GAO recommends steps to improve Defense Department cost reporting

The U.S. Government Accountability Office (GAO) has made several recommendations to the U.S. Department of Defense (DOD) to better improve processes for reporting costs.

The GAO said that while the department has made progress in establishing valid and reliable cost baselines for its business operations, some limitations remain. The baselines included only labor and information technology costs because DOD’s financial data do not attribute costs to other specific activities required under section 921. DOD officials told GAO that they are refining baselines for all department’s enterprise business operations, such as financial and human resource management. GAO said the effort shows promise in addressing the weaknesses in DOD’s section 921 report and meeting the need for consistent baselines for DOD’s reform efforts.

That said, the GAO made several recommendations to improve the process. One, GAO said the Secretary of Defense should ensure that the chief management officer (CMO), Under Secretary of Defense, and the director of Cost Assessment and Program Evaluation (CAPE) establish a formal process that standardizes the development and documentation of cost savings. This should include any underlying analyses. The process should incorporate department-wide guidance and best practices for economic analysis.

The GAO also suggested that the Secretary of Defense should ensure that the CMO, Under Secretary of Defense, and Director of CAPE clarify the department’s definitions of reform and consistently report reform savings based on those definitions. Finally, the GAO recommended that the Secretary of Defense ensure that the CMO, Under Secretary of Defense, and Director of CAPE develop and institutionalize formal policies or agreements related to DOD reform and efficiency collaboration efforts.

The DOD concurred with GAO’s recommendations.