IG GCSS Report

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INTEGR ITY E FF IC I ENCY ACCOUNTAB I L I TY EXCELLENCE

I G U.S. Department of Defense

Report No. DODIG-2014-10

S E P T E M B E R 3 , 2 0 1 4

Global Combat Support

SystemArmy Did Not Comply

With Treasury and DoD Financial

Reporng Requirements


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Mission

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3/60DODIG-2014-104 (Project No. D2013-D000FL-0163.000)

Results in BriefGlobal Combat Support SystemArmy Did

Not Comply With Treasury and DoD Financial

Reporting Requirements

Visit us at www.dodig.mil

ObjecveWe determined whether the Army ieldedthe Global Combat Support SystemArmy(GCSSArmy) with the proper functionalityto provide reliable inancial information andsupport audit readiness requirements.

FindingOfice of the Assistant Secretary of the Army(Financial Management and Comptroller)and GCSSArmy Product Management Oficepersonnel did not ield GCCSArmy with theproper functionality to comply with Treasuryand DoD guidance, which is necessary toprovide reliable inancial information andsupport for audit readiness requirements.

This occurred because DoD and Armymanagement did not have adequate controls,including procedures and annual reviews,in place to ensure GCSSArmy compliancewith Treasury and DoD guidance. Inaddition, the Ofice of the Under Secretaryof Defense (Comptroller)/Chief FinancialOficer, DoD, and Ofice of the Deputy ChiefManagement Oficer personnel did not

provide adequate account attribute, chartof account, or posting logic guidance. Thisoccurred because they did not have formalprocesses for reviewing and ensuring thatDoD guidance is complete and consistentand aligns with Treasury guidance.

September 3, 2014

Although Army personnel have been responsive to correctingdeiciencies identiied during the audit, the Army has spent$725.7 million on a system that still has signiicant obstaclesto overcome to comply with the Federal Financial ManagementImprovement Act and meet the FYs 2014 and 2017 auditabilitydeadlines. This includes posting logic issues that resultedin abnormal balances of $703.7 million, or 23.5 percent, of the$3.0 billion GCSSArmy fourth quarter FY 2013 Trial Balance

RecommendaonsThe Under Secretary of Defense (Comptroller)/ChieFinancial Oficer, DoD, in coordination with the DoD DeputyChief Management Oficer, should develop and implementprocedures to validate that GCSSArmy complies withapplicable guidance and internal control standards. Theyshould also publish account attribute, chart of account, andposting logic guidance by the beginning of each iscal year

with a deadline for system implementation. The AssistanSecretary of the Army (Financial Management andComptroller), in coordination with the GCSSArmy ProductManager, should formalize and expand the annual reviewprocess of GCSSArmy to include a review of the accountattributes, chart of accounts, and posting logic and developan automated functionality for demonstrating GCSSArmyaccount postings.

Management Comments andOur ResponseWe request that the Under Secretary of Defense (Comptroller)/Chief Financial Oficer, DoD, provide additional commentsto Recommendations 1.a.ii, 1.a.iii, and 1.c, and the AssistantSecretary of the Army (Financial Management and Comptroller)provide additional comments on Recommendations 2.b and 2.fPlease see the Recommendations Table on the back of this page

Finding (contd)


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ii Project No. D2013-D000FL-0163.000

Recommendaons Table

ManagementRecommendaons Requiring

CommentNo addional

Comments Required

Under Secretary of Defense (Comptroller)/Chief Financial Ocer, DoD

1.a.ii, 1.a.iii, 1.c 1.a.i, 1.b.i, 1.b.ii, 1.b.iii, 1.d

Assistant Secretary of the Army (FinancialManagement and Comptroller)

2.b, 2.f 2.a.i, 2.a.ii, 2.a.iii, 2.c, 2.d, 2.e

Please provide comments by October 3, 2014.


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September 3, 2014

MEMORANDUM FOR UNDER SECRETARY OF DEFENSE (COMPTROLLER)/CHIEF FINANCIAL OFFICER, DOD

DEPARTMENT OF DEFENSE DEPUTY CHIEF MANAGEMENT OFFICERAUDITOR GENERAL, DEPARTMENT OF THE ARMY

SUBJECT: Global Combat Support SystemArmy Did Not Comply With Treasury and DoDFinancial Reporting Requirements (Report No. DODIG-2014-104)

We are providing this report for your review and comment. The Army did not ensureGlobal Combat Support SystemArmy complied with Treasury and DoD guidance, whichis necessary for providing reliable inancial information and supporting audit readinessrequirements. Although Army personnel have been responsive to correcting deicienciesidentiied during the audit, the Army has spent $725.7 million on a system that hassigniicant obstacles to overcome to comply with the Federal Financial ManagementImprovement Act and meet the FYs 2014 and 2017 auditability deadlines. This includesposting logic issues that resulted in abnormal balances of $703.7 million, or 23.5 percent, of the$3.0 billion GCSSArmy fourth quarter FY 2013 Trial Balance.

We considered management comments on a draft of this report when preparing the inalreport. DoD Directive 7650.3 requires that all recommendations be resolved promptly.Comments from the Under Secretary of Defense (Comptroller)/Deputy Chief Financial Oficer,DoD, on Recommendations 1.a.i, 1.b, and 1.d, and from Deputy Assistant Secretary of theArmy (Financial Operations) on Recommendations 2.a.i, 2.a.ii, 2.a.iii, 2.c, 2.d, and 2.e,addressed all speciics of the recommendations and conformed to the requirements ofDoD Directive 7650.3; therefore, we do not require additional comments. We requestthat the Under Secretary of Defense (Comptroller)/Chief Financial Oficer, DoD, provideadditional comments on Recommendations 1.a.ii, 1.a.iii, and 1.c, and the Assistant Secretaryof the Army (Financial Management and Comptroller) provide additional comments on

Recommendations 2.b and 2.f, by October 3, 2014.

INSPECTOR GENERALDEPARTMENT OF DEFENSE

4800 MARK CENTER DRIVE

ALEXANDRIA, VIRGINIA 22350-1500


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iv DODIG-2014-104

Please send a PDF ile containing your comments to [email protected] . Copies ofyour comments must have the actual signature of the authorizing oficial for yourorganization. We cannot accept the /Signed/ symbol in place of the actual signature.If you arrange to send classiied comments electronically, you must send them overthe SECRET Internet Protocol Router Network (SIPRNET).

We appreciate the courtesies extended to the staff. Please direct questions to me at(703) 601-5945.

Lorin T. Venable, CPA Assistant Inspector General Financial Management and Reporting


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Contents

Introducon

Objective_________________________________________________________________________________________1

Background______________________________________________________________________________________1

Review of Internal Controls____________________________________________________________________4

Finding. Insucient Implementaon of Treasury

and DoD Financial Reporng Requirements_____________________5

Army Did Not Ensure Compliance with Treasury and DoD Financial Requirements _____6

Inadequate System Controls _________________________________________________________________19

Inadequate DoD Guidance ___________________________________________________________________ 20

System Might Not Produce Reliable Information or Correct ArmysMaterial Weakness _______________________________________________________________________ 21

Management Comments on the Finding and Our Response ______________________________ 22

Recommendations, Management Comments, and Our Response_________________________22

AppendixesAppendix A.Scope and Methodology_______________________________________________________29

Use of Computer-Processed Data _______________________________________________________30

Use of Technical Assistance______________________________________________________________30

Appendix B.Prior Coverage _________________________________________________________________ 31

Appendix C.Army Comments on Findings and Our Response____________________________34

Management Comments

Under Secretary of Defense (Comptroller)/Chief Financial Oficer, DoD_________________38

Assistant Secretary of the Army (Financial Management and Comptroller)_____________41

Acronyms and Abbreviaons_____________________________________________50


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Introduction

Objecve

Our objective was to determine whether the Army ielded the Global Combat

Support SystemArmy (GCSSArmy) with the proper functionality to provide reliableinancial information and support audit readiness requirements. See Appendix Afor Scope and Methodology and Appendix B for Prior Audit Coverage.

Background

The Army initiated development of GCSSArmy in 1997. In 2003, the programchanged from custom software to a web-based SAP1 Enterprise Resource Planning(ERP) system. According to Army oficials, the Army invested approximately

$95 million before adopting the ERP approach. The Army plans to replace13 legacy systems with GCSSArmy, including the Standard Army Retail SupplySystem and the Standard Army Maintenance SystemEnhanced. GCSSArmycontains supply, maintenance, property, and tactical inance functionalities. As ofJune 2014, the Army has ielded the system to 122 units. When ielding iscomplete in September 2017, there will be an estimated 160,000 GCSSArmy usersacross 343 units. According to an Army Program Executive Ofice EnterpriseInformation Systems (PEO EIS) representative, as of February 2014, the Armyhad spent $725.7 million on GCSSArmy and plans to spend a total of

$4.3 billion2

. GCSSArmy Product Management Ofice (the PMO) personnel estimatedthe tactical inance functionality will cost approximately $300 million.

