Financial Management: Training of DOD Financial Managers Could Be
Enhanced (Letter Report, 06/24/98, GAO/AIMD-98-126).
Pursuant to a legislative requirement, GAO reviewed the lessons learned
from the results of its survey of selected large state governments and
private-sector corporations that the Department of Defense (DOD) could
use to augment its existing plans to upgrade the competencies of its key
financial managers.
GAO noted that: (1) a key lesson learned from its survey data is that
many state government and private-sector organizations place a strong
emphasis on training as a means of upgrading workforce knowledge of
current financial management, accounting, and reporting requirements;
(2) on average, key financial managers in the surveyed large state
governments and private-sector organizations received 31 hours and 26
hours of training, respectively, in 1996--most of which was in technical
accounting subjects; (3) some of the surveyed organizations had
established training requirements for their financial personnel; (4)
also, several organizations noted that their programs were designed, in
part, in recognition of the training requirements that existed for
employees holding professional certifications; (5) these approaches may
be useful to DOD in addressing its financial management problems; (6)
over half of the key DOD financial managers GAO surveyed--who all held
leadership positions throughout DOD's network of financial
organizations--had received no financial- or accounting-related training
during 1995 and 1996; (7) these key personnel face the challenge of
leading DOD's efforts to produce reliable financial data: (a) throughout
a large complex DOD organization with acknowledged difficult financial
deficiencies; and (b) that build upon existing requirements to include
recent, more comprehensive accounting standards and federal financial
management system requirements; (8) in addition, full implementation of
the Government Performance and Results Act will require DOD financial
personnel to provide information on cost data associated with DOD's
program results; (9) technical financial- and accounting-related
training to supplement on-the-job experiences of DOD's key financial
managers is critical to ensuring that such accurate financial data are
available; (10) the Secretary of Defense has stated in a recent major
reform initiative that while the department is a world-class
organization, it is rendering second-rate education, training, and
professional development to its civilian employees; (11) moreover, the
Defense Finance and Accounting Service (DFAS) is developing a plan
intended to identify the kinds of skills and developmental activities
DFAS financial personnel need to improve their competencies; and (12) in
addition, DOD has not yet established a departmentwide focus with
accountability to ensure that efforts to improve DOD's financial
managers' training are effectively coordinated with the Secretary's
broader training reform initiative.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-98-126
TITLE: Financial Management: Training of DOD Financial Managers
Could Be Enhanced
DATE: 06/24/98
SUBJECT: Chief financial officers
State governments
Human resources training
Federal agency accounting systems
Civilian employees
Accounting
Financial management systems
Accountability
IDENTIFIER: DFAS Financial Management Career Development Plan
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Cover
================================================================ COVER
Report to the Secretary of Defense
June 1998
FINANCIAL MANAGEMENT - TRAINING OF
DOD FINANCIAL MANAGERS COULD BE
ENHANCED
GAO/AIMD-98-126
Training of DOD Financial Managers
(918933)
Abbreviations
=============================================================== ABBREV
CFO - chief financial officer
CGFM - Certified Government Financial Manager
CPA - Certified Public Accountant
DFAS - Defense Finance and Accounting Service
DOD - Department of Defense
FASAB - Federal Accounting Standards Advisory Board
FFMIA - Federal Financial Management Improvement Act
GMRA - Government Management Reform Act
GPRA - Government Performance and Results Act
GS - general schedule
JFMIP - Joint Financial Management Improvement Program
OMB - Office of Management and Budget
Letter
=============================================================== LETTER
B-279753
June 24, 1998
The Honorable William S. Cohen
The Secretary of Defense
Dear Mr. Secretary:
With passage of the Chief Financial Officers (CFO) Act of 1990 and
the Government Management Reform Act of 1994, agencies are
increasingly expected to implement improved financial and accounting
practices with the goal of producing accurate and complete
information on their operations, including auditable financial
statements. Such information is critical for use by managers and
policymakers in making difficult decisions as well as measuring
agency performance and the full cost of government activities as
envisioned by the Government Performance and Results Act of 1993.
Financial management personnel are now required to use new federal
accounting standards that are intended to provide greater
accountability and enhanced decision-making in a cost-effective
manner by enhancing existing accounting and reporting requirements.
Integrating these new accounting standards and legislative
requirements with existing financial management practices creates a
challenge for financial managers throughout government.
The Department of Defense's (DOD) financial management systems,
policies, and procedures continue to be hampered by significant
weaknesses. We have issued several reports pointing out that DOD has
not established policies nor begun to implement many of the
accounting requirements that were being phased in and are now
effective.\1 Consequently, DOD personnel are now confronting an
enormous financial management improvement challenge, the most
difficult in the federal government. Training is key to bringing DOD
financial managers up-to-date and keeping them current on enhanced
accounting standards and legislative requirements. Technical
accounting and financial training can thereby improve the performance
of financial management personnel so that they can more effectively
lead the department's efforts to pass the test of a financial
statement audit and achieve one of the key objectives of the CFO Act.
This report represents the culmination of an effort we undertook to
survey the backgrounds and training of key financial managers, not
only throughout various DOD component organizations, but also in
selected large state governments and private sector organizations.
This led to a series of reports that provided profile information on
the formal education, professional work experience, training, and
professional certifications held by DOD key financial managers.\2 We
also recently issued a report profiling the background and training
of key financial management personnel in selected large state
governments and private sector companies.\3 These key personnel have
had considerable experience in operating the systems and using the
practices necessary to produce reliable financial information to
report to their taxpayers and stockholders, respectively.
