JIEDDO was created by the Deputy Secretary of Defense in January 2006 and is responsible for leading, advocating, and coordinating all DOD efforts to defeat IEDs. Prior DOD efforts to defeat IEDs included various process teams and task forces. For example, DOD established the Joint IED Defeat Task Force in June 2005 for which the Army provided primary administrative support. This task force replaced the Army IED Task Force, the Joint IED Task Force, and the Under Secretary of Defense, Force Protection Working Group. To focus all of DOD’s efforts and minimize duplication, DOD published new IED policy in February 2006 through DOD Directive 2000.19E, which changed the name of the Joint IED Defeat Task Force to JIEDDO and established it as a joint entity and jointly manned organization within DOD, reporting to the Deputy Secretary of Defense. The directive states that JIEDDO shall “focus (lead, advocate, and coordinate) all Department of Defense actions in support of the Combatant Commanders’ and their respective Joint Task Forces’ efforts to defeat Improvised Explosive Devices as weapons of strategic influence.” The organization is directed to identify, assess, and fund initiatives that provide specific counter-IED solutions, and is granted the authority to approve joint IED defeat initiatives valued up to $25 million and make recommendations to the Deputy Secretary of Defense for initiatives valued over $25 million. Under the directive, the Army remains the organization’s executive agent and is responsible for providing primary administrative support to JIEDDO. JIEDDO’s primary role is to provide funding to the military services and DOD agencies to rapidly develop and field counter-IED solutions. Prior to fiscal year 2007, JIEDDO did this by working with the DOD Comptroller to transfer its appropriated funds into a standard DOD appropriation account, such as one for procurement or one for research, development, testing, and evaluation. JIEDDO would then send these transferred funds to the military service that is designated to sponsor the initiatives using a Military Interdepartmental Purchase Request (MIPR). Beginning in fiscal year 2007, Congress provided JIEDDO with its own separate direct appropriation, but it still must transfer funds to the military services using a duly authorized and signed MIPR, which the Defense Federal Acquisition Regulation Supplement (DFARS) Subpart 208.7004 (Procedures, Guidance, and Information (PGI) 208.7004) states is the acquiring department’s authority for acquiring the goods or services on the requiring department’s behalf. DFARS PGI 208.7004 also states that the acquiring department, or military service, is then authorized to create obligations against the funding without further referral to the requiring department—JIEDDO— and that the military service has no responsibility to determine the validity of an approved MIPR. Therefore, after JIEDDO provides funding authority to the military service and the designated program manager for a specific initiative, the service program manager, not JIEDDO, is responsible for managing the initiatives for which JIEDDO has provided funds. JIEDDO’s efforts to counter the use of IEDs and subsequent funding for those efforts are organized according to three primary lines of operation: (1) attack the network that enables the use of IEDs, (2) defeat the IED itself once emplaced, and (3) train the military forces in counter-IED techniques. JIEDDO assigns all funds used to one of these lines of operation—or to a fourth line of operation called staff and infrastructure for miscellaneous expenditures not directly related to the three lines of operation. When JIEDDO undertakes any effort requiring funds, it assigns the funds for the effort to one of the lines of operations. JIEDDO further breaks down its expenditures into more detailed subsets, which it designates as initiatives, assigning a name and a unique number to track expenditures related to each initiative. JIEDDO manages and reports on all funds expended by line of operation and by initiative. Office of Management and Budget (OMB) Circular A-123 specifies that federal agencies have a fundamental responsibility to develop and maintain effective internal control that ensures the prevention or detection of significant weaknesses—that is, weaknesses that could adversely affect the agency’s ability to meet its objectives. According to OMB, the importance of management controls is addressed in many statutes and executive documents. A memorandum from the OMB Director to the heads of the executive departments accompanying OMB Circular A-123 as an attachment requires agencies and individual federal managers to take systematic and proactive measures to develop and implement appropriate, cost-effective internal controls for results-oriented management. FMFIA establishes the overall requirements with regard to internal control. Accordingly, an agency head must establish controls that reasonably ensure that (1) obligations and costs are in compliance with applicable law; (2) funds, property, and other assets are safeguarded against waste, loss, unauthorized use, or misappropriation; and (3) revenues and expenditures applicable to agency operations are properly recorded and accounted for to permit the preparation of accounts and reliable financial and statistical reports and to maintain accountability over the assets. Specific internal control standards underlying the internal controls concept in the federal government are promulgated by GAO and are referred to as the Green Book. In March 2007, the Senate Appropriations Committee directed JIEDDO to identify and track all civilian, military, and contractor personnel in the organization. In addition, DOD Directive 1100.4, “Guidance for Manpower Management,” provides that DOD components shall designate an individual with the authority to establish and maintain a manpower data system that accounts for all manpower resources, to include active military, DOD civilian, reserve component, contract, and host-nation support. The Senate Appropriations Committee, in its report on emergency supplemental appropriations, expressed concern over JIEDDO’s exponential personnel growth and ability to track this growth. The report stated that the committee has limited visibility into current staffing and future staffing requirements and is concerned that JIEDDO is not accounting for certain contractor support properly. As a result of these concerns, the committee directed JIEDDO to provide a report to the congressional defense committees on current staffing levels and future staffing requirements, broken down by function, contractor, civilian, military, and detailed from other agencies, and should include all contractor support that is provided through various contracts. The committee further directed JIEDDO to update this report whenever JIEDDO personnel authorizations change. In response to the committee’s direction, JIEDDO officials developed the JIEDDO Manning Description in May 2007 identifying and accounting for civilian, military, and contractor personnel working for JIEDDO. JIEDDO has made progress in improving its financial management processes but has not yet reached a point where its processes contain a system of internal control that ensures the accuracy of its financial data related to resources it has used in its operations. According to federal standards, internal control comprises the plans, methods, and procedures used to meet missions, goals, and objectives of an organization and help it to achieve desired results through effective stewardship of public resources. In addition, our prior work has stated the importance of organizations addressing internal control weaknesses. Otherwise, organizations may not achieve their objectives or may not use their resources to best advantage in achieving their objectives. Before beginning fiscal year 2007 operations, JIEDDO took several steps to improve its processes for managing and controlling its financial resources, and JIEDDO has been proactive in responding to financial management issues we raised during this audit by pursuing additional