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- Good morning, welcome.

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Today we are meeting to discuss

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the Pentagon's effort to audit itself.

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And basically better understand

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where they're spending their money,

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which is an incredibly
important undertaking.

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And we're joined by four witnesses

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from the Department of Defense,

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the Honorable David Norquist,

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who is the Undersecretary
of Defense, the Comptroller.

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Welcome.

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The Honorable Thomas Harker,

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who's the Assistant Secretary of the Navy

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for Financial Management and Comptroller,

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the Honorable John Roth,

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Assistant Secretary of the Air Force.

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You're sensing a theme here,

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Financial Management and Comptroller,

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and the Honorable John Whitley,

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Assistant Secretary of the Army,

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who has the same position there.

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Thank you all for being here.

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And this is a subject I think every member

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of the committee has been very focused on.

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And it's all about greater efficiency

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and greater accountability
within the Pentagon.

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It is, I don't know if it's the world's

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largest bureaucracy but
it's probably pretty close.

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And spending north of 700
billion dollars a year now,

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it is a large organization
to understand and control.

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But I think the one thing everyone

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in this room agrees
with is we can do better

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in terms of understanding
how the money is spent,

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where it goes, and make
sure that we are spending

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that we are spending
that money efficiently.

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And this is an incredibly important issue.

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Because taxpayers want to know,

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whether it's the Pentagon or anyplace else

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that their money is being well spent.

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Whatever it's going for,
at least we understand

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what it is, and the Pentagon

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has not really met that standard.

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Too large, too bureaucratic has a number

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of stories have documented,

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can't even really keep
track of all the inventory

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within the Pentagon, and in many instances

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can't adequately explain
how you spent the money

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you spent the previous year.

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So then when we are exercising oversight

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from the Armed Services
committee trying to figure out

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how do we better spend the money,

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what programs work, what
programs don't work.

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We don't have the metrics to really make

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as informed a decision as we
would like to be able to make.

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Those decisions will always
be difficult no matter what.

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But if we can see the
money, understand it,

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where it's spent, what the
result was, it's better.

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Now I also understand part of the problem

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is there are computer and IT
systems going back decades

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that have not really
been updated sufficiently

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to keep track of what they
need to keep track of.

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But the biggest question that I have,

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is we all can understand to some degree

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what a full audit would look like.

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You know if you have a
business and you audit it

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penny by penny and you understand
exactly where it's going.

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And I think we can all
agree it's gonna be awhile

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before the Pentagon gets to that point.

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But if we can learn
how are we progressing.

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How is it better this
year than it was last,

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and it was five years ago.

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What are you doing to give
us that greater understanding

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of how the money is being spent

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and what the results of that spending are.

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And then what can we do going forward.

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What's the next steps as
we move towards that point

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where we have the full
understandable audit.

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What are the sort of steps along the way

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that we can get to a better place on.

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Those are the questions
I'm most interested in.

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I thank you all for being here.

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I do, I have an interview to do at 10:40.

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So I'm gonna duck out
briefly at that point.

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But I'll be back.

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And Mr. Brown will take over

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the chair in that timeframe.

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And with that I turn it over

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to the ranking member Mr. Thornberry.

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- Thank you Mr. Chairman.

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And I wanna start by
congratulating you Mr. Norquist

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as well as the team at the Pentagon,

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and the people at the Pentagon
for the past several years

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who have worked incredibly hard

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to get us to the point where the entire

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Department of Defense could
be subject to an audit.

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It turns out that it was in 1990

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that Congress passed the law that required

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all government departments to be

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(clears throat)

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excuse me, to be audited.

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And from 2002 to the current day

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there has been some provision in the NDAA

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to drive us closer to actually
having the audit take place.

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One of the notable provisions
was in the fiscal year 2014

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NDAA we required that the full scope audit

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be performed beginning
in fiscal year 2018.

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A lot of people were skeptical

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about whether it could
occur, and it did occur.

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And so I think the first thing
to say is congratulations.

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And I particularly wanna point out

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the persistent knowledgeable engagement

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of our colleague Mr. Conaway,

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who from the time that
he joined this committee

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has been on this issue
based on his expertise,

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and his understanding of
what it can help achieve,

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and has not let up.

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But he also kept us from
changing the goal post.

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Because there's always,

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I say every year from 2002 there was some

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provision about the audit,

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but there was also a temptation

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to keep moving the goal post,

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and keep changing what
we asked you all to do.

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He kept us with some
discipline focused on it,

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and now it is, it has begun.

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And it is just a beginning as I'm sure

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you all will talk about.

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I find there's misunderstandings

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about what an audit can and cannot do.

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As I understand it y'all can
correct me if you need to,

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but a clean audit does not guarantee

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that you don't waste money.

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A clean audit does not guarantee

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that you can defend the country,

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with the technologies, and the weapons,

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and the people that you need to.

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But as the Chairman mentioned,

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a clean audit can help
us make better decisions

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by understanding better how much

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and on what we are using our resources.

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Finally I just note that for
the fiscal year 2018 audit

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about half of the issues that arose

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were related to cyber and IT.

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Another 500 or so were related
to financial reporting.

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So I do think we on this committee

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and in Congress need to pay attention

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to make sure that we don't take actions

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that make it more difficult to achieve

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some day a clean finding of the audit.

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For example slowing down
movement to the cloud

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may be one of those
things that make it harder

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to have data that is compatible,

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and that's where a lot of
these issues have arisen.

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I think this is a good start.

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It's something that we've been

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pushing toward for a long time.

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Y'all deserve congratulations.

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But obviously now you know where

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the problems or the issues are,

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and together we need to go fix those.

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- Thank you.

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Mr. Norquist

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- Chairman Smith, Ranking
Member Thornberry,

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distinguished members of the committee,

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I appreciate the opportunity to testify

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before you today on the
financial statement audit,

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a key priority for the
Department of Defense.

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I'm joined by the service
financial managers

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who are prepared to answer your questions

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on their respective service audits.

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I'd like to start by thanking you

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for your unwavering support
for the Department of Defense,

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as well as your support for
and interest in the audit.

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Until last year DOD was the
only large federal agency

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not under full financial statement audit.

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Together we have changed that.

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Now audits are not new to
the Department of Defense.

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Numerous audits covering
covering program performance,

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and contract costs are completed each year

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by the Government Accountability Office,

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the Defense Contract Audit Agency,

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the Department of Defense Office

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of the Inspector General, and
the Service Audit Agencies.

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But financial statement
audits are different.

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They are comprehensive.

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The occur annually.

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And they cover more than
financial management.

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For example they include verifying

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the account, location, and condition

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of our military equipment,
real property, and inventory.

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It tests security vulnerabilities
in our business systems,

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and validating accuracy of
personnel records and actions,

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such as promotions and separations.

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For example the audit has looked

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at the Navy's database of real property,

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to include buildings,
underground water pipes,

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fence lines, pulled a statistical sample

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and then went to the relevant bases

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and checked to see if they
could locate each item

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and what condition it was in.

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They also looked around the base

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for other property that ought to have been

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in the property system and wasn't.

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The audit was extensive
with 2.7 trillion in assets,

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and 2.6 trillion in liabilities,

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it involved approximately 1200 auditors

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reviewing hundreds of thousands
of items over the course

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of 900 site visits to
600 different locations.

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So what was the result.

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Six organizations received unmodified

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audit opinions which
is the highest rating.

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Two received modified opinions,

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which means the data is right
with some modest exceptions.

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And the remaining
organizations, the majority,

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received a disclaimer, and many of them,

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this was their first year under audit.

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The disclaimer means that the auditor

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did not have enough evidence
to provide an opinion.

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The short answer is they didn't pass.

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No organization received
an adverse opinion

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which is the lowest level.

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The auditors reported no evidence of fraud

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and provided favorable feedback

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that the Army, Navy, and Air Force

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had properly accounted for
major military equipment,

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and military and civilian pay.

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At a more detailed level though,

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the auditors identified
over 2300 findings.

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What they call notice of findings

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and recommendations, or NFRs.

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And the department has developed

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corrective action plans to address 91%

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of them as of May 13th 2019.

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To give you an example
of the types of findings,

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and I'll stay with the
real property example

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the auditors pulled a sample
of real property assets

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for the Navy and found
that about 6.5% of them,

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or about 2000 items no longer existed.

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The building had been
knocked down and removed,

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the property or structure had taken away,

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but it had never come out
of the property system.

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In contrast the Army had very few errors

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on the existence, their
buildings were there.

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But a number of the things they had

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in their facilities were listed

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as being in usable condition,

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and from the auditor's
perspective they weren't,

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and they ought to have been knocked down.

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Identifying these problems is not

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a step backwards, but a step forwards.

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The very purpose of the audit was to find

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as many problems as we could

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so we could start to fix them.

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And our database of findings

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has already proved tremendously valuable.

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It has allowed us to track

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our progress resolving these issues.

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For the first time the department

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has tools for oversight
and accountability,

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and the opportunity to leverage

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this information using
modern data analytics.

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I would like to close by thanking

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the President, Secretary Shanahan,

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and the Inspector General for their

265
00:11:18,080 --> 00:11:20,720
unfailing support and partnership.

266
00:11:20,720 --> 00:11:23,260
This audit is not about compliance.

267
00:11:23,260 --> 00:11:25,750
It is about protecting taxpayer dollars.

268
00:11:25,750 --> 00:11:27,330
And we are fully committed to making

269
00:11:27,330 --> 00:11:29,410
annual financial statement audits

270
00:11:29,410 --> 00:11:32,330
the new normal at the
Department of Defense.

271
00:11:32,330 --> 00:11:34,710
Finally to Congress and this committee,

272
00:11:34,710 --> 00:11:38,490
both members and in particularly
your staff, thank you.

273
00:11:38,490 --> 00:11:40,530
Not only have you worked
with us closely throughout,

274
00:11:40,530 --> 00:11:41,540
but you have been a key part

275
00:11:41,540 --> 00:11:43,620
of the force in getting us here.

276
00:11:43,620 --> 00:11:45,270
We appreciate the support and we will

277
00:11:45,270 --> 00:11:46,903
need your sustained attention as we move

278
00:11:46,903 --> 00:11:50,990
forward with the fiscal
2019 year audit and beyond.

279
00:11:50,990 --> 00:11:52,710
Thank you Mr. Chairman.

280
00:11:52,710 --> 00:11:53,599
- Thank you very much.

281
00:11:53,599 --> 00:11:55,070
And I understand the other
witnesses are here to answer

282
00:11:55,070 --> 00:11:57,603
questions but do not
have opening statements.

283
00:11:58,550 --> 00:12:02,320
I agree with a couple things
that the Ranking Member said.

284
00:12:02,320 --> 00:12:03,363
First of all it's important to understand

285
00:12:03,363 --> 00:12:06,220
that the full audit does
not eliminate waste,

286
00:12:06,220 --> 00:12:09,421
does not guarantee efficiency,

287
00:12:09,421 --> 00:12:11,090
and make sure the whole
problem gets fixed.

288
00:12:11,090 --> 00:12:12,680
And there are issues even if you know

289
00:12:12,680 --> 00:12:14,697
where you're spending your
money is in the right place.

290
00:12:14,697 --> 00:12:16,930
And that's a separate
and broader discussion.

291
00:12:16,930 --> 00:12:19,750
And once we get into acquisition reform,

292
00:12:19,750 --> 00:12:23,130
which I know Mr. Thornberry's
done a ton of work on as well,

293
00:12:23,130 --> 00:12:26,091
that gets to those questions as well.

294
00:12:26,091 --> 00:12:29,690
And also there has been an effort made

295
00:12:29,690 --> 00:12:31,490
to get a better understanding of it.

296
00:12:32,600 --> 00:12:35,140
But within the audit world,

297
00:12:35,140 --> 00:12:38,440
if we had a full audit,
if we continue forward

298
00:12:38,440 --> 00:12:42,200
on the path that we're on
and get to a better place,

299
00:12:42,200 --> 00:12:44,410
what is the real advantage of that?

300
00:12:44,410 --> 00:12:48,030
Can you tell us how potentially
does it save you money?

301
00:12:48,030 --> 00:12:50,940
Does it give you the ability
to spend money better?

302
00:12:50,940 --> 00:12:52,940
How does having a greater understanding

303
00:12:52,940 --> 00:12:55,150
of what your assets and liabilities are,

304
00:12:55,150 --> 00:12:57,830
where the money goes, and
where it's coming from,

305
00:12:57,830 --> 00:12:59,059
what are the two or
three things you'd say,

306
00:12:59,059 --> 00:13:00,610
this is gonna enable us to do

307
00:13:00,610 --> 00:13:02,930
this better, more efficiently.

308
00:13:02,930 --> 00:13:03,763
- Mr. Chairman I think there

309
00:13:03,763 --> 00:13:05,279
are three things that stand out.

310
00:13:05,279 --> 00:13:08,950
The first one is the better data

311
00:13:08,950 --> 00:13:10,810
to inform better decision making.

312
00:13:10,810 --> 00:13:13,940
And part of this is if you don't trust

313
00:13:13,940 --> 00:13:15,620
the accuracy of your data it's hard

314
00:13:15,620 --> 00:13:17,830
for people to rely on it and use it.

315
00:13:17,830 --> 00:13:19,180
As we've gone through the audit,

316
00:13:19,180 --> 00:13:21,230
to comply with it you have to get

317
00:13:21,230 --> 00:13:23,090
transaction level information.

318
00:13:23,090 --> 00:13:24,300
You can't just bundle them as you

319
00:13:24,300 --> 00:13:25,133
run them through the system,

320
00:13:25,133 --> 00:13:28,130
which means you can do much
more sophisticated analysis.

321
00:13:28,130 --> 00:13:30,570
You can look, and I'll
just use a budget example.

322
00:13:30,570 --> 00:13:33,750
Money that was obligated in the
last week of the fiscal year

323
00:13:33,750 --> 00:13:36,300
that was then de-obligated
two weeks later.

324
00:13:36,300 --> 00:13:38,210
Well that's not a real transaction.

325
00:13:38,210 --> 00:13:39,470
That's somebody gaming the system.

326
00:13:39,470 --> 00:13:41,030
You can find things like that.

327
00:13:41,030 --> 00:13:41,950
Which you can do the same thing

328
00:13:41,950 --> 00:13:44,690
for analysis with trends,
cost or payments for items.

329
00:13:44,690 --> 00:13:48,070
So the ability for us to
make sophisticated analysis,

330
00:13:48,070 --> 00:13:49,990
square footage of property, the analysis

331
00:13:49,990 --> 00:13:53,130
of the usage of them goes up dramatically.

332
00:13:53,130 --> 00:13:55,130
The other part is is drives reform.

333
00:13:55,130 --> 00:13:57,280
Many of the errors in the process

334
00:13:57,280 --> 00:13:59,090
comes from inefficiencies in the system.

335
00:13:59,090 --> 00:14:00,160
A place where somebody's doing manual

336
00:14:00,160 --> 00:14:02,410
data entry of information that had been

337
00:14:02,410 --> 00:14:04,840
previously entered in another system.

338
00:14:04,840 --> 00:14:06,850
In order to pass the audit
you've gotta remove that.

339
00:14:06,850 --> 00:14:08,640
You've gotta have the
clean data flow through it.

340
00:14:08,640 --> 00:14:10,600
Well you've reduced that chance for error.

341
00:14:10,600 --> 00:14:12,340
But you've also reduced the cost.

342
00:14:12,340 --> 00:14:14,750
And as the Navy's reduced its bill to DFAS

343
00:14:14,750 --> 00:14:16,930
when it switched from passing information

344
00:14:16,930 --> 00:14:18,730
that needed to be manual
entered to automated,

345
00:14:18,730 --> 00:14:20,570
that saved 65 million dollars.

346
00:14:20,570 --> 00:14:23,080
Those types of things
become permanent savings

347
00:14:23,080 --> 00:14:24,170
because you're never gonna back

348
00:14:24,170 --> 00:14:26,490
and remake that as a manual process.

349
00:14:26,490 --> 00:14:28,870
And I think the final
piece is transparency.

350
00:14:28,870 --> 00:14:30,730
This is the ability to
answer the questions

351
00:14:30,730 --> 00:14:32,240
of Congress and others at a greater

352
00:14:32,240 --> 00:14:35,100
level of detail about where
we stand on inventory,

353
00:14:35,100 --> 00:14:36,210
where we have other things.

354
00:14:36,210 --> 00:14:39,520
And the confidence that
comes with making decisions

355
00:14:39,520 --> 00:14:42,226
when you have that extra transparency.

356
00:14:42,226 --> 00:14:43,640
- All right so then final question,

357
00:14:43,640 --> 00:14:46,160
as I said in my opening
statement, what's the next step?

358
00:14:46,160 --> 00:14:48,430
What's the next most important
thing that you need to do,

359
00:14:48,430 --> 00:14:51,160
or that we need to do in terms
of instructing this process.

360
00:14:51,160 --> 00:14:52,690
- Sure so the next step in the process,

361
00:14:52,690 --> 00:14:54,250
is we've already started the next audit.

362
00:14:54,250 --> 00:14:56,933
So as we complete corrective action plans

363
00:14:56,933 --> 00:14:59,400
for the things that
the auditors have found

364
00:14:59,400 --> 00:15:01,110
a new audit team's gonna come behind.

365
00:15:01,110 --> 00:15:03,000
And as those, whatever's been completed

366
00:15:03,000 --> 00:15:05,440
by say June or so of this
year, they will retest.