Financial Reporng Requirements

Public Law 101-576, Chief Financial Oficers Act of 1990, November 15, 1990,(the CFO Act) requires each executive agency to prepare and submit auditableinancial statements annually. Public Law 104-208, Federal Financial ManagementImprovement Act of 1996, September 30, 1996, (FFMIA) requires agencies toimplement and maintain inancial management systems that comply substantially

with Federal inancial management systems requirements [and] applicable Federalaccounting standards. Public Law 111-84, National Defense Authorization Actfor Fiscal Year 2010, section 1003, Audit readiness of inancial statements of

1 SAP is a company that develops ERP systems. 2 The $4.3 billion is based on the November 1, 2012, Economic Analysis for GCSSArmy and includes $3.0 billion for

GCSSArmy, $938.7 million for Army Enterprise System Integraon Program, and $341.1 million for Standard Army

Management Informaon System phase out.


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the Department of Defense, October 28, 2009, requires DoD to develop a planto ensure that its inancial statements are validated as ready for audit no laterthan September 30, 2017. In addition, Public Law 112-81, National DefenseAuthorization Act for Fiscal Year 2012, section 1003, Additional requirementsrelating to the development of the Financial Improvement and Audit Readiness Plan,December 31, 2011, requires each Military Department to develop a plan to validatethe Statement of Budgetary Resources for audit by no later than September 30, 2014.

The Treasury Financial Management Service publishes the U.S. Government StandardGeneral Ledger (USSGL), which provides a uniform chart of accounts (COA) andguidance standardizing Federal agency accounting, including USSGL transaction andaccount attribute3 guidance. All DoD accounting systems must use the USSGL. DoDimplemented the Standard Financial Information Structure (SFIS) account attributesto standardize inancial reporting and comply with the USSGL at the transaction

level. DoD annually publishes the DoD Standard Chart of Accounts (SCOA) andthe DoD USSGL Transaction Library (the Transaction Library). The DoD SCOAconsists of USSGL accounts and DoD account extensions to provide the detailrequired for budgetary, inancial, and management reports. The Transaction Librarybreaks down the USSGL transaction guidance into combinations of speciic accounts 4and assigns each combination a DoD Transaction Code (DTC). GCSSArmy isrequired to use SFIS account attributes and process transactions using the DoD SCOAaccording to the deined uses and posting logic in the Transaction Library.

Flow of Informaon for Financial Reporng

GCSSArmy maintains a ledger for Army tactical units. GCSSArmy inancialinformation lows through the General Fund Enterprise Business System (GFEBS),Defense Departmental Reporting SystemBudgetary (DDRSB), and DDRSAuditedFinancial Statements (DDRSAFS), and the Army reports it on the Army GeneralFund (AGF) inancial statements. Figure 1 illustrates the low of information forinancial reporting from GCSSArmy to the AGF inancial statements.

3 Account aributes describe an account and capture the informaon necessary to meet specic external reporng

requirements, including the nancial statements. 4 These accounts are commonly referred to as General Ledger Accounts.


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Figure 1. Flow of GCSSArmy Information for Financial Reporting

System-Related Responsibilies

DoD Responsibilities

The CFO Act created the Under Secretary of Defense (Comptroller)/Chief FinancialOficer, DoD (USD[C]/CFO) position. It requires that the USD(C)/CFO overseeall inancial management activities relating to the programs and operations ofthe agency; direct, manage, and provide policy guidance and oversight of agencyinancial management personnel, activities, and operations; and develop and

maintain an integrated agency accounting and inancial management system,including inancial reporting and internal controls, which complies with applicableaccounting principles, standards, and requirements and internal control standards.The CFO Act also requires this inancial management system to provide for complete,reliable, consistent, and timely information.

DoD Financial Management Regulation (FMR), volume 1, chapter 1, ChiefFinancial Oficer of the Department of Defense, June 2010, assigns the USD(C)/CFOwith responsibility to oversee all inancial management activities relating to the

programs and operations of DoD and requires the USD(C)/CFO to ensurecompliance throughout the DoD with applicable accounting policy, standards andprinciples, to include SFIS. It also requires USD(C)/CFO to develop and maintaina compliant integrated agency accounting and inancial management system thatcomplies with applicable accounting requirements and provides complete, reliable,consistent, and timely information. An agency inancial management system isdeined as the total of agency inancial systems, both manual and automated, forplanning, budget formulation and execution, program, and administrative accounting;as well as all other systems for recording and classifying inancial data and reporting

inancial management information. Finally, DoD FMR, volume 6A, chapter 2,Financial Roles and Responsibilities, August 2011, further requires the Ofice ofthe USD(C)/CFO (OUSD[C]/CFO) to establish and approve schedules required tomeet inancial reporting requirements and deadlines. The Financial Improvementand Audit Readiness Guidance, November 2013, assigns Ofice of the Deputy ChiefManagement Oficer (ODCMO) with the responsibility of assisting with measuringinancial management results and coordinating DoD resources in support ofOUSD(C)/CFO inancial improvement efforts.

GCSSArmy GFEBS DDRSB DDRSAFSAGF Financial

Statements


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Army Responsibilities

The Ofice of the Assistant Secretary of the Army (Financial Management andComptroller) (OASA[FM&C]) is responsible for systems pertaining to Army inanceand accounting operations. Army PEO EIS provides information management

systems to the Army and develops, acquires, and deploys these systems. The PMO,an Army PEO EIS component, is responsible for ielding GCSSArmy. OASA(FM&C)and the PMO are jointly responsible for ensuring GCSSArmy is compliant withTreasury and DoD guidance. However, PMO personnel stated they are required tocoordinate all GCSSArmy changes with GFEBS, as part of the Federated Approachthat is intended to standardize transactional input and business processes across theArmy ERPs and enable common cost management activities.

Review of Internal Controls

DoD Instruction 5010.40, Managers Internal Control Program Procedures,May 30, 2013, requires DoD organizations to implement a comprehensive system ofinternal controls that provides reasonable assurance that programs are operatingas intended and to evaluate the effectiveness of the controls. We identiiedinternal control weaknesses that occurred because DoD and Army managementdid not establish procedures and perform annual reviews to ensure GCSSArmycompliance with Treasury and DoD guidance. We will provide a copy of the report tothe senior oficials responsible for internal controls in the DoD andDepartment of the Army.


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Finding

Insucient Implementaon of Treasury and

DoD Financial Reporng Requirements

OASA(FM&C) and PMO personnel did not ield GCCSArmy with the properfunctionality to comply with Treasury and DoD guidance, which is necessary toprovide reliable inancial information and support for audit readiness requirements.Speciically, GCSSArmy did not:

comply with Treasury guidance for 5 of 15 account attributes tested,equating to approximately $1.8 billion5of inancial impact;

comply with DoD guidance for deining debit or credit balances6 of16 accounts with a net balance of $274.7 million7;

timely comply with the FY 2013 DoD SCOA changes;

deine its posting logic;

include posting logic necessary to attain the same results as theTransaction Library; or

correctly post transactions for three accounts affecting the Statement of

Budgetary Resources.

This occurred because DoD and Army management did not have adequate controls,including procedures and annual reviews, in place to ensure GCSSArmy compliancewith Treasury and DoD guidance.

In addition, OUSD(C)/CFO and ODCMO personnel did not provide adequate accountattribute, COA, or posting logic guidance. This occurred because they did not haveformal processes for reviewing and ensuring that DoD guidance is complete andconsistent and aligns with Treasury guidance.

Although Army personnel have been responsive to correcting deiciencies identiiedduring the audit, the Army has spent $725.7 million on a system that still hassigniicant obstacles to overcome to comply with FFMIA and meet the FYs 2014

5 Dollar values associated with Treasury and DoD compliance are as of the end of third quarter, FY 2013. 6 Commonly referred to by the guidance as a Normal Balance Indicator. 7 Dollar values are associated with four accounts that contained acvity.


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and 2017 auditability deadlines. In addition, incorrect posting logic for threebudgetary accounts, which the Army uses to prepare the Statement of BudgetaryResources, resulted in abnormal balances8 of $703.7 million, or 23.5 percent, of the$3.0 billion GCSSArmy fourth quarter FY 2013 Trial Balance.

Army Did Not Ensure Compliance with Treasury

and DoD Financial Requirements

OASA(FM&C) and PMO personnel did not ield GCCSArmy with the properfunctionality to comply with Treasury and DoD guidance, which is necessary to providereliable inancial information and support audit readiness requirements.

Account Attributes Not Compliant With Treasury Guidance

OASA(FM&C) and PMO personnel did not ensure GCSSArmy complied withTreasury guidance for 5 of 15 account attributes tested, equating to approximately$1.8 billion of inancial impact. According to the U.S. Government Standard GeneralLedger Treasury Financial Manual [TFM] Supplement No. S2, August 2012, accountattributes identify detailed account characteristics used to meet speciic reportingrequirements. The Supplement identiies the range of valid inputs for an accountattribute. GCSSArmy must comply with these account attributes to ensure itprocesses transactions in the same manner as other DoD and Army ERP systems.

The ive noncompliant account attributes representedapproximately 1.6 million unpopulated attributes on

transactions with approximately $1.8 billion of inancialimpact. For example, the GCSSArmy Federal Indicatoraccount attribute was not compliant with Treasuryguidance. Treasury guidance required the Federal

Indicator account attribute to be populated when usingaccount 3102. However, GCSSArmy did not consistently

populate the Federal Indicator account attribute for

transactions using this account. The Army needs to populate theFederal Indicator account attribute required by Treasury guidance to ensure the accuratereporting of trading partner information for transactions that occur between two partieswithin the Government, which has been a long-standing material weakness reported inthe Army Annual Statement of Assurance. Table 1 identiies the ive noncompliantaccount attributes along with their inancial impact.

