DOD Financial Management: Additional Steps Needed to Guide Future Systems Transitions
Fast Facts
In October 2021, the Marine Corps transitioned to a new accounting system. While DOD remains the only large federal agency that hasn't achieved favorable financial audit statement results, small agencies in DOD that use the system have. And the Marine Corps did for FY 2023, signaling significant progress for DOD.
But the system's guidance doesn't require agencies to:
Include all costs or required work in cost and schedule estimates
Fully address leading practices for data migration and conversion or change management
As a result, the Marine Corps faced cost, scheduling, and other challenges. Our recommendations address these issues and more.
Highlights
What GAO Found
The Department of Defense (DOD) used selected leading practices in estimating cost and schedule and in measuring progress of the Marine Corps' migration to an accounting system known as the Defense Agencies Initiative but did not implement all practices. For example, although DOD documented program costs, it did not include all Marine Corps' transition costs in its $1.448 billion life cycle estimate. DOD also did not include all effort (e.g., work required) in its schedule estimate for the Marine Corps' transition to the Defense Agencies Initiative. Further, the Marine Corps did not fully develop performance metrics. Marine Corps officials stated that they followed standard procedures for DOD components transitioning to the Defense Agencies Initiative. However, those procedures do not call for components to include all costs in estimates, include all effort in schedule estimates, or establish comprehensive metrics. As a result, the Marine Corps underestimated the complexity and time required for its transition. The Marine Corps initially planned to move from a stabilization phase to normal operations by December 2021. However, it did not complete the stabilization phase and enter normal operations until February 2024.
Regarding data migration and conversion, the Marine Corps followed five leading practices and partially followed five others. For example, the Marine Corps developed a comprehensive conversion plan that included time frames, program scope, data for conversion, and system inputs and outputs, but did not develop plans for post-go-live data cleansing and quality activities (see table). For change management, the Marine Corps followed four practices and partially followed three others. For example, it communicated with stakeholders to manage commitment, but it did not directly assess stakeholder resistance to change.
GAO Assessment of the Marine Corps' Defense Agencies Initiative Data Migration and Conversion Efforts against Leading Practices for Relevant Phases
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Phases and number of practices |
GAO assessment |
|---|---|
|
Pre-conversion phase (four practices) |
●● ◐◐ |
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Cutover phase (four practices) |
● ◐◐◐ |
|
Post-installation/operations phase (two practices) |
●● |
Legend: ● = Consistent: Marine Corps provided evidence that it satisfied all relevant criteria. ◐ = Partially consistent: Marine Corps provided evidence that it satisfied some, but not all, of the relevant criteria.
Source: GAO analysis of Marine Corps and Defense Finance and Accounting Service migration documentation. | GAO-24-106313
The Marine Corps followed the Defense Agencies Initiative established procedures for its data migration and conversion and change management efforts, but these procedures did not fully incorporate leading practices. Until DOD ensures that the Defense Agencies Initiative standard operating procedures fully incorporate leading practices, DOD components transitioning to the Defense Agencies Initiative risk experiencing understated costs, schedule delays, and limitations in understanding their progress toward achieving their goals. Additionally, DOD components transitioning to the Defense Agencies Initiative risk experiencing systems and processing disruptions and may miss opportunities to identify and address change management issues.
Why GAO Did This Study
The Marine Corps migrated to a new financial management system as part of a broader DOD effort to improve its financial management and achieve an unmodified (clean) audit opinion. Specifically, the Marine Corps has transitioned from its legacy accounting system to the Defense Agencies Initiative. As of February 2024, the Marine Corps and four smaller DOD components that use the system have achieved clean audit opinions.
This report was developed in connection with GAO's audit of the U.S. government's consolidated financial statements. It examines the extent to which (1) DOD used leading practices in estimating cost and schedule and in measuring migration progress and (2) the Marine Corps followed data migration and conversion and change management leading practices for its transition.
GAO reviewed key program management documentation on cost, schedule, and performance; data migration and conversion; and change management. GAO compared DOD's and the Marine Corps' efforts to relevant leading practices. GAO also interviewed DOD program officials.
