The results are in from the Defense Department's second audit, and Deputy Defense Secretary David L. Norquist told lawmakers that the process is benefiting the American people.
Norquist talked about the department's first-in-history audit of fiscal year 2018 audit and the results of fiscal 2019's audit today before the Senate Armed Services Committee's subcommittee on readiness and management support.
"The short answer of why we have an audit is the DOD is an extraordinary large and complex organization," Norquist said. "We employ nearly 3 million service members and civilians, [and] while a typical commercial airline manages between 300 and 1,600 aircraft, the military services fly approximately 16,000 aircraft."
DOD also manages $292 billion in inventory — more than six times the size of Walmart, the world's largest retail company, he added.
Financial statement audits are a proven commercial solution that uses independent auditors to effectively assess complex operations, Norquist noted. A financial statement audit is comprehensive, he explained, and includes verifying the count, location and condition of military equipment, property, material and supplies.
"[An audit] tests vulnerabilities in the security system of our business systems, and it validates the accuracy of records and actions such as promotions and separations," he said, noting it is the independent feedback that DOD leaders and members of Congress need.
For the fiscal 2019 audit, more than 1,400 auditors conducted more than 600 site visits with these results, he said:
Also, one more organization than in the fiscal 2018 audit received a clean opinion for fiscal 2019: the Defense Commissary Agency. Seven of 24 organizations will have an unmodified or clean opinion this year, Norquist said.
"And of the 2,377 findings in [fiscal] 2018, the department was successful in closing more than 550 – 23% of the findings," the deputy secretary told the senators. "The audit demonstrates progress, but we have a lot more to do."
Audits benefit the taxpayer through transparency, Norquist said. But DOD has also seen how the audit saves money improving inventory management, identifying vulnerabilities in cybersecurity and providing better data for decision-makers.
For example, he said, the Navy's fleet logistic center in Jacksonville, Florida, conducted a 10-week assessment and identified $81 million worth of active material not tracked in the inventory system. That equipment is now available for immediate use to decrease maintenance and fill 174 requisitions.
"They also eliminated unneeded equipment, freeing up approximately 200,000 square feet — the equivalent of 2.6 acres," the deputy secretary said.
The benefits of metadata and the use of data analytics are already becoming evident, Norquist said. He told the panel that DOD uses the Advanta workflow tool to automate the quarterly review process of its obligations. It has eliminated inefficiencies and provided analysts the time and insights they needed to identify $316 million in high-risk funds, moving them from a low-priority function to better use before they were canceled or expired, he added.
"The audit is a foundational element of a broader landscape of business reform in the National Defense Strategy," Norquist said.
"We are moving forward on multiple fronts, improving our enterprise buying power, consolidating [information technology], realigning and reforming health care consistent with congressional direction, reforming how we do background investigations to make them more effective and less expensive, and eliminating duplicate and inefficient business systems, as well as identifying efficiencies in what we like to call the Fourth Estate," he said.
Moving to the subject of a DOD budget, Norquist said the continuing resolution now in place and the one under consideration have harmful impacts on DOD.
"The department and the White House have both expressed the urgent need for Congress to pass the [fiscal] 2020 authorization and appropriation bills," he said. "The CR stop-gap measures are wasteful to the taxpayer. They delay storm-damage repairs and damage the gains our military has made in readiness and modernization."
Ultimately, a continuing resolution is good for the enemy and not for the men and women of the U.S. military, Norquist told the Senate panel. "The administration and I urge Congress to come to agreement as quickly as possible consistent with the budget deal reached in the summer," he said.
DOD is one of the most complex enterprises in the world, Norquist said. "In partnership with this Congress, we must continually improve our business practices to reduce costs and maintain our competitive edge," he added. "Each of us owes it to the American taxpayer to be as responsible in spending their money as they were in earning it."