8 Abnormal balances are those in which an accounts normal balance (debit or credit) is reversed.

TheGCSSArmy

Federal Indicatoraccount attribute

was not compliantwith Treasury

guidance.


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Table 1. Noncompliance With Treasury Guidance

Account AributeNo. of Noncompliant Account

Aribute ValuesAmount (millions)

Apporonment Category 15,102 $ 30.8

Custodial Indicator 607,481 504.7

Prior Period Adjustment 960,322 905.5

Federal Indicator 842 184.1

Trading Partner 909 184.4

Total 1,584,656 $ 1,809.5

Note: DoD Oce of Inspector General (DoD OIG) auditors veried that the transacons reviewedcontained a compliant account aribute value per Treasury guidance and did not determine thecorrectness of the account aribute values in the transacons. In addion, some of the transaconsreviewed were missing mulple account aribute values.

Source: Based on GCSSArmy transacons in the rst three quarters of FY 2013

PMO personnel provided a system change request, which they indicated wouldcorrect four account attributes in July 2014. In addition, PMO personnel providedanother system change request they indicated would correct the remaining accountattribute (Prior Period Adjustment) in late FY 2015. PMO personnel stated that,as part of the Federated Approach, they made the decision to delay implementationof this system change request until after the GFEBS Program Management Oficeimplemented a corresponding change to GFEBS inFY 2015. PMO personnel also explained that when

they were required to submit the funding requestto implement Treasury and DoD guidance timely,they could not predict how much it wouldcost to make GCSSArmy comply with futurerequirements. While the PMO personnelsubsequently provided an SFIS implementationstrategy to become compliant with FY 2013Treasury account attribute guidance during FY 2015,implementing changes almost 3 years after the iscal

year started is not timely.

OASA(FM&C) is responsible for ensuring GCSSArmy account attribute compliance,while the PMO is responsible for implementing OASA(FM&C) account attributeguidance. However, OASA(FM&C) does not have a process to ensure accountattribute compliance with Treasury and DoD guidance. The Assistant Secretary ofthe Army (Financial Management and Comptroller) (ASA[FM&C]), in coordination

ThePMO personnel

subsequently providedan SFIS implementation

strategy to becomecompliant with FY 2013

Treasury accountattribute guidance

during FY 2015


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with the GCSSArmy Product Manager, should formalize and implement an annualreview process to ensure the timely compliance of GCSSArmy with accountattribute guidance.

Furthermore, the FFMIA, CFO Act, and DoD FMR address OUSD(C)/CFOs

responsibility for inancial systems, which includes GCSSArmy; and DoD FMR,volume 1, chapter 1, addresses OUSD(C)/CFOs responsibility for ensuringGCSSArmy complies with accounting policy, standards, and principles andinternal control standards. Based on this guidance, adequate oversight would includeestablishing controls to validate GCSSArmy account attribute compliance. Additionally,Financial Improvement and Audit Readiness Guidance states ODCMOis responsible for coordinating resources to support OUSD(C)/CFOs inancial

improvement efforts. Currently, ODCMOs SFIS validationprocess relies on PMO personnel for notiication

that a system change request9 has occurred,signifying the need for ODCMO personnel to

revalidate GCSSArmy compliance withestablished guidance, to include Treasuryaccount attribute guidance. The USD(C)/CFO,in coordination with the Deputy Chief

Management Oficer (DCMO), should develop andimplement a process for the annual validation of

GCSSArmy account attribute compliance with

Treasury guidance.

Account Inconsistencies With DoD Guidance

OASA(FM&C) and PMO personnel did not ensure GCSSArmy complied with DoDguidance for deining debit or credit balances of 16 accounts, affecting four accountswith a balance of $274.7 million. The GCSSArmy Normal Balance Indicators (NBIs)for 16 accounts did not match those prescribed in the FY 2013 DoD SCOA. TheseNBIs identiied the normal condition of the account balances, such as debit orcredit, in the GCSSArmy COA and should have matched the NBIs in theFY 2013 DoD SCOA. GCSSArmy can identify abnormal balances to system usersin instances where an account balance does not match the NBI.

9 A system change request documents a formal request for a change to an automated informaon system. The change may

be for either a x to a problem or an enhancement.

DoD FMR,volume 1, chapter

1, addresses OUSD(C)/CFOs responsibility for

ensuring GCSSArmy complieswith accounting principles,

standards, and requirementsand internal control

standards.


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For example, according to the GCSSArmy COA, account 1010.0120, Fund Balance WithTreasury-Funds Disbursed, had an NBI of debit; however, the FY 2013DoD SCOA NBI for this account was a credit. To demonstrate the signiicanceof this incorrect NBI, a debit balance in account 1010.0120 would understatedisbursements and overstate available Army funds. This NBI functionality isvital in determining whether accounts contain the proper balances. However,because the NBI for account 1010.0120 did not match the DoD SCOA,GCSSArmy incorrectly identiied the balance for this account, $268.5 million inFY 2013, as abnormal.

While the previous example depicts an instance of GCSSArmy incorrectlyidentifying normal balances as abnormal balances, in other instances GCSSArmywould not identify true abnormal balances. For example, if the1010.0120 account had a debit balance when, according

to the FY 2013 DoD SCOA, it should have had a creditbalance, GCSSArmy would not have detected thisabnormal balance because the incorrect GCSSArmyCOA NBI (debit) would have matched the accountbalance (debit). Without the ability to accuratelyidentify abnormal balances, PMO personnel cannotensure GCSSArmy is providing reliable inancialinformation to the Army and DoD inancial statements.

PMO personnel corrected 14 of the 16 accounts with NBIs that did not align withDoD guidance. They explained that they did not correct the remaining accountsbecause GCSSArmy needed to remain aligned with GFEBS as part of the FederatedApproach in which the Army integrated inancial reporting across the two systems.

OASA(FM&C) is responsible for Army inance and accounting operations, whichincludes ensuring GCSSArmy complies with the DoD SCOA. For OASA(FM&C)to fulill its responsibility, OASA(FM&C) personnel issue GCSSArmy-speciicrecommended changes to the PMO. While this process includes a review of the

GCSSArmy COA, the review process does not include the review of NBIs inGCSSArmy. The ASA(FM&C), in coordination with the GCSSArmy Product Manager,should formalize and expand the annual review process for GCSSArmy to ensuretimely compliance with all COA guidance.

Withoutthe ability to

accurately identifyabnormal balances, PMOpersonnel cannot ensureGCSSArmy is providing

reliable inancialinformation


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Chart of Accounts Needs to Timely Comply With DoD Changes

OASA(FM&C) and PMO personnel did not update GCSSArmy timely to implementthe FY 2013 DoD SCOA changes. PMO personnel did not implement theFY 2013 DoD SCOA changes in GCSSArmy until approximately 10 months

after OUSD(C)/CFO published it. OUSD(C)/CFO published the DoD SCOA onNovember 15, 2012, and OASA(FM&C) personnel provided implementing guidanceto the PMO on January 7, 2013. However, PMO personnel did not incorporatethese changes into the system until August30, 2013. While PMO personnel eventuallyimplemented the recommended changes, three accounts contained erroneouslyposted transactions totaling $1.3million for the irst three quarters of FY 2013.

OASA(FM&C) is responsible for Army inance and accounting operations, and thePMO is responsible for implementing OASA(FM&C) COA guidance in a timely

manner. However, OASA(FM&C) does not currently provide a deadline forGCSSArmy implementation of the annual DoD guidance. The ASA(FM&C),in coordination with the GCSSArmy Product Manager, should formalize andimplement an annual review process that meets the DoD compliance deadline.

The FFMIA, CFO Act, and DoD FMR address OUSD(C)/CFOs responsibility forinancial systems, including GCSSArmy; and DoD FMR, volume 6A, chapter 2,addresses OUSD(C)/CFOs responsibility for the establishment and approval of

schedules required to meet inancial reporting requirements anddeadlines. In addition, ODCMO publishes annual guidance to

support OUSD(C)/CFOs inancial improvement efforts. Thecurrent version of the guidance does not impose animplementation deadline. To ensure timely compliancewith the DoD SCOA, the USD(C)/CFO, in coordination withthe DCMO, should publish a deadline for system

implementation of the SFIS account attributes, DoD SCOA,and Transaction Library guidance.

In addition, OUSD(C)/CFO and ODCMO did not publish the FY 2013 and FY 2014

DoD SCOA guidance in suficient time to allow OASA(FM&C) to provide recommendedGCSSArmy changes for the PMO to implement. The FY 2013 DoD SCOA guidancewas published on November 15, 2012, 45 days after the beginning of FY 2013,and the FY 2014 DoD SCOA guidance was published on April 11, 2014, 192 days

Thecurrent

version of theguidance doesnot impose an

implementationdeadline.


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after the beginning of FY 2014. To ensure OASA(FM&C) and PMO personnel cancomply with guidance in a timely manner, the USD(C)/CFO, in coordination withthe DCMO, should publish annual SFIS account attributes, DoD SCOA, and TransactionLibrary guidance by the beginning of each iscal year.