367
00:15:05,440 --> 00:15:07,230
And so we'll see if we've fixed them.

368
00:15:07,230 --> 00:15:10,130
We're particularly prioritizing inventory,

369
00:15:10,130 --> 00:15:12,233
real property, and IT,
those are some of the areas

370
00:15:12,233 --> 00:15:15,880
where the most direct benefit
to the war fighter is seen,

371
00:15:15,880 --> 00:15:18,120
the most immediate
benefit to the department.

372
00:15:18,120 --> 00:15:19,680
And it's the existence and completeness.

373
00:15:19,680 --> 00:15:21,790
We'll get to the property, the evaluation,

374
00:15:21,790 --> 00:15:24,608
but the existence and
completeness is a near priority.

375
00:15:24,608 --> 00:15:27,080
We'll work through those and
we'll keep marching through.

376
00:15:27,080 --> 00:15:28,700
Again when the auditors
complete their audit

377
00:15:28,700 --> 00:15:29,896
they'll find another batch of things.

378
00:15:29,896 --> 00:15:32,190
Each of the services will prioritize.

379
00:15:32,190 --> 00:15:34,700
But we're gonna keep moving,
solving those problems

380
00:15:34,700 --> 00:15:35,790
that have the immediate benefit

381
00:15:35,790 --> 00:15:38,026
to the taxpayer and the war fighter first.

382
00:15:38,026 --> 00:15:41,550
And we'll be able to show you
for each of those findings,

383
00:15:41,550 --> 00:15:44,330
who was responsible, when
they thought it was closed,

384
00:15:44,330 --> 00:15:46,540
whether the auditor
validated it as closed,

385
00:15:46,540 --> 00:15:48,820
and which of the areas
that remain as problems.

386
00:15:48,820 --> 00:15:50,510
And I think on of the
challenges for Congress

387
00:15:50,510 --> 00:15:52,840
has been during all the
years of audit readiness,

388
00:15:52,840 --> 00:15:54,822
is you couldn't show the
Congress the progress.

389
00:15:54,822 --> 00:15:56,800
You couldn't show them
where we were stuck,

390
00:15:56,800 --> 00:15:58,040
and where we're going forward.

391
00:15:58,040 --> 00:16:00,160
And the database we
have now, based on this,

392
00:16:00,160 --> 00:16:02,370
and with the auditor's
independent evaluation

393
00:16:02,370 --> 00:16:04,870
will allow us to move
forward in that area.

394
00:16:04,870 --> 00:16:06,540
- And I would think overall it would make

395
00:16:06,540 --> 00:16:09,490
our systems more secure as well,

396
00:16:09,490 --> 00:16:12,550
as we better understand
what IT systems we have,

397
00:16:12,550 --> 00:16:14,250
what's in there, we clean them up.

398
00:16:15,200 --> 00:16:17,290
We have a better idea of
what it is we're trying

399
00:16:17,290 --> 00:16:19,660
to protect and are better
able to protect it.

400
00:16:19,660 --> 00:16:22,410
- Absolutely, there's a
series of audit standards

401
00:16:22,410 --> 00:16:25,270
for IT systems and security
that the Congress has passed.

402
00:16:25,270 --> 00:16:27,680
People know them under the
acronym FISCM and FISMA.

403
00:16:27,680 --> 00:16:28,980
The auditors go through that.

404
00:16:28,980 --> 00:16:31,500
So as the Ranking Member pointed out,

405
00:16:31,500 --> 00:16:33,500
a significant percentage of our findings

406
00:16:33,500 --> 00:16:35,740
were around vulnerabilities
to the security

407
00:16:35,740 --> 00:16:36,860
of those business systems.

408
00:16:36,860 --> 00:16:39,520
And that's gonna be a major area of focus.

409
00:16:39,520 --> 00:16:42,672
Particularly in the CIO,
we'll disclose those findings.

410
00:16:42,672 --> 00:16:43,505
- All right thank you very much.

411
00:16:43,505 --> 00:16:44,338
Mr. Thornberry.

412
00:16:46,530 --> 00:16:48,520
- As I understand it Mr. Norquist,

413
00:16:48,520 --> 00:16:53,020
so after this year's audit there well may

414
00:16:53,020 --> 00:16:56,180
be some new findings that emerge.

415
00:16:56,180 --> 00:16:59,717
In other words the findings from 2018

416
00:16:59,717 --> 00:17:03,610
are not the total universe
that there will ever be

417
00:17:03,610 --> 00:17:05,450
of things that we need to improve.

418
00:17:05,450 --> 00:17:06,283
Have I got that right?

419
00:17:06,283 --> 00:17:07,580
- Absolutely.

420
00:17:07,580 --> 00:17:10,420
- And so what you do with an audit,

421
00:17:10,420 --> 00:17:12,661
and I've learned all this
from Conaway of course.

422
00:17:12,661 --> 00:17:16,150
What you do with an audit
is you go and take samples

423
00:17:16,150 --> 00:17:19,770
of various things and then
when you have problems,

424
00:17:19,770 --> 00:17:22,770
that becomes the finding,
and then you can go fix it.

425
00:17:22,770 --> 00:17:25,340
- Correct, and in some cases
by fixing the first level,

426
00:17:25,340 --> 00:17:27,410
the auditors were able to go further.

427
00:17:27,410 --> 00:17:29,840
And that uncovered new areas
they couldn't see before.

428
00:17:29,840 --> 00:17:31,620
All of this is useful and helpful.

429
00:17:31,620 --> 00:17:33,700
It just will take time
to uncover them all.

430
00:17:33,700 --> 00:17:35,860
- Okay, the only other
question I've got is,

431
00:17:35,860 --> 00:17:40,370
is as I recall you helped get,

432
00:17:40,370 --> 00:17:42,500
and you were in the comptroller position

433
00:17:42,500 --> 00:17:44,580
when the Department of Homeland Security

434
00:17:44,580 --> 00:17:48,290
got to a clean audit, can you just reflect

435
00:17:48,290 --> 00:17:50,260
a little bit on that experience.

436
00:17:50,260 --> 00:17:53,730
And the challenges at DOD
versus Homeland Security.

437
00:17:53,730 --> 00:17:56,821
What it takes to get from here to there.

438
00:17:56,821 --> 00:18:00,070
And I don't even know if
there is possible with DOD.

439
00:18:00,070 --> 00:18:02,080
But can you just, based on your experience

440
00:18:02,080 --> 00:18:04,360
in getting a clean audit
at Homeland Security,

441
00:18:04,360 --> 00:18:09,040
reflect on it, what on that for DOD.

442
00:18:09,040 --> 00:18:11,370
- So the beginning of the
audit at Homeland Security

443
00:18:11,370 --> 00:18:13,720
which looked much like
the beginning at DOD.

444
00:18:13,720 --> 00:18:15,940
There was a discussion of
whether it was a good idea.

445
00:18:15,940 --> 00:18:17,190
There was a discussion
of whether you could

446
00:18:17,190 --> 00:18:19,890
ever possibly get to a clean opinion.

447
00:18:19,890 --> 00:18:21,820
The difference was homeland
security didn't have a choice.

448
00:18:21,820 --> 00:18:23,880
The audit was mandated
the moment it was created.

449
00:18:23,880 --> 00:18:26,550
So it started with an annual audit

450
00:18:26,550 --> 00:18:28,590
whether it was ready for it or not.

451
00:18:28,590 --> 00:18:30,730
The processes that we put in place there

452
00:18:30,730 --> 00:18:32,690
are the ones that we've adopted here.

453
00:18:32,690 --> 00:18:34,910
The first is, you need the auditors

454
00:18:34,910 --> 00:18:36,870
to provide you detailed level findings.

455
00:18:36,870 --> 00:18:38,940
You know a normal commercial auditor

456
00:18:38,940 --> 00:18:42,060
will simply tell you, you
have not passed and stop.

457
00:18:42,060 --> 00:18:43,780
We've worked with the IG to make sure

458
00:18:43,780 --> 00:18:45,300
that no matter whether we
were gonna pass or not,

459
00:18:45,300 --> 00:18:48,660
the auditor keeps going, find
as many things as possible.

460
00:18:48,660 --> 00:18:50,816
We have the auditor load
those things into the database

461
00:18:50,816 --> 00:18:53,430
so we don't waste time
with self assessments.

462
00:18:53,430 --> 00:18:54,610
I'm really not interested in whether

463
00:18:54,610 --> 00:18:56,380
somebody thinks they're in a good place.

464
00:18:56,380 --> 00:18:57,537
I'm interested in them fixing the problem,

465
00:18:57,537 --> 00:19:00,180
and whether the auditor agrees.

466
00:19:00,180 --> 00:19:03,010
The lessons we learned
from that DHS experiences,

467
00:19:03,010 --> 00:19:04,930
breaking the audit into pieces.

468
00:19:04,930 --> 00:19:07,610
So at DHS it wasn't simply
whether the department passed,

469
00:19:07,610 --> 00:19:10,300
Customs and Border protection, ICE, FEMA,

470
00:19:10,300 --> 00:19:13,450
Coast Guard, each were
evaluated in a stand alone way.

471
00:19:13,450 --> 00:19:15,850
Much as each of the
services are evaluated.

472
00:19:15,850 --> 00:19:17,930
So the department could see the progress

473
00:19:17,930 --> 00:19:20,000
and could explain it to the Congress.

474
00:19:20,000 --> 00:19:21,740
Now the truth is, it took 10 years.

475
00:19:21,740 --> 00:19:24,170
I mean I wasn't even at
DHS when they completed.

476
00:19:24,170 --> 00:19:25,960
But the individuals who were there

477
00:19:25,960 --> 00:19:28,170
when I was there and carried on saw it.

478
00:19:28,170 --> 00:19:29,980
And so one of the things
that's very important to me

479
00:19:29,980 --> 00:19:32,640
is you have a process
that's not personality

480
00:19:32,640 --> 00:19:34,660
dependent that will keep going.

481
00:19:34,660 --> 00:19:36,190
You know this one crossed administrations.

482
00:19:36,190 --> 00:19:38,630
This is a very bipartisan process.

483
00:19:38,630 --> 00:19:40,710
You know Tom Hark who was
there at the Coast Guard,

484
00:19:40,710 --> 00:19:43,030
helping them get across the finish line.

485
00:19:43,030 --> 00:19:45,780
But the lessons from there
are directly relevant to DOD.

486
00:19:45,780 --> 00:19:47,130
And I think they've been very valuable

487
00:19:47,130 --> 00:19:49,615
in making sure we get the
best start on our efforts.

488
00:19:49,615 --> 00:19:51,061
- Thank you, yield back.

489
00:19:51,061 --> 00:19:53,772
- [Mr. Chairman] Mr. Gallego.

490
00:19:53,772 --> 00:19:54,663
- Thank you Mr. Chair.

491
00:19:54,663 --> 00:19:57,273
I yield my time to Miss
Slotkin from Michigan.

492
00:19:58,180 --> 00:19:59,013
- Thanks.

493
00:19:59,013 --> 00:20:00,240
Thanks for being here everyone.

494
00:20:02,220 --> 00:20:06,190
Mr. Norquist in 2018, first
of all I should just say,

495
00:20:06,190 --> 00:20:09,440
I think most of us here really
want to be able to go home

496
00:20:09,440 --> 00:20:12,000
to our districts and say
with a straight face,

497
00:20:12,000 --> 00:20:14,940
the Department of Defense
needs the resources

498
00:20:14,940 --> 00:20:17,300
that it needs, and it's
accounting is in place.

499
00:20:17,300 --> 00:20:19,720
And therefore when they
say they need something,

500
00:20:19,720 --> 00:20:21,540
there's not waste going on.

501
00:20:21,540 --> 00:20:22,683
So I think we're all in the same place

502
00:20:22,683 --> 00:20:25,150
in that we want the same thing.

503
00:20:25,150 --> 00:20:26,696
And it is hard for some of us to go home

504
00:20:26,696 --> 00:20:29,232
and justify increases in spending

505
00:20:29,232 --> 00:20:31,500
when every business in my district,

506
00:20:31,500 --> 00:20:32,490
you have to pass an audit.

507
00:20:32,490 --> 00:20:36,600
Right, every home budget
has to account for itself.

508
00:20:36,600 --> 00:20:40,050
So I think we're all coming
from a positive place on this.

509
00:20:40,050 --> 00:20:42,740
Mr. Norquist in 2018 you
said it might take DOD

510
00:20:42,740 --> 00:20:46,291
10 years to successfully pass an audit.

511
00:20:46,291 --> 00:20:48,740
I know we've had the six organizations

512
00:20:48,740 --> 00:20:53,450
that have passed based on us
being kind of a year ahead now,

513
00:20:53,450 --> 00:20:54,748
what's your anticipated
timeline for the record

514
00:20:54,748 --> 00:20:58,180
in completing a true, complete audit?

515
00:20:58,180 --> 00:20:59,610
- So for the department as a whole,

516
00:20:59,610 --> 00:21:02,610
and the 10 year experience
really came out of the DHS case.

517
00:21:02,610 --> 00:21:04,660
The department as a whole
doesn't get a clean opinion

518
00:21:04,660 --> 00:21:06,740
until each of the 24 elements does.

519
00:21:06,740 --> 00:21:08,370
So lemme first turn to
each of the services

520
00:21:08,370 --> 00:21:10,063
and let them tell you where
they believe they are.

521
00:21:10,063 --> 00:21:11,660
And their time because the department

522
00:21:11,660 --> 00:21:12,850
is gonna be when they are done.

523
00:21:12,850 --> 00:21:15,330
- And just for the sake of time
if it could be pretty brief.

524
00:21:15,330 --> 00:21:16,163
Thanks guys.

525
00:21:17,600 --> 00:21:19,550
- We, the Army, we have put forward dates.

526
00:21:19,550 --> 00:21:24,550
Secretary Esper testified
here that our goal is FY21

527
00:21:24,740 --> 00:21:27,230
for a modified opinion on the
Army Working Capital Fund.

528
00:21:27,230 --> 00:21:31,303
And FY22 for a modified
opinion on the general fund.

529
00:21:32,377 --> 00:21:34,720
It's a very uncertain science.

530
00:21:34,720 --> 00:21:39,380
So we caveat those dates with
the fact that these are goals.

531
00:21:39,380 --> 00:21:40,213
- Great.

532
00:21:41,800 --> 00:21:42,633
- Good morning.

533
00:21:42,633 --> 00:21:44,570
For the Navy we're looking at
a five to seven year window

534
00:21:44,570 --> 00:21:46,150
for getting to a clean opinion across

535
00:21:46,150 --> 00:21:47,746
all of our financial statements.

536
00:21:47,746 --> 00:21:50,210
A lot of that's dependent
on system improvements

537
00:21:50,210 --> 00:21:51,673
we're making and then also changes

538
00:21:51,673 --> 00:21:53,800
in the standardization
of business processes

539
00:21:53,800 --> 00:21:55,767
so that we can have everybody
doing things the same way.

540
00:21:55,767 --> 00:21:57,460
And then decrease a lot of the manual

541
00:21:57,460 --> 00:21:59,060
transactions that are occurring.

542
00:22:01,200 --> 00:22:04,350
- The Air Force is actually in
a similar place as the Navy.

543
00:22:04,350 --> 00:22:06,300
And we have some experience, for example,

544
00:22:06,300 --> 00:22:07,680
through our intelligence programs.

545
00:22:07,680 --> 00:22:09,030
The National Reconnaissance Office

546
00:22:09,030 --> 00:22:10,290
actually has a clean opinion.

547
00:22:10,290 --> 00:22:12,513
It took them nine years for them to get

548
00:22:12,513 --> 00:22:15,620
to their clean opinion as well.

549
00:22:15,620 --> 00:22:17,690
So we would say also that we would give

550
00:22:17,690 --> 00:22:20,160
a range pf four to five to six years

551
00:22:20,160 --> 00:22:23,800
at the optimistic side
to get there as well.

552
00:22:23,800 --> 00:22:25,580
- Okay, and can you give me a sense

553
00:22:25,580 --> 00:22:27,740
Mr. Norquist of the sense of savings

554
00:22:27,740 --> 00:22:30,520
that was borne out just
by the sort of first round

555
00:22:30,520 --> 00:22:32,210
of audit, give me a couple of highlights

556
00:22:32,210 --> 00:22:34,420
that I can explain to people back home.

557
00:22:34,420 --> 00:22:35,253
- Sure.

558
00:22:35,253 --> 00:22:36,086
So the first one I'd highlight

559
00:22:36,086 --> 00:22:37,350
is when you looked at inventory.

560
00:22:37,350 --> 00:22:38,427
And I'll use a Navy example.

561
00:22:38,427 --> 00:22:41,442
And if anyone wants to dive
deeper, Tom can talk to it.

562
00:22:41,442 --> 00:22:44,650
They looked at inventory,
and they found places

563
00:22:44,650 --> 00:22:46,400
where there was inventory
that had been purchased

564
00:22:46,400 --> 00:22:47,770
but not put in their property system.

565
00:22:47,770 --> 00:22:50,460
Which means those trying to
fill orders couldn't see it.

566
00:22:50,460 --> 00:22:52,680
And they found 73 million dollars worth

567
00:22:52,680 --> 00:22:55,820
of inventory that was reusable
put back into their system

568
00:22:55,820 --> 00:22:58,020
that became available to the war fighter.

