Opening the Books

The Defense Department has released its annual financial report covering the recently completed fiscal year 2010 period.

Deputy Defense Secretary Bill Lynn laid out the department's view of how finances were handled over the past 12 months:

In FY 2010 – while military operations continued in Afghanistan, Iraq, and elsewhere in the world – DoD launched an equally important battle: to improve efficiency, effectiveness, and cost-consciousness within its own organization. Initial efforts focused on ending or restructuring troubled or excess weapons programs. In FY 2010, about 20 programs were affected, with additional changes included in the FY 2011 budget request.

The savings were substantial. The Nation’s difficult economic and financial situation means, however, that additional changes will be needed so the Department can maintain the modest, real budget growth necessary to sustain current force structure and make additional investments in modernization.

An issue that has plagued DOD for years is the inability to produce a "clean" audit. The poor performance of the department's financial management systems is to blame. Further in the annual report, the department's inspector general alludes to this problem:

We are unable to express an opinion on the DOD Agency-Wide FY 2010 and FY 2009 Basic Financial Statements because of limitations on the scope of our work. Thus, the financial statements may be unreliable.