Furthermore, OUSD(C)/CFO and ODCMO personnel did not validate that GCSSArmyhad implemented over 300 changes to the DoD SCOA since FY 2011. DoDFMR, volume 1, chapter 1, states that OUSD(C)/CFO is responsible for ensuringDoD-wide compliance with applicable accounting policy, standards, and principles,which would include validating GCSSArmy compliance with the DoD SCOA. ODCMOcompleted an initial SFIS validation of GCSSArmy on October 27, 2011, to supportOUSD(C)/CFOs inancial improvement efforts and has not performed a subsequentrevalidation of changes. Consequently, OUSD(C)/CFO and ODCMO have not validatedGCSSArmy implementation of the 154 changes in the FY 2012 DoD SCOA or

the 162 changes in the FY 2013 DoD SCOA. To ensure compliance with annualguidance, the USD(C)/CFO, in coordination with the DCMO, should develop andimplement a process for the annual validation of the GCSSArmy COA to ensurecompliance with current DoD SCOA guidance.

Unable to Defne System Posting Logic

OASA(FM&C) and PMO personnel did not require the GCSSArmy contractor todevelop and provide the systems posting logic. USD(C)/CFO Memorandum,Department of Defense Standard General Ledger Account Alignment andExemption Guidance, June 3, 2013, required inancial systems to processtransactions according to posting logic in the Transaction Library. In addition,Ofice of Federal Financial Management, Core Financial System Requirements,January 2006, required core inancial systems to provide automated functionality10to deine standard transactions consistent with USSGL posting rules. TheFFMIA requires agencies to implement and maintain inancial systems that complysubstantially with the Federal inancial management system requirements. TFM,chapter 9500, Revised Federal Financial Management System Requirements forFY 2014 Reporting, revised Core Financial System Requirements, but requiredsystems to capture account transaction information consistent with Treasuryaccount transaction codes. Although these requirements clearly articulate theneed for inancial systems to be able to demonstrate posting logic compliancewith Treasury and DoD standards, PMO personnel stated that Army issued the

10 An automated funconality is a task performed by the system without manual intervenon.


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12 DODIG-2014-104

development contract without the requirement forthe contractor to develop an automated functionalityto deine the systems posting logic. Consequently,GCSSArmy does not have the automated functionalityto deine or verify its posting logic.

OASA(FM&C) and the PMO are responsible for ensuringthat GCSSArmy complies with applicable inancial systemrequirements, and OUSD(C)/CFO and ODCMO are responsible for validating thesystems compliance. Without the capability to produce an automated functionalityto deine the systems posting logic, DoD and Army personnel would have to reviewa signiicant number of GCSSArmy transactions occurring during any given periodand compare the posting logic to the Transaction Library to validate the posting logic.

The DoD OIG has issued multiple reports identifying the Armys need for anautomated functionality to deine system posting logic for its ERP systems.Speciically, DoD OIG Report No. DODIG-2011-015, Insuficient Governance OverLogistics Modernization Program System Development, November 2, 2010, andDoD OIG Report No. DODIG-2013-130, Army Needs to Improve Controls and AuditTrails for the General Fund Enterprise Business System Acquire-to-Retire BusinessProcess, September 13, 2013, found that two Army ERP systems, the LogisticsModernization Program and GFEBS, did not have this automated functionality.Logistics Modernization Program personnel stated they did not have the $265,000

available to develop this automated functionality. GFEBS personnel created amanually developed posting logic document to demonstrate how GFEBS postedtransactions. However, the DoD OIG reported that the manually developed postinglogic document did not accurately relect what was occurring in GFEBS. Sincethe completion of the GFEBS audit, OASA(FM&C) has provided multiple manuallydeveloped posting logic documents, and DoD OIG auditors have continued to identifydeiciencies with them.

As Army personnel prepare to meet the FYs 2014 and 2017 auditability deadlines,

they will have to develop a process for Army management and auditors to verifyhow transactions post in GCSSArmy. When DoD OIG auditors inquired into thecost of developing an automated functionality to deine the system posting logic,OASA(FM&C) representatives responded that they were not aware of an analysisto determine the cost of implementing this automated functionality to deine theGCSSArmy posting logic. The Army should consider conducting a cost-beneitanalysis of developing this automated functionality in GCSSArmy or spending

GCSSArmydoes not havethe automatedfunctionality to

deine or verify its

posting logic.


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resources each year to perform an analysis similar to the analysis theDoD OIG auditors performed on the 786,092 transactions. The cost-beneit analysisshould also take into consideration that future GCSSArmy posting logic analyseswould include signiicantly more transactions, because PMO personnel conservativelyestimate that GCSSArmy will produce 39 million transactions annually or3.3 million monthly when fully deployed. Figure 2 illustrates the increase in thenumber of transactions during FY 2013 and the projected monthly volume whenthe Army fully deploys GCSSArmy.

Figure 2. Volume of GCSSArmy Transactions Will Increase Signiicantly

Source: Based on GCSSArmy transacons in the rst three quarters of FY 2013 and a PMO esmateof the number of transacons that will occur when the Army fully deploys GCSSArmy. The3.3 million Fully Fielded transacons is the 39 million esmated annual transacons divided by12 months.

With an automated functionality to deine GCSSArmy posting logic, DoD andArmy management should be able to verify whether GCSSArmy providescomplete, reliable, consistent, timely, and accurateinancial information. In addition, it would help

auditors more eficiently and effectively determinewhether GCSSArmy complied with inancialsystem requirements. If auditors cannot verifyposting logic through use of an automatedfunctionality, they will have to test moretransactions, which will be costly. An automated

-

100,000

200,000

300,000

400,000

500,000

Transactions

100,000

200,000

300,000

3,200,000

3,300,000

Anautomateddemonstration of

compliance with inancialreporting requirements . . .should reduce the overall

number of transactionsindependent auditors would

have to test in inancialstatement audits.


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demonstration of compliance with inancial reporting requirements, combinedwith effective system controls, should reduce the overall number of transactionsindependent auditors would have to test in inancial statement audits. TheASA(FM&C), in coordination with the GCSSArmy Product Manager, shoulddevelop an automated functionality for demonstrating the account postings foreach business event in GCSSArmy.

Posting Logic Did Not Attain the Same Results as the

Transaction Library

OASA(FM&C) and PMO personnel did not ield GCSSArmy with the posting logicnecessary to attain the same results as the Transaction Library. While GCSSArmyis not required to store and maintain the exact DTC used in the Transaction Library foreach transaction, it is required to maintain a COA and use posting logic that

attains the same results as the Transaction Library for each business event. In theabsence of an automated functionality to deine the systems posting logic,166 unique account combinations represented account groupings that shouldhave been consistent with one or more DTCs in the Transaction Library.

Of the 166 unique account combinations identiied, PMO personnel identiiedDTCs for 107 combinations but were unable to crosswalk the remaining59 combinations to DTCs in the Transaction Library. Inaddition, PMO personnel stated that 43 of these

59 account combinations were unexpected andshould not have occurred in the system, affecting7,899 transactions totaling $18.1 million.On April 9, 2014, PMO personnel created ahelpdesk ticket to correct the 43 combinationsthat should not have been occurring. Theystated this change would correct the transactionsthat had already occurred along with the posting logicfor future transactions.

PMO personnel explained that the remaining 16 account combinations werenecessary to accommodate GCSSArmy unique transactions. These combinationsdeviated from Treasury and DoD guidance, but OASA(FM&C) and PMO personneldid not submit documentation to the OUSD(C)/CFO for review as required byTreasury guidance. On April 18, 2014, PMO personnel notiied OASA(FM&C) of thenecessary account combinations for DoD and Treasurys review. Table 2 illustratesthe PMOs attempt to crosswalk the 166 account combinations to DTCs in theTransaction Library.

PMO

personnelstated that 43 of these59 account combinations

were unexpected andshould not have occurred in

the system, affecting7,899 transactions

totaling$18.1 million.


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Table 2. Results of the PMOs Effort to Crosswalk Transactions to DTCs

PMOs DiagnosisNo. of

CombinaonsNo. of

TransaconsAmount

(millions)

Compliant with the TransaconLibrary

107 611,538 $ 941.2

Should Not Be Occurring 43 7,899 18.1

Provided Juscaon 16 166,655 549.2

Total 166 786,092 $1,508.5

Source: PMO personnel provided the informaon presented in PMOs Diagnosis and No. ofCombinaons columns. Auditors obtained the transacons and related amounts from GCSSArmy.

While PMO personnel identiied DTCs for 107 account combinations as compliantwith Treasury and DoD guidance, the work completed to identify these 107 DTCswas unreliable. In various instances, PMO personnel provided DTCs for an account

combination that did not match the accounts required in the Transaction Library.For example, PMO personnel crosswalked one account combination, which occurred2,565 times in the system, to two DTCs.11 Although the Transaction Libraryrequired the use of at least eight accounts for each of these DTCs, GCSSArmy usedonly two accounts, an increase in Expenses (account 6790.9000) and a decrease inAccounts Receivable (account 1310.9000). When questioned about the accuracy ofthe crosswalk, PMO personnel provided a different DTC for the account combinations.While the new DTC matched the account combinations, it took PMO personnel149 days to correctly identify the DTC for this account combination. To help ensure

audit readiness, PMO personnel need to provide supporting documentation timely.