569
00:22:58,020 --> 00:23:00,480
Another example, Hill Air Force Base,

570
00:23:00,480 --> 00:23:02,410
the auditors don't just
look at the existence,

571
00:23:02,410 --> 00:23:04,373
but there were missile motors that,

572
00:23:06,120 --> 00:23:08,360
I this it's about 71 missile motors

573
00:23:08,360 --> 00:23:10,900
worth 53 million dollars, in the database

574
00:23:10,900 --> 00:23:12,290
they said they were unserviceable,

575
00:23:12,290 --> 00:23:13,650
couldn't use the motors.

576
00:23:13,650 --> 00:23:15,630
Auditors went out and checked the motors.

577
00:23:15,630 --> 00:23:16,910
They actually were in working condition.

578
00:23:16,910 --> 00:23:18,830
So you can get those back in the system.

579
00:23:18,830 --> 00:23:21,730
That's another 53 million
that we didn't have to order.

580
00:23:21,730 --> 00:23:24,810
And so this is why the
accuracy and the integrity

581
00:23:24,810 --> 00:23:26,550
of the inventory system is so important.

582
00:23:26,550 --> 00:23:28,740
The completeness of it,
and the accuracy of it.

583
00:23:28,740 --> 00:23:31,500
It saves you money in
making sure you have access.

584
00:23:31,500 --> 00:23:32,910
It also supports the war fighter,

585
00:23:32,910 --> 00:23:34,050
that he's not waiting for a part

586
00:23:34,050 --> 00:23:35,280
that he actually could have access to.

587
00:23:35,280 --> 00:23:37,640
- Um hm, and I know we're all focused

588
00:23:37,640 --> 00:23:40,213
oftentimes on the needs of the war fighter

589
00:23:40,213 --> 00:23:44,050
in terms of hardware, but
clearly it seems to me

590
00:23:44,050 --> 00:23:46,200
business management systems is a place

591
00:23:46,200 --> 00:23:48,130
where we could do some improving.

592
00:23:48,130 --> 00:23:49,340
Can you tell me your strategy

593
00:23:49,340 --> 00:23:51,970
for acquiring better
business management tools,

594
00:23:51,970 --> 00:23:54,540
the way everyone at home has to do.

595
00:23:54,540 --> 00:23:57,150
- So the area we're looking
for with business management

596
00:23:57,150 --> 00:23:59,570
systems is we need to make sure

597
00:23:59,570 --> 00:24:02,020
that the data in it meets the standards.

598
00:24:02,020 --> 00:24:03,900
We have for example
accounting as business,

599
00:24:03,900 --> 00:24:06,210
standards of how the coding
should be structured.

600
00:24:06,210 --> 00:24:08,370
So when it passes from
one system to the other

601
00:24:08,370 --> 00:24:10,030
it stays all the way through.

602
00:24:10,030 --> 00:24:11,197
Some systems don't use all the data,

603
00:24:11,197 --> 00:24:12,500
and they're set up to truncate it.

604
00:24:12,500 --> 00:24:15,790
Well then you've lost the
data as it flows through.

605
00:24:15,790 --> 00:24:17,400
So buying those systems in a way,

606
00:24:17,400 --> 00:24:19,240
and I think one of the provisions

607
00:24:19,240 --> 00:24:23,130
in the NDAA from last year
requires us to have CPAs

608
00:24:23,130 --> 00:24:24,390
and others look at those systems,

609
00:24:24,390 --> 00:24:26,730
confirm that they will meet the standards.

610
00:24:26,730 --> 00:24:28,070
The nice thing about the audit

611
00:24:28,070 --> 00:24:31,400
is those systems get tested along the way.

612
00:24:31,400 --> 00:24:33,520
So we can see whether or not
they're meeting the standards.

613
00:24:33,520 --> 00:24:34,590
Not simply waiting til the end

614
00:24:34,590 --> 00:24:36,830
and saying, oh it doesn't
meet our requirements.

615
00:24:36,830 --> 00:24:37,919
- Great, and then last question.

616
00:24:37,919 --> 00:24:41,020
I think obviously the
training of personnel

617
00:24:41,020 --> 00:24:42,921
of dealing with this kind of skillset

618
00:24:42,921 --> 00:24:43,890
(audio skips)

619
00:24:43,890 --> 00:24:45,290
What are you gonna do differently

620
00:24:45,290 --> 00:24:47,480
to make sure we're
properly training people

621
00:24:47,480 --> 00:24:50,861
at the department to do this
kind of financial oversight?

622
00:24:50,861 --> 00:24:51,900
- [Mr. Chairman] You'll have to answer

623
00:24:51,900 --> 00:24:52,930
that one fairly quickly.

624
00:24:52,930 --> 00:24:54,260
I'm sorry I should've pointed this out.

625
00:24:54,260 --> 00:24:55,290
We try to wrap up--

626
00:24:55,290 --> 00:24:56,356
- Yep I got it.

627
00:24:56,356 --> 00:24:57,821
We have a very robust program
and certification process

628
00:24:57,821 --> 00:25:00,730
for our financial management community.

629
00:25:00,730 --> 00:25:02,490
And OPM has often recognized it

630
00:25:02,490 --> 00:25:03,910
as one of the best practices.

631
00:25:03,910 --> 00:25:05,700
So we are very serious about the quality

632
00:25:05,700 --> 00:25:06,910
and seriousness of the training.

633
00:25:06,910 --> 00:25:07,970
And there's a lot of professional

634
00:25:07,970 --> 00:25:09,920
certifications that go along with this.

635
00:25:10,920 --> 00:25:12,160
- Thank you.

636
00:25:12,160 --> 00:25:12,993
- Mr. Turner.

637
00:25:14,131 --> 00:25:15,187
- Thank you Mr. Chairman.

638
00:25:15,187 --> 00:25:19,478
Secretary Norquist, when
the committee undertook

639
00:25:19,478 --> 00:25:23,350
the efforts to request audits.

640
00:25:23,350 --> 00:25:28,030
We understood that instituting
these new practices

641
00:25:28,030 --> 00:25:31,700
were going to look bleak when
the reports first came back.

642
00:25:31,700 --> 00:25:33,640
And that also it would be a great roadmap

643
00:25:33,640 --> 00:25:36,150
of what we need to do, and how we need

644
00:25:36,150 --> 00:25:37,952
to implement better controls.

645
00:25:37,952 --> 00:25:42,150
But absent those controls
one of the concerns

646
00:25:42,150 --> 00:25:44,150
that I think that
anybody's who's an advocate

647
00:25:44,150 --> 00:25:48,930
for national security,
and defense spending hears

648
00:25:50,020 --> 00:25:53,289
from those who are concerned that DOD

649
00:25:53,289 --> 00:25:58,040
has problems in satisfying
audit requirements

650
00:25:58,040 --> 00:26:01,070
is concerns that the
money is being wasted,

651
00:26:01,070 --> 00:26:04,665
or stolen, misdirected,
that is not being applied

652
00:26:04,665 --> 00:26:07,370
toward the issues of national security.

653
00:26:07,370 --> 00:26:08,651
How can you assure us that,

654
00:26:08,651 --> 00:26:11,330
we're getting ready to
mark up the NDAA again

655
00:26:11,330 --> 00:26:14,880
with another large
increase for the purposes

656
00:26:14,880 --> 00:26:18,940
of trying to address
the issues of readiness,

657
00:26:18,940 --> 00:26:20,810
address the issues of modernization,

658
00:26:20,810 --> 00:26:22,700
look to our near peer
adversaries of modernization.

659
00:26:22,700 --> 00:26:25,910
How can you assure us absent the findings

660
00:26:25,910 --> 00:26:29,917
from the auditors that
everything is in place

661
00:26:29,917 --> 00:26:33,250
to be able to adequately report spending,

662
00:26:33,250 --> 00:26:35,070
that these dollars that we approve

663
00:26:35,070 --> 00:26:36,437
are actually going to
our national security,

664
00:26:36,437 --> 00:26:38,770
are not being misspent,
are not being redirected,

665
00:26:38,770 --> 00:26:40,780
and are not being misappropriated?

666
00:26:40,780 --> 00:26:41,693
- So this is a great question.

667
00:26:41,693 --> 00:26:43,404
I think it highlights
the difference between

668
00:26:43,404 --> 00:26:45,380
the budgeting and the accounting.

669
00:26:45,380 --> 00:26:48,070
We have a very strong budget process,

670
00:26:48,070 --> 00:26:50,098
so when there's money put into a program

671
00:26:50,098 --> 00:26:55,098
for F15 or some other project,

672
00:26:55,260 --> 00:26:57,250
the Congress puts it in a particular line.

673
00:26:57,250 --> 00:26:59,560
All of our rules are
designed around tracking

674
00:26:59,560 --> 00:27:01,970
those from a budgetary perspective.

675
00:27:01,970 --> 00:27:04,890
And so we know that those funds
were spent on that program

676
00:27:04,890 --> 00:27:06,810
absent a reprogramming
and there's some other

677
00:27:06,810 --> 00:27:08,640
notification with Congress.

678
00:27:08,640 --> 00:27:10,020
The audit just goes beyond that.

679
00:27:10,020 --> 00:27:11,820
And so you take a building
under construction,

680
00:27:11,820 --> 00:27:13,300
the audits, it's fine that you spent

681
00:27:13,300 --> 00:27:14,133
the money on the building.

682
00:27:14,133 --> 00:27:16,480
The audit wants to know,
where is it in construction,

683
00:27:16,480 --> 00:27:18,250
in progress, how complete it is.

684
00:27:18,250 --> 00:27:19,880
Once it's up it wants to make sure

685
00:27:19,880 --> 00:27:22,060
you know you can depreciate it,

686
00:27:22,060 --> 00:27:23,558
you know it's still unusable condition.

687
00:27:23,558 --> 00:27:26,230
So the audit takes us to a greater level.

688
00:27:26,230 --> 00:27:27,520
And the benefit of that shows up

689
00:27:27,520 --> 00:27:30,400
most obviously in inventory.

690
00:27:30,400 --> 00:27:32,837
But if you look at pay, it's
one of our single largest items

691
00:27:32,837 --> 00:27:37,580
the auditors didn't have
findings related to those areas.

692
00:27:37,580 --> 00:27:39,581
And so when we get money in those,

693
00:27:39,581 --> 00:27:41,510
we have confidence that we're executing

694
00:27:41,510 --> 00:27:44,040
a consistent with the budget description,

695
00:27:44,040 --> 00:27:45,770
the audit just has a much higher standard

696
00:27:45,770 --> 00:27:47,820
in terms of how much further along we go.

697
00:27:49,280 --> 00:27:50,113
- Thank you Mr. Secretary.

698
00:27:50,113 --> 00:27:51,238
I yield back.

699
00:27:51,238 --> 00:27:53,750
(Chairman speaking off microphone)

700
00:27:53,750 --> 00:27:54,963
- Thank you Mr. Chair.

701
00:27:57,890 --> 00:28:00,650
I find it mind boggling that we

702
00:28:00,650 --> 00:28:02,263
haven't achieved a clean audit.

703
00:28:03,290 --> 00:28:04,710
It's one of the issues that comes up

704
00:28:04,710 --> 00:28:07,330
when I have discussions
with my constituents.

705
00:28:07,330 --> 00:28:09,210
And when I go to the Chamber of Commerce,

706
00:28:09,210 --> 00:28:13,780
the Rotary, everybody just is aghast

707
00:28:13,780 --> 00:28:15,269
that we haven't been able to do this

708
00:28:15,269 --> 00:28:17,363
for the Department of Defense.

709
00:28:18,520 --> 00:28:21,450
Having come up in the
ranks of the enlisted

710
00:28:21,450 --> 00:28:25,030
in the Marine Corps it's mind boggling

711
00:28:25,030 --> 00:28:27,140
that there hasn't been an accountability

712
00:28:27,140 --> 00:28:31,090
and a reprimand at the
higher echelon of our DOD

713
00:28:31,090 --> 00:28:34,303
and all our branches of
the military quite frankly.

714
00:28:35,380 --> 00:28:39,400
The examples you gave of failing to update

715
00:28:39,400 --> 00:28:41,923
our databases with inventory.

716
00:28:43,280 --> 00:28:45,060
Millions of dollars that possibly

717
00:28:45,060 --> 00:28:50,060
would go be at waste, is very unsettling.

718
00:28:50,650 --> 00:28:53,241
And I know you wouldn't
answer the questions

719
00:28:53,241 --> 00:28:56,160
of reprimand and accountability.

720
00:28:56,160 --> 00:28:59,110
But certainly I hope that in the audit

721
00:28:59,110 --> 00:29:03,160
that there is within the
DOD some kind of section

722
00:29:03,160 --> 00:29:06,670
where the higher ups understand

723
00:29:06,670 --> 00:29:10,350
what reprimand and
accountability will look like

724
00:29:10,350 --> 00:29:12,310
if they continue to not implement

725
00:29:12,310 --> 00:29:15,280
the best accounting measures possible.

726
00:29:15,280 --> 00:29:18,850
Undersecretary Norquist
the DODIG has indicated

727
00:29:18,850 --> 00:29:21,410
that longstanding material weaknesses

728
00:29:21,410 --> 00:29:24,240
will continue to affect DOD's ability

729
00:29:24,240 --> 00:29:26,140
to improve it's financial management,

730
00:29:26,140 --> 00:29:30,130
and ultimately accomplishing
a clean audit opinion.

731
00:29:30,130 --> 00:29:31,840
What steps has the department taken

732
00:29:31,840 --> 00:29:33,854
to address some of these
material weaknesses

733
00:29:33,854 --> 00:29:37,373
such as accounting for its
property and equipment.

734
00:29:38,250 --> 00:29:40,550
From the list of longstanding
material weaknesses

735
00:29:40,550 --> 00:29:43,610
are there specific ones
the department feels

736
00:29:43,610 --> 00:29:45,793
are more urgent in terms of addressing?

737
00:29:47,060 --> 00:29:48,470
- I'd be happy to do that.

738
00:29:48,470 --> 00:29:50,160
And so I think that in terms

739
00:29:50,160 --> 00:29:53,930
of what's the most urgent,
the answer is inventory,

740
00:29:53,930 --> 00:29:56,620
is the IT security, and the property.

741
00:29:56,620 --> 00:29:59,290
Those are the three that
are the particular focus.

742
00:29:59,290 --> 00:30:02,560
Well of course all of them,
but those are the first three.

743
00:30:02,560 --> 00:30:04,683
I think if, let me have
one of the services if,

744
00:30:04,683 --> 00:30:06,011
Tom do you wanna give an example

745
00:30:06,011 --> 00:30:08,083
of the steps you're taking on inventory.

746
00:30:09,623 --> 00:30:10,944
- Yes sir, thank you for the question.

747
00:30:10,944 --> 00:30:13,080
We've made a lot of
progress around inventory

748
00:30:13,080 --> 00:30:15,730
where we've gone base to base

749
00:30:15,730 --> 00:30:17,220
trying to do a full complete inventory.

750
00:30:17,220 --> 00:30:19,360
This last year we did an inventory

751
00:30:19,360 --> 00:30:21,140
of the vast majority of our bases.

752
00:30:21,140 --> 00:30:23,740
We've identified areas
where there's a material

753
00:30:23,740 --> 00:30:25,270
that's not recorded in the accountable

754
00:30:25,270 --> 00:30:27,270
property system of record,
and we're taking steps

755
00:30:27,270 --> 00:30:29,823
to get that inventory into our record.

756
00:30:30,670 --> 00:30:33,350
In Jacksonville we found
280 million dollars worth

757
00:30:33,350 --> 00:30:35,920
of items that had been
bought, purchased were not

758
00:30:35,920 --> 00:30:37,890
in our system of record
and they're now are.

759
00:30:37,890 --> 00:30:41,070
We found 81 million of those have gone

760
00:30:41,070 --> 00:30:42,017
back into the system of record.

761
00:30:42,017 --> 00:30:45,640
And they're now being used
to fulfill requisitions.

762
00:30:45,640 --> 00:30:48,170
To date we've filled over $3,000,000

763
00:30:48,170 --> 00:30:50,460
worth of requisitions for that.

764
00:30:50,460 --> 00:30:51,700
- Thank you.

765
00:30:51,700 --> 00:30:54,381
One of the areas GAO continues to see

766
00:30:54,381 --> 00:30:57,770
as areas of improvement is DODs focus

767
00:30:57,770 --> 00:30:59,387
on centralizing its monitoring

768
00:30:59,387 --> 00:31:02,870
and reporting process by
utilizing the database

769
00:31:02,870 --> 00:31:05,370
to include financial
management related findings

770
00:31:05,370 --> 00:31:08,760
and recommendations, and
corrective action plans

771
00:31:08,760 --> 00:31:11,330
to essentially track progress.

772
00:31:11,330 --> 00:31:14,150
Secretary Norquist is
the department facing

773
00:31:14,150 --> 00:31:16,050
any specific challenges in terms

774
00:31:16,050 --> 00:31:19,890
of utilizing and populating
the database more?

775
00:31:19,890 --> 00:31:21,670
- So this was a tremendous help.

776
00:31:21,670 --> 00:31:23,790
One of the lessons we took from DHS

777
00:31:23,790 --> 00:31:25,940
which is we set up an
NFR tracking database.

778
00:31:25,940 --> 00:31:27,530
We worked with the IG.

779
00:31:27,530 --> 00:31:28,530
The IG was very helpful.

