Pentagon puts 'faith' in achieving clean audit by 2017

Wednesday - 8/24/2011, 6:47am EDT

Emily Kopp, reporter, Federal News Radio

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By Emily Kopp
Reporter
Federal News Radio

It's the law: The Defense Department must know how it spends every cent of its budget by 2017. But the agency said only 14 percent of its budget is now auditable.

Deputy chief financial officer Mark Easton jokingly said he's overseeing a "faith-based initiative."

But with budget cuts on one hand and the continuing costs of war on the other, Easton said he has a lot of faith in preparing the nation's biggest employer for a complete financial audit by 2017.

Focus on results and process

"I can't tell you that everyone in the Department of Defense who is focused on buying ships, airplanes and MRAPs — the vehicles that we use to transport personnel in Afghanistan — see it that way," Easton said. "But I'm convinced that as we strengthen our business practices, it will pay us back. It behooves us to make every dollar count."

Easton addressed certified public accountants at a Washington conference of the American Institute of CPAs.

He said Defense Secretary Leon Panetta "finds it unacceptable that we do not have a clean financial opinion," and is setting the tone from the top.

But, Easton said it will take time to change the agency's culture from one focused on results to one that cares about the process.

"We do a great job of putting the President's budget together. It's well documented and justified," he said. "But we need to work on how we execute that and begin to take value in that process, in controls and in being able to have financial information when we need it to support the mission."

Easton added that people from financial managers down to support staff need — and will get — training.

"False starts have occurred because we haven't been involving the right people," he said. "People who write contracts, receive material and do human resource efforts have to be engaged and understand what they need to do."

The Pentagon has been trying to prepare its books for a complete financial audit for more than 20 years. A few departments, including the Army Corps of Engineers, are on track.

Back to the 'building blocks'

"But the picture is different when we look at the Army, the Navy, the Marine Corps and the Air Force," said Asif Khan, the Government Accountability Office's director of financial management and assurance, who joined Easton on the panel.

Khan said one of the biggest problems is DoD hasn't been able to operate what he calls the "building blocks of sound financial management" — the technology known as enterprise resource planning systems (ERPs) that would help them collect, analyze and prepare data.

"There were slippages and there were problems in implementation," Khan said. "One of the main problems we found was requirements management, specifically because of inadequate user testing, which resulted in rework, additional time and additional cost in implementing the ERPs."

He said that's key because even though each division of the agency may know what they're spending on a daily basis, there's no easy way to collect all that data and put it in one financial statement.

"You look at centerfielders who make great shoestring catches that are great, but maybe they have to play those because they're out of position," said DoD audit advisory committee chairman Ernie Almonte. "It's getting the process in place. I see process improvement there, and that's a wonderful thing."

There are a lot of people will be watching for more improvement. The House Armed Services Committee created a panel to oversee the Pentagon's progress on getting a clean audit.

"That will help change the culture. That will help get the word out," said Easton, who added there will be an oversight hearing on the Hill nearly every week for the next six months.

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