This report summarizes lessons learned from the results of our survey
of selected large state governments and private sector corporations
that DOD could use to augment its existing plans to upgrade the
competencies of its key financial managers. The audit work from the
series of reports from which information was drawn in preparing this
report was conducted from June 1996 through March 1998 in accordance
with generally accepted government auditing standards. Our scope and
methodology are described in appendix I. We requested written
comments on a draft of this report from the Secretary of Defense or
his designee. The Under Secretary of Defense (Comptroller) provided
us with written comments. These comments are reprinted in appendix
III and are discussed in the "Agency Comments and Our Evaluation"
section.
--------------------
\1 High-Risk Series: An Overview (GAO/HR-95-1, February 1995),
High-Risk Series: Defense Financial Management (GAO/HR-97-3,
February 1997), and Department of Defense: Financial Audits
Highlight Continuing Challenges to Correct Serious Financial
Management Problems (GAO/T-AIMD/NSIAD-98-158, April 16, 1998).
\2 Financial Management: Profile of DOD Comptroller/CFO Financial
Managers (GAO/AIMD-97-97,
June 27, 1997), Financial Management: Profile of Air Force Financial
Managers (GAO/AIMD-98-4, November 28, 1997), Financial Management:
Profile of Army Financial Managers (GAO/AIMD-98-58, February 25,
1998), Financial Management: Profile of Navy and Marine Corps
Financial Managers (GAO/AIMD-98-86, April 15, 1998), and Financial
Management: Profile of Defense Finance and Accounting Service
Financial Managers (GAO/AIMD-98-133, May 28, 1998).
\3 Financial Management: Profile of Financial Personnel in Large
Private Sector Corporations and State Governments (GAO/AIMD-98-34,
January 2, 1998).
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
A key lesson learned from our survey data is that many state
government and private sector organizations place a strong emphasis
on training as a means of upgrading workforce knowledge of current
financial management, accounting, and reporting requirements. On
average, key financial managers in the surveyed large state
governments and private sector organizations received 31 hours and 26
hours of training, respectively, in 1996--most of which was in
technical accounting subjects. Some of the surveyed organizations
had established training requirements for their financial personnel.
Also, several organizations noted that their programs were designed,
in part, in recognition of the training requirements that existed for
employees holding professional certifications.
These approaches may be useful to DOD in addressing its financial
management problems. Over half of the key DOD financial managers we
surveyed--who all held leadership positions throughout DOD's network
of financial organizations--had received no financial- or
accounting-related training during 1995 and 1996. These key
personnel face the challenge of leading DOD's efforts to produce
reliable financial data (1) throughout a large and complex DOD
organization with acknowledged difficult financial deficiencies and
(2) that build upon existing requirements to include recent, more
comprehensive accounting standards and federal financial management
system requirements. In addition, full implementation of the
Government Performance and Results Act will require DOD financial
personnel to provide information on cost data associated with the
department's program results. Technical financial- and
accounting-related training to supplement on-the-job experiences of
DOD's key financial managers is critical to ensuring that such
accurate financial data are available.
The Secretary of Defense has stated in a recent major reform
initiative that while the department is a world-class organization,
it is rendering second-rate education, training, and professional
development to its civilian employees. He added that DOD must aspire
to world-class educational standards. Each of the military services
has or is planning programs to enhance the skills and competencies of
their respective financial managers. Moreover, the Defense Finance
and Accounting Service (DFAS) is developing a plan intended to
identify the kinds of skills and developmental activities DFAS
financial personnel need to improve their competencies. However, the
DFAS plan does not yet address (1) how the competencies will be
applied to key financial managers throughout DOD, (2) a specific
curriculum supporting the competencies, (3) minimum training
requirements for key financial personnel, and (4) how accountability
will be established to ensure that the plan is effectively
implemented. In addition, DOD has not yet established a
departmentwide focus with accountability to ensure that efforts to
improve DOD's financial managers' training are effectively
coordinated with the Secretary's broader training reform initiative.
BACKGROUND
------------------------------------------------------------ Letter :2
Key DOD financial managers face considerable challenges in addressing
-- the financial management needs of a DOD organization that is
without parallel in the size, diversity, and complexity of its
operations;
-- repeated audit findings that deficiencies in personnel
experience or competencies are a major contributor to DOD's
continuing financial deficiencies; and
-- existing and enhanced accounting requirements that must be
implemented throughout DOD.
IMPLEMENTING EFFECTIVE
FINANCIAL PRACTICES ACROSS
DOD IS A DAUNTING CHALLENGE
---------------------------------------------------------- Letter :2.1
DOD's financial managers are responsible for managing the financial
operations of one of the largest and most complex entities in the
world--over $1 trillion in reported assets, 3 million military and
civilian personnel, and outlays of about $260 billion for fiscal year
1997. It has acknowledged responsibility for the world's largest
dedicated infrastructure, reporting that its physical plant has an
estimated value of about $500 billion. In addition, based on data
provided by DOD, the department has a network of approximately 32,000
financial management personnel, including the positions held by the
1,409 key financial managers responding to our prior surveys. These
1,409 financial management positions are assigned not only to the
Office of the DOD CFO (the Under Secretary of Defense (Comptroller))
and to DFAS--the DOD "accounting firm," but also to financial or
budget components in the military services. Adding to the difficulty
of carrying out financial operations in DOD is the continuing effort
to downsize its operations.
