Pentagon IT accounting 'inaccuracies' total $1.6 billion

The U.S. General Accounting Office said Monday that sloppy accounting practices by the U.S. Department of Defense led to a US$1.6 billion discrepancy between two key IT budget reports for fiscal year 2004. The GAO said in its report that there were "material inconsistencies, inaccuracies or omissions" that tainted the reliability of the Pentagon's IT accounting practices.

The Defense Department's fiscal year 2004 IT budget summary request and its detailed capital investment report were inconsistent, according to the GAO report. The GAO said that 15 initiatives that are in the Pentagon's budget summary aren't included its capital investment reports "and discrepancies exist between the two types of reports in the amounts requested for 73 major initiatives."

All told, the discrepancies add up to about 6 percent or US$1.6 billion of the department's $28 billion budget request for fiscal year 2004.

Officials at the Defense Department could not be reached for comment this afternoon.

Topping the list of projects with budgets out of whack was the Navy Marine Corps Intranet program, which is designed to connect as many as 310,000 Navy and Marine Corps IT users once it is in place. The GAO said about 95 percent of the total dollar difference between IT budget requests from the Navy -- $581 million -- could be attributed to the intranet initiative. That project is expected to cost the Navy $6.9 billion.

"That's a whopping error," said John Gantz, an analyst at AMR Research. "You wouldn't expect an error bigger than 5 percent."

Yet Gantz said he wasn't surprised with the findings of the GAO report, saying the Defense Department is known for poor accounting practices, which he attributed mainly to poor management and accounting procedures. He suggested that a "Sarbanes-Oxley Act" for the government similar to the one for the private sector "would shape it all up pretty quickly."

The GAO attributed the budget discrepancies to what it called "insufficient management attention" as well as "ambiguities" in the Defense Department's internal regulatory processes, including those for ensuring consistency between reports.

The report noted a $362 million discrepancy in Air Force budget requests and a $55 million discrepancy in Army requests. Several other organizations within the department, including the Office of the Secretary of Defense, accounted for another $618 million that could not be accounted for.

The GAO also found discrepancies for other initiatives, including the following:

-- The Global Command and Control System, a program intended to provide the information resources that military personnel need to to accomplish their command-and-control missions.

-- Defense Information System Network, a communications infrastructure initiative intended to connect the Defense Department's mission support and armed forces using a combination of government and private infrastructure.

-- Defense Integrated Military Human Resources System, a system expected to integrate personnel and compensation functions for all military services.

The GAO recommended that the secretary of defense establish policies, procedures and supporting systems to avoid repeating the problems it found in the department's budget request. "This is particularly important because the (department) spends more on IT annually than any other department or agency, accounting for about half of the roughly $59 billion government-wide IT budget in fiscal year 2004," the report said.

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