financial management process improvements. Nonetheless, JIEDDO is lacking an effective system of internal control that will provide adequate assurances of financial data accuracy and operations transparency. Although JIEDDO added changes toward the end of our review that are expected to address internal control weaknesses, their implementation occurred too late for us to determine their effectiveness. Nonetheless, in the absence of an adequate system of internal controls, inaccurate financial data and reports may negatively affect the internal and external decision-making process. JIEDDO has taken several steps to improve its financial management processes. JIEDDO’s actions are divided into (1) those taken in preparation for the beginning of fiscal year 2007 operations and (2) those taken to develop and continually improve on its operations. JIEDDO’s approach for fiscal year 2007 included three changes aimed at streamlining and reducing data processing and analysis. The first of these changes was that JIEDDO took direct control of accounting functions previously performed by Army activities in support of JIEDDO. This allowed JIEDDO to directly execute and oversee funds budgeted and made available to JIEDDO. Second, JIEDDO requested and received a separate appropriation exclusively for its efforts, without having to obtain approval for funds through other DOD funding streams. Third, JIEDDO developed a procedure for assigning distinct numbers to specific initiatives because some initiatives were referred to by more than one name. The assignment of numbers eliminated confusion over the name of the initiative and facilitated the automated transfer of data, which was not possible using only a descriptive name. JIEDDO’s more recent actions were taken as part of its efforts to fully establish its organizational framework as the organization evolves and to continually improve its processes. These actions include issuing an internal written instruction describing the roles and responsibilities of JIEDDO subdivisions in greater detail; developing internal controls imbedded in a new automated document management and storage system; and establishing a new internal control audit function to be staffed by three persons, reporting directly to the JIEDDO Director. While these actions could address JIEDDO’s internal control weaknesses, they have not yet been fully implemented and occurred too late for us to determine their effectiveness. JIEDDO does not have an effective internal control system in place to ensure that its financial data are accurate, and without such assurances, JIEDDO is unable to provide adequate transparency over the cost of its operations. The ability of JIEDDO to provide accurate financial information for internal and external decision makers depends on management accountability and an effective system of internal control. Consistent with federal standards, JIEDDO would need to adequately document its financial management processes and procedures, including related internal controls, and the internal control system would contain basic elements providing assurance that proper authorization is obtained before using funds and that once a transaction occurs it is accurately and promptly recorded. Furthermore, developing adequate oversight mechanisms within JIEDDO is a key factor in developing the conscientious control environment required by federal standards. However, although our review was not designed to identify all significant deficiencies in internal control, we identified four weak control areas at JIEDDO, which individually and collectively precluded adequate assurances of accuracy and usefulness of financial data produced by JIEDDO’s financial management operations. JIEDDO does not have (1) comprehensive documentation of its internal controls, (2) adequate funds authorization controls, (3) sufficient controls to ensure accurate categorization of transactions, and (4) an adequate process to monitor and review its internal control program. First, JIEDDO’s internal control processes related to its financial management are not adequately documented as required by government internal control standards. Specifically, JIEDDO has not developed management directives, administrative policies, or operating manuals that comprehensively describe how JIEDDO financial management personnel should perform their duties and the internal control activities designed to assure management that those duties are timely and accurately performed. As a result, we found inconsistent financial management control processes among JIEDDO staff and managers. For example, while DOD’s JIEDDO directive divides approval authority for JIEDDO initiatives between the Deputy Secretary of Defense—initiatives valued at greater than $25 million—and JIEDDO itself—initiatives valued up to $25 million, DOD did not adequately define in its directive the terms initiative or value with respect to which initiatives measure over or below $25 million. Not defining terms would affect interpretation for both those with approval authority and those making processing and authorization control decisions. As a result, when determining whether an initiative should be forwarded to the Deputy Secretary of Defense for approval—a key external authorization control—or whether the authority rests within JIEDDO itself because the value does not exceed $25 million, various JIEDDO officials and contractors provided us with varying descriptions for value determination (see table 1 for a listing of varying descriptions). However, any of these approaches could significantly change an initiative’s value calculations and consequently affect JIEDDO’s approval control decision process. In November 2007, JIEDDO issued an instruction that included further guidance on how to determine what constitutes an initiative for the purposes of requiring approval by the Deputy Secretary of Defense. However, this instruction has not yet been incorporated into financial management operating procedures to ensure that staff understand the definition and apply it consistently when processing transactions. According to JIEDDO officials, the instruction, while better documenting the initiative determination and approval processes, does not provide adequate detail to constitute sufficient standard operating procedures for the components of JIEDDO. JIEDDO officials added that they have planned to form internal teams in the upcoming months to develop the more detailed operating procedures JIEDDO components need to implement this instruction. Second, JIEDDO’s internal control system does not have adequate funds authorization controls to ensure that transactions are properly authorized before committing funds, which is a fundamental control activity required by government internal control standards. We reviewed 24 initiatives of which 18 had funding transactions totaling $795 million that were not authorized in accordance with the process that JIEDDO officials said should take place in advance of the commitment of funds on initiatives valued at greater than $25 million. JIEDDO officials stated that approval of the Deputy Secretary of Defense had to be obtained before funds could be committed on initiatives valued at greater than $25 million. Fourteen of the 18 initiatives received the required Deputy Secretary of Defense authorization after JIEDDO financial management personnel committed funds by approving the MIPR to transfer funds from JIEDDO to the external program manager for the initiative. For example, JIEDDO spent about $8 million in the first quarter of fiscal year 2007 for an initiative that it expected would, overall, require $57 million for that fiscal year. Since that overall amount exceeded the $25 million value determination that requires the approval of the Deputy Secretary of Defense, JIEDDO acted before obtaining required authorization. JIEDDO did obtain Deputy Secretary of Defense approval for this initiative, but it was approximately 3 months after JIEDDO had committed funds for this initiative. In another case, the financial management division initially refused to commit funds for one initiative exceeding $25 