DOD has a vast number of financial management systems.\4 In its 1997
report to the Office of Management and Budget (OMB), DOD reported
that it had 156 financial management systems. However, as we
reported,\5 DOD relies on a significant number of other financial
management systems and processes operated by DOD entities outside the
DOD Comptroller's organization, such as acquisition, logistics, and
personnel, that provide financial data to DOD's accounting systems.
These "mixed" systems are part of the financial systems network at
DOD. Further exacerbating the task of DOD financial personnel
operating with such a large network of systems are the systems'
seriously deficient processes and controls. For example, the DOD
Inspector General recently concluded, in part, that DOD's financial
management systems did not comply with federal accounting standards.
The diversity, complexity, and size of even the largest private
sector corporations pale in comparison to DOD. For example, the
company that ranked first in Fortune's April 1998 list of the 500
largest companies showed assets of about $230 billion, less than 25
percent of DOD's reported assets for fiscal year 1997. The 1995
revenues of the largest of the Fortune 100 corporations responding to
our recent study on financial managers were about $80 billion and the
1993 revenues of the largest state responding to that same study were
about $110 billion.
In contrast to the largely deficient financial network with which
DOD's financial personnel have been hamstrung for decades, effective,
disciplined financial operations have been in place in the private
sector and state governments for many years. Specifically, the
disciplined process required to generate reliable, accurate financial
data has been in place in the private sector for over 60 years
following the 1929 stock market crash. In state governments, this
disciplined process was enhanced by the passage of the Single Audit
Act of 1984. In comparison, former Secretary of Defense William J.
Perry stated in the 1995 Annual Report to the President and the
Congress that the department's manifold financial management failures
reflect a complex, multifaceted, and antiquated bureaucratic
organization structure.
--------------------
\4 Office of Management and Budget Circular A-127, Joint Financial
Management Improvement Program system requirements, and the Federal
Financial Management Improvement Act of 1996 define financial
management systems to include the financial systems and the financial
portion of mixed systems necessary to support financial management.
A mixed system is defined as an information system that supports both
financial and nonfinancial functions of the federal government or its
components.
\5 Financial Management: DOD Inventory of Financial Management
Systems Is Incomplete (GAO/AIMD-97-29, January 31, 1997).
PERSONNEL EXPERIENCE AND
COMPETENCIES CONTRIBUTE TO
CONTINUING PROBLEMS
---------------------------------------------------------- Letter :2.2
The size and complexity of DOD's financial organization
notwithstanding, audit reports over the past few years have cited
personnel deficiencies, such as the lack of accounting experience or
competencies, and inadequate training, as one of the causes of DOD's
serious financial management deficiencies. For example, in our March
1996 report\6 on the results of our financial review of the Navy, we
recommended that the Navy and DFAS take action to upgrade the
experience of financial managers. In this regard, we cited numerous
examples of Navy and DFAS personnel not performing routine required
reconciliations or investigating and resolving unusual trends in
large year-to-year account balance variations. More recently, in
October 1997,\7 in the course of its work on the department's working
capital funds, which are intended to operate on a businesslike basis,
the DOD Inspector General noted continuing pervasive weaknesses in
the personnel area, including incomplete or no training, insufficient
management oversight, and an inability to respond to a rapidly
changing accounting environment. The Inspector General also pointed
out the critical link between training and the successful
introduction and use of new accounting systems. In addition, the DOD
Inspector General reported a widespread failure of accounting
personnel to understand basic accounting theories and principles that
support transaction entries.
--------------------
\6 CFO Act Financial Audits: Increased Attention Must Be Given to
Preparing Navy's Financial Reports (GAO/AIMD-96-7, March 27, 1996).
\7 A Status Report on the Major Accounting and Management Control
Deficiencies in the Defense Business Operations Fund for FY 1996,
Audit Report of the Office of the Inspector General, Department of
Defense (Report No. 98-002, October 3, 1997).
RECENT LEGISLATIVE
INITIATIVES AND ENHANCED
ACCOUNTING STANDARDS
INCREASE CHALLENGE
---------------------------------------------------------- Letter :2.3
The key legislative initiatives affecting financial reform efforts in
DOD and other federal agencies include the following.
-- Chief Financial Officers Act of 1990 and Government Management
Reform Act of 1994 (GMRA). Together, these acts charge the DOD
CFO with, among other things, (1) directing, managing, and
providing policy guidance and oversight of all agency financial
management personnel, activities, and operations and (2)
overseeing the recruitment, selection, and training of personnel
to carry out agency financial management functions. Under this
legislative mandate, DOD is to annually prepare and have audited
DOD-wide and major component--including Army, Navy, and Air
Force--financial statements, beginning with fiscal year 1996.
The auditors' reports provide an annual public scorecard to
measure agencies' progress in improving financial management.
-- Government Performance and Results Act of 1993 (GPRA or "the
Results Act"). The Results Act is intended to improve the
efficiency and effectiveness of federal programs by establishing
a system to set goals for program performance and to measure
results. To the extent that DOD measures the efficiency of its
operations, such measures are dependent upon accurate cost
information.
-- Federal Financial Management Improvement Act of 1996 (FFMIA).
