DOD is one of the largest and most complex organizations in the world. Defense operations involve about $1 trillion in assets, $310 billion in annual budgetary authority, $24 billion in monthly disbursements, and 3 million military and civilian employees. Moreover, execution of these operations spans a wide range of defense organizations, including the military services and their respective major commands and functional activities, numerous large defense agencies and field activities, and various combatant and joint operational commands that are responsible for military operations for specific geographic regions or theaters of operations. Effectively managing DOD’s finances across this complex array of organizations is both a formidable challenge and a prerequisite for effective and efficient departmental performance and accountability. Without reliable financial management information, DOD cannot make informed decisions among competing spending priorities and cannot effectively identify opportunities for reducing costs and reallocating resources to pressing needs. DOD’s financial management operations and systems span numerous organizations (see fig. 1). The Under Secretary of Defense (Comptroller) is DOD’s Chief Financial Officer and the principal advisor to the Secretary of Defense for budgetary and fiscal matters. The DOD Comptroller is responsible for promulgating financial management policies and procedures relating to financial management matters and the production of financial statements. Under the Comptroller is DFAS, which was established in November 1990 to consolidate DOD’s diffused disbursement and accounting functions. Each of DOD’s components (military services and defense agencies) has a financial management and comptroller organization that is responsible for financial matters within that component, except for those performed centrally by DFAS. These functions include managing financial management activities and operations, directing the preparation of budget estimates, approving asset management systems, collecting debts, and accounting for property and inventories. The DOD Comptroller does not have direct authority over any of the financial management organizations within the military services and defense agencies. However, DOD has directed the military services and defense agencies to follow the DOD Comptroller’s guidance and regulations. With the establishment of DFAS, the military services and defense agencies generally no longer perform the finance (disbursing) and accounting (reporting) functions. However, they continue to perform other financial management functions, such as initiating financial events, obligating and authorizing the expenditure of funds, maintaining stewardship over DOD assets, and accounting for assets, liabilities, and equity. Accordingly, these components are responsible for the systems that create financial event data and “feed” these data to DFAS. According to DOD, the “feeder” systems provide about 80 percent of the financial data used by DFAS. As shown in figure 2, DFAS uses these data, as well as data from non-DOD entities (contractors, vendors, and commercial carriers), to perform the core financial management functions of transaction processing, accounting, and reporting. Transaction processing includes recording the results of financial events in detailed accounts and disbursing payments to DOD personnel and others. Accounting and reporting uses various subfunctions (see fig. 2) to show the financial impact of all the department’s financial events. The department’s long-standing and pervasive financial management problems are well chronicled by the DOD Inspector General (IG), the military service audit agencies, and us. These problems include (1) weaknesses in budget execution accounting, (2) inability to properly account for and report on weapon system support equipment, (3) inability to account for and control its investment in inventories, and (4) inability to capture and accurately report the full costs of its programs. Such problems led us in 1995 to add DOD financial management to our list of high-risk programs vulnerable to waste, fraud, abuse, and mismanagement. Since 1995, we have continued to designate DOD financial management a high-risk program. DOD has acknowledged that its present financial management environment has serious inadequacies and does not, for the most part, comply with the framework for financial reform set out by the Congress in the Chief Financial Officers Act of 1990 and the Federal Financial Management Improvement Act of 1996, as well as OMB direction and guidance, such as OMB Circular A-127, Financial Management Systems (June 10, 1999). To help alleviate these problems, the National Defense Authorization Act For Fiscal Year 1998 (P.L. 105-85) directed the Secretary of Defense to submit to Congress a biennial strategic plan for improving financial management within the department. The Secretary submitted DOD’s first Financial Management Improvement Plan to Congress on October 26, 1998. The plan identified over 200 initiatives that were intended to improve the department’s financial operations and systems. In January 1999, we reported that the plan provided the first-ever vision of the department’s future financial management environment. We also noted that the plan was an important first step in improving DOD’s financial management operations, because it discussed for the first time the importance of the programmatic functions of