million until JIEDDO management obtained approval from the Deputy Secretary of Defense. However, JIEDDO management’s response was to request funds for only one quarter’s expenses, thus reducing the amount to under $25 million. According to documentation in the file, the financial management division then agreed to fund the amount and commit the funds, even though it was aware that total program costs exceeded $25 million for the fiscal year. Subsequently, JIEDDO’s legal advisor determined that the project was not an initiative because it was considered part of JIEDDO’s infrastructure costs and thus did not require approval by the Deputy Secretary of Defense. Nevertheless, although JIEDDO eventually decided approval was not required, the process for approving funds for this project demonstrates a breakdown in the internal control structure necessary to ensure proper authorization before funds are spent, since JIEDDO officials avoided obtaining approval even though they thought prior approval was required. Additionally, it is not clear whether 4 of the 18 initiatives were authorized prior to commitment of funds because authorization letters were not dated, making the time of authorization unverifiable. It is clear, however, that inconsistent with JIEDDO processes, officials within JIEDDO made several funding commitments prior to obtaining the approvals required by JIEDDO processes. This underscores that JIEDDO’s system of internal control allowed funds to be committed without the scrutiny of authorizing agents. Furthermore, the system did not detect, correct, or address this control failure. Third, JIEDDO internal controls do not ensure that its transactions are properly categorized, in spite of federal internal control standards requiring that accurate transaction recording be ensured by an entity’s internal control system. For example, JIEDDO used about $216 million on an initiative titled “CREW — USMC - Program Management Support (Contractor Salaries, Travel & Infrastructure),” recording the expenditure as management and professional support services. However, the $216 million actually funded the purchase of tangible equipment—IED jammers—and therefore should have been recorded as procurement of equipment instead. Overall, of the $1.34 billion in fiscal year 2007 commitments we reviewed, JIEDDO inaccurately recorded at least 83 percent of the dollars committed—involving 15 of the 24 initiatives we reviewed—as management and professional support services, when other categorizations should have been applied by JIEDDO financial managers. JIEDDO’s system of internal control also does not ensure that all transactions are accurately recorded in the proper JIEDDO lines of operation, and this could distort reported expenditures on these lines of operation. A key part of JIEDDO’s overall strategy to manage operations is to code various initiatives to reflect one of four JIEDDO lines of operation to track success in achieving the overall goal of increased effort to attack the IED network. According to officials, JIEDDO policy is to assign a single line-of-operation code to each initiative even when operations overlap, which may result in the reported funding for a given line of operation being inaccurate. For example, JIEDDO’s initiative involving the testing of counter-IED devices (constituting $92 million in fiscal year 2007 funds) was coded as an attack-the-network effort, when our analysis indicates that the initiative more accurately represents JIEDDO’s defeat- the-device line of operation. When originally established, JIEDDO coded its testing efforts as staff and infrastructure, which reflects general overhead incurred by JIEDDO, and reported the initiative as such in its second quarter congressional report. However, subsequently JIEDDO recoded the initiative and reported it as an attack-the-network initiative in its third quarter congressional report. We found four other instances of JIEDDO recoding initiatives in the attack-the-network line of operations that also affected the third quarter report. JIEDDO officials explained that the recoding was based on a JIEDDO decision to code or recode any nondirect overhead staff and infrastructure initiatives as attack-the- network initiatives. They did not have supporting documentation reflecting JIEDDO’s decision to recode. Documented directions would serve to track the rationale for how this line of operation was coded and recoded. The blanket assignment of direct overhead costs to the attack- the-network line of operation, along with reassigning lines of operation after initial recording affects JIEDDO’s ability to accurately determine trends in the use of funds in conjunction with its attack the network objective. Further, in the case of the testing operations, funding for attack the network is overstated because, according to JIEDDO officials, the majority of testing operations can be attributed to other lines of operation. Fourth, JIEDDO’s internal process to monitor and review the efficacy of its internal controls is inadequate. The first federal government internal control standard, relating to an entity’s control environment, includes having oversight mechanisms present within the agency as a key factor in accomplishing a conscientious control environment. However, JIEDDO appeared to lack adequate mechanisms to monitor and review its internal control program during the period of our audit. In a May 2007 internal control report that JIEDDO prepared for the annual DOD internal controls assurance statement, JIEDDO described its process for assessing its controls and, based on that assessment, stated that it was able to provide an unqualified statement of reasonable assurance that its system of internal controls met federal internal control objectives. However, we found several inaccurate statements in the report that were used as the basis for this conclusion, raising questions about the adequacy of JIEDDO’s process for assessing its internal control system and determining reasonable assurance. For example, the financial management section of the report cited four final audit reports from the Air Force Audit Agency, DOD Program Analysis and Evaluation, the DOD Inspector General, and GAO. According to JIEDDO, these reports said the organizations reviewed JIEDDO financial management for activity beginning in fiscal year 2004 and did not have findings or recommendations. However, two of the reports cited do not exist (those for the Air Force Audit Agency and DOD Program Analysis and Evaluation), and the DOD Inspector General report focused on assessing controls over the Army’s purchases from other government activities, not on JIEDDO’s internal control system. Further, that report concluded that the Army did not have adequate internal controls over purchases from governmental sources, which included one JIEDDO fiscal year 2006 expenditure, because the Army did not ensure that expenditures were properly initiated, prepared, executed, and monitored. Lastly, the GAO report cited is the predecessor to this review, and it concluded that JIEDDO’s lack of a strategic plan limits JIEDDO’s ability to properly align its resource use and management to achieve JIEDDO-wide goals. The report, however, did not provide any assessment of JIEDDO’s internal control system. Another question about the adequacy of JIEDDO’s internal control assessment process and related assurance report concerns JIEDDO’s statement that training of its staff has improved internal controls. However, some of the individuals who actually prepared feeder sections of the report had not received any training on internal controls or how to assess them. Further, some of these individuals are not familiar with the internal control standards and the structured internal control risk assessment. We did not assess JIEDDO’s stated basis for reasonable assurance of its internal control standards in its entirety because of the inaccuracies found relating to resource management and training sections of the report and because JIEDDO’s report did not identify the significant control weaknesses we found, such as JIEDDO’s noncompliance with authorization