This act provides a legislative requirement to implement and
maintain financial management systems that substantially comply
with federal financial management systems requirements,
applicable federal accounting standards, and the standard
general ledger. In meeting these requirements, DOD will be
required to implement new, evolving accounting standards, as
discussed below, as well as the federal financial management
system requirements established by the Joint Financial
Management Improvement Program (JFMIP).\8 DOD financial
management personnel face a considerable challenge in meeting
the act's provisions because few of DOD's systems meet federal
financial management systems requirements and DOD has not yet
comprehensively identified and assessed all of its financial
management systems.
Another critical challenge for DOD's financial management personnel
is the recently issued accounting standards--which represent
enhancements to previous standards--that are currently being
implemented (see appendix II for a listing of the standards).\9 If
properly implemented, these standards will provide the impetus not
only for the department to improve its financial management
operations and reporting, but also to strengthen its ability to meet
critical mission objectives because more accurate information will be
provided to decisionmakers.
Neither DOD nor the military services have been able to withstand the
scrutiny of a financial statement audit. In its disclaimer of
opinion on DOD's consolidated financial statements for fiscal year
1997, the DOD Inspector General stated that although progress
continues, significant deficiencies in the accounting systems and the
lack of sound internal controls prevented the preparation of accurate
financial statements. In addition, the Inspector General stated that
the accounting data were not reliable and the DOD Inspector General
was unable to satisfy itself that the data were accurate and
complete.
--------------------
\8 JFMIP is a joint and cooperative undertaking of the Office of
Management and Budget, the General Accounting Office, the Department
of the Treasury, and the Office of Personnel Management to improve
and coordinate financial management policies and practices throughout
the government.
\9 These standards are the result of the establishment of the Federal
Accounting Standards Advisory Board (FASAB) in October 1990. Using a
due process and consensus building approach, the nine-member Board,
which has since its formation included a member from DOD, recommends
accounting standards for the federal government. Once FASAB
recommends accounting standards, the Secretary of the Treasury, the
Director of the Office of Management and Budget, and the Comptroller
General decide whether to adopt the recommended standards. If they
are adopted, the standards are published by OMB and GAO and include a
specified effective date.
WELL-TRAINED PERSONNEL ARE
CRITICAL TO EFFECTIVE FINANCIAL
MANAGEMENT
------------------------------------------------------------ Letter :3
Only about half of the DOD key financial managers responding to our
surveys had taken any accounting or other technical training related
to their career fields in the 2 years we reviewed. Moreover, DOD has
not established an annual training requirement for its financial
management personnel. More than three-fourths of the state
government and private sector company respondents to our survey said
that they encouraged their financial managers to take training. It
is also noteworthy that several of the state government and private
sector respondents indicated that they had designed their training
programs, in part, in recognition of the training requirements that
existed for holders of professional certifications. In addition,
some state government and private sector company respondents had
established annual training requirements for their financial
managers.
MANY KEY DOD FINANCIAL
MANAGERS RECEIVED NO
ACCOUNTING AND FINANCIAL
TRAINING
---------------------------------------------------------- Letter :3.1
Our recent studies showed that 53 percent of DOD's key financial
managers responding to our survey did not receive any accounting or
financial training during calendar years 1995 and 1996, the 2-year
period covered by our survey. As shown in appendix II, seven of the
eight new federal financial accounting standards were issued either
prior to or during that 2-year span. Furthermore, as discussed
previously, the Federal Financial Management Improvement Act, which
has major implications for financial managers, was passed in 1996.
If DOD is to fully and effectively implement this legislation, its
financial personnel must keep abreast of existing and evolving
technical federal financial management system requirements.
As table 1 shows, 32 percent of DOD financial managers received only
general training, which included topics such as computers and
supervision. Moreover, an additional 21 percent of DOD respondents
did not receive any training during 1995 and 1996.
Table 1
Training Reported by DOD Financial
Managers as Being Completed During 1995
and 1996
Type of training Percent reporting
------------------------------------------------ --------------------
Accounting only 3
Finance only 3
Combination of two or more of the following: 41
accounting, finance, and general (see note)
General only 32
No training 21
----------------------------------------------------------------------
Note: General training includes training courses in such topics as
computer operations and supervision.
Source: GAO analysis of questionnaire results.
Nearly 75 percent and 90 percent of state government and private
sector respondents, respectively, commented that they encouraged
their employees to obtain training. Some of these state government
and private sector respondents had established training requirements
for their financial managers. In addition, several organizations
noted that their programs were designed, in part, in recognition of
the training requirements that existed for holders of professional
certifications. For example, to keep a Certified Public Accountant
(CPA) certificate current, 46 of 50 states require individuals to
annually obtain at least 40 hours of technical training. Among state
government and private sector respondents, 31 percent and 29 percent,
respectively, reported having a professional certification (26
percent of the DOD respondents held at least one certification).\10
About a third (33 percent) of the state governments we surveyed had
specific financial management training requirements. Those states
with such requirements had, on average, 36 hours of training required
in 1996, including 26 hours in technical accounting training.
Similarly, about a third (35 percent) of the private sector companies
had specific financial management training requirements. Those
respondents had, on average, 31 total hours of required training in
1996, including 18 hours in technical accounting.
--------------------
\10 These certifications were primarily the CPA and Certified
Government Financial Manager (CGFM). Like the CPA requirement for
annual training, the CGFM has a continuing education and training
requirement of 80 hours every 2 years.
The CPA certification program has existed since 1917. State
organizations administer this program, awarding the certificate based
on the applicant's formal education, professional work experience,
and successful completion of a comprehensive examination developed by
the American Institute of Certified Public Accountants.
