Financial Management: Opportunities to Improve Experience and Training of
Key Navy Comptrollers (Letter Report, 05/05/97, GAO/AIMD-97-58).

Pursuant to a congressional request, GAO reviewed opportunities to
improve the experience and training of key Navy comptrollers, focusing
on: (1) personnel practices and the education and experience of Navy
officers serving in comptroller positions; and (2) options for
strengthening these practices.

GAO noted that: (1) the Navy's personnel practices do not provide a
career path for Navy officers to develop and maintain the core
competencies needed by a comptroller; (2) by contrast, the Air Force and
the Army offer a career path in comptrollership; (3) because of the
Navy's approach, many officers in key comptroller positions lack the
financial management experience and the accounting education needed to
meet the demands of today's financial management environment; (4)
slightly more than half of the Navy's key comptroller positions are
filled by line officers whose primary occupation in the Navy is in
surface warfare, submarines, aviation, or operational staff positions;
(5) these officers averaged 17.8 years of commissioned service in the
Navy, but only 3.4 of those years had been spent in any financial
management position, including their current comptroller job; (6) about
60 percent of the line officers had obtained masters degrees in
business-related majors, but due to Navy personnel practices, many did
not utilize their financial management education until several years
after graduation and generally served in a comptroller position for only
one tour in their career; (7) about 26 percent of the line officers
serving as comptrollers had no college degree in any business-related
field; (8) supply corps officers, while more qualified from a formal
education perspective than line officers for comptroller positions,
generally lacked the depth of experience needed by a comptroller for the
1990s and beyond; (9) most of the supply officers held a college degree
at the bachelors or masters level in accounting or business, but few had
substantial experience in Navy fiscal administration assignments
involving such roles as budget officer, accountant, or comptroller; (10)
they averaged 16.1 years of commissioned service in the Navy of which
3.4 years were in fiscal administration and 5.7 years were in logistics
positions that involved some financial management experience; and (11)
in a few cases, senior supply corps officers had as much as 10 years
experience in fiscal administration.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-97-58
     TITLE:  Financial Management: Opportunities to Improve Experience 
             and Training of Key Navy Comptrollers
      DATE:  05/05/97
   SUBJECT:  Financial management
             Personnel management
             Human resources training
             Education or training
             Training utilization
             Human resources utilization
             Naval personnel
             Civilian employees
             Officer personnel
             Accounting procedures
IDENTIFIER:  Joint Financial Management Improvement Program
             DOD Quadrennial Defense Review
             
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Cover
================================================================ COVER


Report to the Honorable
Tom Harkin, U.S.  Senate

May 1997

FINANCIAL MANAGEMENT -
OPPORTUNITIES TO IMPROVE
EXPERIENCE AND TRAINING OF KEY
NAVY COMPTROLLERS

GAO/AIMD-97-58

Navy Comptrollers

(918865)


Abbreviations
=============================================================== ABBREV

  ASFM - Assistant Secretary of the Air Force for Financial
     Management
  ASN/FM&C - Assistant Secretary of the Navy, Financial Management
     and Comptroller
  CFO - Chief Financial Officer
  DOD - Department of Defense
  GMRA - Government Management and Reform Act
  GPRA - Government Performance and Results Act
  JFMIP - Joint Financial Management Improvement Program
  NPS - Naval Postgraduate School
  OPM - Office of Personnel Management
  QDR - Quadrennial Defense Review

Letter
=============================================================== LETTER


B-275089

May 5, 1997

The Honorable Tom Harkin
United States Senate

Dear Senator Harkin: 

We are responding to your request for information concerning the
background and experience of Navy military officers serving in key
comptroller positions.  The Chief Financial Officers (CFO) Act of
1990, as expanded by the Government Management Reform Act (GMRA) of
1994, and the Government Performance and Results Act of 1993 (GPRA),
are among recent laws that mandate reforms on how agencies manage
programs and report on the results of operations.  Beginning with
fiscal year 1996, the Navy and other federal departments and agencies
are required to produce and have audited financial statements.  These
agencies' ability to produce auditable financial statements will be
crucial to meeting the mandate for audited governmentwide financial
statements for fiscal year 1997.  Furthermore, accurate financial
data are needed for measuring performance under GPRA.  One key factor
in agencies being able to achieve these objectives will be having
trained and experienced financial management staff in key positions. 
In the Navy, comptrollers serve in positions of critical importance
for ensuring that the Department achieves its financial management
objectives as well as meets requirements of the recent reform acts. 

We issued a report in October 1996\1 that cited several advantages of
converting military financial management and other support positions
to civilian status.  These advantages include (1) dollar savings
because civilians are less expensive than military members of
equivalent rank and (2) the stability of personnel because military
staff frequently rotate in and out of positions. 