controls and inaccurate classification of expenditures. As evidenced by these four weaknesses, in the absence of an adequate system of internal control the objectives of the agency may not be fully achieved and its use of resources may not be fully consistent with DOD priorities. Furthermore, decision makers may be basing their decisions on inaccurate financial data and reports. JIEDDO officials stated that their efforts to develop an effective financial management program have been significantly challenged by turnover in key financial positions and difficulties hiring adequate numbers of staff. In discussing these internal control findings at the end of our fieldwork, JIEDDO managers said that they have taken several actions to address and correct these weaknesses, which we noted previously. JIEDDO believes that these actions have already improved the internal control weaknesses found; however, the changes are still in the early implementation stages, and as such, we have not been able to evaluate their effectiveness in improving JIEDDO’s internal control system. JIEDDO does not fully identify, track, and report all government and contractor personnel as provided for in DOD Directive 1100.4. Identifying all government and contractor personnel is important to JIEDDO’s management and oversight responsibilities and contributes to its ability to effectively plan for its future workforce needs. DOD Directive 1100.4 states that it is DOD policy that manpower requirements be established at the minimum levels necessary to accomplish mission and performance objectives. It follows that a manpower data system that accurately accounts for all personnel, to include contractors, enables manpower management that promotes efficient and effective use of manpower resources. While JIEDDO employs various DOD policies to manage civilian and military personnel, these policies do not include accurately accounting for all of its personnel, as described in DOD Directive 1100.4. According to JIEDDO personnel officials, JIEDDO applies existing DOD policies to address administrative issues, such as performance, pay, and leave. JIEDDO also refers to the Federal Acquisition Regulation that includes personnel policy and procedures that are specific to the acquisition and management of services by contract. Additionally, JIEDDO issues policy letters as needed to clarify personnel management issues. For example, JIEDDO issued policy letter #16A that directed the division chiefs to be aware of the number of hours all employees, including contractor personnel, were working, and directed all employees to report all hours worked and obtain approval for their schedules from their supervisors. Nonetheless, these approaches do not identify, track, and report all military, civilian, and contractor personnel. JIEDDO officials track civilian, military, and some contractor personnel on a daily basis to identify personnel currently staffed and determine positions remaining to be filled; however, this effort does not track all personnel performing work for JIEDDO. For example, JIEDDO does not include some or all of personnel in the following categories: contractors working as field service representatives, contractors engaged as interagency liaisons, contractors providing law enforcement training, contractors involved in JIEDDO’s interagency partnership team, civilians and contractors from JIEDDO’s Joint Test Board, and contractors maintaining infrastructure at the Counter-IED Operations Integration Center (COIC) facilities. Personnel officials said that these data are collected to identify changes in JIEDDO’s on-hand strength as personnel leave or are newly assigned and are not intended to be a comprehensive data collection. We reviewed JIEDDO’s daily report from October 9, 2007, which shows that JIEDDO had 321, including civilian, military, and some contractor personnel, out of 418 authorized positions. The Senate Appropriations Committee directed JIEDDO to provide a comprehensive report of all of its personnel by May 2007, and because JIEDDO does not have a comprehensive process to track all personnel, it relied on an ad hoc process to develop the report. The results identified a total of 1,466 personnel working for JIEDDO, as compared to the 321 personnel filling 418 positions routinely tracked by the organization in its daily snapshots. The figures in the report to Congress tripled the number of personnel overall and showed a ratio between contractor and government personnel of nearly 5 to 1 when compared with the figures in the daily snapshots. We were not assured of the accuracy of those figures in the congressional report given the lack of guidance or evidence of a process that would indicate reasonable accuracy in identifying and reporting all categories of government and contractor personnel. JIEDDO officials also said that the organization lacked procedures for identifying and tracking all of its personnel. When we reviewed the report, we discovered inaccuracies and inconsistencies in the data that led us to conclude that about 114 personnel had been omitted from the report: 25 civilian positions and about 30 contractor personnel with the Joint Test Board, all funded by JIEDDO since JIEDDO funds all of the board’s operations costs, including these positions, and 59 contractor personnel working as field service representatives who were not included for one initiative but were reported in JIEDDO’s funding documentation. In addition, we also found 67 personnel who were not reported in the body of the report but were reported in JIEDDO’s summary schedule of personnel, and 9 additional authorized intern positions that were included in the report but were not included in JIEDDO’s daily snapshots. When accounting for personnel, different divisions may have applied inconsistent criteria as they collected data for the May 2007 congressional report because JIEDDO officials did not provide formal guidance to the divisions on how to report some personnel. For example, JIEDDO officials said that they could not tell whether the 474 field service representatives reported reflected actual individuals or full-time equivalents, which could represent more than one individual. At the conclusion of our review, JIEDDO officials were still unable to clarify this issue. In addition to the fact that the figure could be higher or lower, JIEDDO officials further explained that the reported field service figure of 474 was inaccurate because JIEDDO subsequently determined that the number for one initiative included in the data contained a significant error. JIEDDO had no means to track and verify the accuracy of its figures presented in the May 2007 report because officials did not maintain adequate supporting documentation representing how they arrived at their figures. For example, when JIEDDO accounted for field service representatives, we asked JIEDDO officials for clarification on how they arrived at the number of contractors they reported. However, they could not explain adequately because they did not document the process and their recollections were admittedly incomplete. Without adequate supporting documentation, JIEDDO cannot provide assurance that the data it reports are accurate. Furthermore, with change of personnel, which is typical within JIEDDO, new personnel would have difficulty determining the accuracy of figures as well as what process to follow to prepare subsequent reports. Although JIEDDO has not routinely tracked all of its contractors, it has relied heavily on contractor support to accomplish its mission since its creation in February 2006. According to JIEDDO officials, this reliance on contractors was attributed to the lengthy and complex civilian hiring process, the inability of the military services to fill all of the services’ authorized positions, and the urgency of the organization’s mission. Contractors have performed a broad range of labor and services for JIEDDO. Examples of functions contractors have performed include evaluating initiative proposals from outside contractors, piloting unmanned aerial vehicles, managing a division’s efforts to develop useful metrics, conducting