The CGFM program was initiated by the Association of Government
Accountants in July 1994. Until June 30, 1996, the certificate was
awarded based on an evaluation of an applicant's formal education and
professional work experience in government financial management.
Future certifications will require, in addition, the successful
completion of three comprehensive examinations covering (1) the
governmental environment, (2) governmental accounting, financial
reporting, and budgeting, and (3) governmental financial management
and control.
TRAINING WAS A FOCUS OF EFFORTS
TO ENHANCE AUDIT AND
ACQUISITION WORKFORCE
PROFESSIONALISM
------------------------------------------------------------ Letter :4
In order to equip employees to deal with rapidly changing management
and business practices and requirements, the government has put in
place specific training requirements intended to enhance the
professionalism of other disciplines. For example, government
auditors, including those at DOD, are subject to Government Auditing
Standards, which require all audit organizations to have a program to
ensure that their personnel maintain professional proficiency through
continuing education and training. Under these requirements, each
auditor responsible for planning, directing, conducting, or reporting
on audits must complete, every 2 years, at least 80 hours of
continuing education and technical training in subjects that
contribute to the auditor's professional proficiency.
Similarly, DOD's acquisition community is instituting a continuous
learning policy to enhance the existing certification program for the
department's acquisition workforce. The challenge facing DOD's
acquisition community is similar to that facing its financial
management personnel. For example, in justifying changes in the
training provided to DOD's acquisition workforce, the Under Secretary
of Defense (Acquisition & Technology) stated that
"DOD's acquisition specialists . . . are challenged today as
never before by the rapidly changing environment in which they
must function. The pace of efforts to reform basic acquisition
systems, reengineer federal operations, and replace traditional
management structures with teams and matrixed organizations,
coupled with downsizing and the information technology
revolution, has resulted in continuously evolving work
environments and requirements. To meet performance expectations
in such environments, acquisition personnel must be current with
reforms and trends, adaptable, flexible, and willing to learn
new skills."
In response to the Defense Acquisition Workforce Improvement Act of
1991, DOD is implementing a new policy requiring acquisition
professionals to participate in continuous learning activities that
enhance and supplement the minimum standards for their career fields
and specific acquisition assignments. The intent of this initiative
was to help ensure that DOD's acquisition workforce maintains
currency in acquisition reforms and disciplinary and functional
specialties, while developing multifunctional technical and
leadership skills. Under this program, personnel must earn the
equivalent of a minimum of 80 continuing professional education hours
every 2 years by participating in a variety of activities, including
functional, technical, or leadership training; academic course work;
experiential and developmental assignments; and professional
activities related to their functional areas. In meeting the
requirements for this program, emphasis is to be placed on
maintaining currency in acquisition functional areas, acquisition
reform subjects, other emerging acquisition policy areas, and the
individual's own basic discipline or technical field.
EFFORTS UNDERWAY BY DOD TO
IMPROVE ITS FINANCIAL
MANAGEMENT WORKFORCE
------------------------------------------------------------ Letter :5
The Secretary of Defense recently recognized the importance of
upgrading training for the civilian workforce across all disciplines
in DOD. In his 1997 "Defense Reform Initiative: The Business
Strategy for Defense in the 21st Century," Secretary of Defense Cohen
stated that DOD considers itself to be a world-class organization
despite rendering second-rate education, training, and professional
development to its civilian employees. He added that among the
lessons learned from corporate America is that every successful
organization finds its people to be its most important asset, and
reflects their importance in a strong, corporate-sponsored program of
continuous training and professional development. He also stated
that DOD must aspire to world-class educational standards.
The Secretary stated that the department will establish a Chancellor
for Education and Professional Development. The Chancellor will be
responsible for developing and administering a coordinated program of
civilian professional education and training throughout the
department; establishing standards for academic quality; eliminating
duplicative or unnecessary programs and curriculum development
efforts; and ensuring that DOD education and training responds to
valid needs, competency requirements, and career development
patterns. He added that the Chancellor will be responsible for
operating through a consortium of DOD institutions offering programs
of professional development, which is similar to the approach in the
defense acquisition area.
Under the Secretary's recent reform initiative, the DOD Chancellor
for Education and Professional Development will have overall
responsibility for overseeing training of all DOD civilian personnel.
Under the CFO Act and related OMB guidance, agency CFOs are to
"direct, manage, and provide policy guidance and oversight of agency
financial management personnel
. . . including . . . the recruitment, selection, and training
of personnel to carry out agency financial management functions . .
." and should have the authority to provide agencywide policy advice
on the training of all financial management personnel to ensure a
cadre of qualified financial management professionals throughout the
agency. In line with this mandate, the DOD CFO would be the focal
point to coordinate with the DOD Chancellor for Education and
Professional Development on training needs for DOD's large network of
financial personnel (both civilian and military personnel). Although
DOD has not yet established a coordinated agencywide training program
for its financial management personnel, there are a number of
initiatives planned or underway throughout DOD that are intended to
enhance the professionalism of the financial management workforce.
For example, DFAS officials informed us that beginning with fiscal
year 1997 they have centralized control over training funds at DFAS
headquarters and have allocated 3 percent of its budget\11 for
training its financial management staff--an amount within the range
of that spent for training reported by state government and private
sector respondents. It is particularly encouraging that DFAS is
currently finalizing a Financial Management Career Development Plan
for its employees that outlines areas of needed expertise by
occupational series.