We testified in November 1995\2 on long-standing, serious financial
management deficiencies in the Navy.  We stated that the Navy's
financial reports were of little value in assessing its operations or
the execution of its stewardship responsibilities.  Our work
identified substantial misstatements in almost all of the Navy's
major accounts and $225 billion in errors in the Navy's fiscal year
1994 financial reports.  These problems are caused by a complex set
of process and system issues, and to some extent by the Navy's
personnel practices.  This report focuses on personnel practices and
the education and experience of Navy officers serving in comptroller
positions and options for strengthening these practices.  The Navy's
civilian comptrollers and other financial management personnel were
not the focus of this report since they are being addressed in a
broader study.  Details of our scope and methodology are provided in
appendix I. 


--------------------
\1 DOD Force Mix Issues:  Converting Some Support Officer Positions
to Civilian Status Could Save Money (GAO/NSIAD-97-15, October 23,
1996). 

\2 Financial Management:  Challenges Facing DOD in Meeting the Goals
of the Chief Financial Officers Act (GAO/T-AIMD-96-1, November 14,
1995). 


   BACKGROUND
------------------------------------------------------------ Letter :1

The CFO Act requires that an agency Chief Financial Officer (CFO)
oversee all financial management activities relating to the programs
and operations of the agency.  Some key CFO responsibilities are: 

  developing and maintaining integrated accounting and financial
     management systems;

  directing, managing, and providing policy guidance and oversight of
     all agency financial management personnel, activities, and
     operations;

  approving and managing financial management system design and
     enhancement projects;

  developing budgets for financial management operations and
     improvements; and

  overseeing the recruitment, selection, and training of personnel to
     carry out agency financial management functions. 

One of the most important positions under the CFO is the comptroller. 
The comptroller is the CFO's technical expert who oversees and
manages the day-to-day operations.  As such, the comptroller in any
agency, including the military services, is a key financial manager. 

As of October 1, 1996, the Navy had 100 military officers filling key
comptroller jobs.  These jobs have responsibilities involving a
significant range of Navy resources, and are designated to be staffed
by officers who range in rank from captain to lieutenant.  For
example, the comptroller of the Pacific Fleet, billeted for a Navy
captain, is responsible for financial management and financial
reporting of an annual budget of about
$5 billion, comparable in size to a Fortune 500 corporation; whereas
a comptroller at a small installation, billeted for a lieutenant,
manages an annual budget of about $5 million. 

The Navy's definition of a comptroller's job responsibilities is: 

     "Directs formulation, justification and administration of fiscal
     and budgetary management policies, plans and procedures. 
     Determines budget and fiscal control policies.  Coordinates and
     approves allocation of funds to programs and organizational
     units.  Develops reports on status of appropriations.  Provides
     required data on utilization of labor, material, and commercial
     services.  Prescribes required methods for budget estimation,
     fiscal administration, and accounting.  Exercises internal
     control over these systems through administrative and internal
     activities."

Table 1 shows the 100 comptroller jobs by rank. 



                                Table 1
                
                Navy Officers Designated as Comptrollers
                         as of October 1, 1996

                Number
                    of
Rank          officers      Typical positions or functions
------------  --------  --  ------------------------------------------
Captain             22      -Fleet and force comptrollers
                             -Naval shipyard comptrollers
                             -Fiscal planning and budget management
                             positions
Commander           44      -Comptroller billets at:
                             Naval air stations
                             Naval stations
                             Other fleet support stations
                             -Financial analysis, budgeting, cost
                             analysis,
                             and fiscal planning billets
Lieutenant          24      -Comptroller billets at:
 Commander                   Naval air stations
                             Naval bases
                             Naval training centers
                             -Financial management, procedural,
                             and budget analysis billets
Lieutenant          10      -Comptroller billets at:
                             Overseas navy activities
                             Naval training center
                             Naval tactical center
======================================================================
Total              100
----------------------------------------------------------------------
In November 1995, the Joint Financial Management Improvement Program
(JFMIP) published Framework for Core Competencies for Financial
Management Personnel in the Federal Government,\3 designed to
highlight the knowledge, skills, and abilities that accountants,
budget analysts, and financial managers in the federal government
should possess or develop to perform their functions effectively. 
JFMIP stated that federal financial managers need to be well equipped
to contribute to financial management activities such as: 

  the preparation, analysis, and interpretation of consolidated
     financial statements;

  the formulation/execution of budgets under increasingly constrained
     resource caps; and

  the development and implementation of complex financial systems. 

In defining core competencies needed to effectively perform as a
senior accountant and financial manager, which includes positions
such as military service comptrollers, JFMIP emphasizes the need for
a broad range of knowledge, skills, and abilities, including: 

  accounting education with updated knowledge of accounting
     principles and federal accounting concepts;

  knowledge of agency financial statements, internal control
     environment, and agency business practices;

  strategic vision for implementation of GPRA and formulation of
     budgets;

  resource and program management skills, with knowledge of
     appropriation structure and agency management control systems;
     and

  human resource skills to effectively manage a workforce. 