virtually all of the day-to-day management of the various functions at the COIC, and providing equipment maintenance and logistics support in theater for new initiatives. In addition to playing significant roles in accomplishing JIEDDO’s mission, contractors have also held critical positions within JIEDDO management and might have had a significant influence on its decision making. In the recent past, JIEDDO employed contractor personnel for positions the organization designated as inherently governmental. OMB defines an inherently governmental function as one involving the exercise of substantial discretion in applying government authority, making decisions for the government, or both. JIEDDO personnel documentation showed that the organization had staffed contract personnel in positions of key governmental responsibility, and officials stated that the organization is in the process of resolving this practice. In July 2007, JIEDDO officials began transitioning government personnel—primarily temporary military staff— into these positions that until recently were held by contractors. According to JIEDDO officials, the organization is moving toward filling these positions with permanent government personnel. JIEDDO officials said that they did not believe tracking all contractor personnel was necessary because they are not considered JIEDDO staff, and consequently, JIEDDO has not developed a comprehensive process to identify, track, and report all personnel in accordance with DOD policy. However, without a comprehensive process, JIEDDO is not in a position to readily provide accurate and reliable information to internal and external decision makers on its staffing levels. For example, when the Senate Appropriations Committee directed JIEDDO to identify and report on staffing levels of civilian, military, and contractor staff, JIEDDO officials used ad hoc data requests to divisions they receive information from in their daily reports and to activities that are not being captured by the current process in order to collect information on contractor personnel. Despite responding to the committee’s direction for a May 2007 report and its direction to update this report to reflect future personnel changes, JIEDDO officials have not developed a policy requiring the collection of data accounting for all categories of personnel or provided guidance for doing this accurately. Additionally, without a comprehensive process to track all government and contractor personnel, JIEDDO cannot be in a position to effectively plan for its future workforce needs. For example, according to a JIEDDO official, in the case of one initiative JIEDDO needed to compare unmanned aerial vehicle piloting alternatives, contracted versus in-house, and it was critical for JIEDDO to know the quantity of and functions of contractor staff employed under the existing contract. However, because JIEDDO’s manpower management system does not routinely capture contractor staff information, it would have been difficult for JIEDDO to determine whether to continue the contract without finding an alternative source for this information. For this initiative, JIEDDO was able to obtain the information needed through detailed contract information that happened to be available. However, according to the JIEDDO official, these details are not always routinely available, depending on the type and terms of the contract. Our prior work also highlights the importance of accounting for and providing effective oversight of contractors. A recent report concerning the management and oversight of contractor support for deployed forces addresses the issue of limited visibility over the number of contractors deployed with U.S. forces and potential problems with planning for security and logistics needs if the numbers of contractors are not known to military commanders in theater. JIEDDO deploys contractor personnel in the theater to assist with counter-IED solutions. JIEDDO does not track the number of contractors it employs, and yet its May 2007 report indicates that the number can significantly affect how JIEDDO uses its resources and plans for future needs. As IEDs continue to pose a significant threat to U.S. forces in Iraq and Afghanistan, defeating the threat continues to be a high defense priority. This likely will require a continued significant investment in resources, both financial and human capital. The volume of resources required, coupled with the scale and span of JIEDDO’s mission to focus all DOD counter-IED efforts, creates a challenge to achieving efficient and best use of funding made available to JIEDDO. However, DOD and JIEDDO cannot adequately manage JIEDDO’s financial and human capital resources if it does not have an effective system of internal control to provide reliable data and insight into how these resources are invested, and external parties cannot be assured that the information JIEDDO reports is reasonably accurate, complete, and transparent. Consequently, because of the absence of adequate internal controls and of a comprehensive efficient method for identifying, tracking, and reporting JIEDDO’s human capital resources, JIEDDO’s systems currently cannot efficiently provide the data and insight needed for internal management. Further, Congress is limited in its oversight of JIEDDO’s current and future requirements, the organization’s substantial use of contractors, and the organization’s use of resources to support its mission because of the unreliable information JIEDDO has reported. JIEDDO officials are not fully aware of how their personnel resources are being spent, and cannot fully plan for future workforce needs if their baseline information on current funds use and workforce composition is inaccurate. Although JIEDDO has taken several actions to improve its internal control system, as we noted in this report, these actions have not yet been fully implemented. As such, it is important that JIEDDO evaluate its recent actions to ensure that they will address the control weaknesses we identified and provide for a system of internal control that fully meets federal standards. Improving JIEDDO’s internal controls and the quality of its financial and personnel data is critical to assuring Congress and the public that JIEDDO is focusing all of its resources and using them wisely to address the threat of IEDs to U.S. forces. To comply with federal internal control standards as well as improve the quality of JIEDDO’s financial management and the reliability of resulting financial data and reports, we are recommending that the Secretary of Defense direct the Director of JIEDDO to develop and document a comprehensive system of internal control for its financial management processes. Actions to develop and implement JIEDDO’s system of internal control to address specific control weaknesses we identified should, at a minimum, include the following: Fully documenting all internal control processes and procedures related to its financial management through the development of management directives, administrative policies, standard operating procedures, or other documentation that describe how JIEDDO personnel should perform their duties. Establishing effective controls to ensure that transactions are properly authorized before funding is executed, related documentation supporting transactions is accurately dated, and exceptions are properly approved and documented. Establishing effective controls to ensure that all transactions are properly classified by lines of operation and other expenditure categories used by JIEDDO, and to promptly and properly correct misclassifications when identified. Developing an internal process, to include involvement of its internal audit staff, to routinely monitor and review the efficacy of JIEDDO’s system of internal control and promptly correct any weaknesses identified. We are also recommending that the Secretary of Defense direct the Director of JIEDDO to report to Congress on the status of its efforts to implement its comprehensive system of internal control 1 year from the date of this report. To improve JIEDDO personnel or manpower