem of financial disarray at the Pentagon has been a longstanding one that lawmakers, auditors and Defense Department officials said is ever more pressing as record defense budgets have added to the federal debt. An inability to properly track and manage assets has broad ramifications for the U.S. military, they said.

The overruns and delays on the accounting software represent “the best argument for having auditable books,” said Robert E. Andrews, D-N.J., chairman of the House Armed Services Committee’s Defense Acquisition Reform Panel. “If they can’t keep track of setting up an auditing system, it suggests they can’t keep track of anything else.”


To help meet a target set by Congress (PL 111-84) that the Pentagon be able to pass a financial audit by 2017, the department is developing nine new types of accounting and business-management systems — known collectively as the Enterprise Resource Planning program — in each of the military services and for Defense Department-wide operations. These computer programs, originally slated to cost $6.8 billion, are now expected to cost more than twice that — or at least $13.7 billion, Asif A. Khan, the GAO’s director of financial management and assurance, told a Senate panel Wednesday.

Moreover, six of the nine systems will be delivered late — anywhere from two to 12 years behind schedule, due largely to improper management, he added.

Khan said that weak financial systems hurt the Pentagon’s ability to “assess resource requirements; control costs; ensure basic accountability; anticipate future costs and claims on the budget; measure performance; maintain funds control; [and] prevent fraud, waste, abuse and mismanagement.”

At the hearing, held by the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security, lawmakers said that they are fed up with the Pentagon’s lack of progress toward making its books capable of being audited.

“Private businesses in America and their shareholders and top managers understand the importance of passing an audit, but the Pentagon has failed to do so — and the Pentagon’s financial management systems are simply not good enough to even try,” said Thomas R. Carper, D-Del., who chairs the panel.

John McCain, R-Ariz., said Congress is not positive how all of $694 billion was spent in fiscal 2010 at the Pentagon. “We ought to start demanding that people get fired,” McCain said.


The House-passed defense authorization bill (HR 5136) would require the Pentagon to set up a system to reward or punish its agencies, depending on their progress toward achieving auditable financial records. The provisions on the audits and other acquisition overhaul issues were written by Andrews and K. Michael Conaway of Texas, the Defense Acquisition Reform Panel’s ranking Republican.

Khan said the Pentagon has made some progress in its effort to improve financial management. However, he said, it is not clear whether its books will be in shape to face an audit by the current target of 2017, a goal that has been pushed back several times.

The Pentagon “has a long way and many longstanding challenges to overcome,” Khan said.

Robert F. Hale, the Pentagon’s comptroller, told the subcommittee that the Defense Department’s financial management systems have certain strengths, including an ability to meet wartime objectives.

“But I also understand,” he said, “that there are enterprise-wide weaknesses in DOD financial management that demand an enterprise-wide business response.”