United States General Accounting Office

GAO Report to the Secretary of Defense

June 1998 FINANCIAL

MANAGEMENT

Training of DOD

Financial Managers

Could Be Enhanced

GAO/AIMD-98-126

GAO United States

General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

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.

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).

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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.

Results in Brief 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.

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).

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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.

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Background 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

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

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).

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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.

Personnel Experience and

Competencies Contribute

to Continuing Problems

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 report6

 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

6

CFO Act Financial Audits: Increased Attention Must Be Given to Preparing Navy’s Financial Reports

(GAO/AIMD-96-7, March 27, 1996).

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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.

Recent Legislative

Initiatives and Enhanced

Accounting Standards

Increase Challenge

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

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).

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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.

Well-Trained

Personnel Are Critical

to Effective Financial

Management

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

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.

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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

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: accounting,

finance, and general (see note) 41

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

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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.

Training Was a Focus

of Efforts to Enhance

Audit and Acquisition

Workforce

Professionalism

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

10These 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.

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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

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

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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 budget11 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.

11The allocated amount equals 3 percent of the salaries and benefits for financial management staff.

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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

12The 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.

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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.

Conclusions 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

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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 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

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

Page 14 GAO/AIMD-98-126 Training of DOD Financial Managers
B-279753 

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

Page 15 GAO/AIMD-98-126 Training of DOD Financial Managers
B-279753 

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

Page 16 GAO/AIMD-98-126 Training of DOD Financial Managers
B-279753 

Reform Initiative if he or she were not involved in the coordination and

administration of the training of DOD’s financial managers.

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

Page 17 GAO/AIMD-98-126 Training of DOD Financial Managers
Contents

Letter 1

Appendix I 

Scope and

Methodology

20

Appendix II 

Federal Financial

Accounting Standards

22

Appendix III 

Comments From the

Department of

Defense

23

Appendix IV 

Major Contributors to

This Report

27

Tables Table 1: Training Reported by DOD Financial Managers as Being

Completed During 1995 and 1996

8

Table I.1: Distribution of Population Survey and Respondents by

Organization

20

Abbreviations

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

Page 18 GAO/AIMD-98-126 Training of DOD Financial Managers
Page 19 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix I 

Scope and Methodology

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 Organization Population Respondents

Response rate

(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

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.

Page 20 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix I 

Scope and Methodology

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.

Page 21 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix II 

Federal Financial Accounting Standards

Number Title Issue date Effective date

1 Accounting for Selected Assets and

Liabilities

March 30, 1993 For fiscal years ending September 30,

1994, and thereafter

2 Accounting for Direct Loans and Loan

Guarantees

August 23, 1993 For fiscal years ending September 30,

1994, and thereafter

3 Accounting for Inventory and Related

Property

October 27, 1993 For fiscal years ending September 30,

1994, and thereafter

4 Managerial Cost Accounting July 31, 1995 For fiscal years beginning after

September 30, 1997

5 Accounting for Liabilities of the

Federal Government

December 20, 1995 For fiscal years beginning after

September 30, 1996

6 Accounting for Property, Plant, and

Equipment

November 30, 1995 For fiscal years beginning after

September 30, 1997

7 Accounting for Revenue and Other

Financing Sources and Concepts for

Reconciling Budgetary and Financial

Accounting

May 10, 1996 For fiscal years beginning after

September 30, 1997

8 Supplementary Stewardship Reporting June 11, 1996, adopted by the

principals

For fiscal years beginning after

September 30, 1997a

aExcept for the consolidated financial report of the federal government.

Page 22 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix III 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 23 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix III 

Comments From the Department of Defense

See comment 1.

Page 24 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix III 

Comments From the Department of Defense

See comment 1.

Page 25 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix III 

Comments From the Department of Defense

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.

Page 26 GAO/AIMD-98-126 Training of DOD Financial Managers
Appendix IV 

Major Contributors to This Report

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

(918933) Page 27 GAO/AIMD-98-126 Training of DOD Financial Managers
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