These core competencies suggest that individuals filling key
comptroller positions in the federal government need to come to their
jobs with a broad range of knowledge, skills, and abilities,
including a strong foundation of experience and education in
accounting.  Accordingly, the Office of Personnel Management (OPM)
has required that individuals in civilian accounting positions in the
federal government, which are in the GS-510 series, meet a minimum
qualification standard of 24 semester hours of college-level
accounting courses plus an appropriate number of years of experience
for the specific position.  We recognize that there are always
individuals who may lack the educational background desired but who
have developed the technical competencies needed through actual
experience.  However, formal education and technical training are
crucial factors in maintaining a professional workforce whether an
individual is a warfare officer or a financial manager. 


--------------------
\3 Framework for Core Competencies for Financial Management Personnel
in the Federal Government, A Joint Project of the Human Resources
Committee of the Chief Financial Officers Council and the Joint
Financial Management Improvement Program, November 1995. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The Navy's personnel practices do not provide a career path for Navy
officers to develop and maintain the core competencies needed by a
comptroller.  By contrast, the Air Force and the Army offer a career
path in comptrollership.  Because of the Navy's approach, many
officers in key comptroller positions lack the financial management
experience and the accounting education needed to meet the demands of
today's financial management environment. 

Slightly more than half of the Navy's key comptroller positions are
filled by line officers whose primary occupation in the Navy is in
surface warfare, submarines, aviation, or operational staff
positions.  These officers averaged 17.8 years of commissioned
service in the Navy, but only 3.4 of those years had been spent in
any financial management position, including their current
comptroller job.  About 60 percent of the line officers had obtained
masters degrees in business-related majors, but due to Navy personnel
practices, many did not utilize their financial management education
until several years after graduation and generally served in a
comptroller position for only one tour in their career.  About 26
percent of the line officers serving as comptrollers had no college
degree in any business-related field. 

Supply corps officers, while more qualified from a formal education
perspective than line officers for comptroller positions, generally
lacked the depth of experience needed by a comptroller for the 1990s
and beyond.  Most of the supply officers held a college degree at the
bachelors or masters level in accounting or business, but few had
substantial experience in Navy fiscal administration assignments
involving such roles as budget officer, accountant, or comptroller. 
They averaged 16.1 years of commissioned service in the Navy of which
3.4 years were in fiscal administration and 5.7 years were in
logistics positions that involved some financial management
experience.  In a few cases, senior supply corps officers had as much
as 10 years of experience in fiscal administration. 


   THE NAVY HAS NO SPECIFIC CAREER
   PATH FOR ITS OFFICERS TO
   DEVELOP CORE COMPETENCIES IN
   COMPTROLLERSHIP
------------------------------------------------------------ Letter :3

The financial management core competencies needed by individuals in
comptroller positions require both formal education in accounting and
business, and experience in financial management.  The Navy has
recognized the need to upgrade the knowledge and skills of its
individuals in financial management positions.  However, unlike the
Air Force and the Army, the Navy has no specific career path in
financial management aimed at developing needed core competencies for
officers in key comptroller positions. 

Our testimony to the Congress in November 1995 on Navy financial
management stated that the Navy's financial reporting problems could
be attributed in part to the long-standing failure to instill
discipline in its financial operations and follow basic procedures. 
We noted that even rudimentary controls were not routinely carried
out, such as ensuring the conduct of periodic physical inventories,
reconciling related accounts and records, documenting adjustments,
and reviewing abnormal account balances.  We also stated that the
Navy displayed financial management deficiencies to an even greater
extent than the other military services.  The Assistant Secretary of
the Navy, Financial Management and Comptroller (ASN/FM&C), made the
following statement at the same hearing: 

     "Serious problems exist in many facets of DON [Department of
     Navy] financial management...and (we) have responsive
     improvement plans well under way...  Recent changes in law and
     policy have made this a more demanding task and require staffs
     to acquire new knowledge and skills."

We agree with the ASN/FM&C that financial management staff need to
acquire new knowledge and skills.  One of the more critical positions
in a strong financial management function is the comptroller. 
However, we found that the Navy's present staffing practices for
military officers fail to provide a career path for the critically
important comptroller function.  Under present practices, Navy
officers filling fiscal administration jobs, including comptrollers,
devote most of their careers to either operational command positions
or logistics functions.  About half of the key comptroller positions
are staffed by line officers and half by officers in the supply
corps.  Line officers are generally individuals who are eligible to
command at sea, and whose primary occupational specialty is surface
warfare, aviation, or submarines.  Line officers may also include
individuals not eligible to command who serve in various operational
staff positions.  The supply corps officers are considered by the
Navy to be the Navy's business managers and they serve in a wide
variety of logistics and financial management positions. 