PMO personnel provided inal results of their review of the 166 account combinationson March 4, 2014. This was 253 days after auditors initially requested a review. Thereview identiied similar deiciencies in the account combinations, and GCSSArmywas unable to attain the same results as the Transaction Library for eachbusiness event.

11 PMO personnel crosswalked this transacon to DTCs C136-004-13 and C138-001-21.


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PMO personnel could not conirm compliance with DoD guidance in a timelymanner due to the lack of a crosswalk between the system transactions andtheir corresponding DTCs. OASA(FM&C) and PMO did not have a process forreviewing posting logic compliance with Treasury and DoD guidance. The

ASA(FM&C), in coordination with the GCSSArmy ProductManager, should create and maintain a crosswalk

between account combinations occurring in the systemand the DTCs they support. In addition, theASA(FM&C), in coordination with the GCSSArmyProduct Manager, should formalize and expand theannual review process for GCSSArmy to ensure

the system posting logic complies with Treasury andDoD guidance and request approval from DoD for any

deviations from the Transaction Library guidance.

Furthermore, the FFMIA, CFO Act, and DoD FMR, volume 1, chapter 1,addresses OUSD(C)/CFOs responsibility for ensuring GCSSArmy complies withaccounting policy, standards, and principles and internal control standards. Toaddress its responsibilities, the OUSD(C)/CFO must ensure GCSSArmy usesposting logic that attains the same results as the Transaction Library, as requiredby the USD(C)/CFO Memorandum, Department of Defense Standard GeneralLedger Account Alignment and Exemption Guidance, June 3, 2013. As part of theSFIS validation completed on October 27, 2011, ODCMO reviewed the posting logic

of 10 GCSSArmy transactions to baseline the system. However, ODCMO personnelstated that they would not review the posting logic again until PMO personnel notifyODCMO that a system change request has occurred. To ensure the implementationof annual changes to the Transaction Library, and to comply with the FFMIA,CFO Act, and DoD FMR, the USD(C)/CFO, in coordination with the DCMO, shoulddevelop and implement a process for the annual validation of GCSSArmyposting logic to ensure compliance with Treasury and DoD guidance. Thisprocess should include a mechanism for review and approval of deviationsfrom the Transaction Library. Furthermore, the USD(C)/CFO, in coordination

with the DCMO, should ensure the Transaction Library is complete andcontains all necessary GCSSArmy transaction combinations affecting the DoDinancial statements.

OASA(FM&C)and PMO did

not have a processfor reviewing postinglogic compliance with

Treasury and DoDguidance.


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Incorrect Posng Logic

OASA(FM&C) and PMO personnel did not conigure GCSSArmy to correctly posttransactions for three accounts that affect the Statement of Budgetary Resources.DoD FMR, volume 1, chapter 7, United States Standard General Ledger,

June 2009, required inancial systems, including GCSSArmy, to process transactionsaccording to the posting logic in the Transaction Library. Speciically, GCSSArmyprocessed transactions for accounts 4170.9000, 4190.9000, and 4610.9000 usingposting logic that was noncompliant with the Transaction Library. This incorrectuse of posting logic resulted in $703.7 million of abnormal balances, or 23.5 percent,of the $3.0 billion GCSSArmy fourth quarter FY 2013 Trial Balance.

The FY 2012 DoD SCOA required entities to stop using account 4170.9000,Transfers-Current-Year Authority, and begin using detail-level accounts

4170.3102, Transfers-Current-Year Authority Transfers In, and 4170.3103,Transfers-Current-Year Authority Transfers Out. In addition, the FY 2012 DoDSCOA disallowed reporting entities from using account 4190.9000, TransfersPrior-Year Balances, in favor of accounts 4190.3102, Transfers-Prior-YearBalances Transfers In, and 4190.3103, Transfers-Prior-Year Balances TransfersOut. Because these accounts were not approved for DoDuse, the FYs 2012 and 2013 Transaction Libraries didnot prescribe any valid transactions using the.9000 accounts. According to an OUSD(C)/CFO

representative, the .9000 accounts did not providethe appropriate level of detail for inancial reports,including the Standard Form 133, Report on BudgetaryExecution and Budgetary Resources,12 which rollsup to the Statement of Budgetary Resources.

Even though the FY 2012 DoD SCOA and Transaction Library disallowed the useof accounts 4170.9000 and 4190.9000, GCSSArmy continued to post transactionsto them for almost 2 more years. In response to COA changes recommendedby OASA(FM&C) on January 7, 2013, PMO personnel blocked accounts 4170.9000and 4190.9000 and created accounts 4170.3102 and 4190.3103 on August 30, 2013,to record transfers in and transfers out. According to PMO personnel, they usedArmy guidance in the Zero Balance Guide in an attempt to change GCSSArmyposting logic without causing abnormal balances. Even though PMO personnel

12 The Standard Form 133 displays budgetary resources and their status, changes in obligated balances, and outlays.

Accordingto an OUSD(C)/

CFO representative,

the .9000 accountsdid not provide theappropriate level ofdetail for inancial

reports


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Finding

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stated they followed this guidance, $456.1 million of the $703.7 million ofabnormal balances resulted when PMO personnel remapped transactions fromthe .9000 to the .3102 and .3103 accounts and transferred the account balances.The ASA(FM&C), in coordination with the GCSSArmy Product Manager, shouldreview guidance in the Zero Balance Guide, along with any other guidance relevantfor correcting posting logic issues, to ensure the guidance correctly outlines aprocess for remapping accounts without causing abnormal balances.

According to an OUSD(C)/CFO representative, the DoDneeds to report transfers in (.3102) and transfersout (.3103) as unique items. However, for accounts4170 and 4190, PMO personnel programmedthe system to use only one transfer account,regardless of whether the transaction was a

transfer in or out. Without the ability to reporttransfers in and transfers out as unique items,DoD may not have the information required toprepare the Standard Form 133, which could cause amisstatement of the Statement of Budgetary Resources.

OASA(FM&C) and PMO personnel also used incorrect posting logic onaccount 4610, Allotments-Realized Resources, causing abnormal balances of$247.6 million. According to PMO personnel, the abnormal balance occurred

when GCSSArmy automatically transferred fourth quarter allotments toaccount 4650, Allotments-Expired Authority, to prevent further obligations orcommitments during year-end closing. An abnormal balance in account 4610indicates obligations or commitments in excess of authority. Army uses account 4610to prepare the Standard Form 133. Incorrect posting logic could cause amisstatement of the Statement of Budgetary Resources. The ASA(FM&C), incoordination with the GCSSArmy Product Manager, should publish guidanceoutlining a process for performing year-end closing activities without causingabnormal balances in the affected accounts.

For accounts4170 and 4190,PMO personnel

programmed the systemto use only one transferaccount, regardless of

whether the transactionwas a transfer in

or out.


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Inadequate System Controls

DoD and Army management did not have adequatecontrols, including procedures and annual reviews,in place to ensure GCSSArmy compliance

with Treasury and DoD guidance. Speciically,OASA(FM&C) and PMO personnel did not havea complete, formalized annual review process toensure compliance with Treasury and DoD guidance.Furthermore, OUSD(C)/CFO personnel did not fulilltheir oversight responsibilities to ensure and validatesystem compliance with Treasury and DoD guidance,as prescribed in the FFMIA, CFO Act, and DoD FMR, volume 1,chapter 1 and volume 6A, chapter 2.

OUSD(C)/CFO personnel disagreed that their oversight and system complianceresponsibilities included ensuring and validating compliance with Treasury andDoD guidance and stated their only system oversight responsibility was to issueaccount attribute, COA, and posting logic guidance. Although DoD FMR,volume 1, chapter 1, requires OUSD(C)/CFO to ensure the system complies withapplicable accounting policy, standards, and principles and internal controlstandards, OUSD(C)/CFO personnel explained it is the PMOs responsibility tovalidate and self-certify compliance with Treasury and DoD guidance.

However, pursuant to Paragraph 205(a) of the CFO Act, USD(C)/CFO shall developand maintain an integrated agency accounting and inancial management system,including inancial reporting and internal controls, which complies with applicableaccounting principles, standards, and requirements, and internal control standards.By deinition, GCSSArmy is part of that integrated inancial management system.Therefore, USD(C)/CFO is responsible for GCSSArmy compliance. Finally, eventhough OUSD(C)/CFO personnel stated that ensuring and validating systemcompliance with Treasury and DoD guidance is not their responsibility, they also

stated they are considering using independent public accounting irms to performSFIS validations for ERPs. The decision to consider other options, such asindependent public accounting irms, resulted from ODCMOs lack of adequateresources to validate GCSSArmy compliance with applicable guidance.

OUSD(C)/CFO personnel

did not fulill theiroversight responsibilities

to ensure and validatesystem compliance with

Treasury andDoD guidance.


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Inadequate DoD Guidance

OUSD(C)/CFO and ODCMO personnel did not provide adequate account attribute,COA, or posting logic guidance.

