DOD is perhaps the largest and most complex organization in the world and spends billions of dollars each year to maintain key business operations intended to support the warfighter, including systems and processes related to the management of contracts, finances, the supply chain, support infrastructure, and weapons systems acquisition. We have reported for years that inefficiencies in these business operations result in reduced efficiencies, ineffective performance, inadequate accountability, and lack of transparency. Despite various reform initiatives, DOD continues to face weaknesses in business operations that not only adversely affect the reliability of reported financial data, but also the economy, efficiency, and effectiveness of DOD’s operations. To address long-standing management problems, we began our “high-risk” program in 1990 to identify and help resolve serious weaknesses in areas that involve substantial resources and provide critical services to the public. Historically, high-risk areas have been designated because of traditional vulnerabilities related to their greater susceptibility to fraud, waste, abuse, and mismanagement. As our high-risk program has evolved, we have increasingly used the high-risk designation to draw attention to areas associated with broad-based transformation needed to achieve greater economy, efficiency, effectiveness, accountability, and sustainability of selected key government programs and operations. For example, we first added DOD’s overall approach to business transformation to our high-risk list in 2005 because DOD had not taken the necessary steps to achieve and sustain business reform on a broad, strategic, departmentwide, and integrated basis. Furthermore, DOD continues to dominate the high-risk list. Specifically, DOD currently bears responsibility, in whole or in part, for 15 of our 27 high-risk areas. Of the 15 high-risk areas, the 8 DOD-specific high-risk areas cut across all of DOD’s major business areas. Table 1 lists the 8 DOD-specific high-risk areas. Also, as shown in table 1, many of these management challenges have been on the high-risk list for a decade or more. In addition, DOD shares responsibility for 7 governmentwide high-risk areas. Collectively, these high-risk areas relate to most of DOD’s major business operations that directly support the warfighter, including how servicemembers get paid, the benefits provided to their families, and the availability and condition of the equipment they use both on and off the battlefield. Congress passed legislation that codified many of our prior recommendations related to DOD business systems modernization; this includes the establishment of various bodies and plans. Also as required by Congress, DOD commissioned studies examining the feasibility and advisability of establishing a CMO to oversee the department’s business transformation process. As part of this effort, the Defense Business Board, an advisory panel, examined various options and, in May 2006, endorsed the CMO concept. In December 2006, the Institute for Defense Analyses also endorsed the need for a CMO position at DOD. In May 2007, DOD submitted a letter to Congress outlining its position regarding a CMO at DOD, stating that the Deputy Secretary of Defense should assume the CMO responsibilities. Although DOD has made progress in establishing a management framework upon which to develop overall business transformation efforts, this framework currently focuses on business systems modernization rather than broader business transformation efforts. Congress included provisions in the National Defense Authorization Acts for Fiscal Years 2005 and 2006 to assist DOD in addressing financial management and business systems modernization challenges—two of our high-risk areas— and DOD’s leadership has taken steps to comply with these provisions. For example, to improve financial management, DOD issued the initial Financial Improvement and Audit Readiness Plan in December 2005, which was last updated in June 2007, to guide financial improvement and financial audit efforts within the department. Also, to address its business systems modernization challenges, DOD has established the following: Defense Business Systems Management Committee: The Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 required DOD to set up a committee to review and approve major updates of the defense business enterprise architecture—or transformation blueprint— and the obligation of funds for defense systems modernization. Prior to the enactment of this legislation, we reported that DOD had not established a governance structure and the process controls needed to ensure ownership and accountability of business systems investments. Subsequently, Congress directed DOD to establish the Defense Business Systems Management Committee to oversee DOD business transformation. In February 2005, the Deputy Secretary of Defense chartered the Defense Business Systems Management Committee, which consists of senior defense military and civilian leaders. The Deputy Secretary of Defense serves as the chair of this committee and the Under Secretary of Defense for Acquisition, Technology, and Logistics serves as the vice chair of the committee. The committee is intended to establish strategic direction and plans for DOD’s business mission, oversee implementation of systemic performance in DOD’s business operations, approve business transformation plans and initiatives, ensure that funds are obligated for defense business systems modernization in accordance with the law, and recommend policies and procedures to the Secretary of Defense that enable efficient business operations throughout DOD. Investment