By contrast, the Air Force and the Army offer a career path in
comptrollership.  Under the Air Force's career program in financial
management and comptrollership, many Air Force officers devote their
entire careers to financial management.  The Army has designed its
own unique approach to developing a cadre of financial management
officers.  All Army officers are required to spend at least the first
5 years of their careers in positions in either comptrollership or
one of the operational branches of the Army, such as infantry,
artillery, or armor.  Army officers can elect to serve in
comptrollership positions under one of two programs.  In the single
track program, an officer can stay exclusively in financial
management as a specialty.  In the dual track program, an officer can
rotate between financial management jobs and command positions in the
operational branch. 

To illustrate, we judgmentally selected and reviewed the career
experiences of a Navy captain, an Air Force colonel, and an Army
colonel, each currently serving as the comptroller of a major
command.  Each of these comptrollers carries significant
responsibility for the financial management and financial reporting
of activities with annual budgets ranging from around $1 to $5
billion.  The profiles show that the Air Force and Army comptrollers
have significant career experiences that are important in developing
core competencies needed by a military comptroller.  However, the
Navy officer's profile illustrates a focus on a career as a Navy
combat operations officer, rather than on developing competencies
needed as a military comptroller. 


      PROFILE OF A NAVY MAJOR
      COMMAND COMPTROLLER
---------------------------------------------------------- Letter :3.1

He graduated from a major university with a degree in business. 
Devoted his first 7 years to junior command positions as a warfare
officer, then went to graduate school and obtained a masters degree
in business.  In the following 14 years, he served in various
assignments at sea and in training as a warfare officer, and spent
almost 2 years as a plans and policies director for the Joint Chiefs
of Staff.  He was subsequently appointed commanding officer of a
naval station and, 2 years later, became commanding officer of an
amphibious group in the Pacific Fleet.  After a 26-year career as a
warfare officer, this captain was assigned as comptroller of a Navy
fleet. 


      PROFILE OF AN AIR FORCE
      MAJOR COMMAND COMPTROLLER
---------------------------------------------------------- Letter :3.2

He graduated from a major university with a degree in finance.  Spent
the first 13 years primarily as a budget officer at two bases and an
air field, at the U.S.  Air Forces Europe, and at the Office of the
Air Force Comptroller at the Pentagon.  Then, he went to graduate
school and obtained a masters degree in business administration.  For
the next 7 years, he served in various positions, such as, base
comptroller and director of budget for a major command.  Then he
spent 2 years as an executive officer and division chief in the
Office of Assistant Secretary of the Air Force for Financial
Management and Comptroller (ASFM).  Then, for approximately 1 year,
he was Director of Accounting and Finance for a major command.  Then,
he returned to the Pentagon as Director of Budget and Appropriations,
ASFM, for about 3 years.  After a 27-year career in financial
management, he was appointed comptroller of a major command. 


      PROFILE OF AN ARMY MAJOR
      COMMAND COMPTROLLER
---------------------------------------------------------- Letter :3.3

He graduated from a major university with a degree in finance.  Spent
the first 5 years as a tank platoon leader and a special services
officer, then entered the single track comptrollership series and
served as an installation comptroller (resource management officer)
and a finance instructor over the next 7 years.  During that 7-year
period, he obtained a masters degree in business administration with
an emphasis in comptrollership.  Over the next 5 years, he served as
military assistant to the Director of the Office of Management and
Budget, White House.  Then he was assigned for 4 years to a
comptroller billet position at the Office of the Joint Chiefs of
Staff, Pentagon.  He then served as the Deputy Chief of Staff for
Resource Management for an army installation.  After a 24-year Army
career, with 19 years in financial management, he became the
comptroller of U.S.  Army, Pacific. 

We also looked at an Army colonel who was a comptroller of a $4
billion activity.  This individual was in the Army's dual track
program.  Out of a 25-year career this person spent only 6 years in
financial management positions.  While most Army officers are in the
dual track program, we have not reviewed the Army's comptroller
billets to determine if this Army colonel comptroller is typical. 
Also, the single track officer may not be representative of Army
comptrollers either, but he demonstrates the type of experience one
would expect of a comptroller of a major activity. 


   NAVY OFFICERS IN COMPTROLLER
   POSITIONS OFTEN LACK FINANCIAL
   MANAGEMENT EXPERIENCE AND
   ACCOUNTING EDUCATION
------------------------------------------------------------ Letter :4

The Navy has staffed its military comptroller positions with
individuals who, on average, lack the depth of financial management
experience and the accounting education needed for the financial
management environment of the 1990s.  Line officers, who fill most of
the senior-level comptroller positions at the captain and commander
ranks, have spent almost their entire careers in command positions
such as surface warfare officers, aviators, or submariners.  Supply
corps officers fill the remaining comptroller positions, and,
although they have stronger business-related educational backgrounds
and more exposure to financial management activities, most of their
careers have been devoted to Navy logistics. 