DFAS plans to implement this "comprehensive framework to establish
flexibility, development, and advancement of the DFAS workforce"
during fiscal year 1998. The plan calls for job series-specific
competencies and recognizes that these competencies may be obtained
through a combination of education, training, and work
experiences.\12 According to DFAS, a number of sources were
considered in developing these competencies, including prior studies
by JFMIP and the Office of Personnel Management. In addition,
according to a DFAS training official, DFAS contracted with the
Office of Personnel Management to obtain assistance in developing the
overall career development concept and in obtaining data on core
competencies related to DFAS job functions. Within the plan, DFAS
recognized the value of professional certifications to workers as a
means of achieving expertise and excellence in their fields and as a
means of encouraging employees to continue their education and hone
their professional skills.
The plan represents a good start--it demonstrates a growing DFAS
understanding of the importance of and commitment to training. But,
the plan could be improved in several critical areas. For example,
the plan does not specifically address
-- minimum annual training requirements, including a recognition
that the majority of the training must be in technical
accounting or other related financial management areas;
-- the key competencies associated with knowledge of accounting
concepts, such as the statements of federal accounting
standards, and JFMIP's systems requirements;
-- how the general courses/subject areas will be linked to specific
training courses that can be used to attain an identified
competency; and
-- how the competencies and developmental activities identified
will be applied to both new hires and individuals currently
on-board by job series and grade level.
Financial management personnel in the military services will not be
subject to the DFAS plan; although, according to DFAS training
officials, DFAS financial management courses will eventually be
available to financial management personnel in the military services.
In addition, officials from each military service told us that they
have or are developing their own individual programs for their
respective financial managers. The military services' efforts to
improve the skills of their financial management personnel include
(1) an Air Force professional development guide for its financial
management and comptroller officers, which provides information on
career broadening, formal training, and professional development, (2)
an Army initiative intended to improve its personnel capabilities
with respect to information technology, workforce effectiveness,
financial management tools, funds management, and resource
management, and (3) a Navy effort to revise its training program for
its civilian financial management workforce to address financial
management competencies. However, according to military service
officials, these planned or ongoing initiatives to enhance the
military services' financial management personnel do not yet include
requirements for a structured, formalized training program with an
annual training requirement for financial managers or for
consideration of professional certifications as a means of ensuring
continual training.
However well-intentioned the DFAS and military plans for upgrading
their key financial management personnel, they do not provide the
departmentwide perspective called for by the Secretary's reform
initiative or in the CFO Act. The department has not yet named a
Chancellor for Education and Professional Development. Such
departmentwide focus and accountability for overseeing the
development and implementation of a comprehensive training program
for DOD's financial personnel, along with personnel in other
disciplines, is critical if DOD is to avoid potential duplication and
ensure proper coordination among all training and professional
development programs.
--------------------
\11 The allocated amount equals 3 percent of the salaries and
benefits for financial management staff.
\12 The financial management series included in the plan are GS-510
accounting, GS-511 auditing, GS-501 financial administration and
program, and GS-560 budget analysis. Other series-specific groupings
are administrative financial management support, information
management technology, human resources management, professional
management support, administrative support, legal, and contracting.
CONCLUSIONS
------------------------------------------------------------ Letter :6
We are encouraged by the recognition of the importance of training
for civilian personnel across all professional disciplines in the
department and for DOD's financial community, in particular. Various
DOD organizations have initiatives planned or underway that are
intended to enhance their financial management training programs.
When appointed, the DOD Chancellor for Education and Professional
Development must work closely with the DOD CFO, as the designated
focal point under the CFO Act for the department's financial
personnel and associated financial training, to ensure the
implementation of a comprehensive, coordinated training program for
financial management personnel throughout the department. By
building into these efforts the lessons learned from state government
and private sector entities' experiences, DOD can better move toward
developing and maintaining a well-trained, experienced, and
innovative cadre of financial managers. Such a well-trained cadre
will be necessary if the department is to address its decades-old
legacy of deeply entrenched, serious financial weaknesses.
RECOMMENDATIONS
------------------------------------------------------------ Letter :7
We recommend that the Secretary of Defense ensure that the Under
Secretary of Defense (Comptroller) and the Director of DFAS modify
the DFAS Financial Management Career Development Plan to include the
following.
-- Minimum annual training requirements, the majority of which
should be in technical accounting or related financial
management training courses.
-- Key competencies associated with knowledge of accounting
concepts, such as the Statements of Federal Financial Accounting
Standards, and JFMIP's systems requirements for all DOD
financial management job series.
-- A specific curriculum that provides a linkage between general
courses and/or subject areas to specific training courses that
can be used to attain an identified competency.
-- Procedures to ensure that both new hires and current financial
management staff attain relevant competencies.
In addition, we recommend that the Secretary of Defense ensure that
the Under Secretary of Defense (Comptroller) develop and implement a
formalized, structured training program for financial management
personnel throughout the department that takes into account the DFAS
Financial Management Career Development Plan and those initiatives
that are either underway or planned in the military services. This
program should be developed in conjunction with the DOD Chancellor
for Education and Professional Development.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :8
In written comments on a draft of this report, DOD agreed with the
general conclusion presented in the report regarding providing a
strong emphasis on training as a means of upgrading workforce
knowledge of current financial management, accounting, and reporting
requirements. However, DOD did not fully agree with our
recommendations regarding minimum annual training requirements and a
formalized, structured training program for financial management
personnel throughout DOD.