management and provide Congress with the information it needs to perform its oversight duties effectively, we are recommending that the Secretary of Defense direct the Director of JIEDDO to establish and document a method or system to comprehensively identify, track, and report on a routine basis all government and contractor personnel. In written comments on a draft of this report, DOD concurred with our findings and the thrust of our six recommendations. However, DOD did not concur with our fifth recommendation as originally stated in our draft report, which was to report on JIEDDO’s efforts to implement internal control improvements as part of JIEDDO’s recurring quarterly congressional reports. In its response, DOD proposed an alternative means for providing this information to the Armed Services and Appropriations Committees. DOD said that the focus of its quarterly report to Congress is to describe the IED threat and associated counter-IED efforts, and that adding the additional information we recommended would blur the focus of the report. DOD stated that instead, JIEDDO can produce and provide a report to the oversight committees 1 year after the issuance of our report as to the steps JIEDDO has taken to address and correct the weaknesses we identified. We believe that this approach satisfies the intent of our original recommendation and consequently we modified our recommendation to reflect this change. In commenting on our four recommendations dealing with internal control and financial management, JIEDDO provided several details of the actions it plans or said it has already taken to address the recommendations. While we acknowledge that JIEDDO management recognizes the importance of addressing the weaknesses we identified in our report, we maintain that more needs to be done before the weaknesses are fully corrected. For example, regarding our recommendation to develop documented internal control processes and procedures that describe how JIEDDO personnel should perform their duties, JIEDDO responded that it has established and fully implemented an internal control system, identifying four specific efforts for illustration. However, the specific efforts listed do not fully support JIEDDO’s statement that needed controls and operating procedures are fully developed. One of the efforts cited was JIEDDO’s November 2007 Capability Approval and Acquisition Management Plan instruction. While we agree and reported that this instruction is an important step in developing documented processes, it does not contain operating procedures developed to the level we recommended because JIEDDO divisions had not developed and documented roles, responsibilities, and specific procedures for implementing the JIEDDO Capability Approval and Acquisition Management Plan. As of February 2008, JIEDDO was still developing and documenting these roles, responsibilities, and specific procedures for implementing the JIEDDO Capability Approval and Acquisition Management Plan. Consequently, the degree to which JIEDDO has implemented this recommendation is unclear and additional action on JIEDDO’s part may be needed. In commenting on our sixth recommendation regarding establishing and documenting a method to comprehensively identify, track, and report government and contractor personnel, JIEDDO included extensive background information on its existing personnel processes and improvement efforts it is undertaking. However, more remains to be done in order to fully implement our recommendation. For example, while JIEDDO stated that it is in the process of accounting for contractors maintaining COIC facilities, JIEDDO did not identify any additional efforts to account for the remainder of contractor personnel cited in our report or any specific steps it plans to take to establish and document a method or system to comprehensively identify and track all personnel. Instead, JIEDDO explained that it does not track certain classes of personnel working in direct support of JIEDDO because these persons are already accounted for by other organizations in DOD. Consequently, JIEDDO’s insight into its human capital is limited because it excludes tracking certain manpower funded by the JIEDDO appropriation, such as personnel directly working for the Joint IED Defeat Test Board, whose workload is performed exclusively in support of testing JIEDDO initiatives. We recognize JIEDDO’s comments regarding the responsibility of the military, DOD, and other government agencies in providing oversight and reporting of their staff who may be assigned to work in support of the JIEDDO mission. However, we believe that as an organization, JIEDDO has an interest and a responsibility to identify, track, and report all civilian, military, and contractor personnel working in support of JIEDDO as a matter of good resource stewardship and sound human capital management. Any overlapping manpower management interests or responsibilities between JIEDDO and other organizations could still be recognized and reported with the appropriate caveats to users of the information. In its comments related to this recommendation, DOD also cited ongoing efforts that do not directly address our recommendation as well as several new efforts that were not established at the time of our review, and therefore we could not validate or consider them for purposes of this audit. DOD’s comments and our specific responses to them are provided in appendix II. We are sending copies of this report to the appropriate congressional committees and the Secretary of Defense. We will also make copies available to others upon request. If you or your staff have any questions about this report, please contact me at (202) 512-8365 or solisw@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. To assess the Joint Improvised Explosive Device Defeat Organization’s (JIEDDO) financial management processes, controls, and data, we collected data on the $1.9 billion in funds available to JIEDDO for the first half of fiscal year 2007 and analyzed associated financial management and counter-improvised explosive device (IED) initiative data available for management and external reporting of JIEDDO’s activities. We selected the initial fiscal year 2007 funding provided to JIEDDO because it was received after JIEDDO made significant changes in its resource management processes and therefore should reflect impacts and improvements resulting from those changes. We also identified required approval controls over use of funds, reviewed selected transactions for compliance with these controls, and assessed whether the data recorded in the accounting and managerial systems accurately reflected JIEDDO’s activities. However, we did not perform a comprehensive assessment of all of JIEDDO’s internal controls. We drew high-dollar initiatives during the scoping phase of the review to more efficiently assess the largest portion of JIEDDO’s funds use in the relatively limited phase. Because the items initially selected included little in the way of attack the network initiatives, we added items from this line of operations to do control testing. We also reviewed large-dollar initiatives approved by the Deputy Secretary of Defense that had no recorded commitments at the time our initial data were collected for the first half of fiscal year 2007. Because we identified weaknesses in the completeness and accuracy of JIEDDO’s documentation and controls, we did not review the full range of initiatives we had originally planned because it would have added no further value for purposes of addressing the objectives of this review. Our analysis included 47 funding actions totaling $1.34 billion for 24 of the 301 initiatives JIEDDO had approved at the time we collected our data. We selected initiatives to review that reflected the JIEDDO defeat the device and attack the network activities as well as some approved most recently by the Deputy Secretary of Defense. The 24 initiatives we selected were divided into three subsets: 10 counter-IED initiatives JIEDDO identified as defeat the device initiatives with the highest fund commitments recorded as of the time we collected