What We Did
Our overall objective was to determine whether amounts reported in the Defense Departmental Reporting System were supported by business processes in the Navy Enterprise Resource Planning (ERP) system for the Aircraft, Shipbuilding, and Weapons Procurement appropriations.
What We Found
Department of the Navy Office of Financial Operations officials did not use the Navy ERP system to support $416 billion in military equipment assets reported out of the Defense Departmental Reporting System-Audited Financial Statements. This occurred because Office of Financial Operations officials did not reengineer the business process to record military equipment assets in the Navy ERP system and did not use the asset management functionality for military equipment asset management in the Navy ERP system. As a result, Navy officials spent $870 million to implement the Navy ERP system and still did not correct the preexisting military equipment material weakness. In addition, the Navy’s unauditable military equipment assets increased the risk that DoD will not achieve its goal of audit readiness by FY 2017.
What We Recommend
We recommend that the Assistant Secretary of the Navy (Financial Management and Comptroller):
- reengineer the business process used to record military equipment and correct the existing material weakness in military equipment valuation and
- implement processes in the Navy Enterprise Resource Planning system to properly record and support military equipment assets in accordance with DoD Regulation 7000.14-R, “DoD Financial Management Regulation,” volume 4, chapter 6.
We recommend that the Department of the Navy Chief Management Officer require the Department of Navy Office of Financial Operations, in conjunction with the Navy Enterprise Resource Planning system Program Office, to develop a business process reengineering plan that accounts for military equipment assets, and considers the Navy Enterprise Resource Planning system as one of the possible solutions.
Management Comments and Our Response
The Acting Deputy Under Secretary of the Navy responded for the Navy Chief Management Officer and agreed with the recommendation. However, the Acting Deputy Under Secretary did not provide planned actions or actions taken. The Deputy Assistant Secretary of the Navy (Financial Operations) responded for the Assistant Secretary of the Navy (Financial Management and Comptroller) and agreed with the recommendations. However, the Deputy Assistant Secretary did not provide sufficient information on how the Navy was going to correct the military equipment valuation material weakness. Therefore, management comments were partially responsive. We request that the Assistant Secretary of the Navy (Financial Management and Comptroller) and the Navy Chief Management Officer provide additional comments by August 19, 2013.