780
00:31:28,530 --> 00:31:30,220
They modified the contracts to require

781
00:31:30,220 --> 00:31:32,730
the auditors themselves
to enter the findings.

782
00:31:32,730 --> 00:31:34,500
So when we show you we
reported the findings

783
00:31:34,500 --> 00:31:36,960
it's not our view, it's the auditors view.

784
00:31:36,960 --> 00:31:39,920
The system that was set up
was sufficiently well done

785
00:31:39,920 --> 00:31:41,280
that although it was not mandated,

786
00:31:41,280 --> 00:31:43,010
each of the services came along and said,

787
00:31:43,010 --> 00:31:44,640
it's easier for me to use your system

788
00:31:44,640 --> 00:31:46,780
to track progress, and
they started loading

789
00:31:46,780 --> 00:31:48,330
all of their corrective action plans.

790
00:31:48,330 --> 00:31:50,079
So now you've got a
single system that says,

791
00:31:50,079 --> 00:31:52,330
here's the auditor identified problem.

792
00:31:52,330 --> 00:31:54,150
Here's the service's corrective action

793
00:31:54,150 --> 00:31:55,590
plan with who's accountable,

794
00:31:55,590 --> 00:31:57,380
here's when it's supposed to be complete.

795
00:31:57,380 --> 00:31:59,840
And so I think what the GO
and others were highlighting

796
00:31:59,840 --> 00:32:01,180
is they're very fond of that process.

797
00:32:01,180 --> 00:32:02,230
They think that works well,

798
00:32:02,230 --> 00:32:04,841
and they've encouraged us to use that.

799
00:32:04,841 --> 00:32:05,674
- Thank you.

800
00:32:05,674 --> 00:32:07,547
Mr. Chair I yield back.

801
00:32:07,547 --> 00:32:10,135
(Chairman speaking off microphone)

802
00:32:10,135 --> 00:32:10,968
- Thank you Mr. Chairman.

803
00:32:10,968 --> 00:32:12,790
I yield my time to Mr. Conaway.

804
00:32:12,790 --> 00:32:13,920
- Well thank you Mr. Rogers.

805
00:32:13,920 --> 00:32:16,890
And I also appreciate the kind comments

806
00:32:16,890 --> 00:32:18,390
of the Ranking Member at the start.

807
00:32:18,390 --> 00:32:20,020
I know it was painful for him to do that.

808
00:32:20,020 --> 00:32:22,893
But I certainly appreciate the comments.

809
00:32:24,650 --> 00:32:27,860
On the property plan and equipment focus

810
00:32:27,860 --> 00:32:29,820
what benefit would be if at some point

811
00:32:29,820 --> 00:32:31,410
in time in the future
we'll need to evaluate

812
00:32:31,410 --> 00:32:33,160
whether or not we've got excess capacity

813
00:32:33,160 --> 00:32:34,070
at all the bases around.

814
00:32:34,070 --> 00:32:36,510
We typically call it a
BRAC, those kind of things.

815
00:32:36,510 --> 00:32:39,570
To start that the base
document would be those records

816
00:32:39,570 --> 00:32:41,770
that you're going through right now

817
00:32:41,770 --> 00:32:43,574
so that it's, the decision makers had,

818
00:32:43,574 --> 00:32:45,690
we're looking at records
that had buildings

819
00:32:45,690 --> 00:32:48,210
that didn't exist, or
had buildings that were,

820
00:32:48,210 --> 00:32:50,410
did exist but weren't on there.

821
00:32:50,410 --> 00:32:51,823
The decision would be less,

822
00:32:53,490 --> 00:32:55,930
it wouldn't be as good as
if those records are there.

823
00:32:55,930 --> 00:32:57,730
So the importance of having these records

824
00:32:57,730 --> 00:33:00,630
is really important as you go
about making your decisions.

825
00:33:01,740 --> 00:33:03,150
Mr. Norquist this time next year,

826
00:33:03,150 --> 00:33:04,330
we'll have hopefully the Chairman

827
00:33:04,330 --> 00:33:05,980
will have another hearing
like this where we'll ask

828
00:33:05,980 --> 00:33:08,510
you to perhaps bring in the report card,

829
00:33:08,510 --> 00:33:11,700
or the NFR work that's moving
from 18 to 19 and forward.

830
00:33:11,700 --> 00:33:13,291
And we'll be able to see that progress

831
00:33:13,291 --> 00:33:15,310
and help us understand that.

832
00:33:15,310 --> 00:33:16,600
In the meantime though it'd be helpful

833
00:33:16,600 --> 00:33:20,950
for the team to know markets of success.

834
00:33:20,950 --> 00:33:22,890
You've talked a couple of anecdotal pieces

835
00:33:22,890 --> 00:33:25,840
where one off money has been
found to help with the system,

836
00:33:25,840 --> 00:33:27,040
those kind of things.

837
00:33:27,040 --> 00:33:29,700
What would be the
reduction in audit effort

838
00:33:29,700 --> 00:33:31,760
from year to year as you got better?

839
00:33:31,760 --> 00:33:32,980
As your systems got better,

840
00:33:32,980 --> 00:33:34,120
as the accountants were able to rely

841
00:33:34,120 --> 00:33:37,764
on the systems to shrink
the size of their databases.

842
00:33:37,764 --> 00:33:40,300
Can any of the three of you who've maybe

843
00:33:40,300 --> 00:33:41,530
experienced something like that

844
00:33:41,530 --> 00:33:43,350
share with us where at one year it took

845
00:33:43,350 --> 00:33:46,000
us this many audit hours, and man hours,

846
00:33:46,000 --> 00:33:47,540
the next year our systems were better

847
00:33:47,540 --> 00:33:50,250
and the auditors were able
to shrink their sample size.

848
00:33:50,250 --> 00:33:52,420
Can you give us any kind
of a anecdote like that

849
00:33:52,420 --> 00:33:54,910
that shows real progress
on sustaining an audit

850
00:33:54,910 --> 00:33:55,870
year to year going forward.

851
00:33:55,870 --> 00:33:57,706
- I think Congressman the best example

852
00:33:57,706 --> 00:33:59,190
is the Army Corp of Engineers.

853
00:33:59,190 --> 00:34:01,250
I'll let John Whitley talk to it.

854
00:34:01,250 --> 00:34:02,950
But the Corp of Engineers
has a clean opinion.

855
00:34:02,950 --> 00:34:04,390
But they've gone through this process

856
00:34:04,390 --> 00:34:06,420
from beginning to end, so John.

857
00:34:06,420 --> 00:34:08,078
- Yes sir, the Corp of Engineers

858
00:34:08,078 --> 00:34:11,260
did see significant changes as they got

859
00:34:11,260 --> 00:34:13,150
into the modified and
then a clean opinion.

860
00:34:13,150 --> 00:34:15,180
So they've got a clean
opinion for about 11 years.

861
00:34:15,180 --> 00:34:17,190
Over that period of time they went

862
00:34:17,190 --> 00:34:20,730
from about 150 auditors down to 35.

863
00:34:20,730 --> 00:34:22,519
Sample sizes, we've talked already about

864
00:34:22,519 --> 00:34:24,070
going in and taking samples.

865
00:34:24,070 --> 00:34:25,630
Those sample sizes declined from about

866
00:34:25,630 --> 00:34:28,630
14,000 down to about 2000.

867
00:34:28,630 --> 00:34:32,720
And the cost of the audit,
the cost for the auditors

868
00:34:32,720 --> 00:34:34,670
fell, cut in half from about 10 million

869
00:34:34,670 --> 00:34:36,180
to 5,000,000 during that period.

870
00:34:36,180 --> 00:34:37,610
- So hopefully this time next year

871
00:34:37,610 --> 00:34:38,790
you'll see additional progress.

872
00:34:38,790 --> 00:34:41,950
You can help the committee
understand that's real progress.

873
00:34:41,950 --> 00:34:44,320
Because while a clean
audit for the whole thing

874
00:34:44,320 --> 00:34:47,160
is part of a longer journey,

875
00:34:47,160 --> 00:34:49,150
year in year out you're
gonna have to provide us

876
00:34:49,150 --> 00:34:51,600
with audited financial statements
and those kind of things.

877
00:34:51,600 --> 00:34:54,330
Part of the problems
early on were the variety

878
00:34:54,330 --> 00:34:56,110
of Legacy systems that you
were trying to cope with.

879
00:34:56,110 --> 00:34:58,250
Where you were converting from manual

880
00:34:58,250 --> 00:35:00,050
to electronic and everything else.

881
00:35:00,050 --> 00:35:02,470
Any sense on how many Legacy systems

882
00:35:02,470 --> 00:35:06,320
are still being maintained,
and that you still rely on.

883
00:35:06,320 --> 00:35:07,468
I know you're trying to get away from 'em.

884
00:35:07,468 --> 00:35:08,301
But could you give us a sense

885
00:35:08,301 --> 00:35:10,600
on the reduction in those Legacy systems.

886
00:35:10,600 --> 00:35:13,850
- So we have about 294
significant business systems,

887
00:35:13,850 --> 00:35:14,870
which is the largest set.

888
00:35:14,870 --> 00:35:17,210
Not all of them under DOD's control.

889
00:35:17,210 --> 00:35:18,240
I'll use one example.

890
00:35:18,240 --> 00:35:19,330
And the services can probably

891
00:35:19,330 --> 00:35:21,280
just talk to their accounting systems.

892
00:35:21,280 --> 00:35:22,878
Defense Agency, we used to
have seven different systems

893
00:35:22,878 --> 00:35:25,420
supporting 22 different Defense Agencies.

894
00:35:25,420 --> 00:35:28,110
Those have all come down
to one system called DAI.

895
00:35:28,110 --> 00:35:30,230
And that's a huge improvement for us.

896
00:35:30,230 --> 00:35:31,780
And I don't know if, maybe the Air Force

897
00:35:31,780 --> 00:35:34,680
wants to talk about their
efforts on system consolidation.

898
00:35:35,740 --> 00:35:38,110
- Very similar, I'll use as an example.

899
00:35:38,110 --> 00:35:40,480
Okay as we, we're actually pretty pleased

900
00:35:40,480 --> 00:35:41,980
with where we are with
munitions inventory.

901
00:35:41,980 --> 00:35:44,300
We're at actually 100% and all.

902
00:35:44,300 --> 00:35:46,810
We were able to sunset 10 systems

903
00:35:46,810 --> 00:35:49,730
in going to a new modernized,
more up to date system.

904
00:35:49,730 --> 00:35:52,170
So that's just an example
of the kind of trend

905
00:35:52,170 --> 00:35:53,420
that we're looking for in terms

906
00:35:53,420 --> 00:35:56,070
of trying to sunset as
many systems as possible.

907
00:35:56,070 --> 00:35:59,960
Ultimately for example we
have an accounting system

908
00:35:59,960 --> 00:36:01,830
which we deem, we call DEAMS,

909
00:36:01,830 --> 00:36:03,030
which is Defense Enterprise

910
00:36:03,030 --> 00:36:04,720
and Accounting Management System.

911
00:36:04,720 --> 00:36:08,010
Ultimately we hope to sunset
a number of older systems

912
00:36:08,010 --> 00:36:09,960
and as we move to DEAMS and it becomes--

913
00:36:09,960 --> 00:36:11,288
- So Mr. Roth tell us why getting

914
00:36:11,288 --> 00:36:13,760
rid of those systems is
important going forward.

915
00:36:13,760 --> 00:36:15,700
Because someone has to remember

916
00:36:15,700 --> 00:36:17,800
how those systems were
coded and maintained,

917
00:36:17,800 --> 00:36:18,633
and all those kind of things.

918
00:36:18,633 --> 00:36:20,189
Well that all goes away
help us understand--

919
00:36:20,189 --> 00:36:22,670
- As has been noted
before, part of our problem

920
00:36:22,670 --> 00:36:25,370
are the aging systems, and the
nature of the aging systems,

921
00:36:25,370 --> 00:36:27,270
and they take a lot of care and feeding.

922
00:36:27,270 --> 00:36:29,660
But the other problem is as data moves

923
00:36:29,660 --> 00:36:31,330
from one of these systems to the other

924
00:36:31,330 --> 00:36:34,180
is an opportunity for error
at each one of those stages.

925
00:36:34,180 --> 00:36:35,840
Okay and so that is one of our

926
00:36:35,840 --> 00:36:37,380
fundamental weaknesses right now,

927
00:36:37,380 --> 00:36:40,880
one of our Achilles heels
is that a lot of our data

928
00:36:40,880 --> 00:36:43,480
moves from one kind of, like an HR system

929
00:36:43,480 --> 00:36:45,620
to the financial system,
from the logistics system

930
00:36:45,620 --> 00:36:48,062
to the acquisitions and
those kinds of things.

931
00:36:48,062 --> 00:36:50,810
The fewer interfaces you have,

932
00:36:50,810 --> 00:36:52,420
the fewer opportunities for error

933
00:36:52,420 --> 00:36:55,290
and therefore fewer
opportunities for audit findings.

934
00:36:55,290 --> 00:36:56,170
- I appreciate that.

935
00:36:56,170 --> 00:36:57,600
I would like to tell the committee

936
00:36:57,600 --> 00:36:59,570
that even in companies
that have clean opinions,

937
00:36:59,570 --> 00:37:01,373
from time to time the
auditors will find things

938
00:37:01,373 --> 00:37:04,090
that will posit to management

939
00:37:04,090 --> 00:37:05,340
that could be improved going forward.

940
00:37:05,340 --> 00:37:06,430
So even if we had a clean opinion

941
00:37:06,430 --> 00:37:08,890
across the entire system
it would not be unexpected

942
00:37:08,890 --> 00:37:09,943
that going forward they would have

943
00:37:09,943 --> 00:37:12,310
new improvements to be
made in this regard.

944
00:37:12,310 --> 00:37:13,430
This is hard work.

945
00:37:13,430 --> 00:37:14,630
You've got a lot of folks who've put

946
00:37:14,630 --> 00:37:16,028
a lot of time and effort into it.

947
00:37:16,028 --> 00:37:17,720
I appreciate that effort.

948
00:37:17,720 --> 00:37:18,553
We're all frustrated.

949
00:37:18,553 --> 00:37:20,350
You're frustrated that
we're not already there.

950
00:37:20,350 --> 00:37:22,340
But I'll just, to assure my colleagues,

951
00:37:22,340 --> 00:37:26,290
as Max said I've been
shepherding this for awhile.

952
00:37:26,290 --> 00:37:27,440
It's not for lack of effort.

953
00:37:27,440 --> 00:37:29,760
It's not lack of management from the top,

954
00:37:29,760 --> 00:37:31,630
tone from the top that
this is not getting done.

955
00:37:31,630 --> 00:37:32,850
So it is hard.

956
00:37:32,850 --> 00:37:33,990
So I yield back.

957
00:37:33,990 --> 00:37:35,023
- Thank you very much.

958
00:37:35,023 --> 00:37:40,023
And as the Chairman said,
he will be returning

959
00:37:40,200 --> 00:37:43,270
in a few minutes, and
I'll go ahead and yield

960
00:37:43,270 --> 00:37:46,263
to myself for five minutes or less.

961
00:37:47,860 --> 00:37:50,710
So according to this
summary from the Department

962
00:37:50,710 --> 00:37:52,560
of Defense Inspector General,

963
00:37:52,560 --> 00:37:54,970
auditors found significant
control deficiencies

964
00:37:54,970 --> 00:37:57,380
regarding IT systems, and
you've mentioned that,

965
00:37:57,380 --> 00:37:59,633
you've discussed some of that here today.

966
00:37:59,633 --> 00:38:04,633
There's some specific findings
relating to IT systems.

967
00:38:05,300 --> 00:38:09,740
The IG also characterized
financial management systems

968
00:38:09,740 --> 00:38:14,143
and information technology as
the most significant weakness.

969
00:38:15,910 --> 00:38:18,420
Has these deficiencies
prevented the auditors

970
00:38:18,420 --> 00:38:22,090
from assessing the
financial data completely

971
00:38:23,110 --> 00:38:25,770
due to the inability to assess
the integrity of the data.

972
00:38:25,770 --> 00:38:29,500
Should we expect another
wave of adverse findings

973
00:38:29,500 --> 00:38:33,680
once the financial data
itself is better assessed?

974
00:38:33,680 --> 00:38:35,930
- So there's ways for the auditors

975
00:38:35,930 --> 00:38:37,160
to test it but there are limits.

976
00:38:37,160 --> 00:38:39,430
So I would always expect as
the auditors are able to go

977
00:38:39,430 --> 00:38:41,840
further for them to find
additional challenges.

978
00:38:41,840 --> 00:38:43,810
But their concern that
if you enter the data

979
00:38:43,810 --> 00:38:45,216
into the system in one location,

980
00:38:45,216 --> 00:38:49,110
does it properly manage the
transaction to the other side.

981
00:38:49,110 --> 00:38:51,370
They can do that the
hard way by recreating

982
00:38:51,370 --> 00:38:53,460
the process themselves,
but the more they can rely

983
00:38:53,460 --> 00:38:56,250
on the system the stronger and
the better the process gets.

984
00:38:56,250 --> 00:39:00,380
- And when will the
integrity of the IT systems

985
00:39:00,380 --> 00:39:02,460
be sufficient for a full assessment

986
00:39:02,460 --> 00:39:04,770
of the financial data that it contains?

987
00:39:04,770 --> 00:39:06,440
- Sir they will do that system by system.

