Reform

Norquist Updates Congress on DOD Financial Statement Audit

May 16, 2019 | BY Jim Garamone

The Defense Department's comptroller updated the House Armed Services Committee on the department's financial statement audit.

David L. Norquist said the audit has become an integral tool in enabling defense personnel to identify and correct problems. Service comptrollers joined Norquist in his testimony.

The audit has long been a goal of DOD and Congress. The effort to perform a financial statement audit really began in the late 1980s, and successive administrations since then have worked to make it a reality, officials said.

A group of people look at a device.
Warehouse Count
Robert Stan, Navy Exchange Service Command's warehouse management system administrator, left, demonstrates how inventory is counted to Navy Vice Adm. Dixon Smith, deputy chief of naval operations, fleet readiness and logistics, right, at NEXCOM's Northeast Distribution Center in Suffolk, Va., during his visit to discuss audit and inventory processes, Sept. 28, 2018.
Photo By: Petty Officer 3rd Class Michael
VIRIN: 180928-N-PC620-0031


"Until last year, DOD was the only large federal agency not under full financial statement audit," Norquist told the committee. "Together we have changed that."

Norquist stressed that the auditing process is not new to DOD. Outside and inside agencies have conducted numerous audits over the years on programs, contracts, performance reviews and more. "But financial statement audits are different," he said. "They are comprehensive. They occur annually and they cover more than financial management."

The DOD audit was extensive, he said. DOD has $2.7 trillion in assets and $2.6 trillion in liabilities. The audit involved more than 1,200 auditors reviewing hundreds of thousands of items in more than 900 site visits to 600 locations. 

These audits verify the count, location and condition of military equipment, property and inventory. These audits test for vulnerabilities in financial business systems, and validate the accuracy of personnel records.

"For example, the auditors looked at the Navy's database of real property to include buildings, underground water pipes, fence lines," Norquist said. "[Auditors] pulled a statistical sample, and then went to the relevant bases and checked to see if they could locate each item and the condition it was in. They also looked around the base for other property that ought to have been in the property system and wasn't."

A man operates a laptop computer.
Inventory Checker
Senior Airman Jacob Torralva, 5th Logistics Readiness Squadron, performs an inventory audit at Minot Air Force Base, N.D., Oct. 2, 2018.
Photo By: Airman 1st Class Dillon Audit
VIRIN: 181001-F-DJ826-0046A


Norquist told the representatives that six DOD organizations received "unmodified audit opinions" — the highest possible ranking. Two received modified opinions. This means the data is correct with some exceptions. "The remaining organizations — the majority — received a disclaimer," he said. "This disclaimer means the auditors did not have enough information to form an opinion. The short answer is: They didn't pass."

The auditors provided favorable feedback that the Army, Navy and Air Force had properly accounted for major military equipment, and military and civilian pay. "At a more detailed level, auditors identified more than 2,300 findings — what they call 'notice of findings and recommendations,' and the department has developed corrective action plans to correct 91% of them," Norquist said.

Three military helicopters fly above trees.
Huey Trio
Three Air Force UH-1 Hueys assigned to the 1st Helicopter Squadron fly over Joint Base Andrews, Md., May 10, 2019.
Photo By: Air Force 2nd Lt. Jessica Cicchetto
VIRIN: 190510-F-NG306-0024C


In a real property example of the findings, auditors looking at the Navy found about 6.5% of real property — about 2,000 items no longer existed. A building had been knocked down and removed, or the system had been carted away, but they had never come out of the property system. "In contrast, the Army had very few errors on the existence — their building were there — but a number of things they had in their buildings were listed as being usable, and from the auditors perspective they were not."

This information helps officials make decisions. "The purpose of the audit is to find as many problems as we could, so we could start to fix them," he said. "Our database of findings has already proved to be extremely valuable."

The audit gives DOD officials the tools they need to address accountability and oversight. Officials can feed the statistics into modern data systems to point out problems and address them quickly.

A woman sitting at a desk reads a book.
Quick Study
Air Force Tech. Sgt. Barbara Kruse, 334th Training Squadron, studies an audit manual at Keesler Air Force Base, Miss., Feb. 26, 2019.
Photo By: Kemberly Groue, Air Force
VIRIN: 190226-F-BD983-0013A


"This audit is not about compliance," Norquist said. "It is about protecting taxpayer dollars. We are fully committed to making annual financial statement audits the new normal at the Department of Defense."