financial data, 9 of the 10 counter-IED initiatives JIEDDO identified as attack the network initiatives with the highest fund commitments recorded as of the time we collected financial data, and 5 additional initiatives that received Deputy Secretary of Defense approval after the date we collected our comprehensive funding data to determine whether conditions had changed. We also met with officials from JIEDDO’s Counter-IED Operational Integration Center, the Joint Center of Excellence, the Navy Center of Excellence, the Air Force Center of Excellence, the Technology and Requirements Integration Division, and the Joint IED Defeat Test Board to gather information corroborating and explaining the financial activity and documentation related to JIEDDO initiatives we tested. To assess JIEDDO’s efforts to identify, record, track, and report numbers of all personnel, including contractors, we met with officials from JIEDDO’s Secretariat Division who are responsible for the organization’s personnel management to discuss and obtain information on the numbers of JIEDDO personnel, the composition of personnel, and JIEDDO’s processes for capturing this information. We collected information on the numbers of JIEDDO personnel from several personnel documents and reports from the Secretariat Division. We reviewed the information and selectively compared it with corroborating sources, such as interviews with JIEDDO officials and JIEDDO’s financial documentation, to determine whether the reported figures were comprehensive and accurate. We also met with officials from JIEDDO’s Counter-IED Operational Integration Center, the Joint Center of Excellence, the Navy Center of Excellence, the Air Force Center of Excellence, the Technology and Requirements Integration Division, and the Joint IED Defeat Test Board to gather information regarding the numbers of and composition of JIEDDO’s personnel. In addition, we met with officials in the Office of the Secretary of Defense’s Directorate for Organizational and Management Planning to discuss the origins of DOD Directive 2000.19E. We assessed the reliability of JIEDDO’s financial data we reviewed by (1) corroborating the data with supporting information and documentation from physical file records at JIEDDO headquarters and from initiative program offices to verify the accuracy of the data, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data. We found problems with the reliability of the data, which we discuss in the report and in part form the basis for our recommendations. We conducted this performance audit from April 2007 to December 2007 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following are our comments on the Department of Defense’s (DOD) letter dated February 14, 2008. 1. DOD states that before our audit commenced, JIEDDO had worked diligently to formalize and document its processes to ensure that internal controls were in place. Further, DOD asserts that “many of these processes were finalized during the audit timeframe,” and then lists details on four specific “samples” where JIEDDO has “finalized, documented and implemented processes and procedures.” While we recognize that JIEDDO has undertaken efforts to improve its operations and resource management, the specific efforts described in DOD’s comments overstate the status and degree of implementation regarding these four “samples.” Specifically, responses 2 through 5 summarize our conclusions regarding the status and potential effectiveness of JIEDDO “samples” contained in DOD’s comments. 2. Before our review began in May 2007, JIEDDO planned to spin off part of an existing division to form a new acquisition oversight division. JIEDDO did not identify the planned division as relevant to our audit objectives, and while we were aware of the plans for the new division, we did not see documented objectives, plans, or policies describing the division’s role or purpose. The first policy document JIEDDO issued outlining the oversight division’s responsibilities was a broad instruction issued in November 2007, which was too late for us to review in the conduct of our audit. Further, as of mid-February 2008, JIEDDO was still drafting a roles and procedures manual to implement the instruction’s requirements for the new division, and none of the five civil service positions planned for the division had been filled. Consequently, this particular “sample” cited in the DOD comments does not by itself support the statement that JIEDDO has “finalized, documented and implemented processes and procedures.” 3. JIEDDO issued this instruction to define and implement JIEDDO’s “rapid acquisition management responsibilities” established in its charter documents and presented to us when we met to close out our fieldwork. To follow up on the comprehensiveness of the instruction related to the internal control weaknesses we identified during our review, we had brief follow-up conversations with JIEDDO personnel involved in the development of the instruction. At that time, we determined that specific steps regarding addressing the control weaknesses identified were not fully developed because JIEDDO divisions had not yet documented or developed the specific roles, responsibilities, processes, and procedures at the division level. Further, JIEDDO had not yet identified the persons who would participate in developing and drafting proposed division-level instructions for coordination and approval. One official stated that to have done so before issuing the instruction would have delayed issuance by 1 to 2 months. As with the prior item cited in DOD’s comments on our recommendation, this instruction does not by itself support the statement that JIEDDO has “finalized, documented and implemented processes and procedures.” 4. While JIEDDO has established the Records Management Division in recognition of the importance of good documentation, it is still an effort in development and not fully implemented. The comments provided state that some elements of JIEDDO’s records management processes and procedures are still in draft and are not scheduled to be initially operational until March 2008 or fully operational until May 2008. Based on DOD’s comments, we again conclude that establishment efforts for this division do not support the summary statement that JIEDDO has “finalized, documented and implemented processes and procedures.” 5. JIEDDO is in the process of adopting a new financial management system, adapted from an existing system, and is expecting full implementation of the new system by March 2008. While JIEDDO has identified the objectives of the new system and lists expected improvements for the organization, the comments clearly indicate that all requirements for the new system have not yet been gathered, which makes full implementation by March 2008 uncertain. Further, given the tasks yet to be accomplished for full implementation, JIEDDO’s new system status does not support the summary statement that JIEDDO has “finalized, documented and implemented processes and procedures.” 6. DOD states emphatically that funding authorizations are always made and documented according to the criteria in JIEDDO’s charter directive. As we reported, this was not the case for the items we selected in our review. DOD identified a new resource management checklist in its comments, and while it constitutes a new control measure that is a positive step, we were not able to test compliance with the new control or assess its effectiveness. 7. JIEDDO’s reasons for initial assignment and change in its lines of operations accounting do not address the specific inconsistency and potential impact on the reliability of its financial reports that we reported when JIEDDO moved Joint IED Defeat Test Board expenses to its attack the network line of operation. Further, changes in controls over recording of fund use into expenditure categories or lines of operation are either still in development or were not sufficiently developed for us to evaluate their effectiveness in meeting our recommendation’s intent. 