988
00:39:06,440 --> 00:39:08,720
They will have certain systems
where they have reviewed,

989
00:39:08,720 --> 00:39:10,490
and I think the Army has at least one

990
00:39:10,490 --> 00:39:12,190
that they have gone all the way through

991
00:39:12,190 --> 00:39:13,980
all the corrective action plans.

992
00:39:13,980 --> 00:39:15,090
Which is that Ellen?

993
00:39:15,090 --> 00:39:17,780
- [Tom] Ellen Feigal,
Logistics Management Program.

994
00:39:17,780 --> 00:39:19,810
- So can you give me maybe an example

995
00:39:19,810 --> 00:39:21,910
of one that's not where it needs to be

996
00:39:21,910 --> 00:39:23,550
but will be in a short period of time.

997
00:39:23,550 --> 00:39:27,050
And then perhaps what
area or what activity,

998
00:39:27,050 --> 00:39:29,726
what component is
experiencing the greatest

999
00:39:29,726 --> 00:39:31,540
difficulties in this area?

1000
00:39:31,540 --> 00:39:32,910
- [Mr. Norquist] Sure, do one
of the services wanna take,

1001
00:39:32,910 --> 00:39:35,283
which system do you have
that you have to replace?

1002
00:39:37,873 --> 00:39:41,340
- So I would just, say just,
to answer your question

1003
00:39:41,340 --> 00:39:43,350
the L&P system, it took about four years.

1004
00:39:43,350 --> 00:39:46,200
We have, that started with 29 findings.

1005
00:39:46,200 --> 00:39:47,690
Went to 22, went to 12, went to thee,

1006
00:39:47,690 --> 00:39:50,300
and then this year we have zero findings.

1007
00:39:50,300 --> 00:39:52,780
It is covered by one
corporate crosscutting

1008
00:39:52,780 --> 00:39:54,500
finding on end user controls.

1009
00:39:54,500 --> 00:39:55,360
So that's an example.

1010
00:39:55,360 --> 00:39:56,530
We have our other systems.

1011
00:39:56,530 --> 00:39:58,130
Our financial management ERP,

1012
00:39:58,130 --> 00:40:00,550
and our tactical logistics ERP.

1013
00:40:00,550 --> 00:40:02,140
They're kind of at the beginning stage,

1014
00:40:02,140 --> 00:40:03,640
maybe a year or two into that process.

1015
00:40:03,640 --> 00:40:06,743
So I would predict another
couple of years on those.

1016
00:40:08,380 --> 00:40:12,630
- Then one, any examples
of some, couple of decades?

1017
00:40:12,630 --> 00:40:14,000
- Well I'll jump in.

1018
00:40:14,000 --> 00:40:16,030
I think it has been pretty well documented

1019
00:40:16,030 --> 00:40:17,270
over the years that the interface

1020
00:40:17,270 --> 00:40:18,880
between our pay and personnel systems

1021
00:40:18,880 --> 00:40:20,030
has always been a challenge.

1022
00:40:20,030 --> 00:40:22,190
And we tried some enterprise wide,

1023
00:40:22,190 --> 00:40:24,990
DOD wide systems that failed
and these kind of things.

1024
00:40:24,990 --> 00:40:27,090
So we in the Air Force, and
the reason it's a problem

1025
00:40:27,090 --> 00:40:28,190
in part 'cause it takes a lot

1026
00:40:28,190 --> 00:40:29,490
of manual effort to get it right.

1027
00:40:29,490 --> 00:40:31,350
I mean there's no two Airmen for example

1028
00:40:31,350 --> 00:40:33,000
that are paid precisely the same thing.

1029
00:40:33,000 --> 00:40:34,630
And so you have to make sure you get

1030
00:40:34,630 --> 00:40:37,200
all the data in terms
of seniority, and grade,

1031
00:40:37,200 --> 00:40:39,570
and all those kinds of things got correct.

1032
00:40:39,570 --> 00:40:41,194
So the Air Force is
moving to a new system,

1033
00:40:41,194 --> 00:40:44,130
AFIPPS by acronym, where we will integrate

1034
00:40:44,130 --> 00:40:45,198
the pay and personnel system.

1035
00:40:45,198 --> 00:40:49,213
And it's going to reduce the
error rate well over 90%.

1036
00:40:50,079 --> 00:40:52,120
- Are some of the challenges associated

1037
00:40:52,120 --> 00:40:54,660
with the fact that many forms,

1038
00:40:54,660 --> 00:40:57,600
while the data is entered
on a computer terminal,

1039
00:40:57,600 --> 00:41:01,290
that data can't, is not computable.

1040
00:41:01,290 --> 00:41:03,260
It can't be transferred digitally?

1041
00:41:03,260 --> 00:41:06,080
- So it, what happens
is in some cases it's,

1042
00:41:06,080 --> 00:41:07,330
right it's entered in a form that

1043
00:41:07,330 --> 00:41:08,470
that's not easily transmitted,

1044
00:41:08,470 --> 00:41:11,252
or that system only uses
five pieces of information

1045
00:41:11,252 --> 00:41:13,790
and the systems on either
side of it need all eight.

1046
00:41:13,790 --> 00:41:15,550
And so you've gotta
restructure that system

1047
00:41:15,550 --> 00:41:18,340
so it holds the full set
of the string of data

1048
00:41:18,340 --> 00:41:21,250
and allows it to be used by
both sides of the process.

1049
00:41:21,250 --> 00:41:24,861
- Would the DD214 be an example of a form.

1050
00:41:24,861 --> 00:41:26,210
- Do you know if that's on of the issues?

1051
00:41:26,210 --> 00:41:27,470
- Let me take that one for the record.

1052
00:41:27,470 --> 00:41:28,450
- Okay thank you.

1053
00:41:28,450 --> 00:41:33,450
And I will yield to Mr.
Wittman for five minutes.

1054
00:41:34,160 --> 00:41:34,993
- Thank you Mr. Chairman.

1055
00:41:34,993 --> 00:41:36,760
Gentlemen thanks so much
for joining us today.

1056
00:41:36,760 --> 00:41:38,910
Thank you for your continual effort

1057
00:41:38,910 --> 00:41:40,470
in the realm of auditing.

1058
00:41:40,470 --> 00:41:43,490
It is not headline
grabbing, but I think it

1059
00:41:43,490 --> 00:41:46,620
is fundamental to how we
manage the massive amount

1060
00:41:46,620 --> 00:41:48,300
of resources that we send to the Pentagon.

1061
00:41:48,300 --> 00:41:49,770
Mr. Norquist I wanted to get you

1062
00:41:49,770 --> 00:41:51,010
to elaborate a little bit more.

1063
00:41:51,010 --> 00:41:53,084
You've talked about some of the challenges

1064
00:41:53,084 --> 00:41:56,290
within the current DOD system.

1065
00:41:56,290 --> 00:41:57,620
And we understand that there are a lot

1066
00:41:57,620 --> 00:41:59,990
of different ways in
which the service branches

1067
00:41:59,990 --> 00:42:04,520
either transact business,
account for expenditures.

1068
00:42:04,520 --> 00:42:06,400
It seems like to me there ought to be,

1069
00:42:06,400 --> 00:42:09,120
not only as part of getting the picture

1070
00:42:09,120 --> 00:42:11,540
clearer in the audit,
that we ought to look

1071
00:42:11,540 --> 00:42:14,160
at these systems and
determine are there simpler

1072
00:42:14,160 --> 00:42:15,670
and easier ways to do this.

1073
00:42:15,670 --> 00:42:17,010
You just heard the Air Force talk about

1074
00:42:17,010 --> 00:42:21,430
developing their system on
the side of paying personnel.

1075
00:42:21,430 --> 00:42:22,847
Is there a way that we can look at

1076
00:42:22,847 --> 00:42:25,170
unifying these systems, shouldn't there be

1077
00:42:25,170 --> 00:42:29,030
a single system that cuts
across service branches

1078
00:42:29,030 --> 00:42:32,410
and how we transact, and how we acquire,

1079
00:42:32,410 --> 00:42:34,950
how we pay personnel to make it easier

1080
00:42:34,950 --> 00:42:37,160
to go to a single place
in doing the audit.

1081
00:42:37,160 --> 00:42:38,340
It seems like to me that would make

1082
00:42:38,340 --> 00:42:40,030
your job a little bit easier,

1083
00:42:40,030 --> 00:42:42,410
is to have some commonality across systems

1084
00:42:42,410 --> 00:42:44,580
either in how we account for things,

1085
00:42:44,580 --> 00:42:46,350
or just the nuts and bolts

1086
00:42:46,350 --> 00:42:48,830
about how transactions take place.

1087
00:42:48,830 --> 00:42:51,410
- Absolutely and so when
we look at a process,

1088
00:42:51,410 --> 00:42:52,730
the first question we ask is can

1089
00:42:52,730 --> 00:42:55,220
we have a single system
for the entire department.

1090
00:42:55,220 --> 00:42:57,580
If you can that makes everything easier.

1091
00:42:57,580 --> 00:42:59,150
There are places where we do.

1092
00:42:59,150 --> 00:43:02,270
You then drop down and say,
in some cases the process

1093
00:43:02,270 --> 00:43:04,090
is sufficiently
complicated, and we've seen

1094
00:43:04,090 --> 00:43:05,148
the challenges when you try and get

1095
00:43:05,148 --> 00:43:08,310
all three services onto
a system where they each

1096
00:43:08,310 --> 00:43:09,930
have slightly different processes.

1097
00:43:09,930 --> 00:43:11,950
It makes it very hard
for the program manager

1098
00:43:11,950 --> 00:43:14,050
to ever deliver a working system.

1099
00:43:14,050 --> 00:43:15,810
In some of those cases
your answer to the question

1100
00:43:15,810 --> 00:43:18,230
is can I get them all
to agree on receiving

1101
00:43:18,230 --> 00:43:20,880
and transmitting data in the same format.

1102
00:43:20,880 --> 00:43:23,060
In which case I may not mind
that they're different systems

1103
00:43:23,060 --> 00:43:25,380
as long as they will
talk to everything else

1104
00:43:25,380 --> 00:43:26,620
the way they're supposed to.

1105
00:43:26,620 --> 00:43:28,050
And so you work your way through that.

1106
00:43:28,050 --> 00:43:30,090
Somewhere in the question
is do I replace it?

1107
00:43:30,090 --> 00:43:31,400
Do I retire it?

1108
00:43:31,400 --> 00:43:32,865
In a few cases it may be simple enough

1109
00:43:32,865 --> 00:43:35,573
just to modify the system
and it'll be sufficient.

1110
00:43:36,440 --> 00:43:38,680
- To what extent can
you push the different

1111
00:43:38,680 --> 00:43:41,350
service branches with
sometimes the inertia

1112
00:43:41,350 --> 00:43:43,820
that exists there to say
this is the way we do it,

1113
00:43:43,820 --> 00:43:47,320
we can't do it another way
because of particular reasons.

1114
00:43:47,320 --> 00:43:48,750
Do you look at that critically and say,

1115
00:43:48,750 --> 00:43:50,486
well these are legitimate reasons why you

1116
00:43:50,486 --> 00:43:52,430
have a unique way of doing,

1117
00:43:52,430 --> 00:43:53,820
or these are not legitimate reasons,

1118
00:43:53,820 --> 00:43:55,040
there should be a way that you can

1119
00:43:55,040 --> 00:43:57,070
do it in common with the
other service branches.

1120
00:43:57,070 --> 00:43:59,774
I think in some instances being
able to push the envelope,

1121
00:43:59,774 --> 00:44:02,610
push the service branches
essentially past their point

1122
00:44:02,610 --> 00:44:04,688
in comfort to say this is
the way we've always done it,

1123
00:44:04,688 --> 00:44:06,436
and we can't do it another way.

1124
00:44:06,436 --> 00:44:09,040
Do you think about that?

1125
00:44:09,040 --> 00:44:10,780
Do you push the issue to really make them

1126
00:44:10,780 --> 00:44:12,270
critically think about how they're doing

1127
00:44:12,270 --> 00:44:14,660
and the process by which they're doing it.

1128
00:44:14,660 --> 00:44:15,760
- We do, and that's usually one

1129
00:44:15,760 --> 00:44:17,160
of the core of the conversations.

1130
00:44:17,160 --> 00:44:21,280
Which is, is it really an unusual process

1131
00:44:21,280 --> 00:44:24,010
that you have to do, and
the answer is, if it is why?

1132
00:44:24,010 --> 00:44:25,020
Is it your policy?

1133
00:44:25,020 --> 00:44:26,270
Maybe we just change the process.

1134
00:44:26,270 --> 00:44:27,320
I mean one of the things you always

1135
00:44:27,320 --> 00:44:31,360
have to be care about is
automating your existing process,

1136
00:44:31,360 --> 00:44:34,780
not revising your process to
take advantage of automation.

1137
00:44:34,780 --> 00:44:36,958
And so in some cases
we go back and we work

1138
00:44:36,958 --> 00:44:41,000
with the service and say, that's
not the best way to do it.

1139
00:44:41,000 --> 00:44:42,710
One of the other services
has a better way.

1140
00:44:42,710 --> 00:44:45,330
You need to come over this direction.

1141
00:44:45,330 --> 00:44:46,590
And those are the types of challenges.

1142
00:44:46,590 --> 00:44:47,423
They're often very difficult.

1143
00:44:47,423 --> 00:44:49,470
You're really down into
the technical aspects.

1144
00:44:49,470 --> 00:44:51,330
But it's an essential change
if you can get it right.

1145
00:44:51,330 --> 00:44:54,290
- Sure, let me ask you
of your expectations

1146
00:44:54,290 --> 00:44:58,030
about where we are today, and the path

1147
00:44:58,030 --> 00:45:01,156
that has been charted by DOD,

1148
00:45:01,156 --> 00:45:04,130
and where DOD will be in five years,

1149
00:45:04,130 --> 00:45:07,300
and 10 years related to the audit.

1150
00:45:07,300 --> 00:45:09,750
How much clearer will the audit be?

1151
00:45:09,750 --> 00:45:11,000
How will systems change?

1152
00:45:11,000 --> 00:45:13,080
And what can we expect in that five year

1153
00:45:13,080 --> 00:45:16,680
and then 10 year window
as far as transparency

1154
00:45:16,680 --> 00:45:21,270
and clarity, and the
result of each subsequent

1155
00:45:21,270 --> 00:45:22,910
audit through that period of time?

1156
00:45:22,910 --> 00:45:25,950
- So I think as you
look out say five years,

1157
00:45:25,950 --> 00:45:28,490
you'll either have
organizations with modified

1158
00:45:28,490 --> 00:45:31,095
and clean opinions, or
they will have a particular

1159
00:45:31,095 --> 00:45:34,240
challenge remaining,
and we saw this at DHS.

1160
00:45:34,240 --> 00:45:36,800
They would get down to they
had fixed everything except.

1161
00:45:36,800 --> 00:45:38,320
And then all of a sudden instead of having

1162
00:45:38,320 --> 00:45:40,130
a discussion about financial management

1163
00:45:40,130 --> 00:45:41,953
of the audit in general,
having a very detailed

1164
00:45:41,953 --> 00:45:44,840
specific discussion about a particular

1165
00:45:44,840 --> 00:45:46,900
challenge in that organization.

1166
00:45:46,900 --> 00:45:48,860
That's a very strong place to be.

1167
00:45:48,860 --> 00:45:51,270
But between five and 10
not only do we wanna see

1168
00:45:51,270 --> 00:45:53,310
folks getting to a clean opinion.

1169
00:45:53,310 --> 00:45:55,910
We wanna be able to take
advantage of the data.

1170
00:45:55,910 --> 00:45:57,210
So part of what we're trying to do

1171
00:45:57,210 --> 00:45:59,500
in parallel with this,
now that we're having

1172
00:45:59,500 --> 00:46:00,540
every more accurate data,

1173
00:46:00,540 --> 00:46:02,920
and we have the universal
transactions and other things,

1174
00:46:02,920 --> 00:46:05,430
how do we use that to
drive decision making.

1175
00:46:05,430 --> 00:46:07,259
The Congressman mentioned earlier

1176
00:46:07,259 --> 00:46:09,970
the Brac and real property,
well if you don't believe

1177
00:46:09,970 --> 00:46:11,470
your square footage you're gonna have

1178
00:46:11,470 --> 00:46:13,200
a real hard time having a conversation

1179
00:46:13,200 --> 00:46:14,940
about whether you need
more buildings or less.

1180
00:46:14,940 --> 00:46:16,474
So you wanna have more accurate data

1181
00:46:16,474 --> 00:46:18,270
so you can be clear about.

1182
00:46:18,270 --> 00:46:21,197
And making use of that data
is the real transformative

1183
00:46:21,197 --> 00:46:22,630
effect that we're looking for.

1184
00:46:22,630 --> 00:46:23,463
- Very good.

1185
00:46:23,463 --> 00:46:24,296
Thank you Mr. Norquist.

1186
00:46:24,296 --> 00:46:25,910
Mr. Chairman, I yield back.

1187
00:46:25,910 --> 00:46:28,060
- [Chairman] Thank you, Mr. Langevin.

1188
00:46:28,060 --> 00:46:28,893
- Thank you Mr. Chairman.

1189
00:46:28,893 --> 00:46:30,700
I wanna welcome our witnesses here today.

1190
00:46:30,700 --> 00:46:32,830
Thank you for your testimony.

1191
00:46:32,830 --> 00:46:35,410
Let me begin with this question.