Lack of Account Aribute GuidanceOUSD(C)/CFO and ODCMO personnel did not provide adequate guidance for theimplementation of SFIS account attributes.13 Speciically, OUSD(C)/CFO and ODCMOpersonnel did not provide SFIS account attribute guidance for 80 accounts in theDoD SCOA. In addition, they did not provide guidance identifying which of the46 SFIS account attributes with inancial impact were applicable to each accountin the DoD SCOA. This occurred because OUSD(C)/CFO and ODCMO personnelremoved the SFIS account attribute guidance from the FY 2013 DoD TransactionLibrary and replaced it with DDRS inancial reporting guidance, which was

inadequate. ODCMO personnel stated they removed the account attributes fromthe FY 2013 DoD Transaction Library because the account

attributes related solely to the account and not to thetransaction as a whole. However, deleting the accountattributes from the FY 2013 Transaction Library left avoid in account attribute guidance. OUSD(C)/CFO, incoordination with ODCMO, should annually develop

and publish SFIS account attribute guidance showingwhich account attributes are applicable to each DoD account.

Inconsistent Guidance

OUSD(C)/CFO and ODCMO personnel did not have adequate controls and processesto prevent inconsistencies between DoD and Treasury guidance. Speciically,there were:

202 instances where the Transaction Library did not match theDoD SCOA, and

47 instances where the Transaction Library did not matchTreasury guidance.

13 While neither OUSD(C)/CFO nor ODCMO publish guidance as to which SFIS account aributes were applicable to each

account, ODCMO personnel posted on their website guidance for reporng in DDRS.

Deletingthe account

attributes from theFY 2013 TransactionLibrary left a void in

account attributeguidance.


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The DoD SCOA and Transaction Library guidance establish the requirementsfor the implementation of the USSGL in DoD inancial systems and must beconsistent with Treasury guidance. OUSD(C)/CFO and ODCMO representativesstated OUSD(C)/CFO personnel participate on the Treasury Issue ResolutionCommittee, which provides a forum for discussing potential issues betweenTreasury and DoD guidance. However, OUSD(C)/CFO and ODCMO representativesdid not have formal processes for reviewing and ensuring the consistency andalignment of the three sets of guidance to Treasury guidance. Of the 249 instancesof inconsistency, OUSD(C)/CFO personnel:

corrected 225 instances in the FY 2014 DoD SCOA and Transaction Library.

stated 18 instances were errors in Treasury guidance and needed to becorrected. While OUSD(C)/CFO personnel communicated these instances

to Treasury and participated in the Treasury Issue Resolution Committee,these inconsistencies remained between the two sources of guidance inFY 2014 and should be resolved.

stated the remaining 6 instances were to be corrected with the issuanceof FY 2014 DoD guidance, but they were not. OUSD(C)/CFO personnelshould correct these inconsistencies.

OUSD(C)/CFO personnel stated these 249 inconsistencies in guidance did notdirectly affect GCSSArmy. Due to GCSSArmy PMOs inability to crosswalk all

GCSSArmy transactions to DTCs, the auditors were unable to determinewhether these inconsistent DTCs affected GCSSArmy transactions. Regardless,OUSD(C)/CFO personnel authorized systems to post transactions using theinconsistent DTCs, undermining the effectiveness of controls over DoD ERPs.This absence has the potential to affect the consistency of inancial informationprocessed in other DoD ERPs. The USD(C)/CFO, in coordination with theDCMO, should review and formalize the controls and processes for ensuring theDoD SCOA and Transaction Library guidance are consistent and align withapplicable Treasury guidance.

System Might Not Produce Reliable Informaon or

Correct Armys Material Weakness

The Armys inability to demonstrate that GCSSArmy can process inancialtransactions in accordance with Treasury and DoD guidance raises doubt as towhether the $725.7 million invested in GCSSArmy, as of February 2014, willresult in a system that can comply with FFMIA or assist the Army in:


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22 DODIG-2014-104

resolving the AGF Financial Management Systems material weakness,

meeting the FYs 2014 and 2017 auditability deadlines, or

obtaining a favorable audit opinion.

In addition, incorrect posting logic for three budgetary accounts, which the Armyuses to prepare the Statement of Budgetary Resources, resulted in abnormalbalances of $703.7 million, or 23.5 percent, of the $3.0 billion GCSSArmy fourthquarter FY 2013 Trial Balance.

Management Comments on the Finding and

Our Response

Although not required to comment, the Deputy Assistant Secretary of the Army

(Financial Operations) (DASA[FO]) provided comments on the inding. For summariesof the DASA(FO)s comments on the inding and our response, see Appendix C.

Recommendaons, Management Comments, and

Our Response

Recommendaon 1

We recommend that the Under Secretary of Defense (Comptroller)/Chief

Financial Oficer, DoD, in coordination with the DoD Deputy Chief

Management Oficer, comply with DoD Financial Management Regulation,

volume 1, chapter 1, which requires his Ofice to ensure system compliance

with accounting policy, standards, and principles and internal control

standards, through the following actions:

a. develop and implement processes to validate Global Combat Support

SystemArmy compliance by:

i. annually validating Global Combat Support SystemArmys

timely compliance with Treasury and DoD guidance for:

1. account attributes,

2. chart of accounts, and

3. posting logic.


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ii. reviewing and approving any deviations from the Transaction

Library.

iii. ensuring the Transaction Library is complete and contains all

necessary Global Combat Support SystemArmy transaction

combinations affecting the DoD Financial Statements.

Under Secretary of Defense (Comptroller)/Chief Financial Oficer Comments

The Deputy Chief Financial Oficer (DCFO), responding for the USD(C)/CFO, did notagree with the recommendations, stating that, in accordance with DoD guidancecontrolling defense business system investments, the Component pre-certiicationauthority is responsible for preparing the certiication of compliance withestablished requirements and functionality.

Our Response

The DCFOs response did not address the speciics of the recommendations. Weagree with the DCFO comment that the Army is responsible for GCSSArmycompliance with established requirements and certifying GCSSArmy compliancewith requirements. However, DoD FMR volume 1, chapter 1, requires theUSD(C)/CFO to ensure GCSSArmy compliance with requirements. Also, the CFOAct requires the USD(C)/CFO provide oversight of GCSSArmy, as part of theDoD inancial management system. However, the DCFO response did not addresshow they would ensure GCSSArmy compliance.

While the DCFO did not agree with the recommendations, the DCFO developeda plan of action that addresses Recommendation 1.a.i. The OUSD(C)/CFO andODCMO engaged the Joint Interoperability Test Command to perform conformancetesting of inancial management systems and address deiciencies reported inrecent DoD Inspector General reports on inancial management systems. The DCFOissued a memorandum titled DoD United States Standard General Ledger andStandard Financial Information Structure System Testing Requirement, datedJuly 14, 2014, outlining the testing initiative. On June 25, 2014, the OUSD(C)/CFO

briefed the Financial Improvement and Audit Readiness Subcommittee on the JointInteroperability Test Command Validation Program. The OUSD(C)/CFO presentationstated that, after the initial year of validation, the Joint Interoperability TestCommand will assess new requirements in subsequent years. Because DoDpublishes annual requirements, the assessment of new requirements will becompleted annually. The Joint Interoperability Test Command will test GCSSArmyin FY 2016.


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Finding

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The DCFOs comments did not address Recommendations 1.a.ii and 1.a.iii becausethey did not include any discussion of DoD Transaction Library deviations andcompleteness. Therefore, we request that the USD(C)/CFO provide furthercomments to the inal report addressing the review and approval of deviations fromthe Transaction Library and Transaction Library completeness by October 3, 2014.

b. publish the following guidance by the beginning of each iscal year with

a deadline for system implementation:

i. Standard Financial Information Structure account attribute,

ii. DoD Standard Chart of Accounts, and

iii. Transaction Library guidance.

Under Secretary of Defense (Comptroller)/Chief Financial Oficer CommentsThe DCFO, responding for the USD(C)/CFO, agreed, stating his ofice will publishupdated guidance for the SFIS, DoD SCOA, and Transaction Library annually, within45 days of release of annual updates to the TFM USSGL supplement. Systemowners will be instructed to implement the updated guidance at the beginning ofeach iscal year.

Our Response

The DCFOs comments addressed all speciics of the recommendations, and no further

comments are required.

c. develop and publish consistent Standard Financial Information

Structure account attribute, DoD Standard Chart of Accounts, and

Transaction Library guidance that aligns with applicable Treasury

guidance.


The DCFO, responding for the USD(C)/CFO, disagreed, stating that his ofice will

publish annual updates as indicated in their response to Recommendation 1.b.He stated that they already publish consistent guidance and cited speciicDoD FMR guidance that requires the DoD SCOA and Transaction Library to alignwith the TFM USSGL Supplement, Section I, USSGL Chart of Accounts, andTFM USSGL Supplement, Section III, USSGL Account Transactions, respectively.


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Our Response

The DCFOs response partially addressed the recommendation, as indicated inhis response to Recommendation 1.b, where he agreed to issue annual guidance.The DCFO comment that consistent standing guidance already exists is not

accurate. We agree the DoD FMR requires the DoD SCOA and Transaction Libraryto align with the TFM USSGL Supplement, Section I, USSGL Chart of Accounts, andSection III, USSGL Account Transactions, respectively. However, our reportpresented 249 instances where the standing annual DoD and Treasury guidancewere inconsistent, making this annual DoD guidance non-compliant with the DoDFMR and Treasury. As stated in the report, OUSD(C)/CFO and ODCMO personneldid not have adequate controls and processes to prevent inconsistencies betweenDoD and Treasury guidance. We request that the DCFO provide further comments tothe inal report by October 3, 2014, on what controls will be implemented to prevent

inconsistencies between DoD and Treasury guidance.

d. develop and publish annual Standard Financial Information Structure

account attribute guidance showing which account attributes are

applicable for each DoD account.