      PROFILE OF NAVY LINE
      OFFICERS IN COMPTROLLER
      POSITIONS
---------------------------------------------------------- Letter :4.1

Of the 100 key comptroller positions filled by Navy officers in
October 1996, 53 were occupied by line officers whose primary career
fields were in Navy operational commands, including surface weapons
officers, aviators, and submariners.  For these officers, a
comptroller position offers a temporary shore duty between commands
at sea.  While these line officers are typically highly educated
individuals and have considerable operational experience, they lack
both the financial management experience and accounting education
needed by a comptroller.  These 53 officers present the following
profile: 

  They filled mostly senior-level comptroller positions--14 were
     captains and 25 were commanders. 

  They averaged 17.8 years of commissioned service in the Navy, but
     only 3.4 years in financial management jobs, including their
     tenure in their current comptroller position. 

  Only 19 of the 53 (36 percent) majored in accounting or other
     business-related curriculum as undergraduate students. 

  Thirty-two of the 53 officers (60 percent) obtained masters degrees
     in a business-related major, but 14 of the remaining 21 officers
     (26 percent) lacked either undergraduate or graduate education
     in any business-related field. 

  Our review of a sample of line officers' college transcripts
     reveals that they averaged about 12 semester hours of accounting
     courses, mostly acquired in graduate studies in financial
     management. 

Appendix II summarizes the education and experience of the 53 line
officers filling comptroller positions in October 1996. 

Of the 53 line officers in comptroller positions, 43 earned masters
degrees, 22 from the Naval Postgraduate School (NPS) in Monterey,
California.  Based on Navy data, officers selected for NPS spend 18
months in the program at a cost of about $150,000, including salary
and benefits. 

Of the 43 officers with masters degrees, 32 earned their masters in
business from either NPS or other participating universities.  The
NPS degree program in financial management includes approximately 11
semester hours of accounting and has the objective of preparing Navy
officers for assignments to positions in budgeting, accounting,
business and financial management, and internal control and auditing. 
However, after graduating with their masters degrees in business,
many line officers do not rotate directly to a financial management
position where they could immediately apply their education.  Navy
data on officers serving in comptroller positions show that line
officers selected for financial management positions spend only a
small percentage of their career in finance.  Navy data on a broader
universe of all officers who obtain a masters degree in financial
management at NPS show that 49 percent of line officers do not use
their training for at least 6 years after graduation and 40 percent
never use their education in a Navy financial management job.  Navy
staffing practices are inadequate to ensure that the investment made
in postgraduate financial management training is effectively utilized
in financial management positions. 


      PROFILE OF NAVY SUPPLY
      OFFICERS IN COMPTROLLER
      POSITIONS
---------------------------------------------------------- Letter :4.2

The remaining 47 of the 100 Navy officers filling comptroller
positions on October 1, 1996, were supply corps officers.  The Navy
defines the mission of the supply corps as providing expertise to the
Navy and other Department of Defense (DOD) operations in logistics,
acquisition, and financial management, and refers to the cadre of
supply officers as the Navy's business managers.  While these
officers have careers with more exposure to financial management
activities than line officers, many supply officers still lack the
depth of experience in fiscal administration and the accounting
education needed for comptrollership in today's complex financial
management environment.  The 47 supply officers present the following
profile. 

  They filled both senior- and mid-level comptroller positions--27
     were captains or commanders and 20 were lieutenant commanders or
     lieutenants. 

  They averaged 16.1 years of commissioned service in the Navy of
     which 3.4 years were in fiscal-related positions and 5.7 years
     were in logistics positions that involved some financial
     management experience. 

  Twenty of the 47 (43 percent) majored in accounting or some other
     business-related field in undergraduate school. 

  Thirty-one of the 47 officers (66 percent) obtained masters degrees
     in business-related fields.  Our analysis of transcripts for a
     sample of these officers showed that they averaged about 14
     semester hours of accounting. 

Appendix III summarizes the education and experience of the 47 supply
corps officers filling comptroller positions in October 1996. 

An officer assigned to the supply corps usually will spend his or her
career in one of seven occupational groups: 

1.  fiscal,
2.  subsistence, open mess, and bachelors quarters management,
3.  transportation,
4.  material distribution,
5.  procurement,
6.  inventory control, or
7.  general. 

Of the seven occupational groups, six are predominantly logistics-
oriented, while fiscal assignments can provide Navy officers with
experience for developing core competencies needed by comptrollers. 
The following five job series are included under the fiscal grouping. 

Navy job series       Position title
----------------  --  ------------------------------------------------
1005                  Accounting Officer
1015                  Internal Review Officer
1025                  Budget Officer
1045                  Disbursing Officer
1050                  Comptroller
----------------------------------------------------------------------
Our review of the career histories of the 47 Navy supply officers in
comptroller jobs showed that most of these officers devoted 59
percent of their careers to the six job categories in the logistics
field, rather than to fiscal administration assignments.  The most
common assignment for these officers was as a general supply officer
(job series 1918), with the following primary duties, according to
the Navy manual: 

     "Directs supply department activities.  Applies supply policies
     to operation of department.  Determines demand in accordance
     with mission and standard allowance lists.  Approves
     requisitions, balance sheets and summaries.  Directs receiving,
     storage, inventory control, issue and salvage of material. 
     Oversees procurement and sale of goods and services. 
     Administers operation of general mess, including procurement,
     storage, issue, and inventory of provisions.  Conducts
     disbursing activities in connection with property accountability
     and transfer, payroll, and personal accounts."