In regard to our first recommendation that the DFAS Financial
Management Career Development Plan be modified to include minimum
annual training requirements, DOD suggested that requirements be
changed to goals. In support of this modification, DOD stated that
factors such as a lack of training funds can impede an employee's
ability to attain all required training within a specified period.
We continue to recommend that minimum training requirements be
established. Given the poor training record of DOD financial
managers in the past--as we reported, 53 percent of our survey
respondents had received no accounting or financial training over a
2-year period--and the range of new accounting and systems issues to
be mastered, it is imperative that training requirements be
established as soon as possible. Without stated minimum requirements
and the strong commitment to training that they would represent, it
is unlikely that the objectives of DFAS' Career Development Plan will
be achieved. Furthermore, if the department is committed to
providing training and enhancing the quality of its financial
management workforce, adequate funding will be made available for
training.
DOD also stated that tracking achievement of required training would
be extremely difficult to implement. We disagree with DOD's
position. Some level of tracking is obviously necessary to monitor
staff progress in meeting the requirements; however, developing and
implementing a tracking system need not be a difficult task. For
example, in the acquisition community, the planned tracking is the
responsibility of the approximately 100,000 acquisition employees and
their supervisors. Central management oversight tracking is being
planned at the component level (about 50 components throughout DOD
have acquisition personnel), not at the individual level. For DOD
Inspector General audit staff, fulfillment of training requirements
is monitored centrally and periodic reports are provided to staff and
supervisors which show the status of training received at that point
in the 2-year period.
Also, although DOD's response refers to the difficulty in levying
penalties for employees not meeting annual training requirements, our
recommendation does not call for DOD to levy penalties. The overall
purpose of these recommended requirements is not to penalize staff or
to create an adversarial relationship between the employee, the
supervisor, and the organization, as DOD's response implies. Rather,
the purpose is to ensure that as many financial managers as possible
are provided the up-to-date, technical training they need to carry
out their responsibilities. Other functions that currently offer a
continuous learning environment do not seek to penalize staff. For
example, the DOD Inspector General's office requires its audit staff
to complete 80 hours of training over a 2-year period. A grace
period of 2 months is provided for staff to complete this requirement
if training has not been completed at the end of the 2-year cycle.
In the acquisition community, the plans allow for waivers to be
granted if a staff member is unable to meet the stated standard after
an initial 3-month grace period. The waivers can be extended for an
additional 2 years, if specified conditions are met.
In addition, DOD's response states that it may not be feasible or
beneficial to specify training requirements for all financial
managers at all levels. The DFAS plan, which our recommendation
addresses, specifies those financial management job series and grade
levels that are covered by the plan. The job series are Accounting
(GS-510), Auditing (GS-511), Budget Analysis (GS-560), and Financial
Administration and Program (GS-501). The grade levels are GS-7
through Senior Executive. The plan states that, as of July 1996,
these job series and grade levels include nearly 5,500 positions at
DFAS. These and comparable military positions are generally the same
as the key financial managers included in our surveys, which we
identified in conjunction with DOD.
Further, DOD did not fully agree with our recommendation that the
Under Secretary of Defense (Comptroller) develop and implement a
formalized, structured training program for financial management
personnel throughout the department in conjunction with the DOD
Chancellor for Education and Professional Development. Rather, DOD
stated that DFAS will be charged with developing a generic plan that
can be used as a model, but that individual organizations should be
allowed flexibility in implementing the career management plans.
While it is appropriate for DFAS to develop a model or baseline plan
for DOD's financial management staff, the role of the Under Secretary
of Defense (Comptroller) is critical in both the development and
implementation of formalized, structured training programs for
financial management personnel throughout the department. Although
individual organizations may have to tailor such programs for the
specific needs of their staffs, the oversight of the Comptroller is
crucial to ensure that such training is consistent and as current as
possible throughout the department. Moreover, as stated in the
report, the CFO Act specifically charges agency CFOs with
responsibility for overseeing the training of personnel to carry out
agency financial management functions.
In addition, regarding our recommendation that these training
programs be developed in conjunction with the DOD Chancellor for
Education and Professional Development, the Chancellor would not be
able to carry out the responsibilities defined in the Secretary of
Defense's 1997 Defense Reform Initiative if he or she were not
involved in the coordination and administration of the training of
DOD's financial managers.
---------------------------------------------------------- Letter :8.1
This report contains recommendations to you. The head of a federal
agency is required by 31 U.S.C. 720 to submit a written statement on
actions taken on these recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform and
Oversight within 60 days of the date of this report. You must also
send a written statement to the House and Senate Committees on
Appropriations with the agency's first request for appropriations
made over 60 days after the date of this report.
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Governmental Affairs; the
House Committee on Government Reform and Oversight and its
Subcommittee on Government Management, Information, and Technology;
and the Director of the Office of Management and Budget. We are also
sending copies to the Director of the Defense Finance and Accounting
Service; the Assistant Secretaries of the Air Force, Army, and Navy
(Financial Management and Comptroller); and to the Under Secretary of
Defense (Comptroller). Copies will also be made available to others
upon request.
If you have any questions about this report, please contact me at
(202) 512-9095. Major contributors to this report are listed in
appendix IV.