1192
00:46:35,410 --> 00:46:37,070
As the Chair of the Intelligence

1193
00:46:37,070 --> 00:46:39,250
and Emerging Threats and
Capabilities Subcommittee

1194
00:46:39,250 --> 00:46:42,980
I'm increasingly concerned
with the lack of clarity

1195
00:46:42,980 --> 00:46:47,493
on the costs, expenditures
associated with cyber operations.

1196
00:46:48,930 --> 00:46:50,470
For example this committee needs to have

1197
00:46:50,470 --> 00:46:54,050
a sense of how CYBERCOM has used

1198
00:46:54,050 --> 00:46:56,110
its appropriated money to date.

1199
00:46:56,110 --> 00:47:00,200
And how it is not duplicative of what

1200
00:47:00,200 --> 00:47:01,540
the military services are funding

1201
00:47:01,540 --> 00:47:05,100
for organic capabilities and for CYBERCOM.

1202
00:47:05,100 --> 00:47:07,680
So can you tell me how
can the audit create

1203
00:47:07,680 --> 00:47:10,461
greater transparency on operational

1204
00:47:10,461 --> 00:47:14,040
and other costs for DOD cyber operations?

1205
00:47:14,040 --> 00:47:15,770
- So the value of the audit is the ability

1206
00:47:15,770 --> 00:47:17,281
to break down the transactions

1207
00:47:17,281 --> 00:47:19,880
to the lowest level,
the transaction level.

1208
00:47:19,880 --> 00:47:21,590
The issue with cyber is going to be

1209
00:47:21,590 --> 00:47:24,330
making clear to people the
boundaries of the definition.

1210
00:47:24,330 --> 00:47:26,570
So some people by cyber
refer to almost anything

1211
00:47:26,570 --> 00:47:28,818
that uses IT which becomes very broad.

1212
00:47:28,818 --> 00:47:31,620
But being able to be
particular about what we mean

1213
00:47:31,620 --> 00:47:33,360
and then either through
the budgeting process

1214
00:47:33,360 --> 00:47:34,438
set up categories so that Congress

1215
00:47:34,438 --> 00:47:36,740
sees those numbers in its report.

1216
00:47:36,740 --> 00:47:37,850
Right now for a lot of those,

1217
00:47:37,850 --> 00:47:39,160
they're sort of ad hoc data calls.

1218
00:47:39,160 --> 00:47:41,460
We can use the audit findings

1219
00:47:41,460 --> 00:47:43,300
to produce more accuracy in those.

1220
00:47:43,300 --> 00:47:44,403
But you're still working off

1221
00:47:44,403 --> 00:47:47,540
what's the definition
and how do we capture it.

1222
00:47:47,540 --> 00:47:48,799
But the level of accuracy in the data

1223
00:47:48,799 --> 00:47:51,277
and the ability to sort on key information

1224
00:47:51,277 --> 00:47:53,480
will help be able to
give you a better answer.

1225
00:47:53,480 --> 00:47:55,930
- And so where are we in establishing

1226
00:47:55,930 --> 00:47:58,310
those definitions and giving that clarity.

1227
00:47:58,310 --> 00:48:00,570
- So I know there's a set we used

1228
00:48:00,570 --> 00:48:01,860
this year in terms of reporting

1229
00:48:01,860 --> 00:48:03,540
the dollar amount for cyber.

1230
00:48:03,540 --> 00:48:04,770
I'd have to sit down with you

1231
00:48:04,770 --> 00:48:06,100
and go over that definition and see

1232
00:48:06,100 --> 00:48:07,680
if it's meeting your requirements.

1233
00:48:07,680 --> 00:48:08,833
But that was something that I know we did

1234
00:48:08,833 --> 00:48:11,320
as part of the program to build this year.

1235
00:48:11,320 --> 00:48:13,160
And was part of our reporting to Congress.

1236
00:48:13,160 --> 00:48:14,932
- Okay I'd welcome that if we can

1237
00:48:14,932 --> 00:48:16,963
work on that together, thank you.

1238
00:48:18,020 --> 00:48:19,650
Next question.

1239
00:48:19,650 --> 00:48:23,870
There's been a push for
innovation of the audit

1240
00:48:23,870 --> 00:48:27,900
to increase audit readiness,
how is the department

1241
00:48:27,900 --> 00:48:29,680
leveraging AI machine learning

1242
00:48:29,680 --> 00:48:33,160
and process robotics to
enhance accountability?

1243
00:48:33,160 --> 00:48:34,860
- So there's some very helpful tools

1244
00:48:34,860 --> 00:48:36,450
in keeping the cost of the audit down,

1245
00:48:36,450 --> 00:48:38,680
improving the accuracy using bots.

1246
00:48:38,680 --> 00:48:41,430
I think the Army's the
most forward on that.

1247
00:48:41,430 --> 00:48:44,280
So maybe John you can
talk to the use of bots.

1248
00:48:44,280 --> 00:48:47,342
- Yeah so we've rolled out
robotic process automation

1249
00:48:47,342 --> 00:48:49,600
to look at some of the
things we talked about

1250
00:48:49,600 --> 00:48:51,630
when the systems don't
talk to each other well.

1251
00:48:51,630 --> 00:48:53,080
The long run solution is to merge

1252
00:48:53,080 --> 00:48:55,440
those systems into a single system.

1253
00:48:55,440 --> 00:48:56,770
That takes time.

1254
00:48:56,770 --> 00:48:58,420
In the meantime we're using robotic

1255
00:48:58,420 --> 00:49:00,180
process automation to clean up

1256
00:49:00,180 --> 00:49:02,970
those unmatched transactions,
and those other discrepancies.

1257
00:49:02,970 --> 00:49:05,430
We're at the very lead, early stages

1258
00:49:05,430 --> 00:49:07,260
of exploring the other
things you mentioned,

1259
00:49:07,260 --> 00:49:09,190
AI and everything else.

1260
00:49:09,190 --> 00:49:10,870
So I think there are gonna
be a lot of applications.

1261
00:49:10,870 --> 00:49:13,950
We're not using any of
those at the current

1262
00:49:13,950 --> 00:49:15,880
moment for, specifically for audit.

1263
00:49:15,880 --> 00:49:18,130
But we're in the middle right now

1264
00:49:18,130 --> 00:49:20,810
of figuring out how to
and where to do that.

1265
00:49:20,810 --> 00:49:24,420
- Okay, and this is for all the witnesses.

1266
00:49:24,420 --> 00:49:25,807
So do, those of us on the committee

1267
00:49:25,807 --> 00:49:28,450
surely understand that the war fighter

1268
00:49:28,450 --> 00:49:32,020
is and should be focused on the mission.

1269
00:49:32,020 --> 00:49:34,740
However we also understand
that the more effectively

1270
00:49:34,740 --> 00:49:36,747
the department's resources are managed

1271
00:49:36,747 --> 00:49:40,172
the more effective our
military operations will be.

1272
00:49:40,172 --> 00:49:43,150
And we're gonna get more
bang for the buck obviously.

1273
00:49:43,150 --> 00:49:45,682
So the financial management community

1274
00:49:45,682 --> 00:49:49,280
cannot achieve a clean audit alone.

1275
00:49:49,280 --> 00:49:51,515
Our war fighters who are
responsible for equipment

1276
00:49:51,515 --> 00:49:53,810
and inventory on a day to day basis

1277
00:49:53,810 --> 00:49:56,460
must be engaged as well.

1278
00:49:56,460 --> 00:49:59,670
So how is the department driving

1279
00:49:59,670 --> 00:50:02,640
by and beyond the FM community

1280
00:50:02,640 --> 00:50:07,450
out of the services and down
to the operational level.

1281
00:50:07,450 --> 00:50:08,458
- That's a good question.

1282
00:50:08,458 --> 00:50:09,291
Let me just give an overview.

1283
00:50:09,291 --> 00:50:10,560
And then each of them give their examples.

1284
00:50:10,560 --> 00:50:12,700
One of the things I had been uncomfortable

1285
00:50:12,700 --> 00:50:14,270
and was expecting was as the auditors

1286
00:50:14,270 --> 00:50:15,380
started to pull their samples,

1287
00:50:15,380 --> 00:50:17,070
we might get pushback on the field

1288
00:50:17,070 --> 00:50:19,130
from the level of effort involved.

1289
00:50:19,130 --> 00:50:21,780
But when it came to the types
of findings of inventory,

1290
00:50:21,780 --> 00:50:23,230
things that were easily understood

1291
00:50:23,230 --> 00:50:26,270
by the commanders in the
field as to their value,

1292
00:50:26,270 --> 00:50:28,560
instead what we noticed
was an enthusiasm for this.

1293
00:50:28,560 --> 00:50:30,297
And what the auditors
found is a number of places

1294
00:50:30,297 --> 00:50:32,430
where there was strong leadership

1295
00:50:32,430 --> 00:50:34,220
there was very high accountability rates.

1296
00:50:34,220 --> 00:50:36,780
So at Kadena and Osan Air Base,

1297
00:50:36,780 --> 00:50:39,330
14,000 munitions, 2.2 billion dollars,

1298
00:50:39,330 --> 00:50:41,790
auditors came back and said 100% perfect.

1299
00:50:41,790 --> 00:50:43,180
Let each of the services talk in terms

1300
00:50:43,180 --> 00:50:45,630
of how they're engaging their,
the military in the field.

1301
00:50:45,630 --> 00:50:47,180
- If you could also include how

1302
00:50:47,180 --> 00:50:49,500
you're using metrics for accountability.

1303
00:50:49,500 --> 00:50:50,930
- [Mr. Norquist] Absolutely metrics, good.

1304
00:50:50,930 --> 00:50:53,065
- Yeah well we measure the accuracy

1305
00:50:53,065 --> 00:50:54,800
of the samples that are taken.

1306
00:50:54,800 --> 00:50:57,800
So we know, so for example if an auditor

1307
00:50:57,800 --> 00:51:00,730
goes into a location
to an arsenal or depo,

1308
00:51:00,730 --> 00:51:03,138
does a real property or a
general equipment sample

1309
00:51:03,138 --> 00:51:07,510
we count, they might
have a sample size of 150

1310
00:51:07,510 --> 00:51:10,010
that they find five exceptions.

1311
00:51:10,010 --> 00:51:12,090
We know exactly what that percentage is,

1312
00:51:12,090 --> 00:51:13,510
and we're tracking that over time.

1313
00:51:13,510 --> 00:51:15,520
And we've made it very
clear to our commands

1314
00:51:15,520 --> 00:51:17,060
and our organizations, that we expect

1315
00:51:17,060 --> 00:51:18,740
those percentages to be marching up.

1316
00:51:18,740 --> 00:51:21,781
And then to get into
the 99, the 100% range

1317
00:51:21,781 --> 00:51:23,203
within a couple of years which is where

1318
00:51:23,203 --> 00:51:25,273
we need to be for the audit opinion.

1319
00:51:27,770 --> 00:51:28,780
- [Chairman] And Brass we can take

1320
00:51:28,780 --> 00:51:30,330
the other examples for the record.

1321
00:51:30,330 --> 00:51:31,180
- [Mr. Norquist] Record, okay.

1322
00:51:31,180 --> 00:51:32,650
- [Chairman] Yeah, thank you.

1323
00:51:32,650 --> 00:51:34,130
Mr. Banks.

1324
00:51:34,130 --> 00:51:35,750
- Thank you Mr. Chairman.

1325
00:51:35,750 --> 00:51:39,800
The audit found a number
of outdated IT systems.

1326
00:51:39,800 --> 00:51:42,770
Some of them were decades old that cost

1327
00:51:42,770 --> 00:51:45,880
the department millions
of dollars to maintain.

1328
00:51:45,880 --> 00:51:47,839
Cyber and IT are two critical aspects

1329
00:51:47,839 --> 00:51:51,070
of the National Defense
Strategy as all of you know.

1330
00:51:51,070 --> 00:51:52,790
I'm concerned that these two aspects

1331
00:51:52,790 --> 00:51:55,420
of the audit have the
most notice of finding

1332
00:51:55,420 --> 00:51:57,550
and recommendations or NFRs,

1333
00:51:57,550 --> 00:52:02,550
representing 1,084 out of the 2348 total.

1334
00:52:03,205 --> 00:52:05,275
I've had many service members tell me

1335
00:52:05,275 --> 00:52:09,980
about the poor quality of
personnel related systems.

1336
00:52:09,980 --> 00:52:12,030
Service members often need to use several

1337
00:52:12,030 --> 00:52:16,660
interfaces or repeat actions
on different platforms.

1338
00:52:16,660 --> 00:52:18,570
This problem is especially prevalent

1339
00:52:18,570 --> 00:52:21,970
in the Reserves as I
experienced first hand.

1340
00:52:21,970 --> 00:52:25,950
Mr. Norquist can you
summarize the audit findings

1341
00:52:25,950 --> 00:52:29,830
regarding the functionality
of department IT systems?

1342
00:52:29,830 --> 00:52:30,890
- So Congressman I think you started

1343
00:52:30,890 --> 00:52:33,070
with what I think, it
is the single largest

1344
00:52:33,070 --> 00:52:34,730
source of findings in the audit.

1345
00:52:34,730 --> 00:52:37,090
There's a very large number of old systems

1346
00:52:37,090 --> 00:52:41,622
that we have to either retire,
and replace, or modify.

1347
00:52:41,622 --> 00:52:44,370
The personnel ones, things like travel,

1348
00:52:44,370 --> 00:52:46,280
those are ones that are
very labor intensive.

1349
00:52:46,280 --> 00:52:48,270
They do not have the automated controls

1350
00:52:48,270 --> 00:52:50,870
that make it easy for people
to avoid making mistakes.

1351
00:52:50,870 --> 00:52:52,980
All of those generate frustration.

1352
00:52:52,980 --> 00:52:55,350
So we're looking to systematically go

1353
00:52:55,350 --> 00:52:57,470
through and replace those.

1354
00:52:57,470 --> 00:53:00,280
In our process the CIO is
a key lead in this effort.

1355
00:53:00,280 --> 00:53:02,040
And so when we talk about meetings.

1356
00:53:02,040 --> 00:53:04,910
It's not really the FM
who's chairing them.

1357
00:53:04,910 --> 00:53:06,040
They're one of the key players.

1358
00:53:06,040 --> 00:53:07,760
But we have one that's acquisition,

1359
00:53:07,760 --> 00:53:09,600
with the head of acquisition
who co chairs it.

1360
00:53:09,600 --> 00:53:11,820
We have one where the CIO co chairs it.

1361
00:53:11,820 --> 00:53:14,470
And the point to them is,
where as the FM committee

1362
00:53:14,470 --> 00:53:15,710
we're happy to be involved,

1363
00:53:15,710 --> 00:53:18,410
but this is really an IT
security issue, an IT issue.

1364
00:53:18,410 --> 00:53:20,680
And the audit's identifying it.

1365
00:53:20,680 --> 00:53:22,530
But it's not FM in nature.

1366
00:53:22,530 --> 00:53:24,100
It's quality of service to the field

1367
00:53:24,100 --> 00:53:25,410
with the accuracy of the data.

1368
00:53:25,410 --> 00:53:26,260
- Got it.

1369
00:53:26,260 --> 00:53:29,400
Of the IT related NFRs specifically,

1370
00:53:29,400 --> 00:53:32,070
how many findings or recommendations

1371
00:53:32,070 --> 00:53:33,620
could you say that would require

1372
00:53:33,620 --> 00:53:37,570
an entirely new system
to address the problems?

1373
00:53:37,570 --> 00:53:38,610
- Let me take that for the record,

1374
00:53:38,610 --> 00:53:40,120
and we'll be able to
see if we can sort that.

1375
00:53:40,120 --> 00:53:40,953
- Thank you.

1376
00:53:40,953 --> 00:53:42,860
And Mr. Norquist how long would you expect

1377
00:53:42,860 --> 00:53:46,150
the remediation process
for those NFRs to take?

1378
00:53:46,150 --> 00:53:48,470
- I think that will be one of
the longest poles in the tent.

1379
00:53:48,470 --> 00:53:50,310
I think even after we get a clean opinion,

1380
00:53:50,310 --> 00:53:52,250
there will still be findings and audit

1381
00:53:52,250 --> 00:53:54,410
systems will have just
figured out ways around them.

1382
00:53:54,410 --> 00:53:57,860
But getting those down is part
of the single largest effort.

1383
00:53:57,860 --> 00:53:59,090
- Okay thank you.

1384
00:53:59,090 --> 00:54:00,970
Last year in the Navy
Times it was reported

1385
00:54:00,970 --> 00:54:04,967
that the audit found that
"five sites that manage

1386
00:54:04,967 --> 00:54:07,147
"ballistic missile defense elements

1387
00:54:07,147 --> 00:54:09,717
"and technical information were failing

1388
00:54:09,717 --> 00:54:12,627
"to take basic cyber security steps

1389
00:54:12,627 --> 00:54:15,277
"to ensure that information on America's

1390
00:54:15,277 --> 00:54:16,727
"Ballistic Missile Defense System

1391
00:54:16,727 --> 00:54:20,431
"won't fall into nefarious hands."

1392
00:54:20,431 --> 00:54:23,370
Mr. Norquist to your
knowledge have there been

1393
00:54:23,370 --> 00:54:25,610
any steps taken to correct
those vulnerabilities

1394
00:54:25,610 --> 00:54:26,980
to our missile defense systems?

