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Budget Uncertainty Hinders DOD Accountability Effort

By Claudette Roulo
American Forces Press Service

WASHINGTON, Sept. 14, 2012 – Budget uncertainty is hindering the Defense Department’s efforts to achieve budget auditability by 2014, a senior defense official told Congress today.

DOD Comptroller Robert F. Hale, testifying before the Oversight and Investigations Subcommittee of the House Armed Services Committee said that while modernization of the department’s business system environment is progressing, budget uncertainty has led to “time-consuming and unproductive planning efforts.”

The hearing, a follow up to last year’s Defense Financial Management and Auditability Reform panel, is part of an ongoing review of the DOD’s financial management system.

The review’s intent is to oversee DOD's financial management system and its capacity for providing timely, reliable and useful information needed for making accurate decision-making and reporting, said Rep. Rob Wittman, the committee chair.

“We remain fully committed to meeting our audit goals,” Hale told the subcommittee, “and we're reasonably confident that we will meet those goals in the time frames that have been established by us and, in some cases, in the law.”

Auditability will allow DOD to make better use of taxpayer resources, Hale said.

“That's important, especially in these times of fiscal stress and declining budgets,” he said.

The most important reason DOD is working to achieve auditable financial statements is to secure public confidence, Hale said.

“I don't think we'll ever convince the American public, I don't think we'll convince the Congress that we're good stewards of their funds unless we can pass an audit test,” he said.

However, Hale noted, DOD is tracking taxpayer money and knows where every dollar is spent.

“We pay our people and our vendors on time and accurately, and record the transactions properly,” he said. “If that weren't the case, you would see massive problems of missed payments and mission failure.”

Auditability hasn’t yet been achieved, Hale said, “because we can't document the transactions properly and quickly and because, in some cases, our financial processes and internal controls are not sufficiently strong and consistent. These are problems we can and will fix.”

The department is focused on the information it most needs to manage and is seeing meaningful progress, he said.

Along with the commitment of Defense Secretary Leon E. Panetta, “we have a combination of short-term goals and long-term goals, a supportive governance structure [and] dedicated funding of $300 million to $400 million a year throughout our planning period,” Hale said.

The efforts to improve financial management and achieve audit readiness are just part of a broader effort to improve business operations across the DOD, Elizabeth A. McGrath, the Pentagon’s deputy chief management officer, told the House panel.

A significant development in the business system modernization effort was the creation of a single business system investment review board following the 2012 National Defense Authorization Act, McGrath said.

“This board reviews and certifies planning, design, acquisition, development [and] modernization -- all aspects of a project -- [and] how they fit into the broader business conversation ... for all systems and initiatives that are greater than $1 million,” she said.

The change helps the department to make better investment decisions, McGrath said.

“It also accelerates the retirement of legacy systems,” she said. In 2011, DOD retired 120 legacy business systems. In 2012, the number of retired systems is approaching 200, with about 150 projected for retirement in 2013.

Modernizing the systems environment requires input from each of the services, McGrath said, and the diversity of requirements and in the life cycles of existing systems has presented some challenges. But, she said, “we are also delivering capabilities: shorter repair cycle times, better visibility of our assets, reduced interest penalties and better scheduling of maintenance activities.

Modernizing the business system environment will not enable auditability by itself, she said, but the effort is necessary to meeting and sustaining the goal of audit readiness.

“We're grateful for the support that we've gotten from the Congress,” Hale said. “Congressional attention is one effective means of ensuring that audit readiness remains a high priority.

“There is another thing you can do to help,” Hale told members of the panel. “In recent years, we've encountered unprecedented budgetary uncertainty, including no fewer than four shutdown drills ... They've generated time-consuming and unproductive planning efforts. Sometimes I think I spend most of my time planning for things I hope don't happen.

“Now we face the prospect of sequestration and yet another long-term continuing resolution,” he continued. “Dealing with these extraordinary actions is sapping the time we could be spending on other things, including audit readiness. The single-biggest thing you can do to help me would be to return to a more orderly budget process.”

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Biographies:
Robert F. Hale
Elizabeth A. McGrath


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