The duties of a general supply officer provide financial management
experience to supply corps officers, as indicated by the above
description of duties.  Other supply officer assignments in logistics
specialties also have financial management components, such as budget
management.  While the logistic positions provide officers with some
financial management experience, it is the fiscal administration-type
assignment, i.e., budget officer, accountant, or comptroller that
best addresses the core competencies needed by key financial
managers. 

Although the Navy does not have a career path in financial
management, a few supply corps officers have a career profile that
was heavily focused on fiscal assignments.  For example, one captain
now serving as the comptroller of a major Navy command has 25 years
in the Navy, and he has spent 10 of the past 13 years in comptroller
positions.  However, we believe most of the supply corps officers in
comptroller positions would fall short of meeting JFMIP's core
competencies because their career paths have not been concentrated in
fiscal administration.  As stated earlier in this report, recent
reform initiatives aimed at addressing long-standing and severe
federal financial management problems, including the CFO Act and
GPRA, have placed demands on comptrollers in the 1990s that are
substantially greater than in the past.  To meet these demands, Navy
personnel practices for key comptroller positions need improvement to
ensure the development of the core competencies and experience
necessary to meet today's considerable challenges. 


   COMPTROLLER POSITIONS ARE
   CANDIDATES FOR CONVERSION TO
   CIVILIAN STATUS
------------------------------------------------------------ Letter :5

Conversion of military financial management and other support
positions to civilian status was the topic of our October 1996
report.\4 We cited two advantages of conversion to civilian status: 
(1) dollar savings because civilians are less expensive than military
members of equivalent rank, and (2) stability of personnel because of
frequent rotation of military staff that rotate in and out of
positions. 

Our report suggested that DOD could save as much as $95 million
annually by converting positions occupied by military officers to
civilian status.  In that report, we identified about 9,500
administrative and support positions that civilians may be able to
fill at lower cost and with greater productivity due to the
civilians' much less frequent rotations.  Examples of career fields
that contain positions that might be converted are information and
financial management, which would include comptroller positions. 

DOD guidance on civilian versus military staffing of positions was
written in 1954.  It requires that civilians be used to staff
positions wherever possible.  However, the guidance also provides a
high degree of flexibility to DOD by allowing positions to be
designated as military essential, and therefore to be filled by an
active military officer for any of the following reasons. 

  Required training is only available in the military. 

  The position is needed to maintain combat readiness. 

  The position requires a general military background for successful
     execution. 

  The law requires that the position be staffed by military
     personnel. 

  The position must be military in order to maintain good order and
     discipline or exercise authority under the Uniform Code of
     Military Justice. 

  The position is needed to ensure adequate opportunities to rotate
     personnel from overseas locations or sea duty to tours of duty
     in the continental United States. 

  The position must be military for security reasons in which the
     incumbent may be involved in combat, expected to use deadly
     force, or expected to exhibit an unquestioned response to
     orders. 

  The position requires unusual duty hours that are not normally
     compatible with civilian employment. 

Since these guidelines were issued over 40 years ago, the
government's financial management environment and personnel needs
have changed substantially, particularly with respect to the need for
specialized positions such as comptroller.  Increased demands and
challenges faced by government financial managers resulting from
financial management reform legislation of the 1990s warrants a
closer look at staffing these key positions. 

To identify candidates for conversion in our October 1996 report, we
developed criteria based on the above DOD directive and service
implementing guidance.  The criteria consisted of four questions that
reflect the substance of the DOD criteria.  Answering "no" to all
four questions would be one approach to identifying positions that
could be converted to civilian status.  The questions were as
follows. 

(1) Is the primary skill or knowledge required in the position
uniquely available in the military? 

(2) Does the position have a mission to deploy to a theater of
operations in wartime or during a contingency? 

(3) Does any law require that the position be staffed by a military
person? 

(4) Is the position needed to support the normal rotation of service
members deployed overseas or afloat to assignments in the continental
United States? 

DOD's response to our October 1996 report acknowledged the potential
savings and other advantages of military-to-civilian conversions. 
DOD also noted impediments to placing civilians in certain positions,
such as the lack of consistent funding for the hiring of civilian
replacements, the ongoing civilian personnel draw-down, and military
strength floors.  DOD, in its response to the report's
recommendation, said the issue of military-to-civilian conversion is
an important component of DOD manpower requirements determination and
the issue is currently being discussed in planning for the
Quadrennial Defense Review (QDR). 

