Defense comptroller: Financial management better than perceived

Defense Comptroller Tina W. Jonas on Wednesday defended her department's progress in improving financial management, despite the fact the Defense Department and military services have never been able to produce the kind of financial reporting statements required by law.

"We know where our money is. We track our money. We send accounting reports to Congress and we tell them by appropriation and line item where the money went and what it went for," Jonas said at a breakfast in Washington sponsored by the Association of Government Accountants.

The ability to produce annual consolidated financial statements, as required by the 1990 Chief Financial Officers Act, has been the holy grail for federal finance and accounting staff, and agencies have in some cases gone to extraordinary lengths to garner clean audit opinions from independent accounting firms. But the Homeland Security and Defense departments have yet to be able to produce the statements.

In the case of Homeland Security, the four-year-old department is still struggling to merge multiple entities with separate finance and accounting systems and procedures.

For Defense, which accounts for more than half of discretionary spending, the problems are far more complex. Every year, Defense disburses $424 billion, and processes 145 million pay transactions, 14 million commercial invoices and 57 million general ledger transactions.

Reconciling those activities into a single financial statement has proved impossible, and Jonas, unlike her predecessors, won't predict when that will happen.

Achieving a clean audit is important, Jonas said, but resolving other issues such as material weaknesses is even more important. She said that in 2001, auditors identified 71 material weaknesses; today there are 19, which the department expects to eliminate in 2008.

Relmond P. Van Daniker, the association's executive director, agreed that achieving a clean opinion has limited value: "As professionals, we say that we exist to provide information so people can make decisions. I'm not exactly sure what decisions people make relative to the financial statements. They come out after the fact and they're very thick."

Improving financial management at Defense hinges on showing military leaders and managers why it's important to their mission, Jonas said. "We have to really sell it internally to our culture, which is very mission focused -- not so focused all the time on the efficiency of operations but on the success of operations, whether it's [in Iraq] or supporting tsunami victims. We have to demonstrate the value we bring," she said.

One example she cited was being able to reduce the number of late payments to vendors, thereby lowering the penalties the services paid. Late payments are one of 39 specific metrics Jonas' office tracks; as a result, financial managers have reduced the number of late payments by 61 percent, saving about $151 million annually.