Recommendations
GAO is making 14 recommendations on cost, schedule, performance measures, data migration, and change management. DOD concurred with 13 of the 14; it concurred with comment on the remaining one. DOD added that, given its progress to date, selected recommendations could be consolidated, deleted, or closed. GAO maintains that each of the 14 recommendations is warranted.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, revise the DAI standard operating procedures to include all costs when developing future DAI cost estimates. This cost estimate should document all life-cycle costs, including costs associated with bringing new user components into the DAI system. (Recommendation 1) |
As of August 2024, the Department of Defense (DOD) has demonstrated that it addressed the intent of this recommendation. In July 2024, the department updated the Defense Agencies Initiative (DAI) Implementation Agreement to require an integrated cost estimate that includes all stakeholders' life-cycle costs associated with bringing new user components into the DAI system. As a result, the department is better positioned to understand the full scope of costs associated with the DAI system, limit the risk of cost overruns, and help ensure more effective and successful DAI implementations during future transitions.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the Marine Corps, and other DOD components, as appropriate, include all remaining effort in the schedule for the remaining tasks associated with the Marine Corps' full transition to DAI, which appropriately accounts for program complexity. This schedule should document all remaining effort needed to complete the Marine Corps' stabilization phase and transition to normal operations in DAI if the Marine Corps does not meet its planned completion date. (Recommendation 2) |
As of August 2024, the Marine Corps has demonstrated that it addressed the intent of this recommendation. As a result, we have closed this recommendation as implemented. The Marine Corps addressed this recommendation by completing its transition to normal operations in Defense Agencies Initiative (DAI) in February 2024 and demonstrating that it was tracking the status of open issues prior to its transition. In addition, the Marine Corps documented that it determined the remaining open issues met its criteria for transitioning to normal operations. Further, the Marine Corps demonstrated that it continued to monitor and prioritize ongoing and systemic issues that need to be resolved after transitioning into normal operations in DAI.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, develop schedule estimates for future user components migrating to DAI that include all new user components' efforts, activities, and complex financial transactions, and that identify DAI's capability to process those transactions. (Recommendation 3) |
As of January 2025, the Department of Defense (DOD) has demonstrated that it addressed the intent of this recommendation. In December 2024, DOD provided its updated Defense Agencies Initiative (DAI) Implementation Agreement template, DAI Data Conversion Plan, and DAI Standard Operating Procedure. These documents call for schedule estimates for future user components migrating to DAI to include all new user components' efforts, activities, and complex financial transactions, and identify DAI's capability to process those transactions. As a result, the department is better positioned to develop future schedule estimates that contribute to more effective and successful implementation of future DAI transitions.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, establish performance metrics for new user components that address all elements described by the leading practices discussed in this report. (Recommendation 4) |
As of January 2025, the Department of Defense (DOD) has demonstrated that it addressed the intent of this recommendation. In December 2024, DOD provided its updated Defense Agencies Initiative (DAI) Implementation Agreement template, DAI Data Conversion Plan, and DAI Standard Operating Procedure. These documents call for DOD components, as appropriate, to establish performance metrics for new user components that address the elements described by the leading practices discussed in our report, including compliance, process, and stakeholder acceptance. As a result, the department is better positioned to measure and understand their progress toward achieving its goals for future DAI transitions.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the Marine Corps, and other DOD components, as appropriate, establish comprehensive performance metrics for the Marine Corps' transition to DAI that address all elements described by the leading practices discussed in this report. (Recommendation 5) |
As of August 2024, the Marine Corps has demonstrated that it addressed the intent of this recommendation. As a result, we have closed this recommendation as implemented. The Marine Corps addressed this recommendation by completing its transition to normal operations in Defense Agencies Initiative (DAI) in February 2024 and demonstrating that it was tracking the status of open issues prior to its transition. In addition, the Marine Corps documented that it determined the remaining open issues met its criteria for transitioning to normal operations. Further, the Marine Corps demonstrated that it continued to monitor and prioritize ongoing and systemic issues that need to be resolved after transitioning into normal operations in DAI. While the Marine Corps did not document that it established comprehensive performance metrics for transitioning to DAI, the Marine Corps' transition to normal operations in the system and its tracking of open issues collectively address the recommendation's intent. Because the Marine Corps as now achieved normal operations in DAI, no further action is required.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, revise the DAI standard operating procedures for new user components migrating to DAI to include plans for post-go-live data-cleansing and quality activities. (Recommendation 6) |
As of January 2025, the Department of Defense (DOD) has demonstrated that it addressed the intent of this recommendation. In December 2024, DOD provided its updated Defense Agencies Initiative (DAI) Implementation Agreement template, which calls for new components migrating to DAI to plan for pre- and post-go-live data cleaning and quality operations. DOD also provided its updated DAI Data Conversion Plan, which calls for new user components to plan to address residual errors from data migration and conversion and unmatched transactions in DAI, consistent with the leading practices described in our report. As a result, the department is better positioned to test converted data, make needed corrections, and establish reliable data in the system for more effective and successful implementation of future DAI transitions.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, revise the DAI standard operating procedures for new user components migrating to DAI to include a requirement to, as feasible, trace data to an auditable source before migration to better inform data migration and conversion efforts. (Recommendation 7) |
As of August 2024, the DOD has demonstrated that it addressed this recommendation. In July 2024, the department updated the Defense Agencies Initiative Implementation Agreement to require data tracing to an auditable source where such tracing is feasible. As a result, the department is better positioned to reduce the risk of a new component migrating unreliable data to DAI.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, revise the DAI standard operating procedures for new user components migrating to DAI to include a backup plan, or other contingency plan, in case the DAI failed to operate as expected, as part of the cutover plan. (Recommendation 8) |
As of August 2024, the DOD has demonstrated that it addressed this recommendation. In July 2024, the department updated the Defense Agencies Initiative (DAI) Implementation Agreement to require a backup plan in case the DAI system fails to operate as expected during a component's transition to DAI. As a result, the department is better positioned to prevent disruptions to systems and processing for new components migrating to DAI.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, revise the DAI standard operating procedures for new user components migrating to DAI to require realistic data conversion goals for performance metrics in their conversion plans. (Recommendation 9) |
As of January 2025, the Department of Defense (DOD) has demonstrated that it addressed the intent of this recommendation. In December 2024, DOD provided its Defense Agencies Initiative (DAI) Implementation Agreement, which requires new components transitioning to the DAI system to establish realistic data conversion goals for performance metrics in their data conversion plans. DOD also provided its updated DAI Data Conversion Plan, which addresses how new components transitioning to DAI are to determine realistic data conversion goals, as discussed in our report. As a result, the department is better positioned for new user components migrating to DAI to use realistic data conversion metrics and goals to monitor and inform future migration decisions.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, revise the DAI standard operating procedures for new user components migrating to DAI to require components to compare and reconcile DAI output reports with legacy output reports. (Recommendation 10) |
As of August 2024, the DOD has demonstrated that it has addressed this recommendation. In July 2024, the department updated the Defense Agencies Initiative (DAI) Implementation Agreement to require the new components migrating to the DAI system to have cutover plans that compare and reconcile DAI output reports with legacy output reports. As a result, the department is better positioned that the new components migrating to DAI will adequately reconcile converted data to DAI.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO and other DOD components, as appropriate, revise the DAI program standard operating procedures for new user components migrating to DAI to require the completion and documentation of a change readiness assessment. Such an assessment should include focus groups, surveys of change readiness, and interviews with leadership. (Recommendation 11) |
As of August 2024, the DOD has demonstrated that it addressed this recommendation. In July 2024, the department updated the Defense Agencies Initiative (DAI) Implementation Agreement to require new components migrating to the DAI system complete and record a change readiness assessment, and include focus groups, change readiness questionnaires, and leadership interviews as part of its assessment. As a result, the new components will be better positioned to manage the changes associated with migrating to DAI.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO and other DOD components, as appropriate, revise the DAI program standard operating procedures for new user components migrating to DAI to require that they complete and document a stakeholder readiness assessment. Such an assessment should include identifying and assessing key stakeholder groups by common characteristics, communication needs and preferences, and learning styles. (Recommendation 12) |
As of January 2025, the Department of Defense (DOD) has demonstrated that it addressed the intent of this recommendation. In December 2024, DOD provided its updated its Defense Agencies Initiative (DAI) Implementation Agreement template. The agreement calls for new users to complete and document a stakeholder readiness assessment, including addressing stakeholder concerns related to business process reengineering, as feasible. Further, DOD also provided its DAI Standard Operating Procedure, which calls for new components transitioning to DAI to identify and assess stakeholder groups by common characteristics, communication needs and preferences, and learning styles. As a result, the department is better positioned for future components transitioning to DAI to identify and address change management issues.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the DAI program, and other DOD components, as appropriate, revise the DAI program standard operating procedures for new user components migrating to DAI to require that future user components ensure that stakeholder concerns, including those related to business process reengineering, are fully addressed. (Recommendation 13) |
As of August 2024, the DOD has demonstrated that it addressed the intent of this recommendation. In July 2024, the department updated the Defense Agencies Initiative (DAI) Implementation Agreement to require new users to complete and document a stakeholder readiness assessment including addressing stakeholder concerns related to business process reengineering as feasible. As a result, the new component's will be better positioned to address stakeholder's concerns related to the new system and the associated business process reengineering with migrating to DAI.
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| Department of Defense | The Secretary of Defense should ensure that the USD(C)/CFO, the Marine Corps, and other DOD components, as appropriate, engage all DAI stakeholders; focus on identifying and addressing all barriers to change, including those barriers unrelated to processing financial transactions; and log communications with stakeholders. (Recommendation 14) |
As of January 2025, the Department of Defense (DOD) has demonstrated that it addressed the intent of this recommendation. DOD stated that the Marine Corps transitioned to normal operations in the Defense Agencies Initiative (DAI) in February 2024. In addition, DOD provided documentation (e.g., meeting logs and meeting minutes) indicating that the Marine Corps engages and plans to continue to engage with key internal and external DAI stakeholders and partners through multiple platforms after its transition to normal operations in the system. Further, DOD provided documentation demonstrating that the Marine Corps continues to engage with key stakeholders and partners and that it seeks to identify and address all barriers to change, including those barriers unrelated to processing financial transactions. In addition, DOD demonstrated that it logs communications with stakeholders thorough its meeting minutes and other associated documentation. As a result, the Marine Corps is better positioned ensure stakeholder concerns are addressed, including concerns related to business process reengineering, and identifying and addressing all barriers to change, including those barriers unrelated to processing financial transactions.
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