< Previous page
Next page >

"Their systems can't keep track of who they've sold stuff to, who owes them, who they owe," he said.

Another factor that has evolved over the decades is a decentralized system that records the same part with a multitude of different multi-character codes, and difficulties ensue with any cross-service transaction because their ordering codes differ as well.

"The Navy has a set [of codes], the Army has a set, the Air Force has a set," Minnery said. "They don't have the same number of digits, and they can't match each other."

Not a new challenge

The department has been unwieldy for decades. In 1960, President-elect Kennedy decided he needed to tap a financial "whiz kid" from Ford Motor Co., Robert S. McNamara, as defense secretary.

Goals of getting the Pentagon's financial house in order have evaded both Republican and Democratic administrations.

"No one has proven themselves strong enough to tackle it," said Danielle Brian, executive director of the Project on Government Oversight, a watchdog group.

The GAO began classifying some government agencies as "high risk" in 1990, and DOD's supply chain and weapon systems acquisitions have remained on the list ever since. Six additional defense divisions were on the risky list as of 2005.

"Nothing's gotten better," Brian said. "It keeps getting worse."

The consequences have been well-documented in a relentless stream of damning reports by the GAO. Ineffective accounting systems have lost track of planes and tanks, left wounded soldiers without pay and stranded troops without everything from meals and water to tires and generators.

The current administration recognized the real-world costs early.

In a speech he gave Sept. 10, 2001, Defense Secretary Donald Rumsfeld called the arcane accounting systems and bureaucracy one of the biggest threats to national security.

"It is not, in the end, about business practices, nor is the goal to improve figures on the bottom line," Rumsfeld said. "It's really about the security of the United States of America. And let there be no mistake, it is a matter of life and death."

Trying to improve

The Defense Department has spent hundreds of millions of dollars on new business systems and consultants to try to fix the problems. The latest effort is going well because the managers are doing a better job of showing staff how improvements can help troops, said Paul Brinkley, deputy undersecretary of defense for business transformation.

"By making the business process support the war-fighter more efficiently, we are seeing a significant amount of momentum," Brinkley said.

Despite good intentions, there has been little quantifiable progress. For example, two automation systems meant to resolve disbursement problems cost the government $179 million but failed, the GAO said.

The department had gotten a "clean opinion" on only 16 percent of its assets and 49 percent of its liabilities as of June, Modly told lawmakers.

Modly said in an interview that the Defense Department now hopes to settle the balance sheet on 47 percent of assets and 49 percent of liabilities by 2007, which until recently was its self-imposed goal for getting a clean audit for the whole department.

With President Bush's release last week of his 2007 budget request -- military spending was pegged to grow 7 percent in the otherwise austere $2.77 trillion budget -- the department is likely to come under closer scrutiny to prove that it isn't just throwing good money after bad. Its auditing budget was slashed by more than $100 million in the 2006 appropriations bill signed by Bush in January.

< Previous page
Next page >