Reforming Defense Department business practices for greater performance and accountability is one of three lines of effort Defense Secretary James N. Mattis outlined when the National Defense Strategy was released earlier this year, two senior DoD officials told the Senate Budget Committee today.
DoD Comptroller David L. Norquist, the department’s chief financial officer, testified along with John H. Gibson II, DoD’s chief management officer, on DoD’s ongoing audit and business operations reform at the Pentagon.
“The third line of effort relates directly to the audit,” Norquist said, calling the audit an important component in the improvement of DoD business operations. “We anticipate auditor findings in many areas,” he told the senators. “That is why we are doing these audits — to find the problems and fix [them.]”
It is a long-term, meaningful and necessary undertaking that encompasses all of DoD, and its success depend on sustained congressional support, Norquist said. While audits are not new to DoD, he added, this is the first time the department has undergone a full financial statement audit.
“A financial statement audit is comprehensive; it occurs annually and it covers more than financial management,” he said. “Financial statement audits include verifying count, location and condition of our military equipment — real property and inventory.
“[The audit] involves testing security vulnerabilities in our business systems,” he continued. “It tests system compliance with accounting standards and validates the accuracy of our personnel records and actions, such as promotions and separations.”
DoD expects about 1,200 financial statement auditors who will assess whether its books and records present an accurate picture of DoD financial conditions and results of its operations, based on accounting standards, Norquist said. “However,” he noted, “we won’t have to wait for a clean opinion to derive benefits from the audit. The financial statement audit helps drive enterprisewide improvements to standardize our business processes and improve the quality of our data.”
DoD owes accountability to the American people, Norquist said, adding that transparency, accountability and business process reform are some of the benefits of the financial statement audit.
And as for transparency, the audit improves the quality of DoD’s financial statements and underlying data available to the public, including a reliable picture of its assets, liabilities and spending, he said.
Norquist said the DoD consolidated audit is likely to be the largest audit ever undertaken, and that it comprises more than 24 standalone audits in an overarching consolidated audit.
“Looking forward,” he said, “we will measure and report progress toward achieving a positive opinion on the audit, using the number of audit findings resolved.”
He thanked the committee members for their interest in, and focus on, DoD’s audit.
“I anticipate the audit process will uncover many problems, some of which will be frustratingly difficult to fix, but the alternative is to operate in ignorance of these problems and miss the opportunity to reform,” Norquist said. “We are committed to the audit and implementing the necessary reforms to be good stewards of the taxpayers’ dollars.”
Lower Ops Costs for Resources
To fund incremental resources, the military needs to achieve its mission requirements, Gibson told the committee. “We must lower our cost of operations to yield these resources,” he said. “The global challenges to our military remain significant, and to best equip our men and women in uniform to meet their mission, we must consider significant reforms in the department.”
Foundational to DoD’s vision of success in this area, he added, is the establishment of a culture of performance and productivity on an enduring, institutionalized basis. “The work we are all doing today becomes a benefit for the next generations of leadership and war fighters to come,” the chief management officer said.
“Knowing the challenges to any significant reforms, we are constantly fostering a sense of urgency, maintaining leadership alignment at all levels, communicating a consistent message, proactively removing obstacles, driving immediate wins and working to anchor all of this in long-term behavior and culture,” Gibson said.
As DoD’s processes mature, the department will form an integrated management board, he said, which will use relevant standard measures and goals, coupled with authorities to manage, enforce and institutionalize a culture of performance and productivity, all with the goal of continuous improvement in DoD’s business operations, he said.
Timely, Accurate Data
“Quality data is essential to good decision making, and we are working to improve the infrastructure to host and make available timely, accurate and relevant data across the enterprise,” Gibson told the Senate panel. He said DoD is also building a framework that reflects cost to support efficiency-driven decisions throughout the department.
The DoD financial audit is undertaking a “tremendous tool and serves as an invaluable piece to our reform efforts,” Gibson said. The audit process will improve the quality of DoD’s financial data, which is essential to good business decision making, and will also reveal business systems and processes that need to be reformed and can be incorporated into ongoing reform efforts, he said.
“By improving these business processes, we drive improved operational measures, such as timeliness, productivity and simplification,” he explained. “Many of these processes will have direct positive impacts on lethality.”
By addressing its reform projects, DoD also is looking outside of the department by incorporating the whole of government, Gibson said.
“As our efforts progress, we will be looking to Congress as a source of support,” he said. “And as with any board of directors, we believe Congress is our partner, understanding the shared risk in this incredibly robust and aggressive work. We intend to keep an ongoing dialogue with [committee members], our plans and progresses, and we’ll be seeking your input, feedback and assistance as some of our objectives will require mutual actions to achieve our goals.”
(Follow Terri Moon Cronk on Twitter: @MoonCronkDoD)