1395
00:54:26,980 --> 00:54:29,417
- So there are steps
being taken to correct on,

1396
00:54:29,417 --> 00:54:31,060
and those would be the war fighting side.

1397
00:54:31,060 --> 00:54:32,583
But just like we have folks worried about

1398
00:54:32,583 --> 00:54:34,640
IT security on the business systems

1399
00:54:34,640 --> 00:54:37,610
through the audit, we
have forums that look at

1400
00:54:37,610 --> 00:54:40,350
the cyber security of weapons
systems and those programs.

1401
00:54:40,350 --> 00:54:42,200
And those steps are underway.

1402
00:54:42,200 --> 00:54:44,188
- Okay, some of the system flaws

1403
00:54:44,188 --> 00:54:49,188
had been originally identified
in 1990, and in 2013.

1404
00:54:49,930 --> 00:54:52,460
I can't find any evidence
that those at that point

1405
00:54:52,460 --> 00:54:55,780
were ever addressed or fixed after those

1406
00:54:56,790 --> 00:54:59,100
findings many years ago.

1407
00:54:59,100 --> 00:55:01,090
What is the DOD and Inspector General's

1408
00:55:01,090 --> 00:55:03,166
timeline to reinvestigate?

1409
00:55:03,166 --> 00:55:05,640
- I don't know about the
Inspector General's timeline.

1410
00:55:05,640 --> 00:55:06,970
There was congressional language

1411
00:55:06,970 --> 00:55:09,760
that directs us for a
series of weapons systems,

1412
00:55:09,760 --> 00:55:11,760
particularly the ballistic
missile defense ones,

1413
00:55:11,760 --> 00:55:14,930
to look at cyber security,
have the services

1414
00:55:14,930 --> 00:55:17,000
develop assessments of the risk,

1415
00:55:17,000 --> 00:55:18,819
and the corrective action plans.

1416
00:55:18,819 --> 00:55:20,257
That needs to go faster.

1417
00:55:20,257 --> 00:55:21,890
The risk there is very serious.

1418
00:55:21,890 --> 00:55:23,340
I believe the ballistic missile is one

1419
00:55:23,340 --> 00:55:25,760
of the first to start going through it.

1420
00:55:25,760 --> 00:55:27,380
But we need to do better in that area

1421
00:55:27,380 --> 00:55:30,320
because of the sheer risk and
vulnerability cyber creates.

1422
00:55:30,320 --> 00:55:31,390
- Got it, thanks.

1423
00:55:31,390 --> 00:55:34,190
In your summary of audit findings,

1424
00:55:34,190 --> 00:55:39,190
464 findings from the FY18
audit related to IT security.

1425
00:55:40,010 --> 00:55:42,030
Are you aware of any of these,

1426
00:55:42,030 --> 00:55:44,874
if any of these are critical
weaknesses in the systems

1427
00:55:44,874 --> 00:55:47,700
necessary to maintain the
safety of our service members

1428
00:55:47,700 --> 00:55:49,100
and the security of our nation.

1429
00:55:49,100 --> 00:55:51,440
- So most of the ones in the
audit are business systems.

1430
00:55:51,440 --> 00:55:55,010
But even then, there's a
consequence of business systems.

1431
00:55:55,010 --> 00:55:57,250
Their either privacy data,
people's personnel records,

1432
00:55:57,250 --> 00:55:58,934
an individual potentially being able,

1433
00:55:58,934 --> 00:56:01,700
that could be asked if you're not secure.

1434
00:56:01,700 --> 00:56:03,900
Spare parts, making sure the integrity

1435
00:56:03,900 --> 00:56:05,190
of the spare parts information

1436
00:56:05,190 --> 00:56:06,127
to support the war fighter.

1437
00:56:06,127 --> 00:56:07,816
Even though they're business systems,

1438
00:56:07,816 --> 00:56:10,150
it's the business of
supporting the military.

1439
00:56:10,150 --> 00:56:11,880
And therefore there are consequences.

1440
00:56:11,880 --> 00:56:12,900
- Appreciate it very much, thank you.

1441
00:56:12,900 --> 00:56:14,470
I yield back.

1442
00:56:14,470 --> 00:56:15,303
- [Chairman] Thank you.

1443
00:56:15,303 --> 00:56:17,090
Mr. Cisneros.

1444
00:56:17,090 --> 00:56:17,923
- Thank you Mr. Chairman.

1445
00:56:17,923 --> 00:56:19,960
Thank you gentlemen for being here.

1446
00:56:19,960 --> 00:56:24,647
Mr. Norquist I'm
concerned with self audits

1447
00:56:24,647 --> 00:56:26,647
and ensuring best practices.

1448
00:56:26,647 --> 00:56:31,400
So rather than waiting for
the next audit to come about

1449
00:56:31,400 --> 00:56:33,360
how are we encouraging the services

1450
00:56:33,360 --> 00:56:35,980
and the various commands
about implementing

1451
00:56:35,980 --> 00:56:39,120
processes to find those repair parts

1452
00:56:39,120 --> 00:56:41,504
that may be sitting on a
shelf that nobody knows about?

1453
00:56:41,504 --> 00:56:44,181
How are they implementing these processes

1454
00:56:44,181 --> 00:56:48,430
so we can find them before
the next audit comes?

1455
00:56:48,430 --> 00:56:50,640
- So we have for each of the areas,

1456
00:56:50,640 --> 00:56:53,440
whether it's inventory, or IT security,

1457
00:56:53,440 --> 00:56:56,140
or financial, we have
forums for all the services

1458
00:56:56,140 --> 00:56:58,170
there and give updates
and share best practices.

1459
00:56:58,170 --> 00:57:00,118
Did you wanna mention
one in particular John?

1460
00:57:00,118 --> 00:57:02,980
- I can just give you a couple
of concrete examples sir.

1461
00:57:02,980 --> 00:57:04,940
I mean we, we were just at one of our

1462
00:57:04,940 --> 00:57:08,500
arsenals and depos that one of the things

1463
00:57:08,500 --> 00:57:10,120
we care about is equipment,

1464
00:57:10,120 --> 00:57:10,980
and the inventory of the equipment,

1465
00:57:10,980 --> 00:57:12,120
and the condition of the equipment.

1466
00:57:12,120 --> 00:57:13,650
One of the things that typically happens

1467
00:57:13,650 --> 00:57:15,500
is a piece of equipment is purchased

1468
00:57:15,500 --> 00:57:17,770
and used for a particular job.

1469
00:57:17,770 --> 00:57:19,040
That job gets finished.

1470
00:57:19,040 --> 00:57:20,460
That piece of equipment gets set aside

1471
00:57:20,460 --> 00:57:21,466
and we lose track of it.

1472
00:57:21,466 --> 00:57:22,760
That becomes an audit problem

1473
00:57:22,760 --> 00:57:24,440
because we lose track of its condition.

1474
00:57:24,440 --> 00:57:26,060
But that also becomes
an operational problem,

1475
00:57:26,060 --> 00:57:27,440
because now I have an
expensive piece of equipment

1476
00:57:27,440 --> 00:57:31,180
that might be needed
somewhere else in that plan.

1477
00:57:31,180 --> 00:57:33,877
So what that organization did,

1478
00:57:33,877 --> 00:57:37,060
was they created a system that now ties

1479
00:57:37,060 --> 00:57:39,070
to the inventory of the general equipment

1480
00:57:39,070 --> 00:57:41,857
that reports when it's idol at every day.

1481
00:57:41,857 --> 00:57:43,180
And that allows everybody else

1482
00:57:43,180 --> 00:57:46,050
in the organization to recognize that,

1483
00:57:46,050 --> 00:57:47,340
and then they go in
and if they have a need

1484
00:57:47,340 --> 00:57:49,010
for that equipment to use that equipment.

1485
00:57:49,010 --> 00:57:50,310
It's helping our audit records,

1486
00:57:50,310 --> 00:57:51,940
keep the conditions of the equipment

1487
00:57:51,940 --> 00:57:53,550
and the status of the
equipment up to date,

1488
00:57:53,550 --> 00:57:54,870
but it's also helping the plan.

1489
00:57:54,870 --> 00:57:56,970
So we have now took that
and we have now broadcast

1490
00:57:56,970 --> 00:57:58,560
that across all of our arsenals and depos.

1491
00:57:58,560 --> 00:58:00,190
And that's gonna be a practice

1492
00:58:00,190 --> 00:58:02,600
that they'll all start adopting.

1493
00:58:02,600 --> 00:58:04,967
- Now are we performing,
are the various commands

1494
00:58:04,967 --> 00:58:06,920
are they performing self audits?

1495
00:58:06,920 --> 00:58:08,350
Are they goin and doin' spot checks

1496
00:58:08,350 --> 00:58:11,197
of repair parts and making sure
that these parts are there,

1497
00:58:11,197 --> 00:58:12,930
and that they're actually working,

1498
00:58:12,930 --> 00:58:15,440
and that we can use these repair parts?

1499
00:58:15,440 --> 00:58:18,020
- So each of the services does
an audit of their inventory.

1500
00:58:18,020 --> 00:58:20,095
You know part of this is
the auditors come through.

1501
00:58:20,095 --> 00:58:22,030
In the long term what they will switch

1502
00:58:22,030 --> 00:58:23,260
to is checking your controls.

1503
00:58:23,260 --> 00:58:25,170
They will check the way
you do your own audit

1504
00:58:25,170 --> 00:58:26,150
if they have confidence.

1505
00:58:26,150 --> 00:58:27,310
At the beginning of an audit they don't

1506
00:58:27,310 --> 00:58:28,700
even assume confidence, they go and they

1507
00:58:28,700 --> 00:58:31,090
replicate the test themselves.

1508
00:58:31,090 --> 00:58:32,550
But each of these organizations

1509
00:58:32,550 --> 00:58:34,400
does a process of inventory.

1510
00:58:34,400 --> 00:58:36,060
Some do site by site.

1511
00:58:36,060 --> 00:58:37,680
Some do 10% a month.

1512
00:58:37,680 --> 00:58:40,300
Others do a whole sweep
at a particular time.

1513
00:58:40,300 --> 00:58:41,133
But yes they do.

1514
00:58:42,290 --> 00:58:43,910
- And what are we doing to share

1515
00:58:43,910 --> 00:58:46,980
best practices across the services?

1516
00:58:46,980 --> 00:58:48,530
So if the Army has a good idea,

1517
00:58:48,530 --> 00:58:50,460
like you just said, how are we sharin'

1518
00:58:50,460 --> 00:58:52,720
that with the Navy and
the Air Force to make sure

1519
00:58:52,720 --> 00:58:54,630
how this is something
that they could implement?

1520
00:58:54,630 --> 00:58:57,040
- So we have a number of
forums where we do that.

1521
00:58:57,040 --> 00:58:59,440
We have the regular
meetings where we do this.

1522
00:58:59,440 --> 00:59:01,630
We also have training
events where we have people

1523
00:59:01,630 --> 00:59:04,470
who've had success whether
it's from the service,

1524
00:59:04,470 --> 00:59:06,440
from another agency come and speak.

1525
00:59:06,440 --> 00:59:08,770
Did you wanna give an example, Tom.

1526
00:59:08,770 --> 00:59:09,603
- Thank you sir.

1527
00:59:09,603 --> 00:59:11,530
One of the areas where the
Navy's made a lot of progress

1528
00:59:11,530 --> 00:59:14,100
this year is dealing with
real property accountability.

1529
00:59:14,100 --> 00:59:16,850
So we took findings we
got from the auditor

1530
00:59:16,850 --> 00:59:18,020
and then we implemented a plan

1531
00:59:18,020 --> 00:59:19,310
to do a full and complete inventory

1532
00:59:19,310 --> 00:59:21,530
of our real property
over a six month period.

1533
00:59:21,530 --> 00:59:22,917
We finished that in March of this year.

1534
00:59:22,917 --> 00:59:25,320
And the auditors have gone out in April

1535
00:59:25,320 --> 00:59:26,640
and started doing their testing.

1536
00:59:26,640 --> 00:59:28,030
And so far they've identified less

1537
00:59:28,030 --> 00:59:30,340
than one half of one percent error rate,

1538
00:59:30,340 --> 00:59:32,780
which is well within the audit standards.

1539
00:59:32,780 --> 00:59:34,460
We've shared what we've done with the Army

1540
00:59:34,460 --> 00:59:35,640
and the Air Force so that they can

1541
00:59:35,640 --> 00:59:38,473
look at incorporating that into
their real property testing.

1542
00:59:39,750 --> 00:59:43,940
- I might just add sir, the
three of us meet weekly.

1543
00:59:43,940 --> 00:59:45,770
And then our audit leads underneath us

1544
00:59:45,770 --> 00:59:46,910
they meet weekly as well.

1545
00:59:46,910 --> 00:59:50,350
It's, there's a lot of
communication across the services.

1546
00:59:50,350 --> 00:59:52,850
- All right, and what
steps are being taken

1547
00:59:52,850 --> 00:59:55,200
to ensure military services,
particularly senior

1548
00:59:55,200 --> 00:59:57,210
uniformed personnel are considering

1549
00:59:57,210 --> 00:59:59,490
the findings of the audit and integrating

1550
00:59:59,490 --> 01:00:01,460
them into corrective steps?

1551
01:00:01,460 --> 01:00:03,290
- It's actually in their
performance evaluations.

1552
01:00:03,290 --> 01:00:04,850
I'll let Tom, John.

1553
01:00:04,850 --> 01:00:07,835
- Sure, for the Navy the
Deputy CNO for Logistics,

1554
01:00:07,835 --> 01:00:10,159
Vice Admiral Smith has gone out

1555
01:00:10,159 --> 01:00:12,840
and personally visited every region

1556
01:00:12,840 --> 01:00:16,340
and met with the various
commanders on the ground

1557
01:00:16,340 --> 01:00:18,080
and talked to them about
the importance of inventory.

1558
01:00:18,080 --> 01:00:19,313
He's put out a directive that mandates

1559
01:00:19,313 --> 01:00:22,490
them to conduct an inventory
last year, which they did.

1560
01:00:22,490 --> 01:00:24,470
And he's worked with the
Chief of the Supply Corp

1561
01:00:24,470 --> 01:00:26,670
and the Commander of NASP to develop

1562
01:00:26,670 --> 01:00:27,850
an inventory operations center

1563
01:00:27,850 --> 01:00:29,670
where they go in and they test

1564
01:00:29,670 --> 01:00:32,063
and tract the inventory
results by warehouse.

1565
01:00:33,560 --> 01:00:35,590
- Is that being done like
on the command level.

1566
01:00:35,590 --> 01:00:38,440
And I'll give you just say, in the Navy,

1567
01:00:38,440 --> 01:00:40,050
are commanding officers of the ship,

1568
01:00:40,050 --> 01:00:41,880
is he being held accountable
for the inventory

1569
01:00:41,880 --> 01:00:43,430
that he has there on that ship?

1570
01:00:46,860 --> 01:00:49,487
- Navy commanders in the
Navy, are they accountable

1571
01:00:49,487 --> 01:00:50,320
for what's on the ship?

1572
01:00:50,320 --> 01:00:51,170
- Yeah so down at the ship level

1573
01:00:51,170 --> 01:00:52,860
we are tracking the inventories as well.

1574
01:00:52,860 --> 01:00:54,590
So at the ship level,
at the warehouse level,

1575
01:00:54,590 --> 01:00:57,038
at the BSO level it's being
tracked at all levels.

1576
01:00:57,038 --> 01:01:00,620
Each of our inventory
points in our ERP system

1577
01:01:00,620 --> 01:01:02,830
they're tracked the different
number of warehouses

1578
01:01:02,830 --> 01:01:06,080
and locations (audio cuts out)

1579
01:01:07,560 --> 01:01:09,310
to hold each commander accountable.

1580
01:01:11,660 --> 01:01:12,640
- Sorry we're running out of time,

1581
01:01:12,640 --> 01:01:14,500
can I just get for the record

1582
01:01:14,500 --> 01:01:16,700
that the other services
are doing that same process

1583
01:01:16,700 --> 01:01:19,820
and holding the local
commander accountable

1584
01:01:19,820 --> 01:01:21,513
for their inventories as well.

1585
01:01:22,380 --> 01:01:23,980
- [Mr. Norquist] We'll take
that for the record yes sir.

1586
01:01:23,980 --> 01:01:25,330
- Thank you, I'm out of time.

1587
01:01:25,330 --> 01:01:26,163
- [Mr. Chairman] Thank you.

1588
01:01:26,163 --> 01:01:27,373
Next, Miss Haaland.

1589
01:01:29,960 --> 01:01:30,830
- Thank you Chairman.

1590
01:01:30,830 --> 01:01:33,290
And thank you gentlemen for
being here this morning.

1591
01:01:33,290 --> 01:01:35,533
Appreciate your time.

1592
01:01:37,350 --> 01:01:41,340
The 2019 DOD IG report
on the audit results

1593
01:01:41,340 --> 01:01:44,870
listed 20 agency wide material weaknesses.

1594
01:01:44,870 --> 01:01:46,936
One of these was related to environmental

1595
01:01:46,936 --> 01:01:49,910
and disposals liabilities where auditors

1596
01:01:49,910 --> 01:01:53,280
found that the DOD was unable to develop

1597
01:01:53,280 --> 01:01:57,630
accurate estimates and account
for environmental liabilities

1598
01:01:57,630 --> 01:02:02,630
in accordance with GAAPA 2014
DOD environmental liabilities.

