Pentagon at 'midfield' in bid for clean books, officials say

Invoking a Washington Redskins football metaphor, Pentagon Comptroller Robert Hale said the Defense Department is at “midfield” in its effort to meet deadlines for auditability of its financial statements, “but we’ve just got Robert Griffin III, and we’ve got the ball and we’ve got momentum,” he told a House panel Friday.

The department and all the military services are struggling to meet a congressional requirement for clean books by 2017, along with a tighter deadline of 2014 laid down by Defense Secretary Leon Panetta. At a hearing before the House Armed Services Oversight and Investigations Subcommittee, Chairman Rob Wittman, R-Va., asked five top officials for progress reports on the efforts of a department with, he noted, $700 billion in net operating costs and $12 trillion in assets.

Hale said he was “reasonably confident” of meeting the twin goals, but added he could make no guarantees. “We’ve been humbled by what’s coming in the next two years, and we’ve overpromised and underdelivered before,” he said. But Congress, he added pointedly, has “sapped some of the time we have for achieving readiness” with its continuing budget stalemate, which has required Hale and his team to execute “four shutdown drills and plan for things that don’t end up happening.”

Asked whether he favored the Audit the Pentagon Act sponsored by Sen. Tom Coburn, R-Okla., which, among other provisions, would threaten to move Defense auditing functions to the Treasury Department, Hale said he did not. “It would have the opposite effect than intended,” he said, saying Defense employees need such day-to-day operations in-house.

Hale and other witnesses noted that sections of each of the services have achieved audit readinesses, mentioning the Defense Information Systems Agency, the Defense Contract Audit Agency, the Army Corps of Engineers and several specific programs. The Marines are viewed as a model in the effort.

The problems have to with the need to document millions of transactions, cultural clashes, a lack of authority for across-the-board retraining and outdated information technology systems, the witnesses said.

Beth McGrath, the Pentagon’s deputy chief management officer, stressed that auditability must be achieved as part of a “broader effort to improve business processes across the department.” The keys are data conversion, business process standardization and IT, she added, noting the department in 2011 replaced 120 legacy computer systems and will replace 200 in 2012 and perhaps 150 in 2013.

The challenge, said Gladys Commons, assistant Navy secretary for financial management, is “these systems were not designed for auditing, so it takes time to eliminate manual work-arounds” to document transactions and present data. “There are millions of transactions involving thousands of people outside the department,” she said. “Those dependencies require constant nurturing and coordination.”

While the Air Force and Army representatives generally agreed with Hale that progress can be reported at the halfway mark, Commons said the Navy is more likely 30 percent of the way toward auditability, which she finds encouraging.

Hale said the training effort is hampered by a lack of authority for across-the-board requirements, though “not all employees need to become [certified public accountants].” Most of the senior executives, he said, are aware that the auditability effort is now a part of their performance reviews. “It’s tied to bonuses and raises, and there will be a stigma for those who don’t succeed,” he said. “It’s gotten people’s attention.”