review boards: The Ronald W. Reagan National Defense Authorization Act also required DOD to set up investment review boards to evaluate systems’ consistency with the business enterprise architecture and to provide oversight of the investment review process for business systems. Prior to the establishment of investment review boards, we had reported that billions of dollars were being spent on business systems investments with little oversight. DOD established the investment review boards in 2005 to serve as the oversight and investment decision-making bodies for business system investments in their respective areas of responsibility. These boards assess modernization investments over $1 million and determine how the investments will improve processes and support the warfighter. Business Transformation Agency: DOD established the Business Transformation Agency in October 2005 with the intent for it to support the Defense Business Systems Management Committee and coordinate business transformation by ensuring adoption of DOD-wide information and process standards as defined in the business enterprise architecture. The Business Transformation Agency reports to the Under Secretary of Defense for Acquisition, Technology, and Logistics in his capacity as the vice chair of the Defense Business Systems Management Committee. The Business Transformation Agency’s charter includes responsibilities such as identifying urgent warfighter needs that can be addressed by business solutions, articulating the strategic vision for business transformation, exercising executive oversight for DOD-wide programs, and implementing plans and tools needed to achieve DOD business transformation. In addition, the department has developed various tools and plans to enable these entities to manage its business systems modernization efforts. The tools and plans the Defense Business Systems Management Committee approves, the Business Transformation Agency implements, and the investment review boards use to assess compliance include the following: Business enterprise architecture: DOD’s business enterprise architecture is a tool or a blueprint to guide and constrain investments in DOD organizations and systems as they relate to business operations. The business enterprise architecture provides the thin layer of corporate policies, capabilities, standards, and rules and focuses on providing tangible outcomes for a limited set of enterprise-level (DOD-wide) priorities, and the components are responsible under the department’s tiered accountability approach for defining their respective component- level architectures that are aligned with the corporate business enterprise architecture. According to DOD, subsequent releases of the business enterprise architecture will continue to reflect this federated approach and will define enforceable interfaces to ensure interoperability and information flow to support decision making at the appropriate levels. Enterprise transition plan: DOD guidance states that the enterprise transition plan is intended to lay out a road map for achieving DOD’s business transformation by implementing changes to technology, processes, and governance consistent with DOD’s business enterprise architecture. According to DOD, the enterprise transition plan is intended to summarize all levels of transition planning information (milestones, metrics, resource needs, and system migrations) as an integrated product for communicating and monitoring progress—resulting in a consistent framework for setting priorities and evaluating plans, programs, and investments. The enterprise transition plan contains time-phased milestones, performance metrics, and a statement of resource needs for new and existing systems that are part of the business enterprise architecture. Business Transformation Agency officials said that they see the enterprise transition plan as the highest level plan for DOD business transformation. DOD released its first enterprise transition plan in September 2005. DOD updates the enterprise transition plan twice a year, once in March as part of DOD’s annual report to Congress and once in September. While our prior work has acknowledged this progress, we also have reported on limitations. For example, while the latest version of the business enterprise architecture focuses on DOD-wide corporate policies, capabilities, rules, and standards, which are essential elements to meeting legislative requirements, this version has yet to be augmented by the DOD component organizations’ subsidiary architectures that are also essential to meeting these requirements and the department’s goal of having a federated family of architectures. While the latest version of the enterprise transition plan provides performance measures for the enterprise and component programs, including key milestones (such as initial operating capability), it does not include other important information needed to understand the sequencing of these business investments and does not address DOD’s complete portfolio of business system investments. While the department has established and begun implementing the investment review structures and processes that are consistent with legislation, it has yet to fully define the related portfolio-based information technology investment management practices. Furthermore, DOD’s efforts have been mainly focused on business systems modernization. During our review, we examined key documents, such as DOD’s enterprise transition plan, business transformation guidance, and minutes from the meetings of the Defense Business Systems Management Committee, and our analysis found that DOD has not yet expanded the focus beyond business systems.