Sincerely yours,
Lisa G. Jacobson
Director, Defense Audits
SCOPE AND METHODOLOGY
=========================================================== Appendix I
In developing the information for this report, we drew upon the data
gathered and summarized in each of the individual reports on the
qualifications of financial managers in the Office of the DOD
Comptroller, the Air Force, the Army, the Navy, and DFAS. We also
drew upon the information gathered from our audit of the state
governments and private sector companies that may be useful to DOD in
assessing changes needed to enhance its financial management
workforce. The audit work for these six GAO audits was performed in
accordance with generally accepted government auditing standards from
June 1996 through March 1998. To supplement the earlier reports, we
obtained information from each service and DFAS about their plans to
augment or improve the qualifications of their financial management
personnel. We also reviewed prior audit reports from GAO and the DOD
Inspector General. We requested written comments on a draft of this
report from the Secretary of Defense or his designee. The Under
Secretary of Defense (Comptroller) provided us with written comments.
These comments are reprinted in appendix III and are discussed in the
"Agency Comments and Our Evaluation" section.
Our recent reports covering DOD, the military services, and DFAS
focused on those military and civilian personnel that fill key
financial management positions. DOD and military service officials
helped us identify 1,409 key financial management positions to be
included in the surveys out of approximately 32,000 financial
management positions throughout DOD. The positions surveyed most
often included comptrollers, deputy comptrollers,\1 and budget
officers from the military services and accounting and finance
managers from DFAS. Individually prepared responses were received
from 884 (63 percent) of those surveyed. Table I.1 shows the
breakdown, by agency, of the population of financial managers and of
the respondents included in the surveys.\2
Table I.1
Distribution of Population Survey and
Respondents by Organization
Response
rate
Organization Population Respondents (percent)
---------------------------- ------------ ------------ ------------
DOD Comptroller 21 19 90
Air Force 204 173 85
Army 301 233 77
Navy 306 194 63
DFAS 577 265 46
======================================================================
Total 1,409 884 63
----------------------------------------------------------------------
For state governments and Fortune 100 companies, we requested
information on the qualifications of key financial management
personnel from organizations closest in size and complexity to
federal agencies. These organizations included the 25 largest state
governments (based on revenues received in 1993, which was the latest
available information at the time of the survey) and the 100 largest
private corporations in the United States (based on 1995 revenues as
reported in the April 29, 1996, issue of Fortune, which was the
latest available issue at the time of the survey), commonly referred
to as the "Fortune 100."
For the state governments, surveys were sent to the 25 state
CFO/Comptroller offices. The 1993 revenues of the state governments
responding to our survey ranged from $10.8 billion to $108.2 billion.
Responses were received from 19 states, including 18 state
comptroller offices (or their equivalent) and 67 operational
departments within 19 of the surveyed states (one state comptroller
office did not respond although one of its departments did respond).
The responses, which represented 1,127 state government financial
managers, were prepared and submitted by the various state government
offices.
For the Fortune 100 companies, surveys were sent to the
CFO/Comptroller offices. The responding companies represented nearly
all major industry groupings. The 1995 revenues of the private
sector respondents ranged from $12.7 billion to $79.6 billion.
Responses were received from 34 Fortune 100 companies and from 54
divisions or subsidiaries of these companies. The responses, which
represented 3,450 private sector financial managers, were prepared
and submitted by the various corporate offices.
--------------------
\1 The Army uses the titles resource manager and deputy resource
manager, respectively.
\2 The population does not include all financial managers, such as
those in the various defense agencies.
FEDERAL FINANCIAL ACCOUNTING
STANDARDS
========================================================== Appendix II
Number Title Issue date Effective date
-------- ---------------------- ---------------------- ----------------------
1 Accounting for March 30, 1993 For fiscal years
Selected Assets and ending September 30,
Liabilities 1994, and thereafter
2 Accounting for Direct August 23, 1993 For fiscal years
Loans and Loan ending September 30,
Guarantees 1994, and thereafter
3 Accounting for October 27, 1993 For fiscal years
Inventory and Related ending September 30,
Property 1994, and thereafter
4 Managerial Cost July 31, 1995 For fiscal years
Accounting beginning after
September 30, 1997
5 Accounting for December 20, 1995 For fiscal years
Liabilities of the beginning after
Federal Government September 30, 1996
6 Accounting for November 30, 1995 For fiscal years
Property, Plant, and beginning after
Equipment September 30, 1997
7 Accounting for Revenue May 10, 1996 For fiscal years
and Other Financing beginning after
Sources and Concepts September 30, 1997
for Reconciling
Budgetary and
Financial Accounting
8 Supplementary June 11, 1996, adopted For fiscal years
Stewardship Reporting by the principals beginning after
September 30, 1997\a
--------------------------------------------------------------------------------
\a Except for the consolidated financial report of the federal
government.
(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II
(See figure in printed edition.)
(See figure in printed edition.)
The following is GAO's comment on the Department of Defense's letter
dated June 16, 1998.
GAO COMMENT
1. Discussed in the "Agency Comments and Our Evaluation" section of
the report.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
George H. Stalcup, Associate Director
Geoffrey B. Frank, Assistant Director
Robert L. Self, Project Manager
Galen L. Goss, Auditor-in-Charge
Dennis B. Fauber, Senior Evaluator
Patricia A. Summers, Senior Auditor
Francine M. DelVecchio, Communications Analyst
DENVER FIELD OFFICE
Glenn D. Slocum, Senior Evaluator
*** End of document. ***