1599
01:02:04,986 --> 01:02:07,260
Best practices guide.

1600
01:02:07,260 --> 01:02:10,550
It identified challenges
the department faces

1601
01:02:10,550 --> 01:02:13,750
which include incomplete
fixed asset listings,

1602
01:02:13,750 --> 01:02:16,710
lack of comprehensive
defensive wide processes

1603
01:02:16,710 --> 01:02:19,010
and controls for identifying

1604
01:02:19,010 --> 01:02:21,560
and measuring environmental liabilities.

1605
01:02:21,560 --> 01:02:24,820
And the inability to adequately support

1606
01:02:24,820 --> 01:02:27,620
assumptions or factors using calculating

1607
01:02:27,620 --> 01:02:30,540
environmental liability estimates.

1608
01:02:30,540 --> 01:02:33,990
How does the DO, and this
is for you Mr. Norquist.

1609
01:02:33,990 --> 01:02:36,930
How does the DOD's inability to develop

1610
01:02:36,930 --> 01:02:38,990
accurate estimates for environmental

1611
01:02:38,990 --> 01:02:41,160
and disposals liabilities impact

1612
01:02:41,160 --> 01:02:44,410
the accuracy of the FY20 environmental

1613
01:02:44,410 --> 01:02:47,110
remediation budget request?

1614
01:02:47,110 --> 01:02:52,110
And specifically that
the DASD for environment,

1615
01:02:52,160 --> 01:02:55,380
Maureen Sullivan testified
at a House Oversight hearing

1616
01:02:55,380 --> 01:02:58,870
that DOD PFAS for example, the cleanup,

1617
01:02:58,870 --> 01:03:01,530
back of the envelope
estimate was two billion,

1618
01:03:01,530 --> 01:03:04,470
but the FY20 environmental
remediation budget

1619
01:03:04,470 --> 01:03:07,910
request is only 1.1 billion.

1620
01:03:07,910 --> 01:03:09,730
- So this is one of the very useful,

1621
01:03:09,730 --> 01:03:11,043
when we talk about the
tools that we're gonna be

1622
01:03:11,043 --> 01:03:12,970
able to take advantage from the audit.

1623
01:03:12,970 --> 01:03:14,700
So the budget for
environmental remediation

1624
01:03:14,700 --> 01:03:17,090
tends to run about a
billion dollars a year

1625
01:03:17,090 --> 01:03:19,010
and goes about the rate of inflation.

1626
01:03:19,010 --> 01:03:21,260
So the question is are
you making progress?

1627
01:03:21,260 --> 01:03:23,040
What's the real size of the challenge.

1628
01:03:23,040 --> 01:03:26,588
There are standards to
use both the auditors

1629
01:03:26,588 --> 01:03:28,630
and the environmental community
to assess a liability.

1630
01:03:28,630 --> 01:03:30,930
What's the chemical,
what's the space it's in,

1631
01:03:30,930 --> 01:03:32,510
and how do you do the measurements?

1632
01:03:32,510 --> 01:03:34,290
Part of the value for the audit,

1633
01:03:34,290 --> 01:03:36,740
for our community and your use and mine

1634
01:03:36,740 --> 01:03:39,820
is the accuracy of those
environmental assessments.

1635
01:03:39,820 --> 01:03:41,280
Are the in compliance?

1636
01:03:41,280 --> 01:03:42,320
The auditors are checking.

1637
01:03:42,320 --> 01:03:44,110
Do you know each of the locations

1638
01:03:44,110 --> 01:03:45,570
where you have an environmental liability

1639
01:03:45,570 --> 01:03:47,430
and are you confident, have you properly

1640
01:03:47,430 --> 01:03:49,260
mapped out the size and scale.

1641
01:03:49,260 --> 01:03:51,173
That will make sure that
when we're budgeting

1642
01:03:51,173 --> 01:03:54,520
for it we have an appreciation of the size

1643
01:03:54,520 --> 01:03:58,200
as well as is that liability
going down year after year,

1644
01:03:58,200 --> 01:04:00,020
or even with the investment we're making

1645
01:04:00,020 --> 01:04:01,890
is that liability going up and we

1646
01:04:01,890 --> 01:04:03,040
need to take a different look.

1647
01:04:03,040 --> 01:04:04,810
So here's one of the areas where the value

1648
01:04:04,810 --> 01:04:06,190
of the audit plays in a place

1649
01:04:06,190 --> 01:04:07,880
that would not necessarily be immediate

1650
01:04:07,880 --> 01:04:09,380
obvious to someone of its use.

1651
01:04:11,130 --> 01:04:12,990
- Okay thank you for that.

1652
01:04:12,990 --> 01:04:16,860
And so I have just a
few followup questions.

1653
01:04:16,860 --> 01:04:19,130
How does it impact the quality of DOD

1654
01:04:19,130 --> 01:04:22,719
environmental remediation
efforts generally?

1655
01:04:22,719 --> 01:04:25,370
You kind of answered that
already probably but.

1656
01:04:25,370 --> 01:04:27,430
- But what they're doing is they're taking

1657
01:04:27,430 --> 01:04:29,440
on the highest priorities areas first.

1658
01:04:29,440 --> 01:04:31,150
And the ones for which the technology

1659
01:04:31,150 --> 01:04:33,900
is the most effective,
but this will allow them

1660
01:04:33,900 --> 01:04:35,480
to be certain that they're
not missing something.

1661
01:04:35,480 --> 01:04:37,190
Right that you have a more confidence

1662
01:04:37,190 --> 01:04:39,100
in the completeness of your assessment.

1663
01:04:39,100 --> 01:04:40,760
Identify other areas that you might

1664
01:04:40,760 --> 01:04:43,060
need to be focusing that
you hadn't seen before.

1665
01:04:43,060 --> 01:04:44,230
- Okay thank you.

1666
01:04:44,230 --> 01:04:46,630
Because there are real human

1667
01:04:48,520 --> 01:04:53,430
I guess human tragedies
involved with this contamination

1668
01:04:53,430 --> 01:04:55,690
of this kind and that, I mean,

1669
01:04:55,690 --> 01:04:59,416
that has to be taken into consideration.

1670
01:04:59,416 --> 01:05:04,110
Not just economic but physical issues

1671
01:05:04,110 --> 01:05:06,800
that have been raised because
of this contamination.

1672
01:05:06,800 --> 01:05:11,100
So next what does the DOD need to do

1673
01:05:11,100 --> 01:05:13,230
in order to address the shortfalls?

1674
01:05:13,230 --> 01:05:15,500
And last what is the DODs timeline

1675
01:05:15,500 --> 01:05:18,330
for addressing the shortfalls?

1676
01:05:18,330 --> 01:05:20,710
- So I will, let me take
the timeline for the record.

1677
01:05:20,710 --> 01:05:23,020
I will talk to the
environmental folks on that.

1678
01:05:23,020 --> 01:05:24,659
But each one of them, they need to develop

1679
01:05:24,659 --> 01:05:27,080
a corrective action plan on either the one

1680
01:05:27,080 --> 01:05:29,070
how to ensure they've
captured the full range,

1681
01:05:29,070 --> 01:05:30,870
or how to improve the accuracy

1682
01:05:30,870 --> 01:05:34,110
of their liability estimates
for the ones that they have.

1683
01:05:34,110 --> 01:05:35,550
But I think the point you made

1684
01:05:35,550 --> 01:05:38,232
earlier in your comment was very clear.

1685
01:05:38,232 --> 01:05:39,910
A financial statement looks
like a sheet of numbers.

1686
01:05:39,910 --> 01:05:41,470
But there is a person who's payment

1687
01:05:41,470 --> 01:05:43,890
is either accurate or inaccurate
at the end of the week.

1688
01:05:43,890 --> 01:05:45,360
There's an environmental cost

1689
01:05:45,360 --> 01:05:48,020
that we either captured and
are properly treating, or not.

1690
01:05:48,020 --> 01:05:49,410
There's a spare part that arrived

1691
01:05:49,410 --> 01:05:51,520
at the war fighter when
they needed it or not.

1692
01:05:51,520 --> 01:05:53,260
So all of these numbers,
while they look like,

1693
01:05:53,260 --> 01:05:54,610
it's just a sheet of paper.

1694
01:05:55,768 --> 01:05:57,060
They all translate to
real meaningful things

1695
01:05:57,060 --> 01:05:59,710
for the people out there
trying to get the mission done.

1696
01:05:59,710 --> 01:06:01,470
- Thank, excuse me, thank you.

1697
01:06:01,470 --> 01:06:05,740
I appreciate that because when these,

1698
01:06:05,740 --> 01:06:07,500
when things like this happen,

1699
01:06:07,500 --> 01:06:09,563
these contamination issues,

1700
01:06:11,350 --> 01:06:15,340
it takes a tremendous toll
on not just the person

1701
01:06:15,340 --> 01:06:18,720
who's being affected by it,
but the entire community.

1702
01:06:18,720 --> 01:06:20,533
And I feel like we need to,

1703
01:06:21,990 --> 01:06:26,866
we need to think about
the humanitarian effects

1704
01:06:26,866 --> 01:06:29,450
that these things have had on people.

1705
01:06:29,450 --> 01:06:30,880
And I yield my time.

1706
01:06:30,880 --> 01:06:31,713
Thank you Chairman.

1707
01:06:31,713 --> 01:06:32,679
- [Chairman] Thank you.

1708
01:06:32,679 --> 01:06:33,512
Mr. Khanna.

1709
01:06:33,512 --> 01:06:35,110
- Thank you Mr. Chairman.

1710
01:06:35,110 --> 01:06:37,180
Thank you all for your service.

1711
01:06:37,180 --> 01:06:39,760
Yesterday the oversight committee

1712
01:06:39,760 --> 01:06:43,420
had a hearing about TransDigm and how they

1713
01:06:43,420 --> 01:06:46,540
basically were ripping
off American taxpayers

1714
01:06:46,540 --> 01:06:49,730
by having excessive prices.

1715
01:06:49,730 --> 01:06:52,107
And the Inspector General went through

1716
01:06:52,107 --> 01:06:55,010
part after part where they were charging

1717
01:06:55,010 --> 01:06:58,213
4000, 3000 percent profits.

1718
01:06:58,213 --> 01:07:01,620
And there was bipartisan
concern on the committee.

1719
01:07:01,620 --> 01:07:05,170
Congressman Mark Meadows
spoke about his outrage

1720
01:07:05,170 --> 01:07:08,693
as did the Ranking Member
Jordan, and democrats did.

1721
01:07:09,920 --> 01:07:11,970
TransDigm obviously is a bad actor.

1722
01:07:11,970 --> 01:07:14,710
And one of the things that the Assistant

1723
01:07:14,710 --> 01:07:16,340
Secretary of Defense there brought up

1724
01:07:16,340 --> 01:07:18,759
was it's unfortunate that
you often have to have

1725
01:07:18,759 --> 01:07:23,380
complex bureaucracy to
deal with a bad actors

1726
01:07:23,380 --> 01:07:27,120
like TransDigm that then
slows down the process.

1727
01:07:27,120 --> 01:07:28,810
But one suggestion that came up,

1728
01:07:28,810 --> 01:07:32,320
and I'm curious what you think of that

1729
01:07:32,320 --> 01:07:36,230
is to allow contractors at
the Department of Defense

1730
01:07:36,230 --> 01:07:40,690
the discretion to ask
for a cost information

1731
01:07:40,690 --> 01:07:43,070
even if it's below a threshold

1732
01:07:43,070 --> 01:07:47,733
if they feel that a defense
contractor is a bad actor

1733
01:07:47,733 --> 01:07:49,590
or isn't being honest.

1734
01:07:49,590 --> 01:07:53,470
And so this wouldn't
require it in every case,

1735
01:07:53,470 --> 01:07:56,550
but would give them the
discretion to do so.

1736
01:07:56,550 --> 01:07:57,974
And I'd be curious about your,

1737
01:07:57,974 --> 01:08:00,870
everyone, Mr Norquist
maybe starting with you,

1738
01:08:00,870 --> 01:08:04,300
your thoughts about
that or other solutions?

1739
01:08:04,300 --> 01:08:05,970
- Sure I think that's an
important step forward.

1740
01:08:05,970 --> 01:08:08,270
So the model that this company did,

1741
01:08:08,270 --> 01:08:09,500
and it's really, it's not a partner firm,

1742
01:08:09,500 --> 01:08:10,900
it's a predatory approach.

1743
01:08:10,900 --> 01:08:12,670
Is they went and they bought licenses

1744
01:08:12,670 --> 01:08:14,510
for things where there
was no other competitor,

1745
01:08:14,510 --> 01:08:16,710
assached to large assets like aircraft

1746
01:08:16,710 --> 01:08:19,660
where the department
couldn't function without it.

1747
01:08:19,660 --> 01:08:22,340
And if they were under
two million dollars,

1748
01:08:22,340 --> 01:08:24,427
the rules don't require
them to disclose cost.

1749
01:08:24,427 --> 01:08:25,750
And that was originally set up

1750
01:08:25,750 --> 01:08:27,209
because you weren't trying to hit the same

1751
01:08:27,209 --> 01:08:29,540
reporting burden on every firm.

1752
01:08:29,540 --> 01:08:31,850
And for most of the firms
that's not an issue.

1753
01:08:31,850 --> 01:08:33,230
But as you point out, the bad actor

1754
01:08:33,230 --> 01:08:34,990
creates a burden for everyone else.

1755
01:08:34,990 --> 01:08:36,260
By being below that threshold

1756
01:08:36,260 --> 01:08:37,940
they didn't have to disclose cost data.

1757
01:08:37,940 --> 01:08:41,090
They had no other competitors
so they could drive markup.

1758
01:08:41,090 --> 01:08:43,580
So that predatory practice by functioning

1759
01:08:43,580 --> 01:08:45,760
in that rule gap is a real problem.

1760
01:08:45,760 --> 01:08:47,319
So I think one of the things you wanna do

1761
01:08:47,319 --> 01:08:48,570
is you need to get the
accuracy of the data.

1762
01:08:48,570 --> 01:08:50,060
The question is you
also need to figure out

1763
01:08:50,060 --> 01:08:52,320
how to not be trapped in a monopoly

1764
01:08:52,320 --> 01:08:53,720
supplier position like that.

1765
01:08:53,720 --> 01:08:55,960
Whether it's looking
at the licensing rules

1766
01:08:55,960 --> 01:08:56,793
or some of the others.

1767
01:08:56,793 --> 01:08:59,150
But you wanna, there's a
real problem with that.

1768
01:08:59,150 --> 01:09:02,300
And the need to try and
break that monopoly.

1769
01:09:02,300 --> 01:09:04,140
And you know we have a lot of good firms,

1770
01:09:04,140 --> 01:09:06,240
they're partners, they're
aimed at the national security.

1771
01:09:06,240 --> 01:09:07,520
And then you got these predators

1772
01:09:07,520 --> 01:09:08,810
that make life difficult for everyone.

1773
01:09:08,810 --> 01:09:10,900
I don't know if any of
you have comments on that?

1774
01:09:10,900 --> 01:09:12,659
Or no, okay.

1775
01:09:12,659 --> 01:09:16,159
(speaking off microphone)

1776
01:09:34,450 --> 01:09:36,658
Absolutely happy to
work with the committee.

1777
01:09:36,658 --> 01:09:37,658
- Thank you.

1778
01:09:38,570 --> 01:09:39,403
- Thank you.

1779
01:09:39,403 --> 01:09:40,236
I just echo that point.

1780
01:09:40,236 --> 01:09:41,580
I mean that's hopefully one of the things,

1781
01:09:41,580 --> 01:09:44,080
once we you understand
better what the inventory is,

1782
01:09:44,080 --> 01:09:46,030
what you have, what's coming in,

1783
01:09:46,030 --> 01:09:47,643
we can do a better job of
policing this sort of thing.

1784
01:09:47,643 --> 01:09:49,530
Because the amount of
money that the Pentagon

1785
01:09:49,530 --> 01:09:52,360
spends is just an open invitation

1786
01:09:52,360 --> 01:09:55,210
to people to try to gouge,
particularly if they don't

1787
01:09:55,210 --> 01:09:56,774
think you're keeping
track, very careful track

1788
01:09:56,774 --> 01:09:58,910
of what they're charging,
or what they're doing.

1789
01:09:58,910 --> 01:10:00,680
So the better system we have,

1790
01:10:00,680 --> 01:10:02,000
the better we're gonna
be able to address this.

1791
01:10:02,000 --> 01:10:03,350
And I wanna work with Mr. Khanna

1792
01:10:03,350 --> 01:10:05,777
as we try to figure out what we could do

1793
01:10:05,777 --> 01:10:08,940
to change the law to
help address this issue.

1794
01:10:08,940 --> 01:10:10,405
Mac you have anything for us?

1795
01:10:10,405 --> 01:10:11,503
Well thank you very much.

1796
01:10:11,503 --> 01:10:12,470
It's very helpful.

1797
01:10:12,470 --> 01:10:15,840
And this is going to be an
ongoing process obviously.

1798
01:10:15,840 --> 01:10:17,580
But I think we are making progress

1799
01:10:17,580 --> 01:10:18,630
and look forward to working with you

1800
01:10:18,630 --> 01:10:20,210
to continue to do so.

1801
01:10:20,210 --> 01:10:21,936
With that we are adjourned.

1802
01:10:21,936 --> 01:10:24,603
(bang of gavel)