The DCFO, responding for the USD(C)/CFO, agreed, stating he is developingdocumentation which will identify appropriate SFIS data elements required to be

recorded for each account within the DoD SCOA.

Our Response

The DCFOs comments addressed all speciics of the recommendation, and no furthercomments are required.

Recommendaon 2

We recommend that the Assistant Secretary of the Army (Financial

Management and Comptroller), in coordination with the Global Combat

Support SystemArmy Product Manager:

a. formalize and expand the annual review process for Global Combat

Support SystemArmy to include a review of the timely compliance of:

i. account attributes,

ii. chart of accounts, and

iii. posting logic.


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Finding

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Assistant Secretary of the Army (Financial Management and

Comptroller) Comments

The DASA(FO), responding for the ASA(FM&C), agreed, stating that GCSSArmywill formalize and expand the annual review process to ensure timely compliance

of all COA guidance to include account attributes, COA, and posting logic. Healso stated that timely compliance and implementation is contingent uponthe timely receipt of the DoD SCOA from OUSD(C)/CFO. Finally, hestated that, by the end of FY 2015, account attributes and posting logicreviews will be performed concurrent with the completion of SFIS 10implementation and that Army will formalize and implement a process for acontinual review of account attributes and updates to posting logic documentsto ensure timely compliance.

Our ResponseThe DASA(FO)s comments addressed all speciics of the recommendations, and nofurther comments are required.

b. develop an automated functionality for demonstrating the account

postings for each business event in Global Combat Support

SystemArmy.

c. create and maintain a crosswalk between account combinations

occurring in the system and the DoD Transaction Codes they support.



The DASA(FO), responding for the ASA(FM&C), agreed with Recommendations 2.band 2.c. However, he responded that, in FY 2015, GCSSArmy personnel will launchan effort for a manually prepared and maintained posting logic document ratherthan develop an automated functionality. He explained that the Army was doubtfulthat a comprehensive automated posting logic functionality with built-in crosswalksto DoD transaction codes could be built in SAP, and if possible, such effort would

likely require prohibitive and costly outlays. He also stated a manually preparedand maintained posting logic document will crosswalk each business event to theTransaction Library/DoD Transaction Codes.


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Our Response

The DASA(FO)s comments partially addressed Recommendation 2.b and addressedall speciics of Recommendation 2.c. An automated functionality to demonstrateGCSSArmy posting logic document would be inherently more reliable and consistent

than a manually prepared posting logic document. The manual process proposedby the Army to produce the posting logic document introduces an increased risk oferrors. In addition, the DASA(FO)s comments indicate that the Army has concludednot to develop the automated functionality without determining whether it ispossible or the associated cost of development. We request that the ASA(FM&C)reconsider this position for Recommendation 2.b and provide further commentsto the inal report by October 3, 2014, indicating consideration for building theautomated posting logic in SAP. No further comments are required forRecommendation 2.c.

d. develop and implement a process to request approval from DoD for

any deviations from the Transaction Library guidance.



The DASA(FO), responding for the ASA(FM&C), agreed, stating that GCSSArmypersonnel implemented a process to request approval from DoD for any deviationsfrom the Transaction Library. He also stated that GCSSArmy has already submittedcurrently known deviations to DASA(FO) for approval.

Our Response

The DASA(FO)s comments addressed all speciics of the recommendation, and nofurther comments are required.

e. document a review of guidance in the Zero Balance Guide, along

with any other guidance relevant for correcting posting logic issues,

to ensure the guidance correctly outlines a process for remapping

accounts without causing abnormal balances.



The DASA(FO), responding for the ASA(FM&C), agreed, stating that, beginningin FY 2015, ASA(FM&C) will work with the GFEBS Project Manager and theGCSSArmy Product Manager to review and update current guidance in theZero Balance Guide.


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Finding

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Our Response

The DASA(FO)s comments addressed all speciics of the recommendation, and nofurther comments are required.

f. publish guidance for performing year-end closing activities inaccount 4610 without causing abnormal balances.



The DASA(FO), responding for the ASA(FM&C), disagreed, stating that fullimplementation of the recommendation will require a major change to the SAPsystem functionality that must also be implemented in GFEBS as well, if at all feasible,and at considerable cost to both systems. He explained that a normal (credit)balance existed in account 4610 throughout the year and until moments beforeSeptember 30 year-end close out and that this procedure is also a SAP systemstandard for all Federal Public Sector entities that handle single year quarterlyapportioned funds. The DASA(FO) stated the Army will reassess the postings todetermine if there are other alternatives that will not lead to abnormal balancesin account 4610. He stated that a review, in concert with GFEBS, will take place inFY 2015. However, he also stated there may not be an alternative through whichthis recommended change could be made to work or its cost could be justiied.

Our Response

The DASA(FO)s response did not address the speciics of the recommendation.We agree with the DASA(FO)s planned efforts to determine whether there is analternative through which closing activities in account 4610 could be made withoutcausing abnormal balances. However, the DASA(FO)s response did not addressthe publication of guidance for performing year-end closings in account 4610without causing abnormal balances. We request the ASA(FM&C) provide furthercomments to the inal report by October 3, 2014, on when ASA(FM&C) willpublish guidance for performing year-end closing activities in account 4610

without causing abnormal balances.


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Appendix A

Scope and Methodology

We conducted this performance audit from June 2013 through May 2014 in

accordance with generally accepted government auditing standards. Those standardsrequire that we plan and perform the audit to obtain suficient, appropriate evidenceto provide a reasonable basis for our indings and conclusions based on our auditobjectives. We believe that the evidence obtained provides a reasonable basis forour indings and conclusions based on our audit objectives.

We conducted site visits at Fort Bliss, Texas; Fort Irwin, California; and Fort Lee,Virginia, to interview Army Training and Doctrine Command, Forces Command,and Combined Arms Support Command personnel. We also communicated with

personnel from OUSD(C)/CFO, ODCMO, OASA(FM&C), Army PEO EIS, ArmyEnterprise Systems Integration Program-Program Management Ofice, GFEBSProgram Management Ofice, and the Defense Finance and Accounting Service. Weobtained an understanding of the functional roles and responsibilities in relationto the creation and maintenance of the SFIS account attributes, DoD SCOA, andTransaction Library, along with the GCSSArmy COA and posting logic.

We requested PMO personnel provide a:

crosswalk between GCSSArmy account attributes and Treasury guidance.We tested 15 of the 21 GCSSArmy account attributes. For the other sixattributes, PMO personnel did not provide information timely for us toreview.

review of the 166 unique account combinations that we identiied andcrosswalk them to the appropriate DTCs.

We also examined GCSSArmy transactions for compliance with FY 2013 Treasuryand DoD guidance to determine whether the system provided DoD management with

reliable inancial information. Speciically, we examined:

15 account attributes against the universe of 786,092 transactions thatoccurred in the irst three quarters of FY 2013 to determine compliancewith applicable Treasury guidance,

the GCSSArmy COA to determine compliance with DoD SCOA guidance,


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166 account combinations representing the 786,092 transactions thatoccurred in the irst three quarters of FY 2013 to determine compliancewith Treasury and DoD guidance, and

the fourth quarter FY 2013 DDRS Trial Balance to determine whether

GCSSArmy transactions generated abnormal balances.

In addition, we compared the FY 2013 SFIS account attribute, DoD SCOA, andTransaction Library to identify any inconsistencies. We also compared these toapplicable Treasury guidance to identify any inconsistencies and determine whetherDoD guidance complied with Treasury guidance.

PMO personnel did not provide GCSSArmy information timely. The PMO tookan average of 46 days to provide requested documentation and information. Thisoccurred because the Army PEO EIS established a lengthy approval and coordination

process for GCSSArmy information requested by the auditors. This processinvolved 12 other DoD and Army organizations that needed to review and approveany documentation provided to the auditors. With the current approval process,Army will not be able to provide documentation in a timely manner to the auditors.

Use of Computer-Processed Data

To perform this audit, we used FY 2013 GCSSArmy transactional data, trialbalances, and COAs. We validated the accuracy of the GCSSArmy COA, account

attributes, and posting logic against guidance. We used this information todetermine whether the Army complied with Treasury and DoD requirementswhen developing and deploying GCSSArmy. Through this analysis, we identiiedaccounts, attributes, and transactions that did not comply with guidance. The datareliability issues we identiied are discussed in the inding. We determined thecomputer-processed data we used were suficiently reliable to support the audit indingand conclusions in this report.

Use of Technical Assistance

We did not use technical assistance in conducting this audit.


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Appendix B

Prior Coverage

During the last 5 years, the Government Accountability Ofice (GAO) and the DoD

OIG, and the U.S. Army Audit Agency (AAA) issued 27 reports related to GCSSArmyor SFIS. Unrestricted GAO reports can be accessed at http://www.gao.gov .Unrestricted DoD OIG reports can be accessed at http://www.dodig.mil/pubs/index.cfm.Unrestricted Army reports can be accessed at http://www.army.mil/aaa .