personnel, acquisition, property management, and inventory management to the department’s ability to provide consistent, accurate information. However, we also reported that the plan’s discussion of the future environment was focused on DFAS and did not address how financial management reform and modernization would address such areas as asset accountability and control and budget formulation. Additionally, we reported that the 200 planned initiatives were not clearly linked to DOD’s future financial management environment and that the plan did not address feeder systems’ data integrity. In September 1999, DOD updated the plan, and in July 2000, we testified that although the plan provided more detail on strategies and on the hundreds of improvement initiatives, the fundamental issues that we reported on in January 1999 still remained. In January 2001, DOD issued an updated plan and stated that it had established a process for the military services and defense agencies to follow in making their respective accounting, finance, and feeder systems compliant with federal financial management requirements. Under the Financial and Feeder System Compliance Process, DOD components are assigned responsibility for ensuring, in consultation with DFAS, that their systems are compliant. Modeled after the department’s Year 2000 process, the process consists of five phases: awareness, evaluation, renovation, validation, and compliance. Each component is to have defined exit criteria for each phase. The Senior Financial Management Oversight Council is to provide oversight and guidance. The National Defense Authorization Act For Fiscal Year 2001 directs that we review the plan and that we report our results to the defense authorization and appropriations committees. Our work to respond to this mandate is ongoing. An enterprise architecture systematically captures in useful models, diagrams, and narrative the full breadth and depth of the mission-based mode of operations for a given enterprise, which can be (1) a single organization or (2) a functional or mission area that transcends more than one organizational boundary (e.g., financial, acquisition, or logistics management). Further, such an architecture describes the enterprise’s operations in both (1) logical terms, such as interrelated business functions, information needs and flows, work locations, and system applications, and (2) technical terms, such as hardware, software, data, communications, and security attributes and performance standards. An architecture also provides operational and technological perspectives or views both for the enterprise’s current (or “as is”) environment and for its target (or “to be”) environment, and it provides an IT capital investment road map for moving between the two environments. The development, implementation, and maintenance of enterprise architectures are recognized hallmarks of successful public and private sector organizations. Managed properly, an enterprise architecture can clarify and thus help to optimize the interdependencies and interrelationships among an organization’s business operations and the underlying IT infrastructure and applications supporting these operations. Employed in concert with other important IT management controls, such as portfolio investment management (selection, control, and evaluation) practices and continuous information security management practices,enterprise architectures can greatly increase the chances of modernization programs succeeding. Congress, OMB, and the CIO Council have recognized the importance of enterprise architectures. The Clinger-Cohen Act of 1996 mandates that an agency’s CIO develop, maintain, and facilitate the implementation of these architectures as means for managing the integration of business processes and agency goals with IT. Further, OMB has issued guidance that, among other things, requires system investments to be consistent with these architectures. Similarly, the CIO Council has issued guidance providing (1) a federal framework for the content and structure of an enterprise architecture, (2) a process for assessing investment compliance with an enterprise architecture, and (3) a set of management controls for developing, implementing, and maintaining an enterprise architecture. DOD has also issued enterprise architecture policy, including a framework defining an architecture’s structure and content. Specifically, in February 1998, DOD directed its components and activities to use the Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) Architecture Framework, Version 2.0. According to DOD, the C4ISR Architecture Framework is a critical tool for achieving its strategic direction, and all DOD components and activities should use the framework for all functional areas and domains within the department. The C4ISR Architecture Framework is recognized in the CIO Council’s A Practical Guide to Federal Enterprise Architecture as a model architecture framework. (Appendix II provides more detailed information on the C4ISR Architecture Framework.) DOD does not have an enterprise architecture to guide and constrain the billions of dollars it plans to spend to modernize its financial management operations and systems. Rather, DOD is relying upon three other initiatives for directing operational and technology change in this area: the DOD Financial Management Improvement Plan, a DFAS enterprise architecture that is under development, and the DOD Financial and Feeder System Compliance Process.