We recognize the difficulties DOD and the Navy face while operating
in fiscally constrained times.  However, DOD and the Navy should
benefit significantly in terms of more efficient and effective
operations if a strong comptroller function is established and
maintained.  A well-educated and experienced cadre of comptrollers,
whether military or civilian, is critical to managing a large
organization such as the Navy. 


--------------------
\4 GAO/NSIAD-97-15, October 23, 1996. 


   CONCLUSION
------------------------------------------------------------ Letter :6

While DOD anticipates that the QDR will concentrate on identifying
methods to overcome the impediments to large-scale
military-to-civilian conversions for all the military services, steps
need to be taken to address the Navy's lack of a career path for
military comptrollers.  As the Air Force and the Army have
recognized, financial management and comptrollership is a
professional career track that requires highly trained and skilled
individuals.  In the military combat operations environment one would
not expect an officer with only 3 to 4 years experience to command a
ship, squadron, or fleet.  Similarly, one would not expect a
comptrollership, responsible for billions of dollars, to be staffed
temporarily by a less than fully experienced financial manager.  This
would be true whether the comptroller was a military officer or a
civilian.  However, that in effect is the unintended consequence of
the Navy's present personnel practices with respect to assigning its
military officers to comptroller positions.  Therefore, if the Navy
is to be successful in meeting the objectives of the various
governmentwide financial management reform initiatives, it must have
a highly skilled and experienced financial management staff in place
to help guide and manage its efforts. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

We recommend that the Secretary of Defense ensure that the following
steps are taken by the Navy. 

  Identify which key military comptroller positions can be converted
     to civilian status in order to gain greater continuity,
     technical competency, and costs savings. 

  For those comptroller positions identified for conversion to
     civilian status, ensure that those positions are filled by
     individuals who possess both the proper education and experience
     needed to meet the JFMIP core competencies. 

  For those comptroller positions that should remain as military
     billets, establish a career path in financial management that
     ensures that military officers are prepared, both in terms of
     education and experience, for comptrollership responsibilities. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

In commenting on a draft of this report, DOD generally agreed with
the report findings.  These comments are summarized below and
reprinted in appendix IV.  Specifically, DOD agreed that there may be
key military comptroller positions that can be converted to civilian
status.  The Department also recognized the need to fill such
positions with individuals who possess the proper education and
experience, and supported the report's message that the Navy needs to
strengthen its existing training program for financial management
subspecialists. 

However, DOD did not concur with our third recommendation on
establishing a specific career path in financial management.  This
recommendation is aimed at ensuring that Navy military officers
develop the technical competencies needed to be effective
comptrollers through training and experience.  The Navy does not
believe a formal career program in comptrollership is feasible
because of the small number of officers in this field combined with a
need for extensive experience in fleet operations.  While fleet
experience may help to develop a better understanding of operational
issues, a comptrollership function demands a high level of financial
management expertise for an individual to be effective in today's
complex environment.  Further, the relative number of military
comptrollers is not the issue, rather the issue is that these
officers should have the technical competencies necessary to perform
in these key Navy comptroller positions. 

Although DOD did not concur with our recommendation, the Department
acknowledged that some naval officers may have been assigned as
comptrollers without a strong background in some aspects of financial
management.  To address this problem, DOD plans to take steps to
increase the number of tours or months of experience required to
become a financial management subspecialist and upgrade all
comptroller billets to proven subspecialist billets.  These steps
should increase the amount of experience that Navy officers bring to
the comptroller positions.  However, the Navy needs to ensure that
its comptroller positions are filled with individuals who bring a
strong background of financial management experience to those
positions.  We are concerned that simply increasing the number of
months necessary to qualify as a subspecialist or adding a tour of
duty, though a positive step, will not fully achieve the desired
goal.  We continue to believe that a career path, similar to the Air
Force or Army, is the best approach. 

We are also pleased that the Navy plans to enhance its training for
military officers who will serve in comptroller positions.  A
critical aspect of such training is that officers completing the
course should be assigned to a comptroller position within a
relatively short period of time so that the benefits of the training
are not lost before being put into application for the benefit of the
Navy.  As noted in this report, utilization of financial management
training by Navy officers has been a problem in the past because many
years elapsed between completion of training and an assignment to a
key financial management position. 


---------------------------------------------------------- Letter :8.1

As agreed with your office, unless you publicly announce the contents
of this report earlier, we will not distribute it until 30 days from
the date of this letter.  At that time, we will send copies of this
report to the Chairmen and Ranking Minority Members of the Senate
Committee on Governmental Affairs and the House Committee on
Government Reform and Oversight and other interested committees.  We
will also send copies to the Secretaries of Defense and the Navy and
the Director of the Office of Management and Budget.  Copies will be
made available to others upon request. 

If you have any questions about this report, please contact me at
(202) 512-9095.  The major contributors to this report are listed in
appendix V. 