8. DOD’s statements acknowledge JIEDDO’s internal control weaknesses. The actions proposed and those already taken, if fully implemented, would substantially address the intent of our recommendation. 9. Expressing full agreement with the findings in our report, DOD proposed an alternative approach for communicating the status of its efforts to Congress. We agree that DOD’s approach for reporting its progress in implementing internal control measures satisfies the overall intent of our recommendation. Consequently, we modified our original recommendation to reflect this change. 10. JIEDDO outlines steps that it is taking toward identifying and tracking civilian, military, and contractor personnel and to improve its personnel management practices that we highlighted in our report. While a positive first step, other efforts are needed to comprehensively account for all personnel, as noted in comments 11 through 16. 11. JIEDDO introduces processes that do not directly address our recommendation. We were aware of the development of JIEDDO strategic human capital plan, and based on our review of JIEDDO’s working documents, we concluded that the strategic human capital plan would not directly address the extent to which JIEDDO would identify and track all of its personnel. Also, JIEDDO had not instituted prior to the conclusion of our audit its Manpower Staffing Request System within the JCAAMP program to formalize the management of new manpower requirements. While these steps may assist JIEDDO in improving its personnel management, they do not directly address our recommendation. 12. We recognize and understand DOD’s comments regarding accounting for JIEDDO personnel who staff programs under the control and direction of the military services and other DOD and government departments, including those funded wholly or in part by JIEDDO. However, we believe that as an organization, JIEDDO has an interest in accounting for all civilian, military, and contractor personnel working in any capacity for JIEDDO, as a matter of sound personnel management. This information can be collected and reported with caveats stating that the personnel are, in whole or part, funded by JIEDDO. 13. DOD noted that our report suggested that JIEDDO does not account for categories of contractor personnel, such as field service representatives, interagency liaisons, law enforcement training personnel, interagency partnership team members, and infrastructure contractors, and stated that the information was included in the Senate report. During our audit and as stated in our report, we recognized that this information with the associated charts was included in the Senate report, but we found that it was not included in any of JIEDDO’s personnel documentation or daily staffing reports prior to the development of the Senate report. As a result, we questioned why JIEDDO did not account for these categories of personnel in its daily staffing reports or in other personnel documentation. 14. DOD explained JIEDDO’s challenges in hiring staff and the steps it is taking to increase the number of military and civilian billets and to facilitate the hiring of civilian employees by working with the Army and the Office of the Secretary of Defense. While these steps appear to address our recommendation and other areas of concern, we cannot validate the information because these steps occurred after we completed our audit. 15. We disagree with DOD’s statement that JIEDDO provides some funding for the staff of the Joint Test Board. According to financial documentation we obtained and corroborated with interviews, the Joint Test Board’s primary mission is to provide support to JIEDDO as stated in JIEDDO’s charter, DOD Directive 2000.19E. 16. See comment 11. In addition to the contact named above, the following individuals made contributions to this report: Cary Russell, Assistant Director; Grace Coleman; Eric Essig; Paul Kinney; Ronald La Due Lake; Stephen Lipscomb; Lonnie McAllister; Paulina Reaves; James Reynolds; Brian Shiels; Glenn Slocum; Yong Song; and John Strong.

Summary: Improvised explosive devices (IED) have been and continue to be a significant threat to U.S. forces. The Department of Defense (DOD) expanded efforts to defeat IEDs with the establishment of the Joint Improvised Explosive Device Defeat Organization (JIEDDO) in January 2006. GAO was asked to review JIEDDO's management and operations. For this second report in its series, GAO determined (1) the extent to which JIEDDO's management processes provide adequate assurances that its financial information is accurate and provides transparency over its operations and (2) the extent to which JIEDDO identifies, records, tracks, and reports numbers of all personnel, including contractors. GAO analyzed data for the first half of fiscal year 2007, which included 47 funding transactions totaling $1.34 billion for 24 initiatives to address these objectives. JIEDDO's financial management processes do not provide adequate assurances that its financial information is accurate, and as a result, JIEDDO is unable to provide full transparency over the cost of its operations. While JIEDDO has improved its financial management processes, it has not yet reached a point where those processes contain an effective system of internal control. According to federal standards, internal control comprises the plans, methods, and procedures used to meet missions, goals, and objectives of an organization and help it to achieve desired results through effective stewardship of its resources. GAO identified four internal control weaknesses that affect JIEDDO's financial management processes. First, JIEDDO has not comprehensively documented its administrative policies and operating manuals, which affects the consistency of how its financial management personnel perform their duties. Second, JIEDDO does not have adequate funds authorization controls to ensure that transactions are properly authorized before funds are committed. In reviewing funding transactions totaling $795 million, 18 of 24 initiatives were not properly authorized in accordance with internal control standards. As a result, funds may be used without proper scrutiny and without a mechanism to detect, correct, or address this control failure. Third, JIEDDO does not have controls to ensure that transactions are properly categorized. For example, of the $1.34 billion in fiscal year 2007 commitments reviewed, JIEDDO inaccurately categorized at least 83 percent of these dollars under one category that should have been applied to others. This could distort information used in assessing trends and prioritizing funds. Fourth, JIEDDO does not have an adequate internal process to monitor and review the efficacy of its internal controls. In the absence of an adequate system of internal control, the agency may not achieve all of its objectives and its use of resources may not be consistent with DOD priorities. Furthermore, decision makers may be basing their decisions on inaccurate financial data and reports. At the end of this review, JIEDDO managers said that they had corrected these weaknesses; however, because these actions occurred after audit completion, GAO could not determine their effectiveness. JIEDDO does not fully identify, track, and report all government and contractor personnel as provided for in DOD Directive 1100.4. Identifying all government and contractor personnel is important to JIEDDO's management and oversight responsibilities and contributes to its ability to effectively plan for its future workforce needs. While JIEDDO has a system in place for routinely tracking and reporting numbers of personnel JIEDDO regards as staff, this system is limited because it does not track all government and contractor personnel performing work for JIEDDO. However, since its creation in February 2006, JIEDDO has relied heavily on contractor support to accomplish its mission, which is not fully reflected in JIEDDO's system. When the Senate Appropriations Committee directed that JIEDDO provide a comprehensive accounting of all of its personnel, including contractors, by May 2007, JIEDDO had to rely on an ad hoc process to develop the report, which resulted in several inaccuracies and inconsistencies.