GAO

GAO Report No. GAO-13-557, DOD BUSINESS SYSTEMS MODERNIZATION: FurtherActions Needed to Address Challenges and Improve Accountability, May 2013

GAO Report No. GAO-12-685, DOD BUSINESS SYSTEMS MODERNIZATION:Governance Mechanisms for Implementing Management Controls Need to BeImproved, June 2012

GAO Report No. GAO-12-177T, DOD FINANCIAL MANAGEMENT: Challenges inthe Implementation of Business Systems Could Impact Audit Readiness Efforts,October 2011

GAO Report No. GAO-11-933T, DOD FINANCIAL MANAGEMENT: Improved Controls,

Processes, and Systems Are Needed for Accurate and Reliable Financial Information,September 2011

GAO Report No. GAO -11-684, DEPARTMENT OF DEFENSE: Further Actions Neededto Institutionalize Key Business System Modernization Management Controls,June 2011

GAO Report No. GAO-11-139, DEFENSE LOGISTICS: Additional Oversight andReporting for the Army Logistics Modernization Program Are Needed,November 2010

GAO Report No. GAO-11-53, DOD BUSINESS TRANSFORMATION: ImprovedManagement Oversight of Business System Modernization Efforts Needed,October 2010

GAO Report No. GAO-10-1059T, DEPARTMENT OF DEFENSE: Financial ManagementImprovement and Audit Readiness Efforts Continue to Evolve, September 2010


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GAO Report No. GAO-10-695, DEPARTMENT OF DEFENSE: Additional ActionsNeeded to Improve Financial Management of Military Equipment, July 2010

DoD IG

DoD IG Report No. DODIG-2013-130, Army Needs to Improve Controls and AuditTrails for the General Fund Enterprise Business System Acquire-to-Retire BusinessProcess, September 2013

DoD IG Report No. DODIG-2013-057, Enterprise Business System Was NotConigured to Implement the U.S. Government Standard General Ledger at theTransaction Level, March 2013

DoD IG Report No. DODIG-2012-140, An Unreliable Chart of Accounts AffectedAuditability of Defense Enterprise Accounting and Management System Financial

Data, September 2012

DoD IG Report No. DODIG-2012-111, Enterprise Resource Planning SystemsSchedule Delays and Reengineering Weaknesses Increase Risks to DoD's AuditabilityGoals, July 2012

DoD IG Report No. DODIG-2012-066, General Fund Enterprise Business SystemDid Not Provide Required Financial Information, March 2012

DoD IG Report No. DODIG-2012-051, Navy Enterprise Resource Planning SystemDoes Not Comply With the Standard Financial Information Structure andU.S. Government Standard General Ledger, February 2012

DoD IG Report No. DODIG-2011-015, Insuficient Governance Over LogisticsModernization Program System Development, November 2010

Army

AAA Report No. A-2012-0177-FMR, Examination of Federal Financial Management

Improvement Act ComplianceRequirements Baseline Revalidation: Global CombatSupport SystemArmy, September 2012

AAA Report No. A-2012-0153-FMR, Examination of the General Fund EnterpriseBusiness SystemFederal Financial Management Improvement Act Compliance:Examination Requirements Through Test Event 1.4.4, August 2012


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AAA Report No. A-2012-0123-FMR, Examination of Federal Financial ManagementImprovement Act Compliance Validation: Logistics Modernization Program SystemThird DeploymentSelected Requirements, July 2012

AAA Report No. A-2012-0090-FFM, Audit Readiness: Statement of Budgetary

ResourcesAppropriations Received, April 2011

AAA Report No. A-2011-0012-FFR, Examination of Federal Financial ManagementImprovement Act of 1996 ComplianceBusiness Processes: Global Combat SupportSystemArmy Release 1.1, October 2010

AAA Report No. A-2010-0187-FFM, General Fund Enterprise Business SystemFederal Financial Management Improvement Act Compliance: Examination ofRequirements Through Test Event 1.4.0, September 2010

AAA Report No. A-2010-0220-FFM, Examination of Federal Financial ManagementImprovement Act ComplianceRequirements: Logistics Modernization ProgramSystem, Third Deployment, September 2010

AAA Report No. A-2009-0224-FFM, Examination of Federal Financial ManagementImprovement Act ComplianceRequirements: Global Combat Support SystemArmyRelease 1.1, September 2009

AAA Report No. A-2009-0226-FFM, Examination of Federal Financial Management

Improvement Act ComplianceTest Validation: General Fund Enterprise BusinessSystem Release 1.2, September 2009

AAA Report No. A-2009-0231-FFM, General Fund Enterprise Business SystemFederal Financial Management Improvement Act Compliance: Examination of Release1.3 Functionality, September 2009

AAA Report No. A-2009-0232-FFM, General Fund Enterprise Business SystemFederal Financial Management Improvement Act Compliance: Examination of

Releases 1.4.1, 1.4.2, 1.4.3, and 1.4.4 Requirements, September 2009


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Appendix C

Army Comments on Findings and Our Response

The DASA(FO)s comments below discuss additional details and comments related to

the audit results and indings.

Management Comments on Insucient Implementaon of

Treasury and DoD Financial Reporng Requirements

The DASA(FO) commented that there is a signiicant time lag between publishingof USSGL requirements (which are updated at least annually) and publishingof corresponding SFIS updates. OSD(C)/CFO needs to have a process for thoseupdates to low into SFIS requirements and from there to DoD inancial systems,such as GCSSArmy. The current process, from Treasury adding or changingattributes to them being available in GCSSArmy, takes too long for the attributesto be available on October 1. Until DoD documents a process and the DoDIGaccepts that process, there will continue to be a disconnect between realityand expectation.

Our Response

We agree with the DASA(FO)s comments, and we addressed this issue inRecommendation 1.b, which was directed to OUSD(C)/CFO. The DCFO agreed

with the recommendation and outlined the action his ofice will take.

Management Comments on Account Aributes Not Compliant

with Treasury Guidance

The DASA(FO) stated that GCSSArmy will be upgraded with SFIS 9 on or beforeSeptember 30, 2014, and SFIS 10 later in FY 2015 in coordination with GFEBS. TheSFIS 9 updates will include rules that will not only remedy and correct the errorsnoted in four attributes, but will also bring GCSSArmy into SFIS 9 compliance.With the implementation of the SFIS 10 upgrade in late FY 2015, the Prior

Year Adjustment Code attribute will be captured and reported makingGCSSArmy 100 percent SFIS 10 compliant. When Army accomplishesSFIS compliance, GCSSArmy account attribute rules will comply with Treasuryguidance allowing GCSSArmy to process transactions and report correctly.


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Our Response

While the implementation of this account attribute guidance will not be completedtimely, we recognized in our report the Armys plan to become compliant. Wecommend the DASA(FO) for actions taken to upgrade GCSSArmy that are intended

to correct the attribute errors identiied during the audit and bring the systeminto compliance.

Management Comments on Account Inconsistencies With

DoD Guidance

The DASA(FO) stated that the current version of the Abnormal Balance Report isnot reliable and is being modiied with an updated GFEBS design that will improveits accuracy and relevance. The report will be updated in FY 2015. However, inaccordance with the audit recommendation, GCSSArmy has corrected NBIs on

14 of 16 accounts per DoD guidance. Accounts 3106 and 4190 with credit anddebit NBIs, respectively, the same as in GFEBS, are not in conformance withDoD guidance, which require debit in account 3106 and credit in account 4190.PMO personnel are not going to correct the NBI for these two accounts. The currentNBIs must remain so as to preserve master data alignment between the GFEBS andGCSSArmy systems and to ensure that all inancial accounting and reporting isconducted consistently, correctly, completely, accurately, and timely.

Our Response

We agree with Armys actions taken and plan to improve the accuracy and relevanceof the Abnormal Balance Report. However, the Army should request Treasuryand DoD approval of NBI guidance deviations for accounts 3106 and 4190,similar to the process set forth in Recommendation 2.d. ASA(FM&C) wouldsubmit an issue to the USSGL Board through the agencys USSGL representative[OUSD(C)/CFO] to seek approval for transactions not already considered.

Management Comments on Posng Logic Did Not Aain the

Same Results as the Transacon LibraryThe DASA(FO) disagreed with the comment that the work completed to identifyitems that were compliant with the Transaction Library was unreliable. Hestated that the auditors did not provide details in support of the comment and,therefore, this comment lacks balance. He concluded that if the auditors performedthe audit work in accordance with generally accepted auditing standards, therewould be no question as to the reliability of the GCSSArmy data. Finally, he


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explained that USSGL recognizes there are valid deviations from the guidance.However, the DoDIG has not recognized the uniqueness of the GCSSArmy ERPand has not taken into consideration nor examined the underlying business casethat has led to these valid deviations.

Our Response

We performed the audit in accordance with generally accepted governmentauditing standards for performance audits. We planned and performed the auditto obtain suficient, appropriate evidence to provide a basis for our indings andconclusions based on our objective. Generally accepted government auditingstandards deines reliability as referring to the consistency of results wheninformation is measured or tested and includes the concepts of being veriiableor supported. We obtained evidence showing three attempts by PMO personnel

to determine which transactions were compliant with DoD Transaction Libraryguidance and which were not. The number of compliant and non-complianttransactions signiicantly changed between attempts and this raised doubt as tothe reliability of the work completed. We recognize the dificulties PMO personnelexperienced attempting to determine whether posting logic is compliant withguidance. Implementation of our recommendations would reduce these dificulties.

We acknowl

Documents

IG GCSS Report