Sincerely yours,

Lisa G.  Jacobson
Director, Defense Audits


SCOPE AND METHODOLOGY
=========================================================== Appendix I

We identified the Navy's military comptroller billets by interviewing
Bureau of Naval Personnel officials and reviewing Navy staffing
policy and procedures manuals.  We obtained a database from the
Bureau of Naval Personnel on Navy officers who were in financial
management positions.  Using this database, we identified the
universe of military officers in comptroller positions as of October
1, 1996.  We also used this database to document the formal education
and experience of these officers.  We supplemented the database
information by reviewing microfiche records which contained detailed
career histories and college transcripts for each officer.  We
interviewed officials at the Bureau of Naval Personnel and met with
selected Navy comptrollers to obtain a detailed understanding of Navy
staffing practices and Navy recordkeeping systems. 

We identified 191 military comptroller (code 1050) billets as of
October 1, 1996.  Further analysis showed that 91 of the 191
comptrollers were in either the Medical Service Corps or Civil
Engineering Corps.  We excluded the 89 medical corps officers from
our analysis because (1) medical comptrollers perform specialized
duties that are closely related to the field of health care
administration and (2) funding in this area represented only about 1
percent of the Navy's budget.  We also excluded the two civil corps
officers to maintain a clear distinction between the line officers
and supply officers who were the focus of our review. 

Based on the data provided by the Navy, we profiled the career
experiences, in terms of education and assignment history, of the
remaining 100 Navy officers filling comptroller positions.  We
segregated these officers for purposes of analysis into line officers
and supply officers to assess if there were any differences in
educational background and financial management experiences due to a
career track.  Further, to illustrate the possible disparities in the
financial management experiences of comptrollers representing the
three military services, we judgmentally selected for analysis senior
officers representing the Navy, Air Force, and Army.  These
individuals were chosen based solely on whether the officer was the
comptroller of a major command--in the $1 to $5 billion dollar budget
range.  However, this assignment was principally focused on the
analysis of the qualifications of Navy officers in key comptroller
positions.  As such, we did not review the profiles of all Air Force
and Army officers in key comptroller positions. 

This review excluded any analysis of civilians in comptroller
positions because we have a broader review underway that will analyze
the education and experience of key financial managers throughout
DOD. 

We conducted our work from July 1996 to March 1997 in accordance with
generally accepted government auditing standards.  We requested
written comments on a draft of this report from the Secretary of
Defense.  DOD provided us with written comments.  These comments are
discussed in the "Agency Comments and our Evaluation" section and are
reprinted in appendix IV. 


PROFILE OF EDUCATION AND
EXPERIENCE OF NAVY LINE OFFICERS
OCCUPYING COMPTROLLER POSITIONS AS
OF OCTOBER 1, 1996
========================================================== Appendix II

Education and experience of Navy Line        Number of
Officers                                      officers         Percent
--------------------------------------  --------------  --------------
Number currently in comptroller                     53           100.0
 billets
Number with bachelors degrees in                    19            35.8
 accounting or business-related majors
Number with masters degrees                         43            81.1
Number with masters degrees in                      32            60.4
 accounting or business-related majors
Number with no degrees in accounting                14            26.4
 or business-related majors
Average semester hours in accounting              11.9
 courses
Average number of years of Navy                   17.8           100.0
 experience
Average number of years of Navy                    1.9            10.7
 experience in fiscal administration
Average number of years of Navy                    1.5             8.4
 experience in other financial
 management positions
----------------------------------------------------------------------

PROFILE OF EDUCATION AND
EXPERIENCE OF NAVY SUPPLY OFFICERS
OCCUPYING COMPTROLLER POSITIONS AS
OF OCTOBER 1, 1996
========================================================= Appendix III

Education and experience of Navy             Number of
Supply Officers                               officers         Percent
--------------------------------------  --------------  --------------
Number of supply officers in                        47           100.0
 comptroller positions
Number with bachelors degrees in                    20            42.6
 accounting or business-related majors
Number with masters degrees                         33            70.2
Number with masters degrees in                      31            66.0
 accounting or business-related majors
Number with no degree in                             8            17.0
 accounting or business-related majors
Average semester hours of accounting              14.2
 courses
Average number of years of Navy                   16.1           100.0
 experience
Average number of years of Navy                    3.4            21.1
 experience in fiscal administration
 positions
Average number of years of Navy                    5.7            35.4
 experience in logistic positions with
 some financial management exposure
----------------------------------------------------------------------



(See figure in printed edition.)Appendix IV
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================= Appendix III



(See figure in printed edition.)



(See figure in printed edition.)


The following is GAO's comment on the Department of Defense's letter
dated April 18, 1997. 

GAO COMMENT

1.  Discussed in the "Agency Comments and Our Evaluation" section. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Patricia A.  Summers, Senior Auditor
W.  David Grindstaff, Assistant Director

DENVER FIELD OFFICE

Lowell E.  Hegg, Assistant Director

SEATTLE FIELD OFFICE

Richard L.  Harada, Senior Evaluator
Karlin I.  Richardson, Senior Evaluator


*** End of document. ***