For Defense, Crunching the Numbers Is Half the Battle
By Stephen Barr
Monday, May 12, 2008; D01
It has more than 3 million employees, more than 600,000 buildings and does business in 134 countries.
Those are some of the numbers that define the Defense Department, a megacorporation with lines of business and obligations that go far beyond war fighting.
“We do everything from floor waxing to repairing vehicles to accounting to logistics operations to running grocery stores,” said Tina W. Jonas, the department’s comptroller and chief financial officer.
From her Pentagon office, Jonas is responsible for the department’s financial management policies, the computer systems that track $3.4 trillion in assets and liabilities, an annual budget of more than $600 billion and efforts to modernize business practices.
There are big-ticket items, like health care, which costs $43 billion a year — “about $3 billion more than Germany spends on its entire defense budget,” Jonas said — and is likely to keep on increasing, to a projected $64 billion in 2015.
And there’s the daily grind of managing cash flow. For example, every time the price of fuel goes up by $1, it costs the department $130 million, she said.
“When you get to this level, pretty much everything that walks through your door is going to be a problem,” Jonas said during a recent interview. “So what you have to have is a mind-set to be a problem solver and figure out a corrective action plan.”
Jonas was sworn in as an undersecretary of defense in July 2004, after serving as an assistant director and chief financial officer for the FBI. She also has worked as a budget examiner at the Office of Management and Budget and as a staff member on the House Appropriations Committee.
Her job is one of the toughest in the government. The Pentagon has been widely criticized for years on Capitol Hill and by think tanks for poor management, cost overruns, improper payments and payroll problems. The Government Accountability Office designated the department’s financial management as an area of “high risk” in 1995.
Jonas, however, thinks the department is making substantial progress in financial management. She has created a “dashboard” on her desk — two flat-screen monitors that display trend data on dozens of accounts over multiyear periods.
“We look at our numbers and say, ‘We’re not doing too hot today,’ or, ‘What are we doing about this problem that is emerging?’ or, ‘The trend doesn’t look good here,’ ” she said.
One dashboard chart shows Jonas the percentage of debt more than 60 days old because of unpaid bills from “purchase cards,” a government credit card used by federal employees for official business. The delinquency rate is about 4 percent, down from nearly 7 percent in 2001.
Another chart shows that unsupported accounting entries have been reduced from $2.3 trillion in 1999 to $95.7 billion at the end of last year. The goal is to make sure all financial information is documented, putting to rest allegations that the department can’t find or track its money, Jonas said.
According to the dashboard, the Army’s account for military salaries and other expenses will run out of money by June 15. Jonas will likely have to transfer funds from other accounts if a supplemental spending act does not take effect in time.
“It drives me a bit crazy when people say the department’s books are all messed up and we don’t know what the heck is going on,” Jonas said. “We do know what is going on.”
Part of the department’s accounting woes can be attributed to outdated technology. Some computers in the field still run on old COBOL program language, operating like a checkbook register showing money in and money out, but incapable of connecting to a department-wide system that generates financial statements.
By June, Jonas hopes to have deployed new accounting codes and a software language that pulls together the department’s 2,900 accounting systems.
Next year, Jonas predicts that two-thirds of the department’s assets and liabilities will be ready for independent audits, a major step on the road to producing a department-wide financial statement that adheres to generally accepted accounting principles.
Jonas also has moved to cut operating overhead. The Defense Finance and Accounting Service, which once had 22,000 employees, is down to 13,000 and will shrink to 7,000. With the reductions and improvements in technology, the department has saved $500 million in operating costs.
Such savings “in the back office,” Jonas said, make millions of dollars available for the armed forces. “It matters to the soldiers, it matters to the Marines, it matters to the airmen, it matters to the sailors, and all their families and all our defense workers whether or not we are efficient.
“So at least we are trying to change the culture, and we think we’ve made some good progress.